IMPROVING CUSTOMER SERVICE BECOMES MSO'S MAJOR OBJECTIVE: EMERGENCE OF DBS AND TELCO COMPETITORS MEANS NEW WAY OF BUSINESS.

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When cable tv was the only way consumers could get CNN, ESPN and Nickelodeon, the industry didn't have much incentive to promote its service or improve interactions with customers.

Despite being reputed for high rates and poor customer service, 62 million homes signed up for cable. Still, those without cable cited those complaints most often as their reasons for not subscribing.

Now, for the first time in its history, cable TV is facing tough competition in the programming distribution business. The success of its rivals has forced the cable industry to review and upgrade its consumer marketing.

`MONOPOLY TO COMPETITION'

"When you're the monopoly, there's no recourse for consumers other than not buying the service," says Chet Kane, president of marketing consultancy Kane, Bortree & Associates. "Cable TV has got to realize that they've moved from communism to capitalism, from monopoly to competition."

Cable's competition is coming predominantly from Baby Bells and, more notably, direct broadcast satellite services.

Ameritech New Media, a subsidiary of Ameritech Corp., already has franchises with 27 communities in Illinois, Michigan and Ohio. And more than 3.5 million consumers have signed up with DBS services, such as market leaders DirecTV and Primestar.

The DBS industry has been aggressively marketing its service, better picture quality and greater channel choice. In fact, DirecTV and Primestar will spend a combined $300 million in advertising to state their points.

"The cable industry has been complacent for too long," notes Clay Timon, chairman, Landor Associates, a San Francisco-based brand image and design consultancy. "They've been late to introduce new technologies and products, they've been late to recognize the value of customer service . . . and now they have to change the way they do business overnight."

OVERCOME AN IMAGE

As evidence of the public's poor perception of cable operators, a recent survey by J.D. Power & Associates found that if consumers had to choose among cable TV, local or long-distance telephone companies for all their telecommunications needs, only 3% would select their cable operator.

"The study reveals that cable TV providers have to overcome a strong negative image that consumers have of their services," says Zaiba Nanji, director of telecommunications services at Power. "Satisfaction also becomes increasingly important if cable TV companies hope to compete effectively."

The cable industry is the first to acknowledge its arrogance and high-handedness in its marketing, and the business is now scrambling to incorporate 1990s marketing and advertising techniques into their operations.

"When you're in a non-competitive situation, there's not a lot of economic incentive to spending money on advertising," says Char Beales, president-chief operating officer of industry group Cable Telecommunications: A Marketing Society. Consequently, she says, not many cable operators know much about advertising in a competitive marketplace.

EXPERIENCED HIRES

In the last two years, some major multiple systems operators have obtained marketing savvy by tapping executives from outside the cable and broadcast industries, primarily from package-goods marketers.

Tele-Communications Inc., the nation's largest MSO, has hired Camille Jane, who brings experience from marketing positions with Procter & Gamble Co. and Ameritech, and Barbara Mallory, who is credited with creating American Airlines' frequent flyer program. Jerry McKenna joined Post-Newsweek Cable after 25 years at RJR Nabisco, while Cindy Winning is back with Jones Intercable after 10 years of marketing Citibank's retail credit cards.

"What we bring to the cable industry is a wealth of experience in marketing to consumers," says Mr. McKenna, VP-strategic marketing, Post-Newsweek Cable. "My contribution has been to encourage our management to focus on the customer. This is not something that the cable industry has much experience with, but it is the most critical element of our business."

WELCOME NEWS

A focus on the customer would be welcome news to fed-up cable subscribers, agrees Ms. Winning, Jones' group VP-marketing.

One of the first strategies to do just that is introducing cable operators to database marketing.

"We have a lot of information about our subscribers and we can use databases to understand, segment and target them with marketing campaigns," says Ms. Winning. "The idea is have a more predictive environment in which we can tell who is about to be ready to leave [cable service] and try harder to retain that subscriber."

Ms. Winning points out that it's "five times more expensive to get a new customer" than it is to invest in retaining an existing customer. This is a new concept to many MSOs, she points out.

"Many cable MSOs don't understand what competition means and what it is like," she says. "They're coming to understand

.*.*. that it's not just a matter of advertising new rates and services but of changing the entire structure of the organization."

One major change for Jones is that the company has set up retail kiosks in local grocery and hardware stores that allow customers to test new cable services, such as digital compression and high-speed cable modem access to the Internet.

"We're not out on the edge of town, trying to hide, but making ourselves available to the consumer," she says.

NEW CAMPAIGN

CTAM and the National Cable Television Association have joined together to offer cable operators a customizable TV, print and radio campaign advertising an "On-time Guarantee" of cable installation and repair services.

If the cable company is not on time for installation, it's free. If the company is late for a service/repair job, the company pays the consumer $20.

According to Ms. Beales, about 40% of the 8,000 participating cable systems are offering more than the $20 rate. Shepardson, Stern & Kaminsky, New York, handles the campaign, which will continue in 1997 with a budget of $4.5 million.

Still, all the guarantees won't help improve customer relations if the organization itself is still entrenched in a monopolistic mindset, says Mr. Kane.

"They've got to get the entire organization into a consumer-oriented, marketing mindset," he says. "Until they change the actual company, all the service and new products won't mean much in the long run."

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