Handset Brand Increasingly Important to Consumers

As the number of service features being offered on cell phones grows and new designs become more popular, customers are increasingly influenced by the handset when selecting a wireless service, according to a new JD Power report.

The study finds that 19% of customers cite the type or brand of cell phone as a key factor during the initial process of selecting a wireless service-up from 11% in 2004. While the brand of wireless provider is still the most popular reason influencing the initial selection process, it has decreased significantly in importance -- down 8 percentage points from 2004 to 40 percent in 2006. Other key factors that influence the initial selection process are price/promotion (29%) and retail location (12%).

"It is clear that as the number of cell phone service offerings increases, and the design and visual appeal improves, wireless carriers and national retail chains are using the handset as a key promotional tool to attract new subscribers," said Kirk Parsons, senior director of wireless services at J.D. Power and Associates. "Additionally, as service plans are more competitively priced, retail outlets of the major wireless carriers are also using cell phones as a key differentiator -- typically offering exclusive deals on new and popular models, such as the Motorola RAZR. Carriers and retail chains are making these trendy cell phone models more available in order to increase store traffic, raise market share and, more importantly, increase the likelihood of repeat purchases."

Customer satisfaction with the retail buying experience can vary significantly depending on the key factor that is considered during the initial selection process. For example, the overall retail satisfaction score among customers who cite the wireless carrier brand as the most important factor is 751 points on a 1,000-point scale. This compares to a satisfaction score of 719 points among those who cite the type or brand of cell phone as their key reason to purchase a wireless service. Additionally, among customers who are most influenced by the cell phone brand, the likelihood of switching carriers in the next 12-month period is 60 percent higher than among customers who cite the brand of the wireless provider as their key factor in the selection process.

"Promoting the cell phone instead of the service plan and the carrier that provides that service may drive more initial traffic to the stores, but it can potentially have a negative financial impact with higher churn rates," said Parsons. "It is imperative for wireless carriers to strike a balance between attracting new subscribers based on price or the latest cell phone model, and making sure the customer is using the right service plan or provider that will meet their wireless calling needs."

The semi-annual study analyzes the experiences of customers who recently had a wireless retail sales purchase experience. The study measures overall customer satisfaction for the major wireless carrier-branded stores based on four factors. They are (in order of importance): sales staff (51%); store display (17%); price/promotion (16%); and store facility (16%).

Among major wireless carrier-owned retail stores, T-Mobile ranks highest in customer satisfaction for a fourth consecutive reporting period. T-Mobile receives particularly high ratings in all four factors that determine overall satisfaction. T-Mobile is followed in the rankings by Verizon Wireless and Alltel, respectively.

The study also finds the following key retail wireless sales transaction patterns:

• The typical wireless customer who has purchased a cell phone or service plan within the past six months from a carrier-owned store uses their cell phone an average of 624 minutes (10.4 hours) per month. This is approximately 1 hour and 27 minutes longer than the average user who purchased from a national retail chain brand (548 minutes or 9.13 hours).
• The average wireless retail sales transaction takes approximately 1 hour to complete from the time the customer enters the store to the time the final paperwork is finished and the cell phone is received. This is a decrease of 10 minutes from 2005.
• Retail satisfaction suffers among those customers who believe they were pressured during the sales process. The average overall satisfaction rating among customers who report experiencing no pressure is 744 index points, compared to 640 index points among those who experienced pressured in some way.

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Posted to the site on 27th October 2006