Prior to the COVID-19 crisis, wireless providers expected flat to little growth in 2020 while still preparing for costly infrastructure upgrades to support 5G. As consumer seek to curtail spending due to COVID-19, providers can expect higher churn rates than the 2008-2009 recession, particularly from premium plans, or “postpaid” options, to cheaper plans and providers, or prepaid or pay-as-you-go.
Providers are responding by offering short term forgiveness, flexibility, and incentives to retain customers. Verizon, which gave an extra 15GB of data to its customers, is one example. “But will incentives like freebies and entertainment be enough to keep people from switching?” said David Poole, digital business transformation strategist at Publicis Sapient. “They’re making you this data offer, but does that help you if you’re still paying the same high monthly bill?”
This approach is short-sighted and providers need to embrace a self-disruption mentality. They must look at churn differently to shed customers that’ll become increasingly unprofitable, while retaining those that will represent value through the recession and beyond. While first quarter financials showed providers weathering the crisis, future quarters will reveal the impact of churn, and this approach will be critical to remain profitable.
Providers should ask themselves three key questions when responding to current and future economic crises:
- Can providers be proactive and offer downgrade options? Many customers will increasingly struggle to pay their bills the longer the crisis lasts and the longer they are unemployed. Consider partnering with lenders to help customers through hardships.
- How do carriers reconcile their subsidiary pre-paid brands, such as AT&T’s Cricket, as they allow customers to downgrade to plans that look very much like their pre-paid brands? Making movement fluid between sub-brands is key and avoids sacrificing the premium brand quality.
- Will these pay-as-you-go plans make a resurgence even after the COVID-19 crisis passes? Will more customers demand this option? The crisis helped customers identify services that they can live without during tough times. Rather than bundling, providers should consider offering more a la carte plans that let customers pick and choose services they want to pay for.