Primus and Vonage talk about channels

The Internet remains the most important outlet for customer purchases, according to the country's two largest independent Voice over Internet Protocol (VoIP) service providers, but Primus Telecommunications Canada Inc. and Vonage Canada are not about to underestimate the value of retail sales either.Rob Warden, VP of marketing of residential services for Primus Canada says the majority of consumers come to the company through the digital realm. "Online for our Voice over IP is our biggest channel," he tells Network Letter, adding that the ratio of online customers to retail buyers has remained nearly the same over the years.The volume of online sales can be attributed to the fact that the company pushes people to its website. "We...actively encourage our customers and prospects to visit our website," Warden says. "And, given you need high-speed Internet for Voice over IP our customers for Voice over IP products are pretty web-savvy." He describes these customers as people unafraid of newer technology or of doing online shopping.Darrin Lamont, VP of sales and customer operations for Vonage Canada, says the majority of the company's sales are made up of Internet purchases, but this number has changed over time. " sort of one-third retail, two-thirds Internet," Lamont says of the current split. "In the early days at Vonage, we didn't have a retail presence so all of our customer acquisition was done via the online channel. Over the last two years we've seen a redistribution by adding the retail channel into our overall footprint."While the Internet is still the dominant sales channel for the two companies, both suggest that retail will remain important for their overall sales and marketing strategies."We're going to continue with the in-store," states Warden. Primus currently sells its services in more than 300 locations in Canada at retailers such as Best Buy, Future Shop, WirelessWave and The Telephone Booth."We think they're good ones because they are technology-focused, or telecom-focused in the case of WirelessWave and Telephone Booth," he says of the company's retail partners. Warden adds that he doesn't think VoIP is ready to support its own retail store since it is still a relatively new technology.VoIP has a relatively short history in Canada. It first became an alternative for telephone users in January 2004 when Primus Canada launched its VoIP service. That same year, Vonage began offering services in Canada. But VoIP didn't really take off in Canada until the cable companies got involved. Despite being late-comers, four of the country's cablecos now dominate the VoIP market through rapid customer growth.Rogers Communications Inc., which debuted its cable telephony service on July 1, 2005, added 95,100 residential subscriber lines in the fourth quarter of 2006, bringing its total VoIP customer base to 365,900. Shaw Communications' digital phone lines increased by more than 38,000 in Q1 2007, totalling 250,904 lines. Shaw debuted its service in February 2005.Cogeco Inc. increased its digital telephony customer base dramatically in one year, jumping to 52,315 customers nationwide at the end of August 2006 from 1,448 at the same time last year. And, since launching its cable telephone service in early 2005, Vidéotron ltée has also registered steady growth for the service. The company gained 235,000 new customers in 2006 and passed the 400,000 mark in January. Though the cablecos control the lion's share of the country's VoIP market, Vonage Canada and Primus Canada are managing to play a steady game of catch-up and are maintaining their percentage of the market share each year.According to Lamont, the Canadian VoIP market grew at a phenomenal rate in the last year. "If you look at how the industry grew, how the category grew, it grew by about 100%, and our retail channel mirrored that growth," he says. "We kept pace with the overall growth of the market, which tells you we were maintaining our share position."Warden adds that both retail and Internet sales have been steadily increasing for Primus, but the gap between the two channels is fairly significant. "We're doing in the hundreds a month in retail whereas we're doing thousands a month in online," he notes. Warden attributes this trend to the fact that purchasing VoIP service isn't the same as buying a new stereo. "You don't really need to go touch and feel the product as much," he says. "People will tend to do some homework, understand how Primus' deal compares to someone else's deal, and there are always nuances in terms of features and price and things like that. "So people will do their homework and then they can get it online versus having to then go out to a retail location," he adds.Lamont couldn't disagree more on this matter, however. He believes that the ability to interact with a sales associate is the main reason why retail sales for Vonage have grown to represent a third of all purchases. "It's much different than seeing it on the Internet," he says of retail VoIP shopping. "They can actually go out and into a retail location and touch and feel it." He adds that Canadians tend to be "tactile" shoppers and many of them still prefer to go to retail locations over shopping online. "For many Canadians, this is relatively new for them. Much of our early online performance was from the who were comfortable in making purchases like that online, but as we move into the early stages of the mass market people do want to actually see and touch and feel things before they make the purchase. And our market research backs that up," Lamont continues. "We know that when a consumer decides to go to retail to purchase, they've done some education online before they've stepped in the store."There also exists a geographical disparity in the distribution of the two company's customers across the country. While Primus' customers can be found in most Canadian urban centres, Vonage has found that more of its VoIP customers tend to live on opposite sides of the country. Lamont says Quebec and British Columbia are huge adopters of Vonage. "On Quebec, they're typically the most price-sensitive consumers in Canada, and on the British Columbia side they're typically earlier adopters to technology," he adds. The Vonage and Primus representatives are optimistic that VoIP growth in Canada will continue at a steady rate and that the two providers will mirror that trend."There are lots of choices out there," Warden notes. "We've been at it for over three years now, marketing our Voice over IP, and the sales have been very steady. So we have no reason to think that they're going to experience a sharp decline of any sort, nor a huge spike."Vonage consulted a number of sources to size the 2007 VoIP market, including the CRTC, the SeaBoard Group, Angus Reid Strategies and NBI/Michael Sone Associates Inc., and Lamont says that each of these organizations estimated market growth at about 70%. "That's off of 100% last year," notes Lamont. He contributes this to the fact that a lot of early adopters moved to VoIP but, now that the company is beginning to focus on the mass market, people are a little more hesitant about jumping into using a new technology.Despite this, Lamont believes that Vonage will continue to grow its VoIP customer base in Canada: "We expect to mirror the growth of the market at the very least."

Primus and Vonage talk about channels

News | April 13, 2007

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