Everything about the telecommunications sector is fast becoming super-sized.
Just as telecommunications companies are morphing into "super carriers" that offer everything from Internet and cable access to wireless and long-distance service, their agencies are following suit, becoming "super agencies" --able to penetrate many markets with a single telecom brand.
While long-distance service is estimated to be a $75 billion industry and local service rings in at about $90 billion, a hybrid industry formed by the convergence of various communications services is creating a new category estimated to be worth some $500 billion.
Telecommunications is expected to be the third most advertised industry by the end of 1997, an exponential gain for an industry that not so long ago was one of the most utilitarian, low-profile categories around. But agencies today are eager to sink their teeth into a piece of the now lucrative pie.
"The agency role is changing in telecommunications," said Glen Gilbert, VP-advertising and social responsibility at GTE, who formerly worked for Young & Rubicam, American Express Co. and BBDO Worldwide.
AGENCIES AS CONSULTANTS
"Corporations are looking to them as more than purveyors of advertising and increasingly as consultants to help with major marketing issues. But it's getting real difficult to find a new shop that already doesn't have some kind of conflict."
In the past few months alone close to $500 million in business has been parceled out to agencies: U S West awarded N.W. Ayer & Partners, New York, its estimated $60 million branding account; Ameritech tapped Cliff Freeman & Partners for a $50 million assignment; SBC Communications snagged Goodby, Silverstein & Partners, San Francisco, for its coveted new $80 million long-distance business; AT&T awarded Young & Rubicam, New York, a new $100 million branding campaign; and both GTE Corp. and Sprint Corp. have pending reviews estimated at $100 million and $40 million, respectively.
As telecom providers plan their future moves in a very competitive, deregulated era, more than ever they are relying on the marketing expertise of just a few advertising agencies that are well-versed in not only the telecommunications industry, but the nuances of consumer behavior.
"What agencies bring to the table is the ability to help companies look at the situation from a market by market perspective, not a technology perspective," said Brian Adamik, a consultant with the Yankee Group. "Marketing is trying to fulfill a consumer need; there isn't a phone customer or a cable customer or an Internet customer, there's just a customer. And it's agencies that know the most about customer behavior."
Hence, U S West selected Ayer--which had been AT&T's agency for 88 years until a couple months ago--for branding and long-distance work.
`BUILDING ON THE BASE'
"Our relationship is very strategic in nature," said June Smith, executive director of marketing communications and brand management at U S West. "We're building on the base they've already built with AT&T. We're after something similar."
Many carriers have been consolidating their agency business. Ameritech, which had 10 agencies at one point, is now down to just three primary shops. GTE is on the verge of naming one agency to handle the bulk of its business; BellSouth has a very tight group of core agencies and Bell Atlantic relies almost solely on Saatchi & Saatchi Advertising, New York.
"When we have meetings about various budgets for consumer or business or cellular or Internet, we are able to make objective assessments of what the market seems to be asking for rather than pushing a hidden agenda to boost our own billings," said Tom Messner, a partner at MCI's sole agency Messner Vetere Berger McNamee Schmetterer/Euro RSCG, New York.
Industry executives believe customer segmenting also will be key to maintaining market share in the coming years. Rather than marketing by product or service, telecommunications companies and agencies will be focusing on bundling certain products for various segments.
Copyright November 1996, Crain Communications Inc.