The launch of the iPhone created a nearly unprecedented frenzy of industry and consumer media attention. Now is an interesting time to look back at some of the events that have shaped today’s telecom world, which contains valuable lessons for all marketers.
Lesson #1: Expect unexpected outcomes and make the best of them.
The Verizon brand was launched in the summer of 2000. The launch was a highly-ambitious effort to repackage the telecommunications services of a merged Bell Atlantic and GTE. Press and industry analysts had barely time to decry the new name before the company was hit by a massive strike—almost a third of the workforce walked off the job in a contract dispute that lasted three weeks. At the time, there was some question whether the young new entity could survive the blow, or if consumer trust would be destroyed by service outages resulting from the strike.
The logic of brand management is often counterintuitive. Rather than damaging Verizon’s reputation, the strike kept the new name in the papers for weeks, and effectively rooted the brand in a way that advertising alone could not have done. A scant seven years later, the Verizon brand is a household name, both in wireless and fiber optic offerings.
Lesson #2: Brand value has become elastic and highly volatile.
Less than a year later, the US market had another new brand name to learn: Cingular. The new wireless communications company was the result of a joint venture between SBC Communications and BellSouth, among others. The brand launch was supported by a youth-oriented and somewhat irreverent advertising campaign centered on an innovative new rollover pricing scheme—one where unused minutes accrued month-to-month. At the time, Cingular and Verizon were up against a once-dominant but struggling third player, AT&T Wireless—the cellular arm of what was left of Ma Bell. Cingular eventually became the market leader after an aggressive $41 billion purchase of AT&T Wireless in 2004.
Today, of course, all of this is ancient history. SBC became AT&T after it acquired the non-wireless portions of that company. The “new AT&T” in turn acquired BellSouth, to become the sole owner of the joint venture, Cingular, and opening the way for that brand’s demise. It used to be that brands took decades to build and just as long to decline. Today’s market is far more open to new brands, particularly brands that offer new kinds of value or address unmet needs. This is not all good news for marketers: the flipside of the equation is that brand value can erode as quickly.
Lesson #3: Look for brand power through association.
We stand at another inflection point in the tumultuous recent history of US telecommunications. The AT&T that we see today bears little resemblance to the company that once held a sanctioned telecommunications monopoly in the US market. However, like Verizon in 2000, this new AT&T is a brand in transition. While it has the advantage of being a familiar name, it must work as hard as Verizon did to establish its promise in the context of current market realities and expectations.
However, AT&T’s re-branding (or, more accurately, de-branding) of Cingular is being executed less around a media plan and more on the most high-profile and highly-anticipated consumer electronics product in history: the Apple iPhone. AT&T is betting that by tying its brand launch to an exclusive distribution agreement for the iPhone it will generate far more awareness of, and interest in, its offering than it could through traditional marketing alone. Judging from the amount of pre-launch publicity, the strategy appears to be working.
AT&T’s iPhone deal represents one of the most interesting phenomena of contemporary marketing: the idea that associative brand value is an asset which can be bought, sold or borrowed. As the assault on mass media marketing continues, brand partnerships like this one have increasingly become the norm as seen in content deals, sponsorships, co-brand partnerships and exclusive distribution agreements.
Lesson #4: Value is built on product and service blending.
Let’s look at AT&T’s iPhone deal in the context of the telecom brand launches outlined above. The Verizon brand was positioned around a technology differentiator; the call quality of its CDMA (code division multiple access) network. Cingular, on the other hand, differentiated itself based on a pricing scheme; its rollover minutes plan. While AT&T will retain rollover pricing, the company’s brand re-launch represents the first time that a telecom carrier has used a handset to launch its brand in the market.
The value of products and services has never been so interwoven. The iPod’s success was not just based on its innovative industrial design and interface. Instead it was a combination of product design with the iTunes service. The combination of the right product with the right service made mp3 players simpler to use at the same time as it made it easier to find a large selection of affordable, legal digital music. Branding a product/service combination requires that the consumer’s perceptions of value are shaped in an ongoing way, not just at point of sale.
Lesson #5: The market will define the pace of change.
Change in the market is accelerating constantly. Advances in technology, evolving consumer expectations and shifts in market power, drive it. The brand marketers at AT&T are trying to get a lot done in a short period of time. They are banking on the market momentum behind the Apple brand and the equity resident in the “iconic” AT&T brand. Will they succeed? Perhaps, but market predictions have become a fool’s game. The only thing that can be said for certain is that the launch of the device will precipitate a new wave of market change and that the telecom game is no longer the same.
Michael Megalli is a partner at Group 1066. He can be reached at [email protected]
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