Retailers can look forward to a higher level of merchandising sophistication in instituting their prepaid phone card programs this year.
A more developed marketing approach to telecard retailing will be possible through instant card activation at checkout. This will enable the industry to sell phone cards more like other packaged goods on the supermarket shelf. The result, say prepaid phone card suppliers, will be increased competition for brand names and bigger national promotions for market share, all increasing the bottom line for the retailer.
Most grocery retailers treat phone cards as cash and sell them hidden away behind service centers or from the cash register drawer. Instant activation will allow retailers to display prepaid cards on the shelf and activate them with a simple "swipe" as the consumer passes through the checkout. Bob Odette, vice president of sales for Associated Grocers of Florida, Miami, mentioned it has been difficult to deal with prepaid phone cards when they are treated as cash. "Those huge dollar items are tough to keep track of and have presented a hindrance to expanding the market. It's a good business for the store, one which is going to grow even more, but we have stayed away from it for this very reason," he said. "Bringing the cards out in front of consumers will do a lot to drive sales," said Marlene Waltz, director of prepaid cards at Sprint, Overland Park, Kan. "Now retailers don't have to worry about theft and shrinkage and they can easily display our product anywhere impulse purchases occur." Sharon Robbins, director of marketing at AT&T Prepaid, Basking Ridge, N.J., agrees that taking the cards out of the drawers changes how you market them. "Most major players are moving toward point-of-sale activation. When that occurs, sales will increase. Right now, the cards are like cash sitting in the register drawer. When they come out, they turn into a packaged-goods item. Then you have the opportunity for merchandising, display and promotion that is very visible to the consumer." "Instant activation will be a tremendous benefit for us," said Kathy Sweidel-Caton, director of customer service operations at Gerland's Food Fair, Houston, which currently sell cards in its service centers. "Moving prepaid cards to the shelves will allow us to display them like other packaged-goods products. It will probably pit one brand against the other, but that's what all the other products do anyway," Sweidel-Caton said.
Thinking of prepaid cards as a packaged-goods product has caused companies like MCI to assemble their prepaid marketing teams from packaged-goods and retail models. "This involves everything from changing the way you do business and changing the mind-set of the people involved in delivering this product," said Stacey Borocz, senior manager for retail marketing at MCI, Atlanta. "We've hired brand managers from consumer products companies, buyers, merchandisers and retailers," said Borocz, whose background includes Macy's and Federated Department Stores.
This new positioning will raise the consumers' consciousness about what brand the card is, Robbins pointed out. "There's a lot more noise in the industry about whose brand the card is. Consequently, consumers will start looking for brands," Robbins said. Brand awareness has increased, too, due to the consolidation within the industry, executives agreed. Because a lot of smaller companies have merged or disappeared, the major brands have emerged in a stronger position. "There will be a place for small players but they'll need to choose their market niches very carefully," said one executive. "There was less comfort or confidence among retailers and consumers about the viability of these smaller companies," said Sprint's Waltz. "The fact that the bigger companies are left, and can advertise and educate people on what prepaid cards can do, is helping the industry grow." Waltz said that the percentage of people in the United States who have bought a prepaid card in the past year has nearly doubled, to 11% from 6%. "This increased knowledge, awareness and acceptance of prepaid cards will pump up retail sales as well." At Friedman's Markets, Butler, Pa., prepaid phone cards are sold from vending machines provided by Talk 'N Toss, Vancouver, Wash. Dale Eichenlaub, vice president of general merchandise, is very pleased with his setup and hasn't heard anything about instant activation. His sales are up too. "Sales of phone cards are up 5% over last year and I do very little for them. They're just there for the customer's convenience. And I see more and more people buying them," Eichenlaub said. As the big companies enact their 1998 national promotions, prepaid phone cards will gain even more attention, said suppliers. "We'll be there to help retailers merchandise cards by supplying a variety of merchandise units and POP items to help educate and point consumers to the product," Waltz said. Sprint's Spree $20 and $50 cards, starting in April, will be packaged with a "scratch-and-win" promotion where consumers can win up to a year's worth of long-distance calls. AT&T is countering with a National Basketball Association "call-and-win" promotion where consumers find out the first time they use their cards whether they have won NBA products or tickets to the final play-offs. Kolins Group, West Bloomfield, Mich., recently teamed with Phone Card Express, Fort Lauderdale, Fla., to produce a promotional "peel-and-win" card for Fuji film, where consumers could win $500 or a free photo enlargement. The promotion, which also included peel-off coupons, doubled the sales of the product over the same period last year. Another area of prepaid cards that is experiencing growth is the collectible card. "The prepaid card shows are not to be believed," said Sweidel-Caton, who had just returned from one. "They have cards with Elvis, Marilyn Monroe, cartoons, everything." Collectible prepaid phone cards are partnering with entertainment properties in all shapes and sizes. Phone cards are attached to theatrical and home video releases, television shows, Broadway shows, CDs, magazines, sports teams and entertainers. But some in the industry speculate that prepaid cards could be replaced by prepaid phones. Companies such as Omnipoint and Digitec are selling prepaid cellular minutes to what they deem essentially the same market: those who don't have or want an account with a regular telephone company. "Prepaid cellular is explosive right now," said Barry Catmur, vice president of business development at Digitec, Cedar Knolls, N.J. "It's what phone cards were three years ago." With a Digifone "to go," consumers get a cellular phone, battery charger, the first month's access and 30 minutes of air time. Additional time can be purchased in 60-minute increments. "The phone card is now the phone," said Terry Phillips, an official for Omnipoint, Cedar Knolls, N.J. "Our phones have cards in them with a computer chip that stores all the information, your number, how many minutes you have, voice mail, e-mail. If you change phones, you just change cards inside and everything else stays the same." But Rich Teich, executive vice president at SmarTalk, Los Angeles, disagrees. "There's a place for prepaid cellular, but with its pricing it doesn't replace long-distance prepaid cards. It supplements and enhances them and we do see one card serving both markets in the future."