PARTNER CHANNEL: Home Sweet Home

Posted: 8/2003

ANY-DISTANCE BUNDLES REVITALIZE RESIDENTIAL AGENCY PROGRAMS

By Tara Seals

The agent business once thrived on selling long distance to consumers, but it's a model that has waned as downward price pressure on long-distance service, "anywhere minutes" mobility plans and a telemarketing backlash eroded the moneymaking prospects in the residential market. Today, the demographic is seeing a renaissance as local exchange carriers roll out any-distance bundles that combine unlimited local and long-distance service into one plan, at one fixed price. Suddenly, the millions of home phone users out there once more have become a lucrative market.

"We have about 50 products -- local and bundled services, Web, DSL, satellite, home security, calling cards," says independent agent Q. Ester Woods, who sells residential and small business service for Cognigen Networks Inc. "People are going for bundled services with the unlimited long distance, especially in some of the rural areas where sometimes the costs tend to be a little bit more that what we would pay in the cities. Our $29 unlimited has really been a big hit."

It's a trend: Momentum Business Solutions Inc., Z-Tel Communications Inc., MCI's The Neighborhood, Lightyear Communications Inc., Excel Communications and most RBOCs are just a few of the players in the bundling space. Some agents offer a smorgasbord of opportunities, but many prefer to stick with one carrier.

"We try to keep things simple," explains Brad Edwards, vice president at master agency Telebay. "You give them 20 or 30 different products, agents tend to lose focus on what they want to sell. So we believe in selling one thing and selling it well."

Specifically, Telebay concentrates on selling Z-Tel's product, ZLineHOME. The CLEC's plan offers unlimited local calling and unlimited nationwide long-distance from home, popular calling features such as call waiting and a unified communications feature called Personal Voice Assistant (PVA), for one price.

When asked about fears that market pressures will commoditize the business proposition, as was the case with long distance, Edwards says the competition has actually helped in approaching the market.

"You have to fill an educational role," he says. "With some of the competition that's out there competing with Z-Tel, like the Bells, it's actually helping our agents sell better, because before there was an element of skepticism in the public -- what are you talking about, free, unlimited long distance? And they're like, well, that's too good to be true."

When an incumbent hires a celebrity like Danny Glover, or MCI launches a media blitz as it did for its Neighborhood unlimited product, it means that it's not such uncharted territory.

Nonetheless, some agents are not convinced. "The fact of the matter is, I don't know of a way we can really concentrate on residential and make a lot of money on it," says Devaux McLean, president of master agency Prodial Communications. "Today with the prices the way they are you either have to concentrate on something that's very easy to do, or else you have to sell an awful lot of them, or maybe both."

He notes volume sales via the Internet or affinity groups may make selling to consumers worth the effort, but that many people will balk at the $49 per month price tag for a bundle primarily because they don't spend that much now. He explains, "Some of them have commented that they may use long distance one month for some reason, but not every month. So, they're looking for a good deal. The traditional split between local and long distance is going to go away anytime soon. There's a lot of momentum to overcome."

However, many are bullish on the prospects of the bundle. Jason Guck, president of agency 5 Linx Enterprises Inc., sells Internet, wireless, long distance, satellite TV and, for the past few months, local/long-distance bundles.

"I think the best way to indicate what's going to happen in the future is to look back at the past," he says. "And when we look at the deregulation of long distance, people left AT&T for MCI and Sprint, and the price wasn't even any better. So based on that model alone we know that 15 percent of the market will leave the Baby Bells just because there's never been a choice."

Agents in the space say the key to approaching the residential market is finding the type of sales tactics and the range of marketing that works for an agent's particular situation.

For instance, Z-Tel's PVA can help open a tough account.

"We tell our agents to focus on the hard sell first, the hard sell being something that customers have never heard about, that being Z-Tel's Personal Voice Assistant," says Edwards. "So we tell people to educate customers about that. And customers aren't likely to switch on the basis of Personal Voice Assistant alone, but it will get them thinking." Just when the customer thinks he or she may not want to switch on that basis alone, the agent brings up the unlimited long distance as a closer.

While Edwards says he has subagents doing traditional telemarketing, Telebay is doing most of it's marketing online. "People can sign up online, and we've set up the Web site so customers can do an instant chat with a representative, and we can address questions right then and there with instant messaging," he explains.

The friends-and-family approach also works well with this model, say agents. "Our model is strictly network marketing, word-of-mouth approach, friends, family, people we know, there's a trust factor, credibility established there," says Guck. "And if we're going to refer someone to the service, will that trust factor they'll at least try it."

Face-to-face presentations are also on the rise. "I find that face-to-face and the personal approach has been better for me and that's because people kind of like to put a face to the services that they're using," says Woods. "They know if they call someone else, each time they get a different person. With me, I establish a personal relationship with them so they know if they have any problems, I'm real to them. But I've gotten quite a bit of online business too."

"Z-Tel really helps us because they provide $20 referral credits to the customer's phone bill," says Edwards. An agent can thus talk to a potential customer and say, how would you like to have your next phone bill for free? Give me some names and I'll call them for you and if they sign up you'll get a credit, and that's huge with face-to-face."

As for the business market being more lucrative for less work because of the size of the account, players that focus on residential these days are loyal. They say it just makes sense.

Momentum pays agents up-front commissions, the same amount agents would make with a business account, says Todd Zittrouer, area vice president for Momentum. And, the demand is there. "We are absolutely hitting it out of the park," says Zittrouer. "This is easy to sell, and it targets the main focus group of those middle-aged and 30-somethings who want call waiting and caller ID and all the features, but they also want to know what the bill will say every month so they can plan their finances."

Others see agents that shy away as missing out. "Agents that don't want to approach the market, thanks for the opportunity," says Guck. "Our core business is residential. It's a no-brainer to say, here's a service, unlimited, with all these additional features. We go into a new marketplace like New York, and I see 11 million people, we think, over the next 24 months if we just attracted 3 percent of this market, what would that be? And that's how we approach the market.

"Local service can target everybody because there are different plans," he adds. "It runs $40 to $60 for dial tone alone in the New York area. We can put people in a better position 90 percent of the time."

ztel.comZ-Tel's Personal Voice Assistant is a new feature of Z-LineHOME Unlimited home phone service.

Study: Bundling Ups Consumer $atisfaction

Competition in the long-distance telephony market and the increasing popularity of bundling services are causing steep price drops and increased customer satisfaction, according to the J.D. Power and Associates 2003 Residential Long Distance Telephone Service Study released July 1.

The study finds mean household monthly expenditure on long distance now is $24.40 per month -- down 30 percent since 1998. These spending drops coincide with a significant overall increase in customer satisfaction levels over 2002.

"The fast-growing popularity of bundling telecommunications services with a single company is one of the big reasons behind price drops," says Steve Kirkeby, senior director of telecommunication research at J.D. Power and Associates. "As states began allowing more local telephone companies to offer long distance service over the past year, consumers jumped on board with bundling, thanks to attractive discounts and the convenience of paying just one bill for multiple services."

The share of households that report bundling at least their local and long-distance services with one carrier has increased from 26 percent in 2002 to 40 percent in 2003 -- an overall increase of at least 10 million households. The study finds customers who bundle services report higher overall satisfaction than those who are not bundling services. Forty percent of respondents say they most likely would choose their local telephone company to provide bundled services, followed by their long-distance company (21 percent) and cable company (16 percent).

"Even though prices are down and customer satisfaction with long distance companies is on the upswing, we're also finding that consumer intent to switch carriers is surprisingly high due to the lure of bundling," said Kirkeby. "Wireless phones with long-distance packages also continue to displace traditional long-distance calling, which is an ongoing challenge for long-distance providers."

In the mainstream user segment, which includes customers who spend less than $30 per month on long distance, Cincinnati Bell Inc. ranks highest in customer satisfaction for the third consecutive year. AT&T Corp. ranks highest in customer satisfaction among high- volume users who spend more than $30 a month on long-distance service.

The mainstream segment includes the addition of two cable companies in the study -- Cox Communications Inc. and AT&T Broadband (now Comcast Corp.), with Cox performing near the top of the rankings. Talk America Inc., which ties with Cox to rank second in the segment, is the most improved provider with particularly strong performance in the cost of service and customer service factors.

The 2003 Residential Long Distance Telephone Service Study is based on a national representative sample of more than 8,500 households.