Last month, AT&T announced it would stop investing in traditional consumer services, such as wireline residential telephone service, and concentrate on the b-to-b market and emerging technologies, such as voice over Internet protocol (VoIP), which can serve businesses as well as consumers.
"The company will be putting its energies into the core of its business, which is the enterprise business customer," said Connie Weaver, exec VP-public relations, marketing and brand for AT&T, noting that nearly 75% of AT&T's total revenue comes from business customers.
She said the move is an evolution of AT&T's marketing strategy that recognizes the significance of the enterprise market. Earlier this year, AT&T launched a $200 million ad campaign with the tagline "The world's networking company" aimed at redefining AT&T from a telephone company to a leading provider of networking and communications services.
AT&T will continue this campaign, working with its existing ad agency, Y&R Advertising, New York. The next installment of the campaign, a series of TV commercials focusing on the AT&T brand and enterprise services, will break later this week during the Summer Olympics in Athens.
AT&T will spend roughly $50 million on advertising during the Olympics, Weaver said. "We've had a pretty hefty budget on the b-to-b side all along," she said.
Weaver said the marketing budget will continue to evolve for b-to-b advertising, but she declined to comment on exact budget levels or budget reallocations as a result of the marketing shift. She also said it was too early to comment on staff changes as a result of the shift. AT&T has no plans to change its agency relationship at this time.
Shift not unprecedented
AT&T is not the first company to drop consumer products and advertising and focus its marketing purely on b-to-b, but it is probably one of the most notable examples.
In 1999, computer giant IBM Corp. discontinued selling its line of Aptiva personal computers through the retail channel, shifting its marketing efforts to enterprise. "Q4 of 2000 was not a good quarter for the PC industry," said Roger Kay, VP-client computing at researcher IDC, noting that sales of personal computers plummeted. "At that moment, IBM looked brilliant."
However, he said, since that time the PC market has experienced a comeback, with technological advances such as multimedia development and digital entertainment.
"In some sense, IBM has missed out on all that growth," Kay said. "Now, IBM is looking at opportunity costs that are mounting from a strategy they pursued a while ago."
In the telecom space, other providers have shifted between b-to-b and b-to-c but not as dramatically as AT&T. For example, wireless communications provider Nextel, which primarily serves the b-to-b market, has attempted to reach out to consumers at times, said Joe Laszlo, senior analyst at Jupiter Research. "Their core business is b-to-b, and they don't do as well with revenues in the consumer market," he said.
Laszlo said that while some providers have gone back and forth between b-to-b and b-to-c, nothing rivals AT&T's marketing shift.
"Given how venerable they are as a consumer brand, I don't think there is anything comparable where such a strong consumer brand is saying they are giving up on the consumer market," he said. "AT&T was Ma Bell. For decade upon decade, they have been one of the most trusted brands for consumers."
As a result, he said, AT&T must be careful not to alienate small-business customers with its new strategy. "It may lead small businesses to think less of AT&T," Laszlo said. "If AT&T is abandoning the residential market, small businesses may think AT&T isn't working for them either."
To address this potential brand issue, Laszlo said, "There are ways AT&T can build marketing messages around how consumer grade service is different from small-business grade service."