Cell phone carriers try novel pitches

It’s so cruel but so clever. Virgin Mobile USA’s “rescue ring” lets subscribers program their cell phones to ring during a bad date, providing a convenient escape.

A new breed of wireless carrier is relying on ideas such as the rescue ring and American Idol-related polls (does Ryan wear boxers, briefs or nothing at all?) to attract young cell phone users.

As mainstream cell phone service providers struggle to attract customers and increase sales in the grim economy, two maverick companies are changing the rules of the wireless game. Virgin Mobile and rival Boost Mobile are targeting the high school and college-age crowd with simple pre-paid wireless plans, and features based on fun and convenience rather than just pricing.

Unlike mainstream plans that do credit checks and lock customers into annual contracts, Virgin Mobile and Boost – both part-owned by major cellular companies – let customers buy minutes through calling cards sold at music and electronics stores – so even pre-teens could buy and manage their own wireless minutes. And unlike existing prepaid plans, Virgin Mobile and Boost offer cutting-edge services and a hip image.

But what makes these pre-paid newcomers even more intriguing to the industry is their ability to control costs through simplicity. Virgin Mobile said its service plan is so straightforward, 87 percent of subscribers added minutes to their account in January without speaking to customer service and 50 percent activated their phones online.

Those numbers have the wireless industry salivating because, aside from marketing, calls to customer service are one of the biggest costs in the business.

Andrew Cole, wireless industry analyst at consulting firm Adventis, said Virgin Mobile’s results show how pre-paid companies can make money.

“No carrier in the U.S. would have in their wildest dreams come up with the rescue ring. It’s a good example of how these companies are important and relevant,” Cole said. “If it’s done well, it can actually make the market more efficient.”

Though it might seem like a gimmick, the rescue ring is just one example of how Virgin Mobile is trying to create a community and a culture among its users. Here’s how it works:

To use the rescue ring, a cell phone user preprograms the phone to ring at a time when the user might need an escape. There’s even a choice of several MTV personalities to voice the rescue. When the phone rings, the user can choose to ignore or answer, depending on the circumstances. Virgin Mobile also has features such as a “balance button” that shows how much talk time the user has left, and message groups where users can share opinions through text messages.

So far, the strategy appears to be working. Virgin Mobile USA has amassed about 450,000 new customers since it went live last August, said CEO Dan Schulman. And he’s on track to reach a half million by this month.

“The rock in our slingshot in this battle of David versus many Goliaths is focus,” Schulman said. “We built this from the ground up to focus on the youth market.”

Virgin Mobile and Boost have been around for less than a year, and several young people in Silicon Valley said they are still skeptical of the pre-paid newcomers. “It’s like, hmm, too good to be true,” said Hava Brchich, 16.

But competitors in the wireless market are taking notice. Analysts are whispering that other companies, spurred by Virgin Mobile’s early success, are thinking about launching similar ventures focusing on teens and young adults.

Particularly, some in the wireless industry now think that some of these potential young customers – contrarian teens who listen to rap-metal, for instance – would never buy a phone from the same wireless carrier their parents use. It will take a different brand name and a different marketing message to reach them.

It makes sense, then, that mainstream wireless carrier Sprint PCS owns half of Virgin Mobile USA – the other half is owned by Virgin Group, the British travel and entertainment company. Nextel Wireless, the business-centric carrier, owns 66 percent of Boost Mobile.

While they are both targeting the youth market, Virgin Mobile and Boost are going about it in different ways.

Virgin Mobile has a partnership with MTV that allows its subscribers to use phones for video voting, audio postcards and wake-up calls from reality-show celebrities; also, Virgin Mobile has attracted a national customer base that is 55 percent female, which is highly unusual in the wireless business. Boost has tie-ins with surfing, biking and other extreme sports events; its customers are in California and Nevada only, and they are about 60 percent male.

Virgin Mobile’s rebel reputation is more than just marketing; the company really is riling the other wireless carriers. That’s because Virgin Mobile operates unconventionally. Rather than own the information delivery system – in Virgin Mobile’s case, the cellular towers and transmission equipment – it leases them from another wireless carrier, adds its own features and brand image, and resells service to customers.