Monday, July 16, 2007
SunRocket post mortem
Chris Koehncke, a former SunRocket excutive now back at BroadSoft, has this to say about what went wrong at SunRocket (I'm not so convinced the customer acquisition strategy was necessarily so doomed to failure, but more on that later): "It appears that SunRocket was indeed acquired and with it the vast majority of the remaining employees unceremoniously laid off sans a small group of 15-20 of the folks necessary to keep the network alive. SunRocket network suppliers were notified late Friday so they wouldn't turn them off.
With 200k subscribers and say a $40m revenue base, if they simply stop marketing, give crappy customer support and run it on a shoestring -- it's a nice little pocket business. Playing in the fringes.
In hindsight, it was kinda of crazy to spend $200+ to acquire a customer whose annual spend was only $200+. Hard to outrun the economics. The hopes, of course, was that if you reached a decent size, people would come to you and you could reduce your marketing costs. Vonage certainly hasn't seen this, so SunRocket wasn't going to be much better.
Customer service cost also can eat you alive. Anytime you call for customer service, figure it's costing that company between $0.75 and $1.00 PER MINUTE to talk to you. For a typical 10 minute call that's $8-10. Call twice in a month and for a SunRocket $17 a month revenue, they lost money on you. It's also amazing the number of people who buy cheap are also the same group who complain constantly. They want it all and they're willing to bitch about it.
Sprint's decision to whack 1000 customers who were constantly calling customer support (I suspect their initial list had 10k names on it) is wise. Perhaps, SunRocket simply should not have had telephony support at all and just offered email support.
Some folks have just crappy internet service and SunRocket was never going to fix that. Perhaps after 3 customer support calls, SunRocket should have pro-actively canceled the customer's account. Why keep a customer that will never be happy?
Perhaps rather than being a nationwide telephone service, SunRocket should have focused on a specific region or vertical consumer group. Better targeting their marketing spend and creating a reputation in a specific niche.
VC's are an inpatient lot. They give a start-up money and urge them to spend it as fast as possible and grow as quickly as they can. In doing that, the start-up makes mistakes, does stupid things, hires the wrong people, it's a wild ride for sure. VC's don't mind failures, that's the business they're in, but if it's going to fail, they want it fail fast so they can move on to the next hot idea. SunRocket had to build a complete telephone company literally overnight with hundreds of moving parts so it's not surprising mistakes were made.
The genesis of the idea of SunRocket is still valid, create something different that people will be loyal to and ultimately becomes virally marketed. But by buying off the shelf VoIP and traditional telecom products the ability to differentiate the service, other than with a pricing model, was nil. You can't buy innovation in a catalog."
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