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The wireless battle for small business customers


Over the past few months, the leading U.S. wireless carriers have launched major advertising and sales campaigns targeted at the small business sector. Why the renewed focus on a large sector (28 percent of all employees, and half of private-sector, non-farm GDP) whose importance is already well documented? Because small businesses represent one of wireless carriers’ few remaining avenues of growth.

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Wireless connectivity is a critical tool for success and growth at small businesses. In fact, recent forecasts estimate that small business spending for wireless services ($14 billion in 2010) will overtake spending on landline voice and data by 2012. With this projected increase in wireless spending and expected government incentives to aid small business, it’s little surprise that carriers are focusing on and investing in this segment.

The Switching Conundrum

Small businesses have enough to deal with on a day-to-day basis, and switching carriers is far from the top of their owners’ minds, especially when they are reasonably satisfied with their service. At the same time, there are other fundamental obstacles to switching carriers. Because connectivity is so vital for small businesses, changing providers poses significant risks—just one lost day could mean lost sales for a traveling sales team, and poor coverage at important locations, such as a customer’s office, could disrupt operations. Furthermore, the complexities and costs associated with switching carriers, including early termination fees, changing handsets and credit checks, make it a cumbersome and often prohibitive step.

As a result, small businesses are often remarkably loyal to their carriers—Some Small Businesses have relationships with their carriers that are more than 10 years old. Translation for wireless carriers: While increasing market share in this segment is not easy, if you can get a small business to switch—no small task—there is a strong chance you will be able to forge a long-term relationship.

Meeting the Wireless Needs of Small Businesses. So what does it take to win over small businesses? Targeting potential customers with promotions that offer slightly lower-priced services than the next provider will not suffice when customers are not eager to switch. Small businesses are becoming more demanding for products and services that meet all of their specific needs. What are those needs?

Coverage and reliability are critical. In contrast to consumers, small businesses cannot afford a dropped or undelivered call—it could mean a missed opportunity or put a dent in the quality of the service they offer their own clients. Strong coverage and reliability are must-haves that reduced pricing cannot address. Small businesses identify coverage to be the second most important factor driving carrier selection [behind price competitiveness] , and much higher than consumers, who rate coverage behind price, family plans, payment options and free in-network calling.

One size does not fit all for rate plans. Flexible or customized rate plans are increasingly becoming important to small businesses. For example, one carrier recently launched a month-to-month, no-contract offer that enables small businesses to test its network and services and provide a stop-gap solution for short-term needs. Another carrier recently launched a plan that provides additional flexibility by separating the purchase of the handset from the wireless service plan. As a result, customers willing to keep their existing phones get service discounts of more than 30 percent compared to similar plans.

Small businesses use less data than they realize. Small business owners prefer the concept of “unlimited” data plans, but most do not know their companies’ actual data usage levels, and others confused network speed with data capacity. At the same time, carriers are moving away from truly unlimited data to ease the capacity pressures on their networks. To avoid dissatisfaction among its customers, carriers should increase customer education on actual data usage and offer data plans that reflect those levels.

Customers seek “killer” devices. The best devices are often a major reason businesses select (and retain) a carrier. Take the iPhone—small business owners identify it as a primary business device, and they made their carrier decision accordingly. This phenomenon will likely exist for other devices as small businesses learn the true power of wireless connectivity and demand cutting-edge devices.

Simplicity and transparency can go a long way. Managing a small business’s wireless spending can be complex for its owner, because of the diverse needs, uses and preferences of different users and the organic nature of how wireless usage grows. Small business owners complain about long and confusing billing statements that are extremely challenging and frustrating to keep track of. Providing more simplicity and transparency, especially in areas such as billing, account management and carrier switching, would add meaningful value to customers.

Apps are not yet critical. The app marketplace for consumers has exploded in recent years, but it remains in the early stages for small businesses. Most use basic GPS-based applications to manage workforces, and social networking to connect with customers. However, carriers are still seeking new solutions and applications to increase data use. Several carriers have entered into partnership with third-parties to offer credit and debit card payment solutions for small businesses.

Engagement is vital. Becausesmall businesses often look and act like regular consumers, it can be difficult for carriers to identify and capitalize on these prospective customers. Carriers must increase the engagement and focus on this segment across all channels. In particular, they should increase visibility and presence for small businesses in retail outlets, where a seemingly unassuming consumer could really be seeking a 50-line deal.

A Long Way to Go

Though all major U.S. carriers have begun to intensify and revamp their tactical efforts, the battle for small business customers is far from over. Looking over the vast array of needs, gaining market share in this segment won’t be easy or quick—it will require an innovative approach to meet the unique and changing needs of small businesses. But the winners will find long-term value from a large and loyal customer base.

This guest post was contributed by:

Reuben Chaudhury, Partner & NA Head of A.T. Kearney’s Telecom Practice
Alicia Covaleda, Manager
Roi Ross, Associate

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