Wednesday, August 13, 2008

Get me the (free) 411

I heard a story today on National Public Radio about a handful of companies that are infiltrating the multibillion-dollar 411 market. As we all know, the phone companies today make a fortune on 411 calls (a service, by the way, that used to be free).

These new directory assistance companies don’t charge users a fee. Rather, they charge advertisers to run short ads through the information retrieval process. Companies employing this model have been profitable almost instantly – and they themselves don’t advertise, their business is generated 100% by word-of-mouth advertising and repeat users.

What are the lessons here for A/E firms? The phone company teaches us that if we offer a non-technical value-added service to clients (e.g., facilitating a permitting process, getting public acceptance of a project, etc.) we should be charging for it.

These upstart directory assistance outfits are showing us that even a monopolistic service like 411 can be infiltrated – if you come at the issue at the proper angle. It’s not impossible to gain traction on a sheer cliff if you have the right tools (and attitude). The other lesson is don’t discount the power and reach of word-of-mouth marketing. Remember, these upstarts are making money because people who use the service are happy and come back. They are growing because other people are talking about them.

For AT&T’s part, they are not worried. An AT&T executive quoted in the story said “lots of people will still pay for our 411 service”. Perhaps, but not as many and probably for not as long as he thinks.


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