28 Mar Things Australian ISP marketers should consider Posted at 06:36h in Strategy by Danielle Spinks-Earl Share INTERNET SERVICES INDUSTRY In Australia, there are just a handful of big players. Telstra BigPond owns 45% market share, Optus is number 2 with 17%. Zeithaml says, “services are low in search attributes but high in experience attributes and (consumers) may also rely on credence attributes to make an evaluation of the service quality.” Similarly, Shostack writes of the “scale of market entities” a model that presents a continuum ranging from salt to teaching as a way of categorising a product as either tangible dominant (salt) or intangible dominant (teaching). In this case, internet services (specifically broadband internet) are intangible dominant. The electronic nature of internet services works to overcome some of the challenges inherent in service offerings, however. The variability can be standardised. Back-end programs and technology can maintain service quality control. All customers receive the same level of speed and reliability. The variation would only come into effect when the customer needs additional support. Like most services, the delivery of this support and the satisfaction with the support may depend on the user’s level of experience and expectations. The inseparability element is also reduced through the online relationship. A consumer is able to purchase a plan and experience the service whenever they wish and without the interference or presence of other customers. On Zeithaml’s scale, internet services are low in search attributes, but high in experience attributes, meaning they are easy to evaluate post consumption (using factors such as speed, reliability, customer service, for example). In other words, the consumer is able to evaluate whether the service is satisfactory as opposed to products (such as surgery or mechanical work), which is difficult to evaluate post-purchase. There is much emphasis on this pre-purchase evaluation stage of the consumer’s buying cycle. The literature points to a number of communication objectives that each stage of the cycle (pre-purchase, consumption, post-purchase evaluation) should consider. Services are hard to evaluate at the pre-purchase stage. Consequently, consumers perceive a high degree of risk in the purchase of a service and display higher, more long-term loyalty also. These risks include financial, social and performance risks (Hoffman, et al, 2010). In the case of internet services, financial and performance risks are the most salient. It requires a considerable amount of time to search for an internet solution and make comparisons. It requires the seeker to have a degree of computer literacy and understanding of key terms. The purchase also carries financial risk in that internet service plans generally involve a contract period which can span as much as 36 months and thousands of dollars. In order to aid information search, ACMA notes that in December 2010, “1.6 million Australians accessed a price comparative site”, examples of which include www.getprice.com.au, www.iselect.com.au, www.myshopping.com.au (2011). For these reasons, service consumers have a high reliance on personal sources of information in making a pre-purchase evaluation. Advertising and direct mail, for example, carry less weight than word-of-mouth, opinion leaders, referral, public relations, and publicity. Zeithaml argues that consumers must in fact “first consume a service before they can form an attitude toward it and make an evaluation” (1981). PRE-PURCHASE STAGE BRANDING Many researchers cite ‘branding’ or ‘brand equity’ as a method of reducing risk (Berry, 2000, Shostack, 1977). Mittal also sees it as important so that the second-order benefit you attach to the service does not get conveyed to a competitor (2002). There are a number of examples of internet service providers using branding as a key component of their promotional messages. Telstra (the corporate brand) has suffered from mixed attitudes towards its telephony and customer service for many years. As such, BigPond has been used as the child-brand to quarantine any potential negative associations. Thus, Telstra has deliberately avoided using “the brand’s reputation for quality for the extension (Smith & Bush, 2002). Optus, on the other hand, has used its same branding across both its telephone and internet services, possibly to strengthen its number two position. Other ISPs conduct a lesser level of national or mainstream advertising, reflecting an equivalence between market share and share of voice. INTANGIBILITY A number of researchers argue in favour of services using “tangible clues”. Shostack pioneered this argument in saying, “products use abstraction to create images. Services must do the opposite” (1977). Carlson, Grove and Dorsch suggest that advertising itself is a form of tangibilisation and concur that, “marketers should integrate evidence to compensate for intangibility” (2003). Although a vocal critic of what he sees as ubiquitous, “mindless” tangibilisation that “fails to capture the core service benefit”, Mittal also suggests the use of elements including “performance documentation and physical representation”, where they are appropriate (2002). Items such as offering performance guarantees, equipment warranties, and free trials are all used to reduce the consumer’s level of perceived risk and thereby obstacles to purchase. Hamid, in his assessment of Internet Service Providers, says, “if a site can assure that the firm’s services are highly reliable and consumer data is strictly protected, they may have an edge to win loyalty” (2008). TARGETING MOTIVATIONS Interestingly, the research for this paper revealed that few if any advertising communications were using ‘tangible elements’ in the form of either performance documentation or physical representations (e.g. computers, modems, speeds). This may be due to the widespread acceptance of the technology (ACMA cites 85% of Australians over 14 have internet access). The innovation has well and truly been diffused. It may also be due to the relative homogeneity of broadband internet service, made all the most prevalent now that the NBN infrastructure is rolling out through Australia. Instead, the key method of branding and differentiating for ISPs appears to be on the “second-order benefits” espoused by Mittal as their value proposition. Hand-in-hand with this is the segmentation of users according to their different motivations. This also supports Martin’s view that “prospective customers avoid messages that are too technical” (1999). Shostack says, “more than one reality may be found in a service market” (1977). She uses the example of a tax accountant service as being motivated by a “financial opportunity to save” for one user and “freedom from financial responsibility” for another. She argues that “the crux of services knowledge is to find consensus realities.” In other words, Internet service providers are segmenting, targeting and positioning. BigPond’s Great Wall of China campaign (Appendix 1) targets families with school-aged children. A conversation between a father and son takes place in a car. No imagery of computers, modems or speed is depicted. No statistical evidence is provided. The core service benefit is that broadband can “give your kids the right answers”.BigPond’s “I’ve Been Everywhere Man” (Appendix 2) targets singles or professionals, ostensibly those without children. It uses the iconic Kombi as an abstract representation of the ability of broadband to roam all over the place. Dodo Internet targets young people with its capped price plans. It also does not show any evidence, only the sales promotion details and young people dancing in a nightclub. Internode uses its advertising to challenge BigPond by displaying a rusted and decrepit Kombi and a tagline promoting switching, strategy which would only work if customers have experienced dissatisfaction with BigPond. BigPond music is an augmented service offering to add extra value to customers. This is also communicated through a ‘transformational appeal’ to the user’s “(ideal) social self-image” (Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk, 2008) rather than any tangible element. PERSONAL SOURCES It is interesting that none of the researched companies use testimonial in advertising or opinion leaders. However, public relations activities including sponsorships were high for BigPond (NRL) and Optus (Football Federation). Other examples including sponsorship of Business Women’s Awards. These may go a way to creating the “emotional connection” between consumers and a brand (Berry, 2000). CONSUMPTION STAGE During service consumption, consumers prefer to have a high “level of perceived control” (Hoffman, et al, 2010). They need to understand the ‘script’ and the role they play to create their own satisfaction. In the service delivery, BigPond has garnered criticism for “excess usage charges”, which are generally 15c per megabyte. This has resulted in bills far in excess of user expectations. As a result, many ISPs (including BigPond) now offer ‘shaping’ where the speed slows down when the data allowance has been used. Similarly, Optus has created a reputation of poor service for its 3G network through over-subscribing customers and using the mobile wireless infrastructure for its broadband. Despite their combined 62% market share, it appears that the two biggest ISPs accept a larger zone of “acceptable service” (Hoffman, 2010). Frei argues that services need to pick what they will excel at, whether this is service, price, convenience etc, and advises that “trade-offs are necessary” (2008). Hamid argues that “experienced users are less tolerant towards incomplete services and providers have to offer a higher quality of service in order to build long-term relationship” (2008). Four of the main ISPs were found on Twitter, but only Dodo, Optus and Internode were using it as a service delivery tool (customer support). Facebook was used as a customer support tool for iinet. In the service delivery, customer support is often needed. A customer’s level of satisfaction with a problem resolution can influence their overall satisfaction with the service. If Dougherty and Murthy (2009) are correct in knowing “what service customers really want”, recruiting and training skilled and empathetic people is extremely important. Customers want to know that the person they are speaking to in the call centre is knowledgeable and that their problem will be resolved on that first call. POST-PURCHASE EVALUATION REMINDING & REWARDING Hamid says experienced users look for “rewards, lower prices, updated information and efficient customer service” (2008). Optus has successfully used Facebook to offer its subscribers rewards. Telstra / BigPond has achieved this through its SMARTER Business Ideas magazine. This adds value to consumers and also acts as a vehicle to share client testimonial in the form of case studies of the business segment. Telstra’s partnership with ACP both rewards customers with valuable advice as well as remind them that Telstra’s solutions are at the forefront. Also, features photographed interviews with successful business people who profess their use of various Telstra and BigPond solutions are critical to their success. The strategy works by not only providing promotion for those businesses but forms a credible referral source for existing customers for whom Telstra might like to sell additional products. CUSTOMER ADVOCACY Reichheld (2003) believes that “the only path to profitable growth may lie in a company’s ability to get its loyal customers to be its marketing department”. He says that the Net Promoter Score is the best quantitative method of determining growth as well and satisfaction. The above example of SMART business magazine is a good example of fuelling customer advocacy. Dahlsten (2003) argues that, “firms should find ways to increase positive emotional aspects of their service over time”. He believes it is qualitative research and insights that matter, although it is possible that the two can be used hand-in-hand. MANAGERIAL IMPLICATIONS There are a number of implications from the academic research and the successes of other ISPs that could be used to in the communication of a smaller or regional ISP. 1. Branding can and should be invested in, at minimum, clear “visual pathways”, that is consistent imagery, symbols, logo, colours used across all elements. 2. Consumers rely on personal sources of information, therefore, it is useful to consider including customer testimonial in advertising and ‘performance documentation’ (e.g. uptime, speed, support, localness) as evidence. 3. Tangibilisation of the service is not as necessary as communicating the core service benefit. In this respect, customers should be segmented along “consensus realities” and the benefit for each used as service advertising communication. 4. As recommendations from people they know and trust are so critical, ensuring customers are rewarded for referral business is worth considering. Similarly, the use of localised public relations or sponsorships would have much leverage and create an emotional connection. 5. Some marketing communications should attempt to show the working relationship with the ISP. In this case, it could be how to log on, make an order, check webmail, etc. Communications should be simple for anyone to understand and sales promotions should include risk-reducing elements such as free trials and performance guarantees. 6. If trade-offs are necessary (Frei, 2008), the small ISP should determine its own fame. It could differentiate through service delivery (e.g. personal phone support and installation on-site). “Service consumption experiences” therefore could be used to depict this key value across the different segments, with a pertinent second-order benefit to each. 7. A company website should be kept up-to-date with information that offers value, reminds users of services and benefits and rewards them for loyalty. To create a brand “community” users could be cross-promoted to fuel word-of-mouth, emotional connection and loyalty. For example, featuring local businesses in eNewsletters, student success stories, acts of philanthropy associated with the brand, and new features online generally will add this value to users. 8. Social media channels should be used to augment value to the user as both customer service tools (Twitter) and rewarding (Facebook). Iinet is a testament to the power of customer engagement. It has five times more fans than the biggest ISPs. 9. Finally, Bitner and Brown’s advice should be taken to aid differentiation. Services should be “co-created with the consumer” (2008) and also “service delivery”. Keeping a customer’s point of view will aid long-term success. CONCLUSION While there are some additional challenges to the communication of Services, there are also opportunities to differentiate and add value through the service delivery process and the use of staff. Emphasising tangible clues is important but this can be done in a number of ways. More importantly, understanding the “determinant attribute to the audience” is key. Whether tangible or not, this factor can go a long way to differentiate the brand and segment the user base. Finally, reminding and rewarding customers for making their choice will ensure they continue in a long-term relationship with your brand, as well as form a source of critical word-of-mouth. Fundamentally, the most successful ISPs have designed and delivered services from a customer’s point of view. —- References ACMA (July, 2011) “The internet service market and Australians in the online environment”. Berry, (2000) “Cultivating Service Brand Equity”, Journal of the Academy of Marketing Sciences, 28 (1) p 128-137 Bingemann, M “NBN a catalyst for acquisitions in a saturated telco market” The Australian January 04, 2012 12:00AM http://www.theaustralian.com.au/business/companies/nbn-a-catalyst-for-acquisitions-in-a-saturated-telco-market/story-fn91v9q3-1226235971979 Accessed 21 March 2012 Bitner & Brown (2008) “The Service Imperative”, Business Horizons Issue 51 p39-46 Carlson, L., Grove, S., & Dorsch, M.J., (2003) “Services advertising and integrated marketing communications: an empirical examination”, Journal of Current Issues & Research in Advertising, 25(2), 69-82 Dahlsten (2003), “Avoiding the Customer Satisafction Rut”, MIT Sloan Management Review, Summer 2003 Destination NSW Website http://archive.tourism.nsw.gov.au/Snowy-Mountains-Campaign-Activity_p1410.aspx accessed 24 March 2012 Dougherty and Murthy (2009) “What service customers really want”, Harvard Business Review, September 2009 Facebook www.facebook.com accessed 24 March 2012 Hamid, (2008) “Consumers’ behaviour towards Internet technology and Internet marketing tools”, International Journal of Communications, Issue 3, Vol 2. Hoffman, Bateson, Elliott, Birch (2010) Services Marketing: Concepts, Strategies and Cases, Cengage Learning Interbrand, “Brand Valuation: The financial value of brands”, Brand Channel Website Lagrosen, S., (2005) “Effects of the internet on the marketing communication of service companies”, Journal of Services Marketing, 19(2), 63-70 Martin (1999), “The History, Evolution and Principles of Services Marketing”, Marketing Information and Planning 17 (7) Mittal, B., (2002), “Services communications: From mindless tangibilisation to meaningful messages”, Journal of Service Research, 16(5), 424-431 National Rugby League website, accessed 24 March 2012. Optus Website, http://www.optus.com.au/portal/site/aboutoptus/menuitem.ee0ee21ac9cce722d0b61a108c8ac7a0/?vgnextoid=429f3dd4813b1010VgnVCM100000c8a87c0aRCRD accessed 24 March 2012 Schiffman, Bednall, O’Cass, Paladino, Ward & Kanuk, (2008) Consumer Behaviour, 4th edition, Wiley & Sons. Shankar, Berry, Dotzel (2009), “A Practical Guide to Combining Products and Services”, Harvard Business Review, November, p94-99 Shostack (1977) “Breaking Free from Product Marketing”, Journal of Marketing, April, p73 Smith, R., Bush, A., (2002) “Using the incomplete information framework to develop service provider communication guidelines”, Journal of Services Marketing, 16(6), 535-552 Smarter Business Ideas http://www.theaustralian.com.au/business/companies/nbn-a-catalyst-for-acquisitions-in-a-saturated-telco-market/story-fn91v9q3-1226235971979 Accessed 21 March 2012 Twitter www.twitter.com accessed 24 March 2012 Zeithaml, (1981) “How consumer evaluation differs between goods and services”, Marketing of Services, p186-191 Tags: academic paper, acma, australian isp, bigpond, communicating services, dodo, iinet, internet services marketing, internode, nbn, optus, social media, Telstra, tpg Danielle Spinks-Earl BA Comm. M Mktg. Freelance writer, designer, marketing communications manager.