The cellular industry has taken numerous steps to package cellular for the mass consumer retail market, but a small gap remains between the industry’s effort and the complicated process to activate a phone.
“Mass merchants are a substantial opportunity for everyone to make this business bigger,” said Michael Lang, vice president of marketing for Sony Wireless Telecommunications Co. “But the mind-set of these retailers is they want the same process in every store. You can’t ask them to handle your product differently,” Lang said.
Many mass merchants such as Wal-Mart and Kmart are not willing to do the extra work traditionally involved in a cellular sale-program the phone, activate the service, carry the negative margin, receive a commission and, in essence, create a back-office accounting system.
“Cellular has been a complex sale and there are retailers who have stepped up to that ability and are willing to do that,” said David Laible, staff director of indirect distribution for Bell Atlantic Nynex Mobile. But mass retailers aren’t in the arena to sell service, he said.
“Dealers would like to be taken out of the service business, sell a phone and just make the margin on that,” said Jon Hulak, cellular analyst with Giga Information Group of Boston, formerly BIS Strategic Decisions.
Retail salespeople are less likely to have the electronics expertise to conduct a multistep activation process and manage a service contract, according to industry marketing managers. Cellular phones each are programmed a little differently, depending on the manufacturer, and carrier contracts vary from market to market. Manufacturers have considered creating a standard programming system, and carriers say they have worked continuously to simplify activation.
“But we still have a lot of work to do as an industry. PCS [personal communications service] has solved these problems and their digital products will have [over-the-air] activation from the beginning,” Lang said.
Over-the-air activation is included in the standard for Code Division Multiple Access and Time Division Multiple Access Interim Standard-136. Subscriber Identity Modules in Global System for Mobile communications systems also allow over-the-air activation. PCS operators have said from the beginning they expect to target the consumer market.
Cellular operators are just beginning to switch their analog networks over to CDMA and TDMA IS-136 digital, and the process is expected to take several years. The cellular industry’s current approach to mass merchandising is the preprogrammed phone-in-the-box, which marketing managers say is a step toward total over-the-air activation.
U S West Cellular launched its shrink-wrapped TalkAlong product in 1994, and it’s now available in about a dozen markets in stores such as Albertson’s, PayLess Drug Stores and Target. The box contains a preprogrammed analog Nokia Corp. phone, cellular battery, slow charger and activation instructions. Two service plans are available-the metro plan for home area only, or the wanderer plan for roaming. The plans are packaged in different boxes, so the consumer chooses the metro box or the wanderer box.
TalkAlong is purchased with a credit card and the new owner calls an 800 number to activate the phone. The carrier bills a customer’s credit card each month.
“We view all distribution channels as having different challenges, rather than [requiring] one standard program,” said Curt Henninger, director of retail distribution for U S West Cellular.
Bell Atlantic Nynex Mobile and AirTouch Communications Inc. also are promoting TalkAlong as a retail, off-the-shelf solution; some arrangements differ from those of U S West.
Selling cellular to the consumer market calls for a “pull strategy,” said Laurie Burke, director of retail channel marketing for Bell Atlantic Nynex Mobile.
“Early adopters were excited about the service and there was a pent-up demand,” Burke said. The average consumer isn’t so sure a wireless phone is necessary, she said. Self-educating colorful boxes provide information about cellular in case a retail salesperson isn’t available.
Lang said preprogrammed phones that contain a regional phone number can cause enormous warehousing problems for mass merchants that transport products from site to site.
“It can make the mass merchant’s inventory management task more complex, but it’s a good effort toward solving the [activation] problem,” Lang said.
The boxed GoPhone offered by AT&T Wireless Services isn’t preprogrammed with a phone number, said Greg Farrell, director of product development for AT&T WIreless. “It adds to the cost and makes distribution more complex. The consumers will spend less, so the cost has to be less. If we’re selling to them at the lowest possible cost for us, it can be profitable” Farrell said.
BellSouth Cellular Corp. has kiosks in 36 Kroger supermarkets to target a fast-growing consumer segment-women between the age of 25 and 44. Customers entering the store can order a phone at the kiosk, and it will be programmed and ready when they finish their shopping, BellSouth said. The company’s kiosks in Kroger and Wal-Mart are staffed with cellular sales people.
“In the retail landscape, we have to fit the point of distribution,” said Jacki Jaynes, marketing manager of retail distribution for BellSouth Cellular. “The kiosk is one solution. A second method is to streamline the process so all the customer needs is in a box. We’re putting one together now,” Jaynes said.
Handset manufacturer Nokia Mobile Phones recentlylaunched the 600 series product line designed specifically for the consumer market.
Ameritech Cellular Services offers Pick-Up & Go-Cellular in a box with a handle, which contains a Motorola Inc. analog phone as well as a service package. “When you consider the mainstream customer, they are not into high-tech gizmos and are dizzied by the array of pricing plans,” said Ameritech spokeswoman Ellen Butler. Pick-Up offers the safety pack, the convenience pack or the productivity pack, all priced under $30 a month.
“We simplified the purchase so they don’t have to weigh out price plans, which shortens the time the customer spends in the store,” Butler said.
