Back to the future for Centrex

One of the most durable and appealing themes in literature is the "comeback kid," somebody who returns to the playing field late in the game and, against the odds, succeeds. For marketers, the equivalent success story is taking a mature product, one which everyone had predicted was in decline, and breathing new life into it.

Even so, it still comes as a surprise when everything goes exactly like it says in the textbooks:

  • when research is instrumental in defining the market and in helping to target the audience more effectively;
  • when investments in market intelligence pay off as they are supposed to;
  • when it can be conclusively demonstrated that direct response and measured media produce directly attributable superior results; and
  • when market share and positive perceptions are directly, dramatically and positively enhanced by an integrated effort.

Indiana Bell's repositioning of Ameritech Centrex represents such a case study.

Centrex?

Though you may not have realized it, when you've "dialed nine for an outside line," chances are you've used Centrex. Analog Centrex is a telecommunications system for businesses, first introduced back in 1958. At the time, it was a revolutionary tool that enabled medium to large organizations to "link up" all of their offices on their own "system within a system."

With Centrex, the "switchboard" was integrated into the telephone company's central (switching) office. With Centrex, you could dial another office in the system without dialing the whole number. Calls could be forwarded. Calls on one telephone could be picked up from another phone even if they didn't share the same line. These and many other features were made possible by Centrex's central office technology.

By the 1970s and early 1980s, however, AT&T and other telephone companies were moving away from central office-based equipment. Business decisions led them to emphasize the sales of on-premise equipment, notably private branch exchanges (PBXs). Centrex technology lagged behind that of PBX capabilities.

By the time AT&T was broken up in the mid- 1980s, Analog Centrex was a mature product, and well on the way to being a declining product. In effect, AT&T was granted an "exclusive" right to sell equipment. The regional operating companies were prohibited from directly selling the equipment needed to provide PBX systems to business customers. Their fear was that, without a competitive product to sell, they would be reduced to selling "lines"-in effect, access to the local telephone network- rather than value- added products and services.

Confused by divestiture

Research showed that medium and small businesses were confused by the divestiture of AT&T. They wanted "one stop shopping" for their telecommunications services, and in many cases felt comfortable dealing with their local Bell company. They also wanted a personal contact, a "take-charge" person.

Indiana Bell, one of the five operating companies for Midwest-based Ameritech, was particularly aggressive in exploring new ways to market products and services to small businesses. An early innovation was Indiana Bell's decision to allow business services to be marketed through a network of telecommunications agents. This allowed a "rebundling" of products. It enabled customers to pare down the number of vendors while still having the comfort of doing business with a familiar name-Indiana Bell.

This was particularly important when it came to maintaining business relationships with small-to-medium sized companies. As with most marketers of business-to-business products and services, Indiana Bell recognized that most of the growth in telecommunications needs would come from small businesses.

Wrenching reorganization

For example, in the Midwest in the 1980s, many larger companies had gone through wrenching reorganization in order to retain their competitiveness. With larger organizations going through "downsizing" or "rightsizing," those who sold to business had to develop new markets.

Meanwhile, introduction of digital technology allowed Centrex to catch up with and even leapfrog PBX technology. With digital Centrex, the operating companies could offer greatly enhanced calling features, data-handling capabilities and even simultaneous voice/video/data transmission.

The only problem was that for one segment of the market, Centrex was viewed as limited, at best, and obsolete, at worst. The other segment of the market was largely unfamiliar either with Centrex or its capabilities. Quantitative and qualitative research had been used to define the characteristics of the decision makers Indiana Bell wanted to reach. These attitudes first turned up in a large quantitative study designed to asses perceptions of Indiana Bell. The study also proved valuable in segmenting the business market.

Respondents were segmented by number of lines and other criteria using product data available from the company's master customer records database. They were asked to describe their expectations and the outlook for their companies in a series of open-ended questions. They were also asked to respond to a series of self-concept measures.

The smallest companies, those with fewer than three incoming lines, were excluded from the target segment Indiana Bell identified. Once this was done, the small business market which remained was examined. Members of this segment were very different both in self- concept and in their expectations of future performance for their companies.

Entrepreneurial spirit

Many of the businesses Indiana Bell wanted to reach were managed by their founders/owners; in other cases, they were not. In most cases however, the managers shared an enthusiasm and an entrepreneurial spirit. "They are confident. They are forward-looking. When we were developing our marketing strategy in late 1989-90, most economists were predicting a recession. Our prospects remained confident in the future," notes Jim Talhelm, who was then Centrex business manager for Indiana Bell.

"We needed an advertising strategy that reflected that forward thinking and that optimism for the future," adds Bob Clark, Indiana Bell's manager, business advertising. "We wanted to break down obsolete attitudes where they existed, develop a unifying theme and reposition the product."

"We had a good idea where we wanted to go, from a creative standpoint," says Scott Christie, senior account executive for Indiana Bell's advertising agency, Handley Miller. "We focused on the idea that 'tomorrow is the best reason to learn about today's Centrex.'

"We adopted a high-tech look and used spot color in newspaper and other print applications. Focus group research helped us to fine-tune the theme, graphics and tactics prior to introducing the program," he adds.

Respondents selected for the focus groups met the product use profile which had been previously established. Creative executions were developed and respondents were asked to evaluate them. However, special attention was paid to creative executions that mirrored the positive, upbeat attitudes and expectations of the target market. While the respondents thought they were evaluating substance and content, their responses also were used to confirm that the tone and feel of the creative message were on target.

The terms used by respondents to describe and evaluate the test materials were carefully monitored. When the terms matched up with those used to describe personal and business expectations, the moderator probed farther. In this way, it was possible to fine-tune the creative "climate" to match the respondents' expectations, and to couch the product offering in ideas the target market was predisposed to agree with.

"To reposition the product and generate leads, we tested a series of 'blitzes.' Previously, our Centrex advertising budget had been dispersed to major markets, maintenance style, over a full year. Now we reallocated the budget, investing about three-quarters of the year's dollars in selected markets for a compressed, eight week period," says Indiana Bell's Bob Clark.

"This gave us freedom we had not enjoyed before," says Handley Miller's Scott Christie. "We could increase frequency, we could use color, and we could employ multi-media continuity over the entire eight-week advertising flight. We were able to 'tease' the campaign before revealing the full message. We developed two direct mailers, small and large newspaper ads, radio spots and a fulfillment kit."

Different approach tested

According to Clark, three separate markets were identified, and a different approach was tested in each.

In the first test market, an agent calling program was used as a control. The agents were supported by a database that had been developed earlier. Likely prospects were identified by name so that the agent could call directly on the decision maker(s).

In the second test market, the agent calling program was preceded by a two-step direct mail program. Again using the previously-developed database, the direct mail campaign was able to personalize the mailings. In the third test market, measured media (newspaper and radio) was added to direct mail and the calling program, in a sustained eight-week campaign.

"We had a unique opportunity to measure results," says Clark. "We wanted to make certain we did so as thoroughly and effectively as we could. First, we measured customer attitudes using pre- and post-blitz survey research in the three markets."

Compared with the control market in which the agent calling program stood alone:

  • The market with direct mail showed a 2% increase in product awareness and an 8 % increase in Centrex as the "system of choice."
  • The market with both direct mail and measured media showed a 24% increase in product awareness and a 25% increase in Centrex as the "system of choice."

"Because we invested time and resources in building a solid database, we were able to track inquiries, monitor lead activity, and measure actual sales generated by the program," says Indiana Bell's Jim Talhelm.

The control market, which relied exclusively on agent calling, produced a 15% response rate. This rate, standing alone, was about 4-5 times the response rate for past Centrex efforts, and well above the 2-3% rate often projected for direct response programs. The second test market, employing both direct mail and agent calling, produced a 23% response rate. The third test market, in which measured media was added, produced a still-higher 28% response rate.

"Finally, we analyzed our return on advertising dollars invested, and produced over a ten-to-one return in the test program," Talhelm says.

Based on this experience, Indiana Bell rolled the full program into other markets in late 1990 with equally impressive results. "Two of the state's largest markets produced $15.77 and $24.77 in revenue respectively for each advertising dollar invested. In one tri-city market, return has been $5.88 for each dollar invested in advertising. And the last market, in an isolated area of the state, showed a return of $49.01 for each ad dollar invested," Clark says.

What is responsible for producing these results? "Nothing we did was truly revolutionary, although we tried to be creative every step along the way. Indiana Bell was willing to commit the time, resources and investment necessary to do the proper job," Christie emphasizes.

"Too often, marketers give lip service to an integrated marketing/advertising process, but aren't willing to invest in it or listen to what the results tell them," he says.

"Clearly, the return-on-investment results demonstrate that making a well-conceived investment which is properly pre-tested and evaluated will pay handsome dividends."