Free has launched its mobile phone services only one month ago and this company has revolutionised the market by penetrating it. Xavier Niel, its founder had the objective of dividing the mobile phone bill in half, of all French households. This CEO is an idealist who strongly believes in transparency and win/win deals between his company and his clients. On that market, he is the only one who has the objective to “share the pie” with his loyal clients.
We will see later that the core of its strategy is based around its company sustainability and profitability; but above all, its client’s satisfaction and interest. This way, Free manage to build a strong relationship with its customers and as well, attracts a lot of new ones.
One year ago, Free was specialised in DSL services, and the company has just started to spread the rumor that it will enter the market of mobile phones. The target was obviously its current clients who were totally satisfied with the provided DSL services and as well a big part of competitor’s client (Orange, SFR and Bouygues telecom). Most of Free’s clients have been ambassadors of ree mobile launching rumor. They have been so excited by this rumor that many blogs and consumer advertisements have appeared on the web. In this way, Free has benefited from word of mouth communication; the best way to gain clients’ and prospects’ trust.
Free mobile needs to build relationship with as much clients as possible. Before launching its offer; Free mobile have known that most of its DSL clients would get mobile clients as well. They did not have the need to build relationship with their current DSL clients because the relationship was already created. The intimacy already existed with its customers and some of them would as well be ambassadors of free mobile.
Free has always had the image of a big family of customers happy of affordable and complete services. This has created a very good loyalty toward the company. Some of the current clients, proud of being free users because they have “tout compris” which is a French pun meaning at the same time “everything is included in Free offer” and “the client has understood everything being free customer”.
Consequently this satisfaction and the challenging announce of Xavier Niel about the Mobile phone offer in project has generated involvement from clients in order to communicate about the mobile offer about to hatch. Some blogs and websites dedicated to it have been created and some customer ads have been published on different platforms like youtube for instance. Thereby, the relationship with the loyal customers was so strong that they have been advertising free mobile offer by themselves. In order to make the buzz, Free needed then the Medias and reactions from its competitors.
Organising press conferences, Mr Niel has attracted the attention of Medias and as an evidence of his offer’s strength; he has always kept calm front of any kind of attack from anti-Free people. This way he has gained credibility among the potential customers and has managed to convince them to leave their current mobile services provider for Free mobile.
This buzz generated by the challenging announce of Mr Niel stating that he will revolutionise the market of the mobile phone services; coupled to the interest of current customers, potential ones and Médias has put on the stage Free’s offer and consequently the value proposition had to be very good and customer oriented in order to fit with the company’s image. A lot of people were waiting for weaknesses in order to counter attack free. Today, nobody has managed to underline any relevant weakness in the offer of Free mobile. We will not have a look at Free mobile’s value proposition compared to other French mobile phone operators.
We can classify Free’s offer in three value proposition categories. The first is the value for money of its offer, the second is the transparency of its contract and the third corresponds to psychological value.
Firstly, Free mobile offer has an outstanding value for money. The network is as good as the best mobile phone services provider in terms of infrastructures (Orange); the network coverage is perfect in all zones of metropolitan France. Free’s offer has no technical weakness compared to its competitors ones.
Basically, Free calls it the “fair value” of its offer. The fair value is the value the customer gets for the price he pays. Looking at their rates and their strong infrastructure we can understand why free has revolutionised the mobile phone market in France and generated its competitor’s angriness.
Secondly, Free has decided to prove it’s honesty by choosing a very simple and clear contract; understandable from everyone. Compared to all his competitors, the contract of Free is very simplified and is no longer than one page. Moreover, the client is not engaged over 12 or 24 months as any client from another mobile phone operator. This generates trust from clients since they can leave the company as soon as its services do not meet their needs.
Thirdly, what we call psychological value is the satisfaction generated by the anti-oligopoly measure undertaken by Free. Everybody had known that the three main phone companies had agreements about their rates in order to keep their margins very high. The fact that Free has decided to break down these agreements in favor of the customers has increased Free’s brand equity. Free has proved to people that they were exploited by SFR, Orange and Bouygues telecom and offers now a better service for less than half of the price charged previously by his competitors.
Looking at the figures, we can confirm that Free has managed to attract a lot of clients in record time. Three million clients in one month is a very good performance regarding all the constraints that the potential customers had to face (engagement periods, transition delay…). Moreover, the company has currently attracted more than half a million customers from its competitors.
The major success factors are the attractive value for money, the simplicity of the service and the buzz the company has managed to generate with its cheeky press conferences. Free has a bullet proof offer and is generating profit with it, the current situation on a 3G network is completely optimal for the company. Nevertheless, a part of the infrastructure that Free uses is rented to one of its main competitors; Orange. Thereby, Free is dependent of Orange and this constitutes a considerable threat to the company’s sustainability. Moreover, in order to counter attack Free mobile, the other French mobile phone operators are focusing on the development of their 4G network in order to propose a faster technology that Free cannot afford to develop already. Depending on how the smartphones’ technology will evolve, a 4G infrastructure will be more or less useful. Completely superfluous today, this technology could get compulsory in the upcoming years.
Free has to anticipate it and start ether negotiating with Orange in order to rent its infrastructures or to start building its own ones. A good thing for Free is that the profitability of its competitors has been harmed by the introduction of the 2€ and 19€99 packages. The competitors have had to lower their prices in order to keep their clients and consequently reduce their margins. The return on investments is lower and consequently the investments are slowed. This let more time to Free to catch up its delay regarding the 4G technology.
As a conclusion, we can say that on the 3G network Free is in a strong position, it has developed a strong trustful relation with consumers and has armed the credibility of its competitors proving that whit half prices the company still makes profit. Nevertheless, a threat comes from the 4G network that its competitors are developing. We can also say that Free has managed to build a strong trust relationship with its customers and has managed to take advantage from it from the launch of its mobile offer.
They basically build a very strong relationship based on trust with their customers and this synergy attracts new peers interested in joining the “Free family”. They have a value proposition based on three aspects; Free mobile offer has an outstanding value for money, very simple and clear contract understandable from everyone and a psychological value generated by the anti-oligopoly measure undertaken against the current mobile operators. We can see that even if the services are kept simple and standardised; Free manage to build trust with its customers simply by listening to the needs of the market and filling the gap in a very honest way. This company benefit now of a good image in terms of value for money and is really strong. Mr Niel should nevertheless be very careful with the development of 4G networks and try to catch up the train as soon as possible in order to stay in the race; if not, even with a good customer relationship management strategy, the company will not be able to retain its client and obviously not continue to attract new ones.