TracFone Takes on Evildoers of Wireless

NEW YORK TracFone, which carved its niche in wireless by courting cost-conscious consumers, is being cost economical with its marketing spend as well.

The company, which spent $70 million on measured media in 2005 and $30 million last year, per Nielsen Monitor-Plus, is now shooting for far less than that. It is abandoning network and cable TV in favor of in-store TV advertising at Wal-Mart and Target as well as viral, Web-based video.

If you haven’t heard of TracFone, you’re not alone. The company, a unit of America Movil, Latin America’s largest wireless firm, claims about 8.8 million customers, making it the sixth-largest service provider in the U.S. after Alltel. But unlike AT&T, Verizon Wireless, Sprint, T-Mobil and Alltel, TracFone focuses exclusively on prepaid, rather than postpaid customers. So, the brand’s users tend to be credit challenged and low income.

To reach such cost-conscious consumers, TracFone has offered sweetheart deals at retail. For example, last year a Nokia 1100 phone with charger and 40 minutes of airtime was available at Wal-Mart for $20.

“They’re focusing on a segment no one else is able to focus on: people spending $15 a month,” said Roger Entner, svp for the communications sector for IAG Research in New York. “It’s very difficult to make money on $15 a month.”

Linda Barrabee, an analyst with The Yankee Group, Boston, agreed: “They’ve figured out how to minimize the risks of acquiring customers by not spending a lot on marketing.”

But while it’s tempting to equate TracFone with “cheap,” Derek Hewitt, the company’s svp, marketing, chooses to position the firm as “no nonsense.” Hewitt calls the service “clearly the best value proposition” and adds that the company is based on value and simplicity. “Our whole positioning is to be clear, transparent and straightforward.”

A new viral campaign for TracFone’s two-year-old Net10 service—named thus because it promises a firm rate of 10 cents a minute for each call—underscores that positioning. The work, via Droga5, New York, offers tongue-in-cheek portraits of cell phone customers who are unknowingly being ripped off by their service providers.

One video shows a man identified as Bill, who rescues old greyhounds. As we see Bill driving to retrieve a dog, a voiceover lays it on thick: “What a sweet, compassionate man. And these dogs? Are you kidding?”

Then the narrator notes that Bill’s service provider sometimes charges him five times the normal amount for overages. “If someone were to cheat Bill, wouldn’t they really be cheating these dogs?” it asks. The tagline, “No evil,” is a pointed counter-reference to other service providers, which are implied to be of the dark side.

Another video shows a female doctor, who is trying to fight bacteria, but finds that she’s stuck in a two-year contract with a service provider and getting hit with all kinds of fees she doesn’t understand “and she’s a scientist,” the narrator notes. Ads are rolling out this month, and can currently be seen at no-evil.net.

Those spots, plus others, aren’t slated to run on TV, except for Wal-Mart and Target’s in-store networks. Hewitt said the decision to go with viral and in-store TV was based on ROI. “We found our viral efforts were so much more successful,” he said. The company is planning a similar effort for its flagship TracFone in the next few months, Hewitt said.

TracFone’s underdog positioning isn’t unusual and would probably work, at least in the short term, said Allen Adamson, managing director of Landor Associates, a branding consultancy in New York. “While it’s effective positioning, it’s hard to build a brand by disparaging other brands. It usually doesn’t lead to long-term success. You’re better off talking about what you do.”