Wow, I'm really piling on Vonage these days. Oh well, why not? Ever since they lost their ex-CMO Dean Harris, their self-reported cost per acquisition has gone up and they've tried old marketing ideas that I think are not appropriate for their target audience.
Back in April I wrote about their lame attempt at direct marketing to people that have already been bombarded by their online and TV ads. Well, it seems that the marketing geniuses at Vonage must have found an AT&T marketing plan from circa 1995 because in this morning's mail stuffed in a Columbia House DVD mailer, a full color Vonage bill insert slipped out with the rest of the garbage in that envelope. You know the kind of garbage I'm talking about - free checks, credit card offers, and commemorative coins.
Now before you start to think, well Eric their marketing can't be that bad if they found you. Well it is. Let me explain the numbers behind their bill insert program based on my own experience.
Let's use a number of 1,000,000 inserts and based on costs that I've seen over the years, let's assume it costs 12 cents per insert to produce and place in the mailers. That's a cost of $120,000. Now, typically the reason behind doing a bill insert program is that it is cheaper than DM and it can hit a wider, yet untargeted audience. So, response rates are typically around .1%, so that means 1,000 responders. Of course, not all responders translate into a sale, so let's say they do really, really well and convert 25% of them into sales. That's a glorious $480 per gross sale. Don't agree with me? Believe me, I've done a TON of these programs since 1990 and they all look about the same. The only way these programs work is if you don't pay the inserting costs, but almost no one waives that fee today.
Bill inserts and direct mail to their target audience are some of the factors that are driving their cost per acquisition to nearly $210 as reported in their latest SEC filing. What the team at Vonage should do is put aside these ideas and focus on TV and online. TV for putting that annoying WooHoo song from the Kill Bill soundtrack in your head and online for delivering the sales. For online advertising they should continue to pursue their shopping cart mentality and be almost everywhere their audience is, but to do that you have to be ultra aggressive in optimizing the placements as well as the creative. Their creatives look the same and because of that their ads are fast becoming internet wall-paper. Poor optimization of creatives and placements is a recipe for disaster when using a shopping cart online advertising strategy and with their huge online buys, this is the other factor in their rising costs.
Optimizing TV and online campaigns in a very aggressive, yet scientific manner is what they should be doing, not testing offline marketing for this customer base. Maybe it is a little too boring for them, but it will keep their cost per sale numbers down and if they really have money burning a hole in their pocket, maybe they should fix their churn problem.
PardonMyFrench,
Eric
What is shopping cart online advertising strategy? If they have over 2 million subscribers why is their stock so low.They need to get a grip!
Posted by: James Brado | February 26, 2007 at 03:29 PM
Vonage is a bad service. People will leave vonage. Vonage hopes they can hook more people than they loose and someone will buy the company. Vonage has stupid ads and they lie about the quality of thier service.
Posted by: ananymous | April 02, 2007 at 02:31 AM
How do they disconnect your service when the bill always states no amount due? And then tell you your bill is eighty dollars and to keep form paying that you could get a second line. When saying no you don't want a second line they give you one anyway. Even though your bill always shows no amount due.
Posted by: ananymous | September 02, 2007 at 12:43 PM
Everytime someone calls me they complain that my phone is breaking up ia there anythin that i can do to resolve this..? will i get results if i complain to vonage or should i get a new service?
Posted by: alecia | October 06, 2007 at 09:06 PM
Based on what I've seen and read online, I think you might have some sub-par service; personally based on their stock price I think you'll be looking for a new company in a little while anyway.
Posted by: PardonMyFrench | October 07, 2007 at 08:59 AM
I know this blog or whatver it is, is very old news given the time stamps on the posts, but Eric Frenchman, I'm writing this just to try and get some advice. I'm a frshamn at the University of Miami and I'm in a group doing a marketing project. The project is designed so that each group can pick, as my professor said, "a dog", analyize their current marketing strategy, and create, in our opinion, an improved marekting program. From the blog, there are certainly things Vonage is doing wrong and certainly strategies that should be improved, but are there any other suggestions you would have for Vonage's marketing department that could help me out?
Posted by: sebastian | November 09, 2008 at 07:11 PM
Sebastian,
Send me an email at [email protected] with what you've been noticing and I'll be happy to help.
Eric
Posted by: PardonMyFrench | November 10, 2008 at 08:59 PM
All that glitters is not gold... I satisfied by sound quality but support and customer service drive me crazy
Posted by: John Scofield | January 09, 2009 at 10:33 AM