Marketers Cluster, Bundle and Get Sticky

San Francisco -- Even more than "convergence," the terms "clustering," "bundling" and "stickiness" were the buzzwords at the CTAM Summit here last week, as marketers gathered to discuss the challenges facing them in stepping up introductions of digital cable, telephone and high-speed Internet products.

The annual Cable and Telecommunications Association for Marketing conference drew a better-than-projected crowd of more than 2,600. General-session speakers such as AT&T Broadband & Internet Services CEO Leo J. Hindery Jr., CNET CEO Halsey Minor and Benchmark Capital general partner Bruce Dunlevie drew standing-room-only crowds in the large ballroom at the San Francisco Marriott.

Not all of the attendees were cable marketers: Because of its proximity to Silicon Valley, the summit drew attendees who were interested in the anticipated convergence between television and the Internet.

The show also drew a healthy number of international cable executives who were interested in hearing U.S. success stories. And there were more than a few well-known former cable and satellite executives between jobs who were as quick to exchange resumes as others traded business cards.

But their out-of-work status carried no stigma at the CTAM Summit, considering the fact that one of the more popular masters of ceremony there, CTAM Summit co-chair Lou Borrelli, is himself without a full-time gig.

Cable marketers were urged to get their operational houses in order before they move too quickly to new product launches.

"It's hard to do many things at once well," Dunlevie cautioned, saying MSOs would be wiser to improve customer service or programming than to branch out into local telephony.

"One of the key challenges I see is the healthy tension between deployment of new services and hanging on to our [current] customers," said David Watson, newly appointed executive vice president of sales and marketing and customer service for Comcast Corp.'s Comcast Cable Communications Inc.

Some of the things MSOs need to focus on operationally are answering the phones in a timely manner, solving customer problems and sending technicians out when they say they will, Watson said. "We have to do all of this right before we can go forward with the new services," he added.

At a Tuesday-afternoon panel, Watson recounted a complaint by a customer who had called Comcast with a problem only to have the operator hang up on him after saying, "I have nothing I can do for you."

Of course Comcast, like other MSOs, has started to deploy new services in some of its markets.

MSOs are doing so not just to put their collective marketing prowess to the test, but also as a defensive strategy against other communications industries and, probably more important, to make good on promises made to Wall Street.

Speaking of the importance of adding new services to help protect the core business, Hindery said, "Retention is always a challenge, especially in a fiercely competitive market. Our goal is to market bundled product and service packages that are so attractive and value-oriented that they become what I call 'sticky.'"

In a test in Fremont, Calif., AT&T Broadband is offering a 25 percent discount on long-distance and local telephone service for cable customers, although the bills are not yet bundled.

AT&T Broadband has 1.4 million digital-cable customers, with expectations of hitting 1.8 million by the end of the year, not including those expected to come over to it from MediaOne Group Inc. next year.

The MSO also aims to gain 25 percent penetration of homes passed for its AT&T@Home high-speed online service within the next five years, Hindery said.

Minor cautioned that the battle over open access to cable pipes could work against cable, advising cable marketers to remind potential data subscribers that other Internet brands are available through their broadband pipe.

"Open access is actually good because companies will pay cable operators for a place on their pipe, and it will make it good for consumers," he added.

Time Warner Cable, which just launched its first digital-cable markets earlier this summer, has already signed up nearly 40,000 customers in its first four markets, chairman and CEO Joe Collins said. The MSO is targeting a deployment of 400,000 digital set-top boxes by the end of the year, and it is in launch mode in 22 markets.

This fall, Time Warner will launch its Road Runner high-speed online service in Manhattan to heavy pent-up demand, Collins said. At the same time, the MSO will launch digital cable to New York City's outer boroughs, such as Brooklyn and Queens. Next year, Manhattan and the outer boroughs will have both services.

"The New York market is 1.2 million subscribers," Collins said. "We'd simply get overwhelmed if we offered our products to everyone all at once."

While continued clustering will help MSOs to advertise more efficiently across a given market, Collins expects that at least initially, Time Warner will only market as heavily as needed to fill the customer pipeline. "Otherwise, we have too many people in the backlog," he said, "and they get mad if they have to wait too long."

An early believer in the power of bundles, Cox Communications Inc. already has several-thousand customers who buy all three of its services -- voice, video and data -- although they're not yet bundled under a single bill.

"Ultimately, we want to give customers a choice of a single or multiple bills," Cox executive director of marketing David Pugliese said. "Some customers don't want to pay $150 at once for cash-flow reasons."

Pugliese added that Cox plans to offer bundles to drive revenues, to reduce acquisition costs by sending a single marketing piece instead of three, to discourage competitors from coming into its markets and "to make it difficult -- even painful -- for customers to downgrade" when they're pitched by direct-broadcast satellite, for example.

He stressed that brand extension would be crucial in the transition from a video-only provider to a supplier of multiple communications services.

"What good does it do you to offer new products and services if your customers only know you and trust you as a cable company?" Pugliese asked.

Even as MSOs protect their core video business and continue to roll out new services, they must keep at least one eye out for new consumer applications that are likely to gain force in the next five years, such as electronic commerce, video-on-demand and new services yet to be invented.

But not every new idea will win cable customers over.

"The saying, 'If we build it, they will come' just doesn't apply anymore," Oxygen Media CEO Geraldine Laybourne warned. "If you don't build it with the consumer in mind, they won't stay."

Collins gained some perspective on consumers' interactive buying habits through Time Warner's two-way Full Service Network trial in Orlando, Fla., in 1992.

Initially, it's hard to get customers to buy certain products, like clothing or curtains, online, Collins said, but consumers do like to buy stamps online.

"People don't like to go to the post office," he added. "It's kind of scary there."

Jim Forkan and Hank Kim contributed to this story.