The cellular telephony market has been one of South Africa’s great success stories. From a standing start in 1994, the country now has just under 20-million subscribers, outstripping all initial predictions. This success has been matched in its advertising profile. In less than ten years the two original incumbents – MTN and Vodacom – and the new operator Cell C (from 2001), have all rocketed into the top 12 rankings of South African advertisers. In 2004 alone, the combined industry spend on advertising increased 38 percent and, anecdotally, it continued to grow in double digits in 2005.
Actual above-the-line advertising is just one component of the cellular providers’ total marketing spend. Vodacom spends approximately 40 percent of its marketing budget above-the-line, with 60 percent below-the-line, “if one defines sports sponsorship as below-the-line activity”. Cell C’s split is fairly equal, while MTN says there is no set formula. Says Bernice Samuels, general manager of brand MTN: “It is all dependent on our understanding of the market and the business plan that derives from the market as it changes”.
These words are reflective of the general attitude of MTN’s executive director of marketing, Santie Botha, who’s view on any creative or media plan is that it must ultimately translate into sales. As Botha told The Media recently: “Because MTN is a service brand across the total LSM market, originality and relevance are important to me. We want to stand out but at the same time the bottom line is we want to sell.”
What is clear with MTN – as with the other players – is that electronic media receives the largest slice of the advertising pie, although print’s share does remain significant. Samuels says this is because MTN gets the widest reach from television.
But billboards have been widely used to create what Vodacom terms “the big brand feel”, and new media are being added. The Vodacom spokesperson says that the group selects its media by customer segment and continues seeking out “new and exciting channels”, such as Primedia’s Rank TV in taxi ranks.
The industry has also been a leader in advertising creativity. Cell C head of marketing Simon Camerer says that at the recent Loerie awards, “Cell C was the single most nominated brand and won 16 statues”. Cell C works through a number of above- and below-the-line media including SMS and the internet. Its position as the third, loss-making, incumbent means that it has been “very conscious” of its marketing return on investment, although it punches significantly above its market share weight in terms of industry adspend [see graph]. Says Camerer: “We have also focused our efforts on maximising our resources effectively, so as to give our brand breakthrough impact and stature. We do this by looking for new and interesting ways to get our message to our target customers”.
The growth in advertising and marketing spend has partly been driven by what a Vodacom spokesperson describes as the “spectacular” growth of cellular usage over the last three years.
However, as Botha intimates above, it has also been driven by hard-nosed business considerations. The end result is that the cellular providers have now become three of South Africa’s most high profile – and valuable – brands, this despite (or perhaps assisted by) a high profile media battle in 2005 around whether MTN or Vodacom is South Africa’s top brand in financial terms. Notwithstanding that battle, Vodacom’s is ranked as the top brand in telecommunications and the third most popular brand in South Africa in Markinor’s Brands and Branding survey.
But all this does not mean the cellular industry doesn’t face its own specific advertising challenges.
Joanne Scholtz, channel insights director at FCB Headspace, highlights advertising clutter as a key issue. Not only have the cellular providers themselves conducted high profile campaigns across a number of media, there is also lots of noise in advertising spend from other cellular industry participants like Nashua, Altech Autopage and the handset manufacturers. She estimates that the entire mobile connectivity market spent over R1-billion in advertising in 2005. “There is noise for the consumer and confusion in terms of new technology, handsets and content for handsets.”
The test, then, has been how to break through this clutter.
For Vodacom, the biggest challenge – according to a company spokesperson – has been to differentiate the company from its competitors through world-class advertising, “aimed at winning hearts and minds of consumers”. Scholtz says that FCB – and Vodacom – have adopted a strategy to drive “conversations that connect.” Because, apparently, “you can’t ignore ‘someone’ who is touching you.”
Camerer says that Cell C’s key challenges are to “ensure we remain relevant and tap into consumer insights to ensure our advertising resonates with our customers.” What that means, effectively, is that Cell C now need to translate their winning campaigns into greater sales. In addition, Camerer says: “The advertising space continues to become bigger, bolder and more proliferated, so in order to break through the clutter we need to remain consistent and obvious so that customers easily identify us.”
While Botha prefers not to watch too closely what her competitors are doing – having told The Media that “your customer is far more important than your competitors” – Samuels highlights high media inflation, ahead of the consumer price index (CPI), as a particular challenge for MTN.
While these challenges demand their own unique solutions, it’s unlikely that the growth in South African cellular advertising and marketing will continue to grow as strongly as in the past two years, partly because the industry faces a number of new obstacles to its overall profitability.
The incumbents have battled with increased margin pressures over the last two years. This intensified in 2005, partly due to the advent of a price war. Given the regulator Icasa’s concern that South African cellular tariffs are excessive, and the pending introduction of Mobile Number Portability (MNP), the price war could well intensify even further, leaving limited scope for increased advertising budgets.
In addition, the current estimated 58 percent penetration of the population of potential South African cellphone users means that overall subscriber numbers will increase at a slower pace than in the past.
Having said that, Scholtz does not see any easing in current adspend levels. She points out that Virgin Mobile’s forthcoming entry – as a separate brand supported by Cell C – into the South African market will increase brand awareness competition, so advertising budgets are unlikely to be cut.
Vodacom confirms that its adspend will continue at similar levels, whilst Cell C expects inflation-related increases. MTN is coy on the matter.
At the top end of the market, Scholtz believes there is likely to be increased focus on customer relationship management (CRM) and more below-the-line activity to improve consumer loyalty in the face of MNP.
Lastly, the media that the industry uses to market itself is also set to evolve.
Scholtz says that there’s a constant race for media owners to bring new opportunities to cellular companies. “The positive side is that they are aware of new opportunities all the time, the negative is that they get played off against each other”.
Botha, however, encourages the media industry to do better. “It’s a ‘same old, same old’ approach of selling ad space and a rate rather than creating something unique. Most of this comes from us and I believe that they are missing a huge opportunity.”
Vodacom says that the introduction of 3G means it can now offer a multitude of new products that are made possible by the broadband speeds provided by this technology. “The key 3G applications are video calling, high speed internet access via your phone or mobile connect card and of course the very exciting mobile television offering. In future, we may flight our adverts on our own television offering.”
On this imminent arrival of a new way of communicating with consumers – which, clearly, the cellular providers will both pioneer and use themselves – Samuels says that 3G as a platform for advertising will “force us to get smarter and simpler in the way we communicate our messages to achieve a high level of adverts.”