In a hyper-competitive market, a study suggests trumpeting consumer benefits rather than promoting technology.
Posted Jul 9, 2007
As the quality of technology in the telecommunications industry becomes increasingly commoditized, the only way companies can set themselves apart is through customer service and benefits, according to a new report by Ovum.
The report--entitled "Telco marketing strategies need to move into top gear, and fast," by Mike Cansfield, telecoms strategy and practice leader at Ovum--also details the challenges the telecom companies are currently facing and offers what Ovum believes are necessary components for improving customer relationships. Primarily, the report says, operators need to beef up their marketing strategy if they are going to compete.
The telecommunications market has become extremely competitive, according to a 2006 study by Microeconomic Consulting & Research Associates. At the time of that study, an estimated seven million American customers were subscribing to cable telephone service, a figure the study predicted would rise to 23.7 million by 2011. Intense competition has forced telecoms to focus on being both less expensive and of better quality, which has significantly benefited consumers, particularly in the residential and SMB markets.
Marketing strategies, however, have been inadequate, according to the Ovum study. Many companies don't realize that customers are indifferent to the technological functions of a product as long as it works, and that a company's leverage is primarily in offering similar technology as its competitors--at lower cost. Prices, though, can only go so low, Canfield warns in the report.
One important factor is that telecom companies are no longer just competing with each other. The communications landscape has expanded to include other players such as Internet and media companies, as well as retailers, many of which have been vanguards in the service realm and are recognized as premier brands (e.g. eBay and Google's YouTube). Therefore, in such a communication-saturated environment, Cansfield believes that the only way to stand out is to appeal to the consumer on a more intimate level. Companies need to offer something that cannot be simply defined in numbers or bandwidth speed, but in how consumers relate to the company and the company brand.
In order to achieve this objective, the report delineates four key components telcos must keep in mind when restructuring their marketing strategy:
These, Cansfield says, amount to more than "just sales support." Telecom companies can no longer get away with maintaining a black-and-white, question-and-answer relationship with their customers, he notes. Consumers simply don't know whom to pick when the appeal is so strongly technology-based, according to the report. To build company recognition or loyalty, what's required is a strong connection between the customer and the company.
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- positioning (customer service rather than technology-based)
- service innovation
- better customer segmentation
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