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Sprint Hopes to Reduce Churn by Converting Prepaid Users to Postpaid

Sprint
Having identified who their consumers are, Sprint has decided to address their churn rate issue in a strategic way. One way they hope to do this is by converting their prepaid users into long-term postpaid subscribers. And with an almost saturated market like that of the US, the only way Sprint will be able to achieve this is to segment their customer base further more.

As a generalization, Sprint has categorized their prepaid users into three different classes: those who will always go for prepaid, those with credit problems, and those who are still young and hope to establish a credit history of their own. It is, however, important to note that the network has tightened its credit policies for postpaid users in the past 15 months. So how do they plan on lowering their churn rate? It's quite simple. Sprint hopes to lure in the right prepaid users to a more lucrative postpaid plan by giving them customized offerings.

Sprint hopes to go about with this strategy in a scientific manner. Instead of offering random programs for their customers, the company plans to take a look at each customer and upsell a program specific to his behavior. And over time, they can build a billing relationship with Sprint to continue using the program. This also works in Sprint's favor as it turns into an opportunity for them to upsell their customers into their new products and services. So it's a Win-Win situation for everyone.

While this definitely won't happen overnight or in just one quarter, Sprint knows that it's a much needed strategy; especially in a market wherein there is already a decline in smartphone growth and fewer postpaid users. To address this specifically, Sprint has to develop a long-term strategy on how they can capture a saturated market.

And as Sprint hopes to turn its finances around, its executives know they have to focus on their strategy for 2016; which is to reduce costs. This means they will be letting go of things that no longer make sense for this priority. Last Friday, a report on The Kansas City Star depicts that the carrier has already started letting go of employees in an effort to cut $2.5 billion from its budget. Sprint has not given further detail about the job cuts, unfortunately.

Source: FierceWireless

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41 comments:

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  1. Most prepaid users are under the assumption that their $30 a month build a massive network and that postpaid Subscribers are all stupid.

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    1. Economies of scale. If people aren't willing to pay more, the cost of building a network will also fall. Post paid is stupid because most customers think wireless should cost more.

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    2. Postpaid pays the bills, the fixed and variable costs of building and maintaining a network. Prepaid only helps cover the variable costs - not the whole investment. If people don't see extra value in the postpaid service, the network will suffer. And maybe your cheap service will be less cheap.

      Delete
    3. In baby steps I have transitioned from 10+ years of $80 postpaid on AT&T to $0 prepaid on RingPlus. With no loss of functionality and managable loss of geographic coverage. Yes, I was stupid.

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    4. "If people don't see extra value in the postpaid service, the network will suffer. And maybe your cheap service will be less cheap. "

      Competition and technical innovation drive changes that allow perceived value increases for postpaid customers while reducing cost for all users. If not, the flagging carrier deserves to be driven out of business by those that deliver.

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    5. I dont think neither the benevolence of the post paid users nor bargain hunting of prepaid users has any thing to do with why companies build out the network or much less support it. As a matter of fact just because you paid X $ more will not motivate verizon / att to build out their network. There is a different willingness to pay / value that is being offered / demanded and that sets the prices. Sprint was once super profitable just because of MVNOs. It was because of negligence & mismanagement it is in the gutter. Similarly Southwest could make a great business model out of cheap flights vs all the majors (att & verizons of airlines) have filed for bankruptcy multiple times

      *Sorry for the double post originally meant to reply here!

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    6. $30 a month might be well sufficient to build a,massive network. If you compare US charges to those in other countries, you will see that in general we are overpaying by a massive amount.

      Delete
  2. Newflash
    No one cares

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    1. Newsflash: You care, or else you would not have read AND commented.

      Delete
  3. I like sprint because they and to a lesser extent T-Mobile help keep Prices down across all Carriers.

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    1. I personally don't have much use for either due to their substandard "0 bars in most places" networks. ButI want both of them to thrive,get better, and provide the best competition possible.

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    2. You should be please to hear that T-Mobile recently announced they cover 303M POPS with LTE now. With more than 3 weeks left to deploy this year they are well past their plan to reach 300M.

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    3. t-mobile may claim that LTE coverage but I know for a fact in two different states that's he don't have not only don't have LTE but its hard to text out of some of that area and the coverage is sporadic it changes with the weather or something better check it before you buy it

      But yes everybody you can use sprint and tmobile should probably to keep the competition going

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    4. real competition will require the FCC to require mandatory roaming at reasonable rates across all the carriers and having all bands on truly unlock phones for quick changes between MVNO's and the carriers

      But nobody is holding their breath for that one I'm sure!

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    5. POPs doesn't mean as much for MOBILE carriers as geographic coverage does. So the T-Mobile announcements aren't as useful as they could be

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    6. Where I live sprint and tmobile have better service than at&t. I have never tried verizon as they are a rip off. For those people that say that sprint and tmobile have bad coverage, you must live in a shitty part of town or you are the only house with in a 1000 mile radius of a real city.

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    7. Verizon has a far better network, but you pay for that. That's no a ripoff.

      Sprint and T-MOBILE have bad coverage... really, none at all, for most of the Lower 48. If you think that is all ghetto and fake cities...

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  4. Sprint should have gotten their act together when the market wasn't completely saturated, 10 year olds can afford Metro pcs/virgin mobile.

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  5. News flash, cut executive compensation first. It is they who failed the company. Sprint-Nextel? 30 billion dollar writedown. Nascar cup series? Ending in 2016. Stock prices? Tanking since 2014.

    Dale

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    1. The executive compensation argument doesn't fly. Do the math: take the entire CEO payment and average it out over phone bills. See how little you would save.

      It's like the Occupy argument about the riches held by the Walton family of Walmart. Take away all their money and you have enough to give each Walmart worker no more than a one-time $3000 bonus. These forced redistribution arguments never add up.

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    2. Read the news, flash. Sprint has already fired most, if not all of the senior executives who created and carried out Network Vision. They hired new ones. Cutting executive pay means the good ones will leave, crippling Sprint. Not smart, and Son is very smart. He wants a return on his $20B investment, not to watch it flushed away by gutting his new team.

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    3. Of course the arquement doesn't fly when it comes down to financial consideration but I didn't say it would either. Think of it as a child who has done something wrong, and for punishment, you take away his allowance- hoping eventually they learn their lesson.

      Dale

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    4. The 'children' you would punish have already been fired. They won't be around to resist the new plans.
      I think a more apt analogy for Sprint cutting executive pay now is: 'Shooting yourself in the foot.'

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    5. http://www.fiercewireless.com/story/sprints-claure-gives-himself-3-5-years-turnaround-after-1-year-job/2015-08-25

      "Earlier this month Sprint extended his contract until May 31, 2019, and said he will get 10 million shares of company stock if his turnaround efforts can push Sprint's stock to at least $8 per share and keep it there. Sprints stock is now at $4.76 per share."

      Let me get this straight. If he pushes the stock back up to $8 dollars he gets compensated and that's after the company bled value from $14 under his watch?

      Time will tell if they can right the ship. I bid you well.

      Dale

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    6. Re "...after the company bled value from $14 under his watch?"
      S was $5.76 on when Claure became CEO on 8/11/14. It hasn't been above $14 since 2007

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    7. Dennis, That was the price I saw when I looked online yesterday. My apologies if it is (was) incorrect.

      Dale

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  6. I dont think neither the benevolence of the post paid users nor bargain hunting of prepaid users has any thing to do with why companies build out the network or much less support it. As a matter of fact just because you paid X $ more will not motivate verizon / att to build out their network. There is a different willingness to pay / value that is being offered / demanded and that sets the prices. Sprint was once super profitable just because of MVNOs. It was because of negligence & mismanagement in is the gutter. Similarly Southwest could make a great business model out of cheap flights vs all the majors (att & verizons of airlines) have filed for bankruptcy multiple times.

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  7. I'm missing how it's a Win-Win situation for everyone. If the customer gets more and/or pays less, isn't that less profitable for Sprint?

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    1. Yes it is less profitable (still a profit) for sprint or verzion or ATT (why do they offer prepaid as well?). Reasons could be many but it is primarily about segmentation. And specifically in sprint's case the post paid base has lots of credit issues (which could create even larger losses). They did / do take risk on lots of "new to credit" people. Sprint was the only carrier willing to initiate a new line when i came here as student 15 years ago and did not have SSN etc.

      There is a certain scale that you need to maintain to survive in most industries. Prepaid services, MVNOs etc help to provide that scale. On a prepaid network /brand you are getting less customer service, no roaming etc but you are generating revenue. Companies can only survive in the long run if they can either innovate or become more efficient. Sprint is just running out of time to reach there.

      Delete
    2. It's a win for Sprint prepaid users who get targeted, bargain offers to move up to postpaid and get more extras that appeal to them.
      It's a win for Sprint, because prepaid user who move up to postpaid pay more each month, helping Sprint pay off its massive debt and densify their network by deploying thousands of small cells.
      It's a win for all other Sprint users because the network will continue to improve without raising their plan price.
      If the plan is credible, it's a win for investors via the stock price, and combined with cost-cutting at Sprint, it helps Sprint borrow more money on better terms.

      Delete
  8. Yeah...another great Sprint idea...

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    1. I agree that it's another great idea. It is costing Sprint a lot of money to gain new customers; e.g., cut your bill in half, big phone discounts, etc. Anything they can do to reduce customer losses will save them big money in finding replacement customers. Moving prepaid customers that have the right usage and payment history up to postpaid by offering a bargain on extra services that match their usage is a great way to do that. These customers will be less likely to leave Sprint.

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  9. I chose prepaid because I don't have to pay the taxs on postpaid that is almost 20 dollars a months. I hate taxs.

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    1. All prepaid users pay taxes. If not disclosed, they are hidden in the prices you pay. Ignorance is bliss for many.

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  10. I chose prepaid for several reasons: (1) I don't need the latest and greatest phone, (2) Less or no taxes and fees, (3) The freedom to easily change carriers if quality of service drops, and (4) I don't travel internationally so roaming isn't a big deal.

    The savings on prepaid is substantial and the difference between post and pre paid is almost none. Gone are the days of expensive per minute prepaid plans. I use MetroPCS and I think I have the better deal at 60.00 per month.

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    1. Single lines perhaps, but in know many family plan members that pay $40 avg. And that includes an new iPhone.

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    2. I agree with Zach. My daughter and her husband are Sprint postpaid 'lifers,' with an old Framily group plan that gets the full discount. They pay $25/month per line plus $20/month per line for unlimited service. $90/month for two unlimited lines plus $13 taxes. Less expensive than prepaid, and they get free voice and data roaming and data priority on the Sprint network. Sprint never charges them when they exceed their roaming data allotment. And my son-in-law is on an overseas assignment, enjoying the free text and data roaming (he does not need the 20c/minute voice roaming since their iPhone 6 models have WiFi calling).

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    3. Latest Sprint postpaid Framily bill for 2: $25+$20 unlimited =$45 x 2 = $90. $10 Sprint TV on one line. $3 x 2 employer discount: -$6. Taxes: $3.50 total. Sprint surcharges: $$6.43. Total bill: Under $105 with all postpaid perks like data priority and roaming. I don't think it's possible to match this grandfathered plan on prepaid or postpaid service with any carrier.

      Delete
  11. This is off subject but boost has announced unlimited music streaming. Does postpaid sprint offer this?

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    1. Sprint does not. Some analysts argue that music streaming with no data charges is at odds with the FCC's net neutrality principles. The agency's guidelines are intended to prevent wireless carriers and other ISPs from unfairly transmitting their Internet traffic over other providers' traffic. The FCC's net neutrality rules are facing challenges. A U.S. appeals court is weighing whether the FCC overstepped its bounds when it classified wireless carriers and other broadband providers as "common carrier" service providers, making them subject to net neutrality laws. Source: Fierce Wireless

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  12. How about Boost Mobile news on Music Streaming. --> http://newsroom.boostmobile.com/press-release/products-offers/boost-mobile-adds-unlimited-music-streaming

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