A new study from J.D. Power found U.S. mobile phone owners were happier with their device purchase when they expected to use it for a shorter period of time – yet carrier upgrade rates have stagnated at pitifully low levels. So what gives?
First, the study.
According to J.D. Power’s 2016 U.S. Wireless Purchase Experience study for full-service devices, overall satisfaction with the purchase experience was highest among customers who bought a mobile device and expected to use it for less than one year.
The study, which surveyed nearly 7,500 full-service customers, found those who planned to use their device for less than a year pulled the highest satisfaction score – 853 out of 1,000 points – out of full-service customers. Satisfaction decreased to 843 among owners who planned to use the device for one to two years and to 809 among those who planned to use their device for two to three years. Those who planned to use their device for three or more years came in with satisfaction score of 817.
Just over one-third of full-service wireless customers said they expected to own their device for less than a year, the study found. That figure compares with just 13 percent of customers who said they planned to own their device for three or more years. The remaining 53 percent of respondents said they planned to use their device for either one to two or two to three years.
“It’s surprising to learn that the expected length of mobile device ownership can influence the purchase experience process,” J.D. Power senior director and technology, media & telecom practice leader Kirk Parsons said. “Part of the reason is demographics and willingness to own the latest smartphone with the latest technology and service capabilities.”
Perhaps unsurprisingly, the study found full-service wireless customers who expected to use their phone for less than a year tended to be younger, with 58 percent between the ages of 18 and 34. That same age group made up just 28 percent of all customers who said they planned to have their device for three or more years, the study found.
But Parsons said there’s more to a satisfying device purchase experience than just how frequently customers are planning to upgrade.
“When we were looking at the data what really popped was that folks who upgrade more frequently have better experiences,” Parsons said. “Part of that could be halo effect of getting a new phone every year, but there are a lot of other things that have to happen (to create that positive experience).”
According to Parsons, factors influencing a purchase experience include the level of service in a store or over the phone, the transaction time, being connected with the right device and ease of device set up.
Among full-service U.S. wireless carriers, AT&T ranked the highest in delivering this overall purchase experience, with a score of 845. T-Mobile followed with a score of 839, with Verizon and Sprint trailing behind with scores of 824 and 804, respectively.
Another important factor? Price. And it’s that same figure that’s also hampering upgrade rates, Parsons said.
Parsons said carriers unleashed a “Pandora’s box” of consequences when they switched from the subsidy model to installment plans.
Where device upgrades used to cost customers around $200, it’s now costing them $600 or $700, he said. Parsons said it’s no wonder people are holding on to their devices longer.
So what can carriers do? Incentivize, Parsons said.
“There are a number of reasons why a person would walk into a store or buy online or over the phone,” Parsons said. “The one thing that people pull the trigger on is obviously price.”
In particular, Parsons pointed to deals like the recent buy-one-get-one Samsung smartphone offers.
“There are deals like that that could prod people along to get those and upgrade more frequently,” Parsons said.