Round table report: Telecoms marketers discuss brand loyalty in a price-driven market

Telecoms / Utilities

Richard Abbott

October 20, 2009

How long?

4-6 minutes

Round table report: Telecoms marketers discuss brand loyalty in a price-driven market

LONDON - Despite spending millions of pounds on advertising, mobile and broadband operators still suffer from low brand loyalty. Meanwhile, handset manufacturers are experiencing a significant power shift toward their brands, with Apple's iPhone commanding an army of devoted fans.

For our latest 'Opening Up' round table, Marketing and Yahoo! invited a select panel of telecoms marketers and agency experts to join us for a breakfast discussion at the Century Club in London's West End.

Russell Braterman, marketing director at Phones4U, kicks off things with a stinging criticism of network's marketing efforts.

'There is some network loyalty but it is more to do with network negativity. If you look at the amount of money that has been spent on marketing in this industry, and you look at the brand affiliation that has been driven, you have to say that is a pretty poor return on marketing activity,' he says.

'I think a lot of the networks have been sucked into a global marketing perspective, as well as a fantasy about European and global consumers that has led to some very bland advertising. I'm hoping that will change.'

Former BlackBerry and Orange marketer Kristof Fahy, now vice-president of international marketing at Yahoo!, argues that service providers have difficulty communicating their brand values.

'When networks began, consumers would choose the network as well as whatever phone it had,' he says. 'That has changed. [Networks] hate to hear the word, but ultimately they are a pipe. What value they have along that pipe is very difficult for them to communicate.'

The big issue, according to Mark Cridge, chief executive of ad agency Glue London, is that mobile and broadband service-providers rarely bring out positive emotions. They are more likely to be criticised in such cases as connection failure.

'We have found that every mobile operator has horrendous negative word of mouth,' he says. 'No one has a good word to say about any of them, so it is about who has the least-worst word of mouth. That is a major issue.'

However, Dominic Chambers, European marketing director at LG Electronics, believes criticism aimed at networks' marketing may be unfair. He cites O2, which has gone from being a fresh-faced, young brand to market leadership in a short time, backed by initiatives such as its priority ticketing offer and sponsor-ship of The O2 Arena.

John Rudaizky, chief executive of Team Vodafone at WPP, also believes in fighting back. 'There is so much confusion out there, and the networks provide trust and trusted brands,' he says. 'With the increasing proliferation of hand-sets, going to a trusted brand to make a decision makes sense.'

The success of Apple's iPhone demonstrates how clever product development and marketing from an already 'cool' brand can generate broader consumer excitement. Although the device has a small market share for now, its touch-screen interface and the development of apps is causing ripples throughout the market. The addition of the Orange and Vodafone networks to its current exclusive UK deal with O2 is expected to fuel a further spike in take-up.

Our guests agree that the emergence of the iPhone is a significant moment for the mobile telecoms industry; however, they are hesitant to get carried away.

'iPhone has broken the link of networks to consumer via creating a direct post-purchase relationship that is really powerful,' says Chambers. However, he also sounds a warning. 'I don't think they are invincible. Apple will reach a limit where they are too expensive.'

Neil Andrews, head of advertising at 3, also focuses on price. 'Not everyone wants to pay £40-£50 a month. There has been a shift toward value over the past year and iPhone doesn't really fit into that,' he says.

Rudaizky is guarded in his enthusiasm. 'I don't think the iPhone is the panacea of all people, as it sometimes comes over, but it has changed the play in a positive way. It has fuelled a whole new set of development from the operators and the handset manufacturers.'

Some observers have identified the iPhone as a decisive moment for mobile internet, something that, to date, has been hampered by slow speeds and high charges.

Guy Beresiner, head of commercial development at Yahoo!, says: 'I think we will look back on this as a turning point for the industry.'

Andrews adds: 'The use of internet by iPhone users is really high and it is driving the use of sites like Facebook. It is really good for the adoption of internet services.'

Meanwhile, the penetration of broadband has reached the stage where providers are now targeting switchers rather than new customers.

D'Arcy Rossiter, director, consumer insights at TalkTalk, says broadband is now essential for consumers, even more important to them than their mobile. He does not believe choice of broadband operator is simply down to price.

'Brand is essential. It is very difficult to go with someone you don't trust or recognise just because it is a really cheap price,' he adds.

For most broadband customers, the most important considerations after the cost of the subscription are the reliability and speed of their connection, and the quality of their customer service and support.

The last of these considerations has been a constant thorn in the side of telecoms brands. The frustration of dealing with some call centres is a major contributor to the negative word of mouth that can be so damaging for brands.

'Customer service, whether it is in a call centre or on the high street, will be a key focus and an area of difference,' says Rudaizky. 'It is increasingly important to the overall brand experience.'

Braterman highlights how Phones4U is using social media sites, such as Twitter, to resolve issues quickly. 'You will find people tweeting about a sales experience before they actually complain,' he says. 'We can pick up some of those comments quite early, and enter into a dialogue.'

He adds that YouTube enables brands to 'tell very quickly if they like your advertising', through comments on posted TV campaigns.

This evidence suggests that we are ushering in an era in which face-to-face contact with customers is no longer a necessity. However, those at the table disagree, arguing that brands must retain a high-street presence.

Richard Dorman, senior marketing manager at Sony Ericsson, says: 'When it comes to making a technology purchase, the customer's store experience is absolutely vital. There is a large percentage of the population that needs that reassurance. You can go online, but you can't necessarily get that feel for the phone.'

Andrews observes: 'We have found that people research online and then buy in-store. The questions that they are asking when they come in store are still quite in-depth.' He adds: 'Eighteen- to 34-year-olds tend to want to get a feel for products. Older people need to be told about it in layman's terms. Then there are some people who come in once a week, just for a chat.'

Stores are also an important brand-building tool, helping to update consumers about campaigns and offers. The internet, in contrast, remains an information and ecommerce medium for most companies.

'Our site is very much about acquisition, not about brand-building,' says Rossiter. Andrews agrees: 'The 3 website is mainly for tariff information, or for people to find out whether mobile broadband works in their area.'

However, Chambers says the web is 'critical' for LG. 'It is the only experience with the brand for many consumers, because they don't live near stores and might not see the advertising,' he adds.

'Call centres are very expensive and can be a bit of a black hole because they can never be good enough. Getting people out of call centres and resolving their queries on the web is a big drive.'

Yahoo!'s Fahy, who has experienced both sides of this equation as a brand marketer and online media owner, admits that he believes the web has work to do before it can be an effective brand-building tool in this market.

'The web, by its nature, will be quite transactional for a while yet,' he says. 'There is a lot of work that the likes of Yahoo! and MSN will have to do to develop the web as a brand-building platform. You can't take a TV ad and just digitise it. You have to offer a different experience.'

Consumers will enter into relationships only with telecoms companies that they can trust to deliver the desired technology and a reliable service. Loyalty must be earned.