Relationship marketing is all the rage at cable companies
right now.
Some MSOs are hiring marketing executives specifically to
oversee relationships with customers, while others have hired database specialists from
other industries as a first step toward gaining better information about subscribers.
A number of major cable operators -- most notably
Tele-Communications Inc. -- are starting comprehensive loyalty programs, showering
customers with gifts and discounts as they accumulate points from purchases.
Other operators are re-evaluating various traditional types
of "affinity" marketing, such as issuing co-branded credit cards or teaming up
with phone companies to sell long-distance phone service or to co-brand long-distance
calling cards.
Cox Communications Inc., for example, has quietly abandoned
the co-branded credit card that it launched with much fanfare two years ago. The card was
"not meeting expectations," a Cox spokesman said, "and it ended up not
being valuable."
While cable marketers are divided on the most effective
programs to implement, there's no doubt that competition from direct-broadcast
satellite and troubling subscriber churn have spurred MSO executives to scramble to get as
close as they can to their customers. They want to know as much about them as possible,
and to identify the best customers -- and most profitable ones -- so that they can figure
out how to keep them.
If anyone personifies cable's new interest in pursuing
a state-of-the-art relationship with its customers, it's Tim Munoz, who gained his
experience outside of the industry as a marketing executive at Nynex Corp., Young &
Rubicam and Grey Advertising, and who was hired last year by Comcast Corp.'s Comcast
Cable Communications for the newly created position of vice president of advertising and
relationship marketing.
Munoz's boss, senior vice president of sales and
marketing Geof Rochester, who cut his marketing teeth at Procter & Gamble Co. and at
the Marriott International and Radisson hotel chains, is convinced that cable has to
"re-engineer all of its touch points" with the customer.
DATABASE IS KEY
Munoz defined relationship marketing as "going beyond
the basics to add value to the customer by continually understanding what they want and
what they need to the point where you can anticipate those desires."
"The engine for the whole thing," Munoz stressed
-- underscoring a point made by all cable-marketing executives -- "is your
database."
Unfortunately for marketing executives, billing systems and
customer-database information have traditionally been one of cable's most glaring
Achilles' heels.
"That's the big barrier," said Char Beales,
president and CEO of cable-marketing trade group CTAM. "The core issue is people, not
addresses. It's so important to understand what motivates customers. But it's
still incredibly challenging for cable systems."
As a result, a number of major MSOs have made upgrading
their old data systems to state-of-the-art information systems that can hold their own
with other competitive consumer-oriented industries a top priority.
Cox recently hired Margaret Ross away from Delta
Airlines' frequent- flyer program to become director of database marketing, and Mark
Bovoril has jumped from Sprint Corp. to MSO MediaOne to become its new vice president of
marketing information.
At Rifkin & Associates Inc., veteran industry
consultant Lee Clayton, who now oversees marketing for the MSO, has created the position
of director of customer acquisition and satisfaction.
OUTSIDE HELP
Other MSOs -- especially when faced with direct competition
in select local markets -- are turning to outside consulting firms for help.
Time Warner Cable, for example, hired Herndon, Va.-based
relationship-marketing specialists Focalpoint Marketing to work with its Columbus, Ohio,
system, which competes head-on with overbuilder Ameritech New Media, the cable arm of
telco Ameritech Corp.
Using a sophisticated database to segment subscribers and
to identify and cater to those generating the most profit is critical for establishing
successful relationship marketing, executives said.
"You want to target very precisely versus the
profitability segment of your customer base," said Julie Berg, executive vice
president and chief marketing officer for MediaOne. "Ideally, you'd like to be
able to give gold-plated service to the highly profitable segment. They might have their
own personal representative, for example, or even personal technician."
To Thomas Belford, senior partner at Focalpoint,
relationship marketing is "using customer-specific information to create relevant
brand differentiation that adds value to the brand."
Customization, Belford said, is essential. "You want
to come as close as you can to a one-to-one relationship," he stressed. "You
want to tailor your offers so that they're relevant to the customer. A unique product
would be Nirvana."
Comcast, Rochester said, is "gearing up for the day
when we know more about the pay customer than HBO [Home Box Office], more about the sports
enthusiast than ESPN and more about the music lover than MTV [MTV: Music
Television]."
Munoz said the MSO is learning more about its customers by
having its customer-service representatives ask profile questions when people call up for
video or long-distance phone service, and by investing in a proprietary database with
coding based on geography, demographics and psychographics.
"Being able to mine the data holds the most
potential," he said. "You want to target the people that are most likely to buy
more from you."
Sophisticated databases are also key to successful loyalty
programs -- a relationship-marketing technique that is increasingly popular, and
controversial, among cable marketers.
PROS AND CONS
OF LOYALTY
Some marketers believe that these programs, popularized by
airlines as "frequent-flyer" programs, have become an essential marketing tool
for a rapidly changing industry that is adjusting to dramatic new conditions -- and
products -- in its marketplace.
Others think that such programs don't justify their
substantial costs, and that alternative-relationship programs, or "affinity"
programs, can accomplish similar goals with more efficiency and savings.
And outside experts cautioned that cable marketers need to
ensure that rewards are relevant to customer needs when they are used.
Just last month, TCI, the industry's largest MSO,
instituted a new nationwide program, "TCI Rewards," which, said Tom French,
TCI's senior vice president of corporate marketing, would help the company to
"attract new customers, to get more out of current customers and to reduce
churn."
A number of other major MSOs, including MediaOne and
Comcast, are also in the process of launching or preparing loyalty programs.
MediaOne plans to roll out loyalty programs on a regional
basis this year, according to Berg.
Comcast has been using loyalty programs in select markets
in the Midwest, where local systems face competition from ANM, and it is "actively
looking" at expanding the programs into more regions, Munoz said.
And in Columbus, where it faces head-on competition from
ANM, Time Warner has set up a "President's Club" program for loyal
customers.
Rather than featuring a tally of accumulated points or
guaranteed prizes, the program is positioned more as a "glorified thank you" to
establish better communications and relations and to "establish closer intimacy"
with the customer, Belford said.
Other operators doubted whether the
"relationship" and retention benefits of the rewards programs are worth the
considerable time and expenses that are needed to run them.
While Rifkin has begun a new affinity program that includes
calls to individual customers and "unexpected" gifts, Clayton remains suspicious
of airline-type points-based programs. Over time, she is convinced, the value of rewards
earned by points becomes "expected" and, therefore, "diminished."
Similarly, Virginia Gray, Cox's new vice president of
marketing, said she was concerned that in addition to their cost and complexity, once
loyalty programs are instituted, they're difficult to end.
And Skip Harris, vice president of marketing for Falcon
Cable TV Corp., said his customers simply didn't show enough interest in the
programs.
Belford maintained that a points-based loyalty program is
different from a relationship-marketing program. He called points-based programs "an
extended bribe" that is really a "permanent promotion. You want to retain
customers," he emphasized," not bribe them."
OUTREACH TO SUBS
Frequent, customized and relevant communications with
customers is another cornerstone of relationship marketing, executives said.
Clayton expressed a widely held view among cable marketers
that one of the most common complaints among customers is the impression that the only
time that they hear from their cable system is when it's raising rates or trying to
get them to buy something.
As a result, Rifkin has initiated a new outreach program,
letting them know about improvements in products and services, both through newsletters
and through cross-channel spots called "CTV Updates."
Rifkin systems will also thank steady customers with
"unexpected" gifts and "added benefits" to their service, such as free
pay-per-view movies.
Clayton said local systems will also do "customer
call-outs" at least once a year. Every subscriber will be called, not for a sales
solicitation, but to "see if everything's OK."
Falcon is also stressing "repeated friendly
contacts" with subscribers, according to Harris. The operator sends customers a
personal letter from the general manager of their local system, asking for feedback,
Harris said. The letter is then followed up by a phone call, which is followed by another
letter from the divisional manager.
"We think that the real answer to customer
loyalty," he said, "is to ask them what they think and to listen to them through
frequent conversations."
In Michigan, where Harron Communications Corp. faces
competition from ANM, the MSO is "introducing" itself to new customers with door
hangers that include brochures and gifts.
In competitive Columbus, Belford said, Focalpoint designed
a series of communications to Time Warner's customers, including queries about
satisfaction and service.
Once the responses were analyzed, Belford said, the
follow-up letters were carefully tailored to the individual's particular concerns.
For example, if someone complained about price, he was
offered a "Price Peace of Mind Guarantee" that Time Warner would offer the best
value in town.
But if price wasn't an issue, it wasn't
mentioned. By customizing the responses, Belford said, there was "no need to go out
to the entire market and say, 'We'll beat Americast by $2 [per month]."
Rather, Belford noted, Time Warner took the information
that customers provided, "circulated it back and substantively responded by accepting
kudos or trying harder."
