PwC Consumer Intelligence Series Customer Loyalty

ConsumerIntelligenceSeries:

CustomerLoyalty

Series overview

Through PwC’s ongoing consumer

research program, we gain directional

insights on consumer attitudes and

behaviors in the rapidly changing media

landscape. This report summarizes key

findings from an online survey and

follow-up focus groups exploring brand

loyalty among subscription-based

communication providers, with a focus

on the multi-channel video and wireless

business segments, specifically:

Customer perceptions about loyaltyand the factors that drive and buildloyalty in an increasingly digital andfragmented world.

Recent brand switching behavior, aswell as tipping points, that leads tobrand switching.

We conducted a two-phase program inJuly and August 2012 to capture thisdata. In Phase 1, we surveyed ageographically dispersed sample of 1,002adult men and women between the agesof 18-59. In Phase 2, we conducted focusgroups to gain a deeper understanding ofsome of the underlying reasons drivingperceptions and behavior reported in thesurvey.

I. Executive Summary

In today's ultra-competitive media and communications marketplace,attracting customers is only half the battle - keeping them loyal to your brandcan be just as challenging. But building brand loyalty, especially amongsubscription-based providers, most often comes down to a few key factors:the delivery of consistently strong performance at a good price.

While good value drives loyalty, customer service, honesty, and trust areimportant secondary attributes that contribute to brand allegiance. Together,these benefits present a compelling way for media and communicationscompanies to market themselves to attract and maintain customers.

For companies interested in wooing customers away from othercommunication providers, incentives - especially the chance to save moneyis the most effective strategy. Brand switching is most frequently promptedmost by the promise of cost savings, especially among youngwho tend to be more cost conscious and less complacent in longrelationships than their older counterparts, who view brand switching asmore of a hassle. Price-driven switching is especially a threat to(cable, satellite, telecommunications subscription) providers, who areincreasingly competing on cost and content variety.

In the mobile world, brand switching is also strongly driven by deals andpricing, although service contracts still prevail in forcing loyalty fortime. Consumers are willing to pay for freedom from the restrictions and feesof mobile contracts, so mobile companies have an opportunity to generatenew revenues - and perhaps engender loyalty - by offering more contractfreedom.

Ultimately, it's not so much about how many channels of communicationreach consumers, but the content of the message - which should be aboutperformance, pricing, customer service and delivery in a manner whichengenders trust. Companies should consider media strategifocused in message content and tout experience, reliability, and reputationover start-ups and price-driven competitors.

competitive media and communications marketplace,keeping them loyal to your brand

be just as challenging. But building brand loyalty, especially amongbased providers, most often comes down to a few key factors:

the delivery of consistently strong performance at a good price.

ce, honesty, and trust areimportant secondary attributes that contribute to brand allegiance. Together,these benefits present a compelling way for media and communicationscompanies to market themselves to attract and maintain customers.

terested in wooing customers away from otherespecially the chance to save money -

is the most effective strategy. Brand switching is most frequently promptedmost by the promise of cost savings, especially among younger consumers,who tend to be more cost conscious and less complacent in long-term brandrelationships than their older counterparts, who view brand switching as

driven switching is especially a threat to multi-channelproviders, who are

increasingly competing on cost and content variety.

In the mobile world, brand switching is also strongly driven by deals andpricing, although service contracts still prevail in forcing loyalty for periods oftime. Consumers are willing to pay for freedom from the restrictions and feesof mobile contracts, so mobile companies have an opportunity to generate

by offering more contract

t's not so much about how many channels of communicationwhich should be about

performance, pricing, customer service and delivery in a manner whichengenders trust. Companies should consider media strategies that are morefocused in message content and tout experience, reliability, and reputation

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II. Key findings

A. Critical factors influencing service provider loyalty

Percent of respondents who answered that attribute is Very/ Somewhat Important

1. Performance, pricing and service are keydrivers of brand loyalty among subscription-based communication services.

Performance and price are paramount.Reliable, consistent and good performance, alongwith deals and price, were ranked as key drivers ofcustomer loyalty by the vast majority of surveyrespondents across age groups.

– 94% chose “Reliable and consistentperformance” as the most important factor increating brand loyalty. 71% of respondentscited performance as one of their top threereasons for loyalty – the highest for anyattribute.

– 93% chose “Good deals and pricing,” with66% ranking it as one of their top threereasons.

– 93% chose “Good performance," which waslisted by 61% a top three reason. Focus grouprespondents supported this as follows:

o “Whatever it is, it needs to do what it says.It needs to be reliable.” (Consumer,age 35-54)

o “You have to have good and consistentperformance… It’s (reliability) and qualitythat you don’t have trouble with.”(Consumer, age 18-34)

Customer support is also a critical factor inbrand loyalty, but ranks significantlybehind performance and pricing attributesamong consumers' top reasons for loyalty.This attribute was important to 89% ofrespondents, and even higher (92%) among theolder consumers, aged 45-59. However, only 31%chose it as one of their top three reasons forloyalty, though older consumers again ranked thisslightly higher, with 40% including it in their topreasons for loyalty.

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Influences on brand loyalty: Top-Ranked 3importance

Influences on brand loyalty: Top-Ranked 3importance

7%

31%

30%

Trustworthiness of brandname

Good customer support

Good deals and pricing

Reliable and consistentperformance/service

Good performance

Features

0%

3%

10%

3%

7%

Speaks to me throughmultiple channels

Creative offers andprograms

Honest and open policies

Recommendations fromfriends

Offers the latest intechnology

Ranked 3 in

Ranked 3 in

2. Honesty and trust rank high in influencingcustomer allegiance

Transparency and confidence in a brandname are key contributors toward loyalty.

– 83% of consumers choseopen policies” as a very/somewhatimportant driver of loyalty, but just 10%included it as one of their top 3 attributes;relative to price, performance and service,honest & open policies are a lower priority.

– Being honest and transparent wassignificantly more importain the 45-59-year-old group (86%) relative tothe 18-29-year-old group (80%). This could beattributed to a stronger cynicism among theyounger group as well as a sense of frustrationamong the older group from beingunpleasantly surprised in the past by "fineprint."

o “As long as you’re not getting ripped off...As long as your bill stays the same andyou know what it is and you’re gettingwhat you pay for and they don’t try toswitch things on you. That’s important.”(Consumer, aged 18

o “It’s like not trying to hide what your fineprint is and just putting it out in the open.There shouldn’t be any surprises on theback end, like cancellation or terminationfees that they didn’t present up front.”(Consumer, aged 35

– 75% chose “Trustworthiness of brandname” as an important loyalty factor. This isalso consistent with our study earlier this yearon privacy, which found that consumers aremore likely to reveal their personalinformation to larger, wellcompanies and brandsinherent trust because of their size andreputation, which creates a perception thatthese brands would have more to lose.

o “Brand names get around and I think it’sinfluential. I wouldn’t get something like acell phone from a(Consumer, aged 35

31%

66%

71%

60%

30%

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rank high in influencing

Transparency and confidence in a brandname are key contributors toward loyalty.

83% of consumers chose “Honest andas a very/somewhat

important driver of loyalty, but just 10%included it as one of their top 3 attributes;relative to price, performance and service,honest & open policies are a lower priority.

Being honest and transparent wassignificantly more important to the consumers

old group (86%) relative toold group (80%). This could be

attributed to a stronger cynicism among theyounger group as well as a sense of frustrationamong the older group from being

sed in the past by "fine

“As long as you’re not getting ripped off...As long as your bill stays the same andyou know what it is and you’re gettingwhat you pay for and they don’t try toswitch things on you. That’s important.”(Consumer, aged 18-34)

“It’s like not trying to hide what your fineprint is and just putting it out in the open.There shouldn’t be any surprises on theback end, like cancellation or terminationfees that they didn’t present up front.”(Consumer, aged 35-54)

stworthiness of brandas an important loyalty factor. This is

also consistent with our study earlier this yearon privacy, which found that consumers aremore likely to reveal their personalinformation to larger, well-known, reputable

brands - awarding them moreinherent trust because of their size andreputation, which creates a perception thatthese brands would have more to lose.

“Brand names get around and I think it’sinfluential. I wouldn’t get something like acell phone from a brand new company.”(Consumer, aged 35-54)

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3. Product features and the ability to offer thelatest technology are also among topcontributors to loyalty.

Features can serve as key differentiatorsand reasons for selection/loyalty – but thatloyalty can be fleeting if something new/bettercomes along.

– 75% of the sample rated “providing specificfeatures” as somewhat/very important andranked that factor fourth in priority, justbehind “good customer support."

o The younger segment rated "productfeatures" directionally higher inimportance (79%) versus the overallsample. Younger focus group respondentsexplained how the latest features caninfluence loyalty and switching behavior:

> “Apple came out with the iPhone andI practically threw my Sidekick outthe window… I was an AT&Tcustomer before. But the Sidekick wasthe trendy phone and I switched to T-Mobile for two years because I wantedthe new, hot Sidekick. There wasn’tany other cool phone that did all thestuff the Sidekick did… Then I wentback to AT&T for the iPhone.”(Consumer, aged 18-34)

o However, features were somewhat lessimportant among the 30-44-year-oldsegment (important to 73%), for whomthe practicality of performance andreliability are paramount.

> “I don’t need all the bells andwhistles, as long as I can rely on it.”(Consumer, aged 35-54)

Although important, the latest device orfeature is not always considered to be thegreatest.

– A brand that “offers the latest technology” wasimportant to 73% of our consumers, but didnot rank among the highest priorities; only 7%ranked it as one of their top three attributes.

o “I’m more interested in somethingworking properly than whether it’s thenewest, trendiest thing. I’d rather knowexactly what I have.” (Consumer, aged35-54)

– Although having up-to-date technology isimportant for some consumers, for others itmay indicate that the product is yet unproven,or is merely a technological stepping stonebefore the next "latest" advance comes outand renders their version obsolete.

o “They have to be proven before I get intoit. Sort of like when everyone ran out toget the first iPhone, there was no way inhell I was doing that. I was like – ‘I will letyou guys work out the bugs, tell me whatworks best and report back.'” (Consumer,aged 18-34)

o “There’s always something new intechnology. That’s why it’s so upsettingbecause once you get this and spend allthis money on this brand new thing that’sreally great, there’s going to be somethingeven better that comes out.” (Consumer,aged 18-34)

4. A majority of consumer also valued “creativeoffers and programs” - but mostly when"creative" meant "free" or "credit to me."

Offers and programs contribute to loyalty,but are not top drivers.

– It was important to 62% of respondents, butwas ranked as a Top 3 attribute for only 3%. Akey reason may be because such offers tend tobe temporary, influencing trial and switchingbehaviors more than long-term loyalty,especially among price-conscious consumers.

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o “I had a cable provider and they gave mefree stuff for a while. I thought it waspretty cool when I had it but then I startedpaying for it and I got tired of it and justgot rid of the whole thing.” (Consumer,aged 18-34)

– Loyalty programs are interesting to many,especially when they provide a reciprocalbenefit, such as cost savings on products andservices.

o “I like Costco’s executive membershipprogram. You get 2% back at the end ofthe year … I was so pleasantly surprisedbecause I got a credit back and not onlydid it pay for the entire membership, butthere was like $100 left over.” (Consumer,aged 35-54)

5. Recommendations from friends are aninteresting data point for consumers, but nota primary driver of loyalty.

While friends’ recommendations mayprovide awareness and encouragement,personal experience matters most.

– Only 53% of respondents said that theirfriends' recommendation influences theirbrand loyalty. This is slightly higher amongconsumers aged 18-29, at 58%.

o “It’s like Step #2. You pick what you thinkyou want and then if people agree withyou, then that encourages you, but it’s nota decision maker.” (Consumer, aged18-34)

– While the judgments of friends are recognizedas sometimes being different than one’spersonal opinions, such recommendationsserve more as a "data point." At the end of theday, consumers feel they still have to do theirown research.

o “My friends might have different tastesand the products they go for aren’t reallyfor the same reasons why I go forproducts.” (Consumer, aged 35-54)

o “I think if you’re going to switch, you dothe research. You take it into account, butyour friend’s recommendation isn’t goingto be your big influence in switching.”(Consumer, aged 18-34)

6. A brand’s ability to communicate viadifferent media and channels does notdrive affinity.

Although multiple channel messaging maybuild awareness, trial and even relevance,it has little impact on loyalty.

– Only 30% of the respondents said their loyaltyis influenced by companies who speak to themthrough multiple channels. None of therespondents chose it as a Top 3 attribute inimportance.

o “You may participate in differentmediums, but you don’t develop loyalty bythe way (brands) are communicating withyou.” (Consumer, aged 35-54)

o "I don’t think that consciously I wouldthink ‘Oh, that company has a Facebookpage, so I’m going to go to that company.’But I think that, especially if you’relooking for something new and you see acommercial, then you see it on Facebookand you see it on email… 'Oh, you knowwhat? Let me check it out'.” (Consumer,aged 35-54)

– Surprisingly, speaking through multiplechannels was less important to the youngerconsumers (25%), who are most involved inchannels like social media, than to olderconsumers (34%). Part of the reason may be anincreased de-sensitivity from receiving so manymessages across a number of channels.

o “I get so bombarded with emails andwhatnot. I just got a junk mail. I opened itand closed it so I don’t have to read it.”(Consumer, aged 18-34)

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B. Recent switching behaviour

Respondents who have switched providers in thepast 1-2 years

1. Changing provider brands can be a hassle.Overall, the majority of consumers (59%)have not switched their Internet, mobile,cable or content providers within the pastyear.

There often needs to be significantdissatisfaction to offset complacency withone’s current brand.

– Many consumers remain loyal due simply tothe absence of a negative - because it is ofteneasier to put up with something that is lessthan perfect than go to the trouble, hassle andpotential expense of switching.

o “I’m only going to switch if I have a reallynegative experience. You don’t know ifanother one will be better, but… (youswitch) if the current one is just so terriblethat you figure it can’t get much worse.”(Consumer, aged 35-54)

o I’ve got Sprint. I’ve had it forever. It’s allright. I know it’s not the best but I’ve hadit so long and I’ve got like the cheapestdeal.” (Consumer, aged 18-34)

2. Younger consumers are, by nature, bothmore experimental and transient, and haveswitched providers more often than theirolder counterparts in the past 1-2 years.

Significantly more younger consumershave switched brands (50% in past 1-2years) than the older segment (32% in thepast 1-2 years), a trend likely driven by theexperience of trial and error, pursuit of the bestdeals and pricing, as well as transience ofresidence.

o “I think with the Internet in the beginningwhen you first go into an apartment you trythat first company and you’re like…'OK, notfor me’ and you’re constantly changing.”(Consumer, aged 18-34)

o “When I was a kid, I switched everything, justto find out what I liked.” (Consumer, aged35-54)

– Some older consumers say they are just too busy –or lazy – to think about researching new servicesand switching providers unless performance issignificantly impaired.

o “You don’t have time to think about it all daylong. I remember there were days when Ispent hours on the phone with whatevercompany going back and forth. I don’t havetime for any of that stuff now. I barely havetime to sleep.” (Consumer, aged 35-54)

o “Now that I’m older, I’m lazy, like about mycable company. I can’t stand it and it’s reallyfrustrating, but I don’t have time to doanything about it. (Consumer, aged 35-54)

25%

15%

22%

5%

59%

34%

14%

28%

5%

50%

27%

16%

23%

6%

58%

15% 15% 14%

5%

68%

Internet Mobile Cable Content None

Total 18-29 30-44 45-59

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3. Compared to other service providers,Internet (25%) and cable (22%) have had thegreatest percentage of switchers

Primarily because it is comparativelyeasier to switch cable and Internet relativeto mobile carriers

o “They are usually pretty quick in doing it,especially if you’re a new client, especially incable, because it’s so easy to switch.”(Consumer, aged 18-34)

o “Switching your cell phone. I did it once whenI first moved out here. It was a nightmare. Ihad to pay the fees.” (Consumer, aged 18-34)

Switching might be even higher if not for alack of availability. Some claim their optionsare limited or non-existent.

o “Where you live and where you are dependson what you can have.” (Consumer, aged18-34)

o “You don’t have a choice when it comes tocable companies (where I live). You’re stuck.It’s a monopoly.” (Consumer, aged 35-54)

4. Content provider switching is low – due inpart to a comparatively lower subscriptionbase for over-the-top providers

What little switching occurs may be driven moreby dissatisfaction with price than content.

o “I have switched the Netflix. I actually haddowngraded when they upped their prices. Ijust switched to all online instead of gettingDVDs.” (Consumer, aged 35-54)

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C. Critical factors of influence on brand switching

% of respondents who answered that Attribute is Very/Somewhat Important

1. Switching is most often triggered by goodprices and deals.

Even though it's a hassle to switchproviders, the advantage to the wallettrumps the hassle. Special offers and pricingare most effective at prompting a provider change,compensating for the inconveniences involvedwith switching.

– 90% of respondents chose “Good deals andpricing” as a reason for switching. A clearmajority - 71%- chose it as one of their topthree reasons to switch.“The pretty intro rate is what gets people toswitch." (Consumer, aged 35-54)

– Unsurprisingly, price increases can also erodeloyalty and create frustration which canprompt switching.

o “They (cable provider) continued to creepup in price and I didn’t understand that …so I said, all right, cancel it! I didn’t evenknow which cable provider I was going togo to, but I just knew I wasn’t stayinganother day with them.” (Consumer, aged18-34)

2. Both performance and customer support areimportant drivers of switching, too.

However, some feel brand performanceand service are more difficult to discernwithout experience. These elements can beunknown until tested.

– “Good performance” and “Reliable andconsistent performance/service” was chosenby twice as many respondents as one of theirtop three reasons for switching.

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o “With performance, that’s something youalmost have to test out over a period oftime. You don’t really know the trueperformance of something until you haveit and you’re using it yourself. But dealsand pricing, that’s something that’s onpaper... you know how much it’s going tocost.” (Consumer, aged 35-54)

o “You can’t rely on performance if you’reswitching. You have no idea what theperformance is.” (Consumer, aged 18-34)

o “You don’t know yet (about customersupport, when switching brands). Youusually don’t talk to customer supportunless you have some kind of problem.”(Consumer, aged 18-34)

Importance in making you decide to switch

service providers

Top Two Box Ratings

(Very/somewhat Important)

Importance in making you decide to switch

service providers

Top Two Box Ratings

(Very/somewhat Important)

68%

79%

93%

86%

82%

60%

63%

79%

92%

91%

88%

65%

57%

69%

86%

80%

76%

59%

62%

75%

90%

85%

81%

61%

Trustworthiness of brand name



Reliable and consistent performance/service

Good performance

Features

Total 18 - 29 30 - 44 45 - 59

38%

67%

73%

46%

66%

34%

57%

67%

46%

65%

28%

45%

54%

43%

54%

33%

55%

64%

45%

61%

Speaks to me through multiple channels

Creative offers and programs


Recommendations from friends

Offers the latest in technology

Total 18 - 29 30 - 44 45 - 59

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Influences on brand switching: Top 3 in

importance

Influences on brand switching: Top 3 in

importance

7%

24%

71%

59%

54%

28%

Trustworthiness of brandname



Reliable and consistentperformance/service

Good performance

Features

Total

0%

7%

7%

6%

9%

Speaks to me throughmultiple channels

Creative offers andprograms


Recommendations fromfriends

Offers the latest intechnology

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D. Critical factors of influence for staying with current service providers

% of Respondents who answered that attribute is Very/ Somewhat Important

1. Key reasons selected for staying with a brandmirror the factors that drive brand loyalty.

Not surprisingly, those attributes that influencestaying with a current brand [or switching fromone to another] - performance, pricing andservice - were considered equally important asthose perceived to drive loyalty.

2. The notable exceptions were “Trustworthybrand name” and “Friends'recommendations."

These were both less important in influencing thedecision to stay with a current provider. This islikely because these two attributes are more aboutreputation (and perhaps brand adoption) thanpersonal experience.

– “I like when someone says, ‘this is good’. Butyour own experience is most important.”(Consumer, aged 18-34)

E. Plans to switch brands in next12 months

Respondents who intend to switch providers in

the next 12 months

1. It's all good! Nearly 3 out of 4 consumershave no plans to change providers in the nextyear.

25%

15%

22%

5%

59%

34%

14%

28%

5%

50%

27%

16%

23%

6%

58%

15% 15% 14%

5%

68%

Internet Mobile Cable Content None

Total 18-29 30-44 45-59

Good Deals & Pricing (94%)Performance: Good & Consistent/Reliable (92%)

Customer Support (85%)Specific Features (78%)Honest/Open Policies (73%)

Offers Latest Technology (69%)Trustworthy Brand Name (65%)Creative Offers & Programs (62%)

Friends’ Recommendations (42%)

Speak thruMultipleChannels( (34%)

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This finding indicates a high level ofsatisfaction and loyalty, complacency or acombination of both. As noted earlier, manyconsumers are generally satisfied and/or don’twant to go through the time and trouble to make achange when they are not certain it will be asignificant improvement.

– “My cable, my Internet, it works. So there’s noreason for me to go out there and researchunless I were to start having problems.”(Consumer, aged 35-54)

– “They have to make it worth your whilebecause you’re taking a chance. You’re notexactly sure what you’re getting. It may be awhole day out of your life to switch yourcable.” (Consumer, aged 18-34)

2. These are even smaller percentages thanthose who had switched within the past 1-2years.

Once they've found something that isworking relatively well, there is lessinterest in or need to explore otheroptions.

F. Multi-Channel Providers: KeyInfluencers in Selecting/Switching

1. Selection - The need for speed is the keycritical factor of influence in selecting a multi-channel provider - but channel variety and servicebundles are also valued.

Internet speed and reliability is paramount(important to 90%)

– “I have to have my Internet. My Internetneeds to work. I mean, it really needs towork!” (Consumer, aged 18-34)

Variety of channel line-up is also animportant influence (79%). Consumers saythey crave variety and despite all the selectionmany still often feel like “nothing is on.” However,they want to make sure they can access all of theirfavorite programming.

– “On TV even though there’s 5,000 channels,how many times do you just flip and flip?There’s nothing on half the time – it’shorrible.” (Consumer, aged 18-34)

– “I need my MSNBC and I need my BBCAmerica, too. That’s why I don’t switchanything because what if I don’t get those? Iget them now, so everything’s fine.”(Consumer, aged 35-54)

Service bundles are appealing as “one-stop-shop” drivers of convenience andcosts savings.

– “I love that everything is one thing. MyInternet, my television, my cell phone is onething. It’s one website, it’s one phone number,it’s one everything.” (Consumer, aged 18-34)

– “I like the bundling thing. I want to redo mypackage for all my stuff and they’ve got allsorts of little fun things. Like if you bundlethis and this together with this package, thenyou get this discount.” (Consumer, aged35-54)

Influences on multi-channel subscription

selection:

% of Respondents who answered that attribute isVery/Somewhat Important

90%

79%

25%

60%

Speed of Internet

Variety of channel line up

Ability to watch same TVprograms on mobile as I

watch at home

Service bundles

Total

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2. Switching

The multi-channel subscription grass isalways greener. Many feel that there are alwaysbetter deals out there and moreover, that they canget the same level of entertainment off the Web.This is especially true among 18-29-year-olds.

– “Cable companies are always offering a deal."(Consumer, aged 35-54)

They can't keep up with the flurry ofpromotional offers. Many feel that the pricingand deals constantly vary and change, especially atthe introductory level, even though only about20% of respondents say they are planning toswitch service providers when the promotionaloffers expire. This may be why 49% of allrespondents intend to stay with their currentservice provider, but feel they should be able tonegotiate a better deal.

With what's available on the Internet, whoneeds multi-channel subscription anyway?Many feel that the Internet offers new andexpanded content opportunities and options (suchas over-the-top services) that can exceed thoseprovided by multi-channel subscription - andoften for a lesser price. In fact, a full half ofconsumers aged 18-29 said they are likely to usethe Web to satisfy their entertainment needs.

– “I’ve realized that I have other options. Youdon’t have a choice when it comes to cable(Consumer, aged 35-54)

– “On TV even though there’s 5,000 channels,how many times do you just flip and flip?There’s nothing on half the time – it’shorrible. But on the web, whatever you thinkof you can pretty much find it instantly. Likewhatever you’re in the mood to watch, there’sa way to find it. It’s wonderful!” (Consumer,aged 18-34)

– “A couple of people I know have beencancelling their cable altogether and they justuse Netflix or Hulu because it’s cheaper. Thereare some things that you can do with theInternet that you can’t get with cable.”(Consumer, aged 18-34)

Level of agreement to statements about multi-

channel subscription providers

Level of agreement to statements about multi-

channel subscription providers

% of Respondents who completely/somewhat agree

12%

15%

24%

48%

46%

21%

17%

26%

48%

49%

22%

23%

29%

48%

54%

18%

19%

26%

48%

50%

I am planning to switch serviceproviders once the promotional offers

from my current provider are over

I am planning to switch serviceproviders in the next 6 months

I am likely to purchase differentsolutions from my service provider than

the services I currently have

I would likely recommend my cableservice provider to friends/family

I believe there is a better deal withanother service provider than the one I

currently have

Total 18 - 29 30 - 44 45 - 59

17%

16%

18%

20%

50%

29%

31%

22%

26%

50%

50%

47%

25%

26%

47%

33%

31%

22%

24%

49%

I am likely to use the Web to satisfy myentertainment needs

I can obtain the same level ofentertainment on the Web as I can on TV

without my service provider

If service provider allowed me to havemore options on my channel selection but

at a higher proce, I would be moreinclined to select that provider

If a service provider had customerloyalty/rewards program, I would be

willing to pay a premium to that provider

I want to stay with my current serviceprovider, but feel the amount I pay can be

negotiated

Total 18 - 29 30 - 44 45 - 59

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G. Mobile Phone Attitudes/Behavior:Key influencers in selecting/switching

1. When it comes to buying cell phones,customers value the brand names andreputations of cell phone providers.

The majority (62%) of respondents boughttheir current mobile phones from a single-provider mobile phone store. Most of theremaining one-third of current mobile devices havebeen purchased either from an online website (14%) orat an electronics store (12%).

This behavior reiterates the importanceconsumers place on trustworthiness of brandname and reputation, as well as implied customerservice expectations coming from a single-sourcebrand provider.

Where did you buy the mobile phone you

currently use?

2. Contract terms appear to influence how longconsumers keep their cell phones beforereplacing or upgrading.

The majority (62%) of mobile phones are replacedafter a little more than two years, and mostconsumers (68%) use a phone between 18 monthsand three years before replacing it.

This behavior seems to reflect the terms of mostlarge brand mobile contracts (two years).

The younger age group (18-29) is more likely toreplace their phones in less time than the olderage group (45-59). This is consistent with therelatively greater interest among youngerconsumers in features and being up on the "latesttechnology," which is perceived to change rapidlyin mobile devices.

About how frequently do you typically replace or

upgrade your mobile phone?

Average # of Months 25 23 25 27

3. Consumers expect low up-front costs for smartphones, and demand subsidies in more thanthree-quarters of cases.

The majority (75%) of consumers expect topay more than $100 for a smart phone,while half expect to pay $150 or more. Thesenumbers are fairly consistent across age groupsand seem to reflect the current market price formost smart phones (assuming a renewedcontract).

12%

4%

62%

6%

14%

3%

14%

4%

65%

3%

13%

2%

14%6%

57%

6%

15%

2%7%3%

63%

9%15%

4%

Electronic store Mobile phonestore (Multi-

provider)

Mobile phonestore (single

provider)

Discountretailer

Online website Other

Total 18-29 30-44 45-59

1% 3%

15%

35%33%

12%

0%

4%

20%

40%

30%

6%1%4%

15%

33%34%

13%

0% 2%

11%

32%

36%

19%

Every 6 monthsor less

Between 6months to 1

year

Between 12and 18 months

Between 18months and two

years

Between twoand three years

More thanevery three

years

Total 18-29 30-44 45-59

9%

16%

25%24%

26%

less than $50 $51-$99 $100-$149 $150-$199 More than $200

PwC of 17

4. Consumers want the freedom to come and goas they please -- and they are willing to payfor it.

A majority (64%) of consumers are willing to paybetween $26 and $150 or more incremental to thecost of their phone so that they are not bound byan early termination fee.

And 61% of consumers would be willing to paybetween $26 and $100 in order not to have acontract.

About how much more would you be willing to pay for a smart phone to make it worth not having

to pay for an early termination fee?

5. Freedom of restrictive contract terms or lowerupfront fees does not always provide anincentive to change the "purchase model" torent/lease smart phones.

Most (56%) consumers are not willing to rent or leasetheir mobile phone even if it means there would beless restrictive contract terms and a lower upfrontfee.

This could indicate the trade-in value consumersassign when replacing their old phones with a newone.

Ultimately, this could be an indication of theundervaluing of phone subsidies.

Would you be willing to rent/lease a

smartphone if it means less restrictive contract

terms & a lower upfront fee?

Interestingly, there is more interest (significantlyso between the 18-29-year-old consumers and the45-59 group) in purchasing a "certified pre-owned" smart phone than in renting or leasingone.

This further supports the value consumers placeon ownership relative to rental, which continuesto support perceived trade-in value.

Would you be interested in purchasing a

certified, pre-owned smart phone instead of a

brand new phone?

17%

19%

25%

13%

11%

5%10%

Less than $15 $15-$25 $26-$50 $51-$75 $76-$100 $100-$150 $150+

28%

56%

17%

30%

55%

15%

24%

59%

17%

29%

54%

17%

Yes No Don't know

Total 18-29 30-44 45-59

38%

48%

14%

43%46%

11%

39%

48%

13%

32%

50%

18%

Yes No Don't know

Total 18-29 30-44 45-59

PwC of 17

IV. What this means for your business

1. Consistent, reliable performance will attractand maintain loyalty. Companies should toutperformance track records and consider promotingrecords in length of customer loyalty as a credibleloyalty trigger.

2. Consumers cannot pass up a deal. Attractivepricing policies and promotional offers do attractinterest. Even though it may be too time consumingto switch services, consumers can be wooed by anoffer to save money or by offers that come with amonetary benefit. And because the monetary cost ofswitching is relatively low for consumers, some maybe willing to switch on a recurring basis to savemoney.

3. In some cases, age does matter. For olderconsumers, the hassle of switching is not worth thepain, time or trouble of staying. And consistentcustomer support is even more critical as theconsumer gets older. Companies should considerdifferent ways to market to the complacency of theolder customer (via performance and pricingmessaging) in order to incentivize switching.

4. Multi-channel subscription providers need tobetter compete with entertainment optionsfound online. Customers are constantly looking forthe next better deal. Given price as a key driver,attractive pricing packages may be one way tomaintain customer loyalty. Additionally, providingbundled services, will aid in the ability to attract morecustomers focusing on both content and internetservice quality. Opportunities exist for new andexpanded partnerships for media, communications,and technology companies.

5. Trustworthiness of brand name andreputation are important to consumers in drivingloyalty among service providers. Companies shouldtout experience, reliability and reputation over start-ups and price-driven competitors.

6. It's not so much about how many channels ofcommunication reach consumers, but that thecontent of the message -- which should be aboutperformance, pricing, customer service and delivery ina manner which engenders trust. Companies shouldconsider media strategies that are more focused inmessage content and that remind consumers aboutthe value of a brand's reputation and experienceversus less-established brands and smaller start-ups.

7. Because social influence is relatively lessimportant than personal experience, loyaltyefforts need to be more directly focused onestablishing a direct and personal relationship withthe customer. It is important for companies tomanage the brand online real-time to increase loyaltyand prevent brand damage.

8. Flexibility from mobile service providers cantranslate to a new revenue-generatingopportunity. Consumers are willing to pay forfreedom from the restrictions/fees of mobilecontracts. Mobile service providers should considermore ways to monetize contract freedom.

9. Interest in purchasing a certified, pre-ownedphone presents an opportunity to increaserevenue by diminishing reliance on subsidies for newphones. This is further supported by the interest inowning a phone instead or renting/leasing it.

© 2012 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to the United States member firm, and may sometimesrefer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

This document is for general information purposes only, and should not be used as a substitute for consultation with professionaladvisors.

For more information on this research, the PwC ConsumerIntelligence Series, or how digital transformation isshaping the entertainment and media industries, pleasecontact one of our specialists:

Deborah [email protected](213) 217-3302

Dan [email protected](240) 388-7187

Matthew [email protected](213) 217-3326

Mary Shelton [email protected](704) 350-8170

Additional information is also available on:

http://www.pwc.com/consumerintelligenceseries

PwC Consumer Intelligence Series Customer Loyalty

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