Irony in Telecommunications

What could be more ironic than this? You're in the telecommunications biz, and yet you're losing customers because of confusing communications.

That sorry state of affairs is presented by the findings of a recent Siegel & Gale Perplexity Poll. According to the brand strategy firm, "The lack of simplicity and clarity in communications from wireless phone companies is confusing customers, increasing churn rates and harming brand relationships at a cost of $3 billion annually." Ouch!

Look at these numbers, representing what percentage of respondents rated the following companies' information "below average" or "poor": Sprint (NYSE: FON  ) did worst in this group, with a discouraging 27%. That was followed by 26% for AT&T Wireless (NYSE: AWE  ) , 23% for Deutsche Telekom's (NYSE: DT  ) T-Mobile, 21% for Cingular [a joint venture of SBC (NYSE: SBC  ) and BellSouth (NYSE: BLS  ) ], and 20% for Verizon (NYSE: VZ  ) .

Here are more details from Siegel & Gale's press release:

  • 25% of those who changed wireless companies in 2004 cited "confusion" over calling plans, bills, and services as a primary reason for switching.
  • 32% "will not" or "might not" stay with their current wireless company when their contract expires, citing "confusing information" (in part) as motivation for switching.
  • 69% "would never sign up with another wireless phone service provider that does not provide information that is easy to read and understand."
  • 39% "would definitely or probably not subscribe to Cingular" after viewing the calling plan brochure. Only 46% correctly answered a test question about the calling plan.
  • 56% "would definitely or probably not subscribe to Sprint" after viewing the calling plan brochure. Just 68% correctly answered the test question.

The message here is clear (again, ironically) -- and it's meaningful for these companies, their customers, and investors alike. We consumers value clarity and plain language and want to be able to understand what we're buying. If brochures and other communications clearly described calling areas, various calling plans' terms, and so on, revenues and profits would likely improve. (Unless, of course, it somehow costs the companies several billion dollars to write clearly, which isn't likely.)

The topic of simplicity isn't new in Fooldom. Fool co-founder David Gardner wrote about Simplicity Investing back in 2000, as did Matt Richey. Both had read and were inspired by the book Simplicity Marketing. Gardner went on to interview one of the authors on our radio show. In it, Steven Cristol explained:

". for every company that's selling cars, they're going to have one segment of customers that's really into it and really into sorting out those options and that those are likely to be more the aficionados. They're going to have a whole other segment that really wants to have these choices streamlined for them so there's not such an overwhelming, time-consuming proposition. That's probably why when Toyota Motors (NYSE: TM  ) introduced their Tundra truck last year with the fewest options any truck in its class has ever had, it was the most successful product launch in the history of Toyota USA."

As investors evaluating companies, we should keep simplicity in mind and perhaps favor firms that practice it.

Here are some recent articles on telecommunications companies:

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LongtimeFoolcontributor Selena Maranjian does not own shares of any companies mentioned in this article.


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