In the past two days, I’ve written two stories about Clearwire, one on Wednesday, when its first quarter financial report first came out, and one that ran today after I talked with management. One thing that didn’t seem to fit into either is a status report on how sales are going in Seattle following its launch in November.
During the company’s conference call Wednesday, President Perry Satterlee acknowledged that the sales in Seattle were bumpier than expected, and he attributed it to a sales technique the company was testing. (The company didn’t disclose how many subscribers it has in Seattle.)
I asked the CEO Ben Wolff to elaborate on what that means in a follow-up conversation.
He said Clearwire typically has a comprehensive approach when launching in a new market that involves a direct sales force, its own retail stores, kiosks, indirect retail channels, big box retailers, the Internet and telephone sales.
“Our direct sales force is the most expensive cost per gross add, so we decided to try something different,” Wolff said. “We wanted to see if we could bring it [the cost] down sooner by starting out of the gate with a smaller sales force, and relying on less expensive channels.”
In that regard, it was a success.
“The cost of acquisition came down significantly — that was very good for us — but the trade-off was that we didn’t add as many customers,” he added.
Wolff said as a result, the company thinks it is a month or two behind expectations in Seattle.
“There’s a balancing act in determining what’s the best balance, cost vs. the opportunity to bringing on a customer,” he said.
In the first quarter, the cost per gross add (or adding one more subscriber) was $343 each. In the same period a year ago, it was $361.
Wolff said Cleariwre has since decided to add additional sales people in Seattle.
“We are beefing up a bit. This continues to be something we learn and evolve with,” he said. “There’s nothing alarming, we just continue to turn the dials.”