What does wireless have in common with toothpaste? Maybe not much now, but perhaps the toothpaste industry has learned a marketing secret that wireless carriers could benefit from.
Toothpaste companies have learned to pick a customer segment they want and market their brand to that customer, said Mike Crawford, president of M/C/C, a Dallas-based marketing communications firm specializing in the high-tech industry. Crest, he said, has positioned itself as the cavity fighting toothpaste and is marketing its products to parents; the `Aim tastes better’ idea is designed to attract consumers that don’t like toothpaste; Close Up is targeted at young couples with its fresh breath focus; and UltraBrite targets smokers and coffee drinkers by promising whiter teeth.
“Each brand owns an attribute,” said Crawford. “The trick is to figure out what you want to own.”
Most carriers, he said, haven’t figured that out yet. They either are chasing the same group of customers-mainly high-value business or affluent customers-or they are casting their net too wide and trying to catch everybody.
“They each can’t get 18 percent of the market spending $60 or more a month,” said Hunt Eggleston, president of Technology Trends and Focus Inc. “There just aren’t enough people out there.”
The mission of carriers has been growth at all costs, said William Brunette, director of market development at Matrixx Marketing Inc., a provider of outsourced customer care services. “The industry has measured success in terms of subscriber numbers and subscriber additions, and analysts have measured the health of companies by those numbers,” he said. “Those days are coming to an end.”
Ken Woo, a spokesman for AT&T Wireless Services Inc., said the carrier is focused on obtaining high-value customers. “The company obviously has an interest in all of the major markets, but we’re beginning to see market saturation. That puts a whole lot of pressure on the bottom line for us and other carriers as well.
“Our focus is on the high-value customer that spends more than $30 per month,” continued Woo. “We don’t make any money on the casual user who throws his phone in the back seat and forgets about it until he has a flat tire.”
Enhanced specialized mobile radio provider Nextel Communications Inc. also has focused its marketing efforts on high-volume users. Kara Palamaras, a spokeswoman for the company, said Nextel has focused its advertising in media likely to reach high-end customers, such as the Wall Street Journal, CNN and ESPN.
A J.D. Power & Associates study found that in most markets where AT&T Wireless had a presence, it garnered the highest ratings in terms of corporate capability, which includes reputation, ability to stand behind promises, technology, ability to offer a variety of products and services and the ability to provide enhanced services and features. In markets where AT&T did not have a presence, in general the wireless subsidiary of the local carrier received the highest ratings, said the study.
While large nationwide carriers like AT&T might be able to rely on their brand name in the battle for high-value customers, other carriers are going to have to find a different way to survive, say analysts.
The first 2 percent of customers to adopt a new service are the innovators-those that are interested in any new technology, said Bick Truet of Technologies Research Group. The next 8 percent to come on board are the early adopters-those who believe the service can change the way they do business. The next group to adopt is the early majority, and they make their decisions primarily based on brand, said Truet.
The third carrier in a market can position itself as the alternative to what’s already available. After that, new entrants must either have a strong brand or begin a new buying cycle. To do that, carriers will have to come up with new applications to intrigue the innovators, said Truet.
“My belief is that brands are made in national advertising but sales are made in the local channel,” said Bruce Janklow, chief executive officer of TradeOne Marketing, a firm that studies the newspaper advertising trends of carriers. “Now that the easy business has been had, how do we as an industry continue to improve marketing techniques to compete more successfully in a competitive marketplace?”
Janklow said the amount of direct telemarketing and direct mail campaigns is on the rise because that type of marketing can easily be pinpointed to highly specific customer segments.
Although marketing experts offer different models for success at customer segmentation, the key steps carriers need to take include researching the existing customer base, identifying customer segments to target, developing a product to meet that segment’s needs and marketing the product to that segment.
For instance, a carrier could decide to focus its efforts on a segment of working mothers. The carrier then would need to develop a product that fits that group’s needs-$35 a month, 150 included minutes and a feature that allows Mom to find out what is on the menu at Jr.’s school that day, said Eggleston.
“Carriers are not thinking this way,” he said. “To think this way requires that you roll up your sleeves and develop a product. That requires knowing the billing systems and network capabilities.”
Brian Sholly, assistant vice president of marketing communications at GTE Wireless, said, “The long-term success of the wireless industry and the telecommunications industry as a whole will not come down to the strength of the brand. The key is to focus on what consumers’ needs are.”
Sholly said carriers have spent a significant amount of money on pricing promotions, which he said trains customers to be disloyal and drives churn.
Going after the high-value customer may seem like the quickest way to make money, but carriers that focus their efforts on a lower-value customer segment can profit as well.
Most carriers are segmenting their customers based on how much the subscriber bills per month, said Brunette. Matrixx proposes a different approach that involves segmentation according to value and propensity to churn. That model has four quadrants-a high-value, high-churn segment; a high-value, low-churn segment; a low-value, high-churn segment; and a low-value, low-churn segment. Carriers should tailor their marketing depending on which quadrant most of their customers fit into.
“Most carriers are attracted to the high-value customers, but the question is, how can I look at low-value subscribers and stimulate them to start using the service?” said Brunette, who noted that some carriers are picking up on that idea by offering services such as prepaid to customers who normally wouldn’t qualify for traditional service.
Eggleston also encourages carriers to focus on a low-end segment-the youth market. According to his `intergenerational life cycle management theory,’ carriers should create loyalty by developing products to attract younger subscribers, provide them with a positive brand experience and then move them into higher-value products and services throughout their lifetime.
Carriers, he said, could charge the younger subscribers a lower monthly rate and offer them a bundle of evening and weekend minutes-the times younger subscribers want and the time carriers’ networks aren’t filled to capacity.
“When wireless started, there were two competitors in the industry, and they did pretty well because they had a corner on the market,” said M/C/C’s Crawford, who pointed to Sprint Spectrum L.P. as a carrier doing a good job marketing its Sprint PCS brand. “Those days are gone. Now everyone is selling wireless and unless you know who the consumers are and what they want, they won’t know the difference between you and the next guy.”
Although many carriers are not marketing to specific demographic segments, some carriers have implemented targeted marketing campaigns.
Bell Atlantic Mobile said it seg
ments its customers based on usage. The company has offers from prepaid packages for low-end users to mobile Internet packages for high-end users.
Dan O’Brien, director of advertising at Ameritech, said the Illinois-based company takes the position that it can’t convince people to buy a cellular phone, but its advertising is meant to stick with consumers so that when they do decide to purchase a cellular phone, they will think of Ameritech. The company’s humorous commercials have won several awards.
Personal communications services provider Powertel Inc.’s vice president of marketing, Mike Bashaw, said the company originally identified customer segments, but, “experience has taught us that the segments we originally targeted aren’t nearly as narrow as we thought.” Bashaw said many potential customers haven’t adopted service because of cost, confusion and commitment. Powertel’s positioning strategy is based on offering a clear and simple message, which includes simple rate plans for local and long-distance calling.
