Consumer Cellular Accelerates Retail Rollout

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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.

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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