At the end of June, Vodafone's most expensive B2B campaign came to an end (see B2BM June 06, p7). Comprised of TV spots, radio slots, outdoor and national press ads, as well as SMS activity, it bore all the hallmarks of a standard consumer campaign. However, unlike Vodafone's ongoing B2C marketing we are unlikely to see more B2B activity, on the scale of this campaign, for some time.

The press release from Vodafone validates this view. Hailed as the most 'significant campaign ever done in support of enterprise products,' you get the feeling that this was something special, one-off even. Vodafone was also very keen to point out that no expense was spared, claiming that the campaign represented the 'greatest spend on a project of this nature'. ('Of this nature' meaning it targeted small businesses.)

Vodafone invested £4 million in this activity. For a B2B campaign this is serious money, but compared to its B2C investment it's shrapnel. To look at it another way, it is only half of the reported £8 million annual price tag forked out for David Beckham's three-year sponsorship with the brand. Even leaving such high profile sponsorships aside, Vodafone's investment in B2C marketing has to be vastly larger, simply because there is more of it.

Retention problems driving spend

Vodafone is not alone; O2 recently spent £10 million on a brand refresh and T-Mobile's 18-month partnership with Robbie Williams can't have come cheap, whilst Orange has also upped the stakes recently by offering free broadband.

The reason for this aggressive and expensive marketing is down to the mobile industry's problem with retention. On average, 30 per cent of customers leave their operator every year for a better tariff or a more sophisticated phone. Consumers are also leaving traditional mobile phone operators – O2, Vodafone, etc. – for brands such as Virgin, Tesco and Carphone Warehouse who are already in the market.

Tom Weiss, author of Mobile Strategies and previously a VP at T-Mobile – where he was responsible for European product development – believes that many other businesses are looking seriously at launching mobile operations or mobile virtual network operators (MVNO). Weiss comments, “If you're a major brand with strong distribution, it's just a matter of leveraging those distribution channels to target high-value mobile phone users while partnering with a mobile operator to provide the technical infrastructure and billing.”

This means new competition for the mobile networks, and it will be coming from the strongest of quarters, those areas which generate the most brand loyalty: retail, technology and food services. Topshop, Apple and Starbucks could enter this market, thus posing a very serious threat to the likes of O2 and Orange. Disney almost launched an MVNO earlier this year, but backed out when scientists brought up the dangerous affects of mobile phones on children.

Facing up to the threat

The operators are fully aware of this threat. Vodafone, in its end-of-year results for 2005, said in the forward-looking statement, “greater than anticipated competitive activity... could lead to customer churn, make it more difficult to acquire new customers and reduce profitability.”

This is where targeting small businesses more effectively, and determinately, could save the traditional operators. Weiss comments, “Business customers tend to be higher users of mobile phones than anyone else and therefore higher revenue customers.” However, the ideal business customer is one who travels overseas and uses a Blackberry, and these people tend not to work for SMEs. Weiss admits, “Historically, SMEs have been less attractive than larger businesses but they are becoming increasingly important.”

Loyal customers

Given the rate of churn among consumers, it's unsurprising that the operators are getting more interested in SMEs. While a business will negotiate a better price, it is unlikely to change the entire company's telephony system for the sake of a free music video download. Weiss agrees that business customers are less likely to change networks, but he argues this is a much smaller market.

Yet according to the Federation of Small Businesses, there are 4.3 million small businesses in the UK employing a total of 12 million people. The biggest difficulty for the mobile phone operators is reaching these people.

Ian Quest is a director at Newton Industrial Consultants, a 22-strong engineering firm. He comments, “The previous company I worked for had a mobile phone contract, but when we set up Newton we stuck to our own phones because there didn't seem to be any advantage in a business deal. Since then I haven't been directly targeted by any of the operators with another business proposition.” This is just one example, but stories like this abound.

Identifying and targeting potential business users directly is the key to this market, and obviously the marketing directors at these brands realise that; but how relentless and co-ordinated is their strategy? A two-month campaign is not enough. And people across the whole business need to know about solutions so that they too can play a part in converting the 12 million SME employees into customers.

To achieve this, serious investment is required. Perhaps next time, before embarking on a £10 million brand refresh or shelling out £11 million on celebrity du jour, the networks should spare a thought for the SME customer.

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