Advertising and Product Differentiation

The consumer cable services industry is homogenous by nature, yet a handful of national giants command a large portion of market share. The difference in quality and speed between services is negligible to the average consumer of Cable Television and Internet, however market leaders have managed to separate themselves from competition through the use of advertising to create perceived product differentiation. According to Comcast, Verizon Battle it out for Market Share, an article written for boston.com, Comcast Corp. and Verizon Communications Inc. have become incredibly effective in convincing the nieve consumer that they have “the best deals, the most amazing TV pictures, and Internet speeds to dazzle the cyber gods.” The two firms have managed to avoid simple comparisons to each other by offering a motley assortment of cable movie channels and questionably unique pricing packages. Currently, Comcast possesses a stronghold in Massachusetts with 1.6 million subscribers compared to Verizon FiOS’ 226,000, however this gap is rapidly disappearing as FiOS continues to rewire community after community.

In their commercials, both Verizon and Comcast boast superior service speed. Although both firms argue their service is more advanced than any other, industry analysts state that the technical differences between Verizon’s and Comcast’s systems are trivial. According to Bruce Leichtman, president of cable industry tracking firm Leichtman Research Group, “They’re almost identical. If people think they’re missing out on a humongous product differentiation, that’s not true.” As explained by independent telecom analyst Jeffrey Kagan, Verizon entered the TV industry with superior technology to that of traditional cable companies like Comcast, however “that forced the cable companies to upgrade.”

Since Verizon’s major competition has followed their move toward fiber optics, market shares of industry giants remain very competitive, differing only due to minor differences and a perceived competitive advantage from advertising.

This blog post was written by Stephanie Cohen, Carleton Cady, Jeanette Elliot and Walter Peek