Leader of the pack

Latin CEO: Executive Strategies for the Americas, May-June, 2002 by J.P. Faber

Herrington constantly thinks about how to acquire new subscribers. Initially AOLA's target was the so-called SES "A" audience, the Socio Economic Strata "A" also known as the upper class. With Internet penetration levels for the SES "A" level becoming already at 70 percent to 75 percent, "the bulk of the growth will next be in the 'B' level," says Herrington. That's the middle class population, which has Internet penetration rates of 25 to 30 percent. Then there is the working class, or SES 'C' level, the ultimate mass market. "Of course, when you're going into the C social economic level, which is most of the population," says Herrington, "the biggest obstacle to joining the Internet is that PC." Current PC penetration rates average about the same as Internet penetration in the region--6 percent overall--but in the C level population the figure drops well below that,

To that end, AOLA has been working with PC manufacturers to lower costs and offer creative financing programs. Leading that effort in Brazil is Banco Itau, which was given its 12 percent share of AOLA in exchange for trying to bring its online banking population into the fold. Not only' does Itau offer low-cost financing for PCs, it has even set up a subsidiary, Itau Tech, to manufacture inexpensive PCs. In Mexico, meanwhile, AOLA works with Office Max and WalMart to offer similar PC deals. In these and other retail outlets, AOLA has installed AOLA software in kiosks, which demonstrate the service and offer immediate registration. AOLA also markets the Office Max and WalMart PC deals online, and embeds AOLA software in the units for sale.

"Broadly speaking, I'd say that there are two different ways that we get new subscribers," says Herrington. "The first is to get people at the moment they are buying a PC. The other way is that we try to find the profile of the people who want to get onto the Internet, and we try to put a CD in their hands. And of course, there is this big blanket, or umbrella, of advertising that goes with it, to create brand awareness and explain product benefits. We tie the three together."

Bearing mute testimony to the marketing campaigns are the colorful trial membership CDs, with their free offers, similar to the ones that have become as ubiquitous in the US as tissue paper or ballpoint pens. Sixty such CDs are encased on the wall of AOIAs headquarters reception area: "Un Mes Gratis" for Argentines, "E Rapido. E Facil. E 500 horas gratis por un mes" for Brazilians, "250 horas gratis" for Mexicans. Unlike AOI's mass mailings in the US, Herrington says that in Latin America the CDs are sent far more selectively based on close scrutiny of factors including PC ownership, magazine readership, credit card usage, home ownership and so forth,

In terms of sheer marketing blowout, however, little compares to AOLA's sponsorship of the Rock in Rio extravaganza in January 2001. Herrington had AOLA put up US$20 million to back the weeklong concert, which drew 1.4 million people to see 130 performers, including REM, Sting, Britney Spears, N' Sync, Beck, Guns-N-Roses and Sheryl Crow. Even James Taylor was on hand to sing a duet with Brazilian samba legend Joao Gilberto.