Small Operators Get Nontraditional at Independent Show
Panelists Explore ‘Best New Ideas’ for Generating Revenue
By Linda Moss -- Multichannel News, August 1, 2007
Monterey, Calif. -- Cable operators can generate more revenue by entering into nontraditional businesses, such as home security, and by asking new subscribers for contracts and credit cards, according to the closing panel at The Independent Show here Wednesday.
At the session, several cable executives offered their colleagues case studies on “Best New Ideas” for their operations.
Panelist Jerry McKenna, Cable One’s vice president of strategic marketing, explained how securing credit cards and six-month contracts from new customers resulted in a nice reduction in churn at his company.
During his presentation, McKenna used a series of charts and graphs to illustrate how customers who don’t give Cable One a credit card or contract have the highest churn level, followed by those who have a contract only and those who only provide a credit card. The lowest monthly churn rate is for those who give Cable One a credit card and contract, he added.
In fact, the average monthly churn rate for those who provide Cable One with a credit card and contract is 39% less than the churn rate for those who don’t provide a credit card or sign a contract. The churn rate is 4.2% for the credit-card/contract customers, versus 6.9% for those who don’t provide either to Cable One.
“That is huge when you start mapping that out over the course of a year or two years,” McKenna said.
The Phoenix-based cable operator gives customer an incentive to provide their credit card and sign a contract, he added. The cost of an installation goes from $57 to only $30 for those who provide a credit card, and it is free for those who provide both a credit card and sign a six-month contract, according to McKenna.
Panelist Peter Smith, senior VP of programming and product development for Millennium Digital Media, said he is always looking at nontraditional businesses as an opportunity for his company.
“I meet with a lot of people with a lot of screwball ideas,” he added.
Right now, Millennium has a deal with Protect America, the largest reseller of General Electric home-security systems, according to Smith. The cable operator gets referral fees from Protect America for putting a link to the security firm on its Web site, mentioning it in direct-mail pieces and running cross-channel spots promoting it. “If they close a sale, we get a check,” Smith said.
Millennium has four criteria for getting into a nontraditional business: that it involve little or no capital expenditures; that there be low to no operational costs or effort entailed; that no incremental bandwidth is necessary; and that if the cable company generates $1 in revenue, it totals $1 in cash flow as a result of its effort.
A third panelist, Atlantic Broadband CEO Ed Holleran, explained how his company began more frequent, and also more demographically targeted, “customer communications.”
The goal was to improve response rates to mailings, to lower marketing costs and to achieve higher customer satisfaction and loyalty, according to Holleran.
“We felt we were in a rut,” he said
In the 15 months since it launched its initiative, Atlantic sent out nearly 1 million mail pieces, Holleran said, on average “touching” its high-value customers every six weeks.
He noted that the overall response rate from customers is 60% higher than using the traditional marketing the company has employed before.
“We are very happy with the results of this program,” he added.
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