WILL SOCIAL-EXPRESSION PHONE CARDS BRING A RING?

KAREN RAUGUST

Prepaid calling cards that fall under the banner of social-expression cards -- including happy birthday or Merry Christmas -- comprise a gift segment that lends itself particularly well to supermarkets.

Supermarkets are already a destination for consumers in the social-expression aisle, unlike other prepaid channels such as convenience stores or gas stations. "Supermarkets are doing unique little things that are separating them from convenience stores and smaller stores," said Chris Huemmer, director of prepaid sales at Vienna, Va.-based Atcall, which attributes about 50% of its retail prepaid calling-card business to supermarkets.

Huemmer points out that supermarkets have more space than other retail channels to merchandise social-expression cards and that the greeting-card aisle is a logical place to sell these phone cards.

Perhaps surprisingly, vendors have not had a great deal of success with social-expression products and, while most sell seasonal cards of some sort, they consider the business incremental. "These are the sorts of niche markets that will always be around," said Howard Segermark, executive director of the International Telecard Association, Washington.

Most retail social-expression phone cards are identical to regular prepaid offerings, except for their packaging and sometimes for their on-card graphics. Special packaging usually contains a message and artwork specific to the occasion, as well as "To" and "From" spaces to be filled in by the purchaser.

In many cases, these special cards fall within the realm of private-label phone-card programs and are customized, rather than being part of the vendor's core product line. Southern New England Bell, for example, has created special cards for Mother's Day and Christmas, but almost always at the request of the retailer.

Huemmer suggests that prepaid phone cards will eventually move from being an impulse to a destination purchase, "as more and more people start adding [them] to a shopping list." Social-expression cards may benefit from this transition, as consumers start thinking about prepaid phone cards as an alternative to traditional greeting cards.

One barrier to more social-expressions activity is the fact that themed cards often do not sell as well as traditional private-label or branded cards. Mark Welton, vice president of enhanced services at Arlington, Va.-based Qwest Communications, which packages prepaid cards as gift items for Mother's Day, Christmas, birthday and multipurpose greetings, reports that they rarely sell as well as traditional, generic phone cards.

"We tend not to get into the specialized applications," said Wayne White, general manager of prepaid phone-card services at Chicago-based Ameritech, which provides phone-card programs to Aldi, Dominick's and Fleming stores. He noted, however, that the company's distributors and value-added retailers sometimes create special-occasion cards that offer Ameritech service.

Although Qwest's Welton estimates that 90% of social expression-style prepaid cards are intended for retail sales rather than promotions, retailers and vendors occasionally incorporate them into their seasonal marketing activity, in part because they are a cost-effective premium.

Mark Lotstein, national sales manager for retail programs at Southern New England Bell, said that 25,000 Mother's Day cards, good for 10 minutes of free phone time, cost the retailer less than a dollar per card.

While interactive voice response technology has garnered mixed reviews in most applications outside marketing surveys, social expressions offer an opportunity to take advantage of IVR capability, especially to create gift-related phone cards that allow a recorded message from the giver. When the recipient activates the card, he or she hears the five- to 30-second personalized message.

One of Ameritech's distributors offered prepaid cards targeted to parents of new babies, which featured a picture of the newborn. Parents could record a message announcing the baby's name and weight, and send the cards to friends and relatives. Similarly, Qwest Communications marketed a Santa card that allowed children to call a Santa line and record their gift wishes; their parents could then call back and retrieve the information.

Not all vendors are convinced of the benefits of IVR in the social-expressions sector. Alan Stiffler, vice president for global card services at Cable & Wireless, Vienna, Va., said, "What we've found to be most successful is the gift of talk time and not necessarily the frills."

Qwest's Welton believes that using voice-response cards can be difficult for some users. The consumer has to set up a mailbox for the greeting, record the greeting, send the card and worry about whether everything worked. "It's intimidating for some people," said Welton.

Incremental Growth

Many of the trends cited as growth factors for the prepaid phone-card industry overall would seem to bode well for the social-expressions sector.

Since social-expression products lend themselves particularly to the supermarket channel, it makes sense for supermarkets to grab hold of this sector as a means of differentiation, it was said.

The customer base for prepaid phone cards is expanding demographically. A few years ago, the cards appealed primarily to low-income consumers for whom they were sometimes the only means of making a long-distance call. The market has since begun to incorporate middle- and upper-income consumers, particularly families with high school and college students, and business travelers, who buy the cards for convenience, cost-savings and in case of emergency. As the audience becomes more mainstream, less strictly utilitarian products, such as social expressions, may gain market share.

Another factor that suggests growth for social expressions is the fact that prices for prepaid cards have declined, giving purchasers more phone time for the same amount of money. While the lower prices are an incentive to purchase, they also reduce the number of times service needs to be replenished. Social-expression products may be one method of getting consumers back to the store, especially as they start to think of prepaid cards as gifts or as alternatives to greeting cards, analysts noted.

Yet, despite all these positive trends, most observers believe that the social-expressions segment will remain a niche market, generating only incremental sales. One challenge is the fact that not all retailers choose to merchandise the cards in the greeting-card section, and in fact cannot do so, in some cases, due to exclusive vendor agreements with greeting-card manufacturers. (Some companies, such as Cable & Wireless, have experimented with shelf-talkers in the greeting-card aisle that point consumers toward prepaid card displays elsewhere in the store.)

"Private-label programs are where the volume is," concluded Chris Smith, director of marketing at MCI Prepaid, Atlanta. "The use of a calling card is for the function it provides."