SAN FRANCISCO (AdAge.com) -- Prepaid-wireless carrier Virgin Mobile USA is throwing a lifeline to customers who get laid off.
Virgin Mobile will cover the full cost of those customers' calling plans for three months, including taxes and surcharges, under a Pink Slip Protection plan set to launch April 15.
New customers who choose plans that cost $29.99 or more will automatically be enrolled in the program but will need to be paying users for at least two months before becoming eligible. Current Virgin customers can sign on through June 30. In all cases those sticking the carrier with their bills will need to supply proof of state-unemployment-benefits eligibility.
Virgin is betting that its offer will resonate with consumers on limited budgets who want to terminate or switch cellular services as the economy dictate. The move also tries to show that Virgin is sympathetic with its core prepay customers, who are often the most vulnerable in the brutal economic down cycle.
"It's quite a differentiator," said Bob Stohrer, Virgin Mobile's chief marketing officer. "This is relevant to our core customer who typically spends less [on wireless] on a monthly basis than a contract customer."
Virgin Mobile offers prepaid plans to users who do not want to be hemmed in to a contract or have shaky credit histories that lock them out of post-paid plans. Users can either pay as they go or buy prepaid plans that give them a bucket of minutes.
Prepay often appeals to those on limited budgets because they have the flexibility of buying as few or many minutes as they need. And anyone with problematic credit issues can bypass the credit check required for contract customers.
Virgin will also introduce a $49.99 unlimited plan next week, aiming to match a similar plan recently launched by rival Boost Mobile, a unit of Sprint.
Could get some mileage
Some analysts say the safety-net ploy -- the first from a wireless provider -- could get some mileage at a time when people are anxious about their employment status.
"It's a powerful incentive," said Roger Entner, head of telecom research at Nielsen Co. "With a lot of Americans out of a job, a lot more are fearing they'll lose their job."
"It allows you to keep your phone ... when you need a phone to find a new job and when you can afford it the least because you have lost your job," he said.
Mr. Stohrer said promotions for the new offerings will involve digital media, including social networks and sites such as Yahoo, to deliver both broad impact and targeted media. Virgin will also drive marketing from its website and customized point-of-sale promotions through retail outlets such as Walmart and Target.
"Our website is our carrier store, so we will attempt to route as many people as possible to our retail partners," he said.
Coming out ahead
Since carriers subsidize their subscribers' handsets upfront, money is made on the back end during a period when the subscriber is committed to the carrier. For Virgin to come out ahead, customers who benefit from this plan would have to stay with the carrier for at least nine months, possibly longer, Mr. Entner said.
While prepay is used almost exclusively in parts of Europe and Asia, estimates for the U.S. prepay base range from about 10% to 20% of wireless users. Most Americans are post-paid customers who commit them into multiyear contracts.
Although churn rates, or customer turnover, are greater among prepay customers, the prepay segment is expected to grow 14% next year, compared with post-pay's 4%, according to third-party research provided by Boost Mobile.