Marketing misconceptions: Wireless survey reveals there's more to wooing customers than price wars

New research reveals some surprising patterns about wireless end users' motivations, buying habits and technology use. Yet one conclusion is indisputable: Competition demands that carriers understand end users' needs in excruciating detail.

The Wireless Market Monitor Survey highlights four key ways carriers can better meet those needs.

Create a customer proposition. Security is uppermost in the minds of most end users when they buy wireless service. But that's difficult to tell by examining most carriers' marketing campaigns. Price-whether free minutes, discounted equipment or some other bargain-is the focus of most wireless marketing.

Initial service promotions remain a critical tool for attracting new customers. But price alone is not a benefit. Shrewd wireless marketers will combine price incentives with a specific benefit for the consumer, whether it's security, staying in touch for business or staying in touch for personal reasons.

Offer flat-rate pricing. The most important pricing issue revealed in the survey was not low price or discounts, but rather flat-rate pricing. The same confusion reigns in the wireless consumer market that, until recently, characterized the consumer long-distance market.

Users don't know what a particular call will cost. Is it peak or off-peak? Is it included in their free-minutes-per-month package? AT&T's success with its One Rate Plan provides a model for wireless providers that want to enhance their brand image. A significant "first-mover advantage" will accrue for providers that first offer-and promote-the flat-rate plans in their service areas (Figure 1).

Address consumers' security concerns. Developing product packages that address security is alien to many service providers accustomed to serving the needs of business and high-end consumer users. As carriers seek to penetrate new consumer segments, they should focus more on security.

Change calling behavior. Wireless providers must encourage customers to take advantage of the many uses of wireless.

This transformation can generate higher customer lifetime value for the provider as the user starts to produce calling revenue above the monthly service fee that security-conscious consumers typically generate.

Wireless providers should offer incentives for end users to test the service. To ensure that this marketing investment generates a reasonable return, a wireless marketing manager can use elementary database marketing, targeting end users with low calling volumes and a propensity to adopt a higher-volume calling pattern.

Follow-up is as important as the initial promotion. Wireless carriers should provide a transition plan for the end user whose calling volumes increase to move from a security-oriented plan to one consistent with more regular calling.

Let them have wireless Ten years ago, cars with telltale cellular telephone antennae attracted notice. The driver (or, if chauffeured, the passenger) was undoubtedly a powerful and important individual whose time was so important that he or she had to use the precious minutes in transit to hold some consequential conversation. Hand-held cell phones were even more prestigious, attracting stares of wonder to their users outside of board rooms and exclusive Hollywood eateries.

Today those unusual cellular antennae are ubiquitous. The once-exclusive cell phone has found its way into PTA meetings as well as board meetings.

Pagers that were once emblematic of doctors and management information system professionals have penetrated not only the job site, but also schools and homes. This extraordinary change in use and attitude has transformed the way Americans communicate. We are seeing the rise of "the wireless household."

Although more than half the cellular users buy wireless service for emergencies, 35% said that staying in touch for their personal lives was the most important reason they use it (Figure 2). Staying in touch for business was important for 25% of respondents.

Testifying to cellular/PCS service's value to the community, more than 95% said they were very likely to report a crime, a fire or an accident or to call for a medical emergency or assistance from a stranded vehicle with a wireless device.

Wireless penetration reached 41% of households surveyed, including digital and cellular telephony services, and one-way and two-way paging services. Personal digital assistant/palmtop users were a small percentage (1.4%).

In analyzing the responses to the mail portion of the survey, InfoCom formulated the profile of the "typical" wireless household (Table 1).

One of the most interesting findings is that wireless penetration varies significantly depending on life stages (Figure 3). For example, the percentage of penetration for couples younger than 45 with no children is 56%, while the level for single people 65 or older is 8%. Elderly singles ranked lowest in wireless use, with retired older couples second lowest. The penetration level for parents of all ages is 49%.

Niche markets offer opportunities Given the low penetration of PCS in the marketplace, and a study sample of fewer than 50 respondents, the jury is still out on PCS use.

Early PCS users resemble early cellular users: They tend to be more affluent, better-educated and spend more than both the general population and cellular telephone users.

The PCS industry also is attracting some new wireless users who greatly resemble later cellular subscribers. These subscribers are the same ones who helped drive average cellular spending down.

In the next two to three years, PCS will continue to attract from both ends of the market: the high-end cellular user, especially as networks get built out and coverage improves, and the new, lower-end subscriber. To attain their full potential, wireless companies will have to target both types of users.

Paging still represents a smaller, more specialized market than wireless telephony. On a relative basis, however, pager penetration continues to increase. More Americans use pagers for personal business. This development presents an opportunity for paging companies to introduce their cost-effective services to more households.

Still, overall pager use patterns are distinct from wireless telephony, and the reason for a purchase is different. Business communication remains more important than personal communications for ongoing pager use. In addition, emergency use is a much less important factor in paging than in wireless telephony.

For the marketer and the business strategist seeking to sell the combined functionality of the wireless telephone and the pager in a single device, the dichotomy raises certain challenges. Is the decision-maker the same? Is the user the same? What would motivate the wireless user to test and use paging?

Carriers that can successfully answer those questions will have a significant advantage in the coming era of integrated functionality.

PCS by any other name According to U.S. Census Bureau projections, the number of wireless households in the U.S. grew from about 41 million to 44 million, a 7.5% increase from June 1997 to February 1998. That means wireless penetration stands at 44%.

A key factor contributing to this growth are aging Baby Boomers. As today's middle-aged wireless owners grow older, they will retain their wireless devices. Wireless penetration of households in which people are 60 and older, which today is 20%, will reach at least 60% by 2010. Furthermore, as today's youth matures, they will buy wireless service in greater numbers than had their predecessors.

Most U.S. households (81%) had heard of cellular/wireless telephone service and pagers. Demonstrating the earlier life cycle stage of the technology, only 27% were familiar with PCS and 35% had heard of two-way pagers.

Sixty-four percent claimed to have a basic understanding of wireless phone service. By comparison, 90% of responding wireless households made the same claim (Figure 4). While most people said they have a basic understanding of cellular/wireless and paging, fewer had an understanding of newer technologies such as two-way paging and PCS.

The wireless segment of the industry stands at a critical juncture. PCS license holders are building out their networks at a fast pace. At the same time, analog cellular providers are converting to digital.

Even more confusing is the lack of terminology standards. Some companies describe PCS as 800 MHz digital cellular; some use it to refer to 1900 MHz CDMA, TDMA or GSM transmission.

This dilemma represents a significant challenge. Many of the households that say they use PCS actually use digital cellular. Moving subscribers from cellular to PCS will prove difficult as long as consumers perceive that there is no qualitative difference between the technologies.

Now that PCS has become a generic name for digital wireless service, PCS companies must find a way to re-brand their technology in consumers' minds.

Competitors have blurred the distinction between D-AMPS and PCS. To increase awareness and appreciation of PCS's technological benefits, PCS providers must market not only their own brand, but also the brand of their alternative technology. Until consumers understand why they should choose PCS over D-AMPS, PCS providers face an uphill battle.

AMPS providers, on the other hand, face the opposite challenge: They must blur the distinction between the new technology and their own. The complex differences between the two technologies are key to that strategy. Even more important, the more mature networks of the AMPS carriers address dropped calls and call clarity.

* InfoCom, a division of NFO WorldWide Inc., conducted the survey, which was sponsored by the Personal Communications Industry Association.

* Households surveyed represent a cross-section of the American population-men and women, young and old, urban and rural, affluent and low-income. The two-phase process included a mail survey and in-depth telephone interviews. Of 40,000 households that received the mailing, 27,803 returned the completed survey-a 70% response rate. The responses were weighted to achieve a statistically representative sample. The 15-minute telephone surveys involved 500 wireless households.

* This first survey, conducted during the summer of 1997, looked at overall patterns of wireless penetration in the U.S. It explored how and why households use wireless technologies for home and business.

* Research updates will be released every six months and will enlarge the scale and depth of the Wireless Market Monitor. For further information, check InfoCom's Web site at infocom@nfor.com.