Telephone Industry and The Changing End User

By Tom Dougherty

Cellphone brands and the changing world

This market study is in the process of being updated. Still the lessons imparted here are still valuable and vital in today’s market. The names have changed but the rules remain the same.

Introduction

Telephone brands have a harder time differentiating themselves
Telephone brands still matter

Today, the U.S. consumer has made adjustments to the faltering economy by altering their spending habits, while many of the nation’s largest companies and brands struggle as a result. Many are receiving federal bailout money, others are declaring bankruptcy – and only a few are looking for ways to win and grow market share.

Those aiming higher than the rest understand that, no matter the economic situation or the category, a few always emerge as the victors by taking market share from competitor brands.

For that reason, Stealing Share commissioned a national research study of U.S. consumers to get a snapshot of what consumers were thinking in this new economy and how it affects their actions now and in the future. The survey asked consumers about their habits, decision-making processes and beliefs about themselves and the world at large. It also asked questions about many specific industries, including the telephone industry.

Telephone Brands

The bad news for cell phone providers: Only 15% of consumers said they have switched cell phone providers in the last year, which means most Americans hang onto their cell phones longer than the providers would like them to.

The good news: If cell phone providers are aiming for the youth market, that’s the market to target. More than a third (35.7%) of those under the age of 30 have switched in the last year.

If nothing else, even in market without much movement, there is a specific target to hit: The young. And it seems, that’s exactly who many cell phone providers market to. Alltel is gone but look at this commercial from a few years back

 

But Alltel and others only market to the youth market in the most benign of ways. Most resemble a beer commercial – the “dumb” guys approach – with, in the case of Alltel, a goofy version of the “I’m a Mac” approach (and without the direct identification).

Not much has changed. Here is a recent T-Mobil commercial aimed at a younger demographic.

Our research project, however, provides a sense of who those twentysomethings are, the consumers who come of age in the cell phone era and, therefore, are most likely to use them.

In comparison with other age groups, Generation Y (and a few from Generation X) is more frugal in their spending, but, as you would expect, they are also more easily adaptable to change.

The fact they are more frugal may be a surprise to many because it’s been a common theory that they are the most easily swayed by marketing messages because of how powerful a role peer influence plays in their lives.

That is still probably true, but that doesn’t mean they spend more than most. In fact, the opposite is the case: 69% of those under 30 say they have permanently changed their bad spending habits, a greater number than the 52.8% of the other age groups combined. Generation Y also bases purchasing decisions on price more than others (81% of those under 30, 65.7% for the rest) and stays at home more (78.6% compared to 56.3% for the rest of the world).

What has produced this discrepancy? Simple. They are more worried about losing their jobs than anyone else. Almost half of them (45.2%) said they worry about losing their jobs while only 34.1% of the rest of us do.

For cell phone providers, that doesn’t mean price is everything. Those younger consumers are simply looking for what will do the job as they hunker down and seek refuge. It has more to do with “smart” and “right,” and seeking the “best” is not what they are after.

That is one reason why the market leaders have so completely overwhelmed the market. The top four – AT&T, Verizon, Sprint and T-Mobile – account for 84.4% of the market. Top dog AT&T, in fact, has the largest percentage of growth among the big four carriers, although some of that can be attributed to rise of the iPhone.

 

While the younger demographic has hunkered down as much, if not more, than everyone else, there is nuances that marketers can exploit.

Generation Y rides most natural societal currents better than anyone, watching most television from sources other than the main networks (71.4% to 58.5% of everyone else) and finding less of the content on TV less objectionable (only 52.4% thought there was too much of it, while 74.0% of those older agreed).

Here is a recent commercial from Sprint speaking to “free.”

That means they like to see themselves as forward thinkers, first adaptors as it were, which explains some of the success of the iPhone. While it is one of the more expensive options in the market, Apple’s breakout hit doubled its U.S. market share over the last year as it represents the “right” choice because it’s changing in the industry and has been marketed as something more than a phone.

However, the market share among the carriers hasn’t shifted much, with few of those outside the big four able to make much headway.

Here is a newer spot from Apple

Here is a new spot for the iPhone 6

That is, in part, because, like many categories, the cell phone carrier industry is made up of a bunch of copycats. From the point of view of the consumer, the carriers all look and sound alike, especially in terms of tone and personality.

Even the one of the big four struggling the most, Sprint, copies the rest with that clever, suburban approach, one reason why it hasn’t stolen share from its main competitors because there is no emotional differentiation.



Not much has changed. Here is a spot from 2014

If you took out the logos at the end, you wouldn’t be able to tell the differences between the two spots or whom they were for. The brands in this market feel and act the same. That means consumers can’t tell the difference between them, therefore defaulting to one of the market leaders because, in the minds of consumers, you can’t go wrong with “big.”

 (Read about brand differentiation here)