Analysts Don Kellogg and Roger Entner are joined by Ed Evans, Chairman and CEO of Consumer Cellular, to speak about the company's unique strategy for serving seniors in wireless, its successful use of retail stores, and new and innovative product lines for this sometimes overlooked cohort.

00:00 Episode intro

00:26 Consumer Cellular's business model

04:28 Using retail stores effectively

07:07 Knowing the customer

08:24 Tailoring customer service

10:20 Building customer loyalty

10:52 Developing innovative products for seniors

14:14 Episode wrap-up

Tags: telecom, telecommunications, wireless, prepaid, postpaid, cellular phone, Don Kellogg, Roger Entner, Ed Evans, Consumer Cellular, MVNO, seniors, data, customer service, NPS, retail, Target, Walmart, churn, Mint, GrandPad, retention, apps

Don: Hello and welcome to the 313th episode of The Week with Roger, a conversation between analysts about all things telecom, media and technology by Recon Analytics. I'm Don Kellogg and with me as always is Roger Entner. How are you doing, Roger?

Roger: I'm great. I'm excited. We have a great guest.

Don: Yeah, this week we've got Ed Evans. He's the chairman and CEO of Consumer Cellular. Ed, welcome to the podcast.

Ed: Hey, thanks for having me. It's great to be here today.

Roger: So, Ed, you might be the best kept secret in wireless. You run one of the largest carriers in the industry. You have a distinction that you're an MVNO that is post-paid, not prepaid, right? Most of them are prepaid. And you focus on a particularly difficult to serve customer segment and you excel in it. Maybe you can tell us more about Consumer Cellular. And then you also launched just recently another fantastic product.

Ed: Well, thank you for the compliments. I mean, we try hard and we're always trying to get better. But it is a really unique business that's been just a tremendous amount of fun to be a part of for the last seven years. And the company itself is actually 30 years old — it's been around that long. Now it's evolved over that time and we acquired it about seven years ago. But to your point, yeah, we target the 50 plus market. We saw an opportunity years ago where we just believe this market was being really underserved, on a couple of fronts. First and foremost, I would say pricing was just out of whack. When you think about one of the big three carriers and the way they price their services, they've got to serve 18 year olds that are using 200 gigabytes of data every month, and then they have to serve 90 year olds that are using one gigabyte every month. They don't really segment out pricing so much. They take the middle, they assume you're going to use 25 gigabytes of data. They set a price, they call it an unlimited plan, and off you go. And so what we saw was, as we age, we use less and less data. So a 50 year old is not using as much data as a 40 year old. When you turn 60, you use less. When you turn 70, you use less. And so as a result of that, we saw a pretty unique opportunity to come in and price in the market lower than what the big three can price at, still offer unlimited services because we know what they're actually going to use, which is around seven gigabytes of data every month, and have a very profitable business. And at the same time, it became even more important to figure out — okay, differentiating on price is really only one part of this. Anybody can come in and put lower prices out. What can you do better? And we really hung our hat on customer service. This cohort in particular isn't as tech savvy as the 20s and 30s and 40 year olds that are out there. They need a lot more hand holding. And we just decided that we were going to be very focused on that, and we were going to do a better job than anyone else can do. So that's where we are today, and we continue to win awards on the customer service side. But it's just about trying to provide something that nobody else can provide for this cohort.

Roger: Yeah, I know, and our data shows it very clearly week after week. We exactly pick up your customer base, and you have the highest NPS scores in our survey. And we talk to more than 300,000 people on mobile every year. And you guys are the leader here in a segment where everybody else is struggling with, which is the people who are getting older. I think it's always fantastic — and I saw it with my mother. As people get older, their manual dexterity goes down. It's a more challenging device to manipulate, and it's more difficult to serve them and provide customer service. I was my mother's customer service representative, and she was not an easy customer to have. And so we see these spectacular numbers coming from Consumer Cellular. So you certainly have figured out how to serve a very challenging customer base at attractive price points. It's like the definition of a niche player, truly solving the answers and the problems that your customer base have. Now you're going, I think, also more into stores. And you launched a new service which I think also hits exactly what your target customer base is looking for.

Ed: Yeah, so we'll start with the stores. I will tell you that when we came into the business, building brick and mortar was something that just didn't look very attractive to us. They're expensive, they're hard to maintain, your cash acquisition cost goes up fairly substantially. But we were forced to look at alternatives because our biggest channel partner, Target, at the time was exiting wireless. Over the past three years they've been slowly reducing and reducing their footprint, which left us with really just a call center presence and a web presence. We pivoted, we went into Walmart. We've had success with Walmart, they're a good partner. But the difference between a Walmart and a Target is that Target had two, maybe three wireless providers, while Walmart has what I jokingly refer to as the wall of shame. There's 40, 45 different incumbents that are sitting on that wall that you go and pick something up from.

Roger: And they're all locked up.

Ed: Yes.

Roger: That's the other thing.

Ed: You're right, no, you're right, you can't get anything. And so they don't do as well as what a Target store was doing. And so, out of necessity, we needed a brick and mortar solution. And so we started testing stores about four years ago. We opened in what I would call the most obvious places — the Villages in Florida...

Roger: ...and Surprise, Arizona.

Ed: ...and Surprise, Arizona.

Roger: Yeah, you're the biggest carrier in the Villages, right?

Ed: We are. No, that's exactly right. Our share has gone up dramatically in those areas, and Surprise, Arizona, the exact same thing. What we have seen — we're now up to 104 stores as of this recording, and going. We're going to continue to move forward with it. What we have seen with these stores has been amazing. It has far exceeded our expectations. We've seen that, yes, the cash acquisition cost is higher in these channels, but lifetime value is materially higher. They take a better product, they take a more profitable product, they stay longer. Our churn in our stores is under 0.8% that we see. It's just everything about them is positive. We look at CapEx-LTV ratios — the old B-school metric of, hey, if you're getting three, that's really good; if you're getting four, that's a home run; if you're getting five times, you're probably not spending enough on marketing. Our retail stores are five and a half to six times in every market. So they just continue to outperform any of our expectations.

Roger: Yeah, stores really work. At the same time, the big guys are trying to push everything more and more digital, to lower price, and I'm not sure if the customer service and everything else works out. At the same time, I always use the example of mattresses — like, what is it, 43% of mattresses are now bought online? Why can't wireless apply? But it is undeniable that stores buy a higher MRC product, have more attachment, lower churn — everything is better, right? On stores.

Ed: No question. And you know, what's amazing is, look, there are cohorts that are out there that very much prefer the digital channels. Take Mint as an example — Mint does an amazing job in a purely digital world. Their customer journey online is very solid, their customer service experience tests very high. So there are certainly cohorts that are served by that and work well. But when you get into the older cohorts, they just want no part of it. They want somebody to answer the phone. That's all they're asking.

Roger: Yeah, and Mint is great for the children and grandchildren of your customers, right? That's what it comes down to.

Ed: Exactly. That's exactly right. Right, I mean, look, it's all about knowing who your customer is and finding the best way to serve that cohort. Reduce the friction, right? It truly is as simple as answering the phone. And I'll tell an anecdotal story. One of the things that I do every morning when I come in is I'll dial in and I listen to random customer service calls or sales calls, just to hear what's going on — it gives me a feel for kind of what's happening in the market. What I noticed is around the first of every month, when our bills go out, we have a huge number of customers that have been on autopay for five years. They get their bill electronically, it's paid electronically, it always works, it's never failed for five years. But every month, they call in. And it goes like this: "Hi, this is such and such, and I'm just calling to make sure that you got my payment." Well, yeah, we got it — it went through just like it has the last 27 times. And then you continue on, and you find out that after the — what should take 30 seconds to get through the phone call — then they want to talk about their grandkids. And the call goes from being a one-minute call to a ten-minute call. My initial response — as just a finance guy — I'm going crazy. I'm thinking, wow, if I can reduce these calls down to four to five minutes like everybody else, I can save a lot of money, right? We can really cut expenses on this — this is huge. We're running a whole project, run through this whole thing. Four months into this, it's like an epiphany. It's like, what am I doing? These people are calling in to check on their bill — they're calling in because they're lonely. There's nobody else to talk to. So, yeah, we're going to take ten minutes to talk to them. And we do that — we don't limit our reps to how long to stay on the phone. You stay on until the customer's happy, and when they're ready to get off, that's when you get off. And I think that's an important differentiation.

Roger: And you're the last subscription that they ever have.

Ed: Oh, that's exactly right. They don't go anywhere. Our churn for an MVNO is far below any of the other MVNOs, and really close to some of the MNOs.

Roger: Yeah, and it's like, your number one reason for disconnect is probably the people pass away.

Ed: You're right, it's mortality. And if I can figure out how to fix that, we're all going to make a lot of money.

Roger: Ops, tell me. Right after you find out, give me a call.

Ed: I will.

Roger: Right. And so talking about mortality — what we are seeing, and I saw this with my mother again, people want to age in place. They don't want to be in a retirement home. They don't want to be disenfranchised by having to live on an organization's schedule. And you created a product that helps people stay in their homes.

Ed: Yeah, that's correct. We're actually in the process of creating a suite of products. And so it started — we had a minority ownership in a company called GrandPad, which is a small tablet that is designed specifically for the 85 plus market. It's locked down, it's in a walled garden, large icons. Product was very successful. We now own the majority of that company, and we're getting ready to introduce the fifth generation of that product into the marketplace. Next, we introduced the first product, which is the dependent device, or a wearable on your wrist — that's fall detection and emergency access, right? Another step. Step three, what you're referring to now, is the new ThinkEasy products that we've just introduced, which also have a caregiver application component to them. So not only can you get either a traditional flip phone or a smartphone with a very different user interface, much larger icons, walled garden approach, but now you can also get this caretaker app that allows two of your family members to sort of keep track of you, right? If you have an emergency, you simply hold the screen for three seconds and it calls out — it will notify our emergency service center, it will also notify your family members that something's going on. And we can send response help to two people right away. It also allows the caretakers to just sort of see their movements during the day, right? Through geolocation — hey, are they moving around, are they doing things? And one button just to check in — just hit the button once in a while to let your friends and family know that, hey, I'm okay, everything's good.

Roger: Yeah, because if somebody doesn't move for several hours during the daytime — you can take a nap for so long, but when it's like a six-hour nap, you get concerned as a child.

Ed: Absolutely, it's going to start to raise red flags, no question. And it could be something as easy as they just set the device down and didn't do anything with it for six hours, right? It could be something very simple, but—

Roger: But it's a reason to call in so that they don't have to call your customer service.

Ed: Absolutely, exactly right.

Roger: No, this is fantastic. So the service is out, right? If you have elderly parents, I think this is an ideal thing. Do the children or the caretakers have to sign up with Consumer Cellular as well, or does it work with anybody's?

Ed: No, it works with anyone. So the app — you download either the Android Google Play Store or the iOS Apple Store version, it's just an app that you download, and then from the device you actually send out the request to their mobile phone service, whoever they're on. If they're on any of the big three or anyone else, they simply get a text message that has a code in it, they enter the code into the application, and then they're connected. So yeah, they don't have to be on Consumer Cellular. It'll work on any Android or any Apple device.

Roger: That's terrific. Really good job. You're doing such a fantastic job as an MVNO that is truly focusing and servicing the niche that you've selected. Great job. Ed, thank you for coming on the show, this was wonderful. I hope that we can help some of our listeners who are struggling with how to help their parents age in place, and give them a terrific wireless experience. And I think you provide that. Thank you, Ed.

Ed: Roger, thank you for having me. It's always great to talk to you, and I'll look forward to catching up with you again in the near future. Thank you.

Roger: Thank you.

Don: All right, thanks guys. Roger, we'll talk next week.

Roger: Talk to you next week.