by Ron Kahan

Like many Americans, I subscribe to a cable service which provides a diverse selection of programming to my home, as does close to 70% of US households. As a result of this increasingly high penetration rate, cable companies have to deal with an ever diminishing prospect market for acquisition.

In addition, the cable industry is slowly redefining their marketing strategies to position themselves for growing competition. Despite franchising, competition is an ever increasing threat as the days of the cable system monopoly are coming to a close. Satellite DBS services, such as Primestar and Direct TV, have garnered an approximate 3% market share of U S Households while other cable are "overbuilding" fiber optic networks into competitor territories and telecommunications companies are slowly but surely entering the marketplace with cable service offerings.

Many individual cable systems, MSOs (Multiple System Operators) and networks are quickly learning that the answer to combating this competition, or at least a large part of the equation, is database marketing analysis. The cable industry has always been a friend of direct marketing, sending millions of pieces a year into the mailstream, but it's database marketing and the opportunity that leveraging the enabling analytical technology that is a newly evolving strategy within the industry.

They're also learning that their operational systems are not good tools for database marketing, especially in light of the advanced capabilities of marketing database technology in recent years. Presently, there are just a handful of companies offering billing systems for the cable industry and each one does a good job at what it's been designed to do, which is be an operational system. These systems were not designed to, nor are they any good at, being marketing databases. Making the upgrade to technology which is designed for strategic marketing analysis is an effective competitive advantage against competition. Marketing database technology can quickly and interactively capture, update, and analyze information allowing the timely implementation of sound strategies for acquisition, retention and premium channel marketing.

Following are some old vs. new marketing strategies and tactics. The new directions outlined below are attributed to the use of marketing database technologies. Hopefully you'll find some ideas for your business even if you're not in the cable industry.

I. ACQUISITION

Old: Send an offer to any non-subscribing household from the "homes passed" file (homes within the operating territory) on a regular basis.

New: A MSO with headquarters in Denver is keep track of each offer for service sent to individual households. Is there a diminishing point of return to keep sending offers (in many cases the same offers) to the same households? In one case study, however, it was proven that activation increased after the third campaign to the same household. Are you tracking this?

Old: Send the same value offer to everyone (Oh sure, there's always been price, package and some creative testing, but it's still the same basic value offer).

New: One east coast cable network is beginning to segment their prospects by interest or genre. Academics should see how cable will expand their knowledge and golf enthusiasts should be reminded of on-air PGA pro lessons. There is a diversity of interests within prospect households. They're actively religious households, sci-fi buffs, business oriented people, sports fans, and music lovers in that database. Programming department are being tapped to understand the demographics of each network or program and prospects are being targeted with the appropriate message. Third-party marketing information can then be applied to compute a person's (or household's) propensity to view a particular network or program based upon their socio-economic make-up. Speak to these households personally of the benefits and value of being cable subscribers as it directly relates to their personal interests.

II. Retention

Old: Nothing. I don't think I've ever seen a cable retention program before 1996. The mentality has always been, "Why spend marketing dollars, they're already our customers."

New: There are two types of churn: the percentage you can effect and the percentage you cannot. Those you cannot effect result because something happens in the subscriber household's life. Those you can effect will show up in your operational data. What is the common link between downgrades and disconnects? Service calls, truck rolls, or is it simply the length of time they've been a subscriber? A cable MSO in eastern Europe has determined when churn is likely to occur by analyzing the behavioral variables which precede the churn, calculating a probability score to identify those subscribers likely to disconnect and implementing retention measures.

New: A west coast cable system has been refining calculations for the profitability and lifetime value of subscriber segments enabling the development of retention levels which can be offered to those subscribers with a propensity to downgrade or disconnect. Understanding the worth of each individual subscriber has facilitated timely and actionable responses to competitive infringement.

III. Premium Marketing

Old: Send the "free month" offer to all non-premium households.

New: Offer hounds are the folks who always make your response rate to this offer soar and your conversion rate plummet. They'll take the free month and never subscribe. So why are you still sending them the freebie? Save money and omit them when the time is right (see my 1st acquisition tip about the value of successive offers).

Old: Premium and Pay-Per-View networks present no co-op dollars for retention, only acquisition.

New: If an proven "golden rule" like the cost between converting a new customer vs. retaining an existing one is established as approximately 6 to 1, why don't premium channels reinforce the value of their programming to current subscribers?

These two "new" tactics are just starting to happen, but it's usually a fight the more sophisticated MSO is initiating to convince the premium network.

So as you can see, database marketing is beginning to show it's worth to the cable industry. Now if only cable operators and networks would pay more attention to the programming interests of subscriber households. From 6 channels when I was growing-up to over 50 networks today and sometimes I still can't find anything to watch.

Ariss Kahan Database Marketing Group, Inc. assists clients build customer relationships through proven and innovative database marketing techniques and marketing database technologies. They specialize in customer acquisition, retention, cross-sell and up-sell initiatives and can be reached at (303) 368-9800 or via e-mail at rkahan@dbmktg.com.