How would you like to receive hundreds or even thousands of dollars a month from message-on-hold products?

That revenue stream can indeed be yours - if you're willing to avail yourself of it. But if you're like most interconnects, you're not marketing the music and message content and content upgrades that are integral to digital announcers (DAs) - or even selling the digital announcers themselves. DA makers say too many VARs fail to include music/message-on-hold (MOH - used to reference both) in their turnkey solutions or proposals. That may be understandable when you compare up-front revenue: $500 to $1,000 for a DA versus potentially $20,000-plus for a PBX or IP telephony server.

But interconnects are overlooking other benefits. MOH - not to mention other PBX adjuncts - can be used, for example, to help clinch the sale. VARs might discount or eliminate the markup normally charged on the product in a turnkey proposal. Or, to boost customer retention and revenue after the initial sale, they might pitch MOH as a helpful add-on. (Example: Mr. Customer, we thought you might be interested in a special we have this month on a MOH product from ... )

But the most lucrative part of the MOH market is in delivering the content and upgrades. Fact is, interconnects are missing out on a revenue stream that is now largely the domain of MOH production houses and content providers, such as Muzak and 400-plus MOH shops, that also resell digital announcers. Considering these production houses generate, on average, $1,000 to $2,000 per year for MOH upgrades, that can add up to a lot of dough when spread across an entire customer-base.

Looking the Other Way

Alas, few interconnects - or anyone else outside the MOH market - are taking much notice. They should, because MOH is here to stay. What's more, MOH is part of a rapidly expanding services market that is fiercely competing for customers' budgets against traditional enterprise-based, one-time sales. In the telephony space, we see this, for example, in the growing number of hosted telemanagement services (such as call accounting), and in outsourced switching services from IP Centrex and communications applications service provider (CASP) outfits.

How big is MOH? Statistics are scarce because, well, trade associations and market research outfits haven't paid attention either to what, at first glance, might seem like a secret society. MOH market penetration is estimated at from 5-10%. Whichever your chosen percentage, that leaves a lot of MOH prospects untouched: 12 million businesses in North America, of which approximately 11 million have multiline telephone systems installed. Then kick in another 35 million-plus home offices.

The most lucrative prospects for MOH are the less than 8 million businesses that have multiline phones and/or multisite locations and, therefore, may require multiple messaging units. But let's not diminish the potential for single-site businesses. Because millions of them - food chains (like pizzerias), auto dealerships, florists, financial and medical professionals, and more - are hungry for customer relationships management (CRM) tools that can boost their profitability.

CRM, regrettably, is a much-overused acronym that all too many non-CRM vendors apply to their products. But if any solution merits the term, it most certainly is MOH. Think about it. When customers get put on hold, instead of silence, they're greeted by messages and music that capture their interest. If done right, these messages are as good as any high-priced sales and marketing pitch used in other media. Alternatively, MOH might soft-peddle the company by providing useful info not specific to the outfit's products and services. At a minimum, MOH can be indispensable to keeping callers on-hold until they can make contact with an appropriate rep. And, when firms are too understaffed to handle high call volumes, callers' patience (as we all know) wears thin fast.

Compared to other marketing and CRM tools, MOH is exceptionally low-cost, which is both an advantage and a disadvantage. Businesses are accustomed to paying tens of thousands of dollars for radio or TV commercials, newspaper or magazine ads, collateral materials, direct mail, Yellow Pages advertising, or billboards. So, when one learns that MOH service can sell from $600 to $2,000 per year, or less than pennies per impression, people might become suspicious of its effectiveness. People will say, "You only get what you pay for." Or, if the MOH is too cheap, they say "There must be something wrong with it."

But hundreds of thousands of businesses are already benefiting from MOH. Countless companies have recounted how digital announcers and MOH content upgrades paid for themselves in weeks, if not days. The ROI (return on investment) is measured in improved caller retention (i.e., fewer abandoned calls, which businesses can track in a traffic analysis study); and, less tangibly, in the good will and receptivity to vendor offerings that MOH generates.

Market Participants

These facts are not lost on the MOH players. Who are they? At the top of the pyramid are the makers of digital announcers or repeaters. The "Big 6" includes Bogen Communications, Interalia, Mackenzie Laboratories, Nel-Tech Labs, On-Hold Plus, and Premiere Technologies. Of the industry's 16-plus manufacturers, only four also provide MOH value added services - the ongoing message and music content - to VARs and/or end-customers. (For more info on these DA vendors and their products, see next month's feature, "You Are Not Alone.")

That leaves a big space for some 600-plus so-called production locations to fill. The biggest among them are the franchisors: Muzak, Impressions On Hold International, and The Message On Hold Network. Collectively, these outfits account for 200-plus locations in the US and Canada. The remaining 400, however, tend to be small, independent Mom-and-Pop shops that earn part of their living selling services apart from MOH: non-MOH music recording and productions, sounds solutions and equipment, Web site development and maintenance, IT services and so on. (Perhaps we might more aptly describe the MOH market as a "fragmented society.")

These outfits, like interconnects, also resell digital announcers. They typically sign up customers for annual or multiyear contracts that call for three to 12 message updates per year. (The most common is a three-year, 12-production agreement.) Customers pay a monthly fee for services (purchased or leased) that, at the high-end, can entail unlimited productions. The last would be of particular benefit to, say, retail outfits that change their promotions weekly or daily.

While the franchisors and a few larger content providers seem to be riding high, MOH for the 400-plus smaller, independent shops is a tough business. Collectively, they account for less than 30% of the ongoing MOH services business. Most of the production houses have fewer than 200 clients who can generate an ongoing revenue stream. What's more, many houses lack the necessary experience and sales skills to differentiate their offerings from their competitors. A lot of them, too, are short on cash flow needed for marketing purposes - and to stay afloat. The industry's volatility is seen in the rapid turnover. About 40 to 50 production companies get into MOH annually, and from 35 to 45-plus exit each year.