Telecom Tune-up

BELL ATLANTIC is rolling out a business-to-business retention program in New England that had its origins in New York in 1995. The telecommunications firm inherited the program when it acquired Nynex last year.

All the New England states except Vermont are slated for the loyalty-building effort.

Nynex, the former New York telephone services provider, realized it would face competition from long-distance companies when the market was opened by law in 1996. However, it was ill equipped to pursue a long-term relationship strategy, said BCA Associates president William McAndrews, speaking at the National Center for Database Marketing conference in July.

For one thing, Nynex had a bad reputation with its customers. “Their attitude was, ‘We don’t expect much of you, and by God, you don’t deliver it,'” McAndrews said. Another problem was that Nynex had “several legacy systems built up and no dynamic database.

“We had loads of telephone data, loads of transactional data, and boy, could we produce bills!” said McAndrews, who left Nynex last spring. “But we had no insight as to who our customers were.”

For example, a realtor with five offices received five different bills. Nynex billed by telephone lines, and failed to realize it was dealing with one customer.

Finally, the firm had several different sales channels, “each speaking to the customer differently.”

When it attempted to address the issue in 1995, Nynex decided to create competitive “calling products,” based to some degree on value.

So it introduced discounts tied to loyalty. “We gave you 10 cents off for every dollar you spent,” McAndrews said by way of illustration.

Nynex also developed a program of deferral credits that customers could accumulate and redeem for discounts or other benefits. Customers were told that these were “bonus” credits.

“‘Deferral’ didn’t mean anything to customers, but it sang with our CFO,” McAndrews said.

Nynex built a customer list and profile, the first step in setting up a multifaceted database. In New York, estimated by outside sources as a $3.5 billion market, the company relied on a primitive segmentation system that allowed it to market to its Northern and Southern regions. Eventually Nynex developed 80 to 126 targeted offer versions, and started talking to customers in a guarded way to find out who they were and what they wanted.

The bonus credits program proved popular with customers, who used Nynex’s redemption center to keep track of what they’d accumulated. Credits were redeemable for phone discounts as well as training courses and restaurant certificates.

The cost? About $3 million to $4 million a year for everything. The result? Nynex limited share losses to under 15%-far less than the 50% anticipated by some observers. And it minimized the impact from natural erosion of the market.