Wireless operators rank among the most prolific advertisers in the business world.
The wireless industry spent $692 million on advertising during the first quarter, a 17.7-percent increase from the $588 million the industry spent during the first quarter of 2004, according to Nielsen Media Research. For all of last year, industry spent nearly $2.6 billion on advertising, which was 10 percent more than it spent in 2003.
While most of that spending has been on traditional forms of advertising-television and print media-recent reports have shown that consumers increasingly are being influenced by more modern forms of information gathering.
According to a report recently conducted by predictive online analyst firm Compete Inc. and Yahoo! Inc., wireless customers who purchased their services offline said that online tools had more influence on their buying decisions than more traditional marketing sources like TV commercials or print ads.
The study found online searches influenced 37 percent of new wireless subscribers’ offline purchases of wireless service, compared with 21 percent of subscribers who were influenced by TV commercials and 17 percent swayed by print advertisements. The Internet’s influence is more remarkable considering the nation’s five largest carriers spent only 3 percent of their marketing and advertising budgets on Internet campaigns during the first five months of this year.
Yahoo!’s Director of Telecommunications Search Marketing David Rubinstein noted the results showed consumers are relying more on the Internet, and more specifically search engines, when looking at wireless services, and wireless carriers need to take a broader view when marketing their services. Yahoo! operates a search engine.
“Our research shows there is definitely a link between consumers researching wireless services online and buying wireless services offline,” Rubinstein said. “The influence of the Internet shows that carriers need to take a more holistic approach to advertising, realizing how different media influence buying decisions.”
The survey predicted that by the end of the year, nearly 24 million consumers will perform a search for wireless service on the Internet, representing more than $12 billion in potential annual service revenues. Nearly 19 million of those searches will involve the industry’s largest operators-Cingular Wireless L.L.C., Verizon Wireless, Sprint Corp., T-Mobile USA Inc. and Nextel Communications Inc. (now part of Sprint)-while more than 5 million customers will search for prepaid services offered by Tracfone Wireless Inc., Virgin Mobile USA L.L.C. or Boost Mobile L.L.C.
Consumers are not just using the Internet to find information about wireless carriers, they also are using the Web to compare competing services. The survey noted that more than 60 percent of customers who searched for wireless services online said they were comparing at least two different wireless providers, while 47 percent stated online searches helped them narrow down their eventual wireless choices.
“With so many rate plans, devices and coverage decisions to be made, people are using search to help narrow down their choices,” Rubinstein said.
The survey found that 2.5 percent of potential wireless customers using search engines to track down wireless information on the industry’s former five largest operators submitted active phone or plan orders compared with 1.3 percent who did not use search engines. T-Mobile USA and Cingular had the highest percentages of customers using search engines who submitted active orders, while Verizon Wireless, Sprint and Nextel posted conversion rates at or below 1 percent.
Compete’s findings were backed by a study from Keynote Systems Inc. that found nearly 80 percent of wireless shoppers said they prefer to use cell-phone company Web sites to compare plans and products rather than visiting retail stores for such comparisons.
Despite the Web’s increasing influence on ultimate decision-making, the Compete report found that only 5 percent of total wireless gross additions were completed online. The report noted that nearly half of wireless customers said they were uncomfortable purchasing devices without holding them or did not want to wait for phones to be shipped in the mail.
Sprint-which showed the lowest conversion rate of customers looking at wireless service and actually buying service-is outsourcing some of its online sales business to online reseller InPhonic Inc.
InPhonic claimed its online platform was able to activate six times as many customers as Sprint’s internally derived online channel in testing and at a much cheaper cost to Sprint.
“There is still a disconnect between customers researching wireless services online and actually buying wireless services,” said TJ Mahony, Compete’s managing director. “That might be a large gap to bridge in the near term, but other technology industries have managed the challenge.”
The Keynote study found that some of that disconnect can be traced to the performance of carrier Web sites.
“In an industry where the reach and reliability of the wireless network is of paramount importance, companies need to make sure their Web sites are responsive and available,” said Ben Rushlo, manager of professional services at Keynote. “If the Web site performs poorly, consumers might translate that into a reflection on the brand and the wireless network itself.”
The Keynote study singled out the T-Mobile USA Web site as the most “customer focused,” driven by the site’s “excellent performance in plan-shopping and phone-shopping capabilities.” T-Mobile USA’s site also ranked first in visual appeal and was commended for its online coverage map.
Keynote added that while overall response times were strong, several leading brands reported significant reliability issues, and outages with one site made it unavailable to consumers more than 4 percent of the time.
“The Internet is still considered a fringe medium by most carriers, but if they want to attract increasingly tech-savvy and valuable consumers they should readjust those views and take advantage of what the Internet can provide,” Compete’s Mahony added.
