STILL ON THE LINE

Pre-paid phonecards remain a valuable marketing tool.

When airports nationwide were hit with major delays last summer, Lufthansa Airlines staffers gave beleaguered travelers free 20-minute phonecards good for local and international calls to their families and bosses.

The cards didn’t quite alleviate the inconvenience of travelers stuck in airports or left on tarmacs for hours at a time. But they did acknowledge consumer frustration by allowing weary travelers to make alternate arrangements for free. And the Lufthansa Airlines logo on the front of the cards ensured customers wouldn’t forget the brand name.

“We use [phonecards] because they are lightweight, easy to mail, and are rather inexpensive to use as a marketing tool,” says Sonia Anuth, spokesperson for the East Meadow, NJ-based airline.

Pre-paid phonecards may have passed their salad days as a promotional tool. But thanks to a never-ending series of enhancements that have kept cards looking unique and up-to-date technologically since they were first introduced in 1993, a lot of marketers still consider them a creative way to promote brands with an incentive that still carries cachet among consumers.

According to Boston-based consulting firm The Yankee Group, pre-paid phonecards were floating around some 41 percent of the 101 million U.S. households in 2000, up a tad from 39 percent of households in 1999 and 34 percent in 1998. A 13-percent slice of those households received the cards through some kind of marketing initiative, which means at least 13 million phonecards were in promotional play this year (although the actual number could be more than four times higher).

In 1996, when the phonecard was relatively new, Houston-based trade magazine Intele-Card News predicted the industry would be worth $2 billion by this year. In fact, it has grown to $6 billion, according to publisher Laurette Veres. But with that rise in overall usage has come a decline in promotional uniqueness: Phonecard promotions will account for about 30 percent of total sales this year, down from 50 percent in 1996, says Veres.

Yes, the explosive growth of the early ’90s – when phonecard sales were doubling each year – has slowed substantially. But the little items are still proving to be effective and highly efficient weapons in the marketing arsenal.

“Phonecards clearly are not dead, and they have a long way to go,” says Cory Eisner, senior vp-marketing with New York City-based Imagine Telecom, which has been consulting brands on phonecard promotions since the early ’90s. “There is still a large group of people that have never used them before.”

Bass Ale, The Green Bay Packers Official Tour Co., Sheraton Hotels, Hawaiian Punch, Harley Davidson, and Target stores are just a few of the brands that have offered free cards recently. The cards may not be employed as the No. 1 promotional giveaway anymore, but they’re still solid incentives for customer loyalty programs, on-pack promotions, trade show giveaways, job recruitment efforts – or for pacifying angry travelers.

Dial M for Motivation Why a phonecard? It’s simple. At most they are the size of a credit card and can fit in a wallet. But you don’t even need a card anymore, because toll-free and PIN numbers on a sticker or piece of paper (or even in an e-mail) suffice. They’re also cheap, often costing brands as little as three cents per minute, and can be sent inexpensively to numerous targets.

The biggest attribute of a pre-paid phonecard continues to be its perceived value. A 20-minute card, for instance, can save a customer real money off a long distance bill. That can be a nice incentive for someone walking down a store aisle (although the five-minute cards that once were fairly standard don’t attract as much attention these days). Suppliers say the use of phonecards as an incentive remains steady. “The initial hype has died out, but not the use of cards,” says Mark McGill, vp-sales for Stamford, CT-based Communications Design Group. “They have proven themselves over time, and it’s become commonplace to include them in [promotion] budgets.” McGill says his sales volume has increased 600 percent in the last three years, doubling to $16 million in 2000.

Phonecards originally became popular in large part because they offered users an immediate reward. It was an ideal carrot marketers could dangle in front of customer faces to get them to do something – buy a product or participate in a data-gathering survey – or to offer a thanks when an action was completed. Phonecards soon became commodity items, with retail stores beginning to sell them. Then suppliers started to offer phonecards in every shape and size, both to maintain their unique appeal and to better represent clients’ brands. These new cards quickly became a novelty collector’s item.

But like Cabbage Patch Kids and the Macarena, the novelty wore off, especially with the advent of the Internet and free e-mail. In fact, Internet services such as Yahoo, America Online, and Microsoft are now venturing into telecommunications and offering free phone time to members.

Suppliers have thus found themselves working harder to sell marketers on the idea of using phonecards.

Cocktails for Two But it’s not always a hard sell. Earlier this year, Stamford-based Mott’s saw huge sales increases when it gave away 10-minute phonecards attached to 64-ounce bottles of Clamato. The drink is most popular among Hispanics, a demographic that also happens to utilize the most pre-paid phone time, primarily because so many have emigrated from other countries. Using a PIN number found under the cap, consumers received a gift worth as much as five dollars for each $4.50 purchase.

“There was obviously a big need for the customers to get in touch with family members back [home], and long-distance calls home can easily reach 50 cents per minute,” says Mott’s brand manager Marcel Nahm. “We found consumers weren’t as interested in games of chance as they were in instant-win gratification.”

Final results from the promotion aren’t due until next month, but as of November the redemption rate on the phonecards was up around 20 percent. Best of all for Mott’s, sales of Clamato shot up 27 percent among Hispanics and 14 percent overall from July to September. “We will definitely continue to consider phonecards as a mechanism,” Nahm says.

Who Needs a Card? The continued use of phonecards is due in large part to the industry’s ability to adapt to new applications.

Although the notion of an immediate reward will always be there, the challenge lies in finding new and more interesting ways to keep the appeal high. “There are so many applications,” says Denny Kankaris, president of Karis Communications, La Mesa, CA. “You can put a phone number and a PIN code on anything and turn it into a phonecard.”

Suppliers are therefore die-cutting phonecards into just about any shape imaginable to better match a product or promotion, which often makes marketers see things in a different light. Brand managers who requested price quotes for phonecard orders from Hollywood, FL-based PhoneCard Express this year were surprised to find Matchbox cars delivered to their desks. The shiny, black 1962 Corvettes had more under their hoods than a typical toy car: they featured labels offering 20 minutes of free phone time. A number of recipients who called to order the cars were disappointed to learn the item wasn’t a catalog item, says David Redlich, director of sales and marketing at PhoneCard Express.

New York City-based Imagine Telecom has devised a dog locator tag that will hit the market before Christmas. The tag, which pet owners can attach to their dog’s collar, contains a pre-paid phonecard to be used to call the owner if the animal gets lost. The best thing about the tag, according to Eisner, is that owners can pre-program the number so it will be dialed automatically when the phonecard is used.

Shaping cards like products and adding a keyring continue to be popular tactics. Toyota gave customers a keychain card shaped like a cell phone, complete with a flip-up design. Volkswagen recently gave Beetle-shaped keychains to owners who got Castrol oil changes at dealers.

“If you were a (Volkswagen) bug owner, you would put that on your key chain, and that’s what we’re trying to do,” says Redlich, noting that PhoneCard Express orders are up 33 percent this year. “The reason phonecards will stay a success is their universal appeal – anyone from a 13-year-old girl to a grandparent.”

Getting Something Back Marketers also find phonecards valuable as a means of collecting information from consumers. Many brands require users to answer a few questions about themselves before their card is activated. At the very least, a recorded message reminding them about the company or product ensures they remember the gift-giver.

Marketers are now using phonecards to get hits on their Web sites as well. In a program known as an ITB (Internet Traffic Builder), cards carry Web addresses rather than toll-free numbers. Users visit the site and type in an authorization code to receive their PIN number. “The main goal is to get as many hits as possible,” says Bruce Pine, senior vp-marketing for Miami-based iTelsa, a phonecard supplier that has seen 10-percent growth this year. “If a company has invested millions of dollars in a Web site, the best way to get people to visit is to give them something.”

That something might very well be a phonecard. The phrase, “phoning it in,” never sounded so positive.