Sprint-AOL Co-Marketing Deal a Step In the Right Direction
By Khali Henderson
As part of its plan to decrease its mass-marketing budget, Sprint has entered into an agreement with America Online Inc. (AOL) to offer AOL members Sprint long distance plans branded “AOL Long Distance provided by Sprint.”
While analysts say the exclusive deal with AOL is a step in the right direction, they add it doesn’t go far enough.
“Sprint must give up on retailing long distance, leaving it to indirect channels and focus instead on operational leadership,” says Forrester Research Inc. analyst Seema Williams.
Under the multiyear, multimillion-dollar agreement, Sprint will be the exclusive provider for AOL-branded Long Distance on the AOL service. Sprint’s wide selection of long-distance plans will be promoted prominently on the AOL service, and other America Online marketing channels, such as airtime on Time Warner TV properties like Turner Broadcasting System. AOL members will be able to choose from one of Sprint’s any time or international residential long-distance services, including Sprint Nickel Anytime for $5.95 per month. New customers will earn credit toward their AOL service, and they will be able to receive additional credit on AOL every sixth months thereafter.
Williams says deals like this and others with Capital One and Northwest Airlines will cut customer-acquisition costs and help offset the 7 percent decline in long distance revenue that hit the carrier in 2000.
However, she adds, the carrier must turn over all consumer long-distance selling to more proficient retailers, taking an “Intel Inside” strategy. Aside from e-channel partners like AOL, Williams says Sprint should look to partner with large retailers like Target and even to local telecom companies from which consumers prefer to purchase their long-distance service. (Forty-five percent of Sprint’s local customers also use its long-distance services.)
Williams adds such strategies are not confined to Sprint. “As long-distance providers face increasingly dire business prospects during the next two years, they will partner with retailers that bring in million of customer per year and deliver the selling support that commodity telephony products need,” she says.