The Press, June 2011

One of the biggest marketing challenges in the land, apart perhaps from Roger Sutton and CERA trying to keep all Cantabrians happy, is ensuring ServCo thrives in the new world of telecommunications.

Servwho? Servco is the codename for the retail part of Telecom, to be split later this year subject to very likely shareholder approval.

The other part, existing network operation Chorus, will become a listed company in its own right, owning and operating the fancy new ultra-fast broadband network as well as all the old copper lines that carry much of today’s telecommunications.

Telecom ‘Retail’ (codenamed “ServCo” by Telecom) will be left as a standalone company providing a bunch of services to consumers and businesses, such as mobile, regular phones, internet and IT services. They face the big hairy marketing challenge, competing head on with some aggressive and well-funded existing players, and likely new market entrants.

According to various industry analysts Telecom Retail has been protected somewhat from brutal competition, with Chorus delivering significantly more revenues in proportion to its costs. In other words, subsidising the retail arm to some degree, and potentially leaving them vulnerable when faced with direct competitors used to operating without a crutch.

The big question is not whether Telecom Retail can do the advertising and promotion to build their brand, but whether they can actually deliver a positive experience to customers that stands out from the competition.

Brands are often talked about in terms of logos, advertising, jingles, brochures and signs on buildings. Telecom have certainly invested a lot of time and effort in this aspect over the years, and have made some moves to prepare for the new era, polishing up their brand image with a new logo and big advertising campaign in 2010.

A brand is all those things, but a lot more. A brand is the picture each of us holds in our heads about certain products, services and companies – a picture we use when it comes to buying. It is a much more complex and deep thing than a few adverts and a nice logo.

Brands are largely built from our experience with an organisation and their products, and Telecom certainly delivers a lot of these. 49,000 broadband lines and 137,000 access lines were provided to small to medium businesses last year, according to their annual report. 1,400 people staff its 24-hour sales and support helpdesks, and they have a national network of 115 Telecom and dealer stores.

They are big and they are everywhere, but they are not necessarily delivering the experiences that build a great brand. One objective measure is the latest Consumer survey, conducted in November 2010 amongst 12,853 consumer members, which ranks the internet service providers (ISPs) who provide our broadband internet services, an area that has been fully competitive for five years.

Telecom ranked 15th out of the 17 ISPs which had enough feedback to be rated, behind major rival TelstraClear, but ahead of Vodafone. Telecom had historically been rated worse but was making progress, said the report, with customer satisfaction increasing from an “abysmal” 42% in 2007 to 65% in 2010.

So they need to improve the experiences they deliver today, and work out how to deliver new ones for the future. Consumers and businesses are doing more online, expecting access to the internet anywhere, anytime through multiple devices (smart phones, tablets, computer, TVs). There are opportunities for companies that can meet this need.

Telecom’s ability to understand customer needs and deliver smart solutions haven’t always been strong. Then there is ill-fated foray into e-commerce with the embarrassing debacle that was Ferrit. Despite huge investment and a major promotional campaign it was a dismal failure, in stark contrast to bootstrapped TradeMe operation across town.

And who can forget last year’s XT crisis, which caused Telecom huge pain as it’s expensive new mobile network had major performance problems, doing immense damage to their credibility.

The fact remains though that Telecom Retail will be a large company, with a breadth of offerings and the natural inertia of many customers. They’ve also got some good leadership, with a smart marketer at the helm.

Telecom Retail CEO since 2008 Alan Gourdie, learned his marketing trade at DB Breweries before being promoted to the position of Global Marketing Manager for Heineken, and then on to some general management roles around the world. If anyone understands how to build brands, it is the brewers.

Gourdie will understand it is the experience Telecom Retail deliver that will be the cornerstone of their success in this nakedly competitive new era. All the fancy TV ads in the world can’t overcome solutions that don’t meet customer’s needs and are poorly supported.

He might take a lesson from Rob Fyfe at Air New Zealand, who has led the transformation of that company into a leading brand in its market, based on the smart use of technology supporting a strong focus on providing customer value. This was a company so beset with problems only 10 years ago it was bailed out by the government, but last week named the sixth best carrier in the world.

Like Air New Zealand, the success of Telecom Retail will require nothing less than reinventing themselves, achieving a level of change not seen since deregulation in the 1980s. If they put the customer at the centre of this, they’ll be able to fly.

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