Small Shops’ Big Push Lifts Adelphia HD Sales

The city of Buffalo, N.Y., is known for a lot of things: its hellacious winters, the birthplace of the eponymous fiery chicken wings, and for being the second largest city in the state.

But marketing executives for the local cable operator, Adelphia Communications Corp., would like the area to become known for something else: as one of the most densely penetrated markets for HDTV service.

To reach that goal, the system has the advantage of the typical corporate agreements with the national big-box chains, such as Circuit City. Those stores identify Adelphia as the local provider and distribute information on available programming.

But the Buffalo system has taken it a step farther, partnering with five small regional electronics-related businesses, ones that differentiate themselves from the big boys in the area of customer service.

“These guys help us quite a bit,” said Steve Edelman, area director of marketing, sales and retention for Adelphia. “We’ve achieved our goals of higher distribution [of HD].”

Adelphia Buffalo experienced a significant boost in HD sales in 2005, and Edelman attributed 3.79% of those connects to outside retailers. Retailers represent 3% of the HD units sold so far for 2006, so this has the makings of a powerhouse year.

The system offers HD set-tops for $8.95 a month. Broadcast HD reception is no extra charge. A suite of HD channels, including HDNet, movie channels, ESPN and NFL Network, is $7.95.

The marketing agreement allows Adelphia to pick the stores they want a presence in, the retailer agrees to actively support sales of the operator’s products; and the partners collaborate on signage and training.

The retail partners were selected due to their reputations in the community for individualized customer service. This helps the operator close the education gap. Data indicates that consumers are buying HD sets, but that doesn’t automatically translate into HD programming sales. A February 2005 study released by Forrester Research predicted 16 million sets would be in U.S. homes by the end of 2005. The same study indicated that less than half of those buyers, 7 million, would also subscribe to HD programming service. Retailers suggest that the majority of consumers believe they can get a true HD experience with the set alone.

Buying an HD set without the programming is like buying your child an expensive toy and heading home without batteries, said Dean Rallo, vice president of operations for Rosa’s Home Stores, a four-store electronics and appliance outlet in the region that has partnered with Adelphia. Rosa’s stores program a full wall of HD programmed sets, with content directly from Adelphia. Store employees can demonstrate content in any genre a consumer may wish to see.

“We can promote ourselves as a single source solution: We sell the TV, the content, the seating. That gives us a competitive advantage over other retailers,” Rallo said.

Big-box stores represent the highest level of HD sales in the region, Edelman said, but the local Adelphia partners represent 80% of the rest of the HD set sales in greater Buffalo.

The other partners are Stereo Advantage, a single electronics boutique and the top performing partner; Southtown Audio Video, a smaller single-store operation; PC Housecalls, a computer repair shop that also markets HD upgrades to Internet customers it services; and SAPC, a computer reseller. The latter promotes HD and provides self-install kits to consumers.

Adelphia pays the electronics stores a split for every HD unit they sell. (Edelman would not detail the amount). At one point, Adelphia suggested greater compensation for bigger sales goals, but the retailers resisted doing a hard sell, Edelman said. Instead, the operator schedules “Adelphia days,” where they bring food and premiums to the stores to keep workers focused on selling the cable products.

“Adelphia keeps it easy to work with them. You don’t have to jump through 10 hoops just to get your compensation,” said Craig Werynski, vice president of Stereo Advantage.

Though he couldn’t quantify the sales attributable to the partnership, he added, “Does it help along the sale? Absolutely.”

That store specializes in maximizing customers’ knowledge of their electronics, from DVDs to digital cameras to digital video recorders. About once a month, Adelphia comes in to do the weekly seminar, discussing what’s new in HD technology and programming.

HD sets, especially flat-panel LCD displays, are the hottest market segment right now. Rallo said it’s hard to quantify what portion of sales is closed because of the hardware-content combo. He added he does know his consumers are more satisfied when the set and content work right when they get it home.

Werynski and Rallo said they are technology neutral: Both sell direct-broadcast satellite and cable connections.

Rallo said a majority of customers prefer cable, because they already have it at home. Adelphia has a 53.6% penetration rate, or 330,000 basic customers, in the 615,000-home market.

The retailers love the benefits they derive from the Adelphia partnership.

For instance, Stereo Advantage participated in the Horizon Home Show, outfitting a design house with 17 different flat-panel TVs. Adelphia employees worked side-by-side with the electronics salesmen each day of the show to answer consumer questions.

One Rosa’s location was the beneficiary of a local appearance of World Wrestling Entertainment personalities. As part of the promotion for WWE’s “Great American Bash,” staged in Buffalo last July, Adelphia arranged for the wrestlers to appear at the store. The home store chain advertised the event, and Adelphia’s sponsorship, in its 650,000-circulation store advertisers.

“That was a great event,” said Rallo, noting store traffic that day of more than 500 people. According to WWE, the event helped Adelphia to a 1.36 % buy rate for the pay-per-view event.

The retailers said they had no qualms about partnering with the bankrupt operator.

“We dealt with the prior Adelphia management, so we had no reticence. They’re already in homes, they’re highly penetrated,” said Rallo. “They’ve always held true to their word with us. With the new [corporate] management, they’re even easier to deal with now.”