SBHD: Targeting of potential cable television customers used to focus on blanket door-drops. Now cable companies have adjusted their vision of the future and are making use of geodemographic classification systems to find areas that will give the best return
For cable companies, “the priority is to get the roads up and the cables down”, according to Berry Winter, director of public services at information services company CACI. She claims that “the actual sales of the services is a little secondary at present”.
Winter adds that since the establishment of cable television in the Eighties, most direct marketing by cable companies has been fairly simplistic. The main efforts have focused on the delivering of blanket door-drops throughout franchises (a franchise is a geographical area gained via a government licence).
Cable operators may feel this assessment of their operations is unfair. It is true that until recently, targeting of potential customers was crude. However, an increasing number of firms are now making use of geodemographic classification systems such as CCN’s Mosaic. The process is likely to become more sophisticated as the companies begin to target individual households rather than neighbourhoods.
Most firms now employ a combination of direct mail backed up by a direct salesforce, and possibly a telemarketing service, though this is usually only for bound calls.
The most important task for cable operators is to perfect the art of targeting established and potential customers. Since the process of installing the cable system is so expensive -about £40 a metre – one of the main priorities is to identify the sectors of the population who are most likely to purchase the services offered.
At present, the most popular targeting method is through Mosaic. This system allows the division of the population into several broad categories. From these categories, it is possible for cable companies to target those areas which they feel will give them the optimum return.
Both Mosaic and a system known as CableAble allow targeting down to a postcode (approximately 15 homes). CableAble, also developed by CCN, combines geodemographic and lifestyle data to give a group definition to neighbourhoods.
Cabletel is a company in the early stages of development. Its five franchises cover a total of 1.4 million homes and sales have started in the past two months. While Mosaic has been used to target key customers, direct mail and videos have been sent out indiscriminately to the general target group.
Cabletel has also established its own database system, MIMS (Marketing Information Management Systems), on which a lot of varied data has been collated since the beginning of the company’s operations. Marketing manager John Arrons is fully aware of the need to target individual homes, and sees this as the way forward.
For one company a more sophisticated form of targeting is in the process of being developed. Nynex owns 16 franchises in the UK. Direct marketing is carried out in three stages, all of which take place in the pre-construction phase. These consist of an initial letter, introducing all homes in the franchise to Nynex, a second piece of mail which expands on the products available and finally a personal call by the door-to-door salesforce. All direct marketing is carried out on a blanket basis.
It is the aim of Nynex to refine this process and implement a system which highlights those areas dominated by potentially high-spending customers. Targeting will not be centred around a postcode but on individual households. Revenue will be maximised at the earliest stage possible. Grey Communications Group has just been appointed to handle the £8m above and below-the-line account.
John Palmer, marketing manager of information systems at Nynex, was given the task of developing a marketing database which would supply full details of typical Nynex customers.
Palmer decided that a “customer-oriented system designed for marketing use” was needed. He wanted to know what Nynex customers buy, how much they spend and how they pay for their purchases. Palmer also wanted a detailed analysis of the sort of people that use Nynex services, their typifying characteristics and where they live.
Palmer enlisted the help of CACI who established a database which tells Nynex about their customers. This marketing database allowed Nine to put a value on every prospective customer. This was made up of a “positive revenue factor” or the amount of money that might be spent by the customer, balanced by the “relative cost factor” – the amount Nynex would have to spend to supply the service to the customer.
To apply the information collected to individual areas Palmer used a map of the area, the electoral register and customer information that came from Nynex’s own database. It is now possible for Nynex to calculate the revenue that it could expect to earn if an individual prospect becomes a customer.
This work is a great step forward for cable companies, as it really improves their ability to target consumers. Palmer says: “It allows us to compare the values of neighbouring networks, and on a larger scale it allows us to see where the most attractive areas are within a franchise.”
Palmer also says his system is “light years ahead of the CCN system, which allows only a simple level of analysis and does not produce either target segments or target markets”.
As well as the need to achieve more successful targeting of potential customers, cable companies are increasingly aware that it is necessary to tailor packages to suit specific sectors of the population.
In Videotron’s London franchises there is a high percentage of “stylish singles”. This group, which is largely made up of young, well-educated professionals, was perceived as fairly difficult to target via traditional direct sales teams. It was felt that such individuals disliked dealing with sales people and were also unlikely to be at home when sales teams called. Videotron also felt that stylish singles perceived they had less need for the products offered by cable companies than others.
It was necessary for Videotron to produce a package which would maximise sales to this potentially difficult-to-reach target group. The company sent out a package of direct mail which promoted both the television and telephone services. Customer response was primarily by phone (inbound telemarketing) although some of the mail included a contract which could be signed immediately and returned by post.
Videotron thus used a system of direct marketing designed to appeal specifically to those who disliked traditional methods of direct marketing and the door-to-door salesman. The company says that results so far “have been encouraging”.
Methods of direct marketing used by cable companies are constantly being refined. Targeting is slowly becoming more specific. The main problem faced by most operators is that they lack the resources to implement sophisticated forms of targeting, and it remains the case that for many the priority is to lay the cable.