Service bells Featured

6:37am EDT March 22, 2005
For a Midwestern city right smack in the heartland, Cincinnati is wired.

Cincinnati is decorated with American tradition, bolstered by long-standing businesses and spotted with southern hospitality and suburban sprawl. It might be a typical town, but if you ask Jack Cassidy, it's a telecommunications hub with a captive market for services. People are tuned into technology. Big time.

"On a per-capita basis, Cincinnati is the most high-speed market in the U.S., by far," says Cassidy, president and CEO of Cincinnati Bell.

Forty percent of the city's 600,000 households connect to the Internet through broadband; the national average is 30 percent. Add to that the 71 percent of men, women and children in Cincinnati who have cell phones, and you have one high-tech city.

"The population is heavily penetrated with wireless service," Cassidy says.

Those are promising odds for a company that puts the tech into talk -- and not a bad market for a provider with a service menu that appeals to a gadget-hungry populace.

Cassidy calls Cincinnati "a canary in a cage."

"We are one of the few places in the U.S. where a single company owns the local access, wireless and broadband Internet access business," he says. "Because we have overwhelming market share in those different products, our challenge is to successfully fight off competition from many wireless providers that have far more scope and scale."

Cincinnati Bell's 600,000 households subscribe to its local access connection, and 35,000 employees at companies including Federated Department Stores and Procter & Gamble World Headquarters depend on Cincinnati Bell services such as long distance, wireless and broadband.

Owning majority market share in these categories puts the company in the hot seat. National wireless providers vie for customers, and long-distance carriers and cable companies tempt them with broadband and voiceover Internet protocol, in which voice is transmitted through data lines.

"Phone companies lose those margins as the business goes to cable companies," Cassidy says.

Cincinnati Bell is a company formed with one product for one city that evolved into a multiservice organization forced to compete with national heavy-hitters.

"For the first time in the 139-year franchise of our business, our core business is under attack," says Cassidy.

He considers the industry pressures that heat up the battle: consolidation, technology, customer-driven sales and service.

"Our challenge is to maintain our market share and use new technology to grow," says Cassidy, who has watched the wireless industry explode in his 14-year technology career.

He led the successful launch of Cincinnati Bell's PCS business and helped nurture the company as COO, building its service reputation and earning kudos six times from JD Power & Associates. Now president and CEO, Cassidy is dedicated to a three-pronged approach he instills in the work culture: de-lever, defend and grow.

The plus factor

Cincinnati Bell's advertisements aren't glossed with celebrities or technology bling. Basic plus and minus signs spell out clearly what Cassidy wants customers to do. Add more services, eliminate extra providers. Add features, take away expenses. Add technology, simplify life.

"You add, we subtract," says Cassidy.

The company's marketing mantra centers on bundling services. Customers who start with local access connections and basic landline phone service earn better deals on wireless lines if they sign on for those services with Cincinnati Bell.

The more services the company offers, the better it is for revenue and for customer retention. And lower prices are a contributing factor to increased wireless market penetration, Cassidy says. Cell phones used to cost $4,500, not including $500 monthly bills that put them out of reach of the general population. Now, people snag free phones and pay less than $50 per month.

The same is true of the telecommunications industry. Consolidation is whittling down purchase options, and capital-intensive businesses are colliding and folding.

"Given the overcapitalization in our industry, there is far more network than there is demand," Cassidy says. "The merger and acquisition activity happens, but the result is fewer, stronger players. The consumer gets well served in that process because generally, companies take costs out and prices go down."

Cincinnati Bell wasn't immune to those attractive acquisition deals. In 1999, it purchased Broadwing Communications -- once IXC Communications -- and flew into long-haul data transport and broadband access services.

"You have to pay attention to technology, grow with it and have some amount of courage to spend the capital to fit customers' needs," Cassidy says of the deal, which failed from lack of demand.

It cost the company $4 billion and put it near bankruptcy before it sold off the company for $100 million.

"You can see that was a failed strategy," Cassidy says, pointing to the defensive tactic, which employees describe as "paying for a party we didn't get to go to."

Cassidy's focus on rebuilding the balance sheet rather than filing for bankruptcy was, perhaps, more courageous than the initial acquisition.

"Through bond deals and refinancing, we think our balance sheet is far more attractive than it has been over the past two years," he says. "The price of near bankruptcy is extreme; we had to spend time to pay down debt, and we are close to the position where we feel really good about that."

Defend rather than fold; learn and thrive rather than sell off the farm and start from scratch. Cincinnati Bell's loyal customer base and reputation helped lift its spirits on the service side, and revenue followed.

"You can't allow new competition to come in and eat your lunch," Cassidy says. "In our defense strategy, our hallmark is to bundle [services.]"

The strategy works.

"Our major metric is average revenue per household, and we've grown that 2 to 5 percent on a year-over-year basis, consistently," Cassidy says.

To do that requires understanding market needs.

"American consumers value two things -- entertainment and convenience," Cassidy says. "If you can make your product more entertaining and more convenient, that is like building a better mousetrap.

"If you buy more, you buy cheaper. That is an important marketing message and, for consumers, a value message. But none of that is important if the customer service isn't great and the product doesn't work."

411 for growth

Talk is cheap these days, especially for customers who sign on to cell phone specials packed with offers of free phone and hundreds of minutes. But who pays for the bells and whistles?

"It's very expensive to be in our business in terms of new customer acquisition," Cassidy says. "In the wireless business, you buy a phone at wholesale and discount it to sell it to a customer at a great value. It's dilutive."

A cell phone sale must mature one year for Cincinnati Bell to break even. This explains why nurturing customer relationships is critical not just to the company's reputation but to its bottom line. And selling additional services to existing customers increases the profit potential.

"If you have overwhelming market share, you don't want to spend money to add people who already have your stuff," Cassidy says. "You want to market to people who have some of your stuff who need to buy more stuff you have."

Because Cincinnati Bell services the majority of the market, it knows what customers want -- and need. Rather than targeting business through a blanket buy-media approach, it maintains a database with 50 fill-ins for services, demographics and other pertinent information that personalizes billing statements and direct mail communications.

"We mine our customer information database," Cassidy says. "We have 98 percent market share of LAC [local area calling], so we know every customer in Cincinnati and surrounding areas, and we know wireless and broadband services. We sell them up the value c hain. We move someone who is a dial-up customer to broadband, and we move broadband customers into wireless phones."

Essentially, Cincinnati Bell zeros in on customers' interests and hits them with value propositions for additional services before the competition can say "free minutes." Customers who sign up for e-billing provide it with an additional communication avenue. Rather than poking around for a message that resonates with potential customers, Cincinnati Bell does its homework, then hits a homerun.

"We are targeted in terms of getting it right the first time," Cassidy says, referring to the company's initiative to instill Six Sigma systems three-and-a-half years ago. "We identify customers in our marketing database and move them to customer e-billing. Once we move them to e-billing, we now have a direct communication with that person rather than once a month through a billing cycle. We now have the ability to customize on their e-bill a better price value relationship with us, and we have undertaken a huge effort to do that."

E-bills are more pleasant than paper invoices, and removing postage and processing costs saves dollars, Cassidy says. The simplicity of electronic billing goes back to customers' two soft spots -- entertainment and convenience. Meanwhile, the company has streamlined its infrastructure, trimmed its staff and kicked off a solutions-oriented approach to serving customers rather than putting out fires, which requires more manpower and more dollars.

"We are no longer a monopoly," Cassidy says. "We can't afford to do things wrong, create customer issues and then fix those issues at any cost."

With this in mind, he enforces a few basic bylaws. First, work smart.

"Avoid doing work that doesn't affect the outcome for the customer," he says.

Don't do the same work twice. Take care of customers before they have problems rather than inventing solutions for complaints.

"Treat the disease with a cure as opposed to treating a disease with aspirin," Cassidy says. "That really is the benefit of our Six Sigma process. Fix it right the first time. Employees left are doing smart, productive work."

Meanwhile, the CEO who watched Cincinnati Bell elevate revenue from $400 million to $1.2 billion in nine years and who managed a work force of 5,000 that shrank to 3,000 now must prevent the company's size from diluting its culture.

Cassidy protects business by preaching a customer-first message to employees, and he stands by his team by providing technology so they can deliver service efficiently, profitably and in a way that wins repeat customers. E-billing is one example; an acute customer database is another.

To demonstrate his commitment, Cassidy personally delivers these statements and solicits feedback. He calls these forums Chats with Jack.

"I make it a point to see all of our 3,000 employees at least twice a year," he says. "And I send a simple message, which is, without the customer, we don't get anywhere."

Future connections

Now in a healthier fiscal position -- and with revenue up following the failed Broadwing investment -- Cincinnati Bell is primed for the entertainment business, a promising profit venture for capable telecommunications firms, Cassidy says.

"There are selective ways to grow -- there are legs in our broadband and wireless businesses, and we look toward offering entertainment products as a way to grow, as well," Cassidy says.

As cable companies take a bite out of telecommunications business by offering broadband access, Cassidy considers ways consumers can purchase visual entertainment via telephone lines. With Cincinnati Bell's copper plant, which provides a high-level connection, advancing technology and investments, this will be possible. Still, technology doesn't replace service, and Cassidy proudly refers back to the company's six JD Power customer service awards -- a first for a telecommunications company, which customers typically associate with frustrating call centers and "please hold" responses to concerns.

That's not the case at Cincinnati Bell, if Cassidy can help it.

"To win six awards in three years is a lagging indicator that the customer service message that we send and deliver works," he says. "If your product works, if your people care about customers and accentuate that every day, and the price and value is right, you are in a position to take on companies with far more scope and scale than you. You can meet them head on in the market and do well."

How to reach: Cincinnati Bell, (513) 397-9900 or www.cincinnatibell.com