The recent Consumer Electronics Show (CES) in Las Vegas featured the introduction of a dazzling array of new smartphones, ranging from the new Google Nexus One to improvements in existing offerings by Nokia, HTC and Motorola, as well as new implementations of pocket PCs using upgraded Microsoft software. It is clear from the glowing pronouncements of wireless carriers that they consider the capabilities of the smartphones they offer to be a primary competitive differentiator. This is something I call the "gadget factor" -- the more capabilities a device has, the higher its desirability.
In the long run, though, the gadget factor may be trumped by something more basic: customer service, especially when it comes to smartphone support.
In a recent Stratecast consumer survey, we asked respondents to rate their wireless carriers' customer care. While 40% rated their wireless customer service as excellent, 60% indicated that they considered their provider's service to be less than excellent, and a full 8% categorized their service as poor to very poor.
Combine this consumer perception with the likelihood that dissatisfied consumers who feel they have been mistreated will jump to a different carrier, and you have a prescription for a great deal of churn. This is especially true if one can surmise, generally speaking, that smartphones require much more hand-holding to ensure that customers understand how to use them. And with all the bells and whistles, there are probably more things that can go wrong, requiring even more smartphone support for customers.
The implication for carriers is clear: While glitz attracts, customer care retains, and in the wireless business, it is retention that matters. Since smartphones are usually sold at a substantial discount subsidized by the carrier, it is essential that customers stick around long enough to allow carriers to recoup costs. But even with early termination fees, if smartphone support is bad enough, consumers will quit and migrate to different carriers. With regulators paying attention to such things, of course, there may not be much point in building business cases on the expectation of early termination fees.
As Sprint's experience with phone customer service illustrates, carriers ignore service at their peril. Sprint's customer care -- at one point, largely perceived to be the worst in the industry -- ultimately instigated a hemorrhage of subscribers that still hasn't abated. And even though the Stratecast survey's results indicate that Sprint's customer service support is much better now, the company is still losing subscribers.