Marketing Breakthrough? Or Marketing 101?

I can't quite figure out whether Arbros Communications has achieved some kind of marketing breakthrough or simply rediscovered the basic principles taught in Marketing 101. Arbros, a Silver Spring MD-based CLEC operating in the Washington DC area and Philadelphia, announced recently with great fanfare that it had developed "a new business model that segments potential customers based on needs."

Wait a minute, isn't that what all marketing is supposed to do?

Well, Marketing 101 certainly taught the importance of identifying and marketing to customer needs. And I also seem to remember learning about market segmentation techniques. But come to think of it, maybe Marketing 101 never taught exactly what Arbros CEO Jonathan Flicker is crowing about. Flicker, a high-energy talker, certainly wants to make you believe it's a great breakthrough. "I guess you can tell I'm terribly passionate about this," he says at the end of a long interview. Indeed we can.

An exile from the music industry, Flicker started the company in March 1999. For much of the first year, Arbros's main activity apparently was market research. "The first thing we set out to do, the one thing we wanted to accomplish was to understand our customers," he says.

Flicker claims the company conducted 1,600 interviews with telecom decision makers in small and medium-size companies This was done with the help of Chicago-based marketing research firm Lieberman Research Worldwide. The outcome, Flicker claims, is a new way to segment the CLEC market.

Up to now, he says, most service providers have targeted companies of a certain size - well, actually, it seems most have gone after SMEs - or they've targeted one or a few verticals. The Arbros business model falls out of a categorization of customers by "needs" or, more accurately, "buying factors" - the hot buttons that determine how a company selects a telecom vendor.

For example, some companies want or need (or think they need?) the best and latest technology. Others are motivated by price - they want the lowest possible. Still others place the most importance on finding a supplier with a trusted brand - the no-one-ever-got-fired-for-buying-IBM types. There are other customer types but the research is "proprietary," Flicker notes. He'd rather not give it away to his competitors.

Arbros has identified a target segment he refers to as "service intensive," customers that value superior service over low price or the latest, greatest technology. (Not that Arbros prices aren't competitive, Flicker hastens to add.)

He built the company around a strategy of targeting this segment. So the Arbros "value proposition" includes things like easy-to-understand bills, guarantees on meeting provisioning deadlines, service levels spelled out in the contract and a single point of contact for customers.
Nothing terribly original here, but a logical response to the perceived needs of target customers.

How does Arbros know which firms to target, though? As Flicker points out, the problem with targeting companies of a certain size or a particular industry is that despite surface similarities, their buying behaviors may be quite different. He gives as an example, a pair of large name-brand insurance companies Arbros encountered during the marketing research project.

One had developed a strategy of exploiting the latest, most sophisticated technology - document imaging, OCR, digital cameras in the field, etc. - and was highly motivated in its telecom buying by the lure new technology. The other was positively technology-averse. "If you go into those two companies - about the same size and in the same industry - and try to sell them the same value proposition," Flicker says, "you're going to fail miserably. It'll be a waste of time."

"But by understanding the customers' needs - and this is what is so fascinating but also so completely logical about this - you can tailor a value proposition that makes sense to the customer. It has been very, very productive for us."

Arbros launched service in Philadelphia and Washington DC and vicinity in July. It now has "100 contracts in place and several hundred more in the pipeline," Flicker initially says. Later he says he deliberately underestimated the company's numbers.

But getting back to how Arbros identifies target customers: Flicker is a tad vague on this subject. He talks about "some pre-screening techniques" the company has developed, and having done "a lot of statistical modeling." In the end, Arbros sales reps go in and ask "a few probing questions. And they know by the answer if this is a service- intensive customer."

Not that the sales people get up and walk out if it turns out the customer is motivated by other buying factors. But Arbros pitches its advertising in particular to appeal to service-intensive customers - pushing the single point of customer contact and so on.

And the sales people go in with a consultative approach geared to appeal to those customers. "When I talk to the sales people, I say they should be telling the customer, 'I feel your pain,'" Flicker says. "'Now let's talk about it.'"

He claims customers have been responsive to this approach and to the overall marketing strategy, beyond expectations. "Time will tell," he says of the long-term prospects for the Arbros business model. "But in terms of lead generation, it has been very productive so far. We have already exceeded our goals for customer acquisition and revenue for this year."

Meanwhile, the company is expecting to launch in New York, Boston, Pittsburgh, northern New Jersey and Richmond VA in the next few months. This is in line with its strategy of targeting the north-eastern part of the country first - a voice and data market worth an estimated $30 billion a year, Flicker says.

Is Arbros a marketing revolutionary? Flicker apparently thinks so, or pretends to. We're guessing it's more that the company is trying to impress prospective investors and partners. At the least, Arbros has adopted a very logical way of attacking the market. Whether it's new or not is probably beside the point. Even if wasn't taught in Marketing 101 - heck, maybe it was Marketing 201 - it has the ring of good sense to me.

We'll check in on Aeneas next year when it should be up and running and see how the marketing effort is working.