Rate-Plan Wisdom

With so many rate plans out there, how do you make yours stand out?

Whoever said that more choices are better never shopped for wireless-service plans.

In major metropolitan markets, as many as eight providers compete with up to 100 different service plans. This plethora of plans poses problems for providers, too. Competition has reduced airtime prices significantly, making it more difficult to distinguish your plans from those of competitors.

But price still is important. In a 1998 Yankee Group survey of 781 wireless users, 35% of consumers said a plan's basic cost was the most important factor.

Dave Cash, executive editor & vice president of content for Point.com, a Web site that lists service plans in top U.S. markets and offers advice, said comparing rate plans has never been more fun.

"It's a fun area in the wireless market because it's popular with customers," Cash said. "Carriers are jockeying to maximize what they can offer and find offers that are more competitive than the next guy's."

Know Thy Customer
The wireless market is mature, and today's customers are adept at comparing rate plans.

"More folks are into their second, third, fourth or fifth phone and second or third service plan," Cash said. "They know the ropes. They're not necessarily looking for the lowest price. They're looking for the right combination."

"Consumers today are intelligent, but we'd rather see intelligent consumers because they'll make good decisions," said David Friedman, U.S. Cellular vice president of marketing.

Friedman said U.S. Cellular looks at competitors' rate plans in the United States and overseas for good pricing models, and it refines its pricing strategy by talking with customers. Sometimes, however, it's difficult for customers to tell you what they want.

"It's like a police (sketch artist): 'I'm going to draw this picture. Do you want a bigger nose or a smaller nose?'" Friedman said. "They can say, 'We want a smaller nose and bushier eyebrows,' and they can do that with the rate plans. They can take a look at the elements and say: 'We don't like this. We like that.'"

For example, U.S. Cellular developed its FarmFlex pricing plan for consumers in rural areas.

"We developed a specific rate structure for them so that in the planting season, they'd get one rate, and in the off-season, they'd get a different, lower rate," Friedman said. "We recognize that customers are segmented, not only based on psychodemographics but also based on travel patterns and how much they want to spend."

Powertel simplified the pricing structure for consumers with "anytime" minutes, said Tom Konz, director of corporate marketing. Its Personal Power Plans range from $20 for 100 anytime minutes up to $90 for 1,000.

"We built a pricing structure, our standard/Personal Power rate plans, that for a monthly fee gave a generous amount of minutes that can be used anytime," Konz said. "As the market evolved and competition followed our rates, we added long distance on our higher-end rate plans."

Know Thyself
Before selling anything, you need a good understanding of the consumer's needs and how you can meet them.

"If you were to go into a store and say, 'Give me your best deal,' we'd say, 'We have a $19.95 special,'" Friedman said. "It may not be the right plan for you; the geography may be too small; the minute bucket's too small or the equipment attached is not right. When we get that understanding, then we can match you to the plans that we have."

Friedman said it's important to be up-front about pricing.

"We clearly delineate the pricing, the buckets and the features so it makes it easy to make a decision," he said. "We're trying to make sure the customer has the right plans, the right products and the right service, and they feel good about this company."

Powertel asks potential subscribers where they expect to live, work and play and how they'll use the service.

"We try to get a feel for how their usage is going to be distributed: using it in the market, in the Southeast, the long-distance portion and roaming outside of the Powertel footprint," Konz said.

Powertel also tries to determine which enhanced features might add value for customers.

U.S. Cellular tailors its rate plans to individual markets because different markets have different needs. For example, south Texas is more of a cash-oriented society, so prepaid may be a better deal there, Friedman said.

"Because of the amount of minutes south Texans use, we want to emphasize the higher rate plans," he said. "Because they travel a lot, you'll see 'coverage bigger than the state of Texas' in our ads."

The provider also gives customers three price points.

"We try to do price-point advertising, so it's just not 'come in and here's a $19.95 plan,'" he said.

Through its research, U.S. Cellular found out that price alone doesn't mean as much as it used to.

"The industry unfortunately has conditioned people into looking for the word 'free,'" Friedman said. "It's difficult to make money at free."

Know Thy Competitor
The only thing as important as understanding customers is understanding your competitors. Because customers shop around, knowing the market and the competition enables you to answer their questions and, hopefully, prevent them from going to your competitor.

"By understanding the competition, our sales reps can clearly explain the advantages and disadvantages of our plans vis-a-vis the competition," Friedman said. "A lot of the sales managers in the front line are tasked to understand a specific competitor."

U.S. Cellular's field management also receives competitive analyses of its competition including their pricing and strategy. Such information, Friedman said, helps salespeople know how to sell against competitors and understand how your value proposition compares to the competition's and where you're strong or weak.

Powertel also provides its salespeople with competitive analyses. If a customer walks into a Powertel store with a Sprint PCS ad offering 300 minutes for $30, the salespeople are familiar enough with that particular rate plan to sell Powertel's features, service and value against it.

"The customer expects an intelligent salesperson," Konz said. "We want an intelligent salesperson to be able to communicate how Powertel can better serve (him). From an advertising standpoint, there's just so much you can put into a 30-second TV ad.

Konz said it's important for a salesperson to understand not only competitors' basic rate plans, positioning, and pros and cons, but all of the promotional elements, as well. To help its salespeople, Powertel has an employee Web site that contains rate plans, handset prices and other information about every competitor in every market. Powertel employees also regularly "secret shop" competitors' stores.

"It's basically getting the salespeople to be cognizant and aware of the presence of their competition," Konz said. "Any good salesperson will know their competition inside and out."