5 Lessons From T-Mobile’s Game-Changing Strategy

Typical mobile industry players are regarded as arrogant and insensitive to the frustrations of the consumers. It’s an industry that has long frustrated customers with complex plans, locked-in contracts, restrictions against upgrading phones and the loss of investments in existing devices. But now, T-Mobile has introduced a game-changer to the market.

They call themselves the Un-carrier, to vividly emphasize that they are doing something radically different. They’re basing their whole philosophy around doing exactly what the customers want, as indicated by their feedback. It sounds simple. So why did it take so long to create such a strategy? And why was T-Mobile, the number 4 player in the industry, the first to innovate? (Full Disclosure—Prophet was a partner with T-Mobile in developing the new strategy.)

The “Simple Choice Plan,” introduced in March of 2013, included elements that broke long-time industry practices. Long-term contracts were replaced with monthly plans with no long-term commitment. Plan pricing that required you to estimate minutes used and text messages sent was replaced with plan pricing that was much more flexible and easier to understand. The basic plan includes unlimited talk, text and web access (up to 500MB high-speed) and can be augmented for those that need large pools of high-speed data. Finally, you can bring your own device to the program. You don’t have to buy a new phone, but if you do, T-Mobile will finance it over 24 months. When it’s paid off, the monthly bill will be reduced accordingly.

With Un-carrier 2.0, launched in the summer of 2013, family plans without necessary credit checks were added. This was a huge deal for users that are routinely slammed with multiple $200 deposits on family plans. Families could now get four lines with unlimited talk, text, and web (up to 500MB high-speed) for $100 per month, plus taxes and fees. In addition, the JUMP! (Just Upgrade My Phone) Program recently launched, where a person who subscribes for $10 a month can update their phone twice a year. At the same time improvements in their network, particularly in major urban areas, were announced, improvements that allowed T-Mobile to surpass Sprint on coverage.

And the momentum continues. In October of 2013, T-Mobile announced at a New Your concert event their Un-carrier 3.0 strategy, by which they would deliver unlimited global data at no extra charge in 100+ countries. The program was a dramatic attack at the practice of charging large fees for cross-border connections.

Then, at the 2014 Consumer Electronics Show (CES), T-Mobile announced an offer to pay the termination fee of the locked-in customers of Verizon, Sprint or AT&T and give them a credit toward a new phone. The colorful T-Mobile CEO, John Legere was quoted as saying, “We are either going to take over this whole industry or these bastards are going to change.”

Since the Un-carrier launch, T-Mobile has steadily brought this strategy to life through positioning, framing the discussion, messaging, communications, customer experience and employee engagement. The strategy was supported by humorous advertising (advertising gets easy when you have something to say) that featured Bill Hader as an inept phone user who welcomed the Jump! program. The JUMP! campaign was led by some outrageous (think Steve Jobs-style) presentations by Legere talking about why customers are switching to T-Mobile and how backward competitors are.

“They’re basing their whole philosophy around doing exactly what the customers want, as indicated by their feedback.”

At the beginning of 2013, T-Mobile was suffering from an ongoing loss of share that affected its image as well as its financial health. The Un-carrier initiative dramatically changed that. At one point during the campaign, T-Mobile was gaining customers at a rate that exceeded the three competitors combined. Further, according to a study by Baird Equity, 26 percent of potential wireless carrier switchers are looking at T-Mobile, as compared to 9 percent for Sprint, 10 percent for AT&T, and 19 percent for Verizon. In the minds of many, T-Mobile went from an also-ran company to a firm with a leadership position that reinvented a major industry. It’s an amazing achievement.

There are 5 lessons to be learned from T-Mobile’s Strategy: 

As I discussed in Brand Relevance, the only way to grow is to create “must haves” that define a new subcategory

T-Mobile was not able to grow until it did just that, developing a half dozen “must haves.” Note that the disruption was not caused by a technological advance, but by some simple changes in pricing and contracts.

A new subcategory needs to be protected

T-Mobile protected its innovative, disrupter position with breakthrough brand-building and ongoing game-changing innovation.

The disruption was driven by an understanding of basic customer frustrations and complaints

In fact, it did not take strategic insight that was subtle and nuanced. Perhaps the depth and influence of these customer issues were underestimated, but they were well known.

Any brand can become a true challenger brand

It is interesting that the brand that pulled off this innovation wasn’t Verizon or AT&T, but the fourth-place player. Why was that? The industry leaders had too much to gain by sticking with the status quo. As a challenger brand, T-Mobile had less to lose and more to gain by disrupting the wireless category and doing what the other carriers do not; they put the customers’ needs ahead of business-as-usual.

Once you start innovating, keep up the momentum

All three major competitors scrambled to respond with their own versions of fewer contracts, quicker upgrades, cheaper plans and more. To maintain relevance, they had no choice. But they are all clearly copying the innovator, playing catch up. Although these competitors have an impressive set of assets, it is likely that the market structure will be changed by the T-Mobile initiatives. Further, the T-Mobile momentum and energy will make it hard to reverse these changes.