Unlimited is defined as not limited or restricted in terms of number, quantity, or extent. This single word has become the definition of nearly every marketing offer from the telecom industry since the late 90s/early 2000s. Carriers advertise unlimited mobile-to-mobile, unlimited domestic LD, unlimited roaming and unlimited nights and weekends. Unlimited has some great advantages, but is it always cheaper? Earlier this month a Tier I carrier recently changed their SMS tiered approach and decided to replace it with just one… unlimited.
Does paying $20 dollars a month for unlimited SMS make sense versus a tiered approach where the cost can be $5/month for 250 messages or $10/month for 500 messages? The additional annual cost to the subscriber is $180 dollars for those in the lowest tier and $120 dollars for those in the middle tier. Is it worth the added expense? Could it backfire and increase customer frustration resulting in higher churn?
To determine the answer one really needs to examine how many messages one sends and receives in a given month. Sure, the younger generation will generate more messages on average, but over 500/month? What do the numbers tell us? As an engineer, I love numbers and ratios, but sometimes you need to dig deeper to understand the real story.
Lets first look at industry published numbers that address SMS usage:
- According to a recent Neilson report, 64% of all mobile subscribers use SMS which will only increase as the young generation penetrates the marketplace.
- Per the CTIA midyear report, in 2011 SMS messages will eclipse voice MOUs. 1.9 Trillion SMS messages were sent or received in the USA last year.
- Over a period of four years, we’ve experienced a 19% increase in MOUs/Sub. During that same time period, we’ve experienced a 2,000% increase in SMSs/Sub.
We wanted to understand lower level trends so we analyzed over 1.6 billion records from the Mid-Atlantic region to better understand SMS usage patterns. Here’s what the numbers tell us:
It’s clear that 50% of the subscriber base does not generate more than 500 SMS messages in a given month. More surprising is that 25% of the subscriber base practically doesn’t use the service at all (less than 10 messages per month). Moreover, the top 1% averages 15,000 messages per month! From this dataset the majority of subscribers really don’t require unlimited. Using a Tiered approach, these subscribers could pocket over $100 dollars a year and stimulate the economy in other areas. Now maybe that will change over time, but that is what the numbers tell us today. So, before carriers jump on the Unlimited SMS bandwagon and disrupt an existing tiered approach, keep in mind 50% of your subscribers don’t need it today. Being forced to accept an unlimited plan might just be enough firepower to frustration the subscriber that could result in increased churn. Unlimited can be easier and may make sense, just understand the potential risks as well.
So where’s the growth coming from? That will be addressed in my next SMS blog.
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