TracFone Prepaid Cellular Brands & Strategy

TracFone prepaid cellular is a unique wireless company with a lot of interesting aspects about their business that I think you'll find is worthy of its own discussion!  Where they started out, what their focus has been, and what we see them doing now is the focus of this page.  After reading, you will have a good understanding of their general offers and strategy, which at a first glance is really quite confusing; at least it was for me when I first started to look at their different brands and offerings.  If you're interested in reviewing the details of their plans, you can visit the Compare Prepaid Plans section; you'll find TracFone plans in the PAYG, Monthly, and Unlimited sections.

TracFone Prepaid Cellular - Background
TracFone is a subsidiary of America Movil.  They started offering service in 1996, and have become the fifth largest wireless carrier (in terms of numbers of customers) in the U.S., and the largest MVNO!  The latest count is that TracFone has over 23 million customers and growing.  TracFone offers services on both GSM and CDMA networks through multiple MVNO relationships, and supports 4G LTE high speed data.

TracFone prepaid cellular actually operates under four distinct brands:

1. TracFone
2. Net10
3. SafeLink Wireless (a Lifeline program - free government sponsored cell phones)
4. Straight Talk (Walmart exclusive brand)
5. Simple Mobile (purchased in May 2012)

The TracFone and Net10 brands are very similar types of services varying mostly on pricing.  Why they didn't simply offer different price points under one brand, rather than have two completely separate brands is still a mystery to me.  Perhaps it has something to do with their TracFone services historically being based on "units" rather than rating calls in dollars and cents.  Sometimes doing a trial under a different brand can reduce the confusion of having too many offers under one brand making it even more confusing to customers.

Though, typically, the operational cost of managing different brands (ex. customer care, packaging, distribution, and other branding expense) is usually undesirable when the only major difference is pricing, and all services essentially operate the same.  I'm sure there were other factors involved in this decision.  The point here is that they have TracFone and Net10 brands that most people wouldn't know are actually the same company.  And there's no doubt that Net10 is definitely not a trial!  Net10 was actually a clever name back in the day when it first launched and per minute rates were in the $0.25 range.  The $0.10 per minute that it was offering was a great deal.  However, as pricing across all brands decreased over the years, the net10 brand essentially became meaningless.

SafeLink is a U.S. government supported program that offers wireless service to low income customers.  There are particular criteria that customers must meet in terms of income (and other factors) that determine whether someone qualifies for this TracFone prepaid cellular program.  This is certainly a very worthwhile program, and fits well into TracFone's portfolio given its long time focus on low cost service.  Read more about this Free Prepaid Cell Phone program.

Straight Talk was TracFone prepaid cellular's entry into the monthly plan space, and launched as a trial in June 2009.  Unlike its other PAYG brands, Straight Talk is a completely different program veering away from their

classic pricing with the introduction of a monthly and an unlimited plan.  The trial was launched as an exclusive to Walmart program, and was deemed successful after the first year; it was then rolled out nationwide, and continues to be a strong offering in Walmart.  This new brand/offer came as a big surprise to the industry given their history, and remains highly successful (more on that below).

TracFone Prepaid Cellular Started with Low Value Customers
When I say "low value" customers, that's not to say that there's anything wrong with TracFone customers!  It's simply a term that the industry uses to describe customers who spend very little per month compared to other prepaid customers.  For example, although this is constantly changing, TracFone customers (excluding Straight Talk and Simple Mobile) may spend less than $10 per month on average, while other prepaid carriers see their customers spending in the $20, $30, and even in the $50 to $60 range on a monthly basis.  So while TracFone may be the largest prepaid carrier, remember that that's from a customer number perspective, and not from a revenue/earnings perspective.

What this does mean, though, is that TracFone has classically targeted the super value conscious customer who doesn't even necessarily use their phone often.  These customers are often referred to as "glove box users," which means that they keep their phone in the glove box of their car, and take it out only for emergencies (or to let their family know they'll be home for dinner soon!).  Also, the cost of their phones have historically been on the super low end, such that they can almost be considered disposable.  Imagine that you forgot your phone for a trip, or are here from abroad, and you can buy a phone for $10 or $20; once your trip is done, you won't feel much of a loss tossing the phone out.

I'm definitely not saying that their classic products aren't good, or that their customers aren't valuable; quite the opposite!  TracFone has some solid, although basic, phones, and plans that offer great value.  It's a business with an obviously massive market that they've done an extremely good job capturing and maintaining.  So much so that most other prepaid carriers don't want to try to compete in that space.  It's no easy feat to build a business model that can support such a low price point.

Along Came the Competition - Watch Out TracFone!
The problem started for TracFone prepaid cellular when the entire prepaid market started to decrease pricing for standard PAYG products.  So having a brand like Net10, for which the name itself defines the price, becomes a problem when carriers start pushing the price downwards, and $0.10 per minute is no longer a good deal.  That said, TracFone has been able to remain competitive and continues to grow.  Their Double Minutes program, where you can pay a one time fee (ex. $49.99) and get double the value for every reload card you buy (for the rest of your life!) makes their pricing very compelling.  Though, personally, I find it can get very confusing as to how much things actually cost.  I expect that the more you use it, the more comfortable you get with it.  For example, when you're in your home calling area, a service can cost one unit, while when you're outside of your home calling area, it'll cost you two units.  Fortunately, TracFone has moved away from this "units" model, and now quotes services in minutes, texts, and MB/GBs!

TracFone also had to consider a revised strategy as the market began to see monthly, and monthly unlimited plans become more and more popular.  Read more about Straight Talk by clicking on the following link:

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