Wireless analysts say cellular carriers have two distinct goals in releasing a barrage of pricing plans at this time. Get as many customers on contract as possible, and confuse the consumer to avoid price comparisons.
“Now is the time for cellular operators to lock customers into a lengthy contract,” said Clint McClellan with DataQuest of San Jose. “They need to do that before PCS comes. After it arrives, they’ll come up with new plans.”
Cellular carriers are using a classic divide and conquer strategy, said David Kerr, director of mobile communications for Giga Information Group.
For instance, the phone-in-a-box option offered by several carriers entices consumers with lower monthly rates and easy activation.
“We see cellular carriers trying to lock customers into two year contracts or longer, the carrot being lower entry points into cellular. It’s a way of getting those customers who perceive that getting into cellular is too costly,” Kerr said.
Free weekend or evening airtime is a further attempt to grab unwitting consumers, he said.
“It’s a weak and erroneous way to approach the market. It perpetuates the myth that cellular is affordable and most people can use it for day-to-day communications. The reality is you’re still paying a huge premium compared to landline, which is pennies per minute,” Kerr said.
Cellular can be seen mirroring the marketing angles of personal communications services in markets where a PCS operator has launched, McClellan said.
Two current PCS operators-Sprint Spectrum L.P. and BellSouth Mobility DCS-are offering service with no contract. Customers can go month-to-month, but they must purchase their phone outright, at a cost of at least $150.
Cellular carriers are not so daring, but offer plans that appear similar. They have observed that PCS customers are willing to spend $200 up front for a handset and service, so cellular has launched similar-type models.
For instance, GTE Mobilnet Inc. service in Honolulu usually costs $20 a month and 25 cents a minute. But if you pay a year in advance, it will knock off $5 a month. “You’ll save $60 a year!” according to the customer service representative.
Ameritech Cellular Services is jumping on the no-contract boat with a prepay offer. The company’s Chicago customers can now purchase cellular with a disposable prepaid card containing a coded strip. The account is activated with $30, backed by a credit card. When additional funds are needed in the account, the customer presses *PAY and $30 is charged to the account. It’s being promoted as a pay-as-you-go plan with no long-term contracts, monthly bills, cancellation fees or credit restrictions.
Carriers offer a wide variety of plans to garner as many customers as possible, said Rebecca Dierks, Business Research Group. The approach could be compared to shopping for clothes. If you are looking for a shirt and the store only has two styles to choose from, there is less chance of a sale. If the store offers 15 styles, the chance is greater the customer will make a choice.
But in some ways, the profusion of plans with free minutes bundled in, coupled with this-and-that contract incentive, creates a confusion from which some carriers can benefit, Kerr said.
“The approach of carriers is to create this confusion. They don’t want people to do an apples to apples comparison because then they will be in a price game.”
