T-Mobile: If You Love Your Customers, Set Them Free
CEO John Legere was determined to disrupt an industry that was practically synonymous with customer frustration. His decisions would turn a “stupid, broken, and arrogant” industry on its head, and the reverberations would benefit customers for years to come.
In recent years, T-Mobile has illustrated that a win for the customer can also be a win for the business. Think back to 2012 when it seemed that death was the only surefire way to get out of a cell phone contract. Those early termination fees (the dreaded ETFs) could cost up to $350. The odds of hearing a friend grumbling at a party about his wireless carrier far outweighed the odds of a positive anecdote. The industry was, in the words of one insider, “stupid, broken, and arrogant.”
That insider was John Legere, the energetic, unfiltered CEO of T-Mobile, who is known for unabashedly dropping the F-bomb and stirring things up with competitors. He spoke those words at a press conference in 2013, and they were reported far and wide. Just a few months earlier, T-Mobile launched its rebellious campaign as “the Un-carrier” when it banished those despised phone contracts along with subsidized phones. The move would turn a “stupid, broken, and arrogant” industry on its head, and the reverberations would benefit customers for years to come.
When Legere spoke those words, it was less than a year after he’d been hired by T-Mobile, and he was determined to disrupt an industry that was practically synonymous with customer frustration. According to Business Insider, when Legere was being interviewed for the job by René Obermann, CEO of Deutsche Telekom, which owns T-Mobile, he was candid: “Right after, ‘Hello,’ I told him that it was my opinion that he could only fail one way in the U.S. I said, ‘Do exactly what you’re doing—nothing.’”
At the time, T-Mobile was the smallest of the four major wireless players in the U.S. (the others are Sprint, AT&T, and Verizon), but under Legere, it proved to be the most daring when it dropped contracts, allowing customers to pay month to month. That decision came after asking customers what they wanted and then listening to them. And it wasn’t just the customers who benefited. Earlier this year, T-Mobile launched a “KickBack” program that credits some customers up to $10 a month for unused data; such an offering would have been unheard of just five years ago. But it’s the latest “Un-carrier” move by a company that has made its name by giving customers what they want—and transforming the industry in the process.
The move to end contracts was a game changer for the telecom industry, said Jill Steinhour, Adobe’s director of industry strategy, high tech, and telecom. “I think T-Mobile knows how to really shake up the industry,” she said. “It changed the dynamics for the other players in terms of how they were going to go to market.”
In 2015, T-Mobile surpassed Sprint to become the third-largest U.S. carrier. That same year, Verizon went contract-free, followed by Sprint and, later, AT&T.
But while customers reaped the benefits of going contract-free, the future became murkier for carriers, which faced a new challenge: customer predictability.
“They no longer understand when their customer base is going to mature,” Steinhour said. “Historically, they would understand when your contract is coming up and then they would know when to engage and market to you, get you to extend or upsell you to a new phone. That key trigger is fading away.”
On top of that, phone subsidies are disappearing. Historically, customers have paid only a fraction of the cost of the phone and carriers subsidized the difference. Starting in 2013, carriers, led by T-Mobile, moved away from this approach and began to unbundle the cost of the phone from the monthly service. Customers now pay for the phone up front or through a monthly installment, resulting in another shift for telecom competitors.
With installment plans to pay for phones came credit checks—which are offputting to customers and a challenge to the carrier. In fact, carriers found that many customers would abandon the purchase when they reached the credit check part of the process. That’s when carriers started to look to third-party data, Steinhour said, which can give insight into potential customers’ credit-worthiness or propensity to purchase certain types of phones and services.
T-Mobile used Adobe Audience Manager (AAM) to build unique audience profiles. In the case of the telecom industry, those profiles can help fill some of the voids that had arisen following the industry changes. For example, say a carrier wants to identify which of its customers may be planning to travel internationally in the next 30 to 90 days, and thus might need an international calling plan. AAM brings together first-, second-, and third-party data that enables the carrier to identify such a segment. The carrier can then target those customers with offers for international plans or products that would appeal to travelers.
When the telecom industry moved away from contracts and subsidized phones, the big four lost their crystal ball and struggled to see who their future customers might be. With audience tools, businesses are discovering another way to connect with future customers by anticipating their needs.
Still Making Waves
Since Legere uttered those critical words in 2013, sending ripples throughout the industry, T-Mobile has launched more than a dozen “Un-carrier” moves, such as ending overages, free international data roaming, unlimited music and video streaming and, most recently, “KickBack.” The rest of the industry has copied some of those moves: Contracts and switching fees have become a thing of the past, roaming charges have decreased, and the customer can now find a plan that avoids overage charges.
Along the way, T-Mobile has become the fastest-growing carrier in the country. When Legere started, the company had 33 million customers. Today, that number has more than doubled. In 2016, T-Mobile scored the highest in customer satisfaction among the four major carriers in the American Customer Satisfaction Index, with its score increasing 6% from the previous year’s result.
In the aforementioned 2016 interview, Legere told Business Insider: “If you ask your customers what they want and you give it to them, you shouldn’t be shocked if they love it.” By putting the customer first, by being nimble, and by working to understand and connect with its audience, T-Mobile helped move itself, and the industry, forward. It’s a lesson that all segments could put to use.