How Can Product Managers Turn A Competitor’s Advantage Against Them?

by drjim on August 1, 2016

Sprint product managers are making a bold move to win AT&T customers

Sprint product managers are making a bold move to win AT&T customers
Image Credit: Mike Mozart

As product managers sometimes we have to sit back and just watch our competition execute a fantastic marketing program. Due to limitations that might be budget based, resource based, related to our product development definition, or simply lack of time based there is nothing that we can do to counter what our competition is doing. As their sales then zoom up we kick ourselves for not being able to come up with an effective program to counter their moves. This is no fun. Over at the mobile service provider Sprint this was happening to them. However, then they decided to do something very bold…

Sprint’s Bold Plan To Steal AT&T Wireless Customers

So here’s the problem that the Sprint product managers were looking at. Over at their dreaded competitor AT&T Wireless, the parent company, AT&T, had just gone out an slapped down US$49B to purchase satellite television company DirectTV. Clearly what the parent company wanted to do was use this purchase to create unique communication channels to millions of DirectTV customers in order to convince them to purchase more AT&T Wireless products.

Sprint has been financially struggling for the past several years. They certainly don’t have billions of dollars to go toe-to-toe with AT&T. They would like to get the millions of people who subscribe to DirectTV to purchase Sprint wireless products instead of AT&T wireless products. However, what they needed was a way to get the attention of DirectTV customers. This is when the Sprint product managers got really creative.

What they decided to do was to appeal to DirectTV customers directly. They created a Sprint program where they told DirectTV customers that they would give them a free year of wireless service if they would switch to Sprint. Wow – this is the kind of thing that you can put on your product manager resume. Very clearly this was a direct attack on AT&T Wireless. One of the reasons that AT&T was willing to pay so much to purchase DirectTV was because they assumed that they would be able to convert a lot of those television subscribers into AT&T Wireless customers. Clearly Sprint’s new program was going to cause some problems for AT&T Wireless.

Will Sprint’s Plan Work?

So there’s no question that Sprint’s product managers get high marks for boldness. All of the other wireless companies were just content to allow AT&T to purchase DirectTV and then start aggressively marketing AT&T wireless services to DirectTV subscribers. However, boldness is one thing, but effectiveness is the most important thing. Does the Spring plan have a chance of success?

As expected, AT&T is trying to laugh the Sprint program off. They are saying that it is a desperate attempt by Sprint to get more customers and they point out that the program does come with a number of restrictions. What Sprint is offering is a plan with unlimited talk, text, and up to 2G of data per month for free for one year. This program does not include the cost of a smartphone. After the year is up, Sprint says that it will start to charge customers US$50 / month. AT&T says that they still feel good about their offers.

Cleverly the Sprint product managers have restricted the amount of time that this program will be available to roughly a month. What this means is that DirectTV customers who are probably only now starting to get marketing information from AT&T Wireless will now be put under some pressure to make a decision in the short term. The biggest question is going to be how much of a financial hit this may cause Sprint. If the program is successful, they will be giving away a lot of free service for a year. However, no matter how many DirectTV customers they sign up, they will still have made a splash and ensured that people became aware of the Sprint product offerings.

What All Of This Means For You

The one thing that product managers don’t like to see is when their competition gets an advantage. In the case of the wireless service provider Sprint, one of their biggest competitors, AT&T Wireless’ parent company had just purchased the DirectTV satellite television service and its millions of customers. The Sprint product managers knew that they needed to take action, but the big question was what should they do?

What they decided to do was to make a bold move – this is what our product manager job description tells us to do. They created an offer for DirectTV subscribers. They told them that if they were willing to switch their wireless service to Sprint, then Sprint would give them free wireless service for a full year. This included unlimited voice, texting, and 2G of data per month. After the first year, the subscribers would have to start paying $50/month.

Sprint’s plan is very bold. The other wireless providers were just sitting back and allowing AT&T to start to market to the DirectTV customers. The Sprint product managers shook this process up. The limited time line for their offering means that DirectTV customers will have to make a decision quickly in order to take advantage of the Sprint offer. This means that AT&T Wireless has precious little time to communicate a counter-offer. We’ll have to see how all of this works out.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: If you were a product manager at one of the other wireless providers, what would you be doing now?

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What We’ll Be Talking About Next Time

How important is honesty to a product manager? You would think that this would be a big deal to most of us, right? The thinking goes that if we’re not straight with our customers, they they’ll stop trusting us and they’ll go somewhere else to get the products that they need to solve their problems. However, what would you do if you found out that this wasn’t true? What if you discovered that your customers wanted you to lie to them?

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{ 6 comments… read them below or add one }

Fábio August 2, 2016 at 5:33 am

Product Managers paying too much attention to what the competition is doing instead of doubling down in Product Innovation are generally doomed to be B and C players.
I was hopping to read something around Blue Ocean Strategy and Product differentiation or User Testing but instead I’m reading about Pricing and Monetization model Wars. ¯\_(ツ)_/¯

Reply

drjim August 2, 2016 at 11:22 am

Fabio: you make a good point — product managers should not pay TOO MUCH attention to what their competition is doing. However, we do need to spend SOME time watching them. Blue Ocean strategy only applies when you are creating new markets for your product that do not currently have competitors in them…

Reply

Fábio August 2, 2016 at 12:29 pm

Allow me to disagree. BOS does not “only” applies to new markets.

I think you can pretty much apply some of its principles to any business situation and if you don’t want to call it Blue Ocean call it Business Model Innovation instead. You may not necessarily create a new market or new product line but you can segment your offering to a niche which offers precisely what customers want (and double down on quality) without rolling out a full offer with features or services that most wouldn’t care and perhaps the product marketing roadmap can precisely emphasise this instead of going into a risky monetization strategy war with your competition. I sense that some smart users would be taking advantage of 12-months benefit and find a good reason to break the contract agreement for a more compelling alternative one year later.
Competing on pricing (especially with this risky 1-year grace period model) may be good for short-term results and vanity metrics in stakeholder meetings but down the line what really matters is customer lifetime value which translates to a compelling value proposition and customer satisfaction. Pricing should be a byproduct of these not the other way around.
I don’t see how can this “competition counter-measure positioning” can be sustainable from the PM perspective. I see it as a typical tactical decision executed by Business Devs or Head of Sales rather than a PM whose concern should be delivering on the vision, not on the competition or quarterly goals.

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David September 12, 2016 at 9:24 am

Thumbs up to thinking about attacking DirectTV customers, however giving out free service is hardly a “creative” solution. As suggested in the article here, if it is a great success then Sprint stands to lose a lot of money – how long can they sustain those losses? If Sprint decides to add restrictions to cut their losses, then that defeats the purpose of the initiative and will inevitably upset would-be customers and potentially push them to AT&T.

They may wish to look at their focus on mobile solutions vs AT&T’s diversified approach and see who can provide the better customer experience. While pricing will certainly weigh heavily on a customer’s mind, they may see more value in customer care/service and be willing to pay for it.

Reply

drjim September 13, 2016 at 8:24 am

David: Good points. The use of “loss leaders” is basically classical marketing. Your point on Sprint is valid, but we also have to realize that once people sign up they may be resistant to changing no matter how their carrier’s price change.

Reply

David September 13, 2016 at 9:05 am

Would you say that is because the customer is loyal? If so, how would that loyalty be built up? Or why might a customer be more resistant to changing carriers?

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