PCS carriers can be credited with spurring huge demand for wireless service in the United States, but they continue to struggle with brand awareness and perceptions customers have about coverage.
“It’s a brand game and a consumer-marketing game,” said Andrew Sukawaty, president of nationwide carrier Sprint PCS, which has led the industry three consecutive quarters in subscriber additions. “People who walk into a store and look on a shelf and see the Sprint brand along with a brand they’ve never heard of, what are they going to get?”
Though industry experts would argue that brand name alone doesn’t win customers, a strong brand name does earn a company consideration as a potential choice.
Peter Dresch, director of telecommunications market analysis with J.D. Power and Associates, said long-distance carriers and regional telephone companies continue to garner the highest marks for customer satisfaction in a majority of their wireless markets, due in large part to their brand names.
“Across those markets, it is the local [regional Bell operating company] or the AT&T and Sprint that will come out No. 1,” said Dresch. “They are generally up there on corporate capability, reputation and brand.”
The problem for PCS carriers, said Bob Egan, research director with the Gartner Group, a firm that caters to Fortune 500 end users, is they continue to compete on price, rather than researching target audiences in a way that will draw in profitable customers.
“It really comes down to the failure of these companies to develop a brand that is something other than saying, `hey, I’m a cheaper alternative in the market’,” said Egan.
Analysts point to VoiceStream Wireless as a company that is beginning to achieve brand awareness in targeting the mass consumer. The carrier, which is increasing sales and marketing expenses, outpaced Sprint PCS in penetration of covered pops with 2.8 percent in the second quarter, according to Prudential Securities in New York.
But PCS carriers are often disheartened by the length of time and amount of money it takes to establish a brand name when they run up against cellular incumbents. This cost often offsets the benefits of branding, making it more justifiable to compete on price.
Companies like Sprint PCS, which doesn’t do much brand advertising these days, and AT&T Wireless Services have the luxury of riding on the coattails of their parent companies’ strong brand names.
When the pricing game settles, however, customers may feel more comfortable running to a name they know rather than dissecting messages from as many as six operators per market.
The good news for many PCS operators is that in an industry where consumers expect competitive offers, brands can be established, believes David Freedman, wireless analyst with Bear Stearns & Co.
Heavy consolidation within the cellular industry also will give PCS operators a chance to establish a brand name. Bell Atlantic and GTE, two companies with strong brand recognition, hope to complete their merger plans later this year. The result will be a new corporate identity and brand name the new company will have to build from the ground up.
Coverage
While the coverage areas of many PCS carriers have improved dramatically since last year, cellular carriers are finding success in continuing to play the coverage card in their marketing efforts.
“When we walk into a market as a new entrant, the first competitive strike against us is coverage, coverage, coverage,” said Sukawaty. “Incumbents are staying on the coverage page even when you’ve reached an equal position. Customers have to realize that PCS players have filled out their footprints.”
Sprint PCS’s network covered 170 million pops at the end of the second quarter, with affiliates addressing 5 million additional pops, according to analyst firm Warburg Dillon Read.
“Coverage has come an enormous distance,” said Sukawaty. “[It] has really fallen off as a reason for churn.”
Concerns about filling in secondary markets and coverage gaps have been eased somewhat by dual-mode handsets. More than 50 percent of Sprint PCS’s handset sales are dual-mode sales, said Sukawaty.
Cheaper dual-mode handsets are closing the differential gap between dual-mode and single-mode handsets, note analysts, translating into greater customer satisfaction.
PCS operators that don’t have the nationwide footprint advantage are cleverly crafting pricing plans around coverage areas. VoiceStream Wireless has focused its marketing message on strong coverage within a regional area. Its “Get More” campaign showed that consumers are willing to sign contracts in exchange for better value on monthly access fees, said Bear Stearns in a recent report. The contracts have helped produce a lower churn rate than other PCS providers have reported, noted the analyst firm.
VoiceStream and Omnipoint Corp. plan to merge later this year, creating a company that will cover 175 million pops in 17 of the top 25 U.S. markets and compete with national offers.
In contrast to its wireless competitors in the Southeast, PCS carrier Powertel has the largest wireless footprint in this U.S. region and covers the highway corridors that connect major southeastern cities. Perry Walter, wireless analyst with Robinson-Humphrey Co. in Atlanta, believes a large number of corporate sales and service representatives and technicians travel these highway corridors, opening up this market to the company.
