By Mike Shields

Given the still-brutal economic environment, the wireless category has taken on a sort of upstairs-downstairs strategy. Most brands in this hyper-competitive segment are pushing lower-cost offerings to appeal to recession-sensitive consumers, while at the same time peddling flashy and pricy smart phones.

Overall, the category is fairing better than most as mobile phones have become as essential to most Americans lives. “The telecom category has been pretty immune,” says veteran telecom industry analyst Jeff Kagan. “If this economy had happened 10 years ago, wireless would have been killed. Now, wireless is the service people won’t cut.”
So while ad spending among telecom and wireless companies is down, it remains massive. The telecom category spent $8.4 billion in 2008, making it the fourth largest category overall, per TNS. Verizon Communications and AT&T were the No. 2 and No. 4 largest advertised brands, respectively, in 2008, as each laid out in excess of $2 billion in advertising. Still, spending in the category was down 5.7 percent versus the nearly $9 billion tracked in 2008.

While some falloff may be due to consolidation, telcos are also focusing less on the mass market and more on key segments. For instance, prepaid phone plans offered by smaller companies like MetroPCS Wireless and Virgin Mobile—which offer a flat fee and no contracts—suddenly popular. “With the challenging economy, there has been a clear rush to value,” says Charles Golvin, principal analyst at Forrester Research. “There has been a lot of competition around the low end. Companies have been spending to get that message out, that they offer predictability. No hidden fees, no charges sneaking up.” That has nudged the bigger carriers, who have been loath to cannibalize sales by hawking their prepaid services, to step things up in that area.

At the other end of the spectrum, there’s the smart phone crowd. “At the high end, carriers are willing to spend on advertising,” said Golvin “It’s worth it to get those highly profitable users. These are people who are better insulated against tough times and can handle expensive plans.” Even there, though, value is the watchword. Apple’s iPhone lost some ground of late to BlackBerry, whose Curve was the best selling smart phone in the first quarter of 2009 per NPD. That was driven in part by a popular ‘buy one get one free’ promotion peddled by Verizon.

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