Long-Distance Overload : Marketing: The big three carriers put on a $1-billion advertising blitz last year. They are blasting consumers--and each other--to win market share.

It was a television ad that gave AT&T; its first--of many--bloody noses.

On March 17, 1980, an MCI commercial hit consumers--and AT&T--where; they felt it most: the wallet. The split screen ad showed one person making a call on AT&T; and another making a call on MCI. Meters at the bottom of the screen showed how much each call cost. When the callers hung up and the meters stopped ticking, it was clear that the MCI caller paid less. For the first time, AT&T; customers began to wonder: what gives?

Last year, MCI and Sprint both ganged up on American Telephone & Telegraph two days after a computer snafu paralyzed air traffic in New York and disrupted long-distance calls nationally. One MCI print ad featured its five-digit access code across a full page in the Wall Street Journal. “Remember this number the next time AT&T;’s system goes down,” it said.

In American advertising history, perhaps nothing else compares to the fiery marketing battles being waged today by the long-distance phone carriers. Marketing experts say the strategy has been elevated to extremely complex--if not desperate--levels never seen on Madison Avenue. “The game is no longer to reach out and touch someone,” said Sam Craig, marketing department chairman at New York University. “It’s to reach out and grab someone.”

What’s more, the amount of money spent on the long-distance ad campaigns is staggering: nearly $1 billion by the three major carriers last year. At stake is each carrier’s share in the $56-billion long-distance industry. And with slow growth predicted in the future, each carrier is maneuvering for anything that can bump up market share.

What makes the phone campaigns so unique isn’t just the amount of money that goes into them, but the intricate layers of strategy behind them. “If the brainpower that goes into long-distance advertising was to be suddenly redirected toward solving some real problem, like a cure for cancer, I’m embarrassed to say we might be well on our way toward licking the disease,” said a senior marketing official for one of the Big Three long-distance carriers.

Behind all of the industry’s name-calling and fact-stretching are three distinct marketing campaigns that have evolved into something more akin to the dirtiest of political battles. “It’s very much like a political campaign,” said Thomas Messner, founding partner of MCI’s New York agency, Messner Vetere Berger Carey Schmetterer. “Except this campaign never ends.”

Image-bashing ads caused AT&T;’s grasp of the long-distance market to slip long before the breakup of the telephone companies took effect Jan. 1, 1984. Several years later, when AT&T; became more competitive in price, it did the unthinkable by naming its pesky rival, MCI, in a biting parody of MCI’s running-meter ad that asked, “So, where’s the big savings?”

The only thing really being sold is image. To do that, AT&T; is relentless. AT&T; socked more money into advertising in 1990 than did Coca-Cola and Pepsi-Cola combined. Today, an estimated four dozen different ad agencies, consulting firms and research groups play some role in developing its campaigns.

There are thousands of targeted ways that AT&T;, Sprint and MCI constantly try to cajole new customers every day. They call consumers at home. They pester through the mail. They nag incessantly on TV, in the newspaper and on the sides of buses. And like army recruiters searching for enlistees, they try to sign up consumers at shopping malls.

The phrase “We’re listening” was US Sprint’s ad slogan for a brief time. And that’s what the major long-distance companies do these days. Although they are not tapping telephones, they are tapping into the lives of consumers. They listen to what consumers say they like--or don’t like--about anything related to long-distance calls. And they listen to marketing specialists who translate simple consumer reactions into complex marketing strategies.

All of this just to get us to place a few more long-distance calls? Maybe that was the aim 10 years ago. But today it has become a nasty struggle aimed at stealing market share.

Although AT&T; is still king of the hill, the telecommunications giant continues to slide. In 1990, AT&T; controlled 65% of all long-distance business nationwide, while MCI handled 14.2% and US Sprint had a 9.7% share, according to the Federal Communications Commission. But AT&T;’s lead has been slipping steadily for nearly a decade. Almost all of MCI’s and Sprint’s gains have been AT&T;’s loss. In 1984, AT&T;’s market share exceeded 90.1%, while MCI’s share was 4.5%, and Sprint had just 2.7%.

Today, each share point is worth an estimated $520 million per year. That is why the three long-distance carriers are spending more money on advertising than ever. AT&T; spent $797 million in 1990 to try to get across the message that it’s the most reliable of the three. That’s about $230 million more than it spent the year before--an amount that exceeds the combined ad budgets of its two biggest rivals. In 1990, MCI spent about $60 million and Sprint spent about $50 million to tell everyone they’re the least expensive--and most advanced.

Although each firm at one time or another may have had a reasonable claim to the these titles, analysts say that today they are all so similar in quality and price that the main thing left to sell is some advertising wizard’s image of what phone companies should be.

The three carriers watch each other so closely--and react to one another so quickly--that when AT&T; sneezes, MCI and Sprint catch colds. Any time AT&T; throws more money into its advertising, so do MCI and Sprint.

“AT&T; is the yardstick against which almost everything we do is measured,” said Gerald H. Taylor, president of consumer markets division at MCI.

AT&T; goes to great lengths to find out what makes consumers and its competition--tick. Almost every major marketing research firm in America has--at one time or another--been retained to do consumer research for AT&T.; AT&T; will research such minute items as the color of the envelopes in which it stuffs its mail promotions and precisely how many seconds unsuspecting consumers will listen to its commercials.

Some marketing experts contend that the overriding purpose of AT&T;’s massive marketing campaign is keep consumers guessing. When consumers are confused, they rarely make changes. So if AT&T; can keep people scratching their heads, consumers might not be so fast to switch long-distance companies.

It all started in 1979, when MCI did months of consumer research showing that most consumers did not know they had a choice in long-distance companies. So in 1980, MCI responded with its first TV ad telling viewers that they could save money on long-distance calls.

AT&T; officials also knew they had their work cut out for them when they took a survey in August, 1983, and discovered that only 4% of consumers knew that AT&T; provided long-distance service. Until that time people had been dealing with their local phone companies.

To quickly make themselves familiar, AT&T; marketing wizards shrewdly decided to downplay price and instead tell consumers that their company could be trusted while the competitors could not. In a web of intrigue not seen before on Madison Avenue, AT&T; unleashed a super-secret search for a celebrity spokesman that it could adopt as its own “Mr. Clean.”

AT&T; polled thousands of consumers about the celebrities they liked--and didn’t like. It did extensive background checks on celebrities that came out on top. So hush-hush was the celebrity search that even the handful of finalists contacted by AT&T; were kept completely in the dark that it was Ma Bell behind the auditions. That included the celebrity it eventually selected, Cliff Robertson.

Robertson took his agent’s advice six years ago and flew to New York to meet with the publicity-shy client and its agency. “I was astonished to walk into the room and find executives from AT&T;,” Robertson said. When they asked him to be AT&T;’s spokesman, a baffled Robertson accepted. “To this day,” he said, “I don’t know why they chose me.”

AT&T; officials know precisely why they chose Robertson. They chose him because AT&T; had high hopes that the squeaky clean Robertson--who even played John F. Kennedy in the film version of PT-109--could help it stand for all things good. And AT&T; hoped those rival phone companies--born from deregulation--would soon be made to stand for things evil.

“Cliff represented integrity and confidence,” said David Robertson (no relation to Cliff), AT&T;’s top advertising director in charge of the company’s consumer long-distance campaigns. “People just trust him.”

Although Robertson’s face isn’t appearing much in AT&T; ads these days, in order to consistently create ads with Cliff Robertson’s oh-so-comforting voice, AT&T; will go anywhere Robertson is just to record his voice-overs. The company has sent engineers everywhere from Athens to Berlin in order to catch up with Robertson.

So concerned is AT&T; with how it is perceived by consumers that it pries deeply into consumer psychology. In the mid-1980s, it even hired research firms to look closely at the shapes and colors of envelopes in which it was mailing promotions. “We ask focus groups things like: ‘What would it take to get you to open this envelope,’ ” said Alexa Smith, president of the New York-based Research Department, which at one time was retained by AT&T.; Rival Sprint’s marketing campaign took off in July, 1986, with the now-famous commercial that featured the sight--and sound--of a single pin dropping.

The company desperately needed something besides cost savings to attract consumer interest. Sprint had installed a 100% fiber optics network--a quality booster that the other two rivals didn’t have. But how to get that message across to consumers?

Executives from Sprint’s San Francisco ad agency, J. Walter Thompson, were brainstorming one day when a copywriter suddenly suggested the pin-drop idea. “We all looked at each other and said, ‘What the heck, let’s see if it’s true,’ ” said Sherry Paul, deputy general manager at the agency. They placed a phone call to their New York office and asked one of the creative executives there to simply listen. One executive in San Francisco took a pin and dropped it on a table next to the receiver. The listener--who heard it clearly--couldn’t believe it was a pin.

That action and dialogue was converted virtually intact into the TV spot. So effective was that ad in bolstering Sprint’s image that, from a reliability standpoint, many consumers began considering Sprint on par with AT&T.; One year later, in 1987, when Sprint was first introducing its calling card, the company devised a unique way to get its advertisement into the hands of those most likely to use it. Sprint bought ad space on the backs of plane ticket jackets for five airlines. “We bought from any airlines that would let us,” said Jorge L. Rodriguez, vice president of advertising at Sprint. While some car rental companies had done that before, no phone company ever had.

“We tried to think of something we could get into the hands of affluent consumers,” said Rodriguez. “Whether they wanted to or not, they put this advertisement into their pockets.”

To fight back, AT&T; used every available weapon. By the late 1980s, AT&T; had become the nation’s largest telemarketer--making something like 6 million phone calls a month to potential customers.

Five years ago, AT&T; asked consumers--and a corporate identity firm--how it could better position itself around the AT&T; name. “AT&T; was not a brand, it was a corporate identity,” said Clive Chajet, chairman of the New York research firm Lippincott & Margulies. “The only thing you could buy with the name AT&T; on it was the company stock.”

The identity firm helped AT&T; reorganize all of its products and services under the single AT&T; logo. “AT&T; had to become a brand name treated just like Crest or Gleam,” Chajet said. The AT&T; symbol started appearing on all of its products--and even AT&T; operators were instructed to no longer answer the phone as “operator,” but as the “AT&T; operator.”

AT&T; even began targeting first-, second- and third-graders with a series of comic books it introduced in 1989. The AT&T; “Adventure Club” comic book is published three times annually as a supplement to the weekly Scholastic News magazine. The full-color pamphlet comes complete with AT&T;’s name etched across the front and its logo across the back.

Some say the marketing battle became a street brawl in late 1989, when AT&T--reacting; to an MCI ad--took off the gloves and began a veritable character assassination of its rivals. AT&T; introduced its “put it in writing” ad campaign.

The campaign was the direct result of consumer research. AT&T; gathered consumers together and discovered they were generally embarrassed about hanging up the telephone on solicitors from MCI or Sprint. “We needed to come up with a way to get them off the phone,” said Keith Gould, director of creative service at the ad agency NW Ayer, who created the campaign. One consumer suggested the idea of getting it in writing, and the ad agency jumped on it.

Officials at MCI and Sprint say that campaign is riddled with its own confusion. They insist that they always have put their claims in writing. “That AT&T; campaign was misleading and offensive,” said David Schmieg, president of Sprint’s consumer services group. Sprint responded with its familiar, “Lighten up, AT&T;” spots.

About this same time, AT&T; also introduced a commercial featuring a poor sap at a pay phone. The caller is trying to place a call to Phoenix, but twice reaches some beachside hawker in Fiji. When he tells the operator that he wants credit for his misdirected phone call, the operator sharply retorts, “You’re not dealing with AT&T.;” Before slamming down the phone, the customer shouts, “I am now!”

That commercial was the direct result of an experience a former AT&T; customer related in a focus group discussion with AT&T; officials. And the actor who slams down the phone didn’t end up in that role by accident. He was selected out of a casting session of about 75 actors because he was judged by casting directors to be the most believable.

By 1989, AT&T; had also learned how to react far more quickly to competitors. Back in 1980, it took AT&T; nearly a year to get a commercial from concept to completion. By 1984, that time period had been compressed to seven months. And by 1989, it had shrunk to two months. Most recently, AT&T; has shown the ability to respond within a few weeks to the competition.

But the competition continues to be quicker. In January, 1990, after an AT&T; snafu with its switching network caused its long-distance network to fail in some areas, Sprint reacted within two days with an AT&T-bashing; print ad that said “other options exist” besides AT&T.;

In 1990, Sprint also decided to peg its image on a personality. “We looked at Cliff Robertson and tried to think of a personality--preferably a woman--who we could make sort of a counterpoint,” said the ad agency’s Paul.

Sprint’s marketing executives gathered in May, 1990, to discuss celebrities. While talking about popular TV shows, Schmieg remembers blurting out the name Candice Bergen, star of the TV show “Murphy Brown.” “I hate to admit this,” he said, “but we were working on gut feelings.”

They eventually signed Bergen. But marketing experts say it wasn’t really Bergen that Sprint hired--but the quirky TV newscaster she plays on her popular TV show, “Murphy Brown.” Keep in mind, real TV newscasters would be forbidden to endorse products.

Last year, MCI went for the jugular. MCI executives are convinced that consumers want to see specific examples of savings over AT&T.; So MCI put up billboards in several cities--including one at New York’s Times Square--to display in lights how much MCI customers save over AT&T.; The billboards feature numbers that keep growing under the headline, “What America is Saving Using MCI instead of AT&T.;”

The billboard was the brainchild of Messner, the agency chief who has worked on MCI commercials at two agencies. “I didn’t care what the numbers were,” Messner said. “I just wanted something that covered nine digits . . . something in the hundreds of millions of dollars.” The purpose of the billboard, he said, is to “plant the image of savings.”

Perhaps nothing plants that image better than MCI’s current “Friends & Family” campaign. Once again, the idea for the campaign came from groups of consumers who were asked what would nudge them to make the switch to MCI. A 10% cost savings wasn’t enough. But 20% was plenty.

Under the “Friends & Family” program, “calling circles” of up to 12 people save 20% on the long-distance calls they make to each other. Those who join are simply asked to send names--and addresses--of friends or family who they want in their circle of callers.

Unlike past MCI marketing efforts that mostly concentrated on AT&T-bashing;, the company decided to pretty much take the high road on this campaign. “With a product like this,” said Timothy Price, senior vice president of sales and marketing at MCI, “we realized that we no longer had to get people to dislike AT&T; in order to do business with us.”

The results: Since the campaign began in March, 1991, MCI says it has signed up nearly 5 million new customers.

AT&T; is so concerned about this that last week it began mailing personal letters to many of the customers it has lost nationwide. Inside each letter is a certificate for $10 worth of free AT&T; long-distance service--and cost-free switching back to AT&T.; “Since you left us,” says each letter, “we’re not the same.”

Inroads in Long Distance Maybe it’s their marketing tactics, or maybe it’s their less-expensive prices, but MCI and US Sprint have gained market share on rival AT&T; every year since 1984. Long Distance Market Share: 1984 MCI: 4.5%

US Sprint: 2.7%

Others: 2.7%

AT&T;: 90.1%

1990

MCI: 14.2%

US Sprint: 9.7%

Others: 11.1%

AT&T;: 65%

Source: Federal Communications Commission