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Consumer Cellular Accelerates Retail Rollout

11/14/2011 09:20:53 AM Eastern

Portland, Ore. - MVNO Consumer
Cellular, which targets the 50-plus age group with an unusual no-contract
postpaid service, is making some big changes in distribution and product
selection.

Marick

In handsets, the company launched
its first smartphone, the $165 Motorola Bravo, which is also its first 3G
phone. In 2012, the company will make the switch to an all-3G lineup and expand
its smartphone selection, CEO John Marick told TWICE. The company is targeting
three to four smartphones next year out of about six to eight total handsets.

In distribution, the company is
expanding beyond its direct-to-consumer roots by rolling out sales through
online and brick-and-mortar retailers, having launched its postpaid but
no-contract service and handsets through 800 Sears stores midyear as part of a
nationwide test following a 30-store West Coast test in 2010. This month, Consumer
Cellular added 826 Walgreens stores in Florida as a test.

Consumer Cellular service is also
available through the Sears and Walgreens online stores.

The Sears test was successful, and the company's products
will be integrated into Sears's in-line displays in March 2012, Marick said.

The retail expansion followed the
company's first retail foray in 2010, when it entered select RadioShack
franchise stores. The MVNO is currently in 265 franchise stores.

For its retail expansion, the
company is targeting national retailers because most of the company's
advertising has been national, Marick said, pointing to ads in AARP's magazine,
Reader's Digest, other print publications targeted to the 50-plus market, and
national cable-TV networks. The company ramped up TV advertising in 2010. It
also does direct mail.

The over-50 market will account
for a third of the U.S. population by 2013, Marick noted.

Consumer Cellular launched in
1995 as a direct-to-consumer marketer to enable it to grow nationally in a
cost-effective manner, Marick said, but the MVNO is now heading into retail to
reach consumers who prefer to buy in stores, he said.

Mainly through its direct sales,
the company already enjoys more than 700,000 subscribers and projected 2011
revenues of $185 million.

With its retail expansion, the
company forecasts 2012 sales of $250 million, 900,000 subscribers, and an
employee count that will grow to 700 from 2011's 450. That compares with 2005
revenues of $17 million.

When it launched in the
mid-1990s, the privately held company targeted what were then known as cellular
"convenience users" in a market dominated by business users and wealthy consumers.
A few years later, Consumer Cellular shifted its focus to target the 50-plus
demographic with products and services appealing to low-usage consumers who are
not early adopters. That includes simple affordable plans starting as low as
$10/month for users who are nearing retirement and are looking to control costs,
he said. These consumers also don't need unlimited talk or high-data-usage plans
because their children have left the nest, he said.

In an unusual strategy for
carriers and MVNOs, Consumer Cellular offers only postpaid no-contract plans,
appealing to older consumers who have good credit but don't like contracts,
Marick said.

Other strategies targeted to this
group include the ability to switch to lower cost plans without penalty. In
contrast, major carriers let subscribers switch plans during a contract only to
a more expensive plan and require them to recommit for another two years.

Major carriers, he noted, push
smartphones and high-usage data plans to generate ARPU, whereas the MVNO "works
more in partnership with subscribers," he contended.

The MVNO's targets also want an
added level of customer support that carriers don't give, so the MVNO offers a
no-risk 30-day/30-minute trial during which consumers can return their phone
without paying for usage. Customers also get their $35 activation fee returned
and a mailing label so they incur no costs to send the phone back.

The risk-free trial period goes
to 45 days for AARP members, who also get a 5 percent service discount.

Although individual carriers
offer some of Consumer Cellular's benefits in their postpaid or prepaid
services, none delivers all of the benefits in one package, Marick contended.

Another selling point is the use
of U.S.-based customer service reps, he said.

In 2012, Consumer Cellular will
focus on targeting its marketing and advertising messages to different niches
within its target audience, Marick said. He noted that AARP, for example, has
different versions of its national magazine for different age groups.
Similarly, Consumer Cellular has one large-button phone with high-brightness
screen targeted to people ages 65 and older.

Although the MVNO sells phones at
a subsidized price without contract, the company believes it has reduced its
risk through its service plans and service policies. The company's churn rate,
despite lack of contract, is less than 2 percent, lower than typical prepaid
churn rates of 3.5 to 5 percent but only slightly higher than the postpaid
churn rates of 1.25 to 1.5 percent of leading carriers AT&T and Verizon
Wireless, Marick said.

The company also reduces its risk
because it subsidizes its handsets less than postpaid carriers do.

The company offers Nokia, Samsung,
Doro and Motorola brands from free to $165 on the AT&T network.

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