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Customer Segmentation in the Wireless Market | Strategic Pricing Solutions

For years cell phone service came with 2-year contracts and included a discount on a new telephone.  In the past year, however, T-Mobile started a trend of unbundling the purchase of the phone from purchase of talk, text, and data services.  Now all of the major carriers have moved to the unbundled model, with prices mostly dependent on data usage.  This makes sense for many customers, but the carriers also must remember that there are multiple customer segments and for at least one segment the bundle is the better option.

For many customers, the 2-year contracts had been unwanted shackles that prevented switching carriers or phones.  However the carriers were subsidizing the purchases of mobile phones, and the 2-year agreement was needed to make the economics work.  They had to recover the $200 – $400 in telephone subsidies somehow.  Customers unhappy over the contracts and carriers struggling to make money while paying most of the costs of phones created an ongoing tension between customers and providers.  So in the past year, T-Mobile has changed the dynamic.

T-Mobile realized the biggest value factors for most customers were a dedicated phone which could be accessed anywhere, broad access to internet connectivity, the ability to buy only as much data as needed, and the ability to share accounts with family.  Less valued were access to the newest technology, discounted prices on new telephones, and the ability to spread the cost of new phones over time.  So T-Mobile set their prices according to where they added value:  a fee for each phone line, data plans that can be adjusted to your data needs, and a small fee for sharing among the family.  The rest of the carriers have since followed (which is a separate, interesting point that you do not have to be the largest competitor to be a price leader).

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Customer Segmentation in the Wireless Market.

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