Vonage Dials Up DRTV to Sell Low-Cost Phone Plan

Vonage DigitalVoice will use direct response television to woo users of traditional telephone services such as Verizon, MCI and AT&T to switch to its less-expensive option offered via broadband Internet connections at home.

The Edison, NJ, company's ads will target early adopters and broadband users for Vonage's $39.99-a-month service with unlimited nationwide calling.

“It's not easy,” said Dean Harris, vice president of marketing at Vonage. “Although we're selling a product that people use everyday, which is phone service, we're still at a relatively early stage of the whole voiceover Internet protocol telephony market.”

Vonage has two tough sells: its brand, which is only a year and a half old, and the concept of making phone calls over a broadband Internet connection. Moreover, only 20 percent of the 100 million or so U.S. households have broadband connections, though the market is growing. And only by end of this quarter will the service allow 911 or emergency call capability.

Still, the prospect of breaking into the $1 trillion-a-year phone service market is too big to pass up.

Starting Jan. 27, Vonage tests short-form DRTV on network TV, national cable, syndicated programming and local broadcast stations. There will be 3,200 spots of 60-second duration and another 2,000 30-second spots.

Featuring testimonials from actual customers, the ads compare Vonage with traditional phone services as well as the savings and benefits. They will air on channels such as CNN, CNN Headline News, Lifetime, Court TV, MSNBC and CNBC.

Viewers are asked to visit vonage.com or call a toll-free vanity number, 877/4-VONAGE. Vanity numbers raise sales as much as 40 percent, according to Inter/Media Advertising, the Encino, CA, agency that handles media for Vonage.

DRTV marketers often use several toll-free numeric phone numbers so they can track response rates for different channels and time slots. A vanity number is more memorable, but provides less-detailed information about which channels and time slots are working best for a spot because all the responses go to one number.

These ads, which were created in-house, offer no freebies or bonuses.

A flat fee is Vonage's claim to fame in a market riddled with complicated calling plans. For its price, it offers call return, caller-ID block, call waiting and forwarding, voice-mail, repeat dialing and retrieval, real-time call activity reports and online account management. International calls are offered at reduced rates.

Vonage eventually plans to test 30 renditions of the spots. But for now it is testing based on positioning, creative message, type of testimonial delivery and length.

The centerpiece of Vonage's strategy is to harp on its service's low cost plus benefits versus the competition. According to research by the company, the average U.S. consumer pays $73 a month for phone service. Vonage's is almost half that amount.

“We're trying to obtain new customers for the service, and we're looking to the lifetime value of the customer,” said Bob Yallen, president of Inter/Media.

“Basically, we're trying to get new customers that want to switch from their current long-distance carrier to use Vonage,” he said. “It's a typical direct response acquisition model. We're trying to acquire customers for a lot less than their lifetime value.”

Inter/Media has responsibility for strategic planning, research, direct response media buying, traffic and tracking. It will use its AccuTrak lead and sales tracking system to identify and attribute individual calls to specific media.

Vonage so far has relied on online ads, radio spots on shows like Howard Stern and word of mouth to recruit customers. It has nearly 10,000 customers in the United States and overseas, handling 6 million to 7 million broadband phone calls to date. Users tend to be in urban areas, where broadband penetration is highest.

Many Vonage customers came from responses to portal deals, e-mail, keyword buys on search engines, rich media ads, banners, buttons and links. The online ads broke in mid-2002.

“We're frankly willing to test any appropriate media that will drive people to us in a relatively cost-efficient way,” Harris said. “We're trying to be relatively media agnostic. Certainly we'd like to make sure the creative builds the brand.”

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