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A damaged Sprint Nextel is righting its ship with a newfound focus on customers, but big moves like this take time.
On Tuesday, Dan Hesse, the company’s CEO, will be on stage at Forrester Research’s Customer Experience Forum in New York City to discuss the company’s efforts to improve its brand image and customer satisfaction levels. In 2010, Sprint emerged as one of three firms with the biggest improvement in Forrester’s annual Customer Experience rankings based on a survey of more than 4,600 consumers.
Sprint, which is the third largest wireless provider in the U.S., saw its customer satisfaction rating sink to desperation levels a few years ago. But since Hesse took over as CEO two and a half years ago, with a focus on improving customer satisfaction and reviving the company’s brand, the company has seen steady improvements.
“A year ago, Sprint was in the toilet,” said Harley Manning, a vice president at Forrester Research. “But they’ve made a concerted effort over the past two years to really turn things around. And now they’re within spitting distance of the other major wireless carriers.”
Out of a potential 100 points, Sprint went from a rating of 45 in 2009 to a rating of 60 in 2010. While the company still ranks the lowest of all four major U.S. wireless operators, it is not far behind the industry average rating of 65. And if Sprint continues to improve at this pace, the company could lead in customer satisfaction next year.
“Sprint has essentially gone from ‘Do not subscribe to my service under any circumstance’ to being on par with its competitors,” Manning added. “And if the momentum continues, and the company makes an improvement of that size again next year, it will certainly shoot past its competitors in terms of customer satisfaction.”
A bad reputation
Sprint’s reputation for poor customer service and poor network coverage was years in the making. But network and billing problems after the company bought Nextel in 2005 exacerbated an already fragile image. Dissatisfied customers left in droves every quarter. Meanwhile, Sprint’s competitors, AT&T and Verizon Wireless, gobbled up these Sprint defectors, adding millions of new subscribers every quarter to their rosters.
In 2007, Sprint continued to damage its reputation by sending already dissatisfied and disgruntled customers letters terminating their service for calling customer service too often.
Finally, as its reputation sank so low and the blood-let of customers was so bad, the company’s board of directors ousted then CEO Gary Forsee. A few months later at the end of 2007, Hesse was hired as chief executive to turn the company around.
The first order of business for Hesse was to repair Sprint’s damaged reputation with a new focus on its customers.
“When Dan took over in the fourth quarter of 2007, he outlined three main priorities,” said Bob Johnson, chief service officer for Sprint. “The first was to improve the company’s cash standing, and the other two were to improve the company brand and improve the customer experience.”
Johnson said that a two and a half years into Hesse’s tenure as CEO, the three priorities remain the same.
“Dan has created a culture around satisfying customers,” he said. “Every staff meeting we have starts off with discussing the customer experience. We analyze the data and see where the pain points are and work to improve them.”
One of the most important changes Sprint made was focusing on resolving customer issues on the first call to a customer care agent. Making the resolution of the customer’s problem a top priority for care agents helped focus the staff in the call centers, Johnson said.
Sprint also changed its compensation model for employees and outsourced call centers. The company tied customer satisfaction directly to compensation for employees. It applied the same model to its outsourced call center partners. Call centers with higher customer satisfaction levels were awarded more calls, while lower performing call centers were phased out.
As a result, Sprint has been able to consolidate its call centers and reduce the number of centers it had from 74 to about 44 in the past two years. This reduction has helped the company achieve its objective of serving customers. And it has had the added benefit of reducing cost for the company, which has also helped to achieve one of the company’s three main priorities, improving its cash position.
As Sprint’s customer satisfaction levels rise, the company is able to further reduce it’s the number of calls to customer care, which allows it to continue to consolidate its operations.
“Two years ago, our customers called us twice as often as customers for Verizon Wireless or AT&T,” Johnson said. “Fast forward to now, and we are in line with our competitors. Instead of the average customer calling us twice a quarter or eight times a year, they are calling us once a quarter or four times a year, which is how often they call our competitors.”
Manning said that Sprint is on the path toward changing itself from a company that is product-focused to being a company that is customer-focused, which ultimately leads to success.
“There aren’t many companies that say they don’t care about their customers,” Manning said. “But actually doing the tactical work to change the organization and culture, such as changing compensation and making one executive accountable for the customer experience, is something different. And Sprint is doing it.”
Getting results
Sprint’s focus on customer satisfaction has resulted in steady gains in various satisfaction surveys. The company reports it has seen nine consecutive quarters of improved customer satisfaction. According to the 2010 American Customer Satisfaction Index, which evaluates the quality of products and services available to U.S. consumers, Sprint was named the most improved company in customer satisfaction, across all industries, over the last two years.
The company’s improvements have also been recognized by other independent third-parties, including Sprint winning the No. 1 spot for both overall satisfaction for wireless voice service providers and wireless data service providers in a Yankee Group and Mobile Enterprise magazine survey of large business decision makers. Sprint also ranked high in small and medium business customer satisfaction. Sprint also moved up the ranks in Forbes’ Reputation Pulse. Sprint’s 18.22 percent gain puts its improvement in the top 10 percent of the 150 largest U.S. companies, ahead of both AT&T and Verizon, the company noted.
Sprint has not only improved its reputation in customer care, but it’s also worked hard to establish itself as a value service provider in the market with competitive pricing and new phones.
In February 2008, Sprint launched its $99.99 all-you-can-eat rate plan called “Simply Everything,” which includes not only unlimited voice, but also unlimited data, text messaging, e-mail, Web-surfing, Sprint TV, Sprint Music, GPS Navigation, and push-to-talk service. A comparable service from Verizon that includes the same features costs $140 a month.
A year and a half later, the company followed that up with a $69.99 a month plan called Any Mobile, Anytime, which allows subscribers to call any cell phone in the U.S., regardless of the carrier. The plan also comes with Sprint’s Everything Data plan, which includes unlimited text messaging and data services. Subscribers also get 450 voice minutes for calls to landlines.
Sprint has complemented the new rate plans with a slew of new smartphones, including the Palm Pre, which launched a year ago, as well as new Google Android phones, like the HTC Hero and the first 3G/4G handset, the HTC Evo.
Still, Sprint continues to suffer from heavy losses in the postpaid market. During the first quarter of 2010, Sprint lost 578,000 postpaid customers who are on a contract and pay monthly bills. This beat expectations, as analysts had expected the company to lose about 623,500 customers. And it was better than the year before when Sprint lost 1.25 million postpaid customers.
The company tried to make up for some of these losses by also focusing on prepaid customers through its Boost Mobile and Virgin Mobile brands. During the first quarter, Sprint actually added 348,000 prepaid customers and 155,000 wholesale customers. New BlackBerry devices for Boost Mobile and Virgin Mobile should spur demand over the next few quarters.
Sprint isn’t the only wireless provider that is finding it difficult to add valuable postpaid customers. With wireless market penetration in the U.S. at more than 90 percent, AT&T and Verizon Wireless also struggled to add new high-value customers in the first quarter. These companies are also aggressively competing with Sprint for hot new handsets. AT&T is the exclusive carrier for the iPhone 4, and Verizon Wireless is offering new Google Android phones, such as the Motorola Droid X.
Sprint executives know the company has a tough fight ahead. And the company recognizes that changing its image, though crucial to its success, will not happen overnight.
“Believe me, I wish making these changes was more like hitting the gas to turn around a speed boat,” Johnson said. “But it’s more like an ocean liner, which takes time to slow it down and get it turned around in the right direction. We’re at the point where we’ve slowed the ship, and we’re making the turn.”
