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K.C. Neel
Cox Cable San Diego has surpassed the 500,000-subscriber mark, propelling the Southern California cable system into an elite group with only seven other cable systems in the U.S. that can make that claim.
Indeed, Cox San Diego nearly doubled its year-over-year growth, gaining some 19,000 net new customers in 1998. Even more impressively, Cox only spent about 2% of 1998 revenues on its marketing efforts.
The system now serves more than 70% of the homes in its service area and Cox VP-video marketing and operations Duffy Leone expects the system to gain another 15,000 new customers this year.
The key to Cox's success?
"We're working smarter, not necessarily harder," Leone says.
Smarter means the system didn't throw a lot of money at acquisition campaigns and instead focused on eliminating operating inefficiencies already in place. Leone says Cox will bump its marketing budget to around 3% of revenues this year as the company prepares its digital rollout later this month and begins to aggressively market its existing telephony business.
Cox already is rolling digital services in its 600,000-subscriber Phoenix operation. Later this month, plans call for Cox to launch digital in San Diego and Oklahoma City, where the MSO counts 121,000 customers. Cox is deploying Scientific-Atlanta's Explorer 2000 set-tops for its digital service that will add about 100 channels of service to the MSO's lineup.
Cox did take some financial risks early on to set the stage for a good growth year in San Diego. The first thing Leone and his team did in early 1998 was to hire a team of 10 full-time auditors, who found that of 100,000 or so non-subscribers, between 10% and 12% of them were receiving cable service without paying for it.
But the team went a step further by tracking how the free signals were created. To his surprise, Leone says his team found that 90% of the illegal hookups were Cox's fault.
"We found out that we were the reason most people were getting free service," Leone says. "It wasn't like all those people were out to steal the company blind. Many didn't even know they were supposed to pay for it. We went through two computer conversions and a major upgrade in the last couple of years and some things just slipped through the cracks."
Instead of simply cutting service to those non-paying residents, Cox initiated a "hot box" strategy that kept the signal active until a telemarketing person would call and try to convert the illegal hookup to a paying one.
This did a couple of things, Leone says. Not only did Cox gain new customers, it saved the company money by eliminating truck rolls.
"We used to disconnect those illegal hookups, which required a truck roll and then we'd try to get those people to sign back on, which took another truck roll," Leone says. "Before we started this new process, we projected we'd have 368,000 truck rolls in 1998 to gain only 8,000 customers. That was ludicrous."
The new method trimmed 10,000 of the company's truck rolls last year and Leone expects to see further improvements this year. Telemarketing calls accounted for about 3,500 of the total 19,000 net new customers.
By saving money and time on duplicative or unnecessary truck rolls, Cox was better able to handle the increased volume of first-time activation installations and new services. The operator also overhauled its dispatch department by forming installation teams and by overbooking.
"It's sort of like the airlines industry," Leone explains. "They know that some percentage of people are going to cancel and we take that into consideration when we're scheduling installations. We know there will some people who cancel their service call and if they do, the installers have backup work they can complete instead."
Cox also incented its employees last year with an internal campaign to gain customers. The crusade was built around a race car theme, specifically the Indianapolis 500.
"We called it the San Diego 500 - considering we were trying to reach the 500,000-customer mark," Leone says. "A guy in our corporate office knows (race car driver) Johnny Rutherford and he came out to the system. We gave tickets to the Indianapolis 500 race and some people won the chance to ride in the pace car during the race."
Cox kept every employee apprised of the system's growth using "what we called 100-mile marker" banners around the office. And because every employee could benefit from the growth via prizes and awards, the staffers cheered each other on.
"I had guys in the loading and repair area come up to me and say 'Hey, we're almost there!'" Leone says. "These were people who didn't know or didn't want to know that kind of information before. It was great. Everybody was excited."
On the sales front, Cox had disbanded its door-to-door sales force four years ago because executives felt the department wasn't pulling its weight. But the company revisited the technique and revamped the department in a way that allows Cox to manage outside contractors who sell cable service door-to-door. The result: Cox gained 2,000 new customers from the department in 1998.
To keep its numbers from sagging when students attending universities in the area leave for vacation, the operator executed a common campaign trick, but an unusual one for Cox: It discounted its expanded basic tier when a customer subscribed to a pay service as well. The limited-run campaign netted Cox some 1,800 new customers at a time when the system generally loses about 2,000 subscribers. And while there was some falloff in the pay category after the special offer expired, Leone says the system's expanded basic numbers remained steady.
Cox also tied its acquisition campaigns in 1998 to events in the city, which also drove sales, Leone says. For instance, when the Super Bowl was held in San Diego last year, Cox produced a 24-hour channel "that included everything about the Super Bowl except the game."
Other events included ESPN's X-Games and the San Diego Padres.
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