MVNOS, What’s Your Distribution Strategy?

MVNOs What's Your Distribution Strategy?

What ARE The 4 P’s Of Marketing?

Any of us that took an Intro to Marketing class, or learned the hard way by learning how to attract customers through trial and error, know that there are four P’s in Marketing: Product, Pricing Promotion, and Placement.

For most of us in the wireless business, our Product is wireless devices, rate plans, and accessories.

Pricing, while in many cases is dictated by the carrier, allows us to attract a customer and offer a fair price that in turn yields a profit.

What is going to drive the customer’s decision to buy from you right now? The Promotion that is offered. Is it 4 lines for $100? A buy one get one (BOGO)? Or maybe a free handset tied into discounted service. It’s a limited time, gotta buy now offer that drives the customer’s behavior.

Finally, there’s Placement. Placement is sometimes thought of where the product is featured in the store, in an ad, or against its competition. But Placement has a deeper meaning when you look at the wireless telecom model. Let’s turn the 4 P’s of Marketing on its head and look at Placement as Distribution.

Distribution is definitely one of the four elements of the marketing mix. Distribution is the process of making a product or service available for the consumer or business user who needs it. This can be done directly by the producer or service provider, or by using indirect channels with distributors, master agents or retailers.

Many MVNOs have differentiated themselves through their method of distribution or selling to the end user. Remember, there are two things that make an MVNO successful: first, you need a differentiator (something that we discussed in my last article) and then you need a distribution strategy to get your products into the customers hands.

Choosing Your Distribution Strategy

How does an MVNO decide which distribution method to embrace? Here are some thoughts.

In the early days of wireless distribution, the carriers used a shotgun approach to get their products into as many retail locations as possible, usually on an exclusive basis. There were few if any, MVNOs at the time. But with the explosive growth of the industry, MVNOs began to proliferate the landscape. Led by Simple Mobile in the early 2000’s, customers were now given a choice of shopping at a carrier-owned store, or exclusive dealer or a non-exclusive dealer mostly found in urban areas. In some cases, the carrier’s “loss of control” of having a lot of third-party distribution led to a lot of issues like fraud and churn.

The pros of embracing an indirect dealer model was having your product in thousands of locations that customers could be driven into through advertising and promotion. One of the cons was the acquisition costs made up of commissions, residual, co-op, etc. to get that customer on your brand. And with Sprint, T-Mobile, and AT&T embracing MVNOs like Tracfone, H2O Wireless, Red Pocket Mobile, Consumer Cellular, etc., the wholesale business became a legitimate and profitable channel for the carriers to grow their distribution.

Not all MVNOs embraced traditional retail as their only distribution channel. ESPN and Disney both failed by trying to dictate what type of handsets customers had to use. Not too long ago, cable providers like Spectrum and Comcast started mining their vast base of customers to add a wireless offering to their triple play, making it a quadruple play. The end goal was to tie the customer into another product (along with TV, Internet, and the home phone) and enjoy an additional revenue stream before embracing brick and mortar stores. Some MVNOs opted to partner with associations (Consumer Cellular with AARP or Sprint with AAA for example). Others placed their bets on national retailers like Costco, BJ’s Walmart, Target and Best Buy. All have both benefits and some downside and as the carriers began to shift to corporate and dealer branded exclusive stores, the ability for many MVNOs to be successful became costly and led to some dramatic changes.

The Move To Online Selling

One seismic change in independent dealer distribution was driven by Covid in 2020. Dealers selling on the internet was a major no-no until Covid pretty much shut down retail last March. In an effort to keep sales and revenue, some carriers not only allowed their wireless dealers to market via the internet, they embraced it. With ordering by phone and curbside pick-up, many dealers maintained both sales and revenues and reported terrific earnings. Most importantly they have continued to allow dealers to sell via the internet while the retail doors started to reopen.

Now, with continued consolidation and acquisition; Dish owning Boost, Verizon buying Tracfone, Consumer Cellular changing hands; how will the smaller MVNOs determine their distribution strategy? One long-standing MVNO was ahead of the Covid curve and diversified from the traditional dealer model and started focusing on direct and alternative channel distribution. Red Pocket Mobile CEO Joshua Gordon tells me that while a strong focus on the master dealer and retail model once drove incredible volume, it was not without its challenges of churn and high acquisition costs. Through a pivot to focusing on direct-to-consumer sales, Red Pocket has been able to attract long-term customers at a lower cost and can market to them after the sale as well. “By telling our story directly to our customers and to the public, we also now see healthier volume coming to us from our dealer partners,” said Gordon.

Make Your Distribution Decision

The dealer channel is far from dead. Adam Wolf, President of the National Wireless Independent Dealer Association (NWIDA) recently reported that AT&T is giving some of its corporate-owned stores to its key dealers (see: Is AT&T Moving Towards More Dealers? – NWIDA). Verizon will surely have to rely on the indirect channel once the purchase of Tracfone is approved.

So, MVNOs, what is YOUR distribution strategy? Of course, a lot of this will be driven by your differentiator (there’s that word again!).

Brick and Mortar?

On-Line?

Associations?

Highly targeted market/audience?

The business is there for you to get. It doesn’t matter if you’re a Boost, Metro, or Cricket dealer, one who carries multiple brands, those who sell online or those who choose to embrace both traditional and non-traditional channels. Those who sometimes think out of the box are the most successful and stand out from the crowd.

Good Selling

-Jon


Jon Horovitz

Jon Horovitz has been in the wireless industry as a senior executive for 30+ years. He headed up sales and operations in leadership roles for McCaw Communications, AT&T Wireless, Nextel, Boost Mobile, and Sprint. He has owned an MVNO as well as assisted in the start-up of three others. His consulting company, Atrium Unlimited, LLC advises carriers, MVNOs, investment bankers, and venture capitalists interested in joining the wireless space. Jon would love to hear from you about any consultative needs you may have. Please visit https://AtriumUnlimited.com

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