Marketing is the New Battleground in Telecoms
Telcos need to raise their marketing game if they are to survive and succeed in the hyper-competitive market today, says Ovum, the analyst and consultancy company. The big battle in telecoms is not about technology and who can deploy the newest the fastest, it is a marketing one.
As new competitors continue to enter the communications space, telcos no longer just have to compete with other telcos, they now need to compete with media companies (e.g. Sky); Internet companies (e.g. Google, eBay); and retailers (e.g. Tesco, Carphone Warehouse).
"Due to this increased competition, the incumbents that once monopolised the telecoms market are finding that their traditional marketing approach is rendered as outdated as telex in an instant messaging world," says Mike Cansfield, Principal Analyst at Ovum.
To overcome the challenge of not only new competition but also industry consolidation, convergence of networks and mobility, Ovum has identified four major marketing issues that telcos need to address:
Positioning
Telcos need to lead on customer benefits, not technology.
Customers don't care how their computers, mobiles and other gadgets work (as long as they do so when they need them), nor do they care about the technology contained within each, and yet in telecoms we still see advertisements with references to WiFi, ADSL and MPLS.
"Telcos need to concentrate on the services they provide, the features of each and their application, and the benefits enjoyed by customers. By doing so telcos will relate their services to the lives of their customers and not to the technology or the product per se," points out Cansfield.
Segmentation
Customers need to be segmented in a far more sophisticated way than in the past.
Historically, the segmentations used within the industry have been poor and of limited value. Today there are signs that this is no longer the case. The key to success in the future for telcos in highly competitive markets will be how well they identify and capture profitable segments for themselves.
Service innovation
Telcos need to innovate on services and not just technology.
Telcos often use the word 'innovation' when stating their objectives, but all too often they mean technology rather than the service-led kind.
"Certainly telcos do now offer innovative services such as in the area of fixed-mobile convergence (FMC) and TV over broadband, but these are still technology-led," says Cansfield. "However, the big service innovation over the past 18 months in the sector has been the explosive use of social networking sites such as YouTube and MySpace."
Branding
In many cases the offers from different telcos differ very little from one vendor to another, and so customers find it difficult to weigh up each and select a supplier. In this case the brand becomes an increasingly important factor, just as it is in other sectors (e.g. the motor industry, airlines).
The opportunity for a telco is to break out of this and take lead in the market by augmenting tactical (i.e. product focused) with more strategic (i.e. brand building) promotional activity. Its aim ought to be to encourage customers to select the brand first and the service second.
"By doing so, an incumbent can play to its strengths (network reach, service availability) rather than its weaknesses (price comparisons), and also make it easier for customers choose suppliers too," says Cansfield. "The challenge then is for their competitors to respond."
Posted to the site on 29th June 2007