Strategy : The Next Great Branding War

Nick Wreden, MA, MS, is managing director of FusionBrand, a brand consultancy in Malaysia and the author of "FusionBranding: How to Forge Your Brand for the Future" and "ProfitBrand: How to Increase the Profitability, Accountability and Sustainability of Brands." (The latter is published by Kogan Page and is available on Amazon)

Visit his website or contact him by e-mail

Branding wars are fun. Think Coke-Pepsi, FedEx-UPS, Apple-Microsoft, even Wreden-Trout. Now, another great branding war is about to break out.

The battleground will be Internet telephony. The advantages of Internet telephony, technically known as Voice over IP (VoIP), are well-known. Calls are much cheaper. Even calls across continents often cost less than a local call. Telephone numbers are portable worldwide. That 212 area code is increasingly likely to be owned by someone in Russia or China as in New York City. An Internet telephone can send and receive calls wherever it can be plugged into the Internet. Email inboxes can also handle voice mail.

Internet telephony has come a long way in the past five years. In the beginning calls had the same sound quality as string-and-tin-can experiments. Now even large companies like Novartis are relying on Internet telephony, and consumers are being asked to replace their phone jacks with Internet telephones. A Jupiter research study predicts that more than 12 million households will depend on IP telephony services by 2010, up from a miniscule 400,000 subscribers in 2004. Actually, that is probably low, considering that 67% of US homes have Internet access, according to Golin/Harris.

Three players are vying to grab the lion's share of this rapidly emerging market.  The first, obviously, are the traditional phone companies like AT&T and Sprint. AT&T has even stopped offering traditional phone service to concentrate on its Internet telephony offerings. The cable companies like Time Warner, Cablevision and Cox have also joined the fray. The same cable that brings HBO into homes can also deliver phone service. Finally, a host of start-ups are also staking a claim to this market, including Vonage and Skype. Skype has the greater buzz, especially after its recent Linux and Macintosh offerings, but Vonage is signing up 80,000 customers each quarter.

All three face a tremendous initial hurdle to get to the tipping point. The phone that is plugged into the wall always works. Lights go out, batteries die, electronic gizmos age into obsolescence, yet the reassuring buzz of the dialtone is always there.  Anyone who has ever seen the "blue screen of death" wonders about being able to make or receive a phone call when it really counts.

So which player can put Ma Bell out to pasture? Some are betting on AT&T and other national incumbents like Korea Telecom. They have long-established links to consumers, and are able to deploy hefty branding budgets. But AT&T, for one, has historically demonstrated that it is incompetent at marketing technologies - starting with the fax machine in the late '40s and continuing through wireless and PCs. It is now suffering the corporate humiliation of being bought by SBC Communications, one of the Baby Bells it divested in 1984.

Others say, no, the cable companies will win. They have a foothold in 60% of US homes. It is as easy for them to add telephony services as it is to add another channel. Consumers like the one-bill simplicity for multiple services.

The cable companies have their own baggage, however. No other industry has such a terrible reputation for service. Billing errors abound. The technological limitation of "rain fade" means never being able to make a phone call during a thunderstorm. And the biggest handicap? They can onlyserve customers within their geographic region.

So I am betting on the upstarts. They have a historic opportunity. Brand loyalty means little whenever technologies shift. For example, Sony, with its history of the transistor radio and the Walkman, should own the portable music market, not Apple. They start with a clean slate with consumers, without the negative associations of "phone company" or "cable company." And most exciting of all is the expected introduction of Wi-Fi handsets this year and WiMax phones the next. That will give  customers all the mobility of wireless phones with all the advantages of high-speed Internet. (Wireless phone companies will be hemorrhaging customers as a result, but that is another commentary.)

But Vonage and the others must get their branding right to win. Some suggestions:

  • Never, ever neglect the basics: Solid infrastructure and technology. Excellent customer service. Accurate and responsive billing.
  • Stockpile cash now: A pricing war is coming soon to Internet telephony.
  • Segment your marketing: Go after mobile communitieslike students, young professionals or others who move frequently. Sell the idea of having one phone number wherever you go. Also go after the ethnic market - first- and second-generation immigrants who phone their native countries frequently.
  • Bundle services: Just don't sell a pipe. Sell voice mail, conferencing, translation, record-keeping and other services.  
  • Start a sampling program: Set up booths at malls. Allow consumers to call anywhere for free. That will allow them to hear the communications quality.

Branding wars are more than fun. They are also good for branding. They pump competitive juice into everyone involved, lead to greater experimentation and, most important, make companies pay more attention to customers. The VoIP branding war for your telephone number will be fiercely fought worldwide, and will make the AT&T-MCI battles of yore look like a spitball fight. Let's get ready to rumble!

2005 Nick Wreden. All rights reserved.

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