Sellmore proposes travel incentives to put the 'value' back into cellular

Mobile Phone News, August 19, 1996

Wills argues that giving away phones and service leads customers to place no value in cellular, making them more likely to churn. Sellmore's objective is to use incentives to get customers to place high value on cellular service.

In the early years, "the cellular industry shot itself in the foot," said Wills, by offering high activation commissions and requiring no service-length commitment from customers. "Now the 'promo du jour' is to canabalize your own service by giving away phones and airtime," he said.

Sellmore's solution? Pairing free travel - i.e airline tickets, hotel stays - with cellular service differentiates the carrier from competitors. The high value consumers place on travel is carried over to the cellular service, making subscribers less prone to churn, Wills said. Sellmore provides carriers with the promotion materials needed, including agreements with travel companies.

Another way to foster loyalty is through the use of referral cards developed by Sellmore. The cards are given to subscribers; the gas station credit card-type cards are punched for each customer referral that leads to an activation; the subscriber gets a three-day, two-night hotel stay for five referrals. This way, the travel can be used as a year-long promotion and to build top-of-the-mind brand name awareness, Wills said. Carriers can pair better travel promotions with higher rate plans - customers are prone to sign up for the lowest plan, but a better travel destination may discourage this. Travel can be used to encourage customers to make a longer contract commitment.

Wills said the trips cost carriers between $25-$125; these costs can be mitigated by charging for the phones. Research has shown consumers perceive no difference between a free phone and a $19 phone, Wills said. Sellmore has an agreement with Radisson Hotels and is working on one with Carnival Cruise Ships.

Industry analysts agree with Wills that the era of phone giveaways is coming to an end. Giga Information Group Senior Analyst Colin Messenger said during a recent Giga-sponsored teleconference that giving away phones hurts carriers more than anything (MPN, July 29).

"I do think the free phones [promotion] sounds like a dead-end way the cellular industry reached and have to get out of," said Elliott Hamilton, director-wireless consulting for MTA-EMCI. He added that most people realize they end up paying for the phones in other ways and would rather pay for the phones up front. He said conversion to digital will give carriers the opportunity to get away from the phone giveaway/subsidy approach.