Why is Sprint still hemorrhaging customers?

(1) Sprint’s first challenge was to improve their customer experience – by simply providing better customer service than in the past. For this I give them an A+. They have aggressively advertised their commitment to their customers and have taken tangible steps to improve the customer experience. I have had to deal with their customer service department three times this year concerning different issues; and each time they have been exceptional.

(2) Sprint has improved their selection of smart phones. Earlier this year they had poor selection of phones, and were widely criticized on the web, but with the introduction of the Palm Pre which was released to rave reviews, the general comments on the web and perception of Sprint are now positive. The question is did Sprint discourage many of their post paid customers from purchasing the Palm Pre by fixing it’s price too high at $300, and then requiring a mail-in rebate of $100 to bring the final price to $200? We know that Sprint needs every penny they can get, but I remember the days in the late nineties when each wireless customer was valued at $3,000 (if you were an investor wanting to buy a wireless company). If that is still the case, then it makes sense to lose the money ($100) up front on a phone sale and make it back up through the two year agreement, by holding on to a larger percentage of your customers.

(3) I think they (Sprint) saw this loss coming and needed to do something drastic and that is why they introduced the free mobile to mobile service – which I think is a stroke of genius. It has been extremely well received on the Web, but its introduction may have been a little too late to impact their just announced quarterly results.

(4) And finally – Sprint missed the opportunity to push the Palm Pre aggressively and price the phone competitively (the price has now come down to $150 after a $100 mail-in rebate). There are times in business when one should try to build the initial momentum through aggressive pricing. Think about the Wii, some have criticized Nintendo for keeping the price so low ($250) when their competitors were initially selling their devices from $400 to $600 (for the PlayStation 3). But that $250 price created incredible demand for the Wii that took years to abate. Sprint may have a second chance with their exclusivity on the Palm Pixi smart phone. Sprint should aggressively market the Palm Pixi to their customer-base and take advantage of viral marketing (that is, word of mouth [or social networking] from those who purchase the device). But the device should be priced at $0.99 – that is, nearly free. This is what Verizon is doing to sell a ton of BlackBerry smart phones. If Verizon is selling their premium phones this way, why isn’t Sprint doing the same thing? This will allow Sprint to sell their $70 voice/data plan for the Pixi and get a larger percentage of their post paid customers to renew their contract instead of defecting. The Palm Pixi smart phone will appeal to a lot of Women because of its tiny form factor, large beautiful screen, and responsive keyboard. People are still price conscious – especially in this economy; so if Sprint thinks that they can sell the Palm Pixi for $200, and then offer a $100 rebate by mail, this may turn off a lot of potential customers.

The defections may be proving something interesting – that is, it’s not just the quality of the network, or price of the plan, but it may now be the price of the phone – people may simply want the best phone at the best price.