With cellular, personal communications services and enhanced specialized mobile radio providers vying for an estimated 14 million new customers in 1997, the wireless industry is expected to end this year with more than 58 million subscribers-a 32 percent annual gain, indicates a recent study by Paul Kagan Associates Inc.
But as penetration numbers grow, wireless carriers need to become more sophisticated in their marketing strategies. Lifestyle marketing is today’s buzzword.
The industry’s projected intense growth is a result of as many as six mobile phone competitors in each U.S. market fighting vigorously for the general and business consumer with offers like $75 for 1,500 minutes per month. Some rates have fallen so low that they are comparable to wireline and long-distance rates. Sprint Spectrum L.P. recently launched a promotion in San Francisco, offering 700 minutes of airtime plus 1,000 minutes of long-distance calling for $80 per month. These kinds of promotions bring in the new wireless consumer.
Price
“You can’t beat 2,000 minutes a month for $100,” said one Denver-area businessman who relies on mobile phone service to conduct business every day. He said he recently purchased AirTouch Cellular’s digital cellular service. Although he said he doesn’t use the phone while driving because of the high number of dropped calls, he still believes the purchase was worth it because of the price and the features like caller ID and voice mail.
“When you ask consumers the most important factor to purchasing service they say price,” said Christine Wright, vice president of database service for Matrixx Marketing Inc., a Cincinnati-based provider of marketing and customer retention products. “When you do probing, it’s really value for the price they’re paying.”
Most mobile phone carriers have correctly priced and promoted their services outside of the traditional cellular models. Cellular pricing structure tends to scare consumers away, said Bick Truet, president of Clinton, N.J.-based Technologies Research Group Inc.
“We can’t get people off of pricing in focus groups … I advise my clients to always structure pricing different from cellular in any way they can,” said Truet. “Once pricing seems to be like cellular pricing, it turns people off. They’ve heard horror stories about people getting these really high bills.”
Consumers are suspicious of offers that bundle equipment with service, said Wright, whose company has conducted a series of national focus groups. “They really don’t know what they’re paying for. They think that something is being hidden.”
Most promotions offered by mobile phone carriers include no contracts, no bundled equipment, straightforward pricing structures, and a variety of features that include caller ID, text messaging and voice mail-all are features that are different from the old cellular model.
Beyond price
But successful marketing goes beyond price.
As pricing becomes more of a commodity, carriers must become more sophisticated in their marketing to maintain the growth curve, insist marketing specialists.
“Marketing needs to become more sophisticated,” said Matrixx’s Wright, who has more than 15 years experience in the telecommunications industry. “Price competition [currently] is the primary means of getting the customer. As carriers get more sophisticated, they’ll start bundling paging, long-distance, etc… But that becomes a commodity-type option. Carriers need to focus on the customization of offers that match lifestyles and customers. Customers have been told what rate plans they are going to be on.”
Matrixx’s database finds what features and prices match customers’ lifestyles. Information such as billing, lifestyle and customer usage data is imported into the database, which prescribes a whole set of interventions for given customers. The solution initially was used to control churn, but the company developed it into a customer prospect model.
Lifestyle marketing is the buzzword in merchandising circles. According to Hunt Eggleston, president of Technology Trends and Focus Inc., which provides market analysis to wireless carriers, lifestyle-driven marketing increases penetration and keeps customers happy. He recommends what he calls neighborhood marketing. Carriers can send gifts to subscribers for every 500 minutes or every three months on the service, making the gifts both usage and time driven. Some carriers already send thank you coupons for free videos at a Blockbuster video rental chain or something similar, but Eggleston promotes a more aggressive and better-researched version of this practice.
The idea is to make the gifts seem tailored to the individual customer by marketing to the behavior and lifestyles in a zip code based on activities that go on it that zip code.
To do this, Eggleston believes carriers should take the time to send surveys to customers in a given zip code to find out what activities they engage in and, perhaps more importantly, where. Then, send sales reps to video rental stores, restaurants and other establishments listed in the survey in that zip code and work out a deal so the carrier can send coupons to its customers to those places.
“You use neighborhood marketing to build a relationship with a customer,” Eggleston said. “If you build a relationship with a customer, you keep the customer.”
Matrixx’ Wright agrees. “The whole idea is that carriers need to start reducing marketing costs and start acquiring higher-value customers and ones who will stay longer. That means putting customers on the right rate plans and correct packages initially.”
Matrixx’s database classifies customers into categories, said Wright. One category encompasses those customers who are price sensitive. “A heavy user that uses services during the week isn’t interested in weekend calling,” she said. “Similarly, there are lot of new customers in the market buying a phone for security reasons. Why should we give them free minutes or high volume-based usage plans when they don’t use the phone that much?”
Other customers are service-focused, said Wright. Carriers could target these customers by offering them personalized 800 numbers to call about service problems or head off potential problems by calling customers before customers call them with service difficulties.
Simple communication is one of the most important and easiest of all marketing tools, said Wright. It wouldn’t hurt to call your best customers and ask them about their concerns, she said. Sophisticated customers’ largest complaint is that their carriers don’t offer them competitive offers.
It’s in the name
J.D. Power and Associates’ recent Wireless Customer Satisfaction Study indicated that customer confusion in the telecommunications marketplace-wireless and landline-is continually on the rise. The most successful carriers are those that leverage a strong brand and promote their added benefits, said J.D. Power.
“There has been confusion in the wireless industry for a while. Everyone is coming back with competitive pricing plans,” said Zaiba Nanji, group director of telecommunications services at J.D. Power. “Last year we found that consumers gravitated toward a brand because of the confusion … They still have an affinity toward brand for comfort and stability.”
AT&T Wireless Services Inc., which has one of the most powerful brand names nationwide, again dominated J.D. Power’s third annual survey, capturing six of the 18 markets studied. PCS operators took honors in three big markets. These carriers operate under the Sprint PCS and BellSouth name. Additionally, some local telephone companies with strong corporate images continued to lead the survey.
Breaking out of the branding fog is a challenge for carriers. One of PrimeCo Personal Communications L.P.’s biggest challenges is to emerge through the brand clutter, said Lowell McAdams, PrimeCo’s president and chief executive officer. The company-a partnership comprising of Be
ll Atlantic Corp., AirTouch Communications Inc. and U S West Media Group-launched service before the majority of its PCS competitors, but it doesn’t have the widely recognized brand name that Sprint or AT&T has. PrimeCo, like the majority of PCS and cellular carriers, offers bundled minutes in most of its markets.
PrimeCo in July launched a new multimillion-dollar branding campaign designed to distinguish itself from other competitors and aimed at the first-time entrant into the wireless market. It features a small, fuchsia, animated alien child.
“We wanted to use an entirely new approach to reach consumers intrigued by wireless but confused by the `price and promo’ tactics so prevalent in today’s marketplace,” a PrimeCo marketing executive said in July.
“The alien is extremely successful,” said Dan Sutherland, vice president of marketing for PrimeCo. “Our research shows we’ve reached 80 percent [of consumers with] brand awareness.”
Sutherland said the commercial spots are different from other carriers’ marketing techniques, and they have an emotional and episodic appeal to consumers. In one spot, the alien child returns home from a trip to Earth only to be scolded for forgetting his phone. His parents quickly send him back before anyone there discovers the advanced technology, only to arrive too late. He is greeted with a flood of PrimeCo ad posters and a wave of humanity on a busy city street, all carrying PrimeCo PCS phones. The carrier expects to introduce more episodes before Christmas.
U S West Communications Inc. is promoting its strong regional brand name to business customers only in its PCS launch. The company has leveraged its power as a landline provider by offering a product that is different from what the other five mobile operators in Denver are providing.
U S West’s Access2 Advanced PCS allows customers to use the same phone number they have at home or at the office for the PCS phone. When the handset is turned on, calls made to the home or office will ring on the PCS handset. The service is priced a little higher than its competitors’.
“It’s obviously real smart to come out with a smart application in a crowded marketplace,” said Truet. “It positions U S West’s services as a little bit more robust than others.”
