Talking Back

Look in any wallet or purse these days and there’s a real good chance a pre-paid phonecard is tucked inside. How good? According to Boston-based consulting firm The Yankee Group, at least one member in 34 percent of 102 million U.S. households has used the handy little device.

Chances are also pretty good that the phonecard in question will be branded with somebody’s logo – a packaged goods maker, a financial services company, a municipal department, or a local charity. It may even be doubling as the holder’s keychain or business card.

According to Yankee Group, 13.7 percent of households have received free phonecards through promotional giveaways. That’s about 14 million people. As many as 60 million promotional cards in total were dealt out last year, according to industry sources.

“It used to be just the technologically advanced [people] who were getting the cards,” says Fred Voit, Yankee Group’s senior analyst for consumer communications. “[Cards] have gone down-market, and are aimed at pretty much all segments now.”

Widespread acceptance has made the phonecard a standard – although some would suggest almost passe – component in thousands of promotional programs each year. They can be used as a stand-alone giveaway, as an on-pack value-add, or as the centerpiece of a sweepstakes. In the latter, recipients enter the contest at the same time they call in to activate the card.

Now that the public is so receptive to the concept, marketers are increasingly looking to add more bang for their buck by collecting a little user data in return. As long as customers are calling in anyway to activate their cards, why not find out a little bit about their purchasing habits before giving them the free minutes? The idea: transform free phone time into interactive marketing.

A cast of thousands It seems everybody is in the pre-paid phonecard business these days. They are more than 450 companies selling the product in the U.S. (even if you don’t count John Gotti, Jr., recently indicted in a phonecard scam) So suppliers are looking to make their products stand out by licensing well-known brand names and entertainment properties to liven up their packaging.

M & M/Mars recently signed a multi-year deal with telecommunications service provider IDT of Hackensack, NJ, for phonecards bearing the likenesses (and voices) of the M&M characters. AT&T Pre-Paid Cards, Basking Ridge, NJ, used a sweepstakes to launch a series of cards bearing images from Paramount Pictures’ Star Trek: Insurrection. Purchasers entered their PIN number and heard a voice message telling them if they had won the grand prize trip to the Star Trek: The Experience attraction at the Las Vegas Hilton Hotel & Casino.

With most major chains on board now, the pre-paid retail market is booming. Yankee Group projects sales growth of more than 30 percent to $1.3 billion in 1999 (based on the dollar value of cards sold, not retail sales). The fact that all the leading telecommunications players have finally taken a seat at the table should boost the marketplace further. BellSouth entered the pre-paid market for the first time this quarter.

“AT&T is finally serious,” says Voit, noting the telephone giant’s recent purchase of Dublin, OH-based SmarTalk Teleservices, a phonecard pioneer that had fallen on hard financial times but still commands more than 25 percent of the market. AT&T has also sewn up exclusive distribution through the Wal-Mart chain, Voit notes.

But with ubiquity comes dilution, and a distinct lack of creativity in the promo segment of the market. Although total phonecard distribution is expected to rise almost 21percent to $2.1 billion this year, the Yankee Group doesn’t expect to see promotional phonecard dollars increasing at all above the $795 million worth distributed in ’98.

“Like any promo, it has a life cycle, and this life cycle has gone far beyond the norm,” says Voit. “People are really aware of it now. Chances are, if you give them a $5 card, they’ll toss it.”

For cost-conscious marketers, that “breakage” proposition isn’t necessarily a bad one. The economical nature of the phonecard has been one of its major selling points all along.

You put out 10,000 cards and half of them will never be used. That saves on costs,” says Chris Smith, director of MCI WorldCom’s pre-paid phonecard operation. “Plus, you don’t have the redemption issue.”

“It’s a cost-effective program with a high-perceived value among consumers,” adds David Redlich, director of sales and marketing for Hollywood, FL-based PhoneCard Express. “You don’t have to worry about shelf space or inventory. You don’t even really need a card anymore. You just put a sticker with a PIN number on a product or in a mailing.”

A PIN for your thoughts To make sure they maintain their value perception, marketers are starting to make phonecards more functional. At the most basic level, that simply means using a celebrity’s voice in the activation process or adding more information to the pre-activation message. Contests and sweeps that can only be entered by activating a card are more common as well.

At the same time, marketers are making consumers talk to them before they get to talk to anyone else. Data collection is an increasingly requested component by users of phonecard programs, suppliers say.

Most interactive programs still only collect names, addresses, and phone numbers that can be used for future direct-mail efforts. But companies are more frequently adding market research to the mix.

“It’s easy to put some survey information up front,” says Dan Terrill, group manager of Sprint FonPromotions, which distributed more than 20 million cards through 1,400 different promotions in 1998, and is expecting double-digit growth this year. “You just have to be aware of the ‘bug’ rate – how much you can do before people find it to be a hassle,” he says.

“You can’t ask 10 questions and then give them five minutes,” says Redlich. Charlotte, NC-based NationsBank Corp. ran a promotion in which its business-owner customers were asked to answer seven questions about their company’s financial needs. But they received 60 free minutes for doing it, he notes.

Manhattan Beach, CA-based shoe manufacturer Skechers USA this month wraps up an account-specific promo with Nordstrom Department Stores, Seattle, aimed at driving sales and strengthening the brand among 12-to-28-year-old males. The program offers a 15-minute phonecard from Sprint FonPromotions and a $45 berber hat with the purchase of a pair of Skechers shoes at Nordstrom.

The Skechers Hooks You Up from Head to Toe promo was advertised with a 200,000-piece direct-mail drop to Nordstrom customers and print ads in college newspapers. Nordstrom’s staid in-store policies only allowed for a 16-inch-by-20-inch poster sans copy and a small counter display.

“We wanted something that would give value, and everybody says kids use phonecards,” says Skechers marketing director Jeff Greenberg. “I don’t know if [Skechers customers] do, but I’m anxious to find out.”

After getting their cards, purchasers are invited to call in and enter a sweepstakes for four prize packages of shoes, Joe Boxer shorts, hair care products, and a Iron Horse mountain bike. Entering the sweepstakes requires callers to first answer a series of questions including name, address, phone number, age, favorite music group, and frequency of visits to Nordstrom.

Greenberg says Skechers was attracted to its first-ever phonecard promo because of the ability to generate brand impressions both on the card and through the voice prompts on the service. Data capture is an added bonus. “We are definitely going to utilize that information, and we’ll share it with Nordstrom,” he says.

“Phonecards are a great way to bring [a program] all together,” says Melisa Wolfson, president of Los Angeles-based The Creative Couch, which handled the promo. “They’ve been stereotyped as being generic. But with all the different functions and forms now, they’re getting their appeal back.”

Our IVR is standing by Of course, you don’t need a phonecard to run an interactive promotion. Toll-free numbers work just fine in that respect, and offer the same data capture possibilities.

Philips Consumer Communications, a division of Netherlands-based Philips Electronics NV, went that route last quarter as part of its first media tie-in program, with Buena Vista’s Enemy of the State. The interactive element was a logical one for a communications company and a movie in which the cutting-edge technology had a bigger role than co-star Gene Hackman.

Working with Sprint and New York City-based agency Kobin Enterprises, Philips set up a toll-free number that was advertised through P-O-P materials at electronics retailers. Consumers were invited to call in and select the “enemy” that was bugging their phones. A total of 5,000 instant prizes including Philips cellular phones, pagers, radios, T-shirts, and baseball caps were presented based on callers’ selections.

The program generated more than 40,000 calls, with names, addresses, and phone numbers collected from prize winners. “I can’t imagine doing a promotion where you could collect data and not doing it,” says Philips director of global marketing communications Barbara Krafte.

“Companies aren’t afraid to put an 800 number in their ads,” says Steve Kutelik, vp-sales for Omaha, NB-based Call Interactive, which has helped Revlon distribute lipstick samples, Kraft Foods sell Jell-O Jigglers molds, and Fox Broadcasting attract viewers to Party of Five through interactive promotions. “Everybody’s got their own twist, but we are seeing a lot more sweepstakes.”

Advances in interactive voice response (IVR) technology has greatly reduced the costs of running toll-free numbers, because it cuts down on the number of live operators you have to pay. More than two-thirds of consumers responding to Call Interactive programs are now opting to use the electronic system, Kutelik says.

Phonecards don’t have to be stand-alone products anymore, either. MCI WorldCom developed a promotion for MTA New York City Transit in January that offers a Call & Ride card worth 11 trips on NYC subways and buses (a $16.50 value) and 40 minutes of domestic long-distance calls. The MTA came knocking as a way to promote its MetroCard pre-paid fare program. MCI was intrigued by the deal because it gave them an inroad to 3,800 untapped retailers, according to Smith.

It was the second dual card MCI has developed. The company joined with Mobil Oil Co. last year to roll out a Mobil Go debit card that facilitates 25-cents-per-minute phone calls along with gasoline and convenience store purchases.

Looking to expand retail distribution of its pre-paid cards in Illinois, Chicago-based Ameritech, Inc. worked out a deal with the state’s lottery commission last summer to offer a free quick-pick card for any customer who purchased a $10 phonecard. It was an expensive proposition, because the company needed to set up links to the Illinois State Lottery’s mainframe computer that would allow phonecards to be activated and a ticket to be printed out automatically whenever a purchase was made.

Thus far the company has found the expense worth it, says Mark Bruk, senior marketing manager for promotional phonecards. Ameritech launched the program by renting 176 billboards in the greater Chicago area and passing out 150,000 sample cards at summer festivals. Through the first seven months of the program, 1,200 new retailers have signed on. And at least one lottery winner was produced- an Ameritech secretary who hit for $50 after buying a phonecard. (The system is not designed to identify tickets acquired via the program). Ameritech is in discussions to expand the deal to other states, says Bruk.

Are these kinds of multi-use cards the future? Yes, say many analysts. “People are combining phonecards with credit cards, debit cards, frequent shopper cards, trying to give those programs a higher-perceived value,” says Redlich.

Expect to see more debit-type cards offering free long-distance minutes as just one of their uses. Several years down the road, smart cards may render all other pre-paid card programs irrelevent. And that could reduce the promotional phonecard’s effectiveness.

“The big selling point for phonecards is the huge perceived value,” says Dave Fehrman, general manager for Dayton, OH-based Standard Register’s imaging services group, which makes and distributes cards for sales and promotions, and in the latter area has worked with everyone from GE Capital to the Cincinnati Zoo. “With new wireless programs coming out, the five-cents-a-minute on Sunday deals, the perceived value could be dropping.”

Fehrman points to the phonecard’s success as a contributing factor in its eventual demise. “They’ve been instrumental in changing the public’s perception. You didn’t see many pre-paid cards before there were phonecards. ” he says. “Now we’re starting to see debit-type cards for a lot of things.”

Simple still sells Whatever the future may bring, don’t tell brands that the phonecard is losing its value perception among consumers. They’re still seeing results. For all his pessimism, even Yankee Group’s Voit maintains that promotional phonecards “are going to be around for a long time to come.”

Pepsi-Cola Co. is planning a 1999 promotion similar to the one it ran in 1998, when 5-minute and 10-minute cards were packaged with 12 million 12- and 24-packs of Diet Pepsi, according to sources. Coca-Cola currently is running Give the Kids the World, a program in which consumers receive peel-off, five-minute AT&T cards and other discount coupons when they buy Cokes in special large-sized plastic cups. (A cause-related overlay donates $1.50 of the cup’s $1.99 purchase price to charity.)

Following up on a successful back-to-school promo last fall, Binney & Smith, Easton, PA, slapped five-minute cards on 47,000 units of Crayola Bold & Classic markers last quarter for a Walgreens-specific holiday deal. The offer helped score endcap displays and a rare placement in Walgreens’ holiday circular.

The phonecard didn’t have any interactive component, other than a brief ad message for Crayola prior to activation. No user data was collected in the process. But marker sales increased four-fold at Walgreens during the holidays, according to a spokesperson for agency Market Growth Resources, which handled the program.

That doesn’t exactly sound like a promo whose time has passed.