Cable's Wake-Up Call
In selling new services, operators wrestle old problems
By John M. Higgins -- Broadcasting & Cable, 7/31/2005 8:00:00 PM
A gathering of marketing executives usually scares me; they are black belts in mystifying jargon and doubletalk.
But the annual conference of the Cable & Telecommunications Association for Marketing (CTAM) in Philadelphia cut through a lot of the bluster and delivered two clear messages: that the rollout of sophisticated products such as video-on-demand has stumped cable operators in the marketing department and that cable operators are still suffering from decades-old customer-service problems.
That latter message is particularly harsh. It was delivered by Shelly Lazarus, CEO of ad agency Ogilvy & Mather Worldwide. Lazarus can definitely shovel her share of marketing-speak: “I want to talk to you about brands and lovers,” she told the 3,300 executives attending the conference. (That number, by the way, was a record, up from 2,700 last year.)
Lousy customer service
But Lazarus said cable's biggest marketing problem lies not in lofty ideas about brand loyalty, but in the basic blocking and tackling of operators' businesses. After years of struggling to overcome their image of bad service, cable operators continue to infuriate their subscribers. Lazarus—a customer of Time Warner Cable in New York and Comcast in Vail, Colo.—feels as though she's imposing every time she calls a system's customer-service department.
“If I were going to do one thing right now, I would do something with everybody who answers the telephone for you,” Lazarus said, adding that “all the advertising in the world cannot make up for a lousy customer experience.”
Besides customer service, perhaps the biggest challenge cable faces is how to sell new products that don't fit old ad models. At panel sessions and in the hallways, the cable faithful talked about DVRs, high-definition and VOD as tools to coax more money out of customers in the face of threats from DBS and telco video systems.
“Our biggest challenge is taking products that customers don't know they need or want and convincing them they do,” says CTAM CEO Char Beals.
The most interesting insight I heard came almost offhandedly from Marty Youngman, marketing manager of Cox Communications' San Diego system. Youngman noted that, once consumers get VOD and DVRs and are freed from the tyranny of the programming guide, a funny thing happens: Their approach to cable changes.
“We're seeing a behavioral change in San Diego,” Youngman said. VOD and DVR subscribers pretty much cease channel-surfing or using their on-screen guides. They are now operating in a search mode, carefully hunting for specific shows or genres.
That presents a couple of quandaries for operators. The immediate one is that there is no fast search engine for shows in cable systems, so it's hard to pluck just the right sitcom out of thousands of choices.
So if subscribers can find precisely what they want to watch anytime they want to watch it, the traditional cable-TV model seems almost superfluous. A giant part of their systems' resources is devoted to the conventional cable channels, which suddenly become less important.
Operators have spent $80 billion in recent years expanding their capacity to deliver ever more channels. Some of that goes to Internet and phone traffic. But about 75% of the costly capacity is devoted to delivering an average of 223 plain, old linear video channels.
Can VOD take off?
The technical nature of VOD, a switched video system, means it only needs a slender piece of bandwidth and rarely needs more, even as usage explodes. So operators could conceivably have a lot of “stranded” capital, billions of dollars' worth of capacity they may no longer really need.
This becomes problematic only if VOD takes off—which could be a tremendous bonus. But VOD's chances for success are iffy—unless cable operators can fix the customer-service basics, such as learning to answer the phone with a smile.
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