Entner: T-Mobile, AT&T and others eye loyalty plans as competition heats up

Roger Entner

Customer loyalty plans are common in the United States, especially in mature, but competitive markets. A large number of different kinds of companies – from retailers to airlines to restaurants – have customer loyalty programs to reduce the likelihood of customers switching to a competitor. When companies introduce loyalty plans, timing is everything. The loyalty plan has to be a meaningful, compelling differentiator in the eye of the consumer. Consider what happened to Sprint's Premiere loyalty program. In February 2009, Sprint launched the program that entailed accelerated discounts on handsets, loyalty upgrades, tickets for events and accessories discounts. The whole nine yards with such minimal impact that Sprint cancelled the program at the end of 2011 due to cost reasons. While the program was designed well, the timing was off. During 2009 to 2011 the gap between Sprint and its competitors was larger than what the loyalty program could bridge.

The next carrier to try a loyalty program was Verizon in July 2014 with its Smart Rewards program. The program applies to both wireless and wireline customers. Customers can exchange points they have received for discounts and sweepstakes. There are no indications of how successful the program is, which generally indicates that its impact is small.

In May 2015, AT&T began offering Plenti, a multi-company loyalty program that is also offered by Macy's, ExxonMobile, Nationwide and RiteAid. It's a shared rewards program. Considering that AT&T launched a new loyalty program just a year after launching Plenti, it appears AT&T thinks it's a compelling consumer product. In June 2016, AT&T announced another loyalty program called "Thanks." Unlike the previous programs, it features loyalty benefits that customers could immediately use such as a two-for-one movie ticket discount on Tuesdays or preferential access to purchase concert tickets. This is in addition to regular offers like discounted accessories.

Mere days after AT&T's announcement T-Mobile revealed its "Get Thanked" program. In order to participate in the program, customers have to download an app to their smartphone. "Get Thanked" has a rotating number of offers for customers that they can claim on Tuesdays. They include a free movie rental from Vudu, a free Frosty from Wendy's, $20 discount at MLB for assorted items or Stubhub for tickets. Demand for one of its inaugural offers, a free medium pizza from Dominos, was so great that Dominos ran out of dough and had to drop out.

The real differentiator of T-Mobile's Get Thanked program is its stock offer. Postpaid customers receive shares in T-Mobile USA depending on their tenure and how many new customers they have referred to T-Mobile. All the fees for owning the T-Mobile shares are paid by T-Mobile as long the referral remains a T-Mobile customer. Problems can occur after a customer switches to another carrier. The shareholder has to either pay maintenance fees, transfer the shares to another account, or sell the shares – for a fee. Also, shareholders who sell their shares may have to pay additional income tax. If a customer is very successful in attracting new customers to T-Mobile and is awarded a relatively high number of shares, they will have to report their shares as income if the value of the shares is above $600 per year. Right now, this threshold would be reached by referring 15 new customers. Sounds like a lot, but some people really are passionate and the program allows up to 100 shares to be awarded.

Having personally used Sprint's, Verizon's and AT&T's Plenti loyalty programs, I can't say if they are loyalty inspiring. Sprint's rewards were meaningful if it would have had good enough service to justify staying. For Verizon's Smart Rewards and AT&T's Plenti programs, it took me more than two years to get a $25 gift card from Smart Rewards and after seeing the reward structure, I did not even bother to check my Plenti balance. Thank you for the rewards, but they are so low that they do not impact the decision making process. AT&T's and T-Mobile's new plans have meaningful offers that will delight customers with weekly treats with T-Mobile offering the most treats at this time. With the industry players looking for new ways to differentiate themselves, it is only a matter of time until we see a big increase in the number of providers offering a variety of meaningful loyalty programs. The key is keeping the offers relevant and fresh or customer fatigue sets in.

Roger Entner is the Founder and Analyst at Recon Analytics. He received an Honorary Doctor of Science from Heriot-Watt University. Recon Analytics specializes in fact-based research and the analysis of disparate data sources to provide unprecedented insights into the world of telecommunications. Follow Roger on Twitter @rogerentner.