It appears that VoIP no longer stands for "very over-hyped, impossible pipe dream" in cable operators' dictionaries.
Recent announcements of pending Internet-protocol telephony deployments indicate that the industry believes voice-over-IP technology is ready for primetime. However, technology is only half the equation — the other half is getting end users to adopt VoIP.
Therefore, it's important that cable operators pay attention to the issues that surround marketing IP telephony to consumers.
Good marketers understand that a successful product launch will require a plan, and good marketing plans always rest on the so-called four p's: product, positioning, pricing, and promotion. To gather qualitative information on consumers' reactions to VoIP, a series of end-user focus groups were commissioned by several companies leading the IP-telephony revolution.
Participants' reactions to the VoIP concept and mini-demonstration shed some much-needed light on how the four p's of an IP-telephony marketing plan might look.
Product and positioning
As one might expect, consumers have no idea what "VoIP" is. VoIP could stand for "voice-over-intelligent poodles" for all they care, as long as the phone works and it doesn't sound like they are yelling through a shoe.
Consumers already have some context as to what phone service is from their long history with it, and that has both good and bad marketing consequences.
The good news is that VoIP does not require much product explanation. The bad news is that this may make differentiating such a product more difficult.
With their current phone service, consumers use mainly "passive" features." While participants commonly bought bundles of nine or more features from their local carriers, call waiting and caller ID were the two frequently cited as the most used.
Most consumers do not have the desire to memorize long lists of star codes for setting speed dial codes or forwarding their phones, so designing a VoIP service that matches the incumbent phone company's offering feature by feature is not going to make much of a difference in terms of adoption or loyalty.
In general, broadband users were more likely to gravitate towards the Web-based interface, saying, "I think it's great — it's convenient."
On the other hand, dial-up user reactions were less certain. While some reacted enthusiastically, others said: "It seems like it would be more suited to the lifestyle of a busy person, one who can't miss any calls. If you're Joe Schmo, it seems like more of a hassle."
Thus, in talking to consumers about the VoIP product, it's important for cable companies to emphasize that the new phone service contains familiar features, as well as optional elements that improve mobility. While the mobility did not prove to be an influential inducement in adopting VoIP, it may well prove to be a loyalty enhancer.
One myth the research debunked was the idea of a "secondary line." There is a belief that consumers would be willing to take a second line from their cable company, accepting lower reliability or quality in exchange for a lower price. Meanwhile, they would keep their "primary" line from their current phone company. The focus-group research does not support this.
While a few consumers indicated they would subscribe to VoIP as a second line on a temporary or trial basis, most stated they would ultimately use it as a replacement for their current phone service.
Here's a telling quote: "Why would you have two phone services? It's not cost-effective."
Therefore, from a marketing perspective, cable companies should stay away from marketing VoIP as a "secondary line."
For one thing, it comes across as a "me-too" offering that restricts cable companies' pricing power; for another. Its application is limited and competes with cellular phones, which are built for mobility, thereby taking away one aspect of VoIP's differentiability.
Regardless of the disclaimers and waivers they may sign, there is evidence that consumers will end up treating their VoIP connection like a primary line.
When asked how they would feel about potentially losing phone service during a power outage, consumer reactions were mixed. For those with cell phones, losing phone service upon power loss was not an absolute barrier. For those without cell phones, or those with children at home, this was a concern.
Their concerns were ameliorated when they learned that a battery backup for the cable modem was available, prolonging phone service availability during a power outage. However, they did not want to "spend extra" for it — in other words, they expected the battery backup to be included in the price of VoIP.
Several focus group participants then observed, "My cable goes out more often than either my power or my phone. If I might lose phone service during a power outage, won't I lose phone service during a cable outage too?" This was a source of much bigger concern.
Clearly, cable companies need to educate their customers on the issue of VoIP service reliability and stability.
Pricing and promotion
The research confirmed the power of the "triple play," or the bundled offering of voice, video, and data services. Many consumers who were not interested in VoIP or high-speed data from their cable company became interested in both once the idea of bundling came up.
However, the bundled price must be at a discount to what they would pay in total for the services individually. "If there is no substantial savings, it wouldn't make any sense" was a typical comment. Receiving one bill for all three services — phone, cable, Internet — was also an influence in switching away from their phone company: "Having one bill is neat, particularly if there is a savings."
When asked why they expected the triple-play bundle to come at a discount, consumer responses revealed two key assumptions: One, they are being asked to undergo the inconvenience and hassle of switching and should therefore be compensated; and two, the cable company must be realizing a savings in offering all three services in a single package, so some of that should be passed onto the customer.
Thus, price is a key factor in the decision to adopt VoIP, in that it is a measure of "value for money."
In terms of the market segments cable operators should pursue, broadband users are the likeliest candidates for early VoIP adoption. However, there is a "sleeper" segment that consists of dial-up users looking to "trade up" to broadband, and VoIP just gives them the added incentive to do so. This came to light when consumers were asked to write down, in their own words, the definition of "broadband."
Dial-up users' answers ranged from blank stares to "It's one of those things I thought I knew, but when you ask me to define it, I can't."
When the moderator explained broadband using the Moby Dick
example (two seconds to download Moby Dick
at 1.5 Mbps, compared with one hour at 56K), enlightenment occurred. Some became excited enough to point to the cable modem and ask, "You mean that I can install that box in my house and get this phone service and
high-speed data with it? I'm in."
Another dial-up user's opinion: "I like the fact that you can have the telephone and the high-speed Internet — and if it's a lower price than what I'm paying for telephone and regular Internet, I'd do it." Cable companies should focus on ways to identify and market to this segment of dial-up users who could be persuaded to trade up to broadband once VoIP is also bundled into the package.Meanwhile, broadband users could also use some education — they are not as savvy as one might think. Though broadband users were generally aware that they were accessing the Internet using a faster pipe than dial-up, some had trouble distinguishing the type of pipe they had.
For example, several cable modem users told us, "I have DSL from [the incumbent MSO]." When we asked, "Are you sure you have DSL from your cable company?" their response was, "Yes, I'm sure."
This confusion highlights a marketing "opportunity" for cable companies to educate consumers and differentiate their high-speed data offering from that of the incumbent phone company.
The bottom line
In summary, the research showed that there is a promising market for VoIP. In many cases, consumers would welcome their cable operator providing them IP-based phone service.
However, cable operators must devise a marketing plan that comprises sound strategies for the four p's, and be prepared to conduct broad-based consumer education.
One thing looks true: once consumers understand VoIP and learn that their cable operator can offer them bundled VoIP, video, and data, they seem almost eager to sign up.
The last words of several focus group participants as they left were: "Will this new service be offered in our area soon?" If that
question doesn't get cable marketers revving up their VoIP engines, nothing will.