Get ready for a barrage of new messages from Sprint, Cingular, Verizon, and T-Mobile—a reflection of the rising stakes in the war for subscribers
Of the many challenges facing Sprint Nextel Chief Executive Gary Forsee, one of the biggest is reviving his company's wireless marketing machine. In the fourth quarter, the company lost 306,000 customers, in part, analysts say, because of an ad campaign that failed to connect with users, as bigger rivals Verizon Wireless and Cingular were sharpening their marketing messages. "There's no question that Verizon and Cingular have separated themselves from the pack," says Andrew Cole, president of consultancy CSMG. "[Their ad campaigns] have been focused on the right things, like network quality."
Sprint Nextel (S) plans to get its ads focused on the right things, too. To that end, it plans "significantly increased media-related spending," the company said Jan. 8. In the first quarter, Sprint is expected to pick a new ad agency, and it's likely to scrap the "Power Up" ads that industry experts call confusing. "In the second quarter, I expect Sprint to become more aggressive with marketing," says Roger Entner, an analyst with consultancy Ovum. "This should be the year of rebound."
Sprint's not alone in revamping its marketing message. Changes are also on the way from other big wireless service providers, a reflection of the rising stakes in the increasingly competitive and saturated U.S. mobile-phone marketplace. Wireless carriers are among the biggest spenders on advertising and their budgets have been creeping up. To boost sales and to keep investors happy, providers increasingly have to pinch each other's customers.
Changing Messages More Quickly
Spending among the top four providers—Cingular, which is now AT&T (T); Verizon Wireless, owned by Verizon (VZ) and Vodafone (VOD); Sprint Nextel; and Deutsche Telekom's (DT) T-Mobile USA—reached a record $3 billion in the first nine months of 2006, according to consultancy TNS Media Intelligence. The biggest jumps came at T-Mobile, which increased spending 18%, to $384 million, and Verizon Wireless, where spending rose 14%, to $1 billion, says Jon Swallen, director of research at TNS Media Intelligence. Sprint's rose 11%, to $701 million, while Cingular's spending slipped 5%, to $873 million.
What other changes are in the cards? AT&T has said it will spend heavily in the next six months to rechristen Cingular as AT&T, spending more on this campaign than any in the history of the company, which was jointly owned by AT&T and BellSouth before the two merged at the end of 2006. T-Mobile is revamping its message too, and analysts expect Verizon to make changes to a popular but aging message that focuses on network quality. Consultancy eMarketer predicts that U.S. wireless service providers will spend $12.4 billion in 2007, up 8.5% from 2006. "When a category begins to enter a mature phase, typically the messages marketers use are subject to change more frequently," Swallen says.
T-Mobile is no stranger to change. For years, it has trumpeted the low cost of its calling plans. But in October, the carrier replaced its "Get More" tagline with "Stick Together." Instead of promoting low prices, the new message emphasizes the extras T-Mobile users will get, such as myFaves, allowing customers to call five numbers—wireline or wireless—for free as part of a calling plan. "We will be focusing on services that connect you to your network, not an impersonal network of millions," T-Mobile USA Chief Executive Robert Dotson said in October. T-Mobile is also phasing out celebrity spokesperson Catherine Zeta-Jones, who herself replaced Jamie Lee Curtis, and has moved to featuring regular people in its ads.
Verizon Retains the Lead
Verizon Wireless has long emphasized its network quality with a bespectacled test man who asks: "Can you hear me now?" Cole and other analysts expect the company to step up promotion of new data services, appealing to younger consumers and first adopters. In December, Verizon Wireless made clips from video-sharing site YouTube.com, a property of Google (GOOG), available on its mobile phones. This year, it's expected to become the first carrier to offer mobile TV services nationwide via Qualcomm's (QCOM) MediaFlo network (see BusinessWeek.com, 4/3/06, "A Big Push for the Small Screen").
Thanks to nifty on-handset games and video clips promotions, Verizon Wireless has already surpassed Sprint in per-subscriber data revenue, according to consultancy IDC. "I think [Verizon] is going to sustain its lead," says Julien Blin, an analyst with IDC. "Sprint just can't keep up with them. Verizon is doing a really good job in articulating its message."
Plagued by quality problems on its Nextel network, Sprint, meanwhile, seems to be taking a page out of Verizon's book. To build up an image of having a reliable network, it's lately been emphasizing its network quality in certain local markets such as Chicago. Sprint is also starting to copy Verizon Wireless's practice of offering subscribers free promotions and previews of wireless games and content, a practice that seems to encourage more wireless data buying. "As a result, we already see more [data] usage," says John Burris, vice-president of wireless data at Sprint.
Marching to Its Own Beat
Sprint Nextel also seems to be stepping up price competition by copying its bigger rivals' prices on standard plans exactly. "For a long time, all carriers had different packages of minutes," says Burris. "We know customers want choice, but not the complexity." So, on Jan. 14, the company began offering its Power Pack plans, one of which offers 450 minutes, plus unlimited night and weekend calling, for $39.99. That matches Verizon's price to the dot—except Sprint's unlimited free calling kicks in at 7 p.m., two hours earlier than Verizon's. "We want to compete on value," Burris explains.
The company that seems to be marching to its own beat is AT&T, the only company in the U.S. to be the sole owner of a wireless service provider and to own a wireline business. Building on this advantage, AT&T has been ramping up a marketing blitz around its converged services, combining the two offerings. Its Unity service, available since Jan. 21, allows subscribers to the company's wireless and unlimited local and long-distance plans to place calls between all 100 million AT&T mobile and wireline users for free (see BusinessWeek.com, 1/19/07, "AT&T: My Community Is Bigger than Yours").
Another AT&T advantage: This summer, the company's plans will appear in more than 170 Apple (AAPL) stores nationwide, expected to carry the much-anticipated iPhone, a new music phone. Chances are, the Apple-Cingular collaboration won't end there: "Our plans are to collaborate and innovate together, finding network and handset opportunities," says Glenn Lurie, president of national distribution for Cingular/AT&T. The company is also ramping up online sales through Cingular.com. Apple will promote its plans as well.