Getting there will require community-wide commitment to help win new customers, officials say
By DAVID BORAKS
DavidsonNews.net
MOORESVILLE – Could the money-losing MI-Connection Communications System swing from red ink to black in just 12 months? MI-Connection officials think it can be done, with a revved-up marketing campaign that sends town commissioners on sales pitches to community groups and businesses, and enlists citizens to refer new customers in exchange for cash rewards or donations to their favorite charities.
That’s the gist of a new community-focused marketing campaign that MI-Connection officials presented Monday night during an unusual 90-minute joint meeting between the system’s board of directors and the town boards of Davidson and Mooresville, which own the area cable and internet system.
“What we’re talking about is an accelerated growth plan,” said John Venzon, one of two Davidson representatives on the MI-Connection board. “We think there’s market opportunity to give us share to make us profitable.”
Officials at MI-Connection Communications System are looking for a path into the black – financially speaking. Sales of internet and telephone services are rising, but TV customers are continuing to be lured away by satellite services and other competitors. The system now has about 15,200 total customers in Mooresville, Davidson, Cornelius and surrounding areas, hundreds fewer than it started with when the towns bought the system in 2007.
Operating profits – money left over after paying the day-to-day costs of running the system – are growing, but not fast enough to calm fears about never-ending town subsidies. (See Aug. 12, 2010, “Operating profits rose at MI-Connection in 2009-10.”) At current growth rates, it could be years before the system breaks even.
MI-Connection is losing millions of dollars a year mainly because of hefty payments on its massive $92.5 million debt, which now total $7.3 million annually. The towns are making up shortfalls from their own budgets. This fiscal year’s bill: $6.46 million, split between Davidson ($2.02 million) and Mooresville ($4.44 million).
MI-Connection General Manager Alan Hall describes referral programs Monday as system chair Jon Kasberger and Mooresville Commissioner Miles Atkins listen. (David Boraks/DavidsonNews.net)
So on Monday night, MI-Connection General Manager Alan Hall walked the three boards through a plan to turn the company around by Fiscal 2012 – primarily by increasing appeals to the community to support the system. The plan relies on existing direct mail, telemarketing, community marketing and discounts, such as an introductory $9.95/month internet promotion now running. But it will lean even more heavily on person-to-person referrals.
It includes the company’s “Refer a Friend” program, which pays up to $75 to customers who refer their friends and neighbors.
In lieu of rewards, customers also can choose a new program, in which MI-Connection will make donations to their favorite schools or charities. MI-Connection hopes customers will organize themselves to sign up to support specific nonprofits, through the new fund-raising program it calls “Connect My … “. (You fill in the blank with the name of your charity or school.)
Mr. Venzon said MI-Connection has looked at or tried a variety of marketing tactics, including door-to-door marketing. But personal referrals are the single best way to sell, he said.
“Any referral that we can get is the most cost-effective, highest odds of long-term relationships. Because if your neighbor has it, and gives a positive referral, or you have it and give a neighbor a positive referral, it’s instant credibility, because they know you,” Mr. Venzon said.
NEW TARGETS
In his presentation Monday, Mr. Hall said the system could reach profitability in Fiscal 2012 if it can roughly triple its operating profits, to $9.865 million, from this year’s projected $3.406 million. To reach that point, he said, MI-Connection would need to reel in 5,000 new customers who subscribe to all three of its products – TV, internet and telephone. (In industry terms, that three-service bundle is referred to as a “triple play.”)
Each individual service is known as one “revenue generating unit,” or RGU. So looked another way, MI-Connection needs to sell a net total of 15,000 new RGUs over the next 12 months to break even, Mr. Hall said.
“That would generate about $2.5 million in earnings from operations per year, including debt payments,” Mr. Hall said, which would free the towns from having to support the system and provide money for capital investments or dividends to the towns.
The plan revolves around taking advantage of the opportunity that lies in the 20,000 or so “non-customers” in MI-Connection’s Lake Norman area territory. Mr. Halls said MI-Connection needs to boost “penetration” – that’s the percentage of homes in its territory that subscribe to its services. So his 5,000 customer target would be 1/4 of those homes.
Current penetration rates are 38 percent for TV, 26 percent for internet, and just 5 percent for telephone, a service MI-Connection began offering just 15 months ago.
MI-Connection can reach profitability if it boosts those rates to 52 percent for cable, 41 percent for internet and 20 percent for telephone, he said.
Still, the goal of selling 15,000 RGUs over the next year will be a tough one. Right now, MI-Connection is adding about 200 RGUs a month. He thinks the planned “community” marketing campaign can boost RGU growth to 750 a month, which would make the system profitable in 12 months.
Mr. Hall suggested breaking the goal down into town-by-town goals. He said the system’s wants to reach roughly equal penetration in the three towns in its service area – selling the service to about half the homes its network passes. That would mean adding 1,500 new “triple play” homes in Cornelius, 500 in Davidson, and 3,000 in Mooresville.
MI-Connection will have to sell the idea to residents. On Monday night, mayors Chris Montgomery of Mooresville and John Woods of Davidson both pledged, on behalf of their respective town boards, that they and commissioners would get out into the community to promote the campaign, as well as to help push sales to commercial customers.
Mayor Woods said Monday he’s already making phone calls to commercial prospects “here and there” as well as making occasional sales calls with Mr. Hall. “It takes a personal commitment,” he said. “If all of us make that commitment, we will begin moving those numbers and we will being making some headway.”
The meeting wrapped up with various commissioners from Mooresville and Davidson saying they were ready to chip in, and they quizzed Mr. Hall on how the referral programs work.
MI-Connection board chair Jon Kasberger said several times Monday night he thinks the new goals and marketing plans are “do-able.” He said the plan would help the system beat its budget for this fiscal year, which ends next June 30.
He said it will rely on person-to-person contacts, including the efforts of members of the two town boards and the MI-Connection board.
“The power in here to get this done is just incredible, when you think about it. It’s going to be a new day for MI-Connection,” he said.
DOCUMENTS
Download fliers/forms for the two referral programs mentioned above:
Customer referral program (up to $75 rewards for customers who refer friends), (PDF), CLICK HERE>
“Connect My …” program, which will donate up to $75 to nonprofit organizations or schools for each new service a customer buys with MI-Connection. (PDF), CLICK HERE>
PREVIOUS COVERAGE
See previous coverage of MI-Connection on DavidsonNews.net, CLICK HERE>
Time for a reality check. I attended this joint meeting on Monday. Besides members of the Boards, and members of the press, there may have been 10-12 citizens in attendance. What we heard was a cheerleading pep rally by those who refuse to admit the difficulties facing this government-owned, private sector business.
Look at the profitability graph. If MI-Connection’s Board and Management Team can accomplish this, they ought to immediately be put in charge of the entire United States’ economy! What a bunch of smoke and smoke (no mirrors here).
5,000 new customers (15,000 RGUs) in just 12 months? Crazy! Look at their recent actual numbers: For the month of June they lost 67 cable subscribers and gained just 24 data and 55 voice RGUs. They had a net loss of 45 Customer Relationships…a far cry from the 200 customer (600 RGUs) gains their present budget is calling for. In fact, their 4th Quarter Revenues for the year just ended (Apr-Jun 10) were barely better than the same period in 2009. Where is the growth? Where is the success in establishing new customers?
Drive through any Mooresville neighborhood where TWC has moved back in to compete head to head with MI-Connection. I dare say, you will see TWC technicians laying cable and installing new customers. You don’t see a MI-Connection technician at all! Even worse, I understand this is now beginning to happen in Cornelius and, heaven forbid, Davidson, too. If TWC is so bad, with such poor customer service … how can this be?
Does MI-Connection provide installation and service on weekends and holidays? TWC now does. Do Mi-Connection technicians work till 9:00 PM to meet new customer schedules? TWC, Dish, and DirecTV do! (I’m not sure about AT&T).
Mr. Hall, at Monday’s meeting, did not provide the Boards/Press/Public with a status of how sales in the current year are starting off. We’re now 50+ days into their new year. Based on their cheerleading, we should have heard about their achievements of over 300 new customers (900 RGUs) towards the budget and/or 1,250 new customers (3,750 RGU’s) based on this new “Community Growth” plan. Can anyone but me see they’ve given themselves expectations that just aren’t rational? And now, even the Mayors and Town Boards have ownership in this “black hole” of growth. Maybe instead of betting each other a BBQ Dinner for exceeding “their” targets they should start that “door to door” knocking and actually sell some of these products. (Except in Davidson, of course, where it is against the law to market door-to-door!)
It’s time for an honest and frank assessment of this business. The reality is MI-Connection will have a hard time achieving even the $6.7 million dollar, taxpayer-funded loss of this past year for years to come. Will Davidson triple the new trash collection fee next year to make up the difference? Which Town Leader will step up to the plate and tell their citizens the truth?
Why doesn’t the Town of Davidson sell its share of Cornelius MI-Connection customers instead of taxing its citizens? Cornelius customers of MI-Connection have been getting a free ride, largely at the expense of Davidson taxpayers. The true customer breakout of the system is 60% Mooresville homes, 10% Davidson homes, and 30% Cornelius homes. However, the taxpayers of Cornelius are not on the hook for any of the system’s losses. This is because the Towns of Mooresville and Davidson “bought” the Cornelius customer base at the time MI-Connection was founded.
Davidson should consider the immediate benefit of selling some, if not all, of these “unnecessary” customers. If the Town Leaders believe in the plan described in the article above, this sale of surplus assets will actually generate free cash years sooner than it would have under the original Business Plan, and the Town Leaders could be feted as heroes and visionary stewards of the citizens’ monies entrusted to them. Instead of Refer a Friend, they can call it “Sell a Neighbor”!