More letters: this time, Sprint about device pricing and cancellation fees

It appears that I am on a letter writing binge. Here is the email that I just fired off to Sprint’s CEO, Dan Hesse, and President of Strategy and Corporate Initiatives, Keith Cowan.

Mr. Dan Hesse and Mr. Keith Cowan:

I am writing to talk about the differences I have noticed between the way Sprint treats new customers versus the way it treats existing customers. My observations are specifically based on pricing, but I feel that the pricing sends a message. I am not sure it is the message that Sprint intends to send. Furthermore, I would like to propose a new method for calculating device discounts and cancellation fees.

Starting service in 03/2009, I am a data only user of the Sprint network. I use a PC card with my laptop when I am out of the house. I am very happy with the coverage area the speeds that I have been getting with the device on Sprint’s network. I have recommended Sprint’s data services to friends and family, and I plan on continuing to do so.

I recently learned about the Novatel MiFi 2200, and I wanted to know the cost for purchasing one. I am greatly discouraged by what I have learned.

Sprint is selling the Novatel MiFi 2200 to new customers for $50, after instant savings and a mail-in rebate. Since this offer is only available to new customers, I was expecting to have to pay a little more for the device. My price for the device is $299. No instant savings and no mail-in rebates. Full price. Repeat, no discounts.

After talking to a representative in a Sprint store, I learned that after one year of service, I am eligible for a $75 discount on a new device. After two years of service, I am eligible for a $150 discount on a new device. The Sprint store employee was only able to estimate my cancellation fee at about $150.

Reading through the website and a quick customer service chat, transcript attached, confirmed this information. The chat customer service representative was able to provide me the exact cancellation fee: $140.

Here are the options that I put together after collecting this information.
* remain a current customer and purchase the new device: $299.
* terminate service and sign a new contract: $190.
* wait until I have been a customer for one year: $224.
* wait until I have been a customer for two years: $150.

It appears that preferential pricing is being given to new customers, while existing customers are forced to pay higher prices. In my case, the cancellation fee when combined with the cheap introductory price is encouraging me to cancel my service. I find it startling that Sprint would ever introduce pricing schemes that make it appealing for me to discontinue service. Because if I am willing to sign a new contract with Sprint then why not a competitor?

I feel that the discount pricing and cancellation pricing has become too confusing. Steps need to be taken to simplify the pricing model. While doing so, care should be taken to ensure that discounts are applied fairly to both new and existing customers. Care should also be taken to ensure that cancel fees do not appear to be alarmingly high.

Arguments that have been given to the FCC and Congress by cell phone providers in response to inquiries about high cancellation fees have lead me to assume that the cancellation fee exists to defray the cost of discounting devices for customers.

If this is truly the case, then should be clear in Sprint’s initial pricing. And it should apply to upgrade pricing as well. To make this clear, I have a three part proposal.

First, make device prices the same for everyone but fluctuate the discount based on how long the person has been a customer. New customers pay full price minus $240, called the “new customer discount”. (Example: $299 – $240 = $59) Existing customers pay full price minus $10 multiplied by the number of months the customer has had service, called the “existing customer discount”. (Example: $299 – (10 * 9) = $209) In this scheme, an existing customer gets the same discount as a new customer every two years.

Second, the cancellation fee should be $240 minus $10 multiplied by the number of months since the customer has purchased a device with a discount. (Example: $240 – (10 * 9) = 209).

Third, make the device discount and the cancellation fee very visible. They should be visible when you log in to the website, and they should appear on the paper bill. Being more transparent about the fees and discounts is going to significantly cut down on the confusion and frustration surrounding them.

In this scheme, customers are incentivised to stay with Sprint in two ways, accumulating discounts towards new devices and avoiding a high cancellation fee.

I thank you for taking the time to read my suggestions. I wish you and your family a happy holiday season.

M. Scott Ford

One Response to “More letters: this time, Sprint about device pricing and cancellation fees”

  1. Andrea says:

    You are my hero. :D

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