Bundles of joy fail to connect with emotions

Bundled communications package providers could grab a larger slice of the £8bn-ayear market by making their services more engaging rather than basing their offer on price alone, according to new research.

Consumers are spoiled for choice when it comes to phone, TV and broadband bundles, but research by Mintel suggests that many feel confused and unable to weigh up products to meet their needs.

As a result, consumers often base their purchase decisions on price alone. Indeed, the research reveals that 49% of people taking part in the study pick a particular communications package based on the cheapest deal available.

This limits brands’ ability to differentiate their offer, the report argues. Rather than asking how broadband speeds affect their online experience, the majority of consumers lose interest at the first mention of technical specifications.

“It is not a particularly exciting thing to choose. It is essentially a utility,” says Matt King, senior leisure analyst at Mintel and author of the report.

“A lot of people do not know what the actual benefits are. If you say to someone you can have a 50- to 60-megabit internet connection as opposed to a 20-megabit connection, I am not sure that a lot of people understand the real benefit of that. When you are marketing on that basis, and you are pricing your bundles according to those kinds of specifications, a lot of the time it is just numbers to people.”

Mintel estimates the bundles market to be worth £8bn, with phone, TV and broadband “triple play” packages being the main growth area. Based on current prices, the value of triple play sales has increased by 14.8% since 2005, the report says.

However, it also identifies “restricted consumer engagement with products”. The report warns: “Consumers and providers have come to equate value with price alone, a fixation that is pressuring margins and causing the pace of market volume growth to jump ahead of value.”

With consumers’ view of the market teetering between price and product, Mintel notes that the scales will not be tipped by marketing activity alone. While upward social mobility is deemed likely to improve awareness of technological differences, the increase in single person households could restrict uptake. Those living alone could question the value of a bundle, the report suggests. 

Mobile phone services, including 3G internet connectivity, are likely to be more attractive to younger single people than fixed-line phones, and bundles structured around this could be set to grow, the report notes.

At present, quad play packages, with mobile as the fourth option, make up 2% of the bundles market. Virgin Media, the only player in this field, says about 11% of its subscribers have opted for quad play.

Even if mobile is not yet tightly bound into the bundles market, King says messages promoting bundles might do well to take a lead from this sector. He points to O2 as a brand that has associated itself with experiential benefits such as priority tickets to music events, and Orange for its simplification of contract details into its Animal tariffs, such as Dolphin and Racoon.

He says: “If you look at the branding of mobile contracts, a lot of those have got more going for them in terms of image. Maybe something can be done [for bundles] from that point of view.”

The success of marketing in this area depends on how consumers are being targeted, with the report identifying four types of consumers, according to their attitudes towards bundles (see below).

King says: “The Switchers category is probably the warmest target in the context of this market. You are looking at upscale males, who are higher earners and probably in the slightly older age groups. They seem to be comfortable with the idea of switching.

“Nervous Novices are the ones that perhaps need a little bit more hand-holding. When it comes to the marketing, these are the people who might be a bit confused or put off by technical jargon.”

Televisionists put all their emphasis on TV content, while the Unbundled are difficult to target, as this is a large group that has low engagement with such products. King says this group will be hard to rope in because there is no clear marketing strategy that will entice them. 

Much will also depend on how brands present themselves and their services. Many providers offer at least two elements of a telecoms bundle, although Virgin Media, BSkyB and BT also offer TV, thanks to their fixed-line infrastructure. 

More TV content will become available through online video-on-demand platform Project Canvas, which is due to launch next year. The service developed by the terrestrial broadcasters with Arqiva, BT and TalkTalk could open up

the market and expose consumers to an even wider choice of brands.

The attitudes towards the main brands operating in the bundles market portray a “very weakly branded market with very low trust and differentiation”, according to the report.

However, consumers’ perceptions of brands – particularly BT, Sky and Virgin, with which consumers also share the most familiarity – offer some hope to certain providers.

Sky and Virgin are described as “engaging” by 13% of respondents, compared with a sector average of 9%, while Sky (17%), Virgin (14%) and BT (14%) are all called “user-friendly” more often than the average. Virgin is also considered “vibrant” by 13% of respondents, significantly more than any other brand. The percentages of people using more negative words like “annoying”, “confusing” and “disappointing” are generally lower for most of the brands compared to more positive expressions such as “friendly”.

BT might be concerned that 14% of consumers consider it “tired”, well above the average for the sector. It is also considered the least distinctive brand. However, consumers do view it as the most trusted brand. On these last two measures, though, no one brand is picked out for praise by more than 25% of respondents.

Consumer engagement with telecoms bundles could be improved, King argues, by putting a more human face on the robotic reiteration of download speeds, channel numbers and call rates. “Anything that can be done to get out there face-to-face with people is going to be beneficial from a brand point of view,” he says.

The report advises: “Providers of bundled home communications services need to recast their products as more engaging and aspirational than the current price-led proposition has made them in the eyes of cost-conscious consumers.”

Put simply, price is beating product.

The frontline


Ashley Stockwell, executive director of brand and marketing, Virgin Media

While price is still an important consideration for consumers, we are increasingly experiencing a shift to value. For example, there remains a commodity end to the broadband market, but we see clear and compelling trends that people want faster speeds. Our 20Mb and 50Mb services have performed best recently, with 43% more people now paying for these tiers than a year ago.

The increasing propensity for people to live alone is unlikely to make a dramatic difference to the uptake of bundled services. We all want great TV, speedy internet access, and the means of speaking to friends and family, regardless of our living arrangements.

We have tripled our retail presence in the past year as our stores provide a touchpoint for existing and potential customers to experience how we are different. Ofcom’s recent broadband speeds report was good news for our customers, but the real lack of transparency in broadband advertising risks damaging consumer confidence, and the meaningless price comparisons of bundles that provide significantly different services only add to the confusion. The Advertising Standards Authority is now reviewing the way in which broadband is advertised and we are fully engaged with the ASA, as the need for change is urgent.

Virgin Media is a relatively young company with just a three-year brand history. We are pushing the status quo and shaking up the market, so vibrancy helps set us apart from the rest. We always try to convey a simple message in what is a complex digital world, though, to reinforce our differentiation.

Stephen van Rooyen, deputy managing director (sales and marketing), BSkyB

Consumers are smart and weigh up options based on quality, choice and value – cheap and cheerful often means making compromises. They understand this and factor it into their decision-making.

We would also challenge the view that choosing a bundle is a chore. Joining Sky is an investment in entertainment, which people get excited about. Adding home communication services is then a simple decision that follows.

To be successful in this market, you should not forget that people are investing in one of the things they care about most – their home entertainment experience. They are prepared to pay for quality and choice, but they are not prepared to compromise.

In broadband and telephony, it is about delivering a reliable service for value prices. Consumers are attracted to bundling TV, broadband and phone because of the convenience, simplicity and value it offers. This state of affairs is entirely natural and is unlikely to change.

It can be a confusing market, so simplicity and transparency are key marketing factors. When building their bundles, Sky customers have a choice of six basic TV entertainment packs with the option of adding Sports or Movies, two broadband packages and two basic phone packages.

Our marketing strategy is about appealing to people’s passions. We are selling entertainment, not washing powder.

When consumers tell us that they want to take a bundle of services, the watchword is simplicity. Our offer is simple and so is our marketing message.

Jon Hurry, commercial director, BT Retail

Selling TV in a bundle is key to our strategy of attracting and retaining customers.

Project Canvas, which is due to launch next year, will deliver a next-generation TV platform. The joint venture between BT, TalkTalk, the BBC, Channel 4,

ITV and [broadcast infrastructure provider] Arqiva allows us to unite breadth of on-demand content with interactive technology. Customers will, for example, be able to chat on Facebook while watching the football on the same screen.

Given the current economic climate and the importance of price to many of our customers, our more basic bundles are selling well.

That said, we have experienced strong demand for our value-added bundles, as well as some of the “extras” that customers can buy in conjunction with our bundles.


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