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Segment-Based Marketing Takes Center Stage In the Battle for Subscriber Growth

Compete, Inc. Highlights Carrier Traction within Key Segments Resulting from New Marketing Campaigns

Boston, MA – March 22, 2004 -- In the face of market saturation, carriers shifting their marketing focus from creating general market awareness to more targeted segment-based approaches have met mixed results, according to new analysis from Compete, Inc. Just as financial services companies focus on ‘life-stages’ and automakers focus on ‘lifestyles’, carriers are looking to create brand affinity within distinct user groups in new ways. This shift is most clearly evidenced by Nextel’s $700 million quest for NASCAR consumers. But in the battle for untapped and underserved consumer segments, carriers have posted uneven performance.

“Voice services, the foundation of the mobile industry, promise to reach competitive and price parity in the near future, fundamentally commoditizing the industry,” said T. J. Mahony, Compete's senior wireless analyst. “To attract and retain highly-valued consumers, carriers will need to move toward a segment-driven, relationship-based marketing approach,” added Mahony. “In addition to traditional demographic characteristics, marketers will need to segment their marketing based on ethnicity and defining behaviors, such as consumers who interact with music download services and content.”

In a new study, Compete analyzed the pre-purchase shopping behaviors of several million in-market wireless consumers over 13 months to determine brand preferences among five consumer groups: NASCAR Fans, Sports Enthusiasts, Hispanic Consumers, MP3 Consumers and Women Heads of Households. Compete evaluated the volume and intensity of pre-purchase interest that each carrier generated within the five segments relative to its level of interest among consumers overall. Carriers can use this new approach to assess changes in market traction within these segments as they invest in marketing initiatives to create new sources of subscriber growth. For example, Compete found that as a result of its NASCAR sponsorship, Nextel is 2.5 times more attractive to NASCAR Fans than it is to general wireless consumers, an early indication of the partnership’s success. Compete's findings showed that:

Wireless Carriers’ Effectiveness at Attracting Key Consumer Segments

Pre-purchase segment interest compared to national share of interest, indexed to 100.
(August 2003 to January 2004)

  Hispanic Consumers MP3 Consumers Women Heads
of Households		 NASCAR Fans* Sports Enthusiasts
T-Mobile 120 112 83 60 97
Cingular 98 102 117 115 97
Nextel 108 87 92 196 96
Verizon Wireless 90 99 104 107 110
Sprint PCS 108 97 88 75 91
AT&T Wireless 92 98 103 84 103

* Average from November 2003 to January 2004

  • T-Mobile Strong Among Hispanic Consumers. Carriers have launched Spanish version websites, offered Spanish brochures in retail outlets and entered into international partnerships in the Olympic and soccer communities to tap into the buying power of this segment. T-Mobile shows particular strength within the Hispanic consumer segment, outperforming its interest among general wireless consumers by 20%. With a Hispanic-oriented initiative launching last August, Nextel has also increased interest among Hispanic consumers, particularly during sponsored worldwide soccer events. In contrast, the recent AT&T Wireless Spanish-language brand advertising campaign has not resonated with Hispanic consumers.
  • MP3 Consumers Are In-Play. Although T-Mobile performs well within this group due to its relatively young subscriber base, no carrier has yet established a clear advantage among consumers interacting with music download services and content (“MP3 Consumers”). Compete also found that MP3 Consumers exhibit a 23% higher propensity to churn compared to the average wireless consumer. Once mass-market MP3 phones become available, the data revenue potential and the opportunity to cultivate loyal relationships through personalized music libraries will establish MP3 Consumers as a highly valued consumer group.
  • Women Heads of Households Prefer to ‘Add a Line’ with Cingular. Compete evaluated carrier traction among women who manage their family’s assets (“Women Heads of Households”). Cingular is the only carrier to over-index in this segment compared to its interest among general wireless consumers. Cingular outperformed relative to Verizon when it reduced the cost of adding a new line from $16.99 per month to $9.99 last June. Carriers who are successful in attracting this target consumer group will not only position themselves well in the Family Plan market, but will also reap the rewards of a more loyal customer base; Women Heads of Households were found to be 5% less likely to churn than the general wireless consumer.
  • Nextel Earns a Victory Lap with its NASCAR Sponsorship. Nextel’s recent $700 million NASCAR sponsorship is cultivating brand affinity among NASCAR consumers (“NASCAR Fans”). In the three months leading up to the Daytona 500, Nextel’s ability to attract NASCAR Fans rapidly accelerated; by January 2004, Nextel was more than twice as attractive to NASCAR Fans versus its overall market traction. Interestingly, despite its partnerships with the NHL and MLB, Nextel is not as strong among general Sports Enthusiasts.

“Carriers are investing significant resources in sponsorships, partnerships and segment task forces, but in the past, hard evidence into their net effect has been hard to come by. Successful organizations will implement an ongoing evaluation process, adjust campaigns and products as necessary to ensure their approaches are resonating with the desired audiences,” said Mahony.