Out: Sameness. In: A Changed Industry Mindset

It’s Comcast vs. AT&T, Time Warner vs. Verizon, Centurylink vs. Cox or DISH vs. DirecTV or DISH & DirecTV against all of them – each claiming to have the better price, the better programming, the better platform or the better deal.  

“Sameness” is everywhere, and customers “get it!” With all of this market clutter, which message really is effective in actually growing the business? To that point, what will it take in today’s marketplace to truly grow the business in a sustainable and economical way, to keep customers from leaving for the next best offer and to improve a company’s earnings? This is the multi-billion-dollar question in today’s embattled telecommunications market. 

Is it pricing, packaging, customer service, contracts or a new marketing concept that requires a dramatic change both in thinking and in marketing techniques that brings the consumer closer to the service provider and just maybe starts to build some customer loyalty? Regardless, finding the key to the kingdom to get subscribers to stay put (and maybe even brag to their friends and neighbors that they have XYZ service) is worth billions upon billions of dollars to the lucky winners.

A $175 Billion Pie Divided 

With approximately 120 million residential households representing the U.S. telecom market, evaluating the actual cable (video)/Internet/phone marketshare can be a bit confusing. Cable maintains that it serves approximately 60 million customers, satellite claims approximately 33 million and the major telcos are pushing hard to increase their 6 million to 8 million status. Moving forward, it will be just “exchanging customers” for the right deal and, unless some new thinking is explored and companies start differentiating themselves from their competition, billions will be spent while the basic numbers remain the same!

The ultimate goal would be to build a 100-percent triple-play subscriber base – or as close to it as possible. However, almost every direct-mail piece, TV advertisement or message sent out to customers seems to be a “race to the bottom.” Many offers discount and de-value virtually every provider’s product while delivering no message of differentiation. 

To that point, every provider offer touts its service as “the best” and, to prove it, the operator will give it to you almost free. However, customers know the devil is in details of the small print – and they almost immediately reject exploring such “deals.”

A New Alternative

I think maybe it’s competition at its best – or at its worst! Today’s consumers are smart, and they recognize the value of voice, video and data bundling. But with operators offering almost the same package (and sameness, in general) coupled with the continued bombardment of direct mail and TV advertising that mostly is ignored or immediately thrown in the trash, the drumbeat continues! Messages can be confusing, not to mention redundant, and in most cases, ineffective, representing marginal to zero growth at best.

In addition, consumers are convinced these offers can contain punitive elements hidden on the front end, but potentially burning them on the back end. Skepticism is their first reaction, and that first instinct just kills the message.

Eighteen months of consecutive market surveys have produced some rather compelling reasons to change (or, at a minimum, explore) customer acquisition techniques. Here are some selected results taken from 36,000+ respondents to a recent Sterling survey:

• Nearly 25 percent of respondents presently subscribe to a triple-play bundled service (up 2 percent from the previous survey)  
• The following free incentives would push respondents to switch service providers: a big-screen HDTV (57 percent), a smartphone (19 percent), a desktop computer (9 percent), a Visa gift card (9 percent) and a notebook/tablet computer (4 percent).
• Nearly 24 percent of respondents said they would switch providers for a HDTV offer and 24-to-30-month triple-play service plan costing between $149 and $179 per month (and nearly half said they would switch immediately).

The M&A And SAC Comparison 

Each operator calculates subscriber acquisition costs with various accounting methods that include elements of marketing, equipment, labor and deprecation calculated to its best advantage. To grow the subscriber base in markets where infrastructure, personnel and operations are in place, and where hundreds of thousands of residential households are just sitting there dormant, a different mindset may be required to support new marketing and customer-acquisition strategies. 

There must be a mindset that recognizes the difference between hard capital dollars and the limited marketing costs required to maximize market penetration. Securing a new incremental customer for a product-supported offer costing $500 – with asset values ranging anywhere from $4,000 to more than $7,000 – should be a no-brainer. 

It’s time for companies to start differentiating themselves from the pack. Eliminate the “sameness.” Reward high-end customers. Change is not the enemy. Churn alone is costing this industry hundreds of millions of dollars, and its time for innovative thinking that includes “doing something different,” and quickly. Change – along with managed risk – will provide that path for consumers to clearly see the difference between providers and to break the logjam of stagnant growth. 

Contact Dan McGough at [email protected].