Via digital, cable operators will soon offer video-on-demand, commercial-free music, interactive program guides, more channels and e-commerce. MSOs love that cable is moving toward digital because subscribers pay more for each advanced service they choose; the tricky part is selling the services.
Enter the marketers. Operators begin the drumbeating for digital awareness in their own offices. Salespeople at some MSOs are given incentives ? clothing, trips to Hawaii, commissions ? to sell digital cable. Prospective digital customers receive personal letters from corporate executives trumpeting digital, not to mention free installs and discounted service. Given the incremental revenue operators are after, it's money well spent.
According to the National Cable and Telecommunications Association, there were 13.7 million digital cable subscribers as of November, 2001. With the number of basic cable households just below 73 million, industrywide digital penetration is currently around 20%. The NCTA estimates that by 2006, 48.6 million digital subscribers will be surfing several hundred channels via interactive program guides and enjoying music on commercial-free, genre-specific channels.
With this growth in mind, marketers at MSOs have been pushing for high digital penetration rates.
The industry leader is No. 4 MSO Charter Communications, which reports that 2.1 million, or 30.8%, of its nearly 7 million customers were subscribing to digital by the end of 2001. In its 130,000-subscriber San Gabriel, Calif., system, which includes Pasadena, the company has achieved 72% digital penetration.
Rick Cable, group director of marketing for Charter in Los Angeles, says a new corporate culture is behind Charter's success in driving digital. ?We created an environment that Charter was a digital company going forward,? Cable says. ?Analog was a thing of the past.?
Incentives to sell digital doubtless helped Charter salespeople adjust more easily to the corporate reprogramming. As they pushed digital, they pursued weekend getaways and merchandise.
The motivational efforts paid off. According to Cable, Charter began 2001 with 39,000 digital subscribers in the San Gabriel Valley market. It ended the year with 93,500, a 140% increase.
Charter's killer upgrade initiative developed with DMS marketing was based on a vacation-themed direct-mail campaign. The Women's Summer Vacation Campaign pitched a free three-month getaway, which wasn't exactly a trip; customers who upgraded got three free months of digital cable. The offer represented a $24 value, says Cable.
The campaign ran quarterly, targeting specific groups of subscribers. Concurrently, Cable says, Charter ran print and cross-channel advertising that drove callers to Charter's customer care center, where personnel upsold digital. Although the three-month deal wasn't offered to new subscribers, 87% of them opted for digital, compared with 40% before 2001, says Cable.
Charter also ties in its digital pitch to each service call. Whenever a technician visits a customer's home, he or she offers to replace the analog box with a digital one, applying the same three-month offer. According to Cable, out of an average of 162 daily service calls, technicians switch 35 to 50 units a day.
In Fairfax County, Va., Cox Communications boasts a 42% digital penetration rate. The marketing campaign behind this success didn't involve television or radio ads, although Alex Horwitz, Cox's director of public affairs for the region, says Cox plans to deploy both this month.
In that market, Cox is employing a systematic approach that piggybacks the ongoing upgrade of the Fairfax County system. When digital availability is 30 days away, current Cox customers receive a direct-mail notice alerting them to the impending availability of digital, with a number to call for preregistration.
When digital availability is two days away, Cox hangs what Horwitz calls ?doorbags? on current customers' front doors. The doorbags contain literature detailing the benefits of digital ? more than 250 channels, more premium channels, extensive choice in digital music and free installation ? as well as details about Cox's high-speed Internet service and how to swap their analog box for a digital one.
Once digital becomes available in a neighborhood, the Cox Digital Express Trailer enters the scene, setting up shop for a day on the street and giving customers the opportunity to trade up to digital and swap their analog boxes on the spot. (The more service-inclined customers can instead call Cox and have a technician make the switch within 24 hours.)
The free-upgrade promotion is available to subscribers and nonsubscribers alike and saves customers $19.99, the usual price of an install, according to Horwitz.
AT&T Broadband got a strong response to digital before marketing even began, because the company received quite a bit of press coverage for its early digital deployment in 1997, says Julie Seff, VP-marketing for AT&T Broadband in Denver. ?Growth has been steady from our initial launch five years ago,? she says.
The most successful element of AT&T Broadband's multimedia marketing approach has been direct mail ? specifically a ?private sale letter,? which Seff calls a ?from me to you? note to current subscribers from AT&T Broadband's SVP in Denver, Mary White.
The offer garnered an 8% response, says Seff. Since the promotion's launch, she says they've made it ?a little richer? by including a voucher worth $50 toward a digital upgrade ? which, since installs range from $12.95 to $41.99, effectively makes the upgrade free.
According to Seff, the sales call is also an important element of AT&T Broadband's digital sales effort, since ?for every person that signs up for cable, 65% take digital.? Frontline salespeople are rewarded for their digital sales successes with commissions, T-shirts and free dinners. Digital penetration in the Denver market is now 35%, or 230,000, out of 633,000 cable subscribers.
To John Cimperman, regional VP-sales and marketing and EVP-Buffalo Sabres for Adelphia Communications, retail is the key factor in driving digital penetration.
?We can't wait for customers. We need to get to them,? says Cimperman. ?Wherever our customers are, we go to them. Events, retail locations ? we make it extremely easy for customers to get to digital.?
His region, which spans Buffalo, N.Y., and parts of Pennsylvania and Ohio, has seven full-service stores where customers can pick up digital converters and 20 to 30 distribution points that move among retail partners' stores and Adelphia's own payment centers. Adelphia, which owns the Buffalo Sabres, also allows customers to upgrade at the 1,200-square-foot interactive zone at the HSBC Arena, where the Sabres play home games.
The retail strategy has driven Adelphia to about 30% digital penetration among the 1.5 million customers in Cimperman's region. For it to continue expanding and reach 50%, he says, ?We need to put more applications ? VOD, pay-per-view ? into that box.?
Customers are telling Cimperman that they have enough channels and features. ?We need reasons,? he says, for customers to be driven to fill in the remaining 15%. One possibility: the Empire Sports Network, an Adelphia-owned network that offers real-time scores and e-commerce options to Adelphia digital subscribers. ?So what is that?? Cimperman asks. ?Another reason to get digital.?
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