What T-Mobile’s ETF-Buyout Campaign Means for CellBreaker?
I might as well start with competition. It’s an interesting topic for CellBreaker, because there is no one other than CellBreaker in the #cellbreaking business. So, it’s different than one shoe store being another’s clear competitor. However, CellBreaker does face competition.
T-Mobile’s latest headline-grabbing ETF-buyout campaign is one example. CellBreaker breaks cell phone contracts; we beat ETFs. But when a Big carrier like T-Mobile runs a campaign in which it pays off ETFs–of competitors’ customers who switch to T-Mobile mid-contract–it dilutes CellBreaker’s value proposition. Why would a consumer, in other words, venture to beat an ETF when they could switch to a new carrier who will more cleanly pay off the ETF altogether? Good point: ETF-buyout campaigns are clearly a competitive threat to CellBreaker.
But are we worried? No. Here’s why.
Consumers only benefit from an ETF-buyout campaign if they switch to the carrier running it. Consumers can’t choose, in other words, any new carrier they wish and still get the ETF buyout. If you want T-Mobile to pay off your ETF, your only choice is to switch to T-Mobile.
By contrast, CellBreaker customers are free to switch to any carrier they like. We solve the ETF problem without dictating the consumer’s next carrier decision. This is one way that CellBreaker offers a better value proposition for the consumer audience as a whole than T-Mobile’s ETF-buyout campaign. If you want to switch to T-Mobile, maybe the ETF buyout is more appealing to you; for the remaining 91% of consumers (T-Mobile has about 9% of US market share), CellBreaker is a clear winner.
There’s no getting around it: US consumers value freedom. Between ETF-buyouts and CellBreaker, we’re the only solution that doesn’t force consumers to choose between getting out of an unwanted contract and freedom of choice. [Does T-Mobile hate freedom? Another blog post . . .]
I studied sustainability in college. So I’m as qualified as anyone to speak on it. In short, beating ETFs is cheaper than paying them.
The average acquisition cost per customer in the wireless industry is about $400/customer. Add to that the (up to) $350/line that T-Mobile is spending–with each customer bringing up to five lines–and you realize that soon the party will end. Their ETF-buyout campaign will cease, but CellBreaker won’t. Why not?
CellBreaker doesn’t need a war chest of bounty funds to buy consumers out of contracts, because we work smarter, not harder or more expensively. We beat the contract. So, nobody pays the ETF. In hindsight, maybe I didn’t need to go to college to figure this one out.
When I tell people about CellBreaker, many confess it never occurred to them that they can or should get out of a cell phone contract. The notion that #cellbreaking is even possible is still new. So, part of CellBreaker’s challenge is educating consumers about this possibility.
In my view, T-Mobile’s ETF-buyout campaign is–in a bold, hip, pink package–educating consumers about this possibility, and they’re spending way more money than CellBreaker could hope to afford in the foreseeable future. So, T-Mobile is really doing CellBreaker a service. They’re educating future CellBreaker customers for us.
As I said before, T-Mobile will soon run out of money, and their ETF-buyout campaign will cease. CellBreaker will remain. By then, T-Mobile will have planted a seed in the minds of millions of consumers: that you can and should get out of your unwanted cell phone contract. I suppose a thank-you is in order. Thanks, T-Mobile.
Just this week, investor Lister Delgado (@ListerDelgado) asked me: “So what does T-Mobile’s campaign mean for CellBreaker? Is it validation, competition, or both?” Lister, it’s both. T-Mobile’s pricey, pink campaign–with the headlines it’s grabbing–is validating the pain point we built CellBreaker to address, and the competitive threat this represents serves to validate the business opportunity in addressing that pain point.
The question we haven’t yet answered regards the type of business best suited to capitalize on that business opportunity. T-Mobile, of course, is a carrier, a different kind of business than CellBreaker. Carriers have many different ways to monetize a customer relationship, whereas CellBreaker has only a few.
But we have reason for optimism. In summary:
- Consumers care about freedom.
- CellBreaker is the tortoise and ETF-buyout campaigns the hare; the sustainability of our model is our competitive advantage.
- Educating consumers is expensive. So, we’re thrilled that Big carriers with big budgets are doing that for us.