Verizon hit upon an ingenious marketing tactic when it started publicizing the new Droid handset. The company had been sitting idly by while AT&T made headlines — and millions — selling iPhones the past two years. But after doing a bit of research, they noticed that AT&T’s 3G coverage wasn’t as thorough as the company claimed.
Now that they have a Google smartphone in their catalog of phones, Verizon decided to go after AT&T’s network quality, with comparative maps of their coverage. AT&T took none too kindly to the effort, and quickly responded with a lawsuit.
This week, AT&T dropped its case against Verizon. It appears that Verizon has won this round of the cellphone wars. But when it does get its hand on the iPhone, there’s no guarantee that Verizon will have any more success delivering coverage than AT&T.
AT&T’s exclusive contract with the iPhone should be up in the next few months. And when Verizon starts selling the iPhone, the data demands of the product could easily sink their network performance to below AT&T levels.
But Verizon is betting that its network can take the street. The company thinks that network quality is going to be the most important — if not the only thing — that matters for cellphone providers pretty soon. If phone manufacturers keep producing products and marketing them directly to the public, that future could get here pretty soon. If Verizon can deliver on its promise, the company may have hit upon a winning strategy for the long haul.
Part of what makes Verizon’s “There’s a Map For That” ads so ingenious is their mischevious messaging. Verizon may have better 3G service in more places than AT&T right now, but the iPhone is a notorious data suck on AT&T’s network capacity.
The iPhone has been both a blessing and a curse for AT&T exactly for this reason. The more iPhones the company sells, the more money it brings in. But the more iPhone users that exist, the harder it becomes to provide them with reliable service.
And while Verizon has more subscribers than AT&T, (89 million to AT&T’s 81.6 million), thanks to the iPhone AT&T is bringing on more customers at a faster rate than Verizon. They brought in just over a million new-contract subscribers last quarter compared to AT&T’s 1.4 million.
But AT&T is struggling to accomodate all of those new customers.
Which means that putting up a favorable coverage map is exactly the kind of thing you can do when you’re a cellphone provider that currently doesn’t sell the world’s most exciting device. And the approach is working. According to real-time sentiment watcher Twendz, the terms “AT&T” and “map” on Nov. 24, came out with 43% neutral conversations, 41% negative and 16% positive. “Verizon” and “map” came back with conversations that were 39% negative, 39% neutral and 23% positive.
And Verizon is betting that when it does get the iPhone, it will be able to handle the data surge. Speaking at the ANA Masters of Marketing conference last month, Verizon CMO John Stratton says that his company’s focus on network reliability often causes Verizon to be late to market with products.
“We did this making a conscious decision that first and foremost we’d made a commitment to our customers around the quality and reliability of the service we provide. Until the device passed our high standards of testing, we would not put it on the network.”
In a market scrambling to bring customers the most exciting and newest cellphones at any given moment, that can be a real weakness. But Verizon thinks that the network, and not devices, are becoming the most important factor in the cellphone business.
Stratton told the audience at ANA that Apple’s launch of the iPhone created a separation between the device and the underlying network that supported it. “Over the course of time, customers began to disassociate that the network was still part of the equation.”
In less than 18 months, the whole smartphone market grew to over 40% of sales for carriers. But as cellphone creators start marketing their own devices, carriers are likely to become less important. When that happens, network quality will become the only distinguishing factor among carriers. Says Stratton:
“We actually believe that we’re beginning to see a repeat of what happened back at the beginning of this story in the year 2000. Customer demand is starting to put tremendous stress on the underlying data networks. Some carriers are struggling to keep up with that demand. As a result, customer satisfaction… is beginning to feel great pressure. We need to remind the market that a cellphone is only as good as the network it’s on. And so that’s what we’re working on now.”
By putting the emphasis on AT&T’s shoddy coverage, Verizon can both distract from the fact that they don’t sell the world’s most popular smartphone and warm consumers to their offerings once they do.
Karl Barnhart, managing partner at CoreBrand, tells AdAge:
“The genius of Verizon’s strategy is the insight that consumers don’t know the difference between 3G or any other coverage. All consumers know is that they aren’t happy with AT&T’s service.”