Demand for cellular service in the Unites States is booming. Consumers have expressed the need and carriers have stimulated the desire for convenience, safety, efficiency and other benefits of mobility.
Although most of the pie remains-about 90 percent of the market is untapped-the race is on to win customers that vary in age, occupation, income levels and individual requirements from the traditional mobile communications user. As such, reaching these users is quite unlike securing business customers.
When evaluating distribution channels there are two key questions to ask, explains Jim Gerace, executive director of public relations for Bell Atlantic Nynex Mobile. 1) Is it a cost effective way to sell? 2) Can consumers be reached there?
The company, a recent merger between Bell Atlantic Mobile and Nynex Mobile Communications, employs several sales approaches. Most profitable have been sales through company-owned and operated retail stores, due to low acquisition costs, and through direct response marketing or telemarketing. “People buy a shirt through the mail, why wouldn’t they buy a phone?” offered Gerace.
Dan Kelsey, general manager of Contel Cellular in Bakersfield, Calif., said the company markets to consumers through local agents, including telecommunications and electronics stores and large merchandisers such as office supply stores and electronics/computer superstores.
BellSouth Corp.’s cellular division is selling phones at kiosks in Kroger grocery stores. A new software program has enabled the company to activate phones in about 15 minutes so shoppers can buy a phone on their way in and pick it up as they walk out, said Steve Konig, a company spokesperson. Through an agreement with HSN Direct Joint Venture-an affiliate of the Home Shopping Network-and Wholesale Cellular USA Inc., BellSouth is producing infomercials to air on the HSN cable channel in its markets. BellSouth aims to make this a nationwide venture, signing on additional cellular carriers operating in markets where BellSouth does not. SBC Communications Inc. and CommNet Cellular Inc. already have come aboard.
What will drive consumers to a particular service provider?
“Consumers by nature are disloyal,” said Jon Hulak, senior analyst at BIS Strategic Decisions Inc., regarding choice between cellular service providers. Similar to the long-distance wars, price is the key factor in winning consumers’ business. Customer service, call quality and reducing churn are significant issues as well, added Hulak.
Cellular carriers provide a number of pricing plans based on usage patterns. Salespeople who make cellular calls all day long will likely pay a higher per-month fee and lower per-minute airtime charge. For low-volume users, a carrier will profit through higher monthly charges.
Marketing a cellular handset’s brand name is of principal importance, Hulak believes. He expects companies building brand franchise-making their name known in a number of product categories-to gain a competitive advantage. For several years Motorola Inc. has marketed cordless flip phones that resemble cellular handsets. That familiarity might lead a consumer to choose a Motorola cellular phone over another brand.
Hulak also stressed the significance of simplicity. Buying a phone should be easy. Over-the-air or instant activation is one example. Handsets must be easy-to-use and familiar. Some manufacturers have implemented a nonfunctional dial tone in phones and designed keypads to resemble cordless phones.
Over the last decade, per-subscriber use of cellular has declined between 6 and 11 percent per year while the number of actual subscribers has increased, according to a recent report by Herschel Shosteck Associates Ltd. “This reflects two phenomena,” explained Shosteck. “The contracting in cellular use which has typified each new tier of subscribers and-less well recognized-an accelerated decline in cellular carrier tariffs.
Also contributing to the consumer trend might be the decline in costs of owning and using a cellular phone. Shosteck’s research found in 1983 it cost an average of $229 to own and use 250 prime minutes each month, compared with only $71 last year.
