[Selected post on Carnival of Mobilists] Last week, Sprint bought the MVNO Virgin Mobile (US) for $483M, raising it’s inhouse share of the lucrative prepaid market and younger customers. It’s seen by many as a good move in recessionary times, since prepaid customers are growing and can improve Sprint’s overall subscriber count. The question is: Can Sprint keep the successful “Virgin-ness” of the brand, while putting Virgin on a better platform?On Thursday (July 30), J.D. Power released its customer satisfaction ratings of wireless prepaid providers and Virgin Mobile (CDMA) is neck in neck with Sprint’s other prepaid brand, Boost (primarily iDen). Taking a closer look at this and other customer satisfaction ratings yields a few insights. Virgin Mobile customers report particularly high satisfaction with customer account management and billing. While Virgin Mobile is ranked high above the average by customers across the board, in last year’s JD Power rankings, Sprint’s Customer satisfaction average or below average, with a particular hit in the customer experience. So even though Virgin Mobile service rode on Sprint’s Network’s, they were consistently rated higher than Sprint.
Behind the scenes, from the start, Virgin Mobile made a strategic choice. It had an opportunity to use Sprint billing and customer services with their brand, but to competitively differentiate, Virgin chose to develop their own customer service experience and succeeded in pleasing customers. Both Boost and Virgin Mobile have independence from management systems that Sprint uses, good independence in the case of Boost, and absolute in the case of Virgin Mobile. Virgin Mobile drove out their own supporting technology as a part of the strategy.
Can Sprint maintain this good customer satisfaction in the acquisition? Right now, the key is whether Sprint can continue to allow Virgin to maintain the essential level of independence in operations. The danger is the claim of great savings by merging all aspects of their operations, because the Virgin systems have some uniqueness key to their success with customers.
Virgin Mobile’s systems have made possible a certain agility for their management to create innovative programs such as SugarMama, the program that allows customers to earn service through social media ads propogated by the customers themselves. They also offer an “Esty-like” program of allowing customers to offer their own creations of ring tones and screen savers. Virgin was able to quickly offer features to their customers reflecting the fun they expected from the brand.
The addition of Virgin Mobile offers benefits to Sprint management. The retention of Virgin CEO Dan Schulman to helm Sprint’s prepaid products is exciting and with Matt Carter, the head of Boost, they have impressive brainpower in the race.
Sprint has an opportunity to create a better platform for both of these prepaid products. Sprint can offer Virgin advantage in vendor and device negotiations and in service pricing direct to Sprint. More types of devices may be offered through Virgin. It already offers prepaid 3G data cards, and 4G prepaid could be a gateway drug to customers using more 4G services through the subscriber Sprint product line. Also, prepaid could be a way for Sprint to expand internationally and Virgin could be the way, especially through multi-modal devices.
Finally, Sprint has the opportunity to offer app developers something unique for the prepaid segment. They can offer some unified development experience across products. Currently, Boost offers limited developers support for iDen services, but Virgin developers exclusively go to the device manufacturers, like Nokia and Samsung. With its new dominance, Sprint could innovatively redefine the game of prepaid in the US.
** Footnote: hidden benefit examination:
Can Dan Schulman get Sprint executives invited to Richard Branson’s parties? I’m sure this was reviewed before approving the deal.
