Magazine article Marketing

Mark Ritson on Branding: Mobile Brands Make Poor Call on Value

Magazine article Marketing

Mark Ritson on Branding: Mobile Brands Make Poor Call on Value

Article excerpt

Marketing has always been about more than just sales. Getting the customer to sign on the dotted line is merely the opening volley in the battle, not the victory salute. Getting that consumer to stay with you longer and spend more are the real drivers of a company's success.

It is an obvious point, but one frequently missed by marketers. Take mobile phone operators, for example. For years, the four big operators in the UK have been fighting a war of acquisition intended to lure subscribers from their rivals and onto their network. But while O2, Orange, Vodafone and T-Mobile have succeeded in acquiring customers by the busload, they have all failed in the more lucrative challenge of retention.

With no new consumers entering the market and annual churn levels hovering around 25%, the operators remain engaged in a multimillion-pound game of musical chairs. Price reductions and special offers lure a consumer to one network just in time to replace the one heading across the road for the new handset and special tariff being offered by a competitor.

In 2006, T-Mobile slashed tariffs in its infamous Flext offering. UK managing director Jim Hyde was unequivocal about his acquisitory motives. 'We intend to grow our market share, and simple, fair value for our customers is at the heart of this,' he said. Vodafone's UK chief executive Nick Read, however, was having none of it. 'With Flext, (T-Mobile) came in, dropped the price and thought we would not respond We responded. They didn't gain market share and took a hit on margins. If anyone thinks that just by dropping prices they will take share from us, I will respond. I will compete, so they won't be getting an advantage on pure price,' he hit back.

Aside from hurting profits, this also restricts brand equity. Rather than investing in building this, operators have no choice but to maintain mass awareness, communicate commodifying tariffs and promote generic handsets. Meanwhile, consumers are actively incentivised to break any nascent brand loyalty they may have, and switch.

If you measure branding success by the size of the marketing budget, then mobile operators come top of the list. But if your criteria are the amount of differentiation, loyalty and price premium created, they come last. Hundreds of millions in marketing spend have resulted in distinctive logos and unaided recall but little else. …

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