Since 90% of Americans already have some form of cell phone service, according to research from Pew, the major wireless providers can only grow by stealing customers from each other.
With the pool of new customers largely tapped out, AT&T (NYSE:T), Verizon (NYSE:VZ), Sprint (NYSE:S), and T-Mobile (NASDAQ:TMUS) need to steal subscribers from each other. That's a daunting task, but not an impossible one, as a 2013 research report from WDS (owned by Xerox) shows that just over a third (36%) were considering leaving their wireless provider at the time of the March 2013 study.
The report also showed that if a user's current carrier raised prices by 10% that 69% of customers who were previously unlikely to switch would now consider leaving. And if another company offered to lower their bill by 10%, the study found that "only 31% of customers who were previously unlikely to switch could guarantee that they wouldn't leave for this saving."
That means a large percentage of the wireless market is actually in play, and market leaders AT&T and Verizon are at least somewhat susceptible to efforts by upstarts T-Mobile and Sprint. Consumer Intelligence Research Partners analyzed 2,000 U.S. subjects who activated a new or used mobile phone in the 90 days preceding four quarterly surveys covering the period of October 2013 through September 2014. The research company found definitive reasons people moved from one company to the other.
Why do customers switch?
CIRP found that AT&T and Verizon drew customers based on the perceived quality of their networks, wrote Michael R. Levin on the research company's Huffington Post blog. T-Mobile, he found, draws users based on price despite people seeing its network as inferior, and Sprint brings customers in based on features such as as friends and family pricing and unlimited data.
"Based on CIRP analyses, AT&T and Verizon lose customers because of the cost of service and to a lesser extent, the structure of their plans," Levin wrote. "Over half of consumers switched from those two carriers cited cost as the primary reason, compared to less than 40% for other carriers. Almost 40% of Sprint and T-Mobile departing customers identify network quality as the reason to switch."
What doesn't make them switch?
While price and network quality can cause people to switch providers, there's one thing that doesn't.
"Customers do not change carriers because of customer service," he wrote.
That may explain why that particular area has been, if not ignored, at least neglected by the carriers. Why invest in something that people are willing to put up with if there are other areas -- network and pricing -- that could bring in new customers?
Who is this good news for?
Daniel Kline owns shares of Apple. he has been a loyal Sprint customer since 1999 or so, but more out of laziness than anything else. The Motley Fool recommends Apple and Verizon Communications. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.