On Tuesday 11th last week, a suit challenging the merger between T-Mobile and Sprint was rejected. In his ruling, Judge Victor Marrero of United States District Court in Manhattan described T-Mobile’s business strategy as “undeniably successful” and “pro-consumer”. This post reviews how a decade of challenging the status quo paid off for T-Mobile.
First, let’s remind ourselves of the state of play way back in 2011. The two big dogs of U.S. telecommunications, Verizon and AT&T, were fighting it out for top slot, with T-Mobile and Sprint similarly matched but significantly smaller. This was a battlefield where scale and technology favoured the big companies and customer service was a necessary evil, a cost to be minimised, not used for competitive advantage (perhaps because of analyses like the one referred to in this post).
In October 2012, MetroPCS reached an agreement to merge with T-Mobile USA and the following year the two companies combined to create T-Mobile US Inc. and the Un-carrier strategy was launched. The basic idea behind the Un-carrier strategy was to identify every customer experience pain point that existed in the way the telecom industry did business and remove it. And, unlike NAB’s break-up with other, big Australian banks a couple of years earlier, T-Mobile followed through into action.
Fed up with being locked into a two-year contract with one of the big companies? OK, we won’t do that. You want to get that new phone at the same price as a new customer? OK, you can. You want to break your existing contract with the competition? OK, we’ll pay your termination fees. Whether it was free international roaming, not counting streaming music toward data usage or, more recently, eliminating service and access fees to make pricing more transparent, one by one, customer pain points were eliminated.
One might think that simply removing the need for a contract might have people flocking to T-Mobile’s door, but I suspect three factors helped slow the influx of new customers;
T-Mobile’s salience and reputation needed to improve,
Not every customer suffers from or is motivated by the same pain points,
When a 2-year contract is standard it takes time for people to switch.
T-Mobile’s customer base and revenue has grown pretty steadily since the Un-carrier strategy kicked off with the Simple Choice plan back in 2013 but, successful though the strategy has been, the time taken underscores the long-term nature of success in categories like telecom. It takes time for people to realise that the playing field has changed, and that there is an alternative to business as usual.
Looking at Kantar’s BrandZ and examining T-Mobile’s evolution through the lens of our Meaningfully Different Framework it becomes obvious that just establishing wider credibility for the Un-carrier claims took time. From 2013, more people were willing to admit that T-Mobile was different from the competition, but it took a couple more years for growing relevance and affinity to make the brand meaningful to a wider audience. Salience, which had been low relative to the category average grew strongly initially and then slowly gained ground, despite the efforts of Verizon and AT&T to drown out the upstart.
T-Mobile’s marketing has been distinctive and noisy, which it needed to be in order to break through the clutter. Led by cheerleader-in-chief, John Legere, the company’s CEO, T-Mobile’s communications stood out from the crowd, not least in the consistent use of the company’s signature magenta-pink colour. Over five years of use now means that the colour is a brand asset that many will instantly associate with T-Mobile. As a result, the company seeks to keep the colour unique to the T-Mobile brand.
As T-Mobile has made its difference salient and meaningful to more people, the proportion willing to say they would consider the brand has increased. Expanded distribution, improved coverage and the removal of barriers to switching have allowed the brand to more easily turn that consideration into new accounts. The Un-carrier strategy has undoubtedly been successful. The next big question is whether the merger will be equally successful. But what do you think? Please share your thoughts.
Written by Nigel Hollis, Executive Vice President and Chief Global Analyst at Kantar’s Insights Division.