THE SALE SPIN

KAREN RAUGUST

Research shows that most people are first exposed to prepaid phone cards through giveaways. Such premiums have proved critical in promoting the concept of prepaid phone cards to consumers and at retail.

Although the use of prepaid phone cards in promotions is expected to grow at a compound annual rate of 15% until 2002, according to Boston-based Atlantic-ACM, retail sales are expected to rise faster (31% per year), taking over market share from promotions. Fred Voit, senior analyst for consumer communications at The Yankee Group, Boston, estimates that retail's share of the market was more than 50% in 1998.

There is still room for promotional activity, however. The Yankee Group reports that 37% of households used or purchased a prepaid phone card in 1998, meaning that 63% of households represent a still-untapped market.

"Once a customer tries prepaid cards and finds out how convenient they are, it whets their appetites [for the cards]," said Dale Eichenlaub, vice president and general manager at Friedman's Markets, Butler, Pa.

"The trick is, how do you generate awareness and trial?" said Chris Smith, director of marketing for MCI WorldCom Prepaid, Atlanta, whose supermarket customers include H.E. Butt Grocery Co., Albertson's and Safeway. He points out that product sampling works for other items in the supermarket environment, so why not for prepaid phone cards?

Prepaid phone-card promotions take many forms. Atcall, Vienna, Va., has run buy-one-get-one-free offers and contests in which purchasers of prepaid cards can register to win a vacation, and has given away bonus minutes during holiday periods. The bonus time can be distributed as extra minutes on a regular-priced card, or as an additional free card packaged with a regular-priced one.

Ameritech, Chicago, typically introduces new private-label prepaid phone-card programs by distributing free five-minute cards. The promotion can be structured as a straight giveaway or can be tied to store purchases.

Cable & Wireless, Vienna, Va., markets buy-one-get-one-free offers, as well as reduced-price cards during back-to-school and holiday periods. During back-to-school, for example, the company adds on extra time to encourage families to stock up on cards before their children leave for college. "We sell a lot of large-denomination cards during this period," said Alan Stiffler, Cable & Wireless's vice president for global card services. Kansas City Mo.-based Sprint has recently promoted its Spree Prepaid Foncards with a Spree NFL Trivia Contest and with a holiday effort that allowed consumers to add on extra minutes for entering a sweepstakes or for purchasing a card during the promotion.

This summer, MCI is launching a marketing effort intended to increase use during the travel season. The campaign is called "Hello Summer" and is meant to drive incremental sales and increase awareness at all of the company's retail channels through a combination of eye-catching graphics and a low price point, according to Smith. Twelve specially designed 15-unit cards, retailing for $2.99 each, will be displayed on a clip strip. Andy Casey, vice president of loyalty-marketing services for Catalina Marketing Corp., St. Petersburg, Fla., which provides targeted marketing programs at the point of sale for clients, said, "You can do anything with these phone certificates that we do with our system." For example, a retailer could work with a greeting-card manufacturer to offer bonus prepaid phone time to consumers who purchase a certain number of Mother's Day cards.

Similarly, Mark Lotstein, national sales manager for Southern New England Bell, Stamford, Conn.,notes that some shopping malls sell coupon phone cards, which have a coupon on the back of the card good for merchandise at mall stores. Lotstein believes that this promotional tool could apply to supermarkets as well; a prepaid calling-card purchase could come with a coupon for products sold in the store.