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Telecom industry addresses scandal

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WorldCom Inc., mired in bankruptcy proceedings, recently ran a full-page ad in The Wall Street Journal and The Washington Post in a style that has become common to troubled companies: an earnest, reassuring message from the CEO appearing under the headline "Moving Forward."

WorldCom competitor AT&T Corp. has run an ad that also addresses the telecommunications industry’s woes by trumpeting AT&T’s longevity. Its headline: "Yesterday. Today. Tomorrow."

And Sprint Corp. has acknowledged adjusting its "Symbols" campaign, which launched before WorldCom’s accounting scandal erupted, to emphasize its own stability.

WorldCom and its chief competitors in the b-to-b arena are all firing salvos with high-profile ads addressing the scandal with varying degrees of directness. But industry observers say the real battle for corporate customers may take place behind the scenes—where salespeople meet face-to-face with the executives who make the buying decisions.

"The obvious thing is to send your salespeople around," said Carl Howe, an analyst with Forrester Research. "It’s a good strategy to have them saying, ‘We’ll be there, now and forever.’ "

AT&T emphasizes longevity

This message of longevity is exactly what AT&T chose for its "Yesterday. Today. Tomorrow" ad that ran in The Wall Street Journal and other major newspapers. The ad was largely created in-house, with help from a couple of AT&T’s roster agencies, according to company spokesman Gary Morgenstern. He said the ad addressed the general trouble in the telecom industry, not the WorldCom situation specifically.

The ad reads, "For 124 years, through good times and bad, consumers and businesses have relied on one solid name for communications. … We’d like to take this opportunity to let you know there’s never been a better time to choose AT&T."

The ad never mentions WorldCom by name, attempting to strike a balance between being too aggressive and not being aggressive enough, said Al Ries, president of branding consultancy Ries & Ries Inc. He added that he has no doubt the ad was aimed at attracting WorldCom customers.

"It’s a tough problem," Ries said. "They don’t want to appear to be dancing on WorldCom’s grave; but if it’s too subtle, people don’t get it. … They’re being on the safe side."

Lisa Pierce, a Giga Information Group fellow, agreed that WorldCom’s competitors should move cautiously. "They shouldn’t make too much of this," Pierce said. "I’ve had customers approached by aggressive salespeople, and they’ve called them slime, they’ve called them piranhas."

Like AT&T, Sprint is taking a circumspect approach in its advertising. The company launched its "Symbols" campaign in the spring, before the WorldCom accounting scandal surfaced. "We have tweaked it slightly to focus more on our stability," said Lisa Brady, Sprint media and public relations manager. The campaign was created by D’Arcy BOS Group, part of D’Arcy Masius Benton & Bowles Worldwide Network.

One ad points out that Sprint has existed for a century and states, "The real reason we’re still around is that we give 110% to deliver what our customers want: innovation that’s dependable, dependability that’s innovative."

One industry analyst has accused Sprint of being more aggressive behind the scenes than it has been in its advertising. Adam Quinton, a Merrill Lynch telecom analyst, told BtoB sister publication Advertising Age that Sprint created an incentive program for its salespeople to take business away from WorldCom. Brady denied Sprint had such a program.

WorldCom has acknowledged $7.2 billion in accounting irregularities. The company’s most apparent marketing effort to counteract the corrosive effects of the scandal is the full-page ad appearing in national newspapers and bearing president-CEO John Sidgmore’s signature. The ad contains the line, "I pledge that we will work every day to provide the industry’s best service to our customers and to operate WorldCom with the highest ethical standards."

Ries isn’t a big supporter of this style of advertising. "When you see a full-page ad signed by the chief executive, you say, ‘Oh, oh, another company in trouble.’ ... All they’re doing is calling attention to the fact they’re bankrupt. Why would you read an ad like that in the first place? They’re so self-serving, and you know what they’re going to say."

In the short term, WorldCom is placing more emphasis on b-to-b sales promotion efforts to shore up its revenues. The company has created customer satisfaction and loyalty programs, directed at maintaining current corporate customers and at acquiring new business, said WorldCom spokeswoman Debbie Lewis.

This three-pronged program, which runs through Aug. 31, includes:

• A six-month service satisfaction agreement for customers who renew or sign up for new service. The agreement enables customers to cancel contracts for poor service within 180 days without any termination penalty. "This demonstrates our confidence to deliver high-quality service," Lewis said.

• A doubling of WorldCom’s service level agreements. If WorldCom’s service doesn’t meet pre-specified levels, the company will double the current compensatory payout to customers.

• A loyalty program in which corporate customers can receive credit if they grow their service quarter-over-quarter.

"Talking to customers directly, that is our approach," Lewis explained. "It’s a relationship-based approach."

Effects on industry

It’s unclear what effects the sales and marketing efforts of these telecom giants will have on WorldCom’s customer base and the balance of power in the industry.

Many large corporations already do business with at least two of the big three telcom operations. "Most of the larger enterprises do not put their eggs in one basket," said Robert Rosenberg, president of Insight Research Corp. "They require route redundancy and carrier redundancy."

But WorldCom may be vulnerable when a contract is nearing the end of its term. "If it’s up for renewal, WorldCom will take a licking," Rosenberg said.

In addition to the possibility of losing current customers at renewal, WorldCom may be hamstrung in taking contracts away from AT&T and Sprint. "WorldCom, in the near term, is going to get virtually none of those customers," said Giga’s Pierce.

At the same time, Pierce argues that AT&T and Sprint won’t have an easy go of raiding WorldCom’s current customers. "Customers will be asking, ‘Tell me again why I should use you.’ They will still have to win the business. … They still have to say why they should be your choice. What do you do better, faster, cheaper than the other guys?"

Even in the face of WorldCom’s bankruptcy proceedings, this may be difficult because the company’s service will likely be unchanged by its current troubles, according to industry observers.

"Corporations can be resistant to change," Ries said. "If it isn’t broke, don’t fix it. They don’t want to change as long as they’re happy with the service."

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