It’s good to talk with customers

Ben Verwaayen, BT’s new chief executive, has unveiled plans for a radically restructured – and downsized – telecommunications company. His strategy relies on much tighter cost controls, a renewed commitment to broadband (high-speed Internet access) and better customer service. This last item on the agenda means no less than a desire to “delight” the same people BT has always taken for granted.

By emphasising these areas, Verwaayen has confirmed that the era of international expansion and aggressive customer acquisition is well and truly over for BT. It has entered the new millennium a pale shadow of its former self. The once state-owned monopoly, which slept through the Eighties and Nineties as a quasi-monopoly dreaming of global domination, is finally waking up to a completely changed telecoms landscape.

This slimline BT – minus its mobile phone arm (BT Cellnet is now mmO2 – a public company with no financial ties to its former owner), minus its Yellow Pages (snapped up at a fire-sale price by venture capitalists) and minus a slew of stakes and joint ventures that once looked so promising, but had to be sacrificed on the altar of debt reduction – is a company with a glorious past, but an uncertain future.

But is Verwaayen’s plan, with its dependence on customer satisfaction, enough to re-establish BT as a major player in a very competitive telecoms market?

Although structurally slimmed-down, BT has become a confusing hotch-potch of ill-defined sub-brands and services. Corporate Edge director of brand consultancy Peter Shaw says BT would do well to emulate the BBC, whose “mother brand manages to hold together a very diverse collection of businesses”.

In the past, BT could have counted on ramming home a message, such as “BT, the quasi-monopoly, is synonymous with (fixed-line) telephony; use the telephone more (think talkative Beattie or ‘It’s Good to Talk’ Bob Hoskins) and, by default, you will become a more valuable BT customer”.

But those days are now dim memories. Mobile phone usage is so ubiquitous that alternative telecoms companies have siphoned off much of BT’s revenues, and the Internet, e-mail and text messaging have pushed telephonic communication out of the limelight.

What, then, does the BT brand, supported by an ad spend last year of &£90m, really stand for these days? Is it, as the old BT liked to imagine, “Big and Trusted” (remember Buzby, the Seventies and Eighties cartoon bird that graduated from an advertising gimmick to a cuddly company mascot)? Or is it, under Verwaayen’new Internet-embracing agenda, “Broadband and Telephony”?

Or perhaps, in the eyes of defecting customers and unimpressed industry observers, those two letters more accurately suggest “Behind the Times”.

If this last is true, then, like a womanising husband returning to his wife after years of infidelity, BT may find that the faithful “little woman” no longer wants – or needs – her errant spouse. She has plenty of new suitors.

One such suitor is British Gas. After adjusting to the new, ultra-competitive energy provision market over the past five years, the Centrica subsidiary has already become the UK’s biggest electricity supplier and is turning its attention to telecoms – fixed and mobile – and Internet access. It has bought OneTel, which boasts 800,000 customers, and also offers telecoms through the British Gas brand – some 400,000 customers have signed up so far. Recent full-page newspaper ads compare British Gas’s telecoms’ rates favourably against BT’s.

Centrica Telecoms managing director Ian El-Mokadem plans to increase British Gas’s share of the UK residential telecoms market from 4.4 per cent to about ten per cent. “Our strategy,” he says, “is to market telecoms as just another reasonably boring, but essential utility, and to sell the benefits of having all your household services under one ‘roof’. British Gas has already demonstrated its ability to expand its brand into electricity.”

El-Mokadem – a former British Gas marketing director – argues that BT has not had any “real” competition until now. He adds: “There was Mercury and then the cable companies, but the regulatory environment was still heavily skewed in BT’s favour. However, there has been some very significant loosening up in recent months, which has made telecoms much more attractive to resellers like us.”

According to one telecoms industry insider, British Gas has done exactly what BT should have done. He says: “Go back five years and the one UK utility brand with a really strong identity was BT. Back then, British Gas was suffering from customer service issues and brand confusion as it restructured under the Centrica name. You would have thought it much more likely that BT would be invading British Gas’s turf than vice versa.”

Generic branding

But while British Gas made the decision to embrace deregulation and competition, BT seems to have spent the past five years trying to hold back the floodgates, concentrating its energies on ambitious expansion abroad. Now it wants to come back “home” to its core customers, but, says the source, “it’s lost five years and, unlike British Gas, still hasn’t changed its mindset.”

BT’s latest ad campaign, “Gladiator”, running since last summer, is an attempt to reposition the company as a “communications” specialist, embracing the Internet as much as the telephone. But critics see this as yet more “generic” advertising, which tries to own the space rather than pinpoint exactly why BT’s offering is different to the competition’s.

There is no question that BT will be hoping to use bundled packages as a way of winning the communications war. It already claims that about half of its customers have signed up to its BT Together service, which includes the option of unmetered calls at evenings and weekends and is likely to soon include broadband Internet. Those 10 million customers account for 75 to 80 per cent of its revenue.

But BT faces competition from cable companies, which have been bundling Internet, telecoms and TV for a long time. BT chairman Sir Christopher Bland’s recent volte-face – first suggesting, then denying BT’s interest in becoming a video-on-demand broadcaster – shows how little progress the company has made on this front, despite seemingly endless pilot projects. When Verwaayen made no mention of “BT the would-be broadcaster” at his recent strategy presentation, the analysts breathed a collective sigh of relief. As one says: “We’ve had enough negative surprises from BT.”

And if BT isn’t going to compete on broadcast content, it may also find itself vulnerable through its lack of a consumer-focused mobile offering. The company has announced plans to get back into mobile telecoms, leasing airtime from O2, but this will be aimed at business users.

That leaves the way open for initiatives by the likes of British Gas Telecoms, which recently launched what it billed as the first bundled fixed-line and mobile package, Your Choice. This gives customers a pool of pre-paid monthly call minutes that can be used on either the home or mobile phone, with everything presented on one bill.

Customer delight

If it is to compete in this strange “customer delight” terrain, BT will need to get to grips with unified billing – a concept gaining popularity because it gives companies a bird’s-eye view of the customer. This will hopefully lead to better customer service and cross-selling opportunities. The company is racing to update its archaic customer relationship management technology, and has recently installed the highly rated Siebel Systems software at key locations.

BT is also making big investments in its call centre network, consolidating a sprawling, fragmented operation into a smaller number of better-equipped operations.

Angus Porter, managing director of BT’s consumer division, says that being able to “speak with one voice,” and “improve the customer experience” is key to the company’s future. But he dismisses suggestions that BT should also spend time updating its brand identity. The Pied Piper logo is over a decade old and, according to some critics, is a reminder of BT’s complacent, even arrogant past.

“It is a hangover from the Nineties, especially that red and blue,” says Rooney Carruthers, whose new ad agency, VCCP, recently snatched the O2 launch campaign away from incumbent Abbott Mead Vickers.BBDO. He adds: “BT needs a complete overhaul, it needs to take a serious look at what the brand stands for, because things have moved on greatly. Older people might have a lingering affection for BT, but there’s a whole generation of young mobile phone users who just see it as another big corporation, a leftover from an era when people didn’t have any choice.”

Doug Hamilton, the designer who helped create the Orange brand and is working on Hutchison 3G’s (still secret) mobile Internet brand, also thinks BT needs urgent attention. He contrasts its brand image – “all about the power of the corporation” – with Orange – “about the power of the consumer”.

Chris Moss, chief executive of brand consultancy Red Zebra, says BT’s marketing must begin internally. “It’s got to have something that rallies the troops – most BT employees couldn’t tell you what the brand stands for. There’s no big idea.”

But BT’s Porter rejects such criticism. He says: “All the research we’ve done suggests there is nothing intrinsically wrong with the BT brand. We’ve examined the possibility of launching a youth-targeted brand, but, again, our research shows there is no demand for this. It’s much more important for us to focus on customer communication issues, instead of worrying about the logo or the corporate livery on our vans.”

In BT’s defence, Porter points out that the company’s share of the fixed-line residential telecoms market has stabilised at 74 per cent, following a turbulent period when it plunged by five per cent. Over the past 12 months, BT has reversed a decline in customers to become a net gainer, and Porter claims to be outperforming rivals in customer satisfaction surveys.

So, maybe BT has stopped the rot. Maybe its new marketing and Internet focus will return the company to its former glory. Or, then again, maybe this is the calm before the next storm.

Additional reporting by David Benady