Researcher: Keep Marketing, Post-Sept. 11

Even though the Sept. 11 tragedies and an economic recession have left consumers concerned about their personal finances, there is still a demand for new services such as digital cable and high-speed Internet access, according to a new study by Horowitz Associates Inc.

And the cable industry can't afford to back away from its marketing efforts if it wants to reap the rewards of any demand that's there, said Howard Horowitz, president of the Larchmont, N.Y.-based research firm.

Just as President Bush and his administration are encouraging consumers to spend out of a sense of patriotic duty, "we need to encourage the industry to market," Horowitz said. "The consumer will buy if we market, but we need to provide the information people need to make purchases."

In a study of 1,500 people conducted this past November, 20 percent of respondents who said the events had prompted additional concerns about their personal finances still indicated they were likely or very likely to pay $10 more per month for digital-cable service.

And 21 percent of cable customers who plan to cut back on their overall home-entertainment spending plan to add premium channels within the next six months, according to survey results.

The numbers are even greater for newer services like video-on-demand. Of those concerned with their personal finances, 41 percent said they were interested or very interested in VOD, compared with 34 percent of overall respondents.

When paired with a 10 percent discount on overall services, bundles of cable, phone and Internet services appeal to 47 percent of those concerned about their finances, the study said.

Horowitz incorporated the questions about post-Sept. 11 consumer purchasing plans in its annual "strategic pulse of the industry" — the State of the Media Economy 2002 report — which was recently released to the firm's cable-industry clients.

At an internal strategy meeting, Horowitz and his colleagues decided the polling data would be less valuable if the questions were posed immediately after Sept. 11, while most Americans were still in shock. They determined to hold off on questions related to post-Sept. 11 consumer confidence until the annual survey, which had already been scheduled for November.

In the survey, 50 percent of respondents said that "very little in my life habits has changed" since the attacks. And 52 percent said they were now much more interested in what is going on in other parts of the world.

Only 12 percent said they had postponed a planned major purchase. And 13 percent plan to "cut costs by spending less on home entertainment such as cable television and renting movies."

For some consumers, spending habits can belie their purported concerns over their personal finances.

"Actual behavior may actually favor the industry, but we don't think it will be automatic for the industry," Horowitz said.

In other words, MSOs must spend money on marketing to make money on new services.