Earning Loyalty Instead of Demanding It
By Eric Lin, Tue Oct 19 23:15:00 GMT 2004

European carriers that were early to launch 3G services are forcing subscribers into long term contracts. They should work on keeping customers with service, not with signatures.

Those carriers that were brave enough to launch early 3G networks didn't have much choice other than to do so with expensive handsets that often disappointed users. Operators offered huge subsidies on handsets to make them affordable to subscribers, but in order to recoup their costs, the subsidies lock people into long (18-24 month) contracts. Guaranteed post-paid income helped carriers justify the huge price cuts financially. Those contracts also helped to prevent any churn that might have occurred after subscribers experienced disappointing performance or service from early handsets.

Now that technology is more mature, and 3G handset prices have come down, carriers need to stop holding new 3G subscribers hostage. Analyst Emma McClune believes the market is ready for 3G networks that earn customer loyalty with quality services and personal attention. McClune advises that the usual suggestions of appealing applications and handsets are not enough. In order to create voluntary loyalty, carriers must reward it. They should treat long-time customers as first class users, giving them higher priority for support, upgrades and promotions. They also deserve better incentives to re-subscribe at the end of their contracts.

Locking subscribers into long contracts without providing compelling services will not create loyal customers; they are actually more likely to leave at the end of their contract (or break it if possible). People tend to actively rebel when told they have to do something they don't want to do. Long contracts only create loyalty in the short term, and without any compelling changes, could cause a mass exodus in a few years when these long contracts run out.

McClune also believes the least carriers that have already locked subscribers to their service can do is open up their access to content. Giving customers some freedom of choice is imperative to earn their trust. Not only does open content give users a semblance of freedom, it also allows them to spend as much as possible on data service, and revenue was the reason these subscribers got locked into long contracts in the first place.

The handsets, content and even the coverage are all in place for carriers to offer a 3G network that subscribers would be loyal to. The challenge is no longer technical, it is one of culture. Carriers must be devote some effort to reward loyal customers instead of solely concentrating on adding new subscribers. In addition to lowering churn, a network of loyal users has the added benefit of a good reputation, which tends to draw new customers as well as keeping existing ones.