With DirecTV Inc. and EchoStar Communications Corp. outspending the cable industry in terms of marketing dollars, Chuck Ellis says it’s time for cable operators to fire back with a bigger investment in a national ad campaign. Looking ahead to the Cable & Telecommunications Association for Marketing Summit, where cable’s marketers will convene, Time Warner Cable’s chief marketing officer laid out some ideas recently in an interview with national editor Steve Donohue. An edited transcript follows.
MCN: DirecTV Inc. recently switched ad agencies to BBDO, and plans to launch a new ad campaign this fall. Any concern that DirecTV, under new ownership, is really going to step it up in terms of marketing?
Chuck Ellis: There’s a legitimate concern. They have a new company. They have new senior management. They have a new senior marketing person. They have an agency, and a person at that agency that the senior marketing person has known forever, and they’re ginning up to do a massive effort at the end of this year that will do more of what it is they have been doing, and I think at even higher levels. We fully realize they’re going to be coming at us with increasing volume and intensity, and emphasizing the kinds of things that they have been, plus some new things, like interactive programming, and probably some unique programming that they will develop. So yeah, we don’t have our head in the sand in terms of how tough they are and how aggressively they’re going to come after us.
MCN: Will it force Time Warner to follow Cablevision’s strategy of slashing its price for bundled video, voice and high-speed data? Is there a price war brewing here?
Ellis: I think that would be a real mistake. We’re really in the initial stages of the bundled competition versus [digital subscriber line] and the telephone companies for voice. We think there is a tremendous business out there with the propositions that we have today, and offering consumers in each category a reason and incentive to call us, to get a better value. But we don’t think the timing is right for massive, across-the-board bundling discounts.
We think the smarter strategy is, tactically and transitionally, to migrate our existing customer base through targeted acquisition efforts by product category to drive phone volume and then cross-sell and upsell into the bundled category for digital video, voice and high-speed data.
MCN: If you look across the industry at the steady erosion of basic-cable subscribers to satellite, do you think DirecTV and EchoStar’s ad campaigns have been effective?
Ellis: There’s no question they are really tough, and getting [to be] tougher competitors. Obviously, DSL and the telephone companies are ginning up their energy level in those categories as well. But in the video category, the industry in general has been dramatically outspent by DirecTV and EchoStar. Frankly, I think that the absolute [ad-spending] weights have been a significant part of the competitive struggle.
I think they’ve also done a pretty good job of defining themselves as today and tomorrow’s technology and services and products, and us as yesterday, and I think we’ve done a good job of countering that over the last 18 months.
MCN: How effective has the industry’s Only Cable Can campaign been?
Ellis: It’s had one quarter effectively of being utilized, and the preliminary research we got back on it said it was quite effective, and the plan is to look frankly at stepping that up even more dramatically from what we’ve done in the first quarter.
And Only Cable Can has extended itself into the joint industry HD promotions — the Panasonic Olympic one that has launched and Samsung’s promotion in Q1. The cable industry through CTAM is really leveraging itself much more effectively with outside partners to be able to tell our story in a more national broadcast kind of way than we’ve ever done before.
MCN: What else can we expect from Only Cable Can in addition to these partnerships with CE companies? Would you look at doing something like expanding the old On Time Guarantee program with flexible appointment times?
Ellis: There’s a possibility that the industry will align itself against a common denominator like that again. And whatever the next version of that is, I think flexible, convenient appointment times, from all of the research that we’ve done and others have done seems to be the sweet spot beyond the on-time guarantee. There is a high likelihood that we would do that.
But I think the biggest opportunity we have is for the industry to really leverage the resources committed to this upward. We’ve found from the first foray into this that it was successful, that it did resonate; we can work together, there are common messages that go across the companies. And we think we need to refine that model to be even better and be clearer about what the messages are that make the biggest difference that we can share in common. I think we’re pretty close to really raising the level of financial support and media weight to tell our story, because we have some very big, powerful competitors telling their story on a national and regional level, and we think this is one of the really effective ways to counter that.
MCN: How has Time Warner’s marketing strategy changed in the last year?
Ellis: Our core messaging in terms of how it supports the platform and the products that we have launched over the last two-and-a-half years or so has remained relatively consistent. We were one of the first and most aggressive to launch an on-demand platform with digital services, movies on demand, free on demand, DVRs and [high definition] DVRs. Our messaging in support of those offerings has remained relatively consistent based upon consumer research we did to find out which messages resonated, which ones make the most difference.
It has evolved a bit. Our current campaign has a little bit different tone to it in terms of the theme. We call it the time campaign, and basically what it says is the on-demand services and products that we have … offer you an opportunity to enjoy your entertainment services and programming on your time and enjoy your family and the rest of your life on your time as well because it allows you to get what you want, when you want to watch it. That part of it has been a fundamental theme from the beginning.
What we found in kind of our ethnographic research is that having the on-demand services in a home dissolves a lot of conflicts people have with their time. They want to watch what they want to watch but they want to go read a book to their child, they want to give their child a bath, they want to go out and play baseball with their kids. They want to get on with the rest of their life, yet they want to watch their programming. So our whole platform is really oriented around them being able to get what they want, when they want it, and to be able to enjoy, without conflict, the rest of their lives.
MCN: Has Time Warner become more aggressive in its marketing?
Ellis: We’ve actually been pretty aggressive for the past three years. Three years ago we did some consumer research that helped us to point out what our strengths were versus satellite, and we developed a pretty comprehensive media campaign, primarily used on cross-channel, that identified our strengths versus satellite. That has evolved from what it was three years ago into a messaging strategy today that’s more comprehensive, but it still aimed at telling our story versus satellite.
MCN: So with the focus on cross channel, the focus on those ads was purely on retention, not subscriber acquisition?
Ellis: Primarily on retention, although in most of our acquisition pieces that go to satellite customers, and that’s more direct response and direct response in terms of [direct response television] and direct mail, a lot of the key messages that we find work in satellite homes we have utilized those messages in our DR campaigns.
MCN: Of the three ad categories — anti-satellite, subscriber acquisition and branding — what percentage of Time Warner’s ads is focused on each message?
Ellis: Our branding level is probably 20%; product differentiation versus satellite is probably 40%; and acquisition is probably 40%.
MCN: Has that changed dramatically over the last few years?
Ellis: We have probably increased the mix of product advertising and branding compared to where we were three years ago.
MCN: Are you working on any new ad-campaigns that have an anti-satellite message?
Ellis: Yes. One of the messages that works very effectively with all customers happens to be the bundle spots, kind of omnibus “Time Warner Cable now has the three service offerings” — and those have all tested well. We also have developed recently and are just about ready to launch some pretty hard hitting specific anti-satellite spots that have to do with our superiority in HD, our superiority in terms of our movies on demand, and our overall service capabilities. We have a series of those that are about to released in the video category. We also have the same thing in our high-speed online service. We’re launching those, what we call apple-to-lemon, i.e. very hard-hitting comparisons, between DSL and our Road Runner service.
MCN: What are the risks with negative advertising?
Ellis: The risk is that you take your self too seriously and you tend to kind of pound the drum too loudly and too negatively and you lose the audience. What we’ve tried to do with everything we’ve done first of all is to find out which messages make the most difference with the customer; secondly to wrap those from a creative standpoint into a format and context that provides sometimes a little humor, a little lighter context to it; and thirdly is to make sure customers understand what we are versus satellite.
MCN: Is it a centralized approach to marketing at Time Warner?
Ellis: The divisions themselves do a lot of their own creative development, in terms of product and in terms of some of their competitive messaging. But they’ve always been guided by the core research that we’ve done at corporate in terms of which messages and how to use them, so that they can be weaved together effectively. There’s local creative that’s done; there’s a great deal of corporate creative done, again at the branding and product level.
MCN: The cable ads of yesteryear were kind of campy. Has the production quality of ads from Time Warner and other operators improved?
Ellis: I think it’s improved dramatically. I know what we use versus what we used three or four years ago is remarkably and dramatically better — not only better from a quality standpoint, but I think it communicates better and more clearly what it is the consumer needs to hear and wants to hear.