"It's the Bundle, Baby"

Even Joe Rooney, who likes to say that selling Cox's products "is the best and easiest job in the world," admits the cable industry is facing a knockdown, drag-out fight with some of the world's largest and best-capitalized companies.

"We are confronting the biggest competitive challenge in our history," the senior vice president of marketing at Cox Communications argues. He's the king of "bundling"—packaging cable, phone and high-speed Internet services into one consumer package.

It's a tough business. "In every one of our product categories—video, high-speed data, and voice—we have competitors that are very strong, very large, and/or very desperate," he points out. "It's become a battle of bundles. It's the bundle, baby."

The growing battle between packages of services offered by cable systems and those being cobbled together by DBS and DSL operators highlights some of the key marketing challenges facing the cable industry. The bundling wars also help explain why Rooney is being getting a Vanguard Award for marketing, notes Cox COO Pat Esser.

"Very early on," says Esser, "Joe understood the value of bundling video with high-speed data and phone service. He understood that, if you can sell people [more than one product], that increases the long-term value of that customer" and reduces churn.

Rooney's first bundling battle came in 1995, when he was hired to run marketing at Cox's Orange County, Calif., systems. After spending heavily to upgrade its systems in the mid 1990s, Cox was the first MSO to embrace a triple-play strategy, rolling out high-speed Internet service in 1996 and digital TV and phone service in 1997 in the Orange County systems.

Although bundling is now an established practice, selling the concept in the mid '90s was a difficult, completely untested idea.

Consumers "had no idea why they should buy digital TV with 200 channels and an interactive TV guide," Rooney remembers. "They didn't understand the concept of a high-speed Internet connection. They were nervous about trusting the cable company with something as important as their phone service."

To overcome those problems, Rooney commissioned extensive research, which became the basis of the company's bundling, sales, and marketing strategy. Using consumer marketing research and data, he launched sophisticated direct-marketing campaigns targeting different demographic groups with different sales pitches.

Over the past seven years, the bundling strategy produced "penetration for the phone and data product [in Orange County] that are unrivaled in this industry," says Orange County Vice President and Region Manager Leo Brennan, who has worked with Rooney for 14 years at various systems.

That success helped Rooney land Cox's top marketing job in 1999. At corporate, he worked to better communicate the company's new products and its bundling strategies. He hired a new ad agency, Doner in Detroit, to rebrand the company and to launch the tag line "Your Friend in the Digital Age." Research efforts were expanded, and new tools for mining customer and consumer data were created.

By the end of last year, when Cox had rolled out bundles of digital TV, phone, high-speed data in nearly half its homes passed, the company was seeing healthy growth in all areas of its business. In 2003, phone customers grew 38% to nearly 1 million, digital-TV subscriptions rose 20% to 2.1 million, and high-speed-data subscriptions jumped 41% to nearly 2 million.

During 2003, the number of customers taking two or more services also spiked, increasing 36% to 2.25 million. Churn remains low, about 2.6% for basic-video subscribers, and Cox has established an enviable record against DBS and DSL. Rooney estimates that DBS penetration in the 10 million homes where Cox has systems is only 11%, much lower than the 18%-20% found in most locales.

Despite increased competition from local telcos offering heavily discounted DSL services, Cox retains seven out of 10 high-speed customers in the areas it serves. Much of Rooney's marketing success, associates say, can be traced to his long experience working in the field and his focus on understanding the company's customers.

A self-described "gadget nut," Rooney first became interested in the cable industry in college, when it was still a new technology. After graduation, he began selling cable subscriptions door to door in Iowa City, Iowa.

"I got my foot in the door by putting my foot in other peoples' doors," he says. After making four sales on his first night, earning a hefty $100, he figured there might be a future in this industry.

It was also great sales and marketing training. "It taught me the importance of listening to your customer and really understanding them," he says. "When they open their door, you have 30 seconds to size someone up and convince them to buy your product."

Early in his career, Rooney also became active in CTAM, becoming president of some local chapters and eventually taking a more active national role. He was part of a three-person committee that worked with CTAM's leadership to craft the "OnlyCableCan" national campaign launched in 2003; he's currently CTAM's treasurer.

Esser notes that better marketing and research helped Cox grow its margins by 150 basis points in 2003 by cutting the cost of acquiring and servicing customers. As result of those initiatives, about 50% of all new cable-modem customers now install their own service, he notes.

Cox's marketing department is also boosting its focus on new products and underserved markets. Earlier this year, the company hired Cesar Cruz as director of multicultural marketing and has moved to roll out packages better targeting the Hispanic community. For example, in Arizona, which has a large Mexican population, Cox promoted a bundle of video and phone services that provide either 60 or 120 minutes of free long-distance calling to New York, Maldonado says.

Other MSOs may have moved more quickly to rollout video-on-demand and high-definition service, but Rooney believes their rollouts will make Cox's packages even more attractive. And of course, that will make his bundle just keep on growing.