On Nov. 3, Virgin Mobile USA announced that it had signed up its 1 millionth customer. It reached that milestone just five quarters after the youth-oriented service debuted -- as fast as any other wireless provider in history.
That rapid growth struck many analysts as a testament to the power of the youth market. In a research note that day, analysts at SG Cowan said Virgin Mobile is "one of the key drivers of value" at Sprint PCS (PCS ), Virgin's partner in the joint venture, and applauded Virgin's ability to market to the age 12 to 24 demographic.
As a none-too-hip 37-year-old, I can attest that Virgin Mobile owes its rapid growth to more than mere marketing. I'm one of its 1 million customers, and it's a safe bet that none of Virgin's marketing messages, which most often appear on late-night TV, have ever reached me. Even if they had, I'm a working mother with two small children. So Virgin's current ad slogan -- "Live Without a Plan" -- wouldn't have resonated in my household, where the ability to stay on plan is a priority.
NOT OUT OF TOUCH.
I, like 300,000 other Virgin Mobile subscribers above the age 30, use the service for reasons that have nothing to do with the ability to select ring-tones from artists like Ludacris and 50 Cent. The opportunity to download MTV News or have rocker Sammy Hagar recite my voice mail message also isn't what keeps me there.
So, industry analysts and mobile-phone execs, take note. I use Virgin for one reason: It's by far the most affordable cell-phone carrier, given my usage pattern -- which is that I almost never use it.
Truth be told, I'm pretty easy to reach these days. About 90% of the time, I'm either at my desk at work or at home. I carry a phone for emergencies, but luckily I rarely need it. Virgin Mobile charges 25 cents a minute for the first 10 minutes and then 10 cents a minute for the rest of the day. That may be a lot for people who have a cell phone glued to their ear. But it's a good deal for me.
In fact, for the times I actually need the phone, I'd be willing to pay more. I'm also willing to pay for the tiny, (and I think, cute) Audiovox phone I bought for $120 when I signed up.
What I don't want to do is pay for lots of minutes I don't use. Been there, done that -- first with a traditional cell-phone plan and then with another prepaid phone service. The traditional plan I had -- a few years back -- was a mystery, the excess charges a fortune, customer service unreachable. I ended up losing my "free" phone only to discover that I had to pay more than $350 to replace it just to use a plan I was locked into for two years.
And with the other prepaid plan I tried, the minutes expired after a month or two, making me feel like the service was going to waste. Virgin's unused minutes, on the other hand, roll over.
In addition, the prepaid cards from my earlier carrier were a pain to buy. If I ran out of minutes, I frequently would have to scramble to find a store that carried them. Then, when buying one, I often had to suffer through some aggressive salesperson trying to switch me to a monthly plan. With Virgin I can "top up" via the Web or the phone using my credit card.
To get such conveniences I'll gladly suffer through teen-age blather on Virgin's automated customer service line and Web site. For example, they promote its simple billing plan with claims such as, "Never any bizarre fees that only pointy-headed garden gnomes can understand." I cheer the sentiment, even if the Virgin marketers' prose doesn't speak to me.
It turns out that I'm not alone. Prepaid service is likely to grow faster than traditional service, says Tole Hart, a wireless analyst with Gartner. Along with Virgin, another fast-growing prepaid service called Boost that's only available in California and Nevada is proving that an untapped market exists for prepaid services with simple pricing plans.
GLAD TO SELL.
At the end of 2002, there were 9.5 million prepaid phone customers out of 141 million total mobile-phone users in the U.S., according to Gartner. But by the end of 2003, that should be 11.7 million prepaid customers out of 154 million total users. "Prepaid will grow in terms of total percentage," says Hart, "But it will likely stay less than 20% in the long run just because carriers prefer customers to be on postpaid plans, and most customers are used to them."
Virgin Mobile USA Chief executive Dan Schulman says his company welcomes every customer -- even ones who plan to rarely use it. "We built the service knowing the youth market doesn't spend as much as the professional market," he says. "We don't have to be conflicted about bringing in people who might not spend as much."
Just as I don't feel conflicted about using a product aimed at teens who listen to bands I've barely even heard of.
Commentary by Amey Stone, senior writer for BusinessWeek Online