Bundling Up To Market Success
By K.C. Neel -- Multichannel News, 9/23/2007 8:00:00 PM
Cablevision Systems has been phenomenally successful when it comes to enticing consumers to sign up for its voice, video and data products in the past two years. Indeed, 60% of new customers today are taking all three products from the operator. That's a 500% increase from the 11% of new customers that subscribed to all three services just two years ago.
Much of that success boils down to the fact that Cablevision goes to market as a bundled service provider, according to company senior vice president of marketing Jon Hargis.
Cablevision began marketing its triple-play bundle in June 2004, and it has clearly been a success. Digital video penetration has reached 80%; high-speed data exceeds 45%; and 30% of the customer base subscribes to digital phone service. The industry averages in those categories are 40%, 28% and 12% respectively, according to the National Cable and Telecommunications Association.
It's little wonder then that growth has begun to slow a bit. Cablevision's basic growth was flat in the second quarter and company officials warned Wall Street analysts that trend will continue for the rest of the year.
Basic growth may have stalled, but the company is still bringing in digital customers. In the second quarter, Cablevision added 39,000 iO: Interactive Optimum digital customers; 50,000 new Optimum Online high-speed data customers; and 81,000 new Optimum Voice telephone subscribers.
“Cablevision is a victim of its own success,” said Leichtman Research Group president Bruce Leichtman. “They lead in every category by an overwhelming percentage. But the opportunity for growth is beginning to diminish. You can't keep posting 100,000 net adds every quarter.”
If and when the Dolan family succeeds in taking Cablevision private, the pressure on subscriber growth will likely subside and that will be a good thing, said Carmel Group chairman and CEO Jimmy Schaeffler. He predicts Cablevision will concentrate its time, money and resources on keeping its customers happier and within its fold rather than conduct expensive and repetitive acquisition campaigns.
“I can see them spending time and money on mid- and long-term issues, such as keeping customers rather than having to prove to Wall Street they are growing at leaps and bounds. They will able to avoid silly acquisition costs that may not have been needed in the first place,” Schaeffler said.
But it's unlikely, that Cablevision is going to give up trying to lure customers altogether regardless of its ownership structure.
Leichtman and other analysts credit some of its success at luring customers to the market it serves. The company has 3.1 million customers and passes 4.6 million homes in the New York City metropolitan area. The market features several of the richest counties in the U.S. and its consumers are savvy enough to want the most advanced telecommunications services possible.
It's a double-edged sword: Consumers want all the latest products and services and are willing to open their pocketbooks to get them. But competition is fierce and other providers are beginning to nip at Cablevision's heels. Verizon Communications' FiOS TV, EchoStar Communications' Dish Network and DirecTV are all aggressively marketing to the same attractive demographic group. But unlike those other companies, Cablevision has the luxury of being the incumbent provider and can put all its marketing resources into one geographic basket, Hargis said.
“It's great being able to work for Cablevision,” he said. “The company is very entrepreneurial and we get to do a lot of different things. You also get to be both the headquarters and the field personnel. That's unusual in this industry today. You get to see how your campaigns work firsthand and can adjust accordingly.”
The situation allows Hargis and his team to not only create tailor-made marketing campaigns specific to Cablevision's metro New York customer base, it also gives them the opportunity to execute them. The über-competitive New York region requires a nimble attitude when it comes to marketing. Competitors such as Verizon have been adept and aggressive at guerilla marketing and Cablevision has to be able to respond to that.
The company's strategy includes touching every one of its customers and potential customers at least twice a month, according to Kathy Filosa, Cablevision manager of direct marketing. Those contacts can come in the form of direct-mail pieces, e-mail messages, outward bound telemarketing calls, and electronic newsletters. Cablevision sends out millions of messages each year, she said, and tracks the response of every communications blast.
“Cablevision is successful because they are good marketers,” Schaeffler said. “But they are also successful because of who they market to. It works for them because it's Long Island, which has a strong economic base for a company that has been around for a long time. That works to their advantage.”
Clearly, some of Cablevision's success can be attributed to its current service territory, Leichtman agreed. “They certainly weren't posting those kinds of numbers in Cleveland or Boston when they owned those systems,” he said. “Still, that is not to diminish their marketing strategy, which has been very focused. It's the epitome of economies of scale.”
Part of that strategy lies in the Optimum brand name. Cablevision has chosen to brand all its products under the Optimum brand name umbrella. iO, Optimum Online and Optimum Voice are all delivered via Cablevision's Optimum Network.
The same brand name is being extended to the Lightpath business-to-business division product lines, Hargis said. Cablevision began rebranding that product two years ago to further drive home the Optimum brand, he said.
It also branded its online electronics store Optimum Store Online. The store, which is essentially a virtual Wiz Electronics store for Optimum customers, offers access to a slew of electronics including TVs, games, computer add-ons, Optimum services and packages, home monitoring, home networking and wireless services, even though Cablevision has eschewed offering an Optimum branded wireless service.
The Optimum name has evolved since it was first launched in the mid-1990s, when it was tagged as the official name of Cablevision's analog video product. When high-speed data was introduced in the late '90s, the same moniker was used and “it grew so quickly and with such a strong affection among customers” that the company decided to extend the brand to all of product lines, Hargis said.
“Cablevision has created a very strong flanker brand with Optimum,” Leichtman said. “In fact, they are the only cable company to really accomplish that successfully.”
The idea behind Optimum was to help the company cut through the clutter and provides it with a high level of awareness among consumers, Hargis said. The new brand wasn't designed to deflect from the Cablevision moniker, he noted.
“The Cablevision brand is not a negative brand,” he said. “The brand works well for us when it comes to customer service and support. It gives customers a secure feeling knowing that a company the size and scope of Cablevision is taking care of them. The Optimum brand works well for our family of products and customers identify with it.”
And with all the products having the Optimum brand name, it's easy to sell the services separately or bundled. Cablevision was the first operator to offer video, voice and data for $29.95 each if customers subscribe to all three. Other operators have copied that model, Hargis said.
“That's $50 off the price of each service individually,” he said. “And after one year, we give $25 off the bottom line when they continue to take the triple play.”
Cablevision may push the triple play but it also hypes its services individually. For instance, the operator launched its first digital offering dubbed iO in 2001. Rather than introduce the product as a tier, it replaced the basic-cable offering with over 200 cable and interactive channels, including 45 multiplex movie services and more than 700 new video-on-demand choices.
The product has been highly successful: iO has the highest penetration of digital TV in the U.S. Net subscriber growth has exceeded 5% for the last eight quarters, and customer satisfaction has climbed consistently since its launch.
Similarly, campaigns touting improvements to Optimum Online and additional services such as international calling programs and packages offering up to four additional phone lines for Optimum Voice are sprinkled between marketing messages pushing the triple play. Cablevision's umbrella Optimum campaign earned a place in the Cable & Telecommunications Association for Marketing's coveted Hall of Fame roster last summer.
Unlike many other media firms, Cablevision has been able to leverage many of its myriad assets in a synergistic manner using a variety of marketing tools at its disposal.
As part of its customer retention program, it has created a free rewards program that customers can sign up for online. Optimum Rewards members can take advantage of various freebies and discounts at Cablevision-owned venues. For instance, reward members receive two free tickets per day to a single movie of their choice at any Clearview Cinema on Tuesdays. Members also can purchase discounted movie tickets for other showings, as well as for events held at company-owned Madison Square Garden and Radio City Music Hall.
There is even a sweepstakes component to the rewards program. Optimum Rewards members can win a slew of prizes including throwing out the first ball at baseball games and tickets to concerts and events at Cablevision-owned venues. The program also gives sweepstakes winners opportunities to attend movie premieres.
“Unlike a point-based reward system, Optimum Rewards members get their benefits from day one,” Hargis said. “And we are able to leverage our own Cablevision family of assets at the same time.”
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