- Bring down handset return rates.
- Eliminate retail staff commissions.
- Eliminate 24 month contracts.
- Align handset warranties with contract lengths.
- Offer 14 day returns.
- Allow over-the-air software upgrades.
- Speed up mobile number porting.
It is nothing short of a manifesto. Carphone Warehouse’s CEO, Andrew Harrison, has just laid out several reasons why the mobile industry leaves consumers feeling somewhere between disappointed and ripped off.
He wants to work with his suppliers to change that, and sets out both the opportunities and threats that hang in the balance in what he feels is a critical phase for the maturing mobile phone sector.
He points to a changing landscape, stressing the importance of innovation and trust to make consumers loyal to brands. ‘We are going to face the Amazons, the Dells, the Microsofts, the Googles, and we will need to make sure customers trust us over some great brands.’
There are seven areas of particular concern to Harrison, contributing to the perception of the mobile industry that is on a par with bankers.
His frustration is that it should be the reverse. ‘We are the forefront of how society is changing, and it is completely playing into our hands.’
Big brands in mobile are ideally placed to have fantastic credentials for both trust and innovation, but the opportunities are being squandered, he says. ‘We’re so busy looking at our cost structures that we lose sight that the customer has been alienated and has walked away.’
Consumers want increasingly capable handsets (for free) and to pay less every month for more minutes, texts and data. It causes a headache for operators and manufacturers who quite understandably say they have to make money in this context.
Harrison sympathises and says he is willing to discuss sharing the cost of some of the changes if they are to the customer’s benefit. He says the mobile industry isn’t like others where the only option is to ‘chip away cost’. He believes the consumer stance of cynicism and suspicion towards mobile has created the culture of anxious deal seekers and is of the industry’s own making.
We’ve made mistakes
Harrison responds to the accusation that he is simply disguising an agenda that benefits Carphone with a ‘consumer champion’ position. ‘It is not a question of whether this benefits independent retail or Carphone or operators, but whether they are the right things to do,’ he says.
And Carphone is hardly a paragon of virtue itself.
Harrison says his company is far from exempt from censure: ‘Carphone should lay more blame on ourselves and we realise we need to change.’
‘We have been as guilty as anyone, and need to really look in the mirror.’
He refers to the Christmas special of Ricky Gervais’ Extras last year, where Carphone was mocked. ‘It became evident to me that our perception of what we were was far different outside the industry.’
He points to investing in training and ending commissions (he says the new pay structure is slightly more expensive), adding that he expects people to accuse him of cynicism, opportunism or hypocrisy. But Harrison says those accusations don’t cover up the areas he is highlighting for ‘undermining the industry’s reputation and turning customers away’.
He believes that all operators should join Carphone in scrapping staff commissions. The idea of giving a salesperson an incentive to push a sale regardless of the customer’s needs perpetuates the increasingly false myth of spivs and cheats in the industry.
Carphone: Shop window to the industry
It is suggested he will come in for some flak from his suppliers for sticking his head above the parapet and airing such views. ‘We’re at a stage when we want to expand the industry and grow into new areas. We need to bring [manufacturers and operators] with us, and we need customers to want us and believe in us.’
‘It’s hard for me to make the changes I want when the industry is unwilling to alter. We are a shop window for the industry and we can’t change our suppliers’ products, services or terms and conditions.’
Carphone has set up a new committee called ‘voice of the customer’ to fix many policies and practices of its own. ‘The problem we are seeing is that many of the solutions are out of our hands,’ explaining where his frustration has stemmed from.
The industry has a track record of resisting change unless it is forced, Harrison adds. ‘All we do is take stuff out and only react when the regulator forces us to do so.’
Lack of trust in mobile companies
In the absence of a concerted drive by the whole of the industry, Harrison believes there is room for one operator or manufacturer to break away.
Referring to the recently installed CEOs at the UK operators he says: ‘I think the new arrivals have a chance to make a difference.’
He even singles out the market leader. ‘O2 is where it is because it has made the most effort to focus on customers. All the research shows it is better on customer advocacy.’ But he caveats his praise for O2. ‘It’s relative to a bad industry.’
His views may rile some, but mounting evidence suggests he is right. There is a serious lack of trust in mobile companies despite the latent demand and interest in what the industry has to offer. Harrison concludes: ‘It’s not like [mobile companies] intentionally do things against the customer, but gradually we’ve chipped away to a point where you step back and think “this isn’t very good, is it?”.’
Andrew Harrison’s prescription for change
Harrison says return rates of handsets are currently unacceptable. He won’t name and shame, but Mobile has previously reported handsets such as the Sony Ericsson W910, K850, W580, C902 and C905 coming back at levels as high as four out of every 10 sold. Sony Ericsson isn’t alone. Retail staff were telling Mobile this week that Nokia’s N97 also had major reliability issues. HTC, BlackBerry, LG and Samsung have all had their problems too.
He says issues are around manufacturers’ internal systems and controls, and the desire to rush products out into the market before they are ready.
While manufacturers are falling over themselves to copy Apple’s hardware, Harrison says Apple is the example on software, particularly software upgrades where users have access to the latest updates simply and efficiently ‘over the air’.
Warranties are now completely out of kilter with contract lengths. ‘How is a customer supposed to make sense of a 12 month warranty and an 18 or 24 month contract?’
Harrison’s biggest gripe is the emergence of 24 month and more worryingly, 36 month contracts. He believes the trend is turning customers away from taking out contracts with new devices, pushing them into prepay and leaving customers with handsets that stop working or are obsolete mid-way through their contracts.
It was only four years ago when 12 month contracts were the norm. The latest GfK figures for between April and June show 26% of all contracts sold were on 24 month terms, double the level from the period between January and March. By contrast, 18 month contracts have fallen from 60% to 50%, with 12 month contracts now only 3% of the total market.
‘It’s hooking customers into ridiculously long term periods when many of them can’t see the next six months.’
It suggests trapping consumers, ra