While many customers get the latest smartphone and a hefty monthly phone bill from large wireless carriers such as AT&T and T-Mobile, the prepaid market has become an increasingly dynamic part of the market. Customers can purchase handsets without a contract, then buy time as they need it without a monthly bill. Companies that sell prepaid wireless packages are typically resellers who purchase airtime in bulk from the major carriers, then sell it at a higher rate to their own customers.
Plan your costs and market position. The wireless industry is highly competitive and faces high customer turnover, so careful planning before you start is essential. Examine each competitor, from AT&T’s GoPhone service to tiny regional companies, and determine which types of customer needs each of them satisfied. You might find that there are few existing options for business customers or for parents who want very limited phone capabilities for their children. Conservatively estimate how much of that market you can capture and how much those customers will spend, and compare it to your costs to determine if the business is viable.
Investigate franchise opportunities. It may be easier and more profitable to buy a franchise of an existing prepaid service like Cricket or Boost. Compare the price of the franchise fees, the distribution network available to you as a franchisee, and the companies’ reputations for how well they treat their affiliates.
Consider starting your own independent company. If you have significant expertise in the wireless industry or in consumer retail, you might be able to achieve a higher profit by starting your own prepaid company. Compare the start-up costs and the difficulty of getting wholesale minutes and distribution costs against the franchise fees.
Work with the large carriers to negotiate a favorable contract. If you’re independent, you’ll need to determine how many minutes to purchase at what rate. Negotiate a deal that doesn’t include expiry of your minutes, so that you don’t lose unsold minutes. They may require that you commit to a certain dollar amount of purchases per year or quarter.
Find distributors to package sell your phones. Prepaid phones are usually sold within larger retail locations such as grocery stores, electronics stores, or mall kiosks that offer a variety of prepaid phones. You’ll have to pay for shelf space, and may run up against other competitors with exclusive agreements. Try to distribute through stores that are close to the types of customers you’re targeting, such as suburbia for parents, or office parks for business customers. In addition, you’ll have to secure an inventory of handsets for sale, and have them packaged, stored in a warehouse, and shipped on demand to maintain inventory in each of your distribution locations. Shop for a handset distributor with an extremely reliable supply and advanced, responsive inventory management system.
Price and advertise your services. Since this is such a competitive market, you’ll have little room to alter your prices from the expected amount per minute or per text. Create package deals that are attractive for your customers, and keep your pricing plans simple and easy to understand and remember. Then begin your advertising campaign, either through radio, television, and streaming media services, or locally, for example, in the flyers your grocery store distributor puts out to advertise sales.
Evangeline Marzec is a management consultant to small high-tech companies, and has been in the video games industry since 2004. As a published writer since 1998, she has contributed articles and short stories to web and print media, including eHow and Timewinder. She holds a Master of Business Adminstration from Thunderbird School of Global Management.