Monday, March 28, 2011

Carlos Slim's Track Phones: Marketing In Action

Last week's post on ATT's proposal to buy T-Mobile focused mostly on the market concentration among the top three wireless firms.

In subsequent discussion of the proposed deal, Michelle Caruso-Cabrera, a co-anchor and reporter on CNBC, made a very interesting point. Rather than focus on the two major wireless firms, ATT and Verizon, she noted that Mexican billionaire Carlos Slim's Track Phone pre-paid wireless business had the highest growth of any wireless firm.

I can't vouch for exactness, but I believe the data she cited showed Slim's firm adding more subscribers in some recent multi-year period than all three competitors who weren't ATT or Verizon. I believe MetroPCS was one of the firms, and T-Mobile may have been another.

In any case, it got me thinking about segmentation and consumer behavior, always favored topics due to my academic roots in marketing theory and practice.

I'm aware of how differently P&G and Colgate-Palmolive market in third-world countries, as opposed to higher per capita income European and US markets. Specifically, much of their volume moves through neighborhood bodegas with little product display capacity, selling to consumers with little disposable income. Thus, package quantities tend to be much smaller. Detergent might be sold by the envelope, rather than, as in the US, in a money-saving giant bottle.

That said, it makes sense to me that someone with business and cultural roots in a country like Mexico would naturally see the value of pre-paid wireless phones. Rather than take the American vendor route of replacing large monthly landline phone bills with similar-sized, or larger ones for much more feature-rich, multi-functional smart cell phones, Slim chose to offer smaller-sized bites of valuable wireless service to poorer consumers.

The result? Faster subscriber growth in a simpler market. You can bet that Slim's customers probably aren't constantly watching videos or netsurfing on their phones. They're probably happy to have such a powerful, yet inexpensive communications tool on their limited budgets.

When asked, an ATT official made some mention of possible interest in the pre-paid market. And, of course, it's no shock to observers that, for purposes of the proposed acquisition, ATT seeks to define the wireless market to include pre-paid, thus lowering the effective market share of the combined firms.

However, to me, Caruso-Cabrera's comment was eye-opening. Recalling the unsatisfying, mediocre total equity price performances of ATT and Verizon, relative to the S&P500, which appeared in last week's linked post, I can only imagine how Track Phone would look if it were public and standalone.

Just because a product aims at a lower-priced segment doesn't always mean it's lower-quality. That characteristic is, ideally, in the mind of the consumer. And Carlos Slim's people have apparently hit a very good sweet spot, offering affordable doses of a very desirable, powerful service, wireless, to lower-income consumers.

A great marketing story. I love it.

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