A word you never want to hear in the wireless industry is “churn.” As it implies, churn is customer turnover, which is a big killer of profit. Not only does the company lose the business of one of its subscribers, but it also has to spend upwards of $800 to recruit a replacement. So one of the keys to getting ahead in the industry is to retain as many of your subscribers as possible. For the 11th straight quarter, Verizon Wireless leads the pack in that department, reporting a 1.3% churn rate for the second quarter of 2007. This press release cites the churn rates of other carriers, but does not specify names. Allow us to speculate. Carrier X is at 1.6% — that’s AT&T. Carrier Z is at 2.7% — that’s T-Mobile. Carrier Y is n/a, but 2.0% for post-paid only — that’s Sprint (we figure that because they don’t offer their own prepaid services). Carrier Z was destroyed by prepaid churn, as their post-paid churn was 1.8%, which is lower than Carrier Y. We have our gripes with Verizon, one of which we’ll be expressing later today. But we do like them for certain things, like their prorated early termination fee. With most companies, you pay the same fee whether you cancel after two months or two weeks shy of two years. Verizon has a declining early termination fee, which makes sense. Funny how they only company with such a policy sees the least turnover. Hmm… They also offer a Test Drive program, which allows customers to try Verizon risk-free for 30 days. If the customer decides that they are not satisfied with the company, they will be refunded for all calls, equipment, and activation fees. Once again, no other company offers this, yet Verizon still leads in churn rate. Notice to other carriers: If you offer consumer-friendly services to your subscribers and potential subscribers, you will gain more of them. The conventional thought on this is that if you offer something like a risk-free trial or prorated early termination fees, people are going to take you for a ride. However, that’s complete bunk. Just look at the direct mail industry for further proof. Everything you buy through the mail — whether a CD, DVD, or whatever — you can send back and receive a refund. Yet, it’s a rarity. We guess that sometimes there’s just no changing conventional thinking. [CNN Money]]]>
Posted in Verizon Wireless