Magazine article Marketing

Brand Health Check: Carphone Warehouse

Magazine article Marketing

Brand Health Check: Carphone Warehouse

Article excerpt

The retailer's profits are on the rise, but it is failing to satisfy customers, and must act now to stave off the threat of the mobile operators' high-street charge. Daniel Rogers reports.

From a standing start in 1989, and thanks largely to the entrepreneurial zeal of founder Charles Dunstone, Carphone Warehouse has become the biggest independent retailer of mobile phones in Europe. At the start of last month, it reported that pre-tax profits for the half year to 25 September had jumped to pounds 28.1m, from pounds 20.3m last year. Indeed, Carphone has shown a steadily increasing profits curve.

Yet, on the day of its interims, the company's stock closed down 7p at 160p. This may have been due, in part, to Dunstone's prediction that the Christmas market would be 'bedlam'. As he said, there have never been more mobile phone products on sale and the price war has never been so fierce. There is evidence that operators - most notably 3 - are squeezing profit margins.

This is by no means Carphone's only challenge. More worryingly, the retailer came bottom for customer satisfaction in one of the UK's most authoritative consumer surveys, by research firm JD Power (Marketing, 10 November).

Furthermore, faced with falling margins and excessive churn in a virtually saturated market, the mobile operators are muscling in on the high street, once the preserve of Carphone. And they're doing it well: T-Mobile and O2 were named the best mobile phone retailers for customer satisfaction in the JD Power survey.

The operators are not the only ones Carphone needs to watch. Phones4u is focusing on customer service in its latest ads - though it has signalled it may soon move away from this strategy - and was ranked third in the survey.

We asked Richard Hartell, business director at Starcom Mediavest, who has previously worked on Orange, and Olly Raeburn, managing partner at Liquid Communications, how Carphone Warehouse can avoid a downturn in its fortunes.

DIAGNOSIS 1 - RICHARD HARTELL BUSINESS DIRECTOR, STARCOM MEDIAVEST

Carphone Warehouse's first rule as a business is if we don't look after the customer, someone else will.

Its advertising promises us 'A better mobile life'.

It sounds good and, until now, has clearly worked. But what next? Carphone Warehouse came last in JD Power's recent mobile retailer customer satisfaction survey, and, in a way, I am not really surprised. The name just says out of touch (carphone) and cheap (warehouse), and as I have never been a customer, there is nothing to make me think otherwise. …

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