'Skinny' profits set for Telecom sub-brand?

In its infinite wisdom, Telecom New Zealand is to launch a "sub-brand" aimed at "youth" in the New Year.

As it switches off its old CDMA network, the telco is terrified of losing customers to the Vodafone-linked 2degrees network, which has captured a decent share of the budget market.

But is a sub-brand the right strategy for Telecom? I fear there will be pitfalls along the way, especially since Telecom has been down the sub-brand route before, withdrawing its ill-fated Boost mobile service in 2007.

That previous foray, also aimed at youth, featured rap music and hip hop telling us all to "hook up", "hook up".

Telecom wouldn't be the only carrier to look into sub-brands. European telcos have also dabbled in them, following reports sub-branding works in Korea.

However, as noted by marketing experts, sub-brands have their problems. How much might they impact on the parent label? Could they even embarrass or devalue it?

Certainly, the readers of the National Business Review seem most concerned at Telecom's planned Skinny Mobile. As XT customers, they rightly fear whether the Skinny customers will be getting the same service for less. Won't these "premium" XT customers be subsidising the budget sub-brand?

And if Skinny customers can get the same XT service for less, what is there to stop XT customers from migrating over to the cheaper label?

Telecom hopes and obviously believes that such a new sub-brand, moving into a new market and better targeting its campaigning, will help it draw in extra customers. Maybe Telecom has learned from the Boost debacle, but it's certainly taking a risky road. It could well end up "cannibalising" its own customers. Rather than get the "Boost" it hopes for, Telecom could find Skinny Mobile means "skinny" profits ahead.