When Mobile Marketing Fails: Tracfone vs. Virgin Mobile

Tracfone pitches itself as a service for users who don't want to worry about how much money they are spending on wireless. In terms of segmentation, Tracfone intends to appeal to users who are credit-challenged or have low disposal income. Hence the "No Bills, No Contracts, No Surprises, You're in Control" theme.

 

Virgin Mobile provides prepaid-only service,  but with a distinctly youth-oriented flavor, as it is marketed as a phone service for those 14 to 34. Virgin pays more attention to handset and content services to wrap around its service.

 

Of course, marketing pitches are one thing. Customer service is another. And users make up their own minds about how something can be used. A recent analysis of U.S. wireless customer experience (users who had to interact with their providers in some way) shows Virgin Mobile at the very top of the overall rankings, while  Sprint and Nextel brands are at the very bottom.

 

In terms of "ease of use," Virgin is at the very top. But Tracfone is just two percentage points below Virgin. As an industry, mobile providers aren't considered "enjoyable" where it comes to the quality of the interaction, though. Every carrier scored in the "poor" category

 

In terms of "usefulness" of the interactions, Virgin, T-Mobile and Tracfone are at the top, considered "excellent."

 

A separate analysis by Compete.com analyst Elaine Warner examined where wireless users were looking, in terms of competitor Web sites.

 

TracFone, a prepaid wireless carrier with over nine million active subscribers, has been known for its high customer retention rates among prepaid carriers. Compete.com found that TracFone customers are more than three times more likely to visit Virgin Mobile’s Web site than the average American Internet user.

 

TracFone users also are more than three times as likely to visit the boostmobile.com site and more than 2.5 times as likely to visit the shopalltel.com site as the typical Web surfer.

 

 

"Since the third quarter of 2006 TracFone online customers’ consideration of Virgin Mobile has more than doubled," Warner says. "There is a distinct upward trend here and it indicates that TracFone is increasingly exposed to Virgin Mobile."

 

For Tracfone, "this is an alarming trend," she says.

 

The point is that, although both Virgin and Tracfone are in the prepaid segment of the mobile market, each claims to be targeting a different demographic within that segment—and different demographic niches within the broader wireless business. But the Compete.com data suggests all that "positioning" goes only so far.

 

For starters, the "low discretionary income" and "14 to 34" segments overlap. The other observation is that members of one demographic become members of another. One can note simply that college students tend to have relatively low discretionary income.

 

But they are not permanently in that demographic. It is a transitional stage of life and some users who found prepaid a useful service useful when younger, particularly if they are not paying for the service, will sort themselves into different use segments when they graduate and start work.

 

Also, where prepaid might have made sense even for users not in a credit-challenged demographic (phones for 13-year-olds come to mind), as a way of controlling usage, the advent of family plans has blunted the attractiveness of that approach. Up to a point, buying a big enough family bucket accomplishes the same goal. The paying party can buy a plan with a hard limit on usage, or buy a plan large enough that the usage is contained within the overall family minutes budget.

 

Also, despite the differences in positioning, word of mouth makes a difference. Users can "learn" from their friends that one provider really is easier to deal with when a problem occurs. They might also conclude that if the terms, conditions and prices are fairly similar, that one provider has better phones, or that the service includes some better features.

 

Comparing Tracfone and Virgin Mobile, Virgin offers text messaging bundles where Tracfone does not. And on either the "pay as you go" or monthly plans, Virgin Mobile offers more minutes of talk at the same price points.

 

The other observation is that even when a service markets itself one way, users might ignore the positioning. There's a difference between telling a story to create a position, and the actual positioning consumers might decide a firm occupies. Granted, boost mobile, Virgin Mobile and Tracfone all are prepaid services, and any industry observer will say the demographics are different from those of postpaid users.

 

But that doesn't mean the positioning within the prepaid portion of the market is any sort of firewall. As the Compete.com data suggests, users will ignore the positioning. That might be especially true if service quality or customer service issues arise.

 

By definition, prepaid users can switch as soon as the present allotment of minutes is used up. Sure, there is the sunk cost of the phone. But unless the phone has been purchased fairly recently, that isn't much of a barrier to churn behavior.

 

The point is that market positioning gets a service provider only so far. People can look past the positioning and ascertain various services are functional substitutes. And that is what Tracfone customers seem to be doing.