I’m glad to be writing this article now, not later. A few years in the future, a major shift in the telecommunications business will force writers to dig a lot deeper to get the facts. The companies’ products are changing radically. Their marketing emphasis will change as well, and their best, most innovative, most motivating promotional marketing programs may become invisible – unless you’re one of their customers.
In the past few years, hundreds of new telecommunications companies have started competing with the Baby Bells and other established firms to court business and residential customers. Customers have benefited from lower prices, but those came in a flood of confusing, contradictory “cents-per-minute” claims for long distance, “flat-rate dollars per month” for Internet service, and inscrutable roaming charges and weekend discounts for wireless. How many $100 switching checks have you received from AT&T for long-distance? Are you really sure which “10-10” long-distance service Dennis Miller represents? Do you really understand how your cellular phone rate structure works for each time of day and week?
All that’s about to change as a new kind of customer-friendly telecom product makes companies change their marketing focuses from price to value, from getting customers to keeping customers.
From divergence to convergence
Until now, telecom services have been divergent. Most individuals and businesses purchased local phone service from one company, long distance from another, Internet from a third, and wireless and paging from a fourth. Price was, and still is, a critical purchase-decision factor.
Now the big buzzword in telecommunications is “convergence.” Companies are starting to market product packages. Some of them combine technologies, such as low-rate long distance phone service via the Internet. But the real opportunity in convergence is that it lets customers purchase all their needs from one source, on one monthly bill, with one point of contact for customer service. These service bundles promise a total, individualized telecommunications solution.
GTE Corp. is taking advantage of its position as a local phone company to introduce the first-ever complete bundled residential phone product. GTE Unlimited includes local, long distance, call management services, Internet, paging and wireless for one flat monthly rate on one bill.
AT&T’s Digital One Rate (for business travelers) and Personal Network (for residential customers) show how convergent products are already changing consumer perceptions. For about $30 a month, Personal Network customers get 10-cents-a-minute pricing on wireless local and long distance, wireline long distance, and calling card calls, as well as voice mail, text messaging, and caller ID. That means there’s no need to distinguish between wireless and wireline calling.
Within a few years, convergence will mean fewer competitors. Some companies will drop out because they are too small and insufficiently capitalized to compete as communications generalists. Others will be unable to put together complete convergent products because they’ll fail to forge the critical corporate alliances to obtain and package services they don’t create themselves. (Some telecommunications companies are forming alliances with gas and electric utilities to gain distribution to residences and businesses.)
At the same time, convergence will generate more competition. For companies that stay in the fray, there will be more at stake with each customer won or lost.
From price to value
Satisfied customers of convergent telecom products want a good price, but not necessarily the lowest price. They’re more concerned with value; simplicity, services customized to their needs, and volume rewards are the most important benefits. The business benefits for telecom companies include higher value per customer, which makes up for lower revenue per individual service in a highly competitive market. More importantly, the value of convergent products helps companies minimize churn, because it’s much more difficult for competition to get a customer to switch when all his services are part of a single integrated product.
From acquisition to retention
The impact on promotional marketing will be profound. Brand image will become a far more important part of product value. Assuming marketplace saturation and convergent products at parity with each other, the “brand experience” will ultimately provide the real point of difference. Many promotions will emphasize image reinforcement (“get involved with our brand”) in addition to behavior motivation (“buy our brand”).
Price will become a promotional acquisition tool, not a product’s reason-for-being. Telecoms will switch their emphasis – and their marketing dollars – from acquisition to retention programs. These programs will communicate with and incent customers on an individual basis based on personal purchase and use. Marketing will be an integral part of the product itself, not just a way of selling the product. And the marketing programs may well be invisible, because the most effective way to communicate will be through direct mail or e-mail, not mass media.
Telecoms eventually will become more mature marketers, acting more like packaged goods companies. They’ll enjoy enormous marketing advantages, especially for programs designed to retain customers and grow revenues per customer. Unlike packaged goods companies, telecoms own channels of communication, so they can talk to customers any time. They have individualized knowledge of customer transactions – a true behavioral database they can use in real time. And they have direct contact with customers – no wholesaler or retailer intermediaries.
That’s why I’m looking forward to witnessing the ideal one-to-one, real-time customer management marketing programs we’ve been talking about for years. Robinson & Maites is developing one right now, a true “brand experience” for customers of GTE Unlimited.
It’s some of the most innovative work we’ve ever done. The only problem is, unless you’re a GTE Unlimited customer, you’ll never see it.
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