Vodafone needs to watch out

You can forgive someone once, maybe twice, but six court cases concerning misleading advertising from Vodafone New Zealand is stretching credibility somewhat.

I know the company has only admitted to one of the six cases, for which it was fined over NZ$400,000 last week, but Vodafone's appearances in court do seem to be becoming a bit of a habit.

Vodafone admitted five breaches of the Fair Trade Act concerning its Vodafone Live service in 2007-08, which promised "absolutely free" mobile internet for some websites.

However, Vodafone failed to adequately tell users that charges would apply outside Vodafone Live's "walled garden", which left some users facing "bill shock" in excess of NZ$1000.

Just two days prior to Friday's court judgment, Vodafone was defending a "$1-a-day" mobile internet offering, which the Commerce Commission in New Zealand also believes to be misleading.

And there remains four more court cases to come, again involving the marketing of its internet and phone products during 2007-09.

Now, Vodafone is not some shady, sleazy, fly-by-night operator. It is New Zealand's largest mobile phone company, with around half of the market.

It is young, hip and trendy, with the brightest colours, the best-looking staff and the best-looking products. It is a showcase of global branding and marketing wizardry, an organisation that makes its Telecom rival look stale and stodgy by comparison.

But dig deep beneath its marketing froth, and there are many unhappy campers.

The comments underneath news stories confirm this. Commenters accuse the company of rorting customers and delivering poor customer service and coverage.

Consequently, Vodafone is losing customers by the tens of thousands; it lost 27,000 subscribers in the three months to 30 June, giving it just 47 per cent of the market, when it had previously held over half.

With all of this happening, something is surely rotten in the state of Vodaland.

For a company strong on image and branding, the "misleading" marketing is the nail in the coffin.

Vodafone New Zealand must do much to redeem itself and act with total integrity — otherwise the unhappiness and customer losses will only multiply.

Of course, it isn't the only telco that has encountered such issues.

Indeed, in 2009, Telecom was fined NZ$500,000 after pleading guilty to 17 Fair Trading Act breaches over claims made in 2006 when promoting Xtra's Go Large broadband plan.

As Paul Brislen, former Vodafone spokesman and now Chief Executive of the Telecom Users Association of New Zealand, told the New Zealand Herald:

"Theresa Gattung [former Telecom chief executive] said telcos had used confusion as a marketing tool, and she was absolutely right."

However, under CEO Dr Paul Reynolds, Telecom has done wonders for its image. It was open and honest with its XT failings, and it acted as the perfect corporate citizen when Christchurch had its earthquakes. To a large extent, Telecom New Zealand has redeemed itself.

Vodafone needs to realise that New Zealand is a small country, and that customer service counts, as does reliability. People tend to use word of mouth more, and if word spreads about appalling service, or the company gains a poor reputation for honesty, it will suffer immensely.