SBHD: No sooner has Mercury quit the consumer telecoms market, than BT’s Mike Biden proclaims a marketing revolution. But if the company is to develop a `pioneering’ role it will first need to convince the conservative UK public of the emotional benefits of personal communication.
BT has been handed the consumer telephone sector on a plate. After years of undercutting on price, and a long-running and universally lauded advertising campaign that wittily baited and lampooned its foe, Mercury Communications announced its retreat from the UK consumer market in December.
For BT it was sweet revenge. Mercury positioned itself as a consumer-friendly David fighting for better prices and service against a faceless and hostile Goliath. But chief executive Duncan Lewis conceded that we “didn’t have the brand image to take us forward” in the residential market.
With the field clear for BT, Mike Biden, sales and marketing director for personal communications, is promising a marketing revolution – radical and sweeping enough to keep pace with the industry’s own breakneck technological advance.
While BT delights in Mercury’s surrender, for all its ability to hog the limelight and generate positive PR, Mercury was little more than an irritation to BT. With 96 per cent of the residential market under its belt – that’s 20 million customers, £5.5bn or 40 per cent of total revenues and an even higher percentage of profits – the real challenge for BT is to boost the market, not to fight off minnows.
Six months into the job and in charge of “designing, selling and delivering the total portfolio of products and services (except mobile phones)”, ex-Mars executive Biden is in expansive mood. “Telephony is just at the point when it is taking off,” he declares. And BT, he implies, is going to take off with it.
Ten years after privatisation, BT is at last shedding its old utility culture and concentrating on marketing. “We are in the middle of a major transformation,” says Biden.
The potential for growth in this market is breathtaking.
It embraces everything from answerphones and faxes, through a panoply of new services such as call waiting, call diversion, three-way calling, caller line identity and caller display, and into the future with the videophone (already on the market), video-on-demand and teleworking.
Biden says telecoms could triple its share of UK consumers’ spend, from less than one per cent to two or three per cent. “The telephone companies haven’t yet exploited the electronic revolution, never mind cable,” he says. With an army of new competitors – led by the cable firms – marching into the market, Biden adds: “My job is to develop the business faster than I have to concede share”.
Biden has to persuade millions of conservative consumers to change their attitude to the telephone. It has become almost an obsession within BT that US consumers on average spend five times longer on the phone a day than their UK counterparts (20 minutes as opposed to four).
With its huge resources and clear position as market leader, the responsibility to change this rests squarely on BT’s shoulders.
So far there are few signs that BT has really accepted the challenge. Critics of its marketing strategy say it is characterised by an overdependence on sheer size and muscle. In the 12 months to October, BT more than doubled its ad spend to £100m (Register-MEAL), swamping Mercury’s £13m budget.
Another criticism is that BT follows rather than leads. When Mercury produced YourCall (which offered discounts on five named numbers) BT replied with an identical scheme called Friends and Family. Biden admits: “We have been a defensive culture.” So defensive, that when he joined last June only two people told him that BT was actually price competitive against Mercury. “Nobody else understood that we were,” he says. They had got used to – and simply accepted – Mercury’s propaganda.
But the BT marketing machine is learning. It has used price as a weapon. Although forced by Oftel to adopt its RPI 7.5 per cent pricing formula, BT introduced the price cuts one at a time, creating an apparently never-ending sequence of good news. Each reduction targeted a specific market, thereby undermining Mercury’s core price positioning.
Yet being forced to cut prices by a regulator is not the pro-active marketing needed to transform the industry. “We want to be much more outgoing. We want to move from defence to growth,” says Biden.
It will be easier said than done. If the growth potential is tantalising, the pitfalls and barriers are daunting too. Success depends on getting people to spend more on telephone services and less on areas such as travel and entertainment. However, for many the telephone remains a last resort form of communication because it is perceived as expensive to use.
BT’s present wave of advertising through Abbott Mead Vickers.BBDO is one response. TV ads sell the emotional benefits of personal communication. A press campaign tries to persuade recalcitrant males to think about how they use the phone and to accept the rational benefits of using it more. Posters, meanwhile, tackle misconceptions about price.
But, as AMV.BBDO board account director Jeremy Miles stresses, it’s a unified campaign. If a poster compares a ten-minute phone call with the cost of half a pint of beer, it carries more than a simple pricing message. It undermines men who criticise women for chatting too long on the phone.
BT claims the campaign is its most successful yet. “For the first time there has been a measurable impact on call volumes,” claims Biden.
But Miles admits that creating a telephone culture in the UK is “a massive job. We are still just at the beginning.” Changing attitudes is not enough. BT’s 100-strong marketing department needs to create a range of finely-tuned packages of added value telecoms products and services (such as voice messaging) that consumers understand, want and are prepared to pay for.
The “fundamental failure” of telephone marketing so far, according to Biden, is its concentration on selling calls rather than the human benefits of communication and having access to data and entertainment. Overcoming this problem requires making the final move away from BT’s utility heritage. In the past services were offered to every consumer at the same price. A marketing mentality means making different, packaged offers to different, targeted groups of consumers – and at different prices.
There are some tentative signs that this revolution is already under way. BT has introduced Premier Line, a new “club” set up for heavy phone users, which offers extra discounts and add-on benefits such as Air Miles on phone bills or discounts on Forte holidays.
Premier Line’s premise is that it’s a special package, with prices and offers for a targeted group of customers. It was created by analysing BT’s vast database and then marketed direct to named individuals. To get the benefits, consumers have to “join”. By asking them to sign up, says Biden, BT is showing it doesn’t take its customers for granted any more.
Premier Line also uses affinity marketing techniques to leverage marketing budgets with other non-competing companies who are targeting the same audience.
Consumers can expect more of this in the future. BT is running a programme of “cradle-to-grave marketing”, according to Biden. The communications needs of families with 16-year-old children, old-age pensioners on their own or newly-married couples are vastly different, he says. BT marketers have the task of constructing the right packages, at the right price, for each of these groups, and more.
Then those packages have to be sold. Biden has already reorganised BT’s marketing structure to focus on different sales channels such as BT shops, third-party retailers (an area due for rapid growth) and telesales.
Affinity marketing links are also growing. If cable companies are to offer free local calls to attract customers, BT will propose 20 per cent off phone bills for subscribers to Sky – making the cost of a total entertainment/telephony package pretty similar.
Meanwhile, BT is only beginning to develop its vast database: a log of 96 per cent of all residential calls, with a record of who made them and their billing histories.
Perhaps, not surprisingly, Biden is decidedly coy about BT’s database marketing plans – central to the unfolding BT marketing revolution. The challenge is, as Biden puts it, “to pick up substantial groups and identify their communications needs”. Along with changing consumer attitudes and selling appropriate packages of products and services, it’s a huge task.
But knowing what needs to be done is very different from actually being successful. It’s not just consumer culture that needs to be changed, it is BT’s own marketing culture. “Historically, we looked at what was possible in the light of what was. Now we have to look at what needs to be. We are moving on from imitating US telecoms companies to pioneering,” Biden claims.
The old culture was summed up by the phrase “line provision” or “running lines in like gas pipes”. It was internally focused, whereas the new one will need to be more externally focused. Even the marketing style has to change. “I want to sweep away the flavour-of-the-month marketing of the past,” says Biden. “There were too many individual programmes. I am refocusing marketing teams away from campaigns, to customer needs and creating relevant offerings.”
If Biden is successful, over the next few years BT will complete its culture shift from a utility mentality to true customer focus. Consumers will notice the change as the company stops being defensive and starts “pioneering”. If not, it will, like Mercury, find itself severely humiliated by thecompetition.