By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Back in the early 90s, when we first began consulting with the wireless industry, a carrier client of ours was talking about one of its retail dealers — a well-known, large chain of electronics stores.
After complaining about the caliber of the chain’s employees and the condition of its stores, he threw up his hands in frustration and said, ''They’re an embarrassment to us.’’
This chain was then, and is now, among the top five wireless retail outlets in the United States.
Some carriers may still suffer ambivalence about their dealers. I have heard them called the enemy and the more vulgar term for prostitutes.
I used to say, “The first carrier to appreciate who their dealers really are and what makes them tick wins.” But now I say, “The first dealer to appreciate who carriers really are and what makes them tick wins.”
Speak the language your carrier speaks. I took part in a retail panel discussion on the last day of an industry trade show. One of the panelists, Scott Bauhofer, a merchandising VP for Best Buy, titled his presentation: Retailers are from Venus; Carriers are from Mars. He talked about the gap in communications between these two key players. Bauhofer’s appeal to carriers: Understand the retailer’s business and language.
When might you expect this understanding to take place? Here’s a clue — you may have a long wait. Here’s another clue — To gain influence with carriers, understand their business and language.
Esteemed management consultant, Peter Drucker, says this: It is the recipient who communicates … [The recipient] can only perceive what [he or she] is capable of perceiving [based on his or her experience] … One can only communicate in the recipient’s language or in his terms.
So if you seek to communicate more effectively with carriers, which terms might help you get through to them? Gross profit? ARPU? Inventory turnover? Churn? Cost of goods sold? COA? CPGA? Sales gain? Net adds?
To help you use their terms — the words and phrases carriers use to identify the key results areas that matter most to them — consider the mini glossary at right.
To get what you want, help carriers get what they want.
If you can understand the six terms above, you may gain empathy for the carrier’s dilemma — eroding ARPU, high COA, and long payback periods. By the time customers become profitable, they may switch to the competition’s service. Is it possible you might gain influence and earn their attention if you can work in partnership with the carriers to help resolve their issues? As they say about chicken soup and colds: “It couldn’t hurt.” With this in mind, here’s what carriers need from retailers:
Distribution: locations and store environments that make it easy for customers to buy their wireless products and services.
Knowledgeable salespeople:personnel who can and will (a) sell wireless voice and data products, services and applications to qualified customers, and (b) answer customers’ service questions.
Visual merchandising: display of the service provider’s service story and products.
Advertising support and participation.
CompanyNameOperational compliance: conforming to the carrier’s standards of processes, practices, policies and procedures.
Can we define an agenda where both you and your service providers realize payoffs? I asked Michael Misuraca, president of American Wireless, the first and one of the largest wireless master agents in North America, for some advice. His answers to my questions helped form the following rules of engagement:
What, if any, payoff might you expect if you sell more higher tier service plans? ARPU is the carrier’s sweet spot and your payoff is twofold: a higher commission and possible residual income down the road.
Most higher priced rate plans offer you a greater return on each sale, but applied conscientiously over time, you’ll increase your long-term profitability substantially.
The benefits for your customers are: They gain more minutes (weekends – off peak); they enjoy lower per minute charge; and they usually pick up additional features, such as voice mail, call waiting, and call forwarding. The corollary to this, of course, is that if you help your customers get more out of their service, they’ll tend to stick with the service and stick with you because you earned their business.
Since higher ARPU impacts the carriers’ perceived worth on Wall Street, the benefit to the carrier is this: as the investment community sees the carrier acquire higher value and longer term customers, this tends to drive the stock price up.
What, if any, payoff might you expect, if you sell more enhanced services?
Believe it or not, carriers like retail operations that are able to sell and add on these types of services. This drives airtime usage and results in higher ARPU.
Your compensation may be a one-time payment equal to two or three times the amount of the service. For example, if the cost of a feature is $2.95 per month, you may earn an additional $6.00 to $9.00. It doesn’t sound like much, unless you realize that this is pure gross profit. You have no extra cost of goods attached.
Try this exercise — multiply $9.00 by 10. Multiply this by 30. Multiply this by 12. What do you get? Would it surprise you to know that these enhanced services put $32,400 of new gross profit into your pockets? That’s your potential take in a year if you promote and sell 10 enhanced services a day. And please keep in mind — the sale of enhanced data service may offer even greater commissions.
Does it make sense to direct your salespeople to focus on every opportunity possible to increase your bottom line? Is the effort worth it?
What, if anything, might prevent you from selling higher tiered service plans with enhanced services? Whether they’re recommending a better rate plan or enhanced services, a little old fashion salesmanship and courtesy increases your people’s chances to upsell.
Unfortunately, lack of experience on the sales floor can impede your store’s progress. The fact is, many wireless retail salespeople have not reached the level of maturity that enables them to get close to their customers.
Another factor that may limit the predictability of your success is the absence of reinforcement. If you say to salespeople, “We need to sell more enhanced services,” they will hear your words. If you teach them how, they will nod their heads. But to get them to do it, you must measure their productivity and let them know if they’ve met your criteria. Reward performance that meets your expectations; correct performance that falls short. Set goals for selling enhanced features, then hold your people accountable for achievement.
Carriers like it when you do. They even monitor your progress. We have seen reports that break out your attachment ratio by categories such as, percent post-paid, percent pre-paid, percent data, and percent enhanced services.
What, if any, payoff might you expect if you attract and retain more qualified buyers? One of your customer is shocked by her first bill. Why? Who is to blame? Had her salesperson properly set expectations, is it possible that there might have been no shock at all? It’s probable, but the damage has been done. So the first impression the customer gets of the carrier is a bad one. Let’s face it: When a customer receives their very first wireless bills and they are not what they expected, they are not going to be happy with any carrier or the establishment that sold it to you. And this is key.
Under the terms of a residual contract, loyal customers produce long term gains for wireless retailers. Some prefer a “net present value” contract instead. In this case, you earn more commission up-front with no residual. Master agents offer the latter, since they are able to aggregate their production and offer this sort of option to their sub-agents. Either way, the more service or services your customers use and the more airtime revenues this use generates, the more you earn.
What, if anything might prevent you from attracting and retaining more qualified wireless buyers? Qualifying the buyer works in both directions. While you’re trying to attract qualified buyers, they in turn are qualifying you. Their judgment starts when they walk in your door. How does your store look? Is it up to snuff and are your marketing efforts geared towards high-use customers? Are you attracting the right customers and does your offer appeal to them? Would you bet your future on what your customers experience when they visit your stores?
Carriers place great value in active customer retention programs. This practice reaches out to every customer that has purchased service and equipment from your stores. It helps to ensure satisfaction and gives you new opportunities to sell your customers additional phones, accessories, and services. You can do this yourself if you have the people and the time to dedicate to contacting every customer you have. If you’re tight on help (and isn’t everyone?), you can outsource customer retention. You may be thinking, “Uh-oh, another expense,” but the financial justification is a healthy return on investment.
Your retention efforts can create new growth business and subsequently increased commissions, reduced chargebacks and improved gross profit.
What, if any, payoff might you expect, if you sell more service? It’s the net subscriber base that pays the bills — the prime component to all carriers’ profitability. The two main factors in growing and sustaining net adds are improved customer retention and increased gross adds. It’s all in the churn numbers. If you want to get your carrier’s attention, increased gross adds are a big part of the equation.
As an example, say your store activates 100 gross customers per month for the next three months for a total of 300 gross activations. Over the same period of time, 10 customers per month deactivate. You no longer have 300 customers and in fact only have 270 net subscribers. One way to offset or get back to the original number of 300 customers is to generate an additional 30 long-term customers. That’s a 10 percent increase in gross activations to achieve a break even for the loss due to churn. If you can do this, you will get your carrier’s attention and increase your commissions.
This article is excerpted from Legum’s 159-page book, “New Profits in Wireless Retailing: How to drive your sales, margins, traffic, and merchandising.” It’s available at the company’s Web site.
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