GETTING THE WORD OUT

Historically, prepaid phone cards have appealed to rather closed niches -- those people with no income or credit, foreign travelers and college students.the product and the value it offers both consumers and retailers. Some have even called for a national advertising campaign to increase consumer awareness.But there is little doubt among those SN spoke to for this forum that sales of prepaid phone

Historically, prepaid phone cards have appealed to rather closed niches -- those people with no income or credit, foreign travelers and college students.

the product and the value it offers both consumers and retailers. Some have even called for a national advertising campaign to increase consumer awareness.

But there is little doubt among those SN spoke to for this forum that sales of prepaid phone cards are ready to explode when awareness is fully realized.

Capka: The growth rate will be tremendous. The key is in educating people regarding the value of prepaid cards.

If we can educate the people as to their value, every person in America would have one. If a gas station in Chicago was selling gas at 60 cents a gallon, the line would stretch for several states. Most people spend more money on the phone than on gas. By purchasing a prepaid phone card, their minimum savings is 60% over any method they can use to make a call away from home. In some instances, a calling-card call costs less money to make international calls than to make them from your home phone. If we can educate every person that this provides 60% savings over any way to make a call away from home, then everyone would have one. That is the message people have to learn to get across.

Veres: The biggest obstacle is still consumer awareness. The statistics I have seen indicate that seven out of 10 people know what a phone card is. That number used to be one out of 10. But there is still a large number of people who don't understand that this is actually long-distance service they are buying. The key is, it has nothing to do with your long distance at home. You can buy the card and use it anywhere.

The next biggest obstacle to overcome will be having consumers understand the pricing. Pricing on phone cards is very different and is always changing. We can thank Candice Bergen for going on television and telling us Sprint costs only 10 cents a minute. The next step is educating people on what the price per minute is with a phone card and why it is not as low as 10 cents a minute.

Goldberg: I think phone cards have already come of age. In the last few years, many more people have become aware of what they are. But many still have not used them. We still need to get better recognition, awareness and trial by consumers. The more consumers learn about the cards, the more they like them, particularly as a promotional vehicle.

The only other thing to overcome is the stigma left by those people who were not prepared to handle the business properly. The industry needs to show it is as rock solid as the major phone companies.

Capka: The prepaid-phone-card market is no longer limited to certain demographic segments. What is happening is everyone is starting to realize the value of prepaid cards. Up to 20% of the people in America who know about the cards understand that it is a value. If we can convince the other 80%, then prepaid calling cards will become incredibly lucrative for the retailers and distribution will dramatically increase.

Canty: Currently, prepaid phone cards have very low penetration in the market -- less than 10% of consumers have ever used a prepaid card. There is a lot of growth potential. There are a lot of benefits to prepaid cards. These days they are relatively cheap. They allow you to budget yourself better. If you buy a $20 prepaid card, that is all you can spend. That budgeting mechanism is important to a lot of people. There are people who don't have credit. This gives them the ability to go to the store and pay cash for a card so they can make calls. These markets alone are enough to provide a lot of growth.

Segermark: In the future I think prepaid phone cards will continue to grow at a very high rate. Only 60% of Americans know they exist. Less than 15% have ever used them. I think the growth will come. Anyone who travels and does not use a prepaid phone card is missing a bet.

Schloss: The phone-card business will continue to grow for a while. It is still a huge market. A lot of people haven't tried prepaid phone cards yet. They keep hearing about them. Phone cards are a lot less expensive to use in most places.

Prepaid Calling Awareness The sheer potential for greater consumer use will drive sales of prepaid phone cards to the turn of the century, when revenues are expected to hit $2.5 billion. Revenues should jump a healthy 34% this year to $1.4 billion. Although sales will be robust, the compounded annual growth rate will slow down.

Sales of Prepaid Calling Cards

(in millions)

1997 $1,475

1996 $1,100

1995 $750

1994 $350

1993 $100

1992 $12

Source: Atlantic-ACM, Boston