Today’s auction for the licence of 4G data services raised £1.2 billion less than the forecast set out by George Osborne in his autumn statement with rights to the super-fast data being sold for £2.3 billion rather than the £3.5 billion predicted.
On top of this EE, despite being the first and only UK carrier able to offer its customers super-fast 4G mobile internet reported a slowdown in the company’s revenue growth. News of which has apparently led to a lukewarm response from those in the city – and rightly so. EE have spent millions on marketing and have even roped in Hollywood star Kevin Bacon to support their campaign.
Here’s my analysis of where it went so wrong for EE and why I believe their marketing efforts not only marks bad news for George Osborne, but may eventually lead to their competitor’s success:
Getting the message right
The majority of early adopters were always going to be the tech savvy; those willing to pay hiked prices in return for faster download speeds. But those early adopters are few and far between – the real target audience here is the every day consumer, with such limited timelines before the arrival of their fierce competitors EE needs to win the support of the general public. Start ups rely on early adopters to spread the news of their product because they usually have no other choice, but EE are in the honoured position of being able to market their new service to the masses.
Despite spending millions on television advertising EE have completely failed to market their product – the average consumer will take very little away from an EE television ad. I’ve just re-watched the first ad and all I know is that Kevin Bacon was rambling on at me, but about what I’m not exactly sure. Amongst all of his mundane chit chat the product is simply lost.
The whole business of the internet, download speeds and service providers is a complicated process – the average consumer isn’t aware of the technicalities. Instead of overwhelming the consumer with unnecessary information EE should be looking to educate the consumer, explain why EE is the best provider and breakdown the benefits of 4G.
It’s worth clarifying that the product itself couldn’t be much stronger – I have no doubt that 4G is the new 3G; in the next couple of years I expect we’ll all have it on our phones as standard. The key selling point for me is that 4G is five times fast than 3G – that’s five times faster than any of their competition and that’s five times faster than what’s on most of your mobile phones right now. If I was EE I’d be shouting this from the rooftops.
The Price, Not The Product
Is the consumer willing to pay extra for 4G that was always going to be the question. As soon as EE decided to hike up their prices and ask customers from Orange and T-Mobile to pay £5 more for the same amount of data EE risked alienating a huge number of their current customers. In order to position themselves as the number one supplier of 4G data EE needs to be on the mobile phones of as many consumers as possible but the prices from the go were immediately off-putting.
Moving from one provider to another is tiresome and time-consuming – instead of trying to make as much profit as possible from those likely to sign-up EE should be aiming to get as many customers onto their books as possible by offering them a reasonable pricing scheme. With a business model based on subscription, as long as the service provided is of a high-quality and the product is strong, the finances will sort themselves out over time. Instead, EE may have now positioned themselves and 4G as too expensive for the average consumer – the stigma has already been built. It’s because of that very stigma that today’s auction results are not that surprising; with less consumer demand due to high pricing strategies the major mobile phone companies were always going to be less willing to pay for the data EE can’t sell.
Being first was undoubtedly a major coup for EE but today may just have marked the real winners as Hutchinson 3G, Telefonica and Vodafone. By setting their prices too high and pushing for too much EE ran a consumer experiment on their behalf and simultaneously contributed to the lowering sales price of the data they all now own.
I don’t mean to say it’s all over for EE, after all they were today’s second highest bidder but there’s no doubt they’ve failed to capitalise fully on the advantage of being first. They’ll enter this race firmly in the lead but there’s another first to be won; who will be the first brand to offer 4G at an affordable price to the average consumer? Your bet is as good as mine.