Making Customers Stickier?
Smartphones are expensive so putting down somewhere between $500 and $1,200 for a new phone can be a strain for many that find themselves with a damaged phone or one that barely works, so the good folks at US carriers give buyers the option of paying full price for the phone at purchase, or spreading payments out over what is usually a 24 month or 30 month period, encouraging folks to look at the purchase of a new phone or an upgrade as a minor expense added to their carrier bill. The deal helps the customer, but also tends to keep customers from moving to another carrier, as the entire balance comes due if the carrier account is closed. Carriers have offers that pay off your previous phone contract balance if you switch, but there are always ways in which the new carrier gets paid back for that up-front incentive, usually with an extended contract.
All of these financial mechanics are in place to keep customers from moving from one carrier to another, so a new phone payment plan adds to the user’s tendency to stay with that carrier at least until the phone is paid off, which helps carriers with ‘churn’, but it looks like Verizon (VZ) has just added itself to the list of carriers that want to make you even stickier, by extending that new phone payment contract to 36 months. No longer does the customer have the choice of a 24 month or 30 month contract, given only the 36 month payment schedule or the option of paying full price. Of course you can pay off the entire amount at any time during the life of the contract, but you cannot pay more than the normal monthly amount, even if you want to shorten the contract length, and once you pay off the entire amount any promotional credits you were receiving will end.
To be fair, AT&T (T) also has such requirements, and existing Verizon contract terms remain in effect despite the change, but the new terms apply to all Verizon devices including tablets, hotspots, laptops, and smartwatches, and if you damage your phone during the payment period and don’t have a protection plan, you have to either pay off the damaged phone in full or continue to pay for the damaged phone for the entire contract life, even if you have to but another phone. Its all a numbers game for the carriers so a longer contract means a greater return/user. Caveat Emptor… read your contract before signing…
All of these financial mechanics are in place to keep customers from moving from one carrier to another, so a new phone payment plan adds to the user’s tendency to stay with that carrier at least until the phone is paid off, which helps carriers with ‘churn’, but it looks like Verizon (VZ) has just added itself to the list of carriers that want to make you even stickier, by extending that new phone payment contract to 36 months. No longer does the customer have the choice of a 24 month or 30 month contract, given only the 36 month payment schedule or the option of paying full price. Of course you can pay off the entire amount at any time during the life of the contract, but you cannot pay more than the normal monthly amount, even if you want to shorten the contract length, and once you pay off the entire amount any promotional credits you were receiving will end.
To be fair, AT&T (T) also has such requirements, and existing Verizon contract terms remain in effect despite the change, but the new terms apply to all Verizon devices including tablets, hotspots, laptops, and smartwatches, and if you damage your phone during the payment period and don’t have a protection plan, you have to either pay off the damaged phone in full or continue to pay for the damaged phone for the entire contract life, even if you have to but another phone. Its all a numbers game for the carriers so a longer contract means a greater return/user. Caveat Emptor… read your contract before signing…
RSS Feed