Be bought or be history

As we approach the millennium, none of us expect the world to be a simpler place. Our economic lives will probably be busier and noisier, complicated by more product choices, information and advertising messages. This noise is further amplified by the communications revolution - broadband, wireless and, of course, the Internet.

Telephone companies facing this emerging glut of information and products - even that from outside telecom - must address three trends if they plan to cut through the noise, maintain current customers and cultivate new ones.

Growth in value propositions. Recent history has shown high growth in the availability of "value propositions" - products and services that offer value for a price:

- In 1960, 161 mutual funds were available to U.S. investors. By 1980, that number had grown to 564. Today, more than 7300 funds are available to U.S. investors, and these funds outnumber stocks two to one.

- More than 650 long-distance carriers now offer services to businesses and consumers. The top three or so each offer more than 450 individual value propositions.

Declining population growth rates. Although the above examples appear to signify a healthy expansion of supply and demand in a robust economy, population growth is not keeping pace. The U.S. population has grown less than 1% in recent years, a rate that is expected to decline even more.

Increasing value propositions per capita. This trend derives from the first two - a ratio we call VP/C. This ratio, particularly for consumer products, has risen significantly for decades. For example, in 1960, the VP/C for U.S. mutual funds was 0.9 per million people; by 1998, it was 27. In the U.S. telecom industry - just since 1984 - the VP/C has grown by a factor of 100.

With more products available in all categories, managers of telecom companies will need to adopt the following maxims to keep customers, whose attention spans likely will become even shorter than they are today, focused on their individual company's offerings:

Focus on customer behavior. Today's clichA about customer focus will be tomorrow's mandate for managers. If a company's value propositions are not in sync with customer priorities, the company must improve its propositions, buy or invent better ones or face certain loss of shareholder value. The failure of ISDN can be traced to consumer perceptions of limited value, high prices and complicated purchase and installation processes.

Target and tailor. Companies must carefully target the customers they want to serve, the channels through which to serve them and the value propositions they will offer. Not everyone will want a cell phone that can "do data," and not everyone will want to pay for overloaded bundles. As more products and services are devised, fewer will have universal consumer appeal. The need for micro-segmentation has been coming; in the next century, it will be imperative for survival.

Grow brands. Companies must grow and nurture brands that represent their value propositions. Strong brands influence consumer choices and are powerful weapons against value proposition proliferation and marketplace noise. Look at how AT&T has survived the onslaught of thousands of new long-distance propositions.

Grow relationships. Managers who discover the power of customer relationships can help themselves further by leveraging the latest information technology and devising marketing strategies that allow them to branch out into new areas of value. Such techniques will allow them to acquire, develop and retain customers and give them an advantage over competitors that have not learned to cope with the increasing information onslaught.

Own more of the landscape. Managers may choose to control a bigger share of the value proposition landscape through acquisitions and mergers, alliances, co-branding and such. If the likelihood of creating a "category-killer" is decreasing, then good managers will limit the risk posed by potential new entrants by broadening their offerings.

In the end, business is about whether customers buy or don't buy your value propositions. "Be bought or be history" might be a good slogan for companies in any century, but it will be a life-or-death rule for 21st century managers.