Fighting For The Money
Cable’s intensely competitive landscape, replete with a dizzying array of products, services
and pricing packages, is whetting the industry’s already voracious appetite
for innovative new marketing strategies.
The ability to respond quickly to rapidly changing consumer demands and competitive threats in the world of triple and quadruple plays and complex promotional packages, while simultaneously crafting marketing messages that resonate with consumers, is turning traditional cable marketing on its head.
Albeit not rocket science, at least not yet, the complexity of integrating new technologies, operations, sales and customer care into a well-oiled marketing machine, designed to acquire, retain and entertain customers, is pushing the marketing envelope like never before.
Add to the marketing mix a mountain of data and metadata generated by sophisticated billing systems and third-party data companies, and it’s little wonder why the marketing of cable versus the competition is changing dramatically.
“Cable is putting lots of scientific marketing strategies in place, while MSOs have broadened their views of marketing and the importance of putting resources behind it. Competition is a factor, and we’re seeing a significant increase in marketing new products and the bundle. And there’s incredible growth in broadband and cable phone being pulled through the bundle in a powerful way,” said Char Beales, president of Cable & Telecommunications Association for Marketing (CTAM).
Yet to compete against Verizon’s FiOS, AT&T’s U-verse and others, many experts agree cable better pull harder.
“Cable is almost under assault on all sides. Primary satellite marketing is pushing high-definition (HD), and IPTV’s assault on cable is limited, but extremely competitive. Cable marketing now is a defensive move against satellite, HD, IPTV interactivity, and offensively it is attacking voice subscribers, and that means it’s all about the bundle. Short and long term, that’s where the center of competition will be,” said Mark Kirstein, president and co-founder of MultiMediaIntelligence.
ActiveVideo Networks’ mosaic screen
And smack in the middle of the competition is cable marketing, which has emerged as the lead dog in cable’s own assault on the competition.
“We have embraced the test-and-learn strategy of marketing. It might be completely different than traditional direct mail, and moving customers to more efficient channels like online to order bundles and services. From an analyzational, strategic standpoint, it’s about coming up with the technologies and insights to help bridge different channels, like call centers and online,” said Tim Doolittle, vice president of marketing science for Charter Communications.
It’s also about data, and lots of it. The collection, analysis and effective use of the sea of consumer data being collected is now a crucial component in any marketing campaign or strategy. It’s rapidly becoming ... well, a science.
“We’ve built 10-12 statistical/propensity models of people who would likely take a service, and we are refining that technique. We’ve seen a very significant increase in take rates. Now we need to look at what types of offers drive customers to certain packages. When we look at our offers versus the competition, we see more value in bundling,” Doolittle explained.
One telling piece of data, he discovered is that most customers responding to direct mail don’t take the service being advertised. “Only 15 percent of callers took the initial service they were asked about. The challenge is to push the data analytics and coordinate with call centers as we create offers. We’re working on presenting the CSRs with information about what the customer has responded to in the past, and their lifetime cycle, then drive the offer sequence. We have all the analytics, now we’re working on presenting the information.”
The use of quality data to move customers to bundled packages and individual services is emerging as the critical element in a competitive marketing strategy. And cable is getting the message.
“Sources of new customers are becoming more distributed. In the past, 90 percent of our calls came through the call center. Not anymore. There are new marketing channels we need to access and tap into. The days of marketing tonnage are over. We need to be much more specific and targeted to optimize our marketing investment, and there are tools to do that,” said Steve Brookstein, executive vice president of operations for Bresnan Communications.
One tool, he says, is “propensity modeling,” a way of looking at current customers more closely. “It allows us to look at our customer base in a much more exacting way that better targets our prospects, and those segments that have a higher propensity to purchase. We contact them more often and identify universes like bad debt customers. The result has been better sales at lower costs.”
Better indeed. According to Brookstein, Bresnan has grown its basic subscriber base each year since 2006, and expects to do better in 2008.
Yet for many cable companies, including Bresnan, transforming mounds of data into a competitive marketing strategy isn’t for the faint of heart. It takes a village of disciplines melded into one smooth functioning plan.
“On an operational basis, simplicity is important. For example, we were experimenting with different offers, but you whipsaw your customers. So, for three years we kept our triple-play package at $99.99 and internally there were supplemental strategies like free HD. But the core message has been: We are a triple-play provider,” Brookstein said.
Much of the message is based on tons of data, which creates another sticky issue – information overload. Admitted Brookstein: “Data is captured through the billing system and cross-tabulated with marketing efforts. But the level of detail you can get into brings in the danger of too much information. With every campaign, we know the response rate and track everything. It’s almost scary.”
Scaring cable’s marketers into the new era of competitive marketing may be a good thing, and the use of data, technology and innovative marketing techniques such as propensity modeling, coupled with traditional marketing campaigns, lie at the core.
Surewest's Bundle of Joy triple-play
mailer geared toward new customers.
“The big issue with cable operators is the better they understand customers, the better they’ll retain them. The marketing model and goal is to keep customers from switching. Now, they need data they can understand to build marketing models,” said Chris McDonald, president of Pluris Inc., a leading provider of data organization and analytics.
That data, he maintains, is coming from a variety of sources such as billing systems and third parties. And online. “The core data comes from billing systems and is extricated, transformed and loaded into data bases, where it can be analyzed. The challenge is to organize the data in a useable way.
It’s just a bunch of codes and a mismatch of things, so trying to create a common theme is very difficult.”
The addition of emerging data points, such as data coming from the Internet, e-mail and customer service online, is extremely valuable, McDonald says.
“It’s valuable data knowing how customers are behaving. Are they looking to switch? Upgrade? At the customer care level, it can be predictive of future events. Most cable operators are in the early stage of using that data,” he added.
Pluris, McDonald noted, is working on “the next major thing” in the use of data in marketing: offer optimization.
“We go through a huge amount of data to build detailed models of who buys certain products and create the most likely products that will be of value. There is moderate progress being made to reach the consumer. But we all know this a number one or two priority,” McDonald concluded.
An integral part of that priority is the emergence of the set-top box (STB) as an invaluable generator of consumer data.
“Marketers want to know who is watching. Our code is set up to work with set-top boxes, and data can be ingested into our system to get a closer look at the behavior and psychographics of each household. Never before has anyone had this level of information on viewers. And, with video-on-demand (VOD), you know what people are actually watching through 54 million STBs. It is the biggest opportunity to collect the most amount of data from the most amount of people. But it will take the industry a while to figure out how exactly to use the information,” said Cathy Hetzel, president of the AMI division of Rentrak.
In the meantime, she added, “The evolution of getting more granular will impact TV and has the capability of being a revolution and directly linking how many people were able to watch and how many took advantage of the offer.”
Revolution may be a stretch, but many industry experts agree that the intelligent use of data in marketing is becoming a go-to strategy in a fiercely competitive marketplace, albeit with some growing pains.
Operator design requests by channel
- Source: Blanc and Otus
“I don’t think the cable industry has begun to reach the full potential of the use of data in marketing – from pulling STBs to psychographics. It is absolutely inevitable, but not imminent, that this data will be used for marketing campaigns,” said Pete Dailey, program manager for consumer media and communications for the research and analysis group, Frost & Sullivan.
Also inevitable, he points out, is the competitive marketing onslaught from satellite, telcos and others, and marrying the operations and marketing disciplines. “The imperative is there and cable is a little behind the telcos. Verizon and AT&T have invested multi-billions of dollars, so they look more carefully where they market and share more data. Cable must do that, too, because of architectural considerations like the bandwidth crunch, analog reclamation, plant upgrades to 1 GHz and the emergence of DOCSIS 3.0. Marketing can’t oversell the resources.”
Nor can it ignore the importance of market timing. Especially for smaller triple-play providers such as SureWest Communications, a fiber-to-the-premises company serving northern California with quad-play services, and which recently acquired Everest Broadband, a Kansas City-based provider of triple-play services.
“The timing of the data is critical. We need to react quickly in this competitive environment. We do research on why customers might be looking elsewhere, or why they’re happy. And data is significant to our marketing campaigns. If you don’t have it, you don’t know where the subscribers are coming from. You must have the underlying information, and most of it comes from the billing system,” said Haavard Sterri, executive director of marketing for SureWest.
And it comes on a daily basis, which Sterri admits can be overwhelming at times. “Sometimes there is data overload. It’s great to get daily information, but it can be mind-boggling.”
But nonetheless, extremely valuable. “The more data you can pull into a campaign, the better, but too much can certainly be overwhelming. There’s a lot of data to analyze, but you can define data that can resonate with consumers,” said Sarah Pieri, marketing manager for Momentum Telecom, a wholesale provider of cable phone service.
The use of data in cable marketing is also resonating with companies such as TVN Entertainment Corp., whose traditional role has been as a conduit between content owners and distributors.
“Beyond our role of decoding, distributing and asset management, we’re now becoming a marketing resource to operators. They want to know what is the ideal mix of content that can drive revenues and focus on enhancing the value of VOD. They expect us to share the data we’re collecting and want an overall take on the space. So, what we learn in one region can be used to customize and package products in another region,” said Jim Riley, chief sales and strategy officer for TVN.
On the programming side, Starz Entertainment is literally taking the use of data in its marketing campaigns to another dimension. “We’ve done all the connective work over time, like transactional data to billing and geo-coding it to profile light, medium and heavy users. We’ve dimensionilized data over time. Now, with more products, services and competition, we want to keep the customers. So for us, we have to figure out new places to market and how to sell new products to consumers,” said David Charmatz, senior vice president of product planning and development for Starz.
One place is the Internet, now a valuable source of data for cable marketers. “Cable operators are requesting access and analysis of the data we’re collecting. We’re talking about mountains of data when we first started browsing on the Web and when behaviors were being established,” said Ed Forman, executive vice president of products and services for ActiveVideo Networks.
Just how customers are behaving, and how they’ll behave in the future, is a work in progress for cable marketers. And they have no illusions about the challenges that lie ahead. “The analytics part is easy. Incorporating it into the process is the real challenge.” Doolittle said.
Head-to-head competition using multiple marketing techniques and strategies, most notably the use of data, is now top of mind for the vast majority of cable operators.
Concluded Brookstein: “The competition is ferocious. Satellite is very compelling with HD and Qwest for the bundle. It’s now a share battle for us, so we’ve changed our marketing focus to a much more targeted marketing approach, with messages more relevant to different segments. We’ve got to be effective in identifying those segments and expand our presence on the Internet. That’s the evolution of where we’re going.”
Whether evolution or revolution, cable’s marketing future will likely depend on how it uses the sea of data being generated by numerous sources, and how it is integrated into other disciplines such as operations, sales and customer care.
Concluded Dailey: “Most cable marketing has been based on TV ads, direct mail, door hangars and radio. Now, it has started to collaborate with retail chains like Radio Shack for distribution at the retail level. They want to go beyond simple advertising and promotions to the full marketing mix, and data is a part of that.”