Out with the new, in with the old

Sometimes it seems that carriers are so determined to attract new customers that they ignore their existing subscribers in the process, which makes the recent introduction of Virgin Mobile UK's Pay Monthly program so novel.

According to Virgin Mobile, most handset subsidies are repaid within the first year, so when a contract expires, the carrier will now either cut that subscriber's rates in half or give them a new phone if they renew their service for another year.

While many U.S. operators offer customer retention incentives, like Cingular Wireless' Rollover Minutes (which lets users sock away unused airtime for subsequent months), Virgin Mobile UK is taking a far more aggressive approach, offering subscribers tangible financial benefits in exchange for their continued allegiance. Money talks, which is why carriers so often attempt to lure new customers via bargain offers, but money speaks just as loudly to existing subscribers, who are rarely if ever offered similarly sweet deals once they've signed on the dotted line. This schism is even more absurd when taking into account the high costs of acquiring new customers--rewarding the loyalty of subscribers already on the books appears far more sensible.

Of course, a Pay Monthly-type plan is unlikely to cross the Atlantic anytime soon, given the impact of price cuts on all-important average revenue per user numbers. But if U.S. carriers were to reduce their handset subsidies and, by extension, trim the cost of new customer acquisition, they could offset whatever hits their ARPU suffers in the bargain. In the era of wireless number portability, traditional carrier mathematics no longer compute--loyal customers, not new sign-ups, are where the true value lies. After all, failing to keep your old customers happy only means they're going to become new customers for someone else.

E-mail me at jankeny@primediabusiness.com.