When consumers embark on the quest to trade-in their mobile phone, they face a multitude of options regarding where and how to conduct their trade. All trade-in programs strive to create a very simple experience for this consumer, and they all have many points in common – the customer hands over their old device, the cosmetic & functional condition is verified, and the customer receives payment in return, either in the form of store credit, gift card, or bill credits.
However, behind the scenes, the sponsor of the trade-in program likely has very unique motivations to encourage the customer to trade, which may lead to very different offers and trade criteria. If you are a wireless carrier, an OEM, or a consumer electronics retailer, you are likely to have unique reasons for accepting trade-ins, differentiated ways to advertise them, and compelling deals that only you can offer. We’ll explore these divergent strategies and operational requirements in this blog.
If you are a carrier, retailer, or OEM, and you want to launch a new trade-in program or replace your existing trade-in program, you should consider several key components of your strategy before you design your program. Your program will vary along five axes depending on your business model. These five axes will likely have different levels of importance, and quite different execution, based on whether you’re a carrier, retailer, or OEM.
Axis One: Business & Marketing Strategy
Trade-in programs have grown in popularity over the past five years and are now a staple offering within most venues that sell new devices. One reason for their popularity is that they generate substantive revenue and margin for the program sponsor. However, as the industry has matured, we now see that the primary benefit of trade-in is to drive customer loyalty, attract new customers, and increase sales of new devices.
- If you are a carrier, you are likely geared toward retaining existing subscribers, attracting new subscribers, and increasing the ARPU of every subscriber. Your trade-in program should be designed to deliver great deals on new phones that users cannot get at a competing carrier. Your trade-in program should also serve to make your expensive phones or high-end data plans more affordable to the average subscriber. Giving them access to products or services outside of their normal price range, engendering loyalty and encouraging more spending --- this is the goal of trade-in.
- If you are an OEM, you are likely motivated to get customers to upgrade sooner, purchase your latest model, and convert loyalists from other OEM’s installed base. As such, trade-in programs will give you the flexibility to run targeted trade-in promotions to encourage purchases of your desirable phones (e.g., your latest model), upgrade of your installed base (e.g., trade-in your previous generation device), or conversion from a competitor (e.g., trade-in the previous generation of your competitor’s device). Such targeted trade deals are powerful tools for OEMs.
- If you are a retailer, you are probably agnostic to carriers and manufacturers—you simply want your customers to buy as much as possible from your stores. Pure sales volume becomes your primary motivation. By offering trade-in, you can attract consumers to buy new phones at a lower effective price than your competing retailers. You can also provide incentives for your consumers to put their cost savings towards higher margin items like accessories. Trade-in has proven to be effective at increasing shopping cart size among retail shoppers.
Axis Two: Eligible Product Types
Of course, carriers, retailers, and OEMs will include smartphones in their trade-in programs, but we are seeing an expansion of trade-in of other categories and the aftermarket has been showing keen interest in purchasing other types of wireless devices.
- If you’re a carrier, your top product category is mobile phones, so your trade-in program should have a robust set of features for promoting and managing phone SKUs. Tier 1 carriers should plan to transact millions of pre-owned phones per year, so the scalability and enterprise-class reliability of your trade platform is of paramount importance. Once you have fully established a mature trade-in program for phones, you’ll want to expand to other relevant categories such as tablets and wireless earbuds.
- If you’re a retailer, you will need a much broader trade-in platform that allows you to offer trade-in promotions for every product in your consumer electronics department. Trade-in is known to drive foot traffic, so the broader your program the better. Over the past year, the market has demonstrated the viability of new trade-in categories including watches, smart speakers, and home pods. These categories are now establishing a track record of aftermarket values that is giving retailers confidence to launch full-scale trade-in programs that are as predictable as mobile phones.
- Likewise, many device manufactures have leveraged their success in mobile phone trade-in and are now experimenting with their broader portfolio of wearables, hearables, and audio products. This is creating a virtuous cycle of increased supply, high buyer confidence in the aftermarket value of these categories, and strong trade-in values to customers.
Axis Three: Designing Customer Promotions
As mentioned, carriers, OEMS, and retailers all have different reasons to promote trade-in offers. As a result, consumers may find a wide variety of trade-in offers depending on the venue they choose and the time of year.
- Carriers often have extremely compelling promotional offers because they can combine trade-in with the purchase of a new device and the subscription to a particular rate plan. The aftermarket value of the traded devices can provide a tremendous way to subsidize promotions. This is why trade-in has become a common feature of new product launches, such as the flagship Apple iPhone and Samsung Galaxy launch seasons.
- Tying trade-in promotions to your sales objectives can help spur your customers to make the purchases you want them to. Knowing the type of phone your customer currently has, the age of the phone and the type of service plan allows you to target customers with specific trade-in promotions. Sophisticated trade-in systems are required to manage this level of complexity.
- OEMs typically have simpler trade-in promotions that drive sales of their latest generation model by incentivizing upgrades from their loyal installed base. Trade-in promotions are typically tied to the model of phone purchased and model of phone traded. There’s also been a growing trend to attract “switchers” by running trade promotions that target owners of competing brands. We expect to see a lot more of these promotions over the next year.
- Retailers are also beginning to capitalize on the power of trade-in promotions to cross-sell other product categories. Retailers can accept any type of device for trade, and then provide store credit against the purchase of any other type of consumer electronic device in the store. Running less specific trade-in promotions like this will help to drive up register sales during the same visit and drive repeat trips when the consumer is paid in the form of a closed-loop gift card.
Axis Four: Synergy with Warranty, Insurance, and Refurb Programs
Once your trade-in program is deployed, you will begin handling thousands or even millions of pre-owned devices from consumers. The next step is to monetize these. Many of your devices will undoubtedly be resold into the global aftermarket. In fact, it’s exactly this resale value that allows you to pay high trade-in values to your customers.
But there’s an important and often overlooked facet of trade-in programs that drives real value for program sponsors. Namely, your pre-owned inventory can be redeployed internally. If you offer an insurance program and/or a warranty program for your mobile devices, then you should be taking advantage of your trade-in inventory to feed these other programs. Using your own inventory of pre-owned devices for this purpose can save you millions of dollars per year. You should be sure that your trade-in vendor has the flexibility to send inventory back to you for this purpose.
Furthermore, retailers are capitalizing on the growing popularity of selling refurbished or certified pre-owned devices in their stores. Your trade-in program may serve as the primary source of supply for such refurbished sales.
Axis Five: Future Capabilities
Today we see that many carriers, OEMS, and retailers offer trade-in programs that compete with one another. Retailers in particular have suffered from this competition, and they are typically not able to offer the same richness of promotions as a carrier or OEM. Therefore, there is growing interest in partnerships between retailers, carriers, and OEMs. Specifically, retailers have benefited from running carrier’s trade-in promotions within their stores.
Here at HYLA Mobile, an Assurant company, we have developed a solution that facilitates these partnerships. Our trade-in platform can harmonize and aggregate trade-in programs across channels, allowing a carrier or OEM to expand its trade-in program into retailers without any system integration required by either party. These types of partnerships are proving quite beneficial for all parties by driving more foot traffic for retailers, more sales for OEMs, and more subscriptions for carriers—all while creating happier customers. For more information about how HYLA can run your trade-in program, contact us today!