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TracFone Prepaid Cellular Brands & Strategy
| | TracFone
prepaid cellular is
a unique
company with a lot of interesting things about their business that I
think you'll find is worthy of its own discussion!
 Where they
started
out, what their focus has been, and what we see them doing now is the
focus of this page. After reading, you should have
a
good understanding of their general offers and apparent strategy, which
at a first glance is really quite confusing; at least it was for me
when I first started to look at their different brands and offerings.
If you're interested in reviewing the details of their plans,
you
can visit the Compare
Prepaid Plans section; you'll find TracFone plans
in the PAYG, Monthly, and Unlimited sections.
TracFone Prepaid Cellular -
Background
TracFone
is a subsidiary of America Movil. They started offering
service in
1996, and have become the fifth largest wireless carrier (in terms of
numbers of customers) in the U.S., and the largest MVNO!
At the
time of writing this (July 2009), they have approximately 12.5
million customers and growing. TracFone offers services on
both
GSM and CDMA networks through multiple MVNO relationships.
TracFone
prepaid cellular actually operates under four distinct brands:
- TracFone
- Net10
- Safelink
Wireless
- Straight Talk
The
TracFone and Net10 brands are very similar types of services varying
mostly on pricing. Why they didn't simply offer
different price points under one brand, rather than have two
completely separate brands is still somewhat of a mystery
to me. Perhaps it has something to do with their TracFone
services being based on "units" rather than rating calls in dollars and
cents(?). Sometimes doing a trial under a different brand can
reduce the confusion of having too many offers under one brand making
it more confusing to customers. Though, typically,
the
operational cost of managing different brands (ex. customer care,
packaging, distribution, and other branding expense) is
usually undesirable when the only major
difference is pricing, and all services
essentially operate the same. I'm sure there were other
factors
involved in this decision. The point here is that they have
TracFone and Net10 brands that most people wouldn't know are actually
the same company.
Safelink
is a
U.S. government
mandated and supported program to offer wireless service to low income
customers. There are particular criteria that customers must
meet
in terms of income (and other factors) that determine whether someone
qualifies for this TracFone prepaid cellular program. This is
certainly a very worthwhile program, and
fits
well into TracFone's portfolio given their long time focus on low cost
service. Read more about this Free
Prepaid Cell Phone program.
Straight
Talk is
TracFone prepaid cellular's latest brand that launched as a trial in
June 2009.
Unlike its other PAYG brands, Straight Talk is a completely
different program veering away from their classic pricing with the
introduction of a monthly and an unlimited plan. The trial is
still underway, and the product is currently only available in select
Walmart stores; you can't even buy it on their Website! This
new
brand/offer came as a big surprise to the industry given their history
(more on that
below).
TracFone
Prepaid Cellular Started with Low Value Customers
When
I say "low value" customers, that's not to say that there's anything
wrong with TracFone customers! It's simply a term that the
industry uses to describe customers who spend very little per month
compared to other prepaid customers. For example, although
this
is
constantly changing, TracFone customers may spend less than $10 per
month on average, while other prepaid carriers see their customers
spending in the $20, $30, and even in the $50 range on a monthly basis.
So while TracFone may be the largest prepaid carrier,
remember
that that's from a customer number perspective, and not from a
revenue/earnings perspective.
What
this
does mean, though,
is that TracFone has classically targeted the super value conscious
customer who doesn't even necessarily use their phone often.
These customers are often referred to as "glove box users,"
which
means that they keep their phone in the glove box of their car, and
take
it
out only for emergencies (or to let their family know they'll be home
for dinner soon!). Also, the cost of their phones has
historically been on the super low end, such that they can almost be
considered disposable. Imagine that you forgot your phone for
a
trip, or are here from abroad, and you can buy a phone for $10 or $20;
once your trip is done, you won't fee much of a loss tossing the phone
out.
I'm definitely not saying
that their products
aren't good, or that their customers aren't valuable; quite the
opposite! TracFone has some solid, although basic, phones,
and
plans that offer great value. It's a business with an
obviously
massive market that they've done an extremely good job capturing and
servicing. So much so that most other prepaid carriers don't
want
to try to compete in that space. It's no easy feat to build a
business model that can support such a lost cost.
Along Came the Competition -
Watch Out TracFone!
The
problem started for TracFone prepaid cellular when the entire prepaid
market started
to decrease their pricing for standard PAYG products. So
having a
brand like Net10, for which the name itself defines the price, becomes
a
problem when carriers start pushing the price downwards, and $0.10 per
minute is no longer very interesting. That said,
TracFone has been able to remain competitive and continues to grow.
Their Double Minutes program, where you can pay a one time
fee
(ex.
$49.99) and get double the value for every reload card you buy (for the
rest of your life!) makes
their pricing very compelling. Though, personally, I find it
can
get
very confusing as to how much things actually cost. I expect
that
the
more you use it, the more comfortable you'll get with it. For
example, when you're in your home calling area, a service can cost one
unit, while when you're outside of your home calling area, it'll cost
you two units. TracFone also had to consider a revised
strategy
as the market began to see monthly, and monthly unlimited plans become
more and more popular. Read more about Straight Talk by
clicking
on the following link:
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