CDMA Technology
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By Paula Serratore

CDMA can be a business tool in one market, a low-cost everyday service in another and an essential aid to basic communications in a third. The task for service providers is to find out which approach is going to sell in which market. But they're not alone; manufacturers can help them find a marketing solution that works. Here's how. Paula Serratore, senior director, NSS Global Marketing, Motorola

Last May, Japan's newest digital mobile network operators, DDI and IDO, jointly presented cdmaOne to the public at Business Show '98 in Tokyo. First, they gave visitors the opportunity to try cdmaOne. Then they asked nearly 1,500 potential subscribers to participate in a survey that let them rate their experience.

Given the technological attributes of CDMA, the results were not surprising. According to DDI, an overwhelming majority of survey participants said that CDMA provided call quality that was equal to-or better than-cell phones. Not only that, 80 percent rated CDMA voice quality as higher than fixed telephones. In due time, the results of the survey were released to the public. And, as planned, the publicity helped raise awareness of cdmaOne for DDI's and IDO's subsequent introduction of CDMA service.

What survey participants in the Japanese market were less aware of was that this demonstration of CDMA technology was nothing short of brilliant marketing. Among wireless-savvy Japanese end users, a very large percentage-90 percent of those who participated in that survey-said they wanted to try it. Let's be clear about this: those consumers weren't merely interested in trying a digital phone; they were sold on subscribing to a CDMA system.

This marketing strategy-selling cdmaOne by name-may be surprising to American service providers. But it is at the very heart of DDI's and IDO's strategy. In fact, it is both operators' conviction that by presenting cdmaOne technology by name-by laying claim to the fact that they have it-they are establishing themselves as more advanced and forward-looking than their competitors.

Toshio Itabashi, director and general manager, Engineering Department at IDO comments: "By notifying our market that we are using CDMA, we made it clear that we are serious about providing leading technology. This is important to our customers. They want to be able to take advantage of upcoming, cutting-edge applications. Because of our commitment with the CDMA system, they know we will be able to take them into the future."

Hiroshi Sakai, director and general manager, Mobile Communications Engineering Division at DDI explains it this way: "When we began marketing our cdmaOne system, we were confident that our consumers would be interested and impressed by the system's technological attributes. That has turned out to be true. Our target markets are sophisticated and forward-looking, and they want to transmit and receive multimedia information. They are also aware that moving into the future will require a system that supports increased user traffic. cdmaOne answers those needs and it lets us accurately position ourselves as providers who are planning for the long term."

This is powerful positioning indeed-especially when you take into account that DDI and IDO are relatively recent entrants in the intensely competitive Japanese telecommunications market. In addition, because DDI and IDO will soon be offering powerful new wireless applications, the CDMA name lets them appeal to the high-use business and professional market. As their strategic partner, Motorola Inc.'s Network Solutions Sector (NSS) is presently working closely with DDI and IDO to help them select, provide, and market next generation applications to these segments.

Contrast this with the approach chosen by American providers. Despite phenomenal growth rates that have taken the number of CDMA subscribers in the US past six million, most American consumers have never even heard of CDMA. Even among wireless subscribers, it's likely that-when it comes to the CDMA brand-most don't care what the technology's name is or, for that matter, what any other technology happens to be called.

Certainly American users have heard of digital wireless systems. And many have come to believe that digital may give them some attractive benefits. But choosing a system because it's CDMA? American providers believe that would be like asking Joe America to select his Friday night movie based on the set designer.

American providers prefer to market the advantages the technology gives their customers. They promote clarity and voice quality. Some even promote the notion of "digital." Rather than trying to educate consumers about CDMA, they'd rather have those attributes associated with their own brand. So we see Bell Atlantic advertising its digital service under its own proprietary name, DigitalChoice. And we see that Sprint PCS has eliminated the added name and simply markets itself as the largest, 100 percent digital, 100 percent PCS nationwide wireless network in America.
The stark contrast between the ways in which Japanese and American providers promote their CDMA systems offers a strong reflection of the varying dynamics in the world market. Clearly this is a case where one marketing solution does not fit all markets.

Value proposition
Of course, there is another important tier in the marketing of CDMA, and that is the manner in which a manufacturer presents its technology to a service provider. Motorola NSS has developed its own strategies-strategies which include supporting customers with a value proposition that includes reliability, quality and capacity.

From a tactical point of view, our most successful marketing has involved designing and helping our customers set up a test system and then simply letting them see for themselves.

This was the case with Hong Kong. Set in a mountainous, hilly terrain that requires transmitting signals through ultra-modern urban canyons as well as across a body of water, Hong Kong is tailor-made for the efficiencies of CDMA. In addition, Hong Kong's mobile phone users are sophisticated consumers who demand exceptional voice quality and leading-edge services-both of these attributes of CDMA.

Recognizing the benefits CDMA would bring to Hong Kong, Hutchison asked Motorola to help it design, plan and deploy its 800 MHz CDMA network. The test system results were good enough to encourage Hutchison to select CDMA as its digital system.

Helping a provider set up tests has been an important key to Motorola NSS's marketing success. In Peru, Japan, Brazil, Korea, Beijing and elsewhere, those tests have compellingly demonstrated the CDMA benefits that are critical to a service provider: cost-effective quality, lowered real estate and equipment costs, reduced interference, and a lowered need for frequency planning.

Of course, marketing CDMA's technical benefits to service providers is only the starting point. Motorola NSS believes that is the responsibility of manufacturers to take an active role in helping its service providers market CDMA to their consumers. We feel very strongly that because they are in a strategic alliance, manufacturers must help their customers attract-and maintain-as many subscribers in their system as possible. After all, competition in the industry is continuing to grow.

All this has been going on for several years and shows no sign of letting up. In Europe, average monthly revenue per subscriber fell by 15 percent in l996 to $71, according to CIT Research, a London research group. The same research indicates that by 2001, the European average will decline to $42 per subscriber. In the American market, a report by Sanford Berstein, a New York analyst company, calculated that average monthly revenue per subscriber will fall from $58 in l996 to $49 in 2001.

With operator margins shrinking, manufacturers must see themselves as teammates with a vested interest in helping their service providers succeed. To support our customers worldwide, Motorola NSS has done a great deal of research on the needs of consumers in different markets. Our intention is to help our customers understand and anticipate the consumer needs that drive purchasing and loyalty. Since geographic regions clearly no longer provide meaningful categorizations, our research included relevant marketing variables that go beyond geography.

For example, we have learned that in the emerging entrepreneurial Chinese culture, business needs are most likely to dominate telephone use. It is the value of time-the ability to address business problems immediately-that is key to Chinese customers. This is one of several issues that must be understood and addressed by a provider to differentiate its CDMA offering from its competitors.

In Brazil, on the other hand, the primary motivator for wireless growth is the need for telephone communication. Our private research revealed that business needs also drive mobile communication usage, and that social status has a strong impact. Some Brazilians see that having the latest technology in their mobile phones helps them establish themselves as members of the upwardly mobile.

Of course, there are numerous factors that need to be taken into account when attempting the successful introduction of a new technology. For instance, the market's business and technological environment affects all new-product introductions. Carl Clouse, a senior manager in Motorola's NSS Global Marketing Group, lived and worked in Brazil between l995 and l998. This was a period during which the telephone environment changed almost completely, from a government-regulated analog market to a competitive, privatized market with an entirely new B-Band dimension that didn't exist before.

"During this time," Clouse recalls, "we recognized that future operators and investors had an urgent need for information. We felt it was very important to help them, not just to understand the technology-but to understand it through their consumer's eyes. We decided to keep them focused on their end-users by providing technological information in terms of the benefits it brought to their customers. We knew that, later on, this focus would help them sign up subscribers."

The result was a series of information-based trade advertisements. Targeted at service providers, they were considered quite a departure from normal trade advertising because they pictured consumers-teenagers, professional men and women, as well as people engaged in every day activities-and focused on the end-user benefits of safety, quality of voice, and privacy. When GLOBALTELECOM signed with Motorola NSS last year to provide CDMA to the states of Parana and Santa Catarina, we believe they were better prepared to promote their service in a meaningful way to their customers.

What other regional and cultural differences affect the way CDMA is marketed? Personal safety, for one. In South Africa and the United States, concern about personal safety-the ability to call for help in emergency situations-is a compelling motivator. In Singapore, it's not even a consideration.

When CDMA was introduced in Singapore, consumers were already familiar with wireless service and sophisticated about technology. Because other systems were already in use, Mobile One decided to target cdmaOne to a broad-based market as "M1 Chat." Mobile One's web page includes a colorful, happy illustration festooned with a cartoon of a friendly mascot-a smiling lizard sporting sunglasses and a wireless telephone. This is shown along with the campaign theme: CDMA/ clearly yours.

M 1 Chat is priced at only $18 per month (including 100 minutes of free talk time per month.) As the ads say, it's "so affordable you can chat to your heart's content!"

In Hong Kong, when Hutchison relaunched its CDMA system, it targeted the teen and twenty-something market. To enhance its "cool" quotient, the CDMA system was branded as "Xin Gan Xian," a phrase indicating that the system is in synch with the exciting momentum of city dynamics. The relaunch was done with a local pop star, using images of the fast-paced lifestyle in Hong Kong and Asia and the glamorous young "Jet Set" generation that always needs to stay in touch.

In addition to factoring in consumer motivators, some operators have created marketing tactics that will solve problems. To reduce churn and help subscribers keep their charges under control, some operators have developed "pay as you go" services. The customer buys a handset and pays in advance for a certain amount of airtime. In Portugal, as many as half of all mobile customers use a pre-payment service. In Italy, prepaid cards have also been a great success: within three months of their launch in l996, 570,000 subscribers were using them, according to CIT Research.

Easy purchase
A further boost to subscriber numbers comes from situating sign-up centers in places where nearly everyone can be reached. In August l997, Britain's One2One launched a scheme for sale of pre-paid airtime vouchers in post offices and supermarkets, a strategy that makes purchasing wireless service as easy as buying a postage stamp or a head of lettuce.

One final word on marketing CDMA: as the technology and business of CDMA mature, manufacturers must be committed to developing innovative advances that will let their operators offer more services. These new applications will not only differentiate them in the marketplace but stimulate wireless use.

Obviously, data capabilities will be critical as "killer" wireline applications move to wireless. The Yankee Group forecast is that by 2002, data subscribers will use seven times more minutes than voice users as data penetration moves from two percent in l996 to 22 percent in 2002.

Data means handsets through which subscribers can retrieve information such as inventory and pricing through wireless e-mail. It also means interactive, two-way information transfer that will include everything from wireless network surfing to the wireless retrieval and exchange of medical records.

More services not only mean enhanced competitiveness and customer satisfaction; they also mean more minutes billed.

Marketing, of course, will continue to play a critical role in this growth; and the key to marketing wireless data will be to develop compelling value propositions that stimulate subscriber use. Once that happens, it's likely that one of an operator's major challenges will simply be figuring out how to charge for it.

Paula Serratore is the senior director of the Motorola's Network Solutions Sector's Global Marketing organization, based in Arlington Heights, Illinois. Prior to joining Motorola in May 1998, she was the Director of Business Management for AT&T Local Services. Ms. Serratore has a Bachelor of Science in Business Administration from the University of Maryland and a Master of Science in Management from National-Louis University.