Description
In this report, I have tried to capture most of the areas of Telecom Industry. Major highlights of the report are: Introduction of Telecom Sector and its status at present, its growth & growth drivers, challenges faced by it; Telecom Marketing Mix; Service Marketing in Telecom Sector, Marketing Strategies in Telecom, Market Segmentation, Managing Service Quality in Telecom, and Conclusions and Recommendations.
A Project Report On:
Service Sector Management in Telecom Industry
Submitted By:
Dishank Khandelwal
For The Degree Of
The Bachelor of Management Studies Semester – V Prahladrai Dalmia Lions College of Commerce and Economics
S. V. Road, Sunder Nagar, Malad (W), Mumbai-400064.
Submitted To:
University of Mumbai
Academic Year:
2011-2012
DECLARATION
I, Master Dishank Khandelwal, of Prahladrai Dalmia Lions College of Commerce and Economics of T.Y.B.M.S (Semester V), hereby declare that I have completed the project on ?Service Sector Management in Telecom Industry‘ in the Academic Year 2011-2012. This information submitted is true and original to the best of my knowledge.
Date: Place:
(Signature of the Student)
CERTIFICATE
I, Prof. A. M. Bhende hereby certify that Master Dishank Khandelwal, a student of Prahladrai Dalmia Lions College of Commerce and Economics of T.Y.B.M.S (Semester V), has completed project on ?Service Sector Management in Telecom Industry‘ in the Academic Year 2011-2012. This information submitted is true and original to the best of my knowledge.
External examiner: Date: Project Co-coordinator: Date: College Seal: Principal
ACKNOWLEDGEMENT
It is a matter of great pleasure and privilege to present this report on ? Service Sector Management in Telecom Industry‘. The compilation of this project is a milestone in the life of a management student and its execution is impossible without the co-operation of the project guide. I would like to express my heartfelt gratitude to my project guides for their encouragement and assistance through the course of this project. It is due to the efforts and guidance of my project guides that I am able to present this project. At the outset I would like to take the privilege to convey my gratitude to all those who co-operated, supported, helped and suggested me as to how the project could be completed. This project bears imprint of advices, from many people who were either directly or indirectly involved in it. The Internet has been a veritable treasure throve of information, the websites and the information they contained helped me to do the project in a much easier and better manner. I am also desirous of placing on record profound indebtness to my project guides Prof. A.M. Bhende and Prof. Anshu for their valuable advices, guidance, and precious time and support that they lent to me. I would also like to thank Sales Executive of various company‘s outlets i.e., Reliance Communication Gallery, Tata Docomo Gallery, Airtel Gallery, for their time and valuable inputs they have provided in the course of my research. I would also like to take this opportunity to express my gratitude to the Principal of my college, Dr. N. N. Pandey, for his continued belief in his students and for giving me this opportunity. I would also like to thank the Head of the BMS Department, Prof. A.M. Bhende, for his guidance and encouragement to take up this project.
(Signature of the Student)
EXECUTIVE SUMMARY
The rapid growth in Indian telecom industry has been contributing to India‘s GDP at large. Telecom industry in India started to set up in a phased approach. Privatisation was gradually introduced, first in value-added services, followed by cellular and basic services. Telecom Regulatory Authority of India (TRAI), was established to regulate and deal with competition (the service providers). This gradual and thoughtful reform process in India has favoured industry growth. Upcoming services such as 3G and WiMax will help to further augment the growth rate. The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally by 2010. This is evident from the facts of Telecom Industry for example, India added 113.26 million new customers in 2008, the largest globally. The country‘s cellular base witnessed close to 50 per cent growth in 2008, with an average 9.5 million customers added every month. This would translate into 612 million mobile subscribers, accounting for a tele-density of around 51 per cent by 2012. It is projected that the industry will generate revenues worth US$ 43 billion in 2009-10. In this report we have tried to capture most of the areas of Telecom Industry. Major highlights of the report are: Introduction of Telecom Sector and its status at present, its growth & growth drivers, challenges faced by it; Telecom Marketing Mix; Service Marketing in Telecom Sector, Marketing Strategies in Telecom, Market Segmentation, Managing Service Quality in Telecom, and Conclusions and Recommendations.
INDEX
Chapter 1: Indian Telecom Sector ......................................................................................... 8
1.1 Introduction ................................................................................................................................................. 8 1.2 History of the Indian telecom industry ........................................................................................................ 9 1.3 Role of Telecom Sector in Development Process ..................................................................................... 11 1.4 Top Telecom companies in India .............................................................................................................. 12 1.5 Present Status of the Telecom Sector ........................................................................................................ 15 1.6 Growth of Telecom Sector ........................................................................................................................ 17 1.7 Growth Drivers of Telecom Sector ........................................................................................................... 17 1.8 Challenges and Opportunities of the Indian Telecom Industry ................................................................. 20 1.9 Major Features of the Telecom Sector ...................................................................................................... 32 1.10 Road Ahead ............................................................................................................................................. 34 1.11 Vision ...................................................................................................................................................... 36
Chapter 2: Telecom Marketing Mix .................................................................................... 37
2.1 Product/Service ......................................................................................................................................... 38 2.2 Price .......................................................................................................................................................... 51 2.3 Place .......................................................................................................................................................... 52 2.4 Promotion .................................................................................................................................................. 53 2.5 People ........................................................................................................................................................ 55 2.6 Physical Evidence ..................................................................................................................................... 56 2.7 Process ...................................................................................................................................................... 57
Chapter 3: Service Marketing in Telecom Sector ............................................................... 58
3.1 Service Triangle in Telecom ..................................................................................................................... 58 3.2 Dimensions of Service Triangle ................................................................................................................ 60 3.3 Service Encounter ..................................................................................................................................... 63 3.4 Moment of Truth ....................................................................................................................................... 65
Chapter 4: Marketing Strategy of Telecom Sector ............................................................. 67
4.1 SWOT Analysis ........................................................................................................................................ 67 4.2 Demand Forecasting .................................................................................................................................. 70 4.3 Pricing Strategy ......................................................................................................................................... 71 CASE STUDY 1: Pricing Strategy of Uninor ...................................................................................... 75
4.4 Positioning Strategy .................................................................................................................................. 77 CASE STUDY 2: Airtel's Positioning Strategy ................................................................................... 78
4.5 Promotion Strategy .................................................................................................................................... 79 CASE STUDY 3: Idea Cellular's Advertising and Promotion Strategies ........................................... 82
4.6 Implementation ......................................................................................................................................... 85 CASE STUDY 4: Leadership through Innovation and Creativity in Marketing Strategies .............. 86
4.7 Corporate Strategy .................................................................................................................................... 89
Chapter 5: Market Segmentation of Telecom Sector ........................................................ 96
5.1 Segmentation as per Market ...................................................................................................................... 97 5.2 Segmentation as per Consumers................................................................................................................ 99 5.3 Targeting ................................................................................................................................................. 101
Chapter 6: Managing service quality in Telecom Sector ................................................ 102
6.1 Service Quality ........................................................................................................................................ 102 6.2 Service Quality perception ...................................................................................................................... 102 6.3 Dimensions and Determinants of Service Quality .................................................................................. 104 6.4 Total Quality Management (TQM) ......................................................................................................... 106 6.5 Recommendations to Improve Quality of Service in Telecommunications ............................................ 107 6.6 Service Gap Analysis .............................................................................................................................. 110 6.7 Service Recovery .................................................................................................................................... 117 CASE STUDY 5: Service Recovery in Telecom Sector ..................................................................... 118
Chapter 7: Conclusions and Recommendations ............................................................... 119
7.1 Conclusion .............................................................................................................................................. 119 7.2 Recommendations ................................................................................................................................... 121
Chapter 1: Indian Telecom Sector
1.1 Introduction
Over the past two decades, India has grown rapidly from a ?command and control? economy to a market-based economy. India is now closely integrated with the global economy and is considered one of the pillars of global economic growth. The process of liberalization started in the mid-1980s and gathered momentum in the 1990s, with the further opening of the economy and the creation of regulatory institutions to march toward fully competitive markets. As a result of liberalization, India‘s GDP has been rising by more than 7% annually in the past decade, compared with 3.5% annually from 1950 to 1980. The Indian economy maintained a growth rate of more than 5% even during the global recession. In FY10 (financial year ended 31 March 2010), India‘s service sector was estimated to account for 56.9% of GDP, while the industrial sector and agriculture sector contributed 28.5% and 14.6%, respectively, to GDP. Within the services sector, the telecom sector has been the major contributor to India‘s growth, accounting for nearly 3.6% of total GDP in FY10. In less than a decade, the mobile phone has been transformed from being a luxury that few could own into one of the essentials of an average Indian‘s existence. The easy access to mobile services is the outcome of positive regulatory changes, intense competition among multiple operators, low-priced handsets, low tariffs and significant investments in telecom infrastructure and networks.
1.2 History of the Indian telecom industry
The Indian telecom sector has evolved from the bygone days of ?telephone on demand? to the advent of 3G telephony. Its history begins with the laying down of the first experimental electric telegraph line in Kolkata. In 1881, telephone services were introduced, with exchanges being opened in Kolkata, Mumbai, Chennai, Karachi and Ahmedabad. Following independence, all foreign telecommunication companies in India were nationalized to constitute the Posts, Telephone and Telegraph (PTT), and were under government control. In the early 1980s, the sector underwent its first wave of change. DoT was established in 1985 to provide domestic and long-distance services in India. Further, in 1986, two wholly government-owned companies — Videsh Sanchar Nigam Limited (VSNL), which is now known as Tata Communications, and Mahanagar Telephone Nigam Limited (MTNL) were formed. VSNL and MTNL aimed at providing services to international and metropolitan areas, respectively. The introduction of the New Industrial Policy 1991 initiated the liberalization process in India. Telecom equipment manufacturing was also de –licensed in 1991, and the NTP was announced in 1994. The formulation of NTP 1994 was followed by the launch of mobile telephony in India in 1995. However, growth in the initial years was very slow due to high mobile handset prices as well as the high tariff structure of service providers. The introduction of NTP 1999 heralded pro-consumer policies. NTP 1999 enabled the telecom sector to reach an average subscriber growth rate of more than 35%, primarily due to initiatives taken by the regulator and service providers. The liberalization of the sector resulted in the need for a regulator, and the TRAI was established in 1997. In January 2000, the Telecommunications Dispute Settlement and Appellate
Tribunal (TDSAT) were established to take over the adjudicatory and disputes functions from TRAI.
1.3 Role of Telecom Sector in Development Process
Telecommunications has been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. It has become especially important in recent years because of enormous growth of information technology and its significant potential for the impact on the rest of the economy. The Telecom Sector, which has the
multiplier effect on the economy, has a vital role to play in economy by way of contributing to the increased efficiency. The available studies suggest that income of business entities and households increases by the use of telecom services. Thus it contributes to the growth in GDP. The Government of India recognizes that provision of world class telecommunications infrastructure and information is a key to rapid economic and social development of the Country.
1.4 Top Telecom companies in India
The telecom industry of India has registered manifold growth in the recent years. Personalized telecom access is essential necessity of life for increasing number of the people. The sector offers unlimited prospects when we consider future growth. Both Public Players and Private Players are enhancing their technologies and taking the telecom industry to a much higher growth state. Not only service providers but also handset manufacturers are contributing significantly to the industry and economy of India. The top players in the industry are:
1.4.1 Reliance Communications Limited
Established in 2002, Reliance communication is the wholly owned subsidiary of Anil Dhirubhai Ambani Group of Companies providing the telecommunication services.
1.4.2 Bharti Airtel Limited
Established in 1995 by Sunil Mittal as a Public Limited Company, Airtel is the largest telecom service provider in Indian telecom sector. With market capitalization of over Rs. 1,360 billion, Airtel has 31% of total market share of GSM service providers.
1.4.3 BSNL
Founded in 2000, Bharat Sanchar Nigam Ltd. is India's largest public sector Telecommunications Company providing a wide variety of telecom services. Its service range covers Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services, etc.
1.4.4 MTNL
MTNL has successfully converted its telephone exchange network to the digital mode systems. Having a customer base of more than 6 million, MTNL has showed a growth of over 30% during financial year 2005-06.
1.4.5 Ericsson
Ericsson has a wide network of more than 140 countries and more than 30% market share. Ericsson's parent company Teleonsktiebolaget L M Ericsson was established in 1876.
1.4.6 Nokia
Nokia is one of the leaders in the Indian market providing telecom equipments. Its product range starts from a handset of Rs. 2000-3000 and goes to N series, which amounts to more than Rs. 25000-30000.
1.4.7 Siemens Communications
Siemens is one of world's largest companies providing electrical engineering products and services. Siemens covers a wide range of services in the electronic arena, such as energy, construction, transportation, lighting, information and communication.
1.4.8 Idea Cellular Limited
Aditya Birla Group and Tata Group as joint venture, Idea Cellular, is a part of Aditya Birla Nuvo, a flagship company of the Aditya Birla Group, Idea is growing its network in 11 circles.
1.4.9 Tata Teleservices
Tata Teleservices, one of the 96 companies of Tata Group, has its network in 20 circles. It is the first company to launch CDMA mobile services in India.
1.5 Present Status of the Telecom Sector
Telecommunications is one of the few sectors in India, which has witnessed the most fundamental structural and institutional reforms since 1991. In recent times, country has emerged as one of the fastest growing telecom markets in the world, particularly by the unprecedented growth in mobile telephony. This high growth rate has been achieved in major part due to sharp fall in tariffs. The rapid growth in Indian telecom services has prompted major global manufacturers of telecom equipment to consider investing in India, paving the way for extensive provision of modern communication services in rural areas and also provide a strong boost to government revenues. With the successfully concluded auctions of the 3G and BWA spectrum, this growth is set to become even more pronounced. Indian telecom network has 787.29 million connections as on 31st December 2010 with 752.20 million wireless connections, Indian telecom has become the second largest wireless network in the world after China. The future progress of telecom in our country is very encouraging. The addition of over 18 million connections per month puts the telecom sector on strong footing. The target of 600 million telephones by the end of 11th five year plan has been achieved in February, 2010. With such a pace of expansion the Department is certain to achieve the 11th plan targets.
1.5.1 Present Status of the Indian Telecom Sector:
? Indian Telecom market is one of the fastest growing markets in the world. ? With its 787.29 million Telephone connection as on 31st December 2010, it is the second largest network in the world after China. ? It is second largest wireless network in the world. ? Over 18 million connections are being added every month. ? The target of 600 million telephones by the end of 11th five year plan has been achieved in February'10 itself. ? Wireless telephones are increasing at faster rate. The share of wireless telephones as on 31st December 2010 is 95.54% of the total phones. ? The share of private sector in total telephone is 84.60%. ? Overall tele-density has reached 66.17%. Urban tele-density is about 148%, whereas rural tele-density is at 31.22% which is also steadily increasing. ? Broadband connections increased to 10.74 million by November, 2010.
1.6 Growth of Telecom Sector
The opening of the sector has not only led to rapid growth but also helped a great deal towards maximization of consumer benefits as tariff have been falling across the board as a result of unrestricted competition. Telecom sector has witnessed a continuous rising trend in the total number of telephone subscribers. From a meager 22.8 million telephone subscribers in 1999, it has grown to 621.28 million at the end of March, 2010. The total number of telephones stands at 787.29 million as on 31st December 2010 showing addition of 166.01 million during the period from March to December 2010. Wireless telephone connections have contributed to this growth as the number of wireless connections rose from 35.61 million in 2004 to 584.32 million in March, 2010 and 752.20 million as on 31st December 2010. The wireline started to decline from 40.92 million in 2004 to 36.96 million in March, 2010 and 35.09 million in December, 2010, albeit it is stagnating now.
1.7 Growth Drivers of Telecom Sector
1.7.1 3G Telecom Services
The explosive growth of the telecom industry in India is being followed by the urge to move towards better technology and the next level of service delivery. While the last 5 years have been transformational for Indian telecom industry, the next few years look even more exciting. BWA will overcome the key hindrance of ROW in India, while 3G has the potential to make the mobile phone, a ubiquitous device for accessing the internet. The new opportunities opened through new services such as 3G mobile, VAS, Wi-MAX, MCommerce, Mobile banking and Broadband wireless services will put emphasis on deeper penetration into urban and rural areas.
1.7.2 Mobile Number Portability (MNP)
MNP allows any subscriber to change his service provider without changing his mobile phone number. The much-awaited mobile number portability was launched on 25th November 2010 at Haryana and on January 20, 2011 in entire country. With the rollout of MNP, mobile telecom service providers will be forced to improve quality of their service to avoid loss of subscribers.
1.7.3 Value Added Services (VAS)
The mobile value added services include, text or SMS, menu based services, downloading of music or ring tones, mobile TV, video, streaming, sophisticated m-commerce applications etc. Prior to 2008, a majority of VAS revenues were attributable to SMS's. However, recent trends indicate that this mix is evolving. With greater penetration of new services, availability of relatively inexpensive feature rich handsets and consumer education, VAS other than SMS is gaining importance. It is further expected that 3G and BWA will raise hopes for an increase in demand of data and content based services. Such as cloud computing, remote surveillance, fleet management, telematics and retail supply chain. Mobile VAS such as mobile TV, mobile banking and mobile governance will witness a higher demand in future.
1.7.4 Manufacturing
Indian telecom industry manufactures a complete range of wireline telecom equipment using state-of-the-art technology. Considering the growth of wireless, there are excellent opportunities to domestic and foreign investors in manufacturing sector. Presently most of the wireless core equipments are being imported and there is great potential to manufacture these items in the country. The last five years saw many renowned telecom companies setting up their
manufacturing base in India. The production of telecom equipments in value terms has increased from Rs.488000 million during 2008-09 to Rs.510000 million during 2009-10. The production of telecom equipment including Customer Premises Equipment (CPE) during 2010-11 is expected to be about Rs.535000 million. There are favorable factors such as policy moves taken by the government, incentive offered, large talent pool in R&D and low labor cost which can provide an impetus to the industry. Exports of telecom has also increased from Rs.110000 million in 2008-09 to Rs.135000 million during 2009-10 and it is expected to increase to Rs.140000 million in 2010-11.
1.7.5 Foreign Direct Investment
The liberalization in financial sector has beneficial results as that in telecom sector. Liberalization with allowing entry to the private firms has resulted in unprecedented growth in telecom sector. Today, telecom is the third major sector attracting FDI inflows after services and computer software sector. At present 74% to 100% FDI is permitted for various telecom services. This investment has helped telecom sector to grow. The total FDI equity inflows in telecom sector have been US$ 1093 million during 2010-11 (April-November).
1.8 Challenges and Opportunities of the Indian Telecom Industry
Image: Major Issues and opportunities in Telecom Sector
The Indian telecom industry has come a long way since its liberalization era. The industry has witnessed exponential growth especially in the wireless segment in the last few years. The plethora of telecom services evolved over the years, ranging from basic telephony to voice, video and data services, WiMax, WLAN and VPN, and bandwidth on demand to virtual private networks have catalyzed revolutionary changes in the business operations for the service sector, i.e., IT, BPO and also the manufacturing sectors etc, besides providing millions of people access to new technology. Even though the sector has reflected promising growth, the teledensity in India still remains at a very low level compared with international standards and thus providing tremendous opportunity for future growth. In the medium-term, the industry is expected to continue to record good subscriber growth as a result of low penetration levels, heightened competition; a sustained fall in minimum subscription cost and tariff that increase affordability for lower-income rural users, expansion of coverage area by mobile operators, and government support
through schemes such as the rural infrastructure roll out funded by subsidies from the Universal Service Obligation (USO) Fund. The Indian telecom sector offers unprecedented opportunities in various areas, such as rural telephony, 3G, virtual private network, value-added services, et al. Nonetheless, the lack of telecom infrastructure in rural areas and falling ARPU of telecom service providers could inhibit the future growth of the industry.
1.8.1 Challenges for the industry 1.8.1.1 Rapidly Falling ARPU
The competitive intensity in the telecom industry in India is one of the highest in the world and has lead to sustained fall in realization for the service providers. Intense competitive pressure and cut throat pricing has resulted in declining ARPUs. With increasing number of new entrants in the telecom space the competitive intensity is likely to continue, putting further downward pressures on the telecom tariffs. Thus, the telecom companies might have to grapple with further decline in ARPUs, going forward. Further, with the telecom companies moving their focus to the rural areas for driving the future subscriber growth they might not witness a commensurate increase in revenues. In fact, the risk of steep decline in ARPUs will increase going forward as the telecom companies penetrate rural markets that are characterized by higher concentration of low income, low-usage customers. A higher-than-expected decline in ARPU poses a risk of reduction in margins of service providers. Alternatively, telecom operators are turning their focus to steadily increasing the minutes of usage (MoU) to counter the sustained fall in ARPUs. Likewise, the growth of the VAS is also crucial for some improvement in the ARPUs of operators.
1.8.1.2
Lack of Telecom Infrastructure
Lack of telecom infrastructure in semi-rural and rural areas could be one of the major hindrances in tapping the huge rural potential market, going forward. The service providers have to incur a huge initial fixed cost to enter rural service areas. Further, as many rural areas in India lack basic infrastructure such as road and power, developing telecom infrastructure in these areas involve greater logistical risks and also extend the time taken to roll out telecom services. The lack of trained personnel in the rural area to operate and maintain the cellular infrastructure, especially passive infrastructure such as towers, is also seen as a hurdle for extending telecom services to the under penetrated rural areas.
1.8.1.3
Rural Areas Continue to Remain Under Penetrated
A rural teledensity of merely 15% point towards the fact that a majority of Indian population still do not have access to telecom services. The rural India seems to have remained untouched by the telecom revolution witnessed in the last few years. A huge 'digital divide', which is reflected by the enormous difference of 74% between the urban and rural teledensity, reiterates this fact. However, with the urban markets reaching a saturation point, the telecom service providers are penetrating rural areas for driving future growth. Thus, the service providers entering new rural markets might witness substantial increase in subscriber base. The expansion in the rural areas, however, has increased the risk of further decline in the ARPUs. Nonetheless the revenue growth from these regions is unlikely to match the surge in the subscriber base.
1.8.1.4
Excessive Competition
Another major concern that has come to the forefront in the recent past has been heightened competitive intensity in the industry that has correspondingly fuelled the price war between industry players. The Indian wireless market is one of the world‘s most competitive markets, with 12 operators across 23 wireless ?circles‘ and 6 to 8 competing operators in each circle. The auction of new 3G licenses and the introduction of mobile number portability (MNP) are likely to heat up competition in the industry, going forward. Spectrum is the most important resource that is required for providing mobile services. Given that spectrum is a finite resource, the availability of the same would be inversely proportional to the number of operators. Thus, larger the number of service providers smaller will be the amount of spectrum available to each of them. Scarcity of spectrum leads to higher apex on deployment of mobile networks for the operators as they need more cell sites to improve service quality. Further the growing usage of spectrum and the resultant scarcity may lead to re-use of spectrum and increase chances of congestion in networks leading to constraints on service quality. Evidently, the competition in the industry is expected to intensify further with the entry of new players, both domestic as well as foreign players. With the competitive intensity of the industry already at such high levels new operators might find it difficult to gather significant share in Indian telecom market. While the new players may benefit from a faster network rollout through tower sharing, they will face challenges in terms of high subscriber acquisition costs and lower ARPU customers.
1.8.1.5
Price War between the Service Providers Putting
Pressure on Margins
The ever-increasing competitive intensity in the sector, with licenses and spectrum in several circles allotted to newer operators, is also a concern and could lead to unrealistic pricing levels to grab subscribers. The pricing strategy of per second billing already has taken the price war between telecom operators to the next level. The intensifying price war could put significant downward pressure on the industry revenue growth. Further, the ongoing price war and the concomitant decline in telecom traffic could raise the entry barrier for new companies.
1.8.1.6
Spectrum Allocation
3G Spectrum availability is one of the major concerns for the industry. Lack of adequate spectrum which is the most integral part of the mobile telephony sector could hamper its growth severely. However, the spectrum allotment has been the most controversial issues in the Indian telecom sector. The smooth process of scheduled 3G and BWA spectrum allocation is likely to be one of the key factors affecting the industry dynamics, going forward. Given the highly-competitive nature of the Indian telecom industry on one hand, and limited licenses in the 3G network on the other, the risk of excessive biding by the service providers has increased. Irrational bidding, especially in some circles, might render 3G services financially-unviable. Further, there exists a risk of delay in allotment of proposed spectrum to the service providers who have successfully bid for the 3G spectrum.
1.8.1.7
Regulatory Charges
The regulatory charges in the telecom sector have a complicated structure because multiple levies impede the smooth implementation of telecom projects in India. Given the continuously-declining ARPUs, and the extremely-low tariffs, sustaining the current growth rates of the industry requires urgent attention towards rationalizing the convoluted tax structure in the sector.
TRAI has recommended to the DoT committee to phase out the multiple levies in this sector with a single levy in a phased manner. Further with regard to license fees, which currently stand at 6%-10% of total revenue, TRAI has suggested that it be reduced at a uniform rate of 6% across all licenses.
1.8.1.8
Lower Broadband Penetration
The Indian economy remains highly underpenetrated in terms of broadband connections. High cost of devices (PC and laptop), high internet charges and lower wireline connections have been some of the major factors inhibiting broadband penetration. Broadband is one of the key catalysts for economic development and major initiatives by both the government and service providers are needed to increase its penetration.
1.8.1.9
Other Growth Inhabiting Factors
While the implementation of mobile number portability is likely to aid improvements in quality of service, it is also likely to increase the churn out
ratio significantly. The service providers are likely to turn to the VAS as a service differentiator; however, widespread VAS deployment is restricted due to language and illiteracy. The deployment of 3G services is likely to help the emergence of new VAS. Mass acceptance will be crucial for the success of 3G services in India. Comparatively higher cost of handsets required for accessing 3G services is likely to be one of the major roadblocks in mass 3G adoption in India.
1.8.2 Opportunities for the Industry 1.8.2.1 Rural Telephony – Connecting the Real India
With the urban markets fast reaching their saturation points for telecom services, especially the voice telephony services, the vast rural market holds a huge potential to drive the future growth of the telecom companies. In fact, the teledensity in rural areas is just about 15%, which reflects the extent of opportunity left untapped for telecom companies, going forward. Further, the government initiatives for increasing telecom connectivity in rural areas are also likely to aid the telecom service providers to extend their services in the unconnected rural areas. Initiatives such as USO Fund and infrastructure sharing would be instrumental in increasing the coverage of telecom services in the far-flung areas. Penetration in rural areas will not only support the growth of telecom service providers but also boost demand for equipment and telecom infrastructure.
1.8.2.2
3G Services – Potential Growth Driver
Currently the 3G deployment in India is at a very nascent stage. In fact, 3G services have been launched very recently (February 2009) in India. The 3G services will be instrumental in stimulating future growth of the telecom
industry. The 3G services will not only facilitate business through provision of high-speed data and content rich services but also will play a pivotal role in bridging the urban-rural divide by facilitating faster mobile deployment in rural areas. Introduction of 3G will be beneficial to the Indian BPO industry by increasing their competitiveness. In India, where mobile cellular penetration is much higher than that of fixed telephone lines (nearly 30 mobile cellular subscriptions per 100 inhabitants as compared with less than 4 fixed telephone lines per 100 inhabitants in 2008), mobile broadband through 3G will drive broadband penetration. The inherent benefits of economies of scale and faster time to market of 3G services will benefit service providers. The high-end customers may get attracted to these services and provide a first-mover advantage to the initial entrants in the 3G space. The launch of 3G is also likely to facilitate introduction of various VAS such as video calling, gaming, highspeed Internet access and other data services, which in turn might provide some support to the falling ARPU. The Indian government has planned to sell the spectrum for 3G services through an auction and thereby create a competitive environment that offers better services to consumers. Auction of 3G and broadband spectrum will be done through e-auctioning which shall be executed by a specialized agency to ensure transparency in the selection process. Bids would be invited from domestic, as well as foreign players. New players would also be allowed to bid which in turn is likely to usher technology innovation, increase competition, lead to prompt roll out of services and provide more choices to customers at competitive prices. With the allotment of the 3G spectrum, the pressure on the 2G spectrum is likely to ease especially in the heavy traffic areas. Moreover, freeing 2G bandwidth might help the operators to cater to additional subscribers without significant additional investments. Given the comparatively high cost of handsets and 3G services, the deployment of 3G services is likely to be limited
to high-end customers. Thus, initially the 3G spectrum is expected to be used for voice services, whereby the wireless subscribers might experience improvement in service quality. Going forward, the 3G spectrum is expected to attract major investments and open new growth avenues for the telecom sector.
1.8.2.3
Worldwide Interoperability for Microwave Access
(WiMax) – Reaching the Last Mile
In the wireless communication arena, WiMax technology has emerged as one of the most significant developments. Deployment of WiMax would not only enable the provision of high-speed internet services through high bandwidth spectrum but also prove to be a useful mode of communication in inaccessible terrains. WiMax could be used as an alternative to cable and DSL for providing broadband access in rural areas and hence could be a major factor driving the growth of Indian telecom services, especially the wireless services. Moreover, it is likely to facilitate the propagation of the e-governance services such as telemedicine, e-learning et al through broadband, particularly in the rural areas. Given the fact that WiMax deployment does not require significant resources, it will also be an economically-feasible option to cater to rural communication needs.
1.8.2.4
Mobile Value Added Service (MVAS) – An
Opportunity to Increase the ARPU
The value added services segment is rapidly emerging as a potential revenue generator for the telecom services industry. Given that a substantial part (around 60%) of the total VAS revenue goes into the kitty of the service providers, the development of this segment is likely to offer them an opportunity to support their falling ARPU. The increasing acceptance and usage of mobile commerce services is also likely to boost the VAS segment. Mobile banking is likely to
emerge as a major growth driver in the near future given the issuance of Mbanking guidelines (June 30, 2008) issued by the RBI and increasing demand for this service. The demand for new VAS services is likely to surge given that increasing number of younger generation has started using mobile services and are more inclined to adopt the VAS services. With the implementation of mobile number portability, the service providers would be encouraged to constantly develop new VAS as a service differentiator and retain their existing customers and attract new ones. The introduction of the Next Generation Networks would help in bringing down the cost and roll out time of new MVAS and provide impetus to the growth of the VAS, going forward. Further, with reduction in prices of the feature rich handsets capable of accessing many of the VAS services the demand for the MVAS is set to increase in the future.
1.8.2.5
Infrastructure Sharing – A Profitable Proposition
The rapid expansion in subscriber base has brought to the fore the challenge of increasing and upgrading the telecom infrastructure to maintain quality of services. In the recent years, infrastructure sharing has emerged as a profitable proposition for both the parties involved, as for the tenant it lowers capex and opex, and for the owners, it is an additional source to earn revenue. It would lead to considerable reduction in initial set-up costs for new service providers and existing service providers planning to enter new service areas. Infrastructure sharing might assist the service providers to reduce their operating costs. The cost saving through infrastructure sharing could be passed on to the customers thereby augmenting their affordability. Further, with infrastructure sharing, the companies can reduce the time required to roll out the telecom services in the rural areas. The sharing of telecom infrastructure by
companies could lead to optimum utilization of these resources and thereby improve efficiency. A step forward in infrastructure sharing is the proposal of TRAI to include those rural and remote areas in its purview that are not covered by wireless signals with assistance from the USO Fund.
1.8.2.6
Managed Service – Outsourcing in Telecom
Managed Services typically involve the outsourcing of a specific technical function or capability to a Managed Service Provider (MSP). It is an alternative to in-house management or traditional outsourcing since firms/enterprises do not have to transfer complete control over assets/operations to the MSP but rather can contract or outsource specific management challenges for a shorter period of time. With the rapidly-growing subscriber base, managing infrastructure and networks is becoming increasingly difficult for the service providers. Therefore, many service providers have been outsourcing their infrastructure or network management operations completely or partially. Given the increasing demand for the managed services, the telecom equipment vendors could have an opportunity to take up more roles in the value chain by entering into managed service contracts. Managed Services are fast-emerging as an attractive proposition for many enterprises that do not want to dedicate human resources and capital toward acquiring and administering technology infrastructure. It also allows the telecom service providers to focus on their core activities, to develop new and innovative products and services so as to distinguish themselves from other players in this highly-competitive market.
The service providers can gain significantly in terms of cost reduction and improved efficiency in operations from the economies of scale that an MSP can offer.
1.8.2.7
Opportunities in Other Service Segments
Investing in technologies such as NGN, 3G, WiMax, is likely to open up new frontiers of business. Some services such as IPTV, VPN etc. are expected to gain some momentum in the medium to long run. 1.8.2.7.1 Virtual Private Network (VPN) – Create Your Community: Virtual Private Network, also known as closed user group (CUG), is a private data network that provides connectivity within closed user groups via public telecommunication infrastructure. The option is less expensive as it relies on sharing of public infrastructure. This service was first availed in India by corporate units that required VPN services to connect to their branch offices. 1.8.2.7.2 IPTV: Internet protocol television (IPTV) also referred as ?triple play‘ offers internet, television and telephone services on a single platform. IPTV provides the telecom service providers an opportunity to widen the gamut of existing services and is likely to be beneficial for large players in the telecom sector. Given the lower broadband penetration, the usage of IPTV is likely to be restricted to metros and some urban centers.
1.9 Major Features of the Telecom Sector
1.9.1 Supply
Intense competition has resulted in prompt service to the subscribers. However, smaller towns and villages continue to have waiting periods on account of nonavailability of adequate infrastructure.
1.9.2 Demand
Given the low penetration levels in the country and continuously falling tariffs, demand will continue to remain higher in the foreseeable future across all the segments.
1.9.3 Entry and Exit Barriers
Telecom industry is characterized by high entry and exit barriers. Service providers need to invest huge capital to build or hire the necessary infrastructure for providing services to customers. For e.g. Tata Teleservices in India invested an amount of Rs.7, 533 crores for setting up the required infrastructure. Because of the high cost of capital involved, in most countries, the government owned telecom service organization enjoys a monopoly. Thus, the telecom industry is heavily-regulated by the government. Even in an open industry where the private players are allowed to operate, if a player finds it difficult to compete and wants to quit the industry, finding a right buyer is a formidable task. The buyer should be willing to pay the huge amount, enter the market and face the challenges.
1.9.4 Bargaining power of suppliers
Improved competitive scenario and commoditization of telecom services has led to reduced bargaining power for services providers.
1.9.5 Bargaining power of customers
A wide variety of choices available to customers both in fixed as well as mobile telephony has resulted in increased bargaining power for the customers.
1.9.6 Competition
The entry of fourth cellular player and commencement of WLL services has resulted in intense competition in the bigger cities. Reducing tariffs will hurt the new entrants, as they will be unable to recover their high capital investments.
1.10 Road Ahead
The Indian mobile subscriber base is likely to sustain the rapid growth recorded in the past few years. Presence of skilled labor pool, improving telecom infrastructure, favorable demographics, rising disposable incomes of consumers, declining tariffs, increasing demand, growing attraction for mobiles with new features and greater availability of handsets at lower prices, are expected to continue driving the growth of the telecom sector, going forward. However, the companies are likely to encounter a more challenging business environment in the near future, given the sustained fall in ARPUs, rapidly increasing competition and consequent pressure on margins and regulatory risks. Companies with good rural coverage, better operational efficiency, and superior quality of service are likely to stay ahead of competitors. The government has proposed to achieve a rural tele-density of 25% by deploying 200 million connections at the end of the Eleventh Five Year Plan, given that more than 70% of the population lives in villages. The optimum utilization of USO fund and increase in mobile services might help the government attain this goal. The government‘s thrust on welfare programmes such as community development, education and health and rural connectivity can also be facilitated through satellite communications, internet connections et al. Besides, broadband connections for all gram Panchayats and public healthcare centers, secondary and higher secondary schools and provision of 3G services to all cities/towns with more than 0.1 mn population is also likely to be achieved during the Eleventh Five Year Plan. It is also visualized to link block headquarters and the nearest exchange through the State-Wide Area Networks (SWAN) connectivity. Major initiatives such as e-Agriculture, e-Health, e-
Education, rural BPOs are slated to increase internet penetration as they set the base for increasing acceptance of the same. During the Eleventh Five Year Plan period, Rs 2,670 billion worth of investments are projected to be made in the telecom industry and the public sector is expected to have a 33.50% share in the same, while the private sector is expected to contribute 66.50%. Further, a total of 650 mn connections (including 66 mn wired and 584 mn wireless connections) are expected to be achieved by the end of 2012. The growth process in this ever-evolving sector needs to be backed by a strong R&D support. The active participation of the private sector in R&D would ensure greater benefits for the sector. Further, the government also envisions making India a hub for telephone equipment manufacturing that is expected to be achieved through telecom specific special economic zones (SEZs) and by setting up Export Promotion Council to promote export of telephone equipment and services.
1.11 Vision
The Indian Telecom sector has proved to be an international success story. The sector has witnessed a commendable growth over the past 2 years. With an overall subscriber base of 787.29 million and a teledensity of 66.17%, at the end of December, 2010 the sector continues to grow from strength to strength. With the urban teledensity reaching approx 150%, the market has been showing signs of maturity. Rural India is the key target market likely to drive the next round of growth, particularly for voice based services. It is envisaged that rural teledensity of 40% would be reached by end of 2014. 3G and BWA are expected to reinvigorate the maturing urban markets and help in bringing balanced growth of economy. The aggressive growth observed by mobile services is yet to be replicated in case of broadband service, where the subscriber base currently stands at about 11 million. The successfully concluded auction of the BWA and 3G spectrum will enhance the wireless broadband penetration across the country and help connect the remotest locations across India. The government has a vision to provide telephone connection and
broadband facilities on demand across the country and at an affordable price and it strives to achieve the same.
Chapter 2: Telecom Marketing Mix
Unlike manufacturing organizations that focus on the four P's of the marketing mix, service organizations need to concentrate on seven P's i.e. product, price, place, promotion, people, physical evidence and process. Let us discuss how telecom service providers attempt to design these seven P's to constitute appropriate marketing mix and face the challenges in the telecom industry.
2.1 Product/Service
2.1.1 What is a product?
A product is a logical or physical entity which can be sold out to an end customer by the operators. This could be a mobile phone, internet connection, Voice call connection, VPN, Video on demand, Digital TV connection etc. A product can have their monthly rental which we call periodic charges also. A product can be usage generating product or non usage generating product. A usage generating product is sometime called event generating product and nonusage generating product is also called non-event generating product.
For example, voice call connection, which comes along with a phone number, is a usage generating product because it generates usage whenever end customer uses this product to make a voice call.
A simple phone set without a connection is a non-usage generating product and it could be given to a customer based on monthly rent only. So even if customer is not using it, customer has to pay monthly rental.
2.1.2 What is a service?
When we talk about them from marketing point of view, as such there is no difference in between product and services because most of the times both are used interchangeably by different billing and marketing experts. Simply saying, an operator uses their product to provide voice services to their customers. An international call can be called a service provided using a voice call connection. Another example could be 800 number call may or may not be available through a particular operator, call waiting, call forward could be said a service provided by a model of a phone set or by an operator.
Keeping it simple, Products are items that customers can either buy outright or lease. Products may be: ? Real objects (a mobile phone, for example). ? Services (a call waiting service on a telephone system, for example). ? More abstract concepts (a service level agreement, for example).
2.1.3 Product Families:
Related products can be grouped together into a product family. Multiple levels of products are possible, so a product can be both a parent and a child at the same time. In addition, each product family can have more than one parent products if required. Examples of product families are: 1. 2. 3. 4. Telephony services Cable TV Internet Leased Line
2.1.4 Group of Products i.e. Packages:
Many time operators bundle more than one product into a single group and sell them as complete package. There are billing systems which support bundling of various types of products together as a package, which can be offered at discounted price. Packages allow a product to be offered to a customer at a reduced price if it is taken as part of a package. Each package can consist of any number of products and these products can be taken from more than one product family. This package price plan for a product is usually different to its comparison (that is, non-package) price plan, as this is how the company offers a discount to the customer for buying the complete package. However, this is not mandatory, as a product can have one of its normal price plans assigned to it within a package.
Example: Airtel has launched a gift pack by which: You can now choose from an exciting range of packs to gift to your friends and loved ones. You have options of gifting Voice minutes, SMS or GPRS. To be able to send a gift, you should be using your Airtel prepaid connection for 60 days or more. You can send upto 5 gift packs in a day and upto 30 in a month. Gift packs can be sent to a maximum of 10 unique numbers in a month.
2.1.5 Products Attributes:
A product can have a number of attributes associated with them. Product attributes allow information about individual product instances to be held where the relevant information differs between types of product.
Example 1: a pay TV product may have an attribute recording its set-top box number. Example 2: a mobile phone product may need attributes to record the International Mobile Subscriber Identity (IMSI) and Mobile Station International ISDN Number (MSISDN).
2.1.6 Product Event Types:
A product can have a number of event types associated with it. These event types govern the events that can be generated by the product.
For example, a mobile phone product could have event types such as voice calls and messaging services, there could be many more event types associated with a single phone device and operator can charge end customer for each of the event generated by the customer.
2.1.7 Characteristics of the Telecom Services
Characteristics of the telecom services are in line with the characteristics of any other service; let’s now take a look at the same:
2.1.7.1
Tangibility:
Services are intangible, they cannot be touched. Making the intangibles into tangibles should be the main aim of the companies. In Telecom Industries strives hard to do this by offering various discount packs, SMS packs, per second billing facility, etc. making it easier for the customer to tangibalize the value they get from the service.
2.1.7.2
Perishability:
Services, unlike goods perish quickly; mostly it is a onetime experience. In the telecom sector the services can be experienced for a relatively longer time period as once a plan is taken up by the user it does not perish until the plan expires.
2.1.7.3
Inseparability:
Services are inseparable. Goods are produced, sold and then consumed but services are sold and then produced and consumed. In telecom industry it can be done by constant customer retention efforts like keeping them updated with the recent discount offers, new billing plans, international call services, service calls, etc.
2.1.7.4
Heterogeneity:
It is difficult to set a standard for any service, as the quality cannot be standardized. This can be seen even in the telecom sector, the services provided
for Post paid cards are different as compared to that of the Pre paid ones. Also the 2G/3G services are different compared to the normal ones.
2.1.7.5
Ownership:
Customers cannot own the services they can only have access to it. For example the caller tune services, free calling etc where the customer can only use the service but the ownership of the service remains with the Provider even if we are paying for these services.
2.1.7.6
Simultaneity:
Services have limited geographical areas, either the user is brought to the services or providers go the users. For example done through Vodafone stores, Galleries, Retail Shopkeepers, Mobile Stores etc in one area will provide service to customers of only that area, if the customer wishes to move to another locality, the user will have to approach the service provider in that area.
2.1.7.7
Quality measurement:
It is difficult to measure quality at every level of the service. In telecom industries it can be done by online suggestions, customer complaints and usage.
2.1.7.8
Nature of Demand:
The demand for Services is fluctuating in nature. In telecom industry the demands are mostly consistent, sometimes differs when new discount packs are offered. The introduction of number portability that has been recently introduced in the telecom sector could lead to demand fluctuation.
2.1.8 The four I’s and four C’s of Services 2.1.8.1 Intangibility:
Products can be touched, held and smelled in some cases. Services are the opposite; you can't touch or see a service. Also, services are generally more difficult to evaluate because they're performance based. One of the things marketers attempt to do is show the "benefit" of using the service, this way the consumer has a "view" of what type of benefit they will receive from using the service. There is a need to use promotion to help customers perceive a service as highly tangible. 2.1.8.1.1 To resolve intangibility issue companies could use Creativity: ? Develop tangible representation of the service. Example, the telecom service provider can give new advanced phone models along with their connection to their customers. ? Cite 3rd party endorsements. Need endorsements from those that have experienced the service. ? Word of mouth is very important due to intangibility. ? Offer discounts and free samples/service to customers who encourage friends to come. ? Offer tangible benefits in sales promotions, must be consistent with customers needs/wants ? Establish a clear product position, i.e. 24 hour outside service for repair of industrial equipment. ? Endorsements from third parties are very effective to make services more tangible.
For Example: Use of celebrities as brand ambassadors, like Shah Rukh Khan for Airtel, Abhishek Bachchan for Idea etc.
2.1.8.1.2 Intangibility also presents pricing problems.
Example: How a telecom operator can charge the customer for improving the network of a local area. Visibility of the service may be a problem. Although a problem may have been fixed, you don't understand why. Solution: The service provider has to explain the time needed for repair, and functions that were performed if you want the repair to be more tangible. Also, psychological role of price is magnified since customers must rely on price as the sole indicator of service quality when other quality indicators are absent.
2.1.8.2
Inconsistency:
Services are generally performed by people and people, by nature, have on and off days. Tangible goods may be good or bad, which would be consistent, but if one of the products is good then generally that complete product line will be good also. Services on the other hand rise and fall on how well the service is performed which in turn determines how well the person is feeling performing the service. Lot many times telecom service providers get complaints from customers about poor network, when their fellow beings in their same locality are not facing a problem. This is a typical case of inconsistent service. 2.1.8.2.1 To resolve inconsistency issue using Corrective processes: ? Use high quality technology to help make the service provider more consistent. Introduction of the 3G spectrum is clearly a means to upgrade service and provide consistency in speed. ? Provide training to employees. Executives at telecom showrooms are given guidelines to assist customers to deal with certain problems faced by them. This ensures that a step by step procedure is followed by all executives and no two customers with the same problem are treated differently.
2.1.8.3
Inseparability:
It's hard for a service based company to separate itself from the services performed. Service companies have to uphold their business model "service" and if the service isn't good then the company's name isn't good. Inseparability plays a tremendous role in telecom sector. If a service provider is not able to provide good after sale services to the customers, they can easily switch to their competitors. Poor customer care service, where the customers are made to wait for hours before connecting them to the customer executive, busy customer care lines, error in post-paid billing etc. are some of the problems arising due to separation of customer from the service provider. 2.1.8.3.1 To resolve inseparability issues by providing maximum Convenience to customers: ? There must be close provider-customer relationship. Employee‘s interpersonal skills play a very important here. ? Provision of direct (short) channels of distribution. In some cases it is possible to use intermediaries, dealers, online recharges, net banking etc. ? The quality of "Relationship managers": The quality of relationships determines the probability of continued interchange with those parties in the future.
2.1.8.4
Inventory:
Service based companies generally don't have the same inventory challenges as product based companies do. For service based companies, there service is their inventor in a sense and how well they sell their "inventory" will be determined on how well the person performing the service is trained. Services cannot be stockpiled. There is a need to avoid excess unsatisfied demand and excess capacity leading to unproductive use of resources.
2.1.8.4.1 To resolve inventory issues through maximum Choice: ? Market services like different tariff plans to segments with different demand patterns. The plan marketed to teens need to be different from one marketed to corporate. ? Market new services having counter cyclical demand patterns from existing services. ? Market new services to complement existing services. ? Market service extras at non-peak times. The telecom sector has come up with lower tariffs for night talk time. ? Market new services not affected by existing capacity constraints ? Train personnel to do multiple tasks ? Educate consumers to use service at non peak hours ? Offer incentive The telecom players have to segment their market based on various factors like geography, demography, income, consumer lifestyle etc. and come up with their various plans. They need to make offers at the right time with the right people. In a country as vast as India with innumerable cultures, festivals etc. there will be huge fluctuations in the pattern of spending and usage. So they have to come up with low-cost plans during off-seasons and premium plans in peak seasons to control the demand. Providing extremely low tariff rates to boost the sales can backfire because of unproductive use of resources. Hence the inventory has to be monitored well. We can see the various challenges faced by the telecom sector in terms of the various I’s and how they can be dealt with using the four C’s. It is essential for all players in the sector to understand this shortcoming of the service they are providing constantly device ways and means to overcome them.
2.1.9 Service flower in telecommunications
There are several factors that give a service the competitive advantage it requires to become a service leader in its particular industry. Considering the telecommunications sector for a telecom service provider the standards are set very high and the company requires a number of supplementary services that contribute to the advancement of the core service i.e. telecommunications. Listed are the following supplementary services that form the petals of a service flower in telecommunications:
2.1.9.1
Signal Strength/Connectivity:
This is considered the most important factor when it comes to a network service provider. Consumers‘ today shift between several service providers for the fact that the connectivity remains either very bad or satisfactory. Consistent signal connectivity will ensure the reliability of the telecom service provider.
2.1.9.2
User Plans:
Consumers are attracted to a service provider depending on the type of user plans that suits their needs. Economical user plans enable the consumer to pick out the plan that best suits him. Vodafone has also launched a plan wherein users can customize their own plans and upsize or downsize the features included in their plan depending on the billing that suits the particular customer.
2.1.9.3
Self-service kiosk:
The accessibility of service kiosks around a state, region or country will enable consumers to interface with payments as and when they require and also reduce the time taken when paying bills via visiting the stores.
2.1.9.4
Reliable staff:
Staff at a telecom service provider needs to be consistent, punctual, efficient and reliable. Not only to the management but to the clients they deal with as well. They need to possess an ethicality that brings out the genuine culture of their service.
2.1.9.5
Corporate Plans:
Several corporate need to acquire numbers for their employees and management in their organizations. Corporate plans offer these companies either a fixed rate for the usage of a certain credit limit on all the numbers under a specific corporate plan. Or the billing is accumulated collectively and is delivered to the company as an itemized bill.
2.1.9.6
Responsive customer service:
Employees of the service need to be trained to handle any sort of situation involving interaction with customers as a customer judges a company based on the quality of service an employee provides them with. Several companies do a service quality feedback after a customer has interacted with an employee to judge the effectiveness and efficiency of the employees they hire.
2.1.9.7
Data plans:
The world is moving at a fast pace and presently internet on handsets have become the new fad of consumers in India and the world over. Offering edge and 3G data plans which allow users to utilize the internet via the phone become a handy tool in shaping a slight competitive advantage for a concerned service.
2.1.9.8
Internet Facilities:
This factor includes a website which enables users to calculate plans, view their current and pending bill amounts, learn about the various plans offered and even pay their bills via their credit/ debit cards.
2.1.9.9
Standardized billing:
There are different levels of billing that should be offered. High level plans for customers that are more frequent callers and low level billing for customers that need an economical plan.
E.g. - Plans for a business man as compared to plans for a college student.
2.1.9.10
CDMA Handsets:
A new feature is providing CDMA handsets which do not require a sim card and generally come with a CDMA enabled plan where you pay monthly installments for a particular handset along with the monthly bill.
2.1.9.11
Updated technology:
Technology upgrades daily. Service providers need to regularly upgrade their software and hardware to ensure speed and efficiency in the service.
2.1.9.12
Roaming:
Roaming is generally expensive and not all consumers look to it when they operate with a network service provider. Offering roaming services at reasonable rates will really boost the quality of the service.
2.1.9.13
Customer Security:
The customer is the most important person concerned in a service. The personal information of the customer needs to be protected and encrypted at all times. Infringement of the customers‘ personal information may result in loss of customers‘ ability to trust the service. If any of the above mentioned supplementary services are missing i.e. If any of the petals of the flower is deformed it will definitely affect the core service and render it incomplete.
2.2 Price
Service providers can use cost-based, competition based or demand-based pricing. Most service providers in the telecom industry today are resorting to competition based pricing, which has led to low prices of the services. This has proved to be quite beneficial for the customers, but the telecom companies are struggling to make profits. In the fixed line industry, customers have only one option of payment, that of post-paid. That is, customers pay a fixed amount as rent and the usage charges at the end of the billing period, in cellular industry, service providers offer two options to customers, pre-paid and post-paid. In case of prepaid service, customers buy a card available from retail outlets to activate or recharge their service. The price of the card covers the rent fixed by the service provider plus the cost of certain amount of airtime. For example, Airtel offers different cards with different amounts of airtime and allows its customers to choose from them depending on their need. Though initially, prepaid service was available only for mobile phone users. BSNL is now making prepaid service available for landline users also. In case of postpaid service, depending on the number of calls made by the customer and other services used by him, a detailed bill is prepared and sent to the customer. The total amount to be paid by a customer per month depends on the rent and the services used by him. The customer can make the payment by cash/cheque/credit card at one of the service provider's outlets. Some service providers also allow online payment through Internet. BSNL and MTNL for example allow their customers to make online payment.
2.3 Place
When DOT/BSNL was the only service provider, customers had to go to different locations for different services. Applications for new telephone connections or for transferring a connection from one place to another were accepted only in one major telephone exchange located in the city. Bill payments were accepted in local telephone exchange office located in certain areas. One had to personally go to the office, stand in the queue and make the payments. There was another department for receiving complaints. It took a long time, even a year, to obtain a telephone connection. Complaints remained unattended for several days after a customer registered his complaint with the local telephone exchange. After the entry of private players like Tata and Bharti, things have improved. Most private players have offices at various locations and provide multiple services through them. They are also accessible through the internet. BSNL too set up offices at multiple locations to accept applications for new connections, transfers and payments.
For example, Mobile service providers like Airtel. Hutch and Reliance Infocomm have one-stop shops where customers can purchase handsets, get new connections, subscribe to various value-added services and pay their bills.
2.4 Promotion
Telecom service providers use direct marketing, advertisements in newspapers, T.V., Radio, billboards in public places, etc. to promote their services. In 2002, Airtel used a TV commercial endorsed not by film stars or sports stars but by a successful music composer, A.R. Rehman to promote its brand. Rehman also composed five exclusive symphonies downloadable as ring tones for Airtel users. Telecom services also sponsor some contests or events to attract public attention and gain wide publicity.
For example, in 2003, Reliance Info sponsored a contest for a successful Bollywood film, Kal Ho Na Ho.
Owing to the intense competition in the cellular service sector, the promotion campaigns are quite innovative. Hutch for example launched an advertising campaign using a small boy and his pug, which caught the attention of customers. Hutch also offers discount coupons to its customers, to be availed at various restaurants and lifestyle stores across the city. This helps the company retain its customers and also attract new ones.
2.4.1 Social Media and Word of Mouth Marketing
Word of Mouth has been the oldest marketing tool but was relegated to the background due to higher popularity of direct advertising. In the last century, the mass media became popular and direct advertising soon became a great tool in the hands of the marketing professionals. At that time, the number of TV channels were few, newspapers were few and the radio channels were also few so if you broadcast your message, almost everybody is bound to notice the advertisement. However, things have changed now with the expansion of mass media. Higher number of TV channels mean that the companies have to spend
much higher to reach the same number of people. Even on the same channel, there are more companies advertising which means that an average individual sees 1000-4000 ads in a day. Moreover, there is a degree of distrust in direct advertising and people are more willing to rely on the recommendations and consumer opinions (refer to the survey from Nielsen below).
Given the fact that the word of mouth and recommendations from known people are trusted more that any other form of advertising, it is important to take full advantage of the social media which includes the entire conversational media like social networking sites, blogs, forums, etc. It could be a great tool to attract new customers and give confidence to the existing customers that they made the right decision by choosing your brand.
2.5 People
Customer orientation is crucial to telecom service providers in winning new customers t and retaining the existing customers, when customers report any problem with the service, service provider should send people immediately to get the problem rectified. However, when BSNL/DOT enjoyed monopoly, service personnel did not turn up for days together even after customers reported a problem. The fact that it was the only service provider resulted in excessive load as well as complacency. However, with the entry of private players like Tata Teleservices into the industry, things changed. The new private players emphasized customer satisfaction. They ensured that their service personnel answer customer queries promptly and professionally and attend to their problems immediately. This has brought a change in the working of the telecom industry as a whole.
2.6 Physical Evidence
Telecom service is intangible. A user cannot judge the quality of the service offered by a service provider unless he uses it. Telecom service providers however offer some tangible products to customers to service as physical evidence. They provide customers with a telephone directory that includes names and addresses of all their subscribers. Every year, an updated directory is provided to all subscribers free of cost. However, mobile service providers do not provide such directory because mobile phones are considered personal devices. Reliance Infocomm, however, makes the information about mobile numbers and names and addresses of its subscribers available on reliance network. Telecom service providers also focus on the voice instrument given to customer. When Tata Teleservices entered telecom sector, it gave sleek and attractive looking phone instruments to its subscribers to compete with the phone instruments supplied by BSNL at that time. Later, BSNL also began to focus on the looks of phone instruments given to customers. Telecom service providers also focus on ambience of their service outlets. Reliance Info invests about Rs. 30 lakhs to one crore on building its service outlets.
2.7 Process
Telecom service providers should offer reliable, continuous, quality service to customers. When Tata Teleservices entered the telecom industry, its sales executives visited individual homes, shops and organizations identifying people in need of a phone connection and quality service. If a customer asked for a phone connection, he got it within three days. Now BSNL has also improved its service processes. It has a computerized system that receives complaints from customers round the clock and service personnel attend the customer within 24 hours. One can also obtain the bill information by contacting the number provided for the purpose. Telecom service providers also send detailed bills on request, describing the number called, amount of time spent on the call and the charges incurred. They should however ensure that errors are not committed in billing. This can be a major source of dissatisfaction for customers. In the past, many customers had complaints against BSNL of overcharging them. Some customers who could not settle the issue with BSNL got their phone disconnected and switched to other players. Therefore, telecom players should strive to send error free bills to customers. They should continuously strive to improve their service processes. However, telecom service providers should try to achieve improvement in service process without incurring additional costs in doing so. This is especially important because of increasing competition in the telecom sector.
Chapter 3: Service Marketing in Telecom Sector
Service Marketing in telecom sector can be explained with the help of Service Triangle as follows:
3.1 Service Triangle in Telecom
When it comes to the service triangle of telecommunications, there are several factors that need to be touched upon. Organizations that seek to provide consistently high levels of service excellence will constantly work to align the three sides of the triangle together and is an on-going process that involves the ?Overall Strategic Assessment? and the ?Specific Service Implementation? that relates to the telecom service.
3.1.1 Overall Strategic Assessment
? Firstly, there needs to be consistent effort from the network service providers to provide constant effectiveness on all three sides of the triangle and to keep a track on the efforts of the company on all three sides. ? Secondly, the weaknesses need to be identified that may cause a break in effectiveness of the service triangle implementation. ? Thirdly, the strengths need to be assessed so that the telecom service can enhance their strengths and bank on that for a competitive advantage.
3.1.2 Specific Service Implementation
? Firstly, it needs to be identified what is being promoted by the telecom service and by whom it is being promoted. ? Secondly, is identifying how the service is being delivered and by whom it is being delivered. ? Thirdly, is verifying if the service provider has the required supporting systems in place to deliver the service as promised to the customer?
3.2 Dimensions of Service Triangle
The various Dimensions of the Service Triangle need to be studied in detail to understand it’s relation to the telecom sector:
3.2.1 External Marketing (Making the promises)
? Understanding the customers‘ needs is most important to the service provider. The service is created based on what the customer wants.
E.g. Vodafone comes with a new one rupee per second plan based on research and development from popular demand and feedback from public.
? The service provider needs to be able to manage the expectations of the service.
E.g. Docomo launches a new free 100 rupee credit balance on a 50 rupee sim card. People will rush in to buy, Docomo must be able to have the man power to be able to cater to the public and also have sufficient sim cards to sell.
? Traditional marketing communications need to be enhanced as traditional marketing is marketing at its best. ? Sales and Promotions needs to be kept a tab on.
E.g. Tata photon launches a new teach for India promotions activity. The managers need to be able to keep a check on how many people support the cause and how many people recognize Tata photon as a brand.
? The promises being made need to be advertised in the right aspect.
E.g. Vodafone’s Zoo zoo’s to market various schemes with not just ads but merchandise as well.
? Internet and website communications need to be upgraded regularly to be able to enable the service provider to deliver the service effectively.
E.g. Airtel need to keep upgrading their website to keep a balance on the traffic of users and not cause a delay in operation of net services.
3.2.2 Internal Marketing (Enabling the promises)
? The right people need to be hired to make sure the service is efficient and effective.
E.g. People who know how to deal with the public need to be hired, someone with a polite tone and one who knows to take an insult.
? The people hired need to go through training and development so that they may be able to handle any type of situation while dealing with the customer. ? The employees need to be empowered to do their job. They need to be given responsibilities that make them feel important and needed.
E.g. Airtel has an employee of the month scheme wherein the employee with the best feedback record wins a trip outside the country.
? There need to be efficient and running support systems. ? The equipment and technology needs to be of the latest been made.
E.g. Vodafone’s self-service kiosk.
? The implementation of a reward and incentives system should be implemented so as to motivate employees to do their job.
E.g., Gifts and paid vacations to best performing employees.
3.2.3 Interactive Marketing (Keeping the promises)
? Service Delivery: It includes the reliability, responsiveness, empathy, assurance, tangibles, recovery and flexibility of the service being delivered to the customer.
E.g. Vodafone has launched a new training program to develop strengths in these areas for their employees.
? The service should be able to provide interactions via face to face, telephone and online interviews.
E.g. Promotional calls, one minute interviews at malls etc.
? The customers experience needs to be assessed so as to see the strengths and weaknesses in keeping the promises made and better the quality of the service.
E.g. Vodafone’s feedback message and feedback calls.
? Interactions with sub – contractors and business partners also need to be assessed to identify if the particular sub- contractor or business partner is effective in providing the service.
E.g. Vodafone tied up with Essar and regular checks were made to see if Essar was implementing any change in service.
? ?Moment of truth? (explained in moment of truth part of the document)
3.3 Service Encounter
It is when the customer interacts with the service or product for the first time. It has 3 different P's than the product and they are: people, process, physical evidence. Service encounters are transactional interactions in which one person (e.g., a travel agent) provides a service or good (e.g., airline tickets) to another person. It can also be said that a service encounter is a period of time during which customer interact directly with a service. Any service provider could use it to his advantage or disadvantage at every stage of providing the service. In the telecom sector, Service encounter takes place at various stages:
3.3.1 Obtaining a connection:
This is the first time that a customer interacts with the staff of the service provider, at this stage the customer is bound to judge the service provider and the brand based on the efficiency and speed of the staff in assisting him in getting a connection. If the staff is not well trained and not well versed with the process the customer may not want to risk forming a relationship with the customer.
3.3.2 Enquiry or Assistance in activation or deactivation of different services:
Once the customer is part of the network he expects assistance at every point of the service until it is terminated. Thus when a customer approaches the provider for any assistance, there comes along another chance for the provider to show
the customer oriented approach of his service and provide easy access to customers to all the facilities available.
3.3.3 Complaint Handling:
This is another instance where in the service provider needs to be empathetic towards the customers and quickly resolve any inconvenience caused to the customer thus showing concern and value for the customer. Poor customer handling can be a huge blow to the provider‘s image because at this stage the customer is already irked and wants speedy response on the part of the provider.
3.3.4 Retention of customer:
If all the opportunities of service encounter have been used for satisfying a customer and showing them how one‘s service is better than the others then the provider would never have to reach this stage. However if the provider has failed previously this is his last chance to change the image perceived by the customer by trying to retain the customer through better assurances and services. The provider needs to keep in mind that an unsatisfied customer who leaves the network is bound to talk bad about the brand leading to bad publicity. It would be wise on the part of the service provider to understand the significance of service encounter and make the most of it.
3.4 Moment of Truth
Customer MOT can be defined as “In customer service, instance of contact or interaction between a customer and a firm (through a product, sales force, or visit) that gives the customer an opportunity to form (or change) an impression about the firm.” Managing reputations and managing problems are especially important for service organizations. Services sell intangibles, through expectations and promises of what is to come. A critical moment, which forms or destroys the relationship with customers, is a ?moment of truth? for service organization; this is the point where the customer and organization come together. Also products of a company alone can no longer continue as a market leader, nor can products alone be depended upon to build a small business. In the market place companies across all the industries must delight customers by providing them excellence service as their primary product. Service excellence is the critical elements for the organizations and the marketing expert like to name them ?moments of truth?. Moment of Truth is when the customer comes into contact with any aspect of the company, however remote, and thereby has an opportunity to form an impression. Each customer contact is a unique, unrepeatable opportunity for a company to differentiate itself from the competition. Every decision should be made with the customer in mind and viewed as another opportunity to make a favorable impression. Unfortunately, failure to satisfy a customer on any Moment of Truth will quickly destroy the customer‘s memory of good service. On the other hand, getting it right can erase all the wrongs that the customer previously experienced.
Moment of Truth is ?more than selling?. This is not just an opportunity to sell but also an occasion to enhance the customer experience, reinforce the brand image and to strengthen long-term loyalty by creating an interaction that is meaningful in the context of the interaction, as well as taking into account the past relationship between that customer and the company. This is not only true of channels such as the web and the call centre but also of traditional retail environments, with the availability of point-of-sale systems that can drive personalization based on decision rules and real-time analytics. Of course, contextual (relevant) marketing is also critical in emerging channels such as mobile devices. What customers do not want is to be deluged with offers and messages that do not speak to who they are or where they are which happens very often in the telecom sector. Taking advantage of these opportunities requires nimbleness as well as intelligence. The payoffs, however, are huge. Real-time insight leveraging the right information applied to inbound interactions can yield huge return, both because the costs are lower and because the success rates tend to be higher.
Chapter 4: Marketing Strategy of Telecom Sector
Telecom service providers need to design an appropriate marketing strategy to face the competition and survive in the market. Following are some of the important steps required by the management to design an effective marketing strategy.
4.1 SWOT Analysis
Telecom players should analyze their own strengths and weaknesses vis-a-vis the opportunities and threats in the market. Suppose a telecom player has an innovative service offer and efficient service personnel to market them. These are his strengths. However, say he lacks the resources to adopt advanced technology and promote the services aggressively. To overcome these weaknesses, it can always tie up with strong players in the telecom market or other related industries.
For example, Birla tied up with AT&T to gain from the reputation of latter in the telecom industry. Telecom players should also carefully analyze the threats and opportunities posed by technology, competitors and the external environment, and formulate suitable strategies to overcome threats and exploit opportunities.
The success of Telecom sector is very inspiring for the whole of Indian economy. Like any other sector, Telecom sector also has its Strengths, Weaknesses, Threats and Opportunities which have been identified as below:
4.1.1 Strengths
? ? ? ? ? ? ? ? ? ? ? Fastest growing telecom market. Forward looking approach of the Government. Technology neutrality. Formulation of policies in tune with the growth requirement. Fast adaptation of technological development i.e. Mobile Number Portability (MNP), Next generation Network (NGN), 3G and Broadband Wireless Access (BWA), IPv6 etc. Establishment of Regulatory /Dispute resolution bodies. Framework for responsive Customer Grievance Mechanism. Establishment of decentralized units of DoT like, Controller of Communication Account (CCA) and Telecom Enforcement, Resource and Monitoring (TERM) units etc. Liberal FDI policy. Healthy competition resulting in the most affordable tariffs in the world. Policy of infrastructure sharing leading to optimum utilization of resources.
4.1.2 Weaknesses
? ? ? ? ? ? ? ? ? Lack of indigenous Telecom Manufacturing and R&D Comparatively slower growth of Telecom services in rural/remote areas. Low Broadband penetration in the country Lack of local content/application development. Low profitability of Telecom PSUs. Non availability of adequate spectrum Utilization against the available corpus of USOF. Non availability of adequate power supply for Telecom Services. High Cost of data hosting in India.
4.1.3 Opportunities
? For developing a new comprehensive Telecom policy. ? For accelerating the growth of teledensity in the country. ? For creation of telecom infrastructure in rural and remote areas by utilization of the USO Fund. ? For lying of Optical Fiber Cable (OFC) to uncovered areas and effective utilization of the existing resources to provide backhaul connectivity. ? For huge Broadband potential in the country. ? For R&D, product development and indigenous telecom manufacturing.
? Development of local content/application. ? Development of affordable equipment at the customer end. ? Adoption of emerging technologies.
4.1.4 Threats
? Non availability of adequate spectrum for telecom services ? Underperformance of PSUs resulting in industrial unrest and erosion of value of government equity. ? Dependence on foreign telecom equipment suppliers. ? Cyber threats on ICT networks, leading to security concerns. ? Obsolescence of existing network elements due to fast changing telecom technologies.
4.2 Demand Forecasting
Telecom players should conduct a market survey to analyze the demand for various services among the target customers. For example, when telecom companies saw the need for written message transfer from the sender to the receiver, they introduced the concept of SMS (Short Messaging System). Service Strategy: Telecom players should constantly upgrade their services to meet changing customers' needs.
For example, cellular service providers initially offered only the basic communication services.
However, customers now expect and demand subsidiary services like call waiting, call holding, automatic alerts, sports information etc.
4.3 Pricing Strategy
Telecom players need to determine the price of their services carefully. If they price their services too high, above the perceived value by customers, customers might switch over to competitors offering those services for lesser prices. On the other hand, if they price their services too low, they would not be able to recover the cost and thus get into losses. Normally, service providers in this industry use pricing methods like cost-plus pricing, target profit pricing, breakeven analysis and prevailing value pricing. If all the players in a market are offering similar service and similar supplementary services and other benefits as well, a telecom player aiming to penetrate the market has to price its service lower than others. Sometimes, government policies and regulations prevent telecom players from having control on price factor.
For example, in India, TRAI (Telecom Regulatory Authority of India) wields control over the telecom industry.
4.3.1 Objectives of telecom pricing methodologies
Prices are an important means to achieve policy objectives. The telecom sector‘s objectives cover a wide canvas which includes enhancing efficiency and flexibility of operation, financial viability of the sector, promoting investment and innovation, stimulating demand and competition, addressing unfair competition, and meeting social objectives such as universal provision of telecom services at fair and reasonable rates. For achieving these objectives, there is an increasing focus on efficient costbased pricing, with a forward-looking perspective. At the same time, flexibility of prices and competitive pressure on prices are also emphasized. Price floors and ceiling, together with unbundling of the various services, have been
considered for addressing the issue of unfair competition. Higher peak-time prices are used to better manage demand, and subsidized prices might be required to achieve social objectives such as providing universal access to telecom.
4.3.2 Methodologies for determining telecom tariffs
Earlier, regulators focused on providing telecom operators with a specified rate of return which ensured financial viability while keeping the price low for consumers. Experience showed that this methodology requires considerable information and gives rise to perverse incentives, leading to inefficient operation and investment. More recently, due mainly to increasing competition in the sector, the focus has been on prices which encourage dynamic elements such as efficiency, innovation and flexibility. Prices can be based on costs or demand, and could be specified in terms of a particular level or with some flexibility for the operator to decide the price level. An increasing trend in certain countries has been to exclude services from price regulation if there is adequate competition in their markets. Enhanced competition has also led to tariff restructuring in several countries to alter the previously prevailing pattern of cross-subsidizing local calls and rentals through relatively high prices for long distance and international calls. This restructuring has basically meant that prices are getting more cost-oriented. Such costorientation of prices can arise either through the determination of a price level based on costs, or through a flexible process such as under a price cap methodology.
4.3.2.1
Prices based on costs
? Short run marginal (or variable) costs, long-run incremental costs (which include investment costs), and fully-allocated costs have been considered for specifying prices based on costs. All cost-based pricing requires considerable information and monitoring, and a number of conceptual and practical problems arise in properly measuring and assigning costs to the various telecom services. ? Prices based on short-run marginal costs and long-run incremental costs promote efficient production. However, the revenue derived on the basis of these two cost-concepts does not cover total costs because they do not account for all the costs that are incurred by a telecom operator. In contrast, fully-allocated costs cover all costs. Despite this, there is increasing emphasis on using long-run incremental costs for cost-based pricing because they promote efficiency, while fully-allocated costs foster inefficiency. Long-run incremental costs cover a greater portion of total costs than marginal costs, and incorporate dynamic elements such as technical change and economies of scale. ? Different variants of long-run incremental costs can be calculated depending on the level of output, time period and technologies used. A wide coverage is provided by total service long-run incremental costs (TSLRIC), which basically shows the cost the firm would avoid in the long run if it stopped providing a particular service.
4.3.2.2
Subsidized pricing
? Subsidies to price are given normally for achieving social objectives such as promoting the provision of universal service in telecom or providing preferential telecom access to specific users such as hospitals or those living in remote areas. The subsidy could be given, for example, in terms of access charges, rentals or price of the calls made. ? With greater competition and pressure for changing the prevailing pattern of cross-subsidization, there is a great need to improve the transparency of the extent and nature of the subsidies being provided. This requires greater transparency of costs and revenues, and an unbundling of the services being provided. With such information, the policy-maker would have a better basis to consider alternative policies to fund the subsidies.
4.3.2.3
Demand-based pricing
? Under this methodology, prices reflect willingness to pay for the use of a product, or the value given to a particular product. These prices are shown by the demand curve. In assessing the social value from a demandprice, it would be necessary to specify the social value of consumption of the service by different customer groups. Demand-based prices are not easy to determine on account of the difficulty of determining the demand curve.
4.3.2.4
Flexibility
? With increasing complexity of emerging telecom products, difficulty of monitoring and ascertaining costs of production, and the market providing price discipline as the level of competition increases, telecom regulators are increasingly relying on flexible pricing methodologies. This is done either by providing a range within which prices can be fixed by the operators, or by not extending price regulation to certain products (normally products with competitive markets or those that are not considered essential). ? A flexible price range is usually provided under a price cap methodology, which imposes an upper limit on the average price increase for a basket of telecom services. This increase is specified under a formula which usually incorporates a need to decrease prices due to a rise in productivity. For certain specific services, sub-baskets are devised with conditions different from the overall basket. The price cap methodology provides considerable flexibility to take account of various policy objectives, including equity and efficiency of operation. ? Price floors and ceilings have also been used for providing flexibility, and to limit an operator from abusing its dominant market position. ? Price flexibility is also achieved through different price options provided for alternative combinations (or volume) of services that are purchased by customers. These include, for example, options providing combinations of a high rental and low usage charge or a low rental and a high usage charge, or volume discounts.
CASE STUDY 1:
Abstract:
PRICING STRATEGY OF UNINOR
This case study helps in understanding the concepts of Price strategy and different degrees of Price Discrimination, in the Microeconomics course. Against the backdrop of the swift growth of the telecom industry in India backed by privatization since 1991, new players are emerging, making the telecom field a combat zone. The case study explains the pricing strategy of Uninor, a new entrant. It captures the growth of Uninor and the effectiveness of its "24X7 Badalta Discount Plan" launched in late 2009. The case revolves around the potency of Uninor's weapon over other giant players in both the short run and long run, and the likely response of the existing players. The case enables the students to deal with the following objectives.
Issues:
To analyze the nature of the Indian telecom market and discuss the strategic implications of the economics thereof. To discuss the economic and strategic logic behind Uninor's dynamic pricing strategy - 24x7 Badalta Discount Plan - and debate on the short term and long term impact on the company's performance levels in light of Uninor being the latest entrant into the Indian telecom market. To examine whether Uninor's dynamic pricing corresponds to any of the three forms of price discriminations and discuss the implications of such price discrimination. To discuss all the possible effects of Uninor's dynamic pricing strategy on the rest of the players in the industry and debate whether the existing players should respond or maintain status quo.
Introduction
late 2009, a new entrant into the Indian telecom market - Uninor, a collaboration between India-based Unitech Wireless1 and Norwegian telecom giant Telenor Group2 - announced a dynamic pricing model under the name 24X7 Badalta Discount Plan through which customers could avail of 5% to 60% discounts 24 hours a day. With this dynamic pricing plan, the company intended to create a new trend in the Indian mobile industry, in which price wars were intensifying and the Average Revenue Per User (ARPU) were continuing to fall. Uninor had high expectations of the strategy and felt that the plan would help it to quickly attract many subscribers. However, considering that the company was new and would have to commit high capital for its operations and that it would be competing with established rivals, industry observers wondered whether it could sustain the innovative plan for long enough to break even. Indian Telecom Market: Going Wireless
Telegraph lines connecting several states were established in India in 1851. In 1882, the central telephone exchange was opened, with 93 subscribers. However, the telephone did not gain prominence until much later and post remained the preferred choice. Even after independence, in 1947, the growth of the telecom sector was slow as lack of infrastructure and high tariffs restricted accessibility to it to a minor proportion of the populace... The Busy Lines From the mid-2000s, India's telecom sector witnessed one of the highest growth rates in the sector world-wide, due to various constructive decisions of the GoI such as liberalizing foreign investment regulations, spectrum allocation, and allowing multiple players in all circles... Uninor: The New Entrant Unitech Wireless, a subsidiary of the Unitech Group (leading real estate company in India), was granted a 2G National Long Distance and International Long Distance license for all 23 telecom circles in India for a mandate sum of Rs. 16,500 million (US$389 million)... Scintillating Tone: Discount Pricing The 24X7 Badalta Discount Plan offered a discount - ranging between 5% and 60% on the 50 paisa chargeable per minute of call - based on the traffic handled by a Base Transceiver Station (BTS), commonly called Transmission Tower or Tower... Uninor Dialing: Corrupt Signals? Not many industry analysts shared Uninor's confidence as the Indian telecom sector was crowded and fragmented. Analysts observed that more than 50% of the total Indian population and over 90% of the urban population subscribed to mobile services and with new additions of around 10 million subscribers per month, the industry was fast approaching saturation...
4.4 Positioning Strategy
Telecom players need to identify the different segments that need different services and position their services for die targeted segments. When there were only a few players in the mobile communication services segment, the tariffs were very high.
For example, Airtel positioned its services exclusively for the higher-income segment. At that time, Airtel charged Rs. 16 per minute. When the tariffs were reduced after many private and government players entered cellular services market, pulse rates came down. Airtel then repositioned its services for the common man.
4.4.1 Positioning for Competitive Advantage
? A product‘s position is the way the product is defined by the consumers on important attributes; it is the place the product occupies in consumers‘ minds relative to competing products. It involves implanting the brand‘s unique benefits and differentiation in customers‘ minds. ? To simplify the buying process, consumers organize products, services, and companies into categories and ?position? them in their minds. A product‘s position is a complex set of perceptions, impressions, and feelings that consumers have for the product compared with competing products. ? Consumers will position products with or without the help of marketers. So marketers must plan positions that will give their products the greatest advantage in selected target markets, and then must design marketing mixes to create these planned positions.
CASE STUDY 2:
AIRTEL'S POSITIONING STRATEGY
Bharti decided to introduce a tariff plan (specifically) to attract the youth in the cluttered market. The service, called Youtopia, planned to cash in on the fact that with reduced tariffs, cellular phones would become accessible to teenagers. By targeting youth in the age croup of 14-19 years, Bharti planned to expand the customer base, which was presently limited to the older age groups. Youtopia was a clear deviation from Airtel's earlier positioning as a brand for older people symbolizing dignity and power. Youtopia offered lower tariff rates (at Re.0.25 for 30 seconds) at night. Special merchandising exercises were also undertaken. For instance, a special portal was created, where young people could buy or bid for goods. The company also announced plans for providing customers with various other services such as music download facilities, and SMS (Short Messaging Service) rates at affordable prices. According to the analysts, the company's repositioning strategies paid back well as Bharti became the leading player in most of the circles (it operated in) across the country by early 2002.
4.5 Promotion Strategy
Telecom players should choose the promotion medium depending on the kind of services they offer. Moreover, telecom players need to allocate budget for advertising across different media wisely. They have to determine the money to be spent for advertisements on TV, radio, newspapers, magazines, billboards, and other media. In India, if a telecom player wants to target young people belonging to the middle and upper class families, they can choose a medium like the Internet or billboards near colleges, parks, restaurants, movie theaters, etc.
For example, when Airtel introduced pre-paid cards that customers could choose depending on their monthly budget for communication services, it advertised in all kinds of media with special emphasis on TV.
Such events enable organizations to generate awareness about their services among target customers. Telecom players can also advertise their services by setting up attractive service outlets. retail stores marketing their services.
For example, Hutch gives signboards to retail stores that sell its prepaid phone cards.
In addition, they distribute signboards to
There are 9 major players in the market. The market is dominated by Airtel and Hutch (now Vodafone) and BSNL over the last 3 yrs, but even for players like BPL, MTNL and Spice the share is growing. There have been various promotional strategies implemented by the major cellular service providers in the Indian cellular market.
4.5.1 Promotional Strategies to capture market share:
Most of the promotional strategies revolve around capturing the younger generation who formed a major part of the target market. Prominent among these were - celebrity endorsements, loyalty rewards, discount coupons, business solutions and talk time schemes. The most important consumer segments in the cellular industry are the youth segment and the business class segment. The youth segment is the largest and fastest growing segment and is therefore targeted most heavily by cellular service providers. Bharti Tele-Ventures adopted celebrity endorsement as its chief promotional strategy. By 2007 it emerged the unprecedented leader commanding the largest market share in the cellular service market. Hutch implemented the celebrity endorsement strategy partially, relying primarily on its creative advertising for the promotion of its brand. BSNL, on the other hand, attracted the consumer through its low cost schemes. Being a state owned player, BSNL could cover rural areas, and this helped it increase its subscriber base. Aimed mainly at youth, Idea Goodies card will facilitate easy download of ring tones, logos, wallpapers, games etc. It comes in two denominations of Rs 22 and Rs 55 each and offers full rupee value to the customers. All the content through this card is available at a price tag of almost 33 per cent less as compared to what the customers would usually pay, according to a company press release. AIRTEL launched special mobile packages targeted at the youth, women and senior citizens as part of its market segmentation strategy. While women can get a new post-paid connection with a monthly rental of Rs 150, students will be
able to make calls for as low as 50 paise a minute from predetermined areas such as universities and popular hang outs. Airtel has also introduced a `Friendz' package for the youth whereby subscribers are allowed to transfer mobile recharge — both talktime and validity — from their phone to another phone. The package allows subscribers to form a Closed User Group of up to 5 friends and make calls at 50 paise a minute. Customers opting for the Ladies plan would be able to call three local Airtel numbers at just 50 paise per minute and send SMS to them at 50 paise per message, subject to a maximum of 25 messages per month. Airtel has tied up with women's magazines, offering discounts on subscription. For subscribers who are over 60 years old, Airtel has launched the `Seniors Plan' with a monthly rental of Rs 150 which offers discount on one STD number and one local Airtel number.
CASE STUDY 3: IDEA CELLULAR'S ADVERTISING AND PROMOTION STRATEGIES
Abstract:
The case examines the advertising strategies of Idea Cellular, a leading telecom service provider in India. It explains how Idea promoted its services through several innovative ads via variety of media like TV, print, out-of-home, and radio. Idea had not hired any celebrity to promote its services till late 2007, in contrast to its competitors. However, when Idea expanded its geographical presence to cover several telecom circles in India, it hired film star Abhishek Bachchan to endorse its brand in October 2007. Idea's focus in its ads also changed from highlighting its tariff plans and network coverage to using mobile telephony to solve social issues. Idea also developed several websites to support its ads based on social issues. Idea also tied up with Indian Premier League (IPL) cricket team, Mumbai Indians, and popular players like Sachin Tendulkar and Zaheer Khan were used to promote the brand. Idea chose to promote its brand where as its competitors focused on promoting their value added services and tariff plans.
Issues:
» Appreciate the importance of brand development for achieving longer term growth. » Study the usage of different media for advertising a brand. » Understand how contemporary social issues are highlighted to promote a brand. » Analyze the benefits of viral marketing for brand promotion. "Our effort has been, and continues to be, to make Idea Cellular a champion brand. Thus, all our campaigns are aimed at demonstrating the power of an idea by looking at mobile telephony and what it can do, in a way that's fresh, imaginative, and elevating."1 - Pradeep Shrivastava, Chief Marketing Officer, Idea Cellular, in September 2009
Introduction
In May 2009, India-based leading telecom operator, Idea Cellular's (Idea) advertisement (ad) endorsed by the Indian film star Abhishek Bachchan (Bachchan) won the 'Best celebrity endorsement award' at NDTV Tech Life Awards2. On receiving the award, Bachchan said," The IDEA campaign carries a socially relevant message in today's commercial environment and the brilliant concept of encouraging two-way communication between the government and people has connected with millions across India."3 Idea had chosen Bachchan as its brand ambassador in October 2007. Advertising agency Lowe Lintas (Lowe), which had been designing ad campaigns for Idea since the late 1990s, developed new campaigns after Bachchan, was signed up.
These campaigns, based on social issues that could be solved using mobile telephony, were acclaimed for their creativity. Idea's ads had focused on its network coverage and promotional packages before Bachchan was appointed as its brand ambassador. The company used its brand name 'Idea' in its ad slogans like 'An Idea can change your life,' 'A good Idea,' and 'What an Idea!' According to advertising experts, Idea enjoyed very little brand recall in the initial years after its inception. It had gained on that front by using its brand name in creative and meaningful slogans that concluded in its ads making perfect sense. Analysts felt that using Bachchan, one of the leading movie actors in India who is extremely popular among youngsters, was one of the reasons for the significant improvement in Idea's brand recall. Analysts also attributed the success of Idea in improving its brand recall and subscriber base to the creative work done by Lowe. Idea's ads were in contrast to that of its competitors like Bharti Airtel and Vodafone which focused on their value added services (VAS) and products. However, some experts felt that while Idea's ad campaigns were creative and improved its brand recall, there was nothing in the ads that would attract a customer of its competitors or a new subscriber. They felt that Idea should have promoted the unique selling points of its products and services in the ads rather than only projecting the uses of mobile telephony... Background Note The inception of Idea dates back to 1995 when one of India's leading business conglomerates, the Aditya Birla Group (ABG), ventured into the mobile telecom space by establishing Birla Communications Limited (BCL). BCL started providing GSM services in the Gujarat and Maharashtra circles in India... Idea's AD Campaigns Idea had decided not to adopt celebrity endorsements in 2002 while its competitors like Bharti Airtel had been using multiple celebrities to promote its brand. !dea was launched as a brand in April 2002... 'A Good !dea' Campaign Idea's promotions in 2006 were based on its tariffs, service quality, and network coverage. For instance, Idea started promoting its Rs.0.5 per local call per minute service aggressively. One of its TVCs featured a bowler and an umpire in a game of cricket... Idea's Launch in Mumbai !dea's launch in Mumbai circle was recognized as the world's largest single city launch of telecom services till 2008. Idea spent Rs.8 billion to cover more than 1000 cellular sites in Mumbai. It used extensive out-of-home (OOH) media like bill boards and bus stop shelters for pre-launch teasers. Idea used the then prevailing controversy of natives Vs migrants in Mumbai city... The Online Initiatives
Idea took its 'What an !dea' campaign further - from TV, print, and radio to the Internet. It launched several websites that complemented its campaigns that championed social causes. In December 2008, Idea launched a website called http://bythepeople.in to take forward its TVCs based on democracy... Idea's Association with IPL In March 2009, Idea tied up with Mumbai Indians, one of the teams participating in the Indian Premier League (IPL). IPL provided Idea with a good opportunity for its brand building exercise as the competition was closely followed by the entire country. Idea launched a campaign called 'Call the Cricketers' on April 30, 2009... The 'Out-Of-Home' Campaigns Idea had been using OOH media like hoardings, public transport systems, and bus shelters since the early 2000s. The company used OOH media innovatively to reflect the message of the ad. One of the most noticed campaigns of Idea's OOH was the one used in the city of Surat in the state of Gujarat in Western India... The Road Ahead Advertising experts felt that the campaigns used by Idea to promote its network coverage and tariff plans were creative and would help it to add to its subscriber base. They opined that many of Idea's ads in 'What an !dea' campaign had a rural background and would help Idea in building a strong brand image in rural India. Analysts said that the urban markets were getting saturated for telecom operators and hence expanding into rural India would help them grow significantly...
4.6 Implementation
Framing the marketing strategy will serve only half the purpose of the organization. It is only when the strategy is implemented successfully that the organization realizes its goals and objectives. However, management often faces many challenges in implementation. Strategies are based on certain assumptions regarding the market potential, demand, and competitive environment. Telecom industry, where technology and customer expectations change fast, all these variables also change rapidly. Therefore, the
management has to continuously monitor the telecom environment, revisit their strategies from time, and revise their plans and targets accordingly.
CASE STUDY 4: LEADERSHIP THROUGH INNOVATION AND CREATIVITY IN MARKETING STRATEGIES
Abstract
The telecom sector have been touched and influenced by the process of liberalization and globalization in India. The customer is the king in the market. Telecom companies deal in intangible product that is the call service. With the entry of private players, the competition is becoming intense. In order to satisfy the customer, every company is trying to implement a program of marketing strategy. Keeping this in mind, the present study is designed to analyze the marketing strategy in Indian Telecommunication sector .This study aims to identify the factors responsible for success in terms of getting a market leader position .Brand Airtel is chosen as a case study as it has emerged as a market leader within a short span of time in spite of so many mobile companies prevailing in the market. The study describes the result of survey done with respondents which are the present subscribers of Airtel. The result and analysis is done by using the Factor Analysis tool. The study concludes that out of thirty two marketing strategies, eleven factors are extracted which are found to be more prominent in implementing the marketing strategy. The Company’s marketing strategies are studied and out of which prominent strategies like branding strategy, business operation strategy, target marketing strategy, Service strategy, Network, promotion and pricing strategy are identified. In the end, with the help of results, how successful is the company in implementing the blue ocean strategy is also analyzed.
Introduction
Nowadays telecommunication is a fascinating fast-growing industry that affects each and every aspect of our lives including simple voice telephone calls, access to the Internet, high speed data communications, satellite communications, surfing the World Wide Web, fax transmissions, video conferencing and cable television. The industry is witnessing exceptional growth rates and amidst growing competition it would be tough for mobile operators to survive, unless they strengthen there marketing strategies. Mobile phone market in India has been healthy in the recent years. The Indian Telecom market is likely to see changes in the sphere of marketing strategies. The customer-driven market would result in many flexibilities and innovations in products, pricing, distribution channels and communication mechanisms. The Telecom Regulatory authority of India (TRAI), with its developmental and regulatory guidelines, is likely to endorse competition, fairness and reliability, and at the same time protect the customer against excessive, inadequate or unfairly discriminatory rates, while efforts at intensifying the existing distribution channels and making them more effective would continue. The market is expected to continue growing, hence current operators are expanding the network through out the country. There are also some new operators entering the market soon. Since then the market would be more competitive. The introduction of new intermediaries and utilization of electronics media and Internet would call for new marketing strategies. Communication to create more awareness and greater demand for value added services would continue to assume high importance. At the same time, unfair or misleading advertisements would be discouraged and necessary checks and controls be put in place. Thus only experimenting on 4 P’s of marketing won’t go
for the mobile company as there is need to focus on managing the marketing strategies covering services efficiency, network connectivity, after sales services, more value added services, while managing the operation side of business by outsourcing. The present case focuses on current marketing strategies of telecom sector in India’s with special reference of market leader “AIRTEL”, it also answer that how effectively this brand has managed with its marketing strategies by getting the likelihood level of its current subscribers.
Marketing Strategies of Airtel
Implementing the Blue Ocean Strategy: The Airtel Way By creating uncontested market space, Airtel has gained the position of market leader by its strategy of value innovation by focusing on new Value Added services like innovative SMS Pack scheme. The value added services are designed to cater to the need of technologically advanced youth segment .Also the professional and elite class customer find the value services convenient like Airtel Live and Mobile Office. Also where too many telecom companies like Vodafone, Docomo, MTS, Aircel, Reliance and BSNL are swimming in red Ocean of bloody competition, Airtel has gained the first mover advantage in implementing its strategy of pricing both defined for pre and post paid customers. Another proof of implementing the blue ocean strategy is the strategy of outsourcing the business core operations that is IT, servers and network to the Global companies like IBM, Ericsson and Nokia so that company can focus on customer side thereby getting differentiation and low cost. Branding Strategy Brand increase the value of products and services by differentiating them from the competition, creating positive mental associations and forming emotional relationships with the customer. This is really catered well by AIRTEL as a brand. The core values of the brand were leadership, performance, enthusiasm and dynamism forms the integral part of its branding strategy. Further, Airtel is a product of Bharti Enterprises which is visualized by the customers as Reliable Indian Brand. Dominant in the telecommunications services market, Bharti Enterprises, the telecom giant has unveiled its vision for 2020. Its brand status symbol attempts to reflect its intent to grow its other businesses such as financial services, retail and agri-business. Business Outsourcing Strategy Airtel as part of its outsourcing strategy is enjoying unparalleled competitive advantages by way of lower costs, improved quality and responsiveness. This is done by outsourcing the IT to IBM and network to Nokia/Ericsson. Apart from it the social initiatives made time to time by the company is really recognized and praised by the customer. Market Segmentation Strategy Because of its leadership position in Rajasthan Circle, the company is always ready to take the first mover advantage before the competition. All the new plan, schemes and services are first initiated by Airtel. As part of its market segmentation strategy Airtel focuses on
concentrating on elite, professional and small entrepreneurs who make its brand identity as lifestyle and inspirational brand. But because of more disposable income of the youth segment the target market is also the technology driven and demanding youth market. Value Added Services Strategy Although the Airtel Vas market in Rajasthan is only 15 % of the revenue, but still it is the highest in the circle. The maximum contribution goes to the sms pack schemes, then Airtel Live portal and mobile office. Distribution /Network Strategy The efficiency of a telecom service provider is judged by its network. The roaming facilities, network coverage, ease of availability of recharge outlets; voice clearance contributes to the success of Airtel as a Leader. Promotion Strategy-Creative Advertising Campaign Made by the company by taking the famous celebrities as brand ambassadors and taking Ringtone composed by A.R Rehman as a promotion tool made it easy to get the word of mouth publicity. Pricing Strategy The best 5 plan offered by the company to Rajasthan circle especially to the postpaid customer is the best strategy to increase the number of subscribers. The plan includes: Airtel Freedom 249, Advantage 199, Easy plan 149, Super Combo plan, and STD benefit plan. In addition to it the consideration of rebates and discount on calls also add to the effectiveness of pricing strategy. After Sales Service Strategy Airtel is getting a satisfactory report on the customer care services and the dealer services are also managed well. Airtel is very particular in proving Transparency in Billing to the customer. Thus well focused after sales service helps the company to retain its customer in spite of starting of mobile number portability (MNP).
Conclusion
The findings of this case study revealed that success of telecom service Provider Company depend upon the effective implementation of its marketing strategy. Case also concludes that apart from 4 P’s of marketing strategy (product, price, place and promotion), business operation strategy of outsourcing and after sales service strategy adopted by the company also plays a very important role.
4.7 Corporate Strategy
The corporate strategies of telecommunication industry in India have been based on the Porter‘s Five Force Model.
Image: Porter’s Five Force Model
4.7.1 Dimensions of Porter’s Five Force Model
Corporate strategy of Indian telecommunication industry depends upon the following:
4.7.1.1
The Threats of Substitute Products in Telecom
Industry
The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases. It depends upon the following: i) ii) iii) iv) Buyer propensity to substitute. Relative price performance of substitutes Buyer switching costs. Perceived level of product differentiation.
4.7.1.2
The Threat of the Entry of New Competitors in
Telecom Industry
Telecom industry is a Profitable Industry with high returns and obviously attracts firms, which results in many new entrants, and effectively decreases profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level. It depends upon the following: i) ii) iii) iv) v) vi) vii) viii) ix) x) The existence of barriers to entry (patents, rights, etc.). Economies of product differences. Brand equity. Switching costs or sunk costs. Capital requirements. Access to distribution. Absolute cost advantages. Learning curve advantages. Expected retaliation by Incumbents. Government Policies.
4.7.1.3
The Intensity of Competitive Rivalry in Telecom
Industry
For Telecom industries in India, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc. It depends upon the following: i) ii) iii) iv) v) vi) vii) viii) ix) Number of competitors. Rate of industry growth. Intermittent industry overcapacity. Exit barriers. Diversity of competitors. Informational complexity and asymmetry. Fixed cost allocation per value added. Level of advertising expense. Sustainable competitive advantage through improvisation.
4.7.1.4
The Bargaining Power of Customers in Telecom
Industry
It is also described as the market of outputs. It is the ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes. In telecom industry it depends upon the following: i) ii) iii) iv) v) vi) vii) viii) ix) Buyer concentration to firm concentration ratio. Degree of dependency upon existing channels of distribution. Bargaining leverage, particularly in industries with high fixed costs. Buyer volume. Buyer switching costs relative to firm switching costs. Buyer information availability. Availability of existing substitutes products. Buyer price sensitivity. Differential advantage (uniqueness) of industry products.
4.7.1.5
The Bargaining Power of Suppliers in the Telecom
Industry
It is also described as market of inputs. In Telecom industry suppliers of raw materials, components, labour, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g. charge excessively high prices for unique resources. It depends upon the following: i) ii) iii) iv) v) vi) vii) Supplier switching costs relative to firm switching costs. Degree of differentiation of inputs. Presence of substitute inputs. Supplier concentration to firm concentration ratio. Employee solidarity (e.g. labour unions). Threat of forward integration by suppliers relative to the threat of backward integration by firms. Cost of inputs relative to selling price of the product.
4.7.2 COMPARISONS AND SUGGESTION OF CORPORATE STRATEGY IN TELECOM SECTOR 4.7.2.1 The Threats of Substitute Products
4.7.2.1.1 Strategy of Tackling Threats of Substitute Products 1. 2. 3. 4. Product innovation at regular basis. Providing Value added services. Keeping price according to market level. Pressurizing government to make the policies unfavourable to the substitute product. 5. Providing the facility of substitute product in the current product or service range. For example, To tackle the threat the GSM mobile service the CDMA mobile Service provider have started to provide the additional GSM service in the same set. 6. Negotiation with suppliers for high quality service or raw materials. 4.7.2.1.2 Suggestion 1. Indian telecom companies should invest more in self Research & Development activity rather than depending upon foreign suppliers to tackling the threats of substitute.
4.7.2.2
The Threat of the Entry of New Competitors
4.7.2.2.1 Strategy of Tackling New Competitors 1. Reducing the product and service price. 2. New advertisement campaign. 3. Pressurizing the government to make the policy tough for new competitors. 4. New offer for current customer in terms of price and service.
4.7.2.2.2 Suggestion 1. Since tele density is still around 21% therefore telecom companies have to try to those market which is still untapped by the other telecom companies. 2. Keep their technology up to date so that they should always offer something new to their existing customer and also new customer should provide better customer service through better customer relation so that old customer doesn‘t left.
4.7.2.3
The Intensity of Competitive Rivalry
4.7.2.3.1 Strategy to Tackle the Intensity of Competitive Rivalry 1. 2. 3. 4. 5. Always expanding the product and service range. New ways of advertising. Always enhancing the customer service. Entry in new market segment as well as new geographical area. Keeping the price of product and service according to demand and needs of different section of the society. 6. Always providing something new and extra in terms of product and service. 4.7.2.3.2 Suggestion 1. Should focus more on new rural area where tele density is very low and competition is less. 2. Make strategic alliance with equipment supplier so that become a market leader in the terms of technology.
4.7.2.4
The Bargaining Power of Customers
4.7.2.4.1 Strategy of Tackling the Bargaining Power of Customer 1. 2. 3. 4. 5. 6. Keeping the price according to market level. Providing the highest quality of service. Providing best customer service. Providing value added services at competitive price. Providing up to date technology. Providing wide range of product and services.
4.7.2.4.2 Suggestions 1. Keep the price lowest in market. 2. Actively participate in research and development activities to offer new technology. 3. Try to maintain the uniqueness of product as long as possible. 4. Try to be market leader in product and service range offerings. 5. Try to eliminate the intermediaries involved in providing products and services to reduce the cost.
4.7.2.5
The Bargaining Power of Suppliers
4.7.2.5.1 Strategy of Tackling Bargaining Power of Suppliers 1. Indian Telecom companies negotiate with 4-5 suppliers at the same time for the same contract so that to keep the psychological pressure and also give the message that they have so many options. 2. Always make sensation in media about new project or new requirements so that more and more supplier comes to offer and they can easily bargain with the supplier. 4.7.2.5.2 Suggestion 1. Indian telecom industry should make alliance with foreign supplier and invest jointly in Research & Development activity.
Chapter 5: Market Segmentation of Telecom Sector
India telecom market is mainly divided into two major segments namely, the Fixed Service Provider (FSPs) and the cellular services. Fixed Service Provider network comprises land lines, basic services, domestic and long distance call service. The two major basic operators BSNL and MTNL comprise almost 90 % of the FSPs in the country. Around 5 % are operated by private firms and are mostly scattered in the urban areas. In most cases, the private basic service telephone operators cater to offices, business firms, schools and the corporate sector. In case of the cellular services, there are mainly two sub divisions: Code Division Multiple Access (CDMA) and Global System for Mobile Communications (GSM). In the GSM sector, the major players are Vodafone, Airtel, Idea Cellular, and Aircel and so on. The national company BSNL also has its GSM service named "Cellone" which has a major share in the semi urban and rural areas. The major companies which dominate the CDMA scenario are Reliance Communications and Tata Indicom. In both the sectors of cellular services, perfect competition exists according to the demand supply chains.
5.1 Segmentation as per Market
Now that the determinants of success of the service provider in the IP Telephony market, have been identified and based on the present telecommunication market following four market segments are identified: 1. 2. 3. 4. Retail Segment Corporate Segment Wholesale Segment Village IP Telephony Segment
5.1.1.1
Retail Segment:
In the retail market, the competition is likely to be fierce because the only service provided is a plain vanilla service and, therefore, there is very little differentiation, which is possible. So the competition would be around price and value added services. The issues critical to this segment are: ? ? ? ? ? ? Price Coverage Distribution Value added services Gray market Promotion
5.1.1.2
Corporate Segment:
Corporate segment is the premium segment of this market. This is the segment from where high volumes of profits are always expected. Entry barriers in this market are very high. This is also because a good track record is essential to get business from corporate.
The issues critical to this segment are: ? ? ? ? QoS Coverage Value added services Infrastructure capabilities
5.1.1.3
Wholesale Segment:
In this segment the service provider can target those ITSPs, which do not have their own infrastructure or are short of infrastructure. This segment holds high potential, as this IP Telephony market is attracting large number of small operators, who are in need of established infrastructure in order to compete. The critical issues involved in this segment are: ? ? ? ? ? QoS Price Infrastructure Coverage Value added services
5.1.1.4
Village IP Telephony Segment:
There is a growing demand for basic voice services in India‘s r ural sector, which comprises more than two thirds of the total population. As the cost of adding access lines in the rural areas is on an average three times more than in the metropolitan areas, service providers are challenged to build viable services in less developed rural areas. The critical issues involved in this segment are: ? Price ? Coverage ? Infrastructures
5.2 Segmentation as per Consumers
With the proliferation of mobile phone users, several micro segments have also emerged lately, each with their own specific needs. The Indian Mobile consumer market has been segmented as follows:
The rationale behind the above segmentation is to identify customers on the basis of their stage in life and hence to tailor-make schemes for each customer segment. The different segments are explained as follows:
5.2.1.1
Youth:
Over the years, service providers have started giving greater attention to this segment, as it has emerged as one of the biggest users of mobile phones. For the youth, mobile phones are not just a necessity, but rather an indispensable accessory. This segment particularly values prepaid schemes with free SMS services. It is further differentiated into various micro-segments based on age and gender. For instance, youngsters in the age group of 19 to 23 years generally have a large circle of friends and more access to money.
Companies thus focus on providing services like group talk and group SMS to these people. This segment is very dynamic as its needs keep changing very frequently, driven by the latest trends and fads. For instance,
downloading new ring-tones is the latest fad among the youth today. This is a huge revenue source for service providers and so they need to keep up with the changing tastes of this segment.
5.2.1.2
Young Professionals:
People entering the workforce and thus moving out of the dependent bracket constitute this market segment. They generally prefer using post paid schemes with value added services like information about stock markets, news updates and so on.
5.2.1.3
Small and Medium Enterprise:
This segment mainly consists of people who are switching over from landlines to mobile phones, seeking a cost advantage. The focus here is on economy-packages rather than value added services.
5.2.1.4
Family:
Family as a segment consists of more number of dependents. These dependants are serviced by prepaid schemes. Geographically dispersed families tied by the same cellular service providers may get cost advantages in terms of lower pulse rates.
5.2.1.5
Special:
The ?Special‘ category includes a small but growing segment which requires largely customized services sought by celebrities, politicians, CEOs and the
super-rich. Tailor made schemes for each segment have been a great success so far. This customization, however, has reached such a stage that every service provider has numerous schemes being provided at the same time. Being short term schemes, they keep changing frequently and customers thus start switching from one service provider to another based on the attractiveness of the scheme. This has brought down customer loyalty and hence service providers are finding it difficult to retain existing customers. It is estimated that in the near future the plethora of schemes provided by the different service providers will stop being a differentiating factor.
5.3 Targeting
Target Marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments. Target marketing can be the key to a small business‘s success. The beauty of target marketing is that it makes the promotion, pricing and distribution of your products and/or services easier and more cost-effective. Target marketing provides a focus to all of your marketing activities.
Chapter 6: Managing service quality in Telecom Sector
6.1 Service Quality
Service quality is a business administration's term and describes the degree of achievement of an ordered service. It is highly abstract and thus difficult to measure. It is essential in the telecom sector to maintain competitive advantage and is one of the most crucial factors based on which the customer makes a choice of a particular service provider. It is a means for the various players in the telecom sector to differentiate themselves from the rest. Evaluation of quality happens during the process of delivering the service itself.
6.2 Service Quality perception
Since service quality is difficult to measure it‘s generally based on the customers‘ perception of the same. If the customer is using the service for the 1st time he is bound to judge the quality based on his expectation. Hence when a customer joins a network like loop or reliance, he judges the quality based on the various services and
additional assistance provided to him and compares it with what he expects. If the service is upto his expectations he is bound to be satisfied. If the service is above his expectations it creates customer delight but if the service is below his expectations it will cause dissatisfaction. It is known that with every additional encounter with the provider, further reinforces or revises the service quality perception. In case of the telecom sector due to the high competition a customer may weigh the quality of the different services provided and then for a quality perception based on which he will make a choice. Framing a positive quality perception is essential for the firm to modify future consumer purchase intention.
6.3 Dimensions and Determinants of Service Quality
It refers to the expectations that customers have before the service is provided and the quality of output judged after the service is performed. There are various models to study the various service quality dimensions and analyze them.
6.3.1 PBZ Model of Service Quality
Parasuraman, Zeithaml and Berry (1985) identified ten determinants of service quality that may relate to any service:
6.3.1.1
Competency:
Possession of the required skills and knowledge to perform the service: knowledge and skill of the contact personnel at the showroom, knowledge and skill of the operational support personnel to retrieve data and solve any bill discrepancy problems etc.
6.3.1.2
Courtesy:
Politeness, respect, consideration and friendliness of the contact personnel: consideration for the customer's time while handling complaints through the customer care center, clean and neat appearance of public contact personnel at showrooms, Consideration for immediate activation of services etc.
6.3.1.3
Credibility:
Trustworthiness, believability and honesty: It involves having the customer's best interest at heart: company image building exercises should be carried out by the team regularly; the contact personnel should be given identification mark authorizing him to handle the customer on behalf of the company.
6.3.1.4
Security:
Freedom from danger, risk or doubt: In the telecom sector, it is essential that the companies maintain confidentiality of the information given to them for activation purposes.
6.3.1.5
Access:
Approachability and ease of contact: Service is easily accessible, waiting time to receive service at outlets or at the customer care call center should not be extensive, convenient hours of operation of outlets must be ensured, convenient location of service facility at least an outlet in each locality is a must.
6.3.1.6
Communication:
Informing the customers in a language they can understand and listening to them. It may mean that the company has to adjust its language for different consumers: explaining the service itself, explaining how much the service will cost, explaining the trade-offs between service and cost, assuring the consumer that the problem will be handled.
6.3.1.7
Understanding the customer:
It means making the effort to understand the customer's needs, understanding customer's specific needs, providing individualized attention, recognizing the customer.
6.3.1.8
Tangibles:
Physical evidence of the service: appearance of physical facilities, tools and equipments used to provide the service, appearance of personnel and communication materials, other customers in the service facility.
6.3.1.9
Reliability:
The ability to perform the promised service dependably and accurately: service is performed right at the first time; the company keeps its promises in accuracy in billing, in keeping records correctly and in performing the services at the designated time.
6.3.1.10
Responsiveness:
The willingness and/ or readiness of employees to help customers and to provide prompt service, timeliness of service: mailing a transaction slip immediately.
6.4 Total Quality Management (TQM)
Telecommunication is a service organization that is subscriber oriented. The system in the telecom sector includes the total environment that affects its performance i.e. internal plant and external plant. It also includes the behavior of the staff that interacts with the subscribers. However, according to the subscribers, the quality of telecom services should include: ? ? ? ? ? ? Availability Connection establishment Connection retention Connection quality Billing integrity i.e. no hidden costs Customer service
6.5 Recommendations to Improve Quality of Service in Telecommunications
6.5.1 General:
? Accurately distinguish between competitive and non-competitive services and companies ? Consider full range of service quality dimensions in designing policies, standards and programs ? Regional and national cooperative efforts to assure service quality
6.5.2 Monopoly Services:
? Examine a minimum subscribership plan ? Standards: ? ? ? ? ? ? ? Consider new standards (for example, baud rates) Define standards clearly Do not accept industry standards without careful review Make sure standards are measurable Base standards on open, collaborative rule making processes Consider using weighted indices of quality of service Base standards on expectation of improved quality for basic service ? Specify performance rather than design standards ? Monitoring: ? ? ? ? ? ? ? Require regular company reports Require an appropriate level of detail Use format agreed on by industry and regulator Conduct service quality audits Use field investigations Develop and analyze intrastate data Expand ARMIS data
? Customer complaints: ? Categorize by company and rule ? Establish toll free numbers to file complaints ? Send copies to commissions of all complaints received by company ? Keep electronic records of all complaints ? Customer satisfaction: ? Develop better measures ? Find out how regulated companies are already measuring. ? Enforcement: ? Use ability to assess fines and order rebates ? Tie service quality into price cap formula or price regulation agreements ? Make penalties automatic ? Target penalties to compensate affected customers. ? Resources: ? Develop staff skills in public policy implementation and customer service ? Consider combining customer service and technical staff functions ? Separate telecommunications complaint handling from allutility complaint handling function ? Develop staff skills in handling interconnection quality of service issues
6.5.3 Monopoly and Competitive Services:
? Adopt a consumers‘ bill of rights ? Adopt consumer service standards to promote public values and in areas where a competitive market does not exist ? Use principles of adopting good standards listed above under monopoly services ? Do not apply standards of one industry to all industries ? Establish a data base of consumer education materials prepared by companies and commissions
? Publicize industry results ? Report relative performance across industries ? Label quality
6.5.4 Technical Industry Standards:
? Promote consumer input into the industry standard setting process ? Form user groups for telecommunications technologies ? Provide government leadership in development of the national information infrastructure ? State goals, values and performance standards for U.S. telecommunications policy ? Government subsidization of technical telecommunications research ? Participate through NARUC in industry forums ? Encourage the Network Reliability Council to expand its quality of service oversight
6.6 Service Gap Analysis
A gap is the difference, imbalance or disparity which is determined to exist between customers‘ perception of firm performance and their prior expectation. Service quality (SQ) perceived by customers is therefore as a result of a comparison of customers‘ expectation (E) of services that the organization should offer versus their perception of the performance (P) delivered by the service organization.
Service Quality (SQ) = Customer’s Perception (P) – Customer’s Expectations (E)
Management of service quality largely focuses on managing the gaps between expectations and perceptions of customers. The goal of the firm is to minimize the gap between (P) and (E). Rowley pointed out that previous researchers such as Lehtinen and Lehtinen and Gronroos also applied gap principles similar to that proposed by Parasuraman.
6.6.1 Gap Analysis in the Telecom Sector:
The Telecom sector can be an interesting sector to study the gap analysis as it is a very people oriented industry, with each service provider having thousands of customers who may have different perceptions about the same service delivered by the service provider. Also like in any other service industry the variance in service provide is bound to occur as the service is provided by people who may deliver it differently. Lets us now study the various gaps one by one, with reference to the Telecom sector:
6.6.1.1
Knowledge Gap:
? It is the difference between what consumer‘s expect of a service & what the company perceives that the consumer‘s expect. ? It can cause the company a lot of harm in terms of customer satisfaction, if not identified and handled properly, because the customers‘ expectation will definitely not be fulfilled and they may choose to shift to another service provider who can better satisfy their perceived requirements. ? The company may also invest in functions that customers‘ don‘t really notice, without any returns, while completely ignoring those functions that are expected to be in place may not be there. ? This gap occurs mainly because of lack of proper research on the target market, lack of effective upward communication from staff that deals directly with customers etc. ? In the case of the telecom sector, the knowledge gap can occur easily due to the constantly changing dynamics of the industry.
Examples:
? A Tata Docomo customer from Kozhikode district in Kerala was not very well
versed with conversing in English and preferred talking in Malayalam, however he was left intimidated and uncomfortable as the executive at the nearest Docomo outlet would not speak a word of Malayalam, despite watching him struggle to make his inquiries in broken English.
? Tata Docomo considered speaking in English a way to express their
professionalism and had instructed its staff to only converse in English, not realizing that customers coming to local outlets expect executives to be warm and converse with them in their native language.
6.6.1.1.1 Gap Handling: ? Handling the knowledge gap is easy but identifying it at the earliest and turning important insights into action is crucial. ? Indentifying this gap has to be through direct interaction with customers‘ who may complaint about certain dissatisfying experiences. ? In our earlier example, Tata Docomo on understanding their customers‘ expectation started hiring local employees for their customer service outlets who were well versed with the native language.
6.6.1.2
Standards Gap:
? It is the difference between what management perceives the consumers expect and the translation of their perceptions into service quality specifications set for service delivery. ? Inconsistency, lack of proper standardization of work, poor communication regarding perceptions of customers etc lead to this gap. ? It could lead to customers‘ constantly being subjected to poor service as they feel that despite repeated complaints nothing has changed and that the service provider is unable to match up to their expectation. From order processing speed to the way in which the customer is greeted, almost any process could fail to match the customers‘ expectation. ? The danger lies in the fact that the service provider in this case is under the notion that they have understood the needs of their customers‘ and have processes in place to satisfy them, which is not the case as their processes are faulty due to poorly set out standards of service. ? In case of the Telecom sector this gap often occurs in complaint handling or processing bill payments etc.
Example: Mr. Daruwala, a business man and a Vodafone loyalist, cleared all his bills and changed his personal service provider and also that of his corporate connections to a competing brand after being harassed through constant calls from Vodafone to pay up his bills despite having paid the bill via their e-payment service online, due to lack of updating in the database of payment due customers’.
6.6.1.2.1 Gap Handling: ? Specifying the behavior of contact personnel at each point in the system. ? Getting the middle level management to set, communicate and reinforce customer oriented service standard for their work units. ? Specifying standards for repetitive work etc. ? In the above mentioned example, Vodafone could have retained its loyal customer had their system been updated efficiently which is something a customer expects while he pays the bill.
6.6.1.3
Delivery Gap:
? It is the difference between the quality standards set for service delivery and the actual quality of the service delivered. ? This generally occurs due to role ambiguity, absence of motivation for employees, failure to conform to established standards. Etc. ? This gap clearly indicates a problem in the processes in the functioning of the service, it could occur due to the poor performance of any component in the process. ? In the case of the Telecom sector, it can happen in a number of areas like, network issues, complaint handling or additional services like caller tune services.
Example:
? After paying additional charges for a printed copy of the bill, it is obvious that a
customer would be irked if the bill is not received on time and even more if the bill has any discrepancies. This is exactly what happened to Ms. Sandhya, an Airtel user who had to present the bill to her company for reimbursement. Finally due to overshooting the date to claim returns she was denied the reimbursement and had to pay the heavy bill herself. All of this due to poor delivery of paid services promised by Airtel. They lost a customer right there!
Gap Handling: ? Handling this gap could be expensive as it may mean redesigning the company‘s systems to fulfill and deliver promises made to the customer. ? The company also can avoid this gap by providing excellent training to employees and enabling them to handle situations to deliver superior quality.
6.6.1.4
Communication gap:
? It is the difference between the actual quality of service delivered and the quality of service described in the firm‘s external communications. ? If the company overpromises through their external communications medium, mostly ad‘s they are likely to rise the expectation of the customer to a level that they cannot deliver, which is sure to cause dissatisfaction. ? On the other hand if the ads do not talk enough about the services being provided, the customer may be unaware and will not risk using the particular service. ? In the telecom sector, which so highly competitive it becomes extremely important for companies to promote their services and constantly update customers regarding new applications and tariff plans through external communications, to have that competitive edge. In fact competition is so stiff that often service providers counter attack each other through their ads. With dynamics of this industry changing every day, companies may even overpromise without considering the consequences if they are unable to deliver their promises.
Example:
? Vodafone ad’s constantly talks about “wherever you go, the network follows you”
however when it came to delivering this promise to a bunch of naval officers posted at a naval base in Tamil Nadu, the company miserably failed as it could not install towers within the naval base due to security reasons, hence these customers had no network within the base causing great inconvenience to them.
6.6.1.4.1 Gap Handling: ? For handling this gap the company first needs to understand the reason for the customers‘ grievance and apologize for the inconvenience caused to the customer due to the company‘s irresponsible behavior. ? The gap in the example mentioned can be handled by clarifying and explaining the uncontrollable reason for the shortcoming in service performance and then find alternate solutions to deliver the promise made.
6.6.1.5
Perceptions Gap:
? It is the difference between execution and delivery of service & customers perception of product/ service execution. ? It generally occurs when the market study on the target audience of the service provider has been faulty and the provider designs the service according to what he perceives to be the liking of the customers‘. ? It leads to great dissatisfaction as the provider in this case has completely missed the bull‘s eye and in fact may provide a service that could create an aversion and induce customers‘ to never return to the same service provider. ? The telecom industry is very vulnerable to this gap as each service provider has a huge customer base and understanding their perception about a service is not easy.
Example:
? Most telecom service providers find it feasible and appealing telemarketing about
their various schemes to customers and consider afternoon to be the best time to make these calls as most people have low amounts of activity at that time, however as per a recent study it was clear that customers’ find telemarketing a nuisance specially in the afternoon.
? Another example could be that of the Interactive Voice Response System that
almost all service providers in this industry use on their helpline number is considered convenient to the customers, while in reality customers prefer to sort out their complaints and enquiries by directly interacting with an executive of the company.
6.6.1.5.1 Gap Handling: ? This gap can be avoided by adhering to complaints made by the customers‘ regarding processes.
6.6.1.6
Interpretation gap:
? It is the gap between companies‘ promises or ads and the customers‘ interpretation of the communication. ? It is an extension of the communications act. Here the customer interprets the message sent across by the company‘s external communication in the wrong way. ? In the telecom sector one may see many advertisements that fail to bring out the essence of the service, making it difficult for customer to interpret the ads easily.
Example:
? The Idea ad campaigns started of well with the “What an idea sirji” as their
tagline, but extending it to their 3G campaign seems to have been so costly that they have been unable to invest in idea generation, leading to the disastrous “get 3G” ads, with Abhishek Bachchan - the brand ambassador’s clones representing 2 dull service providers and the third 3g guy offering solutions. The ad is confusing and lacks creativity. Also the population control ad clearly shows lack of content going overboard with the advantages of having 3G services, garnering a lot of criticism for the company from ad makers.
6.6.1.6.1 Gap Handling: ? Handling this gap can be expensive as it means reinvesting in communicating the right message and doing it repeatedly to erase the wrong perception set in the mind of the customer.
6.6.1.7
Service Gap:
? The last gap is a result of all the other gaps mentioned above. ? It is caused due to the snowballing effect of other gaps. ? Like every other sector service gap occurs in the telecom sector as well if there are any discrepancies. Service gaps are bound to occur but what is essential is to learn from them and fix them so that they are not repeated.
6.7 Service Recovery
Service recovery is a term used for systematic efforts by a firm in order to correct the problem following a service failure and to retain a customer‘s goodwill. The goal of service recovery is to identify customers with issues and then to address those issues to the customers' satisfaction to promote customer retention. It is a positive approach to complaint handling. Complaint handling has serious negative connotations; whereas, service recovery has positive connotations. It creates positive word-of-mouth about your company and minimizes the bad spin that lack of service recovery practices can create. A service recovery needs to have the following factors in order to be effective.
6.7.1 Apology:
Whenever things go wrong the service personnel must acknowledge the error and apologize for the trouble caused to the party.
6.7.2 Urgent Reinstatement:
Followed by an apology genuine efforts should be made to rectify the problem.
6.7.3 Empathy:
Understanding the problem from the customer‘s point of view and express it.
6.7.4 Symbolic atonement:
Conveying to the customer that the solution to his/her problem has or might get delayed by intimating them in periodic intervals.
6.7.5 Follow up:
To check with the customer that everything is working fine and whether or not he/she is satisfied with the service provided.
CASE STUDY 5:
SERVICE RECOVERY IN TELECOM SECTOR
Here is a case of Service recovery in the telecom sector:
A customer had a fault with his phone line so he reported it to his service provider online. As soon as he reported the fault on the Friday morning, he received a mail apologizing for the grievances. The customer service called him back 3 times on his alternate number on Friday just to let him know about how they were proceeding with the fault. The customer knowingly or unknowingly felt good somewhere that his problem was being taken care of by those customer service guys. The customer got a phone call on Saturday on his so called faulty phone line which was now fixed and he was asked if there was anything else they could help him with and hopefully that was all to call it a day. A week later that customer gets a call from that telephone company just to check with him that everything was working properly.
Chapter 7: Conclusions and Recommendations
7.1 Conclusion
India has one of the world‘s largest telecommunication networks. The telecom story continues to be the best evidence of the efficacy of the reforms process. In just six years, the number of mobile subscribers has gone up from just about one million to 100 million, a subscriber base that only four other countries China, the US, Japan and Russia can boast of. None can doubt the correlation between this explosive growth in numbers and the steep decline in the cost of the mobile phone and of its usage. Effective tariffs have dropped from over Rs 14 a minute to Re 1, bringing the phone within reach of people even below the middle-class. The Government may have, therefore, landed itself a winner in the mobile phone service providers, but the task of taking telecom to the other 90 per cent of the population will call for even greater innovation in policymaking, technology and marketing. Still three-fourths of the land mass is not
illuminated by a cellular signal and the price of the instrument is beyond the reach of a substantial section of the population let alone the charges for its use. These issues, of course, can be resolved by decisive policy action, such as a creative use of the Universal Services Obligation fund that now has over Rs 70 billion, releasing adequate spectrum to operators in the metros, and a proactive investment policy that invites many more equipment manufacturers to set up base in this country. The number portability issues will solve many
problems and will help the end users, which will change the whole scenario of competition and will make the game tougher for the service providers. Looking at the competition trend, it seems that soon in future, rural schools will be having broadband and internet facilities as their part of studies as well as routine lives. There is availability of internet facility in many villages. But soon it will be taught in secondary and higher secondary schools in all villages and various technologies like 3G and various VAS have made the market more competitive and made easy for the users. Implementation of number portability and 3G technologies have solved many problems and made easy and comfortable for the customers.
7.2 Recommendations
The following recommendations can be concluded for the telecom industry: ? Lowering the tariff plans of service providers will increase more competition. ? In order to allow technological upgradation, segment policies should be technology-neutral, and not specifically prescriptive. ? Resolve spectrum allocation and create need-based licensing of spectrum bandwidth to facilitate the policy of unlimited new entrants in basic services. ? Pass rules on number portability (service migration) to allow free market conditions for fixed line consumers, without taxing new entrants or consumers for moving away from a monopoly service provider. ? Bringing more upgradation in VAS for the betterment of the users. ? Improvement of network infrastructure in both the urban and the rural areas. ? Reducing the STD and ISD charges for the users. ? More FDI inflows can be enhanced. ? More Direct To Home (DTH) services will give benefits to the customers. ? CDMA technology providers i.e. Tata and Reliance are slowly coping up with the competition with GSM operators which gives a good benefit to the end users. These operators should also indulge into providing various services. ? Mobile banking is a new concept which is recently adopted by Airtel and it provides recharge from mobile phone by tie ups with banks. This new concept will bring a new revolution in case of inventions. ? Broadband services can be more focused more if the spectrum issues are solved. Still there are many rural areas where broadband services are not available. ? Companies can provide new and different schemes to their customers. ? Enhance data services on fixed and wireline services. ? Increase in internet speed on mobile can be the criteria for the operators. After talking to the Sales Executives of various companies’ outlets, the following recommendations can be concluded as a part of the strategies for acquiring or retaining new customers in telecom industry:
? The telecom operators should take less time for the solving customer‘s queries. ? Majority of the operators focus on the special occasions to launch new schemes but they can also launch schemes on weekly or monthly basis to attract new customers. ? TV media is more effective for the operators as per the findings. But they should also focus on radio and newspapers for more effectiveness. ? Customer care executives should concentrate more on pre-paid connections for the price sensitive customers and post-paid connections for business class people or high class people. They should use their media tools accordingly. ? They should concentrate more on the attributes like talk-time facility, network, voice clarity etc apart from SMS, VAS and schemes. ? They should focus more on VAS like GPRS facilities, games, astrology, and music for young people and business news for business people. ? They should also focus on new technologies like 3G. ? They should also focus on pilot projects before launching a product, especially in case of rural areas.
BIBLIOGRAPHY
References:
? Dot Annual Report: 2010-11 ? National Telecom Policy: 2011 ? Results Framework Document (RFD) for Department of Telecommunication: 20112012 ? DoT, Ministry of Communications & IT, GoI, Strategic Plan: 2011-15 ? TRAI Report: 2010-11 ? REPORT ON MOBILE VAS IN INDIA: 2010 ? IBEF Report 2007-08: Telecommunication - MARKET & OPPORTUNITIES.
Books:
? Zeithaml, V. A., Berry, L. L. and Parasuraman, A., (1993). Delivering quality service: Balancing customer perceptions and expectations. New York: New York Free Press. ? Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988). SERVQUAL: A Multiple Item Scale for Measuring Consumer Perceptions of Service Quality. Journal of Retailing. ? Dr. C. S. G. Krishna & Dr. R. Lalitha, Innovation Management, Himalaya Publishing House, Mumbai, 2007. ? C. Bhattacharjee, Service Sector Management: An Indian Prospective, Jaico Publishing House Mumbai, 2007.
Websites:
? http://rru.worldbank.org/documents/toolkits/labor/toolkit/module3/benchmarking.htm ? http://www.managementparadise.com/ ? http://www.economywatch.com/world-industries/telecommunications/telecomindustry-in-india.html ? http://rru.worldbank.org/documents/toolkits/labor/toolkit/module3/benchmarking.htm ? http://www.icmrindia.org/casestudies/ ? http://www.sciedu.ca/journal/index.php/ijba/article/view/567/275 ? http://www.trai.gov.in/ ? http://www.telecomindiaonline.com/ ? http://www.dot.gov.in/ ? http://www.cci.in/pdf/surveys_reports/ ? http://www.mobiles.in/mobile-service-providers.htm ? http://www.telecomcircle.com/ ? http://www.indiantelevision.com/tamadex/y2k10/june/tam23.php ? http://www.equitymaster.com/ ? http://www.tutorialspoint.com/telecom-billing/products-services.html
doc_235755835.docx
In this report, I have tried to capture most of the areas of Telecom Industry. Major highlights of the report are: Introduction of Telecom Sector and its status at present, its growth & growth drivers, challenges faced by it; Telecom Marketing Mix; Service Marketing in Telecom Sector, Marketing Strategies in Telecom, Market Segmentation, Managing Service Quality in Telecom, and Conclusions and Recommendations.
A Project Report On:
Service Sector Management in Telecom Industry
Submitted By:
Dishank Khandelwal
For The Degree Of
The Bachelor of Management Studies Semester – V Prahladrai Dalmia Lions College of Commerce and Economics
S. V. Road, Sunder Nagar, Malad (W), Mumbai-400064.
Submitted To:
University of Mumbai
Academic Year:
2011-2012
DECLARATION
I, Master Dishank Khandelwal, of Prahladrai Dalmia Lions College of Commerce and Economics of T.Y.B.M.S (Semester V), hereby declare that I have completed the project on ?Service Sector Management in Telecom Industry‘ in the Academic Year 2011-2012. This information submitted is true and original to the best of my knowledge.
Date: Place:
(Signature of the Student)
CERTIFICATE
I, Prof. A. M. Bhende hereby certify that Master Dishank Khandelwal, a student of Prahladrai Dalmia Lions College of Commerce and Economics of T.Y.B.M.S (Semester V), has completed project on ?Service Sector Management in Telecom Industry‘ in the Academic Year 2011-2012. This information submitted is true and original to the best of my knowledge.
External examiner: Date: Project Co-coordinator: Date: College Seal: Principal
ACKNOWLEDGEMENT
It is a matter of great pleasure and privilege to present this report on ? Service Sector Management in Telecom Industry‘. The compilation of this project is a milestone in the life of a management student and its execution is impossible without the co-operation of the project guide. I would like to express my heartfelt gratitude to my project guides for their encouragement and assistance through the course of this project. It is due to the efforts and guidance of my project guides that I am able to present this project. At the outset I would like to take the privilege to convey my gratitude to all those who co-operated, supported, helped and suggested me as to how the project could be completed. This project bears imprint of advices, from many people who were either directly or indirectly involved in it. The Internet has been a veritable treasure throve of information, the websites and the information they contained helped me to do the project in a much easier and better manner. I am also desirous of placing on record profound indebtness to my project guides Prof. A.M. Bhende and Prof. Anshu for their valuable advices, guidance, and precious time and support that they lent to me. I would also like to thank Sales Executive of various company‘s outlets i.e., Reliance Communication Gallery, Tata Docomo Gallery, Airtel Gallery, for their time and valuable inputs they have provided in the course of my research. I would also like to take this opportunity to express my gratitude to the Principal of my college, Dr. N. N. Pandey, for his continued belief in his students and for giving me this opportunity. I would also like to thank the Head of the BMS Department, Prof. A.M. Bhende, for his guidance and encouragement to take up this project.
(Signature of the Student)
EXECUTIVE SUMMARY
The rapid growth in Indian telecom industry has been contributing to India‘s GDP at large. Telecom industry in India started to set up in a phased approach. Privatisation was gradually introduced, first in value-added services, followed by cellular and basic services. Telecom Regulatory Authority of India (TRAI), was established to regulate and deal with competition (the service providers). This gradual and thoughtful reform process in India has favoured industry growth. Upcoming services such as 3G and WiMax will help to further augment the growth rate. The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally by 2010. This is evident from the facts of Telecom Industry for example, India added 113.26 million new customers in 2008, the largest globally. The country‘s cellular base witnessed close to 50 per cent growth in 2008, with an average 9.5 million customers added every month. This would translate into 612 million mobile subscribers, accounting for a tele-density of around 51 per cent by 2012. It is projected that the industry will generate revenues worth US$ 43 billion in 2009-10. In this report we have tried to capture most of the areas of Telecom Industry. Major highlights of the report are: Introduction of Telecom Sector and its status at present, its growth & growth drivers, challenges faced by it; Telecom Marketing Mix; Service Marketing in Telecom Sector, Marketing Strategies in Telecom, Market Segmentation, Managing Service Quality in Telecom, and Conclusions and Recommendations.
INDEX
Chapter 1: Indian Telecom Sector ......................................................................................... 8
1.1 Introduction ................................................................................................................................................. 8 1.2 History of the Indian telecom industry ........................................................................................................ 9 1.3 Role of Telecom Sector in Development Process ..................................................................................... 11 1.4 Top Telecom companies in India .............................................................................................................. 12 1.5 Present Status of the Telecom Sector ........................................................................................................ 15 1.6 Growth of Telecom Sector ........................................................................................................................ 17 1.7 Growth Drivers of Telecom Sector ........................................................................................................... 17 1.8 Challenges and Opportunities of the Indian Telecom Industry ................................................................. 20 1.9 Major Features of the Telecom Sector ...................................................................................................... 32 1.10 Road Ahead ............................................................................................................................................. 34 1.11 Vision ...................................................................................................................................................... 36
Chapter 2: Telecom Marketing Mix .................................................................................... 37
2.1 Product/Service ......................................................................................................................................... 38 2.2 Price .......................................................................................................................................................... 51 2.3 Place .......................................................................................................................................................... 52 2.4 Promotion .................................................................................................................................................. 53 2.5 People ........................................................................................................................................................ 55 2.6 Physical Evidence ..................................................................................................................................... 56 2.7 Process ...................................................................................................................................................... 57
Chapter 3: Service Marketing in Telecom Sector ............................................................... 58
3.1 Service Triangle in Telecom ..................................................................................................................... 58 3.2 Dimensions of Service Triangle ................................................................................................................ 60 3.3 Service Encounter ..................................................................................................................................... 63 3.4 Moment of Truth ....................................................................................................................................... 65
Chapter 4: Marketing Strategy of Telecom Sector ............................................................. 67
4.1 SWOT Analysis ........................................................................................................................................ 67 4.2 Demand Forecasting .................................................................................................................................. 70 4.3 Pricing Strategy ......................................................................................................................................... 71 CASE STUDY 1: Pricing Strategy of Uninor ...................................................................................... 75
4.4 Positioning Strategy .................................................................................................................................. 77 CASE STUDY 2: Airtel's Positioning Strategy ................................................................................... 78
4.5 Promotion Strategy .................................................................................................................................... 79 CASE STUDY 3: Idea Cellular's Advertising and Promotion Strategies ........................................... 82
4.6 Implementation ......................................................................................................................................... 85 CASE STUDY 4: Leadership through Innovation and Creativity in Marketing Strategies .............. 86
4.7 Corporate Strategy .................................................................................................................................... 89
Chapter 5: Market Segmentation of Telecom Sector ........................................................ 96
5.1 Segmentation as per Market ...................................................................................................................... 97 5.2 Segmentation as per Consumers................................................................................................................ 99 5.3 Targeting ................................................................................................................................................. 101
Chapter 6: Managing service quality in Telecom Sector ................................................ 102
6.1 Service Quality ........................................................................................................................................ 102 6.2 Service Quality perception ...................................................................................................................... 102 6.3 Dimensions and Determinants of Service Quality .................................................................................. 104 6.4 Total Quality Management (TQM) ......................................................................................................... 106 6.5 Recommendations to Improve Quality of Service in Telecommunications ............................................ 107 6.6 Service Gap Analysis .............................................................................................................................. 110 6.7 Service Recovery .................................................................................................................................... 117 CASE STUDY 5: Service Recovery in Telecom Sector ..................................................................... 118
Chapter 7: Conclusions and Recommendations ............................................................... 119
7.1 Conclusion .............................................................................................................................................. 119 7.2 Recommendations ................................................................................................................................... 121
Chapter 1: Indian Telecom Sector
1.1 Introduction
Over the past two decades, India has grown rapidly from a ?command and control? economy to a market-based economy. India is now closely integrated with the global economy and is considered one of the pillars of global economic growth. The process of liberalization started in the mid-1980s and gathered momentum in the 1990s, with the further opening of the economy and the creation of regulatory institutions to march toward fully competitive markets. As a result of liberalization, India‘s GDP has been rising by more than 7% annually in the past decade, compared with 3.5% annually from 1950 to 1980. The Indian economy maintained a growth rate of more than 5% even during the global recession. In FY10 (financial year ended 31 March 2010), India‘s service sector was estimated to account for 56.9% of GDP, while the industrial sector and agriculture sector contributed 28.5% and 14.6%, respectively, to GDP. Within the services sector, the telecom sector has been the major contributor to India‘s growth, accounting for nearly 3.6% of total GDP in FY10. In less than a decade, the mobile phone has been transformed from being a luxury that few could own into one of the essentials of an average Indian‘s existence. The easy access to mobile services is the outcome of positive regulatory changes, intense competition among multiple operators, low-priced handsets, low tariffs and significant investments in telecom infrastructure and networks.
1.2 History of the Indian telecom industry
The Indian telecom sector has evolved from the bygone days of ?telephone on demand? to the advent of 3G telephony. Its history begins with the laying down of the first experimental electric telegraph line in Kolkata. In 1881, telephone services were introduced, with exchanges being opened in Kolkata, Mumbai, Chennai, Karachi and Ahmedabad. Following independence, all foreign telecommunication companies in India were nationalized to constitute the Posts, Telephone and Telegraph (PTT), and were under government control. In the early 1980s, the sector underwent its first wave of change. DoT was established in 1985 to provide domestic and long-distance services in India. Further, in 1986, two wholly government-owned companies — Videsh Sanchar Nigam Limited (VSNL), which is now known as Tata Communications, and Mahanagar Telephone Nigam Limited (MTNL) were formed. VSNL and MTNL aimed at providing services to international and metropolitan areas, respectively. The introduction of the New Industrial Policy 1991 initiated the liberalization process in India. Telecom equipment manufacturing was also de –licensed in 1991, and the NTP was announced in 1994. The formulation of NTP 1994 was followed by the launch of mobile telephony in India in 1995. However, growth in the initial years was very slow due to high mobile handset prices as well as the high tariff structure of service providers. The introduction of NTP 1999 heralded pro-consumer policies. NTP 1999 enabled the telecom sector to reach an average subscriber growth rate of more than 35%, primarily due to initiatives taken by the regulator and service providers. The liberalization of the sector resulted in the need for a regulator, and the TRAI was established in 1997. In January 2000, the Telecommunications Dispute Settlement and Appellate
Tribunal (TDSAT) were established to take over the adjudicatory and disputes functions from TRAI.
1.3 Role of Telecom Sector in Development Process
Telecommunications has been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. It has become especially important in recent years because of enormous growth of information technology and its significant potential for the impact on the rest of the economy. The Telecom Sector, which has the
multiplier effect on the economy, has a vital role to play in economy by way of contributing to the increased efficiency. The available studies suggest that income of business entities and households increases by the use of telecom services. Thus it contributes to the growth in GDP. The Government of India recognizes that provision of world class telecommunications infrastructure and information is a key to rapid economic and social development of the Country.
1.4 Top Telecom companies in India
The telecom industry of India has registered manifold growth in the recent years. Personalized telecom access is essential necessity of life for increasing number of the people. The sector offers unlimited prospects when we consider future growth. Both Public Players and Private Players are enhancing their technologies and taking the telecom industry to a much higher growth state. Not only service providers but also handset manufacturers are contributing significantly to the industry and economy of India. The top players in the industry are:
1.4.1 Reliance Communications Limited
Established in 2002, Reliance communication is the wholly owned subsidiary of Anil Dhirubhai Ambani Group of Companies providing the telecommunication services.
1.4.2 Bharti Airtel Limited
Established in 1995 by Sunil Mittal as a Public Limited Company, Airtel is the largest telecom service provider in Indian telecom sector. With market capitalization of over Rs. 1,360 billion, Airtel has 31% of total market share of GSM service providers.
1.4.3 BSNL
Founded in 2000, Bharat Sanchar Nigam Ltd. is India's largest public sector Telecommunications Company providing a wide variety of telecom services. Its service range covers Wireline, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services, etc.
1.4.4 MTNL
MTNL has successfully converted its telephone exchange network to the digital mode systems. Having a customer base of more than 6 million, MTNL has showed a growth of over 30% during financial year 2005-06.
1.4.5 Ericsson
Ericsson has a wide network of more than 140 countries and more than 30% market share. Ericsson's parent company Teleonsktiebolaget L M Ericsson was established in 1876.
1.4.6 Nokia
Nokia is one of the leaders in the Indian market providing telecom equipments. Its product range starts from a handset of Rs. 2000-3000 and goes to N series, which amounts to more than Rs. 25000-30000.
1.4.7 Siemens Communications
Siemens is one of world's largest companies providing electrical engineering products and services. Siemens covers a wide range of services in the electronic arena, such as energy, construction, transportation, lighting, information and communication.
1.4.8 Idea Cellular Limited
Aditya Birla Group and Tata Group as joint venture, Idea Cellular, is a part of Aditya Birla Nuvo, a flagship company of the Aditya Birla Group, Idea is growing its network in 11 circles.
1.4.9 Tata Teleservices
Tata Teleservices, one of the 96 companies of Tata Group, has its network in 20 circles. It is the first company to launch CDMA mobile services in India.
1.5 Present Status of the Telecom Sector
Telecommunications is one of the few sectors in India, which has witnessed the most fundamental structural and institutional reforms since 1991. In recent times, country has emerged as one of the fastest growing telecom markets in the world, particularly by the unprecedented growth in mobile telephony. This high growth rate has been achieved in major part due to sharp fall in tariffs. The rapid growth in Indian telecom services has prompted major global manufacturers of telecom equipment to consider investing in India, paving the way for extensive provision of modern communication services in rural areas and also provide a strong boost to government revenues. With the successfully concluded auctions of the 3G and BWA spectrum, this growth is set to become even more pronounced. Indian telecom network has 787.29 million connections as on 31st December 2010 with 752.20 million wireless connections, Indian telecom has become the second largest wireless network in the world after China. The future progress of telecom in our country is very encouraging. The addition of over 18 million connections per month puts the telecom sector on strong footing. The target of 600 million telephones by the end of 11th five year plan has been achieved in February, 2010. With such a pace of expansion the Department is certain to achieve the 11th plan targets.
1.5.1 Present Status of the Indian Telecom Sector:
? Indian Telecom market is one of the fastest growing markets in the world. ? With its 787.29 million Telephone connection as on 31st December 2010, it is the second largest network in the world after China. ? It is second largest wireless network in the world. ? Over 18 million connections are being added every month. ? The target of 600 million telephones by the end of 11th five year plan has been achieved in February'10 itself. ? Wireless telephones are increasing at faster rate. The share of wireless telephones as on 31st December 2010 is 95.54% of the total phones. ? The share of private sector in total telephone is 84.60%. ? Overall tele-density has reached 66.17%. Urban tele-density is about 148%, whereas rural tele-density is at 31.22% which is also steadily increasing. ? Broadband connections increased to 10.74 million by November, 2010.
1.6 Growth of Telecom Sector
The opening of the sector has not only led to rapid growth but also helped a great deal towards maximization of consumer benefits as tariff have been falling across the board as a result of unrestricted competition. Telecom sector has witnessed a continuous rising trend in the total number of telephone subscribers. From a meager 22.8 million telephone subscribers in 1999, it has grown to 621.28 million at the end of March, 2010. The total number of telephones stands at 787.29 million as on 31st December 2010 showing addition of 166.01 million during the period from March to December 2010. Wireless telephone connections have contributed to this growth as the number of wireless connections rose from 35.61 million in 2004 to 584.32 million in March, 2010 and 752.20 million as on 31st December 2010. The wireline started to decline from 40.92 million in 2004 to 36.96 million in March, 2010 and 35.09 million in December, 2010, albeit it is stagnating now.
1.7 Growth Drivers of Telecom Sector
1.7.1 3G Telecom Services
The explosive growth of the telecom industry in India is being followed by the urge to move towards better technology and the next level of service delivery. While the last 5 years have been transformational for Indian telecom industry, the next few years look even more exciting. BWA will overcome the key hindrance of ROW in India, while 3G has the potential to make the mobile phone, a ubiquitous device for accessing the internet. The new opportunities opened through new services such as 3G mobile, VAS, Wi-MAX, MCommerce, Mobile banking and Broadband wireless services will put emphasis on deeper penetration into urban and rural areas.
1.7.2 Mobile Number Portability (MNP)
MNP allows any subscriber to change his service provider without changing his mobile phone number. The much-awaited mobile number portability was launched on 25th November 2010 at Haryana and on January 20, 2011 in entire country. With the rollout of MNP, mobile telecom service providers will be forced to improve quality of their service to avoid loss of subscribers.
1.7.3 Value Added Services (VAS)
The mobile value added services include, text or SMS, menu based services, downloading of music or ring tones, mobile TV, video, streaming, sophisticated m-commerce applications etc. Prior to 2008, a majority of VAS revenues were attributable to SMS's. However, recent trends indicate that this mix is evolving. With greater penetration of new services, availability of relatively inexpensive feature rich handsets and consumer education, VAS other than SMS is gaining importance. It is further expected that 3G and BWA will raise hopes for an increase in demand of data and content based services. Such as cloud computing, remote surveillance, fleet management, telematics and retail supply chain. Mobile VAS such as mobile TV, mobile banking and mobile governance will witness a higher demand in future.
1.7.4 Manufacturing
Indian telecom industry manufactures a complete range of wireline telecom equipment using state-of-the-art technology. Considering the growth of wireless, there are excellent opportunities to domestic and foreign investors in manufacturing sector. Presently most of the wireless core equipments are being imported and there is great potential to manufacture these items in the country. The last five years saw many renowned telecom companies setting up their
manufacturing base in India. The production of telecom equipments in value terms has increased from Rs.488000 million during 2008-09 to Rs.510000 million during 2009-10. The production of telecom equipment including Customer Premises Equipment (CPE) during 2010-11 is expected to be about Rs.535000 million. There are favorable factors such as policy moves taken by the government, incentive offered, large talent pool in R&D and low labor cost which can provide an impetus to the industry. Exports of telecom has also increased from Rs.110000 million in 2008-09 to Rs.135000 million during 2009-10 and it is expected to increase to Rs.140000 million in 2010-11.
1.7.5 Foreign Direct Investment
The liberalization in financial sector has beneficial results as that in telecom sector. Liberalization with allowing entry to the private firms has resulted in unprecedented growth in telecom sector. Today, telecom is the third major sector attracting FDI inflows after services and computer software sector. At present 74% to 100% FDI is permitted for various telecom services. This investment has helped telecom sector to grow. The total FDI equity inflows in telecom sector have been US$ 1093 million during 2010-11 (April-November).
1.8 Challenges and Opportunities of the Indian Telecom Industry
Image: Major Issues and opportunities in Telecom Sector
The Indian telecom industry has come a long way since its liberalization era. The industry has witnessed exponential growth especially in the wireless segment in the last few years. The plethora of telecom services evolved over the years, ranging from basic telephony to voice, video and data services, WiMax, WLAN and VPN, and bandwidth on demand to virtual private networks have catalyzed revolutionary changes in the business operations for the service sector, i.e., IT, BPO and also the manufacturing sectors etc, besides providing millions of people access to new technology. Even though the sector has reflected promising growth, the teledensity in India still remains at a very low level compared with international standards and thus providing tremendous opportunity for future growth. In the medium-term, the industry is expected to continue to record good subscriber growth as a result of low penetration levels, heightened competition; a sustained fall in minimum subscription cost and tariff that increase affordability for lower-income rural users, expansion of coverage area by mobile operators, and government support
through schemes such as the rural infrastructure roll out funded by subsidies from the Universal Service Obligation (USO) Fund. The Indian telecom sector offers unprecedented opportunities in various areas, such as rural telephony, 3G, virtual private network, value-added services, et al. Nonetheless, the lack of telecom infrastructure in rural areas and falling ARPU of telecom service providers could inhibit the future growth of the industry.
1.8.1 Challenges for the industry 1.8.1.1 Rapidly Falling ARPU
The competitive intensity in the telecom industry in India is one of the highest in the world and has lead to sustained fall in realization for the service providers. Intense competitive pressure and cut throat pricing has resulted in declining ARPUs. With increasing number of new entrants in the telecom space the competitive intensity is likely to continue, putting further downward pressures on the telecom tariffs. Thus, the telecom companies might have to grapple with further decline in ARPUs, going forward. Further, with the telecom companies moving their focus to the rural areas for driving the future subscriber growth they might not witness a commensurate increase in revenues. In fact, the risk of steep decline in ARPUs will increase going forward as the telecom companies penetrate rural markets that are characterized by higher concentration of low income, low-usage customers. A higher-than-expected decline in ARPU poses a risk of reduction in margins of service providers. Alternatively, telecom operators are turning their focus to steadily increasing the minutes of usage (MoU) to counter the sustained fall in ARPUs. Likewise, the growth of the VAS is also crucial for some improvement in the ARPUs of operators.
1.8.1.2
Lack of Telecom Infrastructure
Lack of telecom infrastructure in semi-rural and rural areas could be one of the major hindrances in tapping the huge rural potential market, going forward. The service providers have to incur a huge initial fixed cost to enter rural service areas. Further, as many rural areas in India lack basic infrastructure such as road and power, developing telecom infrastructure in these areas involve greater logistical risks and also extend the time taken to roll out telecom services. The lack of trained personnel in the rural area to operate and maintain the cellular infrastructure, especially passive infrastructure such as towers, is also seen as a hurdle for extending telecom services to the under penetrated rural areas.
1.8.1.3
Rural Areas Continue to Remain Under Penetrated
A rural teledensity of merely 15% point towards the fact that a majority of Indian population still do not have access to telecom services. The rural India seems to have remained untouched by the telecom revolution witnessed in the last few years. A huge 'digital divide', which is reflected by the enormous difference of 74% between the urban and rural teledensity, reiterates this fact. However, with the urban markets reaching a saturation point, the telecom service providers are penetrating rural areas for driving future growth. Thus, the service providers entering new rural markets might witness substantial increase in subscriber base. The expansion in the rural areas, however, has increased the risk of further decline in the ARPUs. Nonetheless the revenue growth from these regions is unlikely to match the surge in the subscriber base.
1.8.1.4
Excessive Competition
Another major concern that has come to the forefront in the recent past has been heightened competitive intensity in the industry that has correspondingly fuelled the price war between industry players. The Indian wireless market is one of the world‘s most competitive markets, with 12 operators across 23 wireless ?circles‘ and 6 to 8 competing operators in each circle. The auction of new 3G licenses and the introduction of mobile number portability (MNP) are likely to heat up competition in the industry, going forward. Spectrum is the most important resource that is required for providing mobile services. Given that spectrum is a finite resource, the availability of the same would be inversely proportional to the number of operators. Thus, larger the number of service providers smaller will be the amount of spectrum available to each of them. Scarcity of spectrum leads to higher apex on deployment of mobile networks for the operators as they need more cell sites to improve service quality. Further the growing usage of spectrum and the resultant scarcity may lead to re-use of spectrum and increase chances of congestion in networks leading to constraints on service quality. Evidently, the competition in the industry is expected to intensify further with the entry of new players, both domestic as well as foreign players. With the competitive intensity of the industry already at such high levels new operators might find it difficult to gather significant share in Indian telecom market. While the new players may benefit from a faster network rollout through tower sharing, they will face challenges in terms of high subscriber acquisition costs and lower ARPU customers.
1.8.1.5
Price War between the Service Providers Putting
Pressure on Margins
The ever-increasing competitive intensity in the sector, with licenses and spectrum in several circles allotted to newer operators, is also a concern and could lead to unrealistic pricing levels to grab subscribers. The pricing strategy of per second billing already has taken the price war between telecom operators to the next level. The intensifying price war could put significant downward pressure on the industry revenue growth. Further, the ongoing price war and the concomitant decline in telecom traffic could raise the entry barrier for new companies.
1.8.1.6
Spectrum Allocation
3G Spectrum availability is one of the major concerns for the industry. Lack of adequate spectrum which is the most integral part of the mobile telephony sector could hamper its growth severely. However, the spectrum allotment has been the most controversial issues in the Indian telecom sector. The smooth process of scheduled 3G and BWA spectrum allocation is likely to be one of the key factors affecting the industry dynamics, going forward. Given the highly-competitive nature of the Indian telecom industry on one hand, and limited licenses in the 3G network on the other, the risk of excessive biding by the service providers has increased. Irrational bidding, especially in some circles, might render 3G services financially-unviable. Further, there exists a risk of delay in allotment of proposed spectrum to the service providers who have successfully bid for the 3G spectrum.
1.8.1.7
Regulatory Charges
The regulatory charges in the telecom sector have a complicated structure because multiple levies impede the smooth implementation of telecom projects in India. Given the continuously-declining ARPUs, and the extremely-low tariffs, sustaining the current growth rates of the industry requires urgent attention towards rationalizing the convoluted tax structure in the sector.
TRAI has recommended to the DoT committee to phase out the multiple levies in this sector with a single levy in a phased manner. Further with regard to license fees, which currently stand at 6%-10% of total revenue, TRAI has suggested that it be reduced at a uniform rate of 6% across all licenses.
1.8.1.8
Lower Broadband Penetration
The Indian economy remains highly underpenetrated in terms of broadband connections. High cost of devices (PC and laptop), high internet charges and lower wireline connections have been some of the major factors inhibiting broadband penetration. Broadband is one of the key catalysts for economic development and major initiatives by both the government and service providers are needed to increase its penetration.
1.8.1.9
Other Growth Inhabiting Factors
While the implementation of mobile number portability is likely to aid improvements in quality of service, it is also likely to increase the churn out
ratio significantly. The service providers are likely to turn to the VAS as a service differentiator; however, widespread VAS deployment is restricted due to language and illiteracy. The deployment of 3G services is likely to help the emergence of new VAS. Mass acceptance will be crucial for the success of 3G services in India. Comparatively higher cost of handsets required for accessing 3G services is likely to be one of the major roadblocks in mass 3G adoption in India.
1.8.2 Opportunities for the Industry 1.8.2.1 Rural Telephony – Connecting the Real India
With the urban markets fast reaching their saturation points for telecom services, especially the voice telephony services, the vast rural market holds a huge potential to drive the future growth of the telecom companies. In fact, the teledensity in rural areas is just about 15%, which reflects the extent of opportunity left untapped for telecom companies, going forward. Further, the government initiatives for increasing telecom connectivity in rural areas are also likely to aid the telecom service providers to extend their services in the unconnected rural areas. Initiatives such as USO Fund and infrastructure sharing would be instrumental in increasing the coverage of telecom services in the far-flung areas. Penetration in rural areas will not only support the growth of telecom service providers but also boost demand for equipment and telecom infrastructure.
1.8.2.2
3G Services – Potential Growth Driver
Currently the 3G deployment in India is at a very nascent stage. In fact, 3G services have been launched very recently (February 2009) in India. The 3G services will be instrumental in stimulating future growth of the telecom
industry. The 3G services will not only facilitate business through provision of high-speed data and content rich services but also will play a pivotal role in bridging the urban-rural divide by facilitating faster mobile deployment in rural areas. Introduction of 3G will be beneficial to the Indian BPO industry by increasing their competitiveness. In India, where mobile cellular penetration is much higher than that of fixed telephone lines (nearly 30 mobile cellular subscriptions per 100 inhabitants as compared with less than 4 fixed telephone lines per 100 inhabitants in 2008), mobile broadband through 3G will drive broadband penetration. The inherent benefits of economies of scale and faster time to market of 3G services will benefit service providers. The high-end customers may get attracted to these services and provide a first-mover advantage to the initial entrants in the 3G space. The launch of 3G is also likely to facilitate introduction of various VAS such as video calling, gaming, highspeed Internet access and other data services, which in turn might provide some support to the falling ARPU. The Indian government has planned to sell the spectrum for 3G services through an auction and thereby create a competitive environment that offers better services to consumers. Auction of 3G and broadband spectrum will be done through e-auctioning which shall be executed by a specialized agency to ensure transparency in the selection process. Bids would be invited from domestic, as well as foreign players. New players would also be allowed to bid which in turn is likely to usher technology innovation, increase competition, lead to prompt roll out of services and provide more choices to customers at competitive prices. With the allotment of the 3G spectrum, the pressure on the 2G spectrum is likely to ease especially in the heavy traffic areas. Moreover, freeing 2G bandwidth might help the operators to cater to additional subscribers without significant additional investments. Given the comparatively high cost of handsets and 3G services, the deployment of 3G services is likely to be limited
to high-end customers. Thus, initially the 3G spectrum is expected to be used for voice services, whereby the wireless subscribers might experience improvement in service quality. Going forward, the 3G spectrum is expected to attract major investments and open new growth avenues for the telecom sector.
1.8.2.3
Worldwide Interoperability for Microwave Access
(WiMax) – Reaching the Last Mile
In the wireless communication arena, WiMax technology has emerged as one of the most significant developments. Deployment of WiMax would not only enable the provision of high-speed internet services through high bandwidth spectrum but also prove to be a useful mode of communication in inaccessible terrains. WiMax could be used as an alternative to cable and DSL for providing broadband access in rural areas and hence could be a major factor driving the growth of Indian telecom services, especially the wireless services. Moreover, it is likely to facilitate the propagation of the e-governance services such as telemedicine, e-learning et al through broadband, particularly in the rural areas. Given the fact that WiMax deployment does not require significant resources, it will also be an economically-feasible option to cater to rural communication needs.
1.8.2.4
Mobile Value Added Service (MVAS) – An
Opportunity to Increase the ARPU
The value added services segment is rapidly emerging as a potential revenue generator for the telecom services industry. Given that a substantial part (around 60%) of the total VAS revenue goes into the kitty of the service providers, the development of this segment is likely to offer them an opportunity to support their falling ARPU. The increasing acceptance and usage of mobile commerce services is also likely to boost the VAS segment. Mobile banking is likely to
emerge as a major growth driver in the near future given the issuance of Mbanking guidelines (June 30, 2008) issued by the RBI and increasing demand for this service. The demand for new VAS services is likely to surge given that increasing number of younger generation has started using mobile services and are more inclined to adopt the VAS services. With the implementation of mobile number portability, the service providers would be encouraged to constantly develop new VAS as a service differentiator and retain their existing customers and attract new ones. The introduction of the Next Generation Networks would help in bringing down the cost and roll out time of new MVAS and provide impetus to the growth of the VAS, going forward. Further, with reduction in prices of the feature rich handsets capable of accessing many of the VAS services the demand for the MVAS is set to increase in the future.
1.8.2.5
Infrastructure Sharing – A Profitable Proposition
The rapid expansion in subscriber base has brought to the fore the challenge of increasing and upgrading the telecom infrastructure to maintain quality of services. In the recent years, infrastructure sharing has emerged as a profitable proposition for both the parties involved, as for the tenant it lowers capex and opex, and for the owners, it is an additional source to earn revenue. It would lead to considerable reduction in initial set-up costs for new service providers and existing service providers planning to enter new service areas. Infrastructure sharing might assist the service providers to reduce their operating costs. The cost saving through infrastructure sharing could be passed on to the customers thereby augmenting their affordability. Further, with infrastructure sharing, the companies can reduce the time required to roll out the telecom services in the rural areas. The sharing of telecom infrastructure by
companies could lead to optimum utilization of these resources and thereby improve efficiency. A step forward in infrastructure sharing is the proposal of TRAI to include those rural and remote areas in its purview that are not covered by wireless signals with assistance from the USO Fund.
1.8.2.6
Managed Service – Outsourcing in Telecom
Managed Services typically involve the outsourcing of a specific technical function or capability to a Managed Service Provider (MSP). It is an alternative to in-house management or traditional outsourcing since firms/enterprises do not have to transfer complete control over assets/operations to the MSP but rather can contract or outsource specific management challenges for a shorter period of time. With the rapidly-growing subscriber base, managing infrastructure and networks is becoming increasingly difficult for the service providers. Therefore, many service providers have been outsourcing their infrastructure or network management operations completely or partially. Given the increasing demand for the managed services, the telecom equipment vendors could have an opportunity to take up more roles in the value chain by entering into managed service contracts. Managed Services are fast-emerging as an attractive proposition for many enterprises that do not want to dedicate human resources and capital toward acquiring and administering technology infrastructure. It also allows the telecom service providers to focus on their core activities, to develop new and innovative products and services so as to distinguish themselves from other players in this highly-competitive market.
The service providers can gain significantly in terms of cost reduction and improved efficiency in operations from the economies of scale that an MSP can offer.
1.8.2.7
Opportunities in Other Service Segments
Investing in technologies such as NGN, 3G, WiMax, is likely to open up new frontiers of business. Some services such as IPTV, VPN etc. are expected to gain some momentum in the medium to long run. 1.8.2.7.1 Virtual Private Network (VPN) – Create Your Community: Virtual Private Network, also known as closed user group (CUG), is a private data network that provides connectivity within closed user groups via public telecommunication infrastructure. The option is less expensive as it relies on sharing of public infrastructure. This service was first availed in India by corporate units that required VPN services to connect to their branch offices. 1.8.2.7.2 IPTV: Internet protocol television (IPTV) also referred as ?triple play‘ offers internet, television and telephone services on a single platform. IPTV provides the telecom service providers an opportunity to widen the gamut of existing services and is likely to be beneficial for large players in the telecom sector. Given the lower broadband penetration, the usage of IPTV is likely to be restricted to metros and some urban centers.
1.9 Major Features of the Telecom Sector
1.9.1 Supply
Intense competition has resulted in prompt service to the subscribers. However, smaller towns and villages continue to have waiting periods on account of nonavailability of adequate infrastructure.
1.9.2 Demand
Given the low penetration levels in the country and continuously falling tariffs, demand will continue to remain higher in the foreseeable future across all the segments.
1.9.3 Entry and Exit Barriers
Telecom industry is characterized by high entry and exit barriers. Service providers need to invest huge capital to build or hire the necessary infrastructure for providing services to customers. For e.g. Tata Teleservices in India invested an amount of Rs.7, 533 crores for setting up the required infrastructure. Because of the high cost of capital involved, in most countries, the government owned telecom service organization enjoys a monopoly. Thus, the telecom industry is heavily-regulated by the government. Even in an open industry where the private players are allowed to operate, if a player finds it difficult to compete and wants to quit the industry, finding a right buyer is a formidable task. The buyer should be willing to pay the huge amount, enter the market and face the challenges.
1.9.4 Bargaining power of suppliers
Improved competitive scenario and commoditization of telecom services has led to reduced bargaining power for services providers.
1.9.5 Bargaining power of customers
A wide variety of choices available to customers both in fixed as well as mobile telephony has resulted in increased bargaining power for the customers.
1.9.6 Competition
The entry of fourth cellular player and commencement of WLL services has resulted in intense competition in the bigger cities. Reducing tariffs will hurt the new entrants, as they will be unable to recover their high capital investments.
1.10 Road Ahead
The Indian mobile subscriber base is likely to sustain the rapid growth recorded in the past few years. Presence of skilled labor pool, improving telecom infrastructure, favorable demographics, rising disposable incomes of consumers, declining tariffs, increasing demand, growing attraction for mobiles with new features and greater availability of handsets at lower prices, are expected to continue driving the growth of the telecom sector, going forward. However, the companies are likely to encounter a more challenging business environment in the near future, given the sustained fall in ARPUs, rapidly increasing competition and consequent pressure on margins and regulatory risks. Companies with good rural coverage, better operational efficiency, and superior quality of service are likely to stay ahead of competitors. The government has proposed to achieve a rural tele-density of 25% by deploying 200 million connections at the end of the Eleventh Five Year Plan, given that more than 70% of the population lives in villages. The optimum utilization of USO fund and increase in mobile services might help the government attain this goal. The government‘s thrust on welfare programmes such as community development, education and health and rural connectivity can also be facilitated through satellite communications, internet connections et al. Besides, broadband connections for all gram Panchayats and public healthcare centers, secondary and higher secondary schools and provision of 3G services to all cities/towns with more than 0.1 mn population is also likely to be achieved during the Eleventh Five Year Plan. It is also visualized to link block headquarters and the nearest exchange through the State-Wide Area Networks (SWAN) connectivity. Major initiatives such as e-Agriculture, e-Health, e-
Education, rural BPOs are slated to increase internet penetration as they set the base for increasing acceptance of the same. During the Eleventh Five Year Plan period, Rs 2,670 billion worth of investments are projected to be made in the telecom industry and the public sector is expected to have a 33.50% share in the same, while the private sector is expected to contribute 66.50%. Further, a total of 650 mn connections (including 66 mn wired and 584 mn wireless connections) are expected to be achieved by the end of 2012. The growth process in this ever-evolving sector needs to be backed by a strong R&D support. The active participation of the private sector in R&D would ensure greater benefits for the sector. Further, the government also envisions making India a hub for telephone equipment manufacturing that is expected to be achieved through telecom specific special economic zones (SEZs) and by setting up Export Promotion Council to promote export of telephone equipment and services.
1.11 Vision
The Indian Telecom sector has proved to be an international success story. The sector has witnessed a commendable growth over the past 2 years. With an overall subscriber base of 787.29 million and a teledensity of 66.17%, at the end of December, 2010 the sector continues to grow from strength to strength. With the urban teledensity reaching approx 150%, the market has been showing signs of maturity. Rural India is the key target market likely to drive the next round of growth, particularly for voice based services. It is envisaged that rural teledensity of 40% would be reached by end of 2014. 3G and BWA are expected to reinvigorate the maturing urban markets and help in bringing balanced growth of economy. The aggressive growth observed by mobile services is yet to be replicated in case of broadband service, where the subscriber base currently stands at about 11 million. The successfully concluded auction of the BWA and 3G spectrum will enhance the wireless broadband penetration across the country and help connect the remotest locations across India. The government has a vision to provide telephone connection and
broadband facilities on demand across the country and at an affordable price and it strives to achieve the same.
Chapter 2: Telecom Marketing Mix
Unlike manufacturing organizations that focus on the four P's of the marketing mix, service organizations need to concentrate on seven P's i.e. product, price, place, promotion, people, physical evidence and process. Let us discuss how telecom service providers attempt to design these seven P's to constitute appropriate marketing mix and face the challenges in the telecom industry.
2.1 Product/Service
2.1.1 What is a product?
A product is a logical or physical entity which can be sold out to an end customer by the operators. This could be a mobile phone, internet connection, Voice call connection, VPN, Video on demand, Digital TV connection etc. A product can have their monthly rental which we call periodic charges also. A product can be usage generating product or non usage generating product. A usage generating product is sometime called event generating product and nonusage generating product is also called non-event generating product.
For example, voice call connection, which comes along with a phone number, is a usage generating product because it generates usage whenever end customer uses this product to make a voice call.
A simple phone set without a connection is a non-usage generating product and it could be given to a customer based on monthly rent only. So even if customer is not using it, customer has to pay monthly rental.
2.1.2 What is a service?
When we talk about them from marketing point of view, as such there is no difference in between product and services because most of the times both are used interchangeably by different billing and marketing experts. Simply saying, an operator uses their product to provide voice services to their customers. An international call can be called a service provided using a voice call connection. Another example could be 800 number call may or may not be available through a particular operator, call waiting, call forward could be said a service provided by a model of a phone set or by an operator.
Keeping it simple, Products are items that customers can either buy outright or lease. Products may be: ? Real objects (a mobile phone, for example). ? Services (a call waiting service on a telephone system, for example). ? More abstract concepts (a service level agreement, for example).
2.1.3 Product Families:
Related products can be grouped together into a product family. Multiple levels of products are possible, so a product can be both a parent and a child at the same time. In addition, each product family can have more than one parent products if required. Examples of product families are: 1. 2. 3. 4. Telephony services Cable TV Internet Leased Line
2.1.4 Group of Products i.e. Packages:
Many time operators bundle more than one product into a single group and sell them as complete package. There are billing systems which support bundling of various types of products together as a package, which can be offered at discounted price. Packages allow a product to be offered to a customer at a reduced price if it is taken as part of a package. Each package can consist of any number of products and these products can be taken from more than one product family. This package price plan for a product is usually different to its comparison (that is, non-package) price plan, as this is how the company offers a discount to the customer for buying the complete package. However, this is not mandatory, as a product can have one of its normal price plans assigned to it within a package.
Example: Airtel has launched a gift pack by which: You can now choose from an exciting range of packs to gift to your friends and loved ones. You have options of gifting Voice minutes, SMS or GPRS. To be able to send a gift, you should be using your Airtel prepaid connection for 60 days or more. You can send upto 5 gift packs in a day and upto 30 in a month. Gift packs can be sent to a maximum of 10 unique numbers in a month.
2.1.5 Products Attributes:
A product can have a number of attributes associated with them. Product attributes allow information about individual product instances to be held where the relevant information differs between types of product.
Example 1: a pay TV product may have an attribute recording its set-top box number. Example 2: a mobile phone product may need attributes to record the International Mobile Subscriber Identity (IMSI) and Mobile Station International ISDN Number (MSISDN).
2.1.6 Product Event Types:
A product can have a number of event types associated with it. These event types govern the events that can be generated by the product.
For example, a mobile phone product could have event types such as voice calls and messaging services, there could be many more event types associated with a single phone device and operator can charge end customer for each of the event generated by the customer.
2.1.7 Characteristics of the Telecom Services
Characteristics of the telecom services are in line with the characteristics of any other service; let’s now take a look at the same:
2.1.7.1
Tangibility:
Services are intangible, they cannot be touched. Making the intangibles into tangibles should be the main aim of the companies. In Telecom Industries strives hard to do this by offering various discount packs, SMS packs, per second billing facility, etc. making it easier for the customer to tangibalize the value they get from the service.
2.1.7.2
Perishability:
Services, unlike goods perish quickly; mostly it is a onetime experience. In the telecom sector the services can be experienced for a relatively longer time period as once a plan is taken up by the user it does not perish until the plan expires.
2.1.7.3
Inseparability:
Services are inseparable. Goods are produced, sold and then consumed but services are sold and then produced and consumed. In telecom industry it can be done by constant customer retention efforts like keeping them updated with the recent discount offers, new billing plans, international call services, service calls, etc.
2.1.7.4
Heterogeneity:
It is difficult to set a standard for any service, as the quality cannot be standardized. This can be seen even in the telecom sector, the services provided
for Post paid cards are different as compared to that of the Pre paid ones. Also the 2G/3G services are different compared to the normal ones.
2.1.7.5
Ownership:
Customers cannot own the services they can only have access to it. For example the caller tune services, free calling etc where the customer can only use the service but the ownership of the service remains with the Provider even if we are paying for these services.
2.1.7.6
Simultaneity:
Services have limited geographical areas, either the user is brought to the services or providers go the users. For example done through Vodafone stores, Galleries, Retail Shopkeepers, Mobile Stores etc in one area will provide service to customers of only that area, if the customer wishes to move to another locality, the user will have to approach the service provider in that area.
2.1.7.7
Quality measurement:
It is difficult to measure quality at every level of the service. In telecom industries it can be done by online suggestions, customer complaints and usage.
2.1.7.8
Nature of Demand:
The demand for Services is fluctuating in nature. In telecom industry the demands are mostly consistent, sometimes differs when new discount packs are offered. The introduction of number portability that has been recently introduced in the telecom sector could lead to demand fluctuation.
2.1.8 The four I’s and four C’s of Services 2.1.8.1 Intangibility:
Products can be touched, held and smelled in some cases. Services are the opposite; you can't touch or see a service. Also, services are generally more difficult to evaluate because they're performance based. One of the things marketers attempt to do is show the "benefit" of using the service, this way the consumer has a "view" of what type of benefit they will receive from using the service. There is a need to use promotion to help customers perceive a service as highly tangible. 2.1.8.1.1 To resolve intangibility issue companies could use Creativity: ? Develop tangible representation of the service. Example, the telecom service provider can give new advanced phone models along with their connection to their customers. ? Cite 3rd party endorsements. Need endorsements from those that have experienced the service. ? Word of mouth is very important due to intangibility. ? Offer discounts and free samples/service to customers who encourage friends to come. ? Offer tangible benefits in sales promotions, must be consistent with customers needs/wants ? Establish a clear product position, i.e. 24 hour outside service for repair of industrial equipment. ? Endorsements from third parties are very effective to make services more tangible.
For Example: Use of celebrities as brand ambassadors, like Shah Rukh Khan for Airtel, Abhishek Bachchan for Idea etc.
2.1.8.1.2 Intangibility also presents pricing problems.
Example: How a telecom operator can charge the customer for improving the network of a local area. Visibility of the service may be a problem. Although a problem may have been fixed, you don't understand why. Solution: The service provider has to explain the time needed for repair, and functions that were performed if you want the repair to be more tangible. Also, psychological role of price is magnified since customers must rely on price as the sole indicator of service quality when other quality indicators are absent.
2.1.8.2
Inconsistency:
Services are generally performed by people and people, by nature, have on and off days. Tangible goods may be good or bad, which would be consistent, but if one of the products is good then generally that complete product line will be good also. Services on the other hand rise and fall on how well the service is performed which in turn determines how well the person is feeling performing the service. Lot many times telecom service providers get complaints from customers about poor network, when their fellow beings in their same locality are not facing a problem. This is a typical case of inconsistent service. 2.1.8.2.1 To resolve inconsistency issue using Corrective processes: ? Use high quality technology to help make the service provider more consistent. Introduction of the 3G spectrum is clearly a means to upgrade service and provide consistency in speed. ? Provide training to employees. Executives at telecom showrooms are given guidelines to assist customers to deal with certain problems faced by them. This ensures that a step by step procedure is followed by all executives and no two customers with the same problem are treated differently.
2.1.8.3
Inseparability:
It's hard for a service based company to separate itself from the services performed. Service companies have to uphold their business model "service" and if the service isn't good then the company's name isn't good. Inseparability plays a tremendous role in telecom sector. If a service provider is not able to provide good after sale services to the customers, they can easily switch to their competitors. Poor customer care service, where the customers are made to wait for hours before connecting them to the customer executive, busy customer care lines, error in post-paid billing etc. are some of the problems arising due to separation of customer from the service provider. 2.1.8.3.1 To resolve inseparability issues by providing maximum Convenience to customers: ? There must be close provider-customer relationship. Employee‘s interpersonal skills play a very important here. ? Provision of direct (short) channels of distribution. In some cases it is possible to use intermediaries, dealers, online recharges, net banking etc. ? The quality of "Relationship managers": The quality of relationships determines the probability of continued interchange with those parties in the future.
2.1.8.4
Inventory:
Service based companies generally don't have the same inventory challenges as product based companies do. For service based companies, there service is their inventor in a sense and how well they sell their "inventory" will be determined on how well the person performing the service is trained. Services cannot be stockpiled. There is a need to avoid excess unsatisfied demand and excess capacity leading to unproductive use of resources.
2.1.8.4.1 To resolve inventory issues through maximum Choice: ? Market services like different tariff plans to segments with different demand patterns. The plan marketed to teens need to be different from one marketed to corporate. ? Market new services having counter cyclical demand patterns from existing services. ? Market new services to complement existing services. ? Market service extras at non-peak times. The telecom sector has come up with lower tariffs for night talk time. ? Market new services not affected by existing capacity constraints ? Train personnel to do multiple tasks ? Educate consumers to use service at non peak hours ? Offer incentive The telecom players have to segment their market based on various factors like geography, demography, income, consumer lifestyle etc. and come up with their various plans. They need to make offers at the right time with the right people. In a country as vast as India with innumerable cultures, festivals etc. there will be huge fluctuations in the pattern of spending and usage. So they have to come up with low-cost plans during off-seasons and premium plans in peak seasons to control the demand. Providing extremely low tariff rates to boost the sales can backfire because of unproductive use of resources. Hence the inventory has to be monitored well. We can see the various challenges faced by the telecom sector in terms of the various I’s and how they can be dealt with using the four C’s. It is essential for all players in the sector to understand this shortcoming of the service they are providing constantly device ways and means to overcome them.
2.1.9 Service flower in telecommunications
There are several factors that give a service the competitive advantage it requires to become a service leader in its particular industry. Considering the telecommunications sector for a telecom service provider the standards are set very high and the company requires a number of supplementary services that contribute to the advancement of the core service i.e. telecommunications. Listed are the following supplementary services that form the petals of a service flower in telecommunications:
2.1.9.1
Signal Strength/Connectivity:
This is considered the most important factor when it comes to a network service provider. Consumers‘ today shift between several service providers for the fact that the connectivity remains either very bad or satisfactory. Consistent signal connectivity will ensure the reliability of the telecom service provider.
2.1.9.2
User Plans:
Consumers are attracted to a service provider depending on the type of user plans that suits their needs. Economical user plans enable the consumer to pick out the plan that best suits him. Vodafone has also launched a plan wherein users can customize their own plans and upsize or downsize the features included in their plan depending on the billing that suits the particular customer.
2.1.9.3
Self-service kiosk:
The accessibility of service kiosks around a state, region or country will enable consumers to interface with payments as and when they require and also reduce the time taken when paying bills via visiting the stores.
2.1.9.4
Reliable staff:
Staff at a telecom service provider needs to be consistent, punctual, efficient and reliable. Not only to the management but to the clients they deal with as well. They need to possess an ethicality that brings out the genuine culture of their service.
2.1.9.5
Corporate Plans:
Several corporate need to acquire numbers for their employees and management in their organizations. Corporate plans offer these companies either a fixed rate for the usage of a certain credit limit on all the numbers under a specific corporate plan. Or the billing is accumulated collectively and is delivered to the company as an itemized bill.
2.1.9.6
Responsive customer service:
Employees of the service need to be trained to handle any sort of situation involving interaction with customers as a customer judges a company based on the quality of service an employee provides them with. Several companies do a service quality feedback after a customer has interacted with an employee to judge the effectiveness and efficiency of the employees they hire.
2.1.9.7
Data plans:
The world is moving at a fast pace and presently internet on handsets have become the new fad of consumers in India and the world over. Offering edge and 3G data plans which allow users to utilize the internet via the phone become a handy tool in shaping a slight competitive advantage for a concerned service.
2.1.9.8
Internet Facilities:
This factor includes a website which enables users to calculate plans, view their current and pending bill amounts, learn about the various plans offered and even pay their bills via their credit/ debit cards.
2.1.9.9
Standardized billing:
There are different levels of billing that should be offered. High level plans for customers that are more frequent callers and low level billing for customers that need an economical plan.
E.g. - Plans for a business man as compared to plans for a college student.
2.1.9.10
CDMA Handsets:
A new feature is providing CDMA handsets which do not require a sim card and generally come with a CDMA enabled plan where you pay monthly installments for a particular handset along with the monthly bill.
2.1.9.11
Updated technology:
Technology upgrades daily. Service providers need to regularly upgrade their software and hardware to ensure speed and efficiency in the service.
2.1.9.12
Roaming:
Roaming is generally expensive and not all consumers look to it when they operate with a network service provider. Offering roaming services at reasonable rates will really boost the quality of the service.
2.1.9.13
Customer Security:
The customer is the most important person concerned in a service. The personal information of the customer needs to be protected and encrypted at all times. Infringement of the customers‘ personal information may result in loss of customers‘ ability to trust the service. If any of the above mentioned supplementary services are missing i.e. If any of the petals of the flower is deformed it will definitely affect the core service and render it incomplete.
2.2 Price
Service providers can use cost-based, competition based or demand-based pricing. Most service providers in the telecom industry today are resorting to competition based pricing, which has led to low prices of the services. This has proved to be quite beneficial for the customers, but the telecom companies are struggling to make profits. In the fixed line industry, customers have only one option of payment, that of post-paid. That is, customers pay a fixed amount as rent and the usage charges at the end of the billing period, in cellular industry, service providers offer two options to customers, pre-paid and post-paid. In case of prepaid service, customers buy a card available from retail outlets to activate or recharge their service. The price of the card covers the rent fixed by the service provider plus the cost of certain amount of airtime. For example, Airtel offers different cards with different amounts of airtime and allows its customers to choose from them depending on their need. Though initially, prepaid service was available only for mobile phone users. BSNL is now making prepaid service available for landline users also. In case of postpaid service, depending on the number of calls made by the customer and other services used by him, a detailed bill is prepared and sent to the customer. The total amount to be paid by a customer per month depends on the rent and the services used by him. The customer can make the payment by cash/cheque/credit card at one of the service provider's outlets. Some service providers also allow online payment through Internet. BSNL and MTNL for example allow their customers to make online payment.
2.3 Place
When DOT/BSNL was the only service provider, customers had to go to different locations for different services. Applications for new telephone connections or for transferring a connection from one place to another were accepted only in one major telephone exchange located in the city. Bill payments were accepted in local telephone exchange office located in certain areas. One had to personally go to the office, stand in the queue and make the payments. There was another department for receiving complaints. It took a long time, even a year, to obtain a telephone connection. Complaints remained unattended for several days after a customer registered his complaint with the local telephone exchange. After the entry of private players like Tata and Bharti, things have improved. Most private players have offices at various locations and provide multiple services through them. They are also accessible through the internet. BSNL too set up offices at multiple locations to accept applications for new connections, transfers and payments.
For example, Mobile service providers like Airtel. Hutch and Reliance Infocomm have one-stop shops where customers can purchase handsets, get new connections, subscribe to various value-added services and pay their bills.
2.4 Promotion
Telecom service providers use direct marketing, advertisements in newspapers, T.V., Radio, billboards in public places, etc. to promote their services. In 2002, Airtel used a TV commercial endorsed not by film stars or sports stars but by a successful music composer, A.R. Rehman to promote its brand. Rehman also composed five exclusive symphonies downloadable as ring tones for Airtel users. Telecom services also sponsor some contests or events to attract public attention and gain wide publicity.
For example, in 2003, Reliance Info sponsored a contest for a successful Bollywood film, Kal Ho Na Ho.
Owing to the intense competition in the cellular service sector, the promotion campaigns are quite innovative. Hutch for example launched an advertising campaign using a small boy and his pug, which caught the attention of customers. Hutch also offers discount coupons to its customers, to be availed at various restaurants and lifestyle stores across the city. This helps the company retain its customers and also attract new ones.
2.4.1 Social Media and Word of Mouth Marketing
Word of Mouth has been the oldest marketing tool but was relegated to the background due to higher popularity of direct advertising. In the last century, the mass media became popular and direct advertising soon became a great tool in the hands of the marketing professionals. At that time, the number of TV channels were few, newspapers were few and the radio channels were also few so if you broadcast your message, almost everybody is bound to notice the advertisement. However, things have changed now with the expansion of mass media. Higher number of TV channels mean that the companies have to spend
much higher to reach the same number of people. Even on the same channel, there are more companies advertising which means that an average individual sees 1000-4000 ads in a day. Moreover, there is a degree of distrust in direct advertising and people are more willing to rely on the recommendations and consumer opinions (refer to the survey from Nielsen below).
Given the fact that the word of mouth and recommendations from known people are trusted more that any other form of advertising, it is important to take full advantage of the social media which includes the entire conversational media like social networking sites, blogs, forums, etc. It could be a great tool to attract new customers and give confidence to the existing customers that they made the right decision by choosing your brand.
2.5 People
Customer orientation is crucial to telecom service providers in winning new customers t and retaining the existing customers, when customers report any problem with the service, service provider should send people immediately to get the problem rectified. However, when BSNL/DOT enjoyed monopoly, service personnel did not turn up for days together even after customers reported a problem. The fact that it was the only service provider resulted in excessive load as well as complacency. However, with the entry of private players like Tata Teleservices into the industry, things changed. The new private players emphasized customer satisfaction. They ensured that their service personnel answer customer queries promptly and professionally and attend to their problems immediately. This has brought a change in the working of the telecom industry as a whole.
2.6 Physical Evidence
Telecom service is intangible. A user cannot judge the quality of the service offered by a service provider unless he uses it. Telecom service providers however offer some tangible products to customers to service as physical evidence. They provide customers with a telephone directory that includes names and addresses of all their subscribers. Every year, an updated directory is provided to all subscribers free of cost. However, mobile service providers do not provide such directory because mobile phones are considered personal devices. Reliance Infocomm, however, makes the information about mobile numbers and names and addresses of its subscribers available on reliance network. Telecom service providers also focus on the voice instrument given to customer. When Tata Teleservices entered telecom sector, it gave sleek and attractive looking phone instruments to its subscribers to compete with the phone instruments supplied by BSNL at that time. Later, BSNL also began to focus on the looks of phone instruments given to customers. Telecom service providers also focus on ambience of their service outlets. Reliance Info invests about Rs. 30 lakhs to one crore on building its service outlets.
2.7 Process
Telecom service providers should offer reliable, continuous, quality service to customers. When Tata Teleservices entered the telecom industry, its sales executives visited individual homes, shops and organizations identifying people in need of a phone connection and quality service. If a customer asked for a phone connection, he got it within three days. Now BSNL has also improved its service processes. It has a computerized system that receives complaints from customers round the clock and service personnel attend the customer within 24 hours. One can also obtain the bill information by contacting the number provided for the purpose. Telecom service providers also send detailed bills on request, describing the number called, amount of time spent on the call and the charges incurred. They should however ensure that errors are not committed in billing. This can be a major source of dissatisfaction for customers. In the past, many customers had complaints against BSNL of overcharging them. Some customers who could not settle the issue with BSNL got their phone disconnected and switched to other players. Therefore, telecom players should strive to send error free bills to customers. They should continuously strive to improve their service processes. However, telecom service providers should try to achieve improvement in service process without incurring additional costs in doing so. This is especially important because of increasing competition in the telecom sector.
Chapter 3: Service Marketing in Telecom Sector
Service Marketing in telecom sector can be explained with the help of Service Triangle as follows:
3.1 Service Triangle in Telecom
When it comes to the service triangle of telecommunications, there are several factors that need to be touched upon. Organizations that seek to provide consistently high levels of service excellence will constantly work to align the three sides of the triangle together and is an on-going process that involves the ?Overall Strategic Assessment? and the ?Specific Service Implementation? that relates to the telecom service.
3.1.1 Overall Strategic Assessment
? Firstly, there needs to be consistent effort from the network service providers to provide constant effectiveness on all three sides of the triangle and to keep a track on the efforts of the company on all three sides. ? Secondly, the weaknesses need to be identified that may cause a break in effectiveness of the service triangle implementation. ? Thirdly, the strengths need to be assessed so that the telecom service can enhance their strengths and bank on that for a competitive advantage.
3.1.2 Specific Service Implementation
? Firstly, it needs to be identified what is being promoted by the telecom service and by whom it is being promoted. ? Secondly, is identifying how the service is being delivered and by whom it is being delivered. ? Thirdly, is verifying if the service provider has the required supporting systems in place to deliver the service as promised to the customer?
3.2 Dimensions of Service Triangle
The various Dimensions of the Service Triangle need to be studied in detail to understand it’s relation to the telecom sector:
3.2.1 External Marketing (Making the promises)
? Understanding the customers‘ needs is most important to the service provider. The service is created based on what the customer wants.
E.g. Vodafone comes with a new one rupee per second plan based on research and development from popular demand and feedback from public.
? The service provider needs to be able to manage the expectations of the service.
E.g. Docomo launches a new free 100 rupee credit balance on a 50 rupee sim card. People will rush in to buy, Docomo must be able to have the man power to be able to cater to the public and also have sufficient sim cards to sell.
? Traditional marketing communications need to be enhanced as traditional marketing is marketing at its best. ? Sales and Promotions needs to be kept a tab on.
E.g. Tata photon launches a new teach for India promotions activity. The managers need to be able to keep a check on how many people support the cause and how many people recognize Tata photon as a brand.
? The promises being made need to be advertised in the right aspect.
E.g. Vodafone’s Zoo zoo’s to market various schemes with not just ads but merchandise as well.
? Internet and website communications need to be upgraded regularly to be able to enable the service provider to deliver the service effectively.
E.g. Airtel need to keep upgrading their website to keep a balance on the traffic of users and not cause a delay in operation of net services.
3.2.2 Internal Marketing (Enabling the promises)
? The right people need to be hired to make sure the service is efficient and effective.
E.g. People who know how to deal with the public need to be hired, someone with a polite tone and one who knows to take an insult.
? The people hired need to go through training and development so that they may be able to handle any type of situation while dealing with the customer. ? The employees need to be empowered to do their job. They need to be given responsibilities that make them feel important and needed.
E.g. Airtel has an employee of the month scheme wherein the employee with the best feedback record wins a trip outside the country.
? There need to be efficient and running support systems. ? The equipment and technology needs to be of the latest been made.
E.g. Vodafone’s self-service kiosk.
? The implementation of a reward and incentives system should be implemented so as to motivate employees to do their job.
E.g., Gifts and paid vacations to best performing employees.
3.2.3 Interactive Marketing (Keeping the promises)
? Service Delivery: It includes the reliability, responsiveness, empathy, assurance, tangibles, recovery and flexibility of the service being delivered to the customer.
E.g. Vodafone has launched a new training program to develop strengths in these areas for their employees.
? The service should be able to provide interactions via face to face, telephone and online interviews.
E.g. Promotional calls, one minute interviews at malls etc.
? The customers experience needs to be assessed so as to see the strengths and weaknesses in keeping the promises made and better the quality of the service.
E.g. Vodafone’s feedback message and feedback calls.
? Interactions with sub – contractors and business partners also need to be assessed to identify if the particular sub- contractor or business partner is effective in providing the service.
E.g. Vodafone tied up with Essar and regular checks were made to see if Essar was implementing any change in service.
? ?Moment of truth? (explained in moment of truth part of the document)
3.3 Service Encounter
It is when the customer interacts with the service or product for the first time. It has 3 different P's than the product and they are: people, process, physical evidence. Service encounters are transactional interactions in which one person (e.g., a travel agent) provides a service or good (e.g., airline tickets) to another person. It can also be said that a service encounter is a period of time during which customer interact directly with a service. Any service provider could use it to his advantage or disadvantage at every stage of providing the service. In the telecom sector, Service encounter takes place at various stages:
3.3.1 Obtaining a connection:
This is the first time that a customer interacts with the staff of the service provider, at this stage the customer is bound to judge the service provider and the brand based on the efficiency and speed of the staff in assisting him in getting a connection. If the staff is not well trained and not well versed with the process the customer may not want to risk forming a relationship with the customer.
3.3.2 Enquiry or Assistance in activation or deactivation of different services:
Once the customer is part of the network he expects assistance at every point of the service until it is terminated. Thus when a customer approaches the provider for any assistance, there comes along another chance for the provider to show
the customer oriented approach of his service and provide easy access to customers to all the facilities available.
3.3.3 Complaint Handling:
This is another instance where in the service provider needs to be empathetic towards the customers and quickly resolve any inconvenience caused to the customer thus showing concern and value for the customer. Poor customer handling can be a huge blow to the provider‘s image because at this stage the customer is already irked and wants speedy response on the part of the provider.
3.3.4 Retention of customer:
If all the opportunities of service encounter have been used for satisfying a customer and showing them how one‘s service is better than the others then the provider would never have to reach this stage. However if the provider has failed previously this is his last chance to change the image perceived by the customer by trying to retain the customer through better assurances and services. The provider needs to keep in mind that an unsatisfied customer who leaves the network is bound to talk bad about the brand leading to bad publicity. It would be wise on the part of the service provider to understand the significance of service encounter and make the most of it.
3.4 Moment of Truth
Customer MOT can be defined as “In customer service, instance of contact or interaction between a customer and a firm (through a product, sales force, or visit) that gives the customer an opportunity to form (or change) an impression about the firm.” Managing reputations and managing problems are especially important for service organizations. Services sell intangibles, through expectations and promises of what is to come. A critical moment, which forms or destroys the relationship with customers, is a ?moment of truth? for service organization; this is the point where the customer and organization come together. Also products of a company alone can no longer continue as a market leader, nor can products alone be depended upon to build a small business. In the market place companies across all the industries must delight customers by providing them excellence service as their primary product. Service excellence is the critical elements for the organizations and the marketing expert like to name them ?moments of truth?. Moment of Truth is when the customer comes into contact with any aspect of the company, however remote, and thereby has an opportunity to form an impression. Each customer contact is a unique, unrepeatable opportunity for a company to differentiate itself from the competition. Every decision should be made with the customer in mind and viewed as another opportunity to make a favorable impression. Unfortunately, failure to satisfy a customer on any Moment of Truth will quickly destroy the customer‘s memory of good service. On the other hand, getting it right can erase all the wrongs that the customer previously experienced.
Moment of Truth is ?more than selling?. This is not just an opportunity to sell but also an occasion to enhance the customer experience, reinforce the brand image and to strengthen long-term loyalty by creating an interaction that is meaningful in the context of the interaction, as well as taking into account the past relationship between that customer and the company. This is not only true of channels such as the web and the call centre but also of traditional retail environments, with the availability of point-of-sale systems that can drive personalization based on decision rules and real-time analytics. Of course, contextual (relevant) marketing is also critical in emerging channels such as mobile devices. What customers do not want is to be deluged with offers and messages that do not speak to who they are or where they are which happens very often in the telecom sector. Taking advantage of these opportunities requires nimbleness as well as intelligence. The payoffs, however, are huge. Real-time insight leveraging the right information applied to inbound interactions can yield huge return, both because the costs are lower and because the success rates tend to be higher.
Chapter 4: Marketing Strategy of Telecom Sector
Telecom service providers need to design an appropriate marketing strategy to face the competition and survive in the market. Following are some of the important steps required by the management to design an effective marketing strategy.
4.1 SWOT Analysis
Telecom players should analyze their own strengths and weaknesses vis-a-vis the opportunities and threats in the market. Suppose a telecom player has an innovative service offer and efficient service personnel to market them. These are his strengths. However, say he lacks the resources to adopt advanced technology and promote the services aggressively. To overcome these weaknesses, it can always tie up with strong players in the telecom market or other related industries.
For example, Birla tied up with AT&T to gain from the reputation of latter in the telecom industry. Telecom players should also carefully analyze the threats and opportunities posed by technology, competitors and the external environment, and formulate suitable strategies to overcome threats and exploit opportunities.
The success of Telecom sector is very inspiring for the whole of Indian economy. Like any other sector, Telecom sector also has its Strengths, Weaknesses, Threats and Opportunities which have been identified as below:
4.1.1 Strengths
? ? ? ? ? ? ? ? ? ? ? Fastest growing telecom market. Forward looking approach of the Government. Technology neutrality. Formulation of policies in tune with the growth requirement. Fast adaptation of technological development i.e. Mobile Number Portability (MNP), Next generation Network (NGN), 3G and Broadband Wireless Access (BWA), IPv6 etc. Establishment of Regulatory /Dispute resolution bodies. Framework for responsive Customer Grievance Mechanism. Establishment of decentralized units of DoT like, Controller of Communication Account (CCA) and Telecom Enforcement, Resource and Monitoring (TERM) units etc. Liberal FDI policy. Healthy competition resulting in the most affordable tariffs in the world. Policy of infrastructure sharing leading to optimum utilization of resources.
4.1.2 Weaknesses
? ? ? ? ? ? ? ? ? Lack of indigenous Telecom Manufacturing and R&D Comparatively slower growth of Telecom services in rural/remote areas. Low Broadband penetration in the country Lack of local content/application development. Low profitability of Telecom PSUs. Non availability of adequate spectrum Utilization against the available corpus of USOF. Non availability of adequate power supply for Telecom Services. High Cost of data hosting in India.
4.1.3 Opportunities
? For developing a new comprehensive Telecom policy. ? For accelerating the growth of teledensity in the country. ? For creation of telecom infrastructure in rural and remote areas by utilization of the USO Fund. ? For lying of Optical Fiber Cable (OFC) to uncovered areas and effective utilization of the existing resources to provide backhaul connectivity. ? For huge Broadband potential in the country. ? For R&D, product development and indigenous telecom manufacturing.
? Development of local content/application. ? Development of affordable equipment at the customer end. ? Adoption of emerging technologies.
4.1.4 Threats
? Non availability of adequate spectrum for telecom services ? Underperformance of PSUs resulting in industrial unrest and erosion of value of government equity. ? Dependence on foreign telecom equipment suppliers. ? Cyber threats on ICT networks, leading to security concerns. ? Obsolescence of existing network elements due to fast changing telecom technologies.
4.2 Demand Forecasting
Telecom players should conduct a market survey to analyze the demand for various services among the target customers. For example, when telecom companies saw the need for written message transfer from the sender to the receiver, they introduced the concept of SMS (Short Messaging System). Service Strategy: Telecom players should constantly upgrade their services to meet changing customers' needs.
For example, cellular service providers initially offered only the basic communication services.
However, customers now expect and demand subsidiary services like call waiting, call holding, automatic alerts, sports information etc.
4.3 Pricing Strategy
Telecom players need to determine the price of their services carefully. If they price their services too high, above the perceived value by customers, customers might switch over to competitors offering those services for lesser prices. On the other hand, if they price their services too low, they would not be able to recover the cost and thus get into losses. Normally, service providers in this industry use pricing methods like cost-plus pricing, target profit pricing, breakeven analysis and prevailing value pricing. If all the players in a market are offering similar service and similar supplementary services and other benefits as well, a telecom player aiming to penetrate the market has to price its service lower than others. Sometimes, government policies and regulations prevent telecom players from having control on price factor.
For example, in India, TRAI (Telecom Regulatory Authority of India) wields control over the telecom industry.
4.3.1 Objectives of telecom pricing methodologies
Prices are an important means to achieve policy objectives. The telecom sector‘s objectives cover a wide canvas which includes enhancing efficiency and flexibility of operation, financial viability of the sector, promoting investment and innovation, stimulating demand and competition, addressing unfair competition, and meeting social objectives such as universal provision of telecom services at fair and reasonable rates. For achieving these objectives, there is an increasing focus on efficient costbased pricing, with a forward-looking perspective. At the same time, flexibility of prices and competitive pressure on prices are also emphasized. Price floors and ceiling, together with unbundling of the various services, have been
considered for addressing the issue of unfair competition. Higher peak-time prices are used to better manage demand, and subsidized prices might be required to achieve social objectives such as providing universal access to telecom.
4.3.2 Methodologies for determining telecom tariffs
Earlier, regulators focused on providing telecom operators with a specified rate of return which ensured financial viability while keeping the price low for consumers. Experience showed that this methodology requires considerable information and gives rise to perverse incentives, leading to inefficient operation and investment. More recently, due mainly to increasing competition in the sector, the focus has been on prices which encourage dynamic elements such as efficiency, innovation and flexibility. Prices can be based on costs or demand, and could be specified in terms of a particular level or with some flexibility for the operator to decide the price level. An increasing trend in certain countries has been to exclude services from price regulation if there is adequate competition in their markets. Enhanced competition has also led to tariff restructuring in several countries to alter the previously prevailing pattern of cross-subsidizing local calls and rentals through relatively high prices for long distance and international calls. This restructuring has basically meant that prices are getting more cost-oriented. Such costorientation of prices can arise either through the determination of a price level based on costs, or through a flexible process such as under a price cap methodology.
4.3.2.1
Prices based on costs
? Short run marginal (or variable) costs, long-run incremental costs (which include investment costs), and fully-allocated costs have been considered for specifying prices based on costs. All cost-based pricing requires considerable information and monitoring, and a number of conceptual and practical problems arise in properly measuring and assigning costs to the various telecom services. ? Prices based on short-run marginal costs and long-run incremental costs promote efficient production. However, the revenue derived on the basis of these two cost-concepts does not cover total costs because they do not account for all the costs that are incurred by a telecom operator. In contrast, fully-allocated costs cover all costs. Despite this, there is increasing emphasis on using long-run incremental costs for cost-based pricing because they promote efficiency, while fully-allocated costs foster inefficiency. Long-run incremental costs cover a greater portion of total costs than marginal costs, and incorporate dynamic elements such as technical change and economies of scale. ? Different variants of long-run incremental costs can be calculated depending on the level of output, time period and technologies used. A wide coverage is provided by total service long-run incremental costs (TSLRIC), which basically shows the cost the firm would avoid in the long run if it stopped providing a particular service.
4.3.2.2
Subsidized pricing
? Subsidies to price are given normally for achieving social objectives such as promoting the provision of universal service in telecom or providing preferential telecom access to specific users such as hospitals or those living in remote areas. The subsidy could be given, for example, in terms of access charges, rentals or price of the calls made. ? With greater competition and pressure for changing the prevailing pattern of cross-subsidization, there is a great need to improve the transparency of the extent and nature of the subsidies being provided. This requires greater transparency of costs and revenues, and an unbundling of the services being provided. With such information, the policy-maker would have a better basis to consider alternative policies to fund the subsidies.
4.3.2.3
Demand-based pricing
? Under this methodology, prices reflect willingness to pay for the use of a product, or the value given to a particular product. These prices are shown by the demand curve. In assessing the social value from a demandprice, it would be necessary to specify the social value of consumption of the service by different customer groups. Demand-based prices are not easy to determine on account of the difficulty of determining the demand curve.
4.3.2.4
Flexibility
? With increasing complexity of emerging telecom products, difficulty of monitoring and ascertaining costs of production, and the market providing price discipline as the level of competition increases, telecom regulators are increasingly relying on flexible pricing methodologies. This is done either by providing a range within which prices can be fixed by the operators, or by not extending price regulation to certain products (normally products with competitive markets or those that are not considered essential). ? A flexible price range is usually provided under a price cap methodology, which imposes an upper limit on the average price increase for a basket of telecom services. This increase is specified under a formula which usually incorporates a need to decrease prices due to a rise in productivity. For certain specific services, sub-baskets are devised with conditions different from the overall basket. The price cap methodology provides considerable flexibility to take account of various policy objectives, including equity and efficiency of operation. ? Price floors and ceilings have also been used for providing flexibility, and to limit an operator from abusing its dominant market position. ? Price flexibility is also achieved through different price options provided for alternative combinations (or volume) of services that are purchased by customers. These include, for example, options providing combinations of a high rental and low usage charge or a low rental and a high usage charge, or volume discounts.
CASE STUDY 1:
Abstract:
PRICING STRATEGY OF UNINOR
This case study helps in understanding the concepts of Price strategy and different degrees of Price Discrimination, in the Microeconomics course. Against the backdrop of the swift growth of the telecom industry in India backed by privatization since 1991, new players are emerging, making the telecom field a combat zone. The case study explains the pricing strategy of Uninor, a new entrant. It captures the growth of Uninor and the effectiveness of its "24X7 Badalta Discount Plan" launched in late 2009. The case revolves around the potency of Uninor's weapon over other giant players in both the short run and long run, and the likely response of the existing players. The case enables the students to deal with the following objectives.
Issues:
To analyze the nature of the Indian telecom market and discuss the strategic implications of the economics thereof. To discuss the economic and strategic logic behind Uninor's dynamic pricing strategy - 24x7 Badalta Discount Plan - and debate on the short term and long term impact on the company's performance levels in light of Uninor being the latest entrant into the Indian telecom market. To examine whether Uninor's dynamic pricing corresponds to any of the three forms of price discriminations and discuss the implications of such price discrimination. To discuss all the possible effects of Uninor's dynamic pricing strategy on the rest of the players in the industry and debate whether the existing players should respond or maintain status quo.
Introduction
late 2009, a new entrant into the Indian telecom market - Uninor, a collaboration between India-based Unitech Wireless1 and Norwegian telecom giant Telenor Group2 - announced a dynamic pricing model under the name 24X7 Badalta Discount Plan through which customers could avail of 5% to 60% discounts 24 hours a day. With this dynamic pricing plan, the company intended to create a new trend in the Indian mobile industry, in which price wars were intensifying and the Average Revenue Per User (ARPU) were continuing to fall. Uninor had high expectations of the strategy and felt that the plan would help it to quickly attract many subscribers. However, considering that the company was new and would have to commit high capital for its operations and that it would be competing with established rivals, industry observers wondered whether it could sustain the innovative plan for long enough to break even. Indian Telecom Market: Going Wireless
Telegraph lines connecting several states were established in India in 1851. In 1882, the central telephone exchange was opened, with 93 subscribers. However, the telephone did not gain prominence until much later and post remained the preferred choice. Even after independence, in 1947, the growth of the telecom sector was slow as lack of infrastructure and high tariffs restricted accessibility to it to a minor proportion of the populace... The Busy Lines From the mid-2000s, India's telecom sector witnessed one of the highest growth rates in the sector world-wide, due to various constructive decisions of the GoI such as liberalizing foreign investment regulations, spectrum allocation, and allowing multiple players in all circles... Uninor: The New Entrant Unitech Wireless, a subsidiary of the Unitech Group (leading real estate company in India), was granted a 2G National Long Distance and International Long Distance license for all 23 telecom circles in India for a mandate sum of Rs. 16,500 million (US$389 million)... Scintillating Tone: Discount Pricing The 24X7 Badalta Discount Plan offered a discount - ranging between 5% and 60% on the 50 paisa chargeable per minute of call - based on the traffic handled by a Base Transceiver Station (BTS), commonly called Transmission Tower or Tower... Uninor Dialing: Corrupt Signals? Not many industry analysts shared Uninor's confidence as the Indian telecom sector was crowded and fragmented. Analysts observed that more than 50% of the total Indian population and over 90% of the urban population subscribed to mobile services and with new additions of around 10 million subscribers per month, the industry was fast approaching saturation...
4.4 Positioning Strategy
Telecom players need to identify the different segments that need different services and position their services for die targeted segments. When there were only a few players in the mobile communication services segment, the tariffs were very high.
For example, Airtel positioned its services exclusively for the higher-income segment. At that time, Airtel charged Rs. 16 per minute. When the tariffs were reduced after many private and government players entered cellular services market, pulse rates came down. Airtel then repositioned its services for the common man.
4.4.1 Positioning for Competitive Advantage
? A product‘s position is the way the product is defined by the consumers on important attributes; it is the place the product occupies in consumers‘ minds relative to competing products. It involves implanting the brand‘s unique benefits and differentiation in customers‘ minds. ? To simplify the buying process, consumers organize products, services, and companies into categories and ?position? them in their minds. A product‘s position is a complex set of perceptions, impressions, and feelings that consumers have for the product compared with competing products. ? Consumers will position products with or without the help of marketers. So marketers must plan positions that will give their products the greatest advantage in selected target markets, and then must design marketing mixes to create these planned positions.
CASE STUDY 2:
AIRTEL'S POSITIONING STRATEGY
Bharti decided to introduce a tariff plan (specifically) to attract the youth in the cluttered market. The service, called Youtopia, planned to cash in on the fact that with reduced tariffs, cellular phones would become accessible to teenagers. By targeting youth in the age croup of 14-19 years, Bharti planned to expand the customer base, which was presently limited to the older age groups. Youtopia was a clear deviation from Airtel's earlier positioning as a brand for older people symbolizing dignity and power. Youtopia offered lower tariff rates (at Re.0.25 for 30 seconds) at night. Special merchandising exercises were also undertaken. For instance, a special portal was created, where young people could buy or bid for goods. The company also announced plans for providing customers with various other services such as music download facilities, and SMS (Short Messaging Service) rates at affordable prices. According to the analysts, the company's repositioning strategies paid back well as Bharti became the leading player in most of the circles (it operated in) across the country by early 2002.
4.5 Promotion Strategy
Telecom players should choose the promotion medium depending on the kind of services they offer. Moreover, telecom players need to allocate budget for advertising across different media wisely. They have to determine the money to be spent for advertisements on TV, radio, newspapers, magazines, billboards, and other media. In India, if a telecom player wants to target young people belonging to the middle and upper class families, they can choose a medium like the Internet or billboards near colleges, parks, restaurants, movie theaters, etc.
For example, when Airtel introduced pre-paid cards that customers could choose depending on their monthly budget for communication services, it advertised in all kinds of media with special emphasis on TV.
Such events enable organizations to generate awareness about their services among target customers. Telecom players can also advertise their services by setting up attractive service outlets. retail stores marketing their services.
For example, Hutch gives signboards to retail stores that sell its prepaid phone cards.
In addition, they distribute signboards to
There are 9 major players in the market. The market is dominated by Airtel and Hutch (now Vodafone) and BSNL over the last 3 yrs, but even for players like BPL, MTNL and Spice the share is growing. There have been various promotional strategies implemented by the major cellular service providers in the Indian cellular market.
4.5.1 Promotional Strategies to capture market share:
Most of the promotional strategies revolve around capturing the younger generation who formed a major part of the target market. Prominent among these were - celebrity endorsements, loyalty rewards, discount coupons, business solutions and talk time schemes. The most important consumer segments in the cellular industry are the youth segment and the business class segment. The youth segment is the largest and fastest growing segment and is therefore targeted most heavily by cellular service providers. Bharti Tele-Ventures adopted celebrity endorsement as its chief promotional strategy. By 2007 it emerged the unprecedented leader commanding the largest market share in the cellular service market. Hutch implemented the celebrity endorsement strategy partially, relying primarily on its creative advertising for the promotion of its brand. BSNL, on the other hand, attracted the consumer through its low cost schemes. Being a state owned player, BSNL could cover rural areas, and this helped it increase its subscriber base. Aimed mainly at youth, Idea Goodies card will facilitate easy download of ring tones, logos, wallpapers, games etc. It comes in two denominations of Rs 22 and Rs 55 each and offers full rupee value to the customers. All the content through this card is available at a price tag of almost 33 per cent less as compared to what the customers would usually pay, according to a company press release. AIRTEL launched special mobile packages targeted at the youth, women and senior citizens as part of its market segmentation strategy. While women can get a new post-paid connection with a monthly rental of Rs 150, students will be
able to make calls for as low as 50 paise a minute from predetermined areas such as universities and popular hang outs. Airtel has also introduced a `Friendz' package for the youth whereby subscribers are allowed to transfer mobile recharge — both talktime and validity — from their phone to another phone. The package allows subscribers to form a Closed User Group of up to 5 friends and make calls at 50 paise a minute. Customers opting for the Ladies plan would be able to call three local Airtel numbers at just 50 paise per minute and send SMS to them at 50 paise per message, subject to a maximum of 25 messages per month. Airtel has tied up with women's magazines, offering discounts on subscription. For subscribers who are over 60 years old, Airtel has launched the `Seniors Plan' with a monthly rental of Rs 150 which offers discount on one STD number and one local Airtel number.
CASE STUDY 3: IDEA CELLULAR'S ADVERTISING AND PROMOTION STRATEGIES
Abstract:
The case examines the advertising strategies of Idea Cellular, a leading telecom service provider in India. It explains how Idea promoted its services through several innovative ads via variety of media like TV, print, out-of-home, and radio. Idea had not hired any celebrity to promote its services till late 2007, in contrast to its competitors. However, when Idea expanded its geographical presence to cover several telecom circles in India, it hired film star Abhishek Bachchan to endorse its brand in October 2007. Idea's focus in its ads also changed from highlighting its tariff plans and network coverage to using mobile telephony to solve social issues. Idea also developed several websites to support its ads based on social issues. Idea also tied up with Indian Premier League (IPL) cricket team, Mumbai Indians, and popular players like Sachin Tendulkar and Zaheer Khan were used to promote the brand. Idea chose to promote its brand where as its competitors focused on promoting their value added services and tariff plans.
Issues:
» Appreciate the importance of brand development for achieving longer term growth. » Study the usage of different media for advertising a brand. » Understand how contemporary social issues are highlighted to promote a brand. » Analyze the benefits of viral marketing for brand promotion. "Our effort has been, and continues to be, to make Idea Cellular a champion brand. Thus, all our campaigns are aimed at demonstrating the power of an idea by looking at mobile telephony and what it can do, in a way that's fresh, imaginative, and elevating."1 - Pradeep Shrivastava, Chief Marketing Officer, Idea Cellular, in September 2009
Introduction
In May 2009, India-based leading telecom operator, Idea Cellular's (Idea) advertisement (ad) endorsed by the Indian film star Abhishek Bachchan (Bachchan) won the 'Best celebrity endorsement award' at NDTV Tech Life Awards2. On receiving the award, Bachchan said," The IDEA campaign carries a socially relevant message in today's commercial environment and the brilliant concept of encouraging two-way communication between the government and people has connected with millions across India."3 Idea had chosen Bachchan as its brand ambassador in October 2007. Advertising agency Lowe Lintas (Lowe), which had been designing ad campaigns for Idea since the late 1990s, developed new campaigns after Bachchan, was signed up.
These campaigns, based on social issues that could be solved using mobile telephony, were acclaimed for their creativity. Idea's ads had focused on its network coverage and promotional packages before Bachchan was appointed as its brand ambassador. The company used its brand name 'Idea' in its ad slogans like 'An Idea can change your life,' 'A good Idea,' and 'What an Idea!' According to advertising experts, Idea enjoyed very little brand recall in the initial years after its inception. It had gained on that front by using its brand name in creative and meaningful slogans that concluded in its ads making perfect sense. Analysts felt that using Bachchan, one of the leading movie actors in India who is extremely popular among youngsters, was one of the reasons for the significant improvement in Idea's brand recall. Analysts also attributed the success of Idea in improving its brand recall and subscriber base to the creative work done by Lowe. Idea's ads were in contrast to that of its competitors like Bharti Airtel and Vodafone which focused on their value added services (VAS) and products. However, some experts felt that while Idea's ad campaigns were creative and improved its brand recall, there was nothing in the ads that would attract a customer of its competitors or a new subscriber. They felt that Idea should have promoted the unique selling points of its products and services in the ads rather than only projecting the uses of mobile telephony... Background Note The inception of Idea dates back to 1995 when one of India's leading business conglomerates, the Aditya Birla Group (ABG), ventured into the mobile telecom space by establishing Birla Communications Limited (BCL). BCL started providing GSM services in the Gujarat and Maharashtra circles in India... Idea's AD Campaigns Idea had decided not to adopt celebrity endorsements in 2002 while its competitors like Bharti Airtel had been using multiple celebrities to promote its brand. !dea was launched as a brand in April 2002... 'A Good !dea' Campaign Idea's promotions in 2006 were based on its tariffs, service quality, and network coverage. For instance, Idea started promoting its Rs.0.5 per local call per minute service aggressively. One of its TVCs featured a bowler and an umpire in a game of cricket... Idea's Launch in Mumbai !dea's launch in Mumbai circle was recognized as the world's largest single city launch of telecom services till 2008. Idea spent Rs.8 billion to cover more than 1000 cellular sites in Mumbai. It used extensive out-of-home (OOH) media like bill boards and bus stop shelters for pre-launch teasers. Idea used the then prevailing controversy of natives Vs migrants in Mumbai city... The Online Initiatives
Idea took its 'What an !dea' campaign further - from TV, print, and radio to the Internet. It launched several websites that complemented its campaigns that championed social causes. In December 2008, Idea launched a website called http://bythepeople.in to take forward its TVCs based on democracy... Idea's Association with IPL In March 2009, Idea tied up with Mumbai Indians, one of the teams participating in the Indian Premier League (IPL). IPL provided Idea with a good opportunity for its brand building exercise as the competition was closely followed by the entire country. Idea launched a campaign called 'Call the Cricketers' on April 30, 2009... The 'Out-Of-Home' Campaigns Idea had been using OOH media like hoardings, public transport systems, and bus shelters since the early 2000s. The company used OOH media innovatively to reflect the message of the ad. One of the most noticed campaigns of Idea's OOH was the one used in the city of Surat in the state of Gujarat in Western India... The Road Ahead Advertising experts felt that the campaigns used by Idea to promote its network coverage and tariff plans were creative and would help it to add to its subscriber base. They opined that many of Idea's ads in 'What an !dea' campaign had a rural background and would help Idea in building a strong brand image in rural India. Analysts said that the urban markets were getting saturated for telecom operators and hence expanding into rural India would help them grow significantly...
4.6 Implementation
Framing the marketing strategy will serve only half the purpose of the organization. It is only when the strategy is implemented successfully that the organization realizes its goals and objectives. However, management often faces many challenges in implementation. Strategies are based on certain assumptions regarding the market potential, demand, and competitive environment. Telecom industry, where technology and customer expectations change fast, all these variables also change rapidly. Therefore, the
management has to continuously monitor the telecom environment, revisit their strategies from time, and revise their plans and targets accordingly.
CASE STUDY 4: LEADERSHIP THROUGH INNOVATION AND CREATIVITY IN MARKETING STRATEGIES
Abstract
The telecom sector have been touched and influenced by the process of liberalization and globalization in India. The customer is the king in the market. Telecom companies deal in intangible product that is the call service. With the entry of private players, the competition is becoming intense. In order to satisfy the customer, every company is trying to implement a program of marketing strategy. Keeping this in mind, the present study is designed to analyze the marketing strategy in Indian Telecommunication sector .This study aims to identify the factors responsible for success in terms of getting a market leader position .Brand Airtel is chosen as a case study as it has emerged as a market leader within a short span of time in spite of so many mobile companies prevailing in the market. The study describes the result of survey done with respondents which are the present subscribers of Airtel. The result and analysis is done by using the Factor Analysis tool. The study concludes that out of thirty two marketing strategies, eleven factors are extracted which are found to be more prominent in implementing the marketing strategy. The Company’s marketing strategies are studied and out of which prominent strategies like branding strategy, business operation strategy, target marketing strategy, Service strategy, Network, promotion and pricing strategy are identified. In the end, with the help of results, how successful is the company in implementing the blue ocean strategy is also analyzed.
Introduction
Nowadays telecommunication is a fascinating fast-growing industry that affects each and every aspect of our lives including simple voice telephone calls, access to the Internet, high speed data communications, satellite communications, surfing the World Wide Web, fax transmissions, video conferencing and cable television. The industry is witnessing exceptional growth rates and amidst growing competition it would be tough for mobile operators to survive, unless they strengthen there marketing strategies. Mobile phone market in India has been healthy in the recent years. The Indian Telecom market is likely to see changes in the sphere of marketing strategies. The customer-driven market would result in many flexibilities and innovations in products, pricing, distribution channels and communication mechanisms. The Telecom Regulatory authority of India (TRAI), with its developmental and regulatory guidelines, is likely to endorse competition, fairness and reliability, and at the same time protect the customer against excessive, inadequate or unfairly discriminatory rates, while efforts at intensifying the existing distribution channels and making them more effective would continue. The market is expected to continue growing, hence current operators are expanding the network through out the country. There are also some new operators entering the market soon. Since then the market would be more competitive. The introduction of new intermediaries and utilization of electronics media and Internet would call for new marketing strategies. Communication to create more awareness and greater demand for value added services would continue to assume high importance. At the same time, unfair or misleading advertisements would be discouraged and necessary checks and controls be put in place. Thus only experimenting on 4 P’s of marketing won’t go
for the mobile company as there is need to focus on managing the marketing strategies covering services efficiency, network connectivity, after sales services, more value added services, while managing the operation side of business by outsourcing. The present case focuses on current marketing strategies of telecom sector in India’s with special reference of market leader “AIRTEL”, it also answer that how effectively this brand has managed with its marketing strategies by getting the likelihood level of its current subscribers.
Marketing Strategies of Airtel
Implementing the Blue Ocean Strategy: The Airtel Way By creating uncontested market space, Airtel has gained the position of market leader by its strategy of value innovation by focusing on new Value Added services like innovative SMS Pack scheme. The value added services are designed to cater to the need of technologically advanced youth segment .Also the professional and elite class customer find the value services convenient like Airtel Live and Mobile Office. Also where too many telecom companies like Vodafone, Docomo, MTS, Aircel, Reliance and BSNL are swimming in red Ocean of bloody competition, Airtel has gained the first mover advantage in implementing its strategy of pricing both defined for pre and post paid customers. Another proof of implementing the blue ocean strategy is the strategy of outsourcing the business core operations that is IT, servers and network to the Global companies like IBM, Ericsson and Nokia so that company can focus on customer side thereby getting differentiation and low cost. Branding Strategy Brand increase the value of products and services by differentiating them from the competition, creating positive mental associations and forming emotional relationships with the customer. This is really catered well by AIRTEL as a brand. The core values of the brand were leadership, performance, enthusiasm and dynamism forms the integral part of its branding strategy. Further, Airtel is a product of Bharti Enterprises which is visualized by the customers as Reliable Indian Brand. Dominant in the telecommunications services market, Bharti Enterprises, the telecom giant has unveiled its vision for 2020. Its brand status symbol attempts to reflect its intent to grow its other businesses such as financial services, retail and agri-business. Business Outsourcing Strategy Airtel as part of its outsourcing strategy is enjoying unparalleled competitive advantages by way of lower costs, improved quality and responsiveness. This is done by outsourcing the IT to IBM and network to Nokia/Ericsson. Apart from it the social initiatives made time to time by the company is really recognized and praised by the customer. Market Segmentation Strategy Because of its leadership position in Rajasthan Circle, the company is always ready to take the first mover advantage before the competition. All the new plan, schemes and services are first initiated by Airtel. As part of its market segmentation strategy Airtel focuses on
concentrating on elite, professional and small entrepreneurs who make its brand identity as lifestyle and inspirational brand. But because of more disposable income of the youth segment the target market is also the technology driven and demanding youth market. Value Added Services Strategy Although the Airtel Vas market in Rajasthan is only 15 % of the revenue, but still it is the highest in the circle. The maximum contribution goes to the sms pack schemes, then Airtel Live portal and mobile office. Distribution /Network Strategy The efficiency of a telecom service provider is judged by its network. The roaming facilities, network coverage, ease of availability of recharge outlets; voice clearance contributes to the success of Airtel as a Leader. Promotion Strategy-Creative Advertising Campaign Made by the company by taking the famous celebrities as brand ambassadors and taking Ringtone composed by A.R Rehman as a promotion tool made it easy to get the word of mouth publicity. Pricing Strategy The best 5 plan offered by the company to Rajasthan circle especially to the postpaid customer is the best strategy to increase the number of subscribers. The plan includes: Airtel Freedom 249, Advantage 199, Easy plan 149, Super Combo plan, and STD benefit plan. In addition to it the consideration of rebates and discount on calls also add to the effectiveness of pricing strategy. After Sales Service Strategy Airtel is getting a satisfactory report on the customer care services and the dealer services are also managed well. Airtel is very particular in proving Transparency in Billing to the customer. Thus well focused after sales service helps the company to retain its customer in spite of starting of mobile number portability (MNP).
Conclusion
The findings of this case study revealed that success of telecom service Provider Company depend upon the effective implementation of its marketing strategy. Case also concludes that apart from 4 P’s of marketing strategy (product, price, place and promotion), business operation strategy of outsourcing and after sales service strategy adopted by the company also plays a very important role.
4.7 Corporate Strategy
The corporate strategies of telecommunication industry in India have been based on the Porter‘s Five Force Model.
Image: Porter’s Five Force Model
4.7.1 Dimensions of Porter’s Five Force Model
Corporate strategy of Indian telecommunication industry depends upon the following:
4.7.1.1
The Threats of Substitute Products in Telecom
Industry
The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases. It depends upon the following: i) ii) iii) iv) Buyer propensity to substitute. Relative price performance of substitutes Buyer switching costs. Perceived level of product differentiation.
4.7.1.2
The Threat of the Entry of New Competitors in
Telecom Industry
Telecom industry is a Profitable Industry with high returns and obviously attracts firms, which results in many new entrants, and effectively decreases profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level. It depends upon the following: i) ii) iii) iv) v) vi) vii) viii) ix) x) The existence of barriers to entry (patents, rights, etc.). Economies of product differences. Brand equity. Switching costs or sunk costs. Capital requirements. Access to distribution. Absolute cost advantages. Learning curve advantages. Expected retaliation by Incumbents. Government Policies.
4.7.1.3
The Intensity of Competitive Rivalry in Telecom
Industry
For Telecom industries in India, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc. It depends upon the following: i) ii) iii) iv) v) vi) vii) viii) ix) Number of competitors. Rate of industry growth. Intermittent industry overcapacity. Exit barriers. Diversity of competitors. Informational complexity and asymmetry. Fixed cost allocation per value added. Level of advertising expense. Sustainable competitive advantage through improvisation.
4.7.1.4
The Bargaining Power of Customers in Telecom
Industry
It is also described as the market of outputs. It is the ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes. In telecom industry it depends upon the following: i) ii) iii) iv) v) vi) vii) viii) ix) Buyer concentration to firm concentration ratio. Degree of dependency upon existing channels of distribution. Bargaining leverage, particularly in industries with high fixed costs. Buyer volume. Buyer switching costs relative to firm switching costs. Buyer information availability. Availability of existing substitutes products. Buyer price sensitivity. Differential advantage (uniqueness) of industry products.
4.7.1.5
The Bargaining Power of Suppliers in the Telecom
Industry
It is also described as market of inputs. In Telecom industry suppliers of raw materials, components, labour, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g. charge excessively high prices for unique resources. It depends upon the following: i) ii) iii) iv) v) vi) vii) Supplier switching costs relative to firm switching costs. Degree of differentiation of inputs. Presence of substitute inputs. Supplier concentration to firm concentration ratio. Employee solidarity (e.g. labour unions). Threat of forward integration by suppliers relative to the threat of backward integration by firms. Cost of inputs relative to selling price of the product.
4.7.2 COMPARISONS AND SUGGESTION OF CORPORATE STRATEGY IN TELECOM SECTOR 4.7.2.1 The Threats of Substitute Products
4.7.2.1.1 Strategy of Tackling Threats of Substitute Products 1. 2. 3. 4. Product innovation at regular basis. Providing Value added services. Keeping price according to market level. Pressurizing government to make the policies unfavourable to the substitute product. 5. Providing the facility of substitute product in the current product or service range. For example, To tackle the threat the GSM mobile service the CDMA mobile Service provider have started to provide the additional GSM service in the same set. 6. Negotiation with suppliers for high quality service or raw materials. 4.7.2.1.2 Suggestion 1. Indian telecom companies should invest more in self Research & Development activity rather than depending upon foreign suppliers to tackling the threats of substitute.
4.7.2.2
The Threat of the Entry of New Competitors
4.7.2.2.1 Strategy of Tackling New Competitors 1. Reducing the product and service price. 2. New advertisement campaign. 3. Pressurizing the government to make the policy tough for new competitors. 4. New offer for current customer in terms of price and service.
4.7.2.2.2 Suggestion 1. Since tele density is still around 21% therefore telecom companies have to try to those market which is still untapped by the other telecom companies. 2. Keep their technology up to date so that they should always offer something new to their existing customer and also new customer should provide better customer service through better customer relation so that old customer doesn‘t left.
4.7.2.3
The Intensity of Competitive Rivalry
4.7.2.3.1 Strategy to Tackle the Intensity of Competitive Rivalry 1. 2. 3. 4. 5. Always expanding the product and service range. New ways of advertising. Always enhancing the customer service. Entry in new market segment as well as new geographical area. Keeping the price of product and service according to demand and needs of different section of the society. 6. Always providing something new and extra in terms of product and service. 4.7.2.3.2 Suggestion 1. Should focus more on new rural area where tele density is very low and competition is less. 2. Make strategic alliance with equipment supplier so that become a market leader in the terms of technology.
4.7.2.4
The Bargaining Power of Customers
4.7.2.4.1 Strategy of Tackling the Bargaining Power of Customer 1. 2. 3. 4. 5. 6. Keeping the price according to market level. Providing the highest quality of service. Providing best customer service. Providing value added services at competitive price. Providing up to date technology. Providing wide range of product and services.
4.7.2.4.2 Suggestions 1. Keep the price lowest in market. 2. Actively participate in research and development activities to offer new technology. 3. Try to maintain the uniqueness of product as long as possible. 4. Try to be market leader in product and service range offerings. 5. Try to eliminate the intermediaries involved in providing products and services to reduce the cost.
4.7.2.5
The Bargaining Power of Suppliers
4.7.2.5.1 Strategy of Tackling Bargaining Power of Suppliers 1. Indian Telecom companies negotiate with 4-5 suppliers at the same time for the same contract so that to keep the psychological pressure and also give the message that they have so many options. 2. Always make sensation in media about new project or new requirements so that more and more supplier comes to offer and they can easily bargain with the supplier. 4.7.2.5.2 Suggestion 1. Indian telecom industry should make alliance with foreign supplier and invest jointly in Research & Development activity.
Chapter 5: Market Segmentation of Telecom Sector
India telecom market is mainly divided into two major segments namely, the Fixed Service Provider (FSPs) and the cellular services. Fixed Service Provider network comprises land lines, basic services, domestic and long distance call service. The two major basic operators BSNL and MTNL comprise almost 90 % of the FSPs in the country. Around 5 % are operated by private firms and are mostly scattered in the urban areas. In most cases, the private basic service telephone operators cater to offices, business firms, schools and the corporate sector. In case of the cellular services, there are mainly two sub divisions: Code Division Multiple Access (CDMA) and Global System for Mobile Communications (GSM). In the GSM sector, the major players are Vodafone, Airtel, Idea Cellular, and Aircel and so on. The national company BSNL also has its GSM service named "Cellone" which has a major share in the semi urban and rural areas. The major companies which dominate the CDMA scenario are Reliance Communications and Tata Indicom. In both the sectors of cellular services, perfect competition exists according to the demand supply chains.
5.1 Segmentation as per Market
Now that the determinants of success of the service provider in the IP Telephony market, have been identified and based on the present telecommunication market following four market segments are identified: 1. 2. 3. 4. Retail Segment Corporate Segment Wholesale Segment Village IP Telephony Segment
5.1.1.1
Retail Segment:
In the retail market, the competition is likely to be fierce because the only service provided is a plain vanilla service and, therefore, there is very little differentiation, which is possible. So the competition would be around price and value added services. The issues critical to this segment are: ? ? ? ? ? ? Price Coverage Distribution Value added services Gray market Promotion
5.1.1.2
Corporate Segment:
Corporate segment is the premium segment of this market. This is the segment from where high volumes of profits are always expected. Entry barriers in this market are very high. This is also because a good track record is essential to get business from corporate.
The issues critical to this segment are: ? ? ? ? QoS Coverage Value added services Infrastructure capabilities
5.1.1.3
Wholesale Segment:
In this segment the service provider can target those ITSPs, which do not have their own infrastructure or are short of infrastructure. This segment holds high potential, as this IP Telephony market is attracting large number of small operators, who are in need of established infrastructure in order to compete. The critical issues involved in this segment are: ? ? ? ? ? QoS Price Infrastructure Coverage Value added services
5.1.1.4
Village IP Telephony Segment:
There is a growing demand for basic voice services in India‘s r ural sector, which comprises more than two thirds of the total population. As the cost of adding access lines in the rural areas is on an average three times more than in the metropolitan areas, service providers are challenged to build viable services in less developed rural areas. The critical issues involved in this segment are: ? Price ? Coverage ? Infrastructures
5.2 Segmentation as per Consumers
With the proliferation of mobile phone users, several micro segments have also emerged lately, each with their own specific needs. The Indian Mobile consumer market has been segmented as follows:
The rationale behind the above segmentation is to identify customers on the basis of their stage in life and hence to tailor-make schemes for each customer segment. The different segments are explained as follows:
5.2.1.1
Youth:
Over the years, service providers have started giving greater attention to this segment, as it has emerged as one of the biggest users of mobile phones. For the youth, mobile phones are not just a necessity, but rather an indispensable accessory. This segment particularly values prepaid schemes with free SMS services. It is further differentiated into various micro-segments based on age and gender. For instance, youngsters in the age group of 19 to 23 years generally have a large circle of friends and more access to money.
Companies thus focus on providing services like group talk and group SMS to these people. This segment is very dynamic as its needs keep changing very frequently, driven by the latest trends and fads. For instance,
downloading new ring-tones is the latest fad among the youth today. This is a huge revenue source for service providers and so they need to keep up with the changing tastes of this segment.
5.2.1.2
Young Professionals:
People entering the workforce and thus moving out of the dependent bracket constitute this market segment. They generally prefer using post paid schemes with value added services like information about stock markets, news updates and so on.
5.2.1.3
Small and Medium Enterprise:
This segment mainly consists of people who are switching over from landlines to mobile phones, seeking a cost advantage. The focus here is on economy-packages rather than value added services.
5.2.1.4
Family:
Family as a segment consists of more number of dependents. These dependants are serviced by prepaid schemes. Geographically dispersed families tied by the same cellular service providers may get cost advantages in terms of lower pulse rates.
5.2.1.5
Special:
The ?Special‘ category includes a small but growing segment which requires largely customized services sought by celebrities, politicians, CEOs and the
super-rich. Tailor made schemes for each segment have been a great success so far. This customization, however, has reached such a stage that every service provider has numerous schemes being provided at the same time. Being short term schemes, they keep changing frequently and customers thus start switching from one service provider to another based on the attractiveness of the scheme. This has brought down customer loyalty and hence service providers are finding it difficult to retain existing customers. It is estimated that in the near future the plethora of schemes provided by the different service providers will stop being a differentiating factor.
5.3 Targeting
Target Marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments. Target marketing can be the key to a small business‘s success. The beauty of target marketing is that it makes the promotion, pricing and distribution of your products and/or services easier and more cost-effective. Target marketing provides a focus to all of your marketing activities.
Chapter 6: Managing service quality in Telecom Sector
6.1 Service Quality
Service quality is a business administration's term and describes the degree of achievement of an ordered service. It is highly abstract and thus difficult to measure. It is essential in the telecom sector to maintain competitive advantage and is one of the most crucial factors based on which the customer makes a choice of a particular service provider. It is a means for the various players in the telecom sector to differentiate themselves from the rest. Evaluation of quality happens during the process of delivering the service itself.
6.2 Service Quality perception
Since service quality is difficult to measure it‘s generally based on the customers‘ perception of the same. If the customer is using the service for the 1st time he is bound to judge the quality based on his expectation. Hence when a customer joins a network like loop or reliance, he judges the quality based on the various services and
additional assistance provided to him and compares it with what he expects. If the service is upto his expectations he is bound to be satisfied. If the service is above his expectations it creates customer delight but if the service is below his expectations it will cause dissatisfaction. It is known that with every additional encounter with the provider, further reinforces or revises the service quality perception. In case of the telecom sector due to the high competition a customer may weigh the quality of the different services provided and then for a quality perception based on which he will make a choice. Framing a positive quality perception is essential for the firm to modify future consumer purchase intention.
6.3 Dimensions and Determinants of Service Quality
It refers to the expectations that customers have before the service is provided and the quality of output judged after the service is performed. There are various models to study the various service quality dimensions and analyze them.
6.3.1 PBZ Model of Service Quality
Parasuraman, Zeithaml and Berry (1985) identified ten determinants of service quality that may relate to any service:
6.3.1.1
Competency:
Possession of the required skills and knowledge to perform the service: knowledge and skill of the contact personnel at the showroom, knowledge and skill of the operational support personnel to retrieve data and solve any bill discrepancy problems etc.
6.3.1.2
Courtesy:
Politeness, respect, consideration and friendliness of the contact personnel: consideration for the customer's time while handling complaints through the customer care center, clean and neat appearance of public contact personnel at showrooms, Consideration for immediate activation of services etc.
6.3.1.3
Credibility:
Trustworthiness, believability and honesty: It involves having the customer's best interest at heart: company image building exercises should be carried out by the team regularly; the contact personnel should be given identification mark authorizing him to handle the customer on behalf of the company.
6.3.1.4
Security:
Freedom from danger, risk or doubt: In the telecom sector, it is essential that the companies maintain confidentiality of the information given to them for activation purposes.
6.3.1.5
Access:
Approachability and ease of contact: Service is easily accessible, waiting time to receive service at outlets or at the customer care call center should not be extensive, convenient hours of operation of outlets must be ensured, convenient location of service facility at least an outlet in each locality is a must.
6.3.1.6
Communication:
Informing the customers in a language they can understand and listening to them. It may mean that the company has to adjust its language for different consumers: explaining the service itself, explaining how much the service will cost, explaining the trade-offs between service and cost, assuring the consumer that the problem will be handled.
6.3.1.7
Understanding the customer:
It means making the effort to understand the customer's needs, understanding customer's specific needs, providing individualized attention, recognizing the customer.
6.3.1.8
Tangibles:
Physical evidence of the service: appearance of physical facilities, tools and equipments used to provide the service, appearance of personnel and communication materials, other customers in the service facility.
6.3.1.9
Reliability:
The ability to perform the promised service dependably and accurately: service is performed right at the first time; the company keeps its promises in accuracy in billing, in keeping records correctly and in performing the services at the designated time.
6.3.1.10
Responsiveness:
The willingness and/ or readiness of employees to help customers and to provide prompt service, timeliness of service: mailing a transaction slip immediately.
6.4 Total Quality Management (TQM)
Telecommunication is a service organization that is subscriber oriented. The system in the telecom sector includes the total environment that affects its performance i.e. internal plant and external plant. It also includes the behavior of the staff that interacts with the subscribers. However, according to the subscribers, the quality of telecom services should include: ? ? ? ? ? ? Availability Connection establishment Connection retention Connection quality Billing integrity i.e. no hidden costs Customer service
6.5 Recommendations to Improve Quality of Service in Telecommunications
6.5.1 General:
? Accurately distinguish between competitive and non-competitive services and companies ? Consider full range of service quality dimensions in designing policies, standards and programs ? Regional and national cooperative efforts to assure service quality
6.5.2 Monopoly Services:
? Examine a minimum subscribership plan ? Standards: ? ? ? ? ? ? ? Consider new standards (for example, baud rates) Define standards clearly Do not accept industry standards without careful review Make sure standards are measurable Base standards on open, collaborative rule making processes Consider using weighted indices of quality of service Base standards on expectation of improved quality for basic service ? Specify performance rather than design standards ? Monitoring: ? ? ? ? ? ? ? Require regular company reports Require an appropriate level of detail Use format agreed on by industry and regulator Conduct service quality audits Use field investigations Develop and analyze intrastate data Expand ARMIS data
? Customer complaints: ? Categorize by company and rule ? Establish toll free numbers to file complaints ? Send copies to commissions of all complaints received by company ? Keep electronic records of all complaints ? Customer satisfaction: ? Develop better measures ? Find out how regulated companies are already measuring. ? Enforcement: ? Use ability to assess fines and order rebates ? Tie service quality into price cap formula or price regulation agreements ? Make penalties automatic ? Target penalties to compensate affected customers. ? Resources: ? Develop staff skills in public policy implementation and customer service ? Consider combining customer service and technical staff functions ? Separate telecommunications complaint handling from allutility complaint handling function ? Develop staff skills in handling interconnection quality of service issues
6.5.3 Monopoly and Competitive Services:
? Adopt a consumers‘ bill of rights ? Adopt consumer service standards to promote public values and in areas where a competitive market does not exist ? Use principles of adopting good standards listed above under monopoly services ? Do not apply standards of one industry to all industries ? Establish a data base of consumer education materials prepared by companies and commissions
? Publicize industry results ? Report relative performance across industries ? Label quality
6.5.4 Technical Industry Standards:
? Promote consumer input into the industry standard setting process ? Form user groups for telecommunications technologies ? Provide government leadership in development of the national information infrastructure ? State goals, values and performance standards for U.S. telecommunications policy ? Government subsidization of technical telecommunications research ? Participate through NARUC in industry forums ? Encourage the Network Reliability Council to expand its quality of service oversight
6.6 Service Gap Analysis
A gap is the difference, imbalance or disparity which is determined to exist between customers‘ perception of firm performance and their prior expectation. Service quality (SQ) perceived by customers is therefore as a result of a comparison of customers‘ expectation (E) of services that the organization should offer versus their perception of the performance (P) delivered by the service organization.
Service Quality (SQ) = Customer’s Perception (P) – Customer’s Expectations (E)
Management of service quality largely focuses on managing the gaps between expectations and perceptions of customers. The goal of the firm is to minimize the gap between (P) and (E). Rowley pointed out that previous researchers such as Lehtinen and Lehtinen and Gronroos also applied gap principles similar to that proposed by Parasuraman.
6.6.1 Gap Analysis in the Telecom Sector:
The Telecom sector can be an interesting sector to study the gap analysis as it is a very people oriented industry, with each service provider having thousands of customers who may have different perceptions about the same service delivered by the service provider. Also like in any other service industry the variance in service provide is bound to occur as the service is provided by people who may deliver it differently. Lets us now study the various gaps one by one, with reference to the Telecom sector:
6.6.1.1
Knowledge Gap:
? It is the difference between what consumer‘s expect of a service & what the company perceives that the consumer‘s expect. ? It can cause the company a lot of harm in terms of customer satisfaction, if not identified and handled properly, because the customers‘ expectation will definitely not be fulfilled and they may choose to shift to another service provider who can better satisfy their perceived requirements. ? The company may also invest in functions that customers‘ don‘t really notice, without any returns, while completely ignoring those functions that are expected to be in place may not be there. ? This gap occurs mainly because of lack of proper research on the target market, lack of effective upward communication from staff that deals directly with customers etc. ? In the case of the telecom sector, the knowledge gap can occur easily due to the constantly changing dynamics of the industry.
Examples:
? A Tata Docomo customer from Kozhikode district in Kerala was not very well
versed with conversing in English and preferred talking in Malayalam, however he was left intimidated and uncomfortable as the executive at the nearest Docomo outlet would not speak a word of Malayalam, despite watching him struggle to make his inquiries in broken English.
? Tata Docomo considered speaking in English a way to express their
professionalism and had instructed its staff to only converse in English, not realizing that customers coming to local outlets expect executives to be warm and converse with them in their native language.
6.6.1.1.1 Gap Handling: ? Handling the knowledge gap is easy but identifying it at the earliest and turning important insights into action is crucial. ? Indentifying this gap has to be through direct interaction with customers‘ who may complaint about certain dissatisfying experiences. ? In our earlier example, Tata Docomo on understanding their customers‘ expectation started hiring local employees for their customer service outlets who were well versed with the native language.
6.6.1.2
Standards Gap:
? It is the difference between what management perceives the consumers expect and the translation of their perceptions into service quality specifications set for service delivery. ? Inconsistency, lack of proper standardization of work, poor communication regarding perceptions of customers etc lead to this gap. ? It could lead to customers‘ constantly being subjected to poor service as they feel that despite repeated complaints nothing has changed and that the service provider is unable to match up to their expectation. From order processing speed to the way in which the customer is greeted, almost any process could fail to match the customers‘ expectation. ? The danger lies in the fact that the service provider in this case is under the notion that they have understood the needs of their customers‘ and have processes in place to satisfy them, which is not the case as their processes are faulty due to poorly set out standards of service. ? In case of the Telecom sector this gap often occurs in complaint handling or processing bill payments etc.
Example: Mr. Daruwala, a business man and a Vodafone loyalist, cleared all his bills and changed his personal service provider and also that of his corporate connections to a competing brand after being harassed through constant calls from Vodafone to pay up his bills despite having paid the bill via their e-payment service online, due to lack of updating in the database of payment due customers’.
6.6.1.2.1 Gap Handling: ? Specifying the behavior of contact personnel at each point in the system. ? Getting the middle level management to set, communicate and reinforce customer oriented service standard for their work units. ? Specifying standards for repetitive work etc. ? In the above mentioned example, Vodafone could have retained its loyal customer had their system been updated efficiently which is something a customer expects while he pays the bill.
6.6.1.3
Delivery Gap:
? It is the difference between the quality standards set for service delivery and the actual quality of the service delivered. ? This generally occurs due to role ambiguity, absence of motivation for employees, failure to conform to established standards. Etc. ? This gap clearly indicates a problem in the processes in the functioning of the service, it could occur due to the poor performance of any component in the process. ? In the case of the Telecom sector, it can happen in a number of areas like, network issues, complaint handling or additional services like caller tune services.
Example:
? After paying additional charges for a printed copy of the bill, it is obvious that a
customer would be irked if the bill is not received on time and even more if the bill has any discrepancies. This is exactly what happened to Ms. Sandhya, an Airtel user who had to present the bill to her company for reimbursement. Finally due to overshooting the date to claim returns she was denied the reimbursement and had to pay the heavy bill herself. All of this due to poor delivery of paid services promised by Airtel. They lost a customer right there!
Gap Handling: ? Handling this gap could be expensive as it may mean redesigning the company‘s systems to fulfill and deliver promises made to the customer. ? The company also can avoid this gap by providing excellent training to employees and enabling them to handle situations to deliver superior quality.
6.6.1.4
Communication gap:
? It is the difference between the actual quality of service delivered and the quality of service described in the firm‘s external communications. ? If the company overpromises through their external communications medium, mostly ad‘s they are likely to rise the expectation of the customer to a level that they cannot deliver, which is sure to cause dissatisfaction. ? On the other hand if the ads do not talk enough about the services being provided, the customer may be unaware and will not risk using the particular service. ? In the telecom sector, which so highly competitive it becomes extremely important for companies to promote their services and constantly update customers regarding new applications and tariff plans through external communications, to have that competitive edge. In fact competition is so stiff that often service providers counter attack each other through their ads. With dynamics of this industry changing every day, companies may even overpromise without considering the consequences if they are unable to deliver their promises.
Example:
? Vodafone ad’s constantly talks about “wherever you go, the network follows you”
however when it came to delivering this promise to a bunch of naval officers posted at a naval base in Tamil Nadu, the company miserably failed as it could not install towers within the naval base due to security reasons, hence these customers had no network within the base causing great inconvenience to them.
6.6.1.4.1 Gap Handling: ? For handling this gap the company first needs to understand the reason for the customers‘ grievance and apologize for the inconvenience caused to the customer due to the company‘s irresponsible behavior. ? The gap in the example mentioned can be handled by clarifying and explaining the uncontrollable reason for the shortcoming in service performance and then find alternate solutions to deliver the promise made.
6.6.1.5
Perceptions Gap:
? It is the difference between execution and delivery of service & customers perception of product/ service execution. ? It generally occurs when the market study on the target audience of the service provider has been faulty and the provider designs the service according to what he perceives to be the liking of the customers‘. ? It leads to great dissatisfaction as the provider in this case has completely missed the bull‘s eye and in fact may provide a service that could create an aversion and induce customers‘ to never return to the same service provider. ? The telecom industry is very vulnerable to this gap as each service provider has a huge customer base and understanding their perception about a service is not easy.
Example:
? Most telecom service providers find it feasible and appealing telemarketing about
their various schemes to customers and consider afternoon to be the best time to make these calls as most people have low amounts of activity at that time, however as per a recent study it was clear that customers’ find telemarketing a nuisance specially in the afternoon.
? Another example could be that of the Interactive Voice Response System that
almost all service providers in this industry use on their helpline number is considered convenient to the customers, while in reality customers prefer to sort out their complaints and enquiries by directly interacting with an executive of the company.
6.6.1.5.1 Gap Handling: ? This gap can be avoided by adhering to complaints made by the customers‘ regarding processes.
6.6.1.6
Interpretation gap:
? It is the gap between companies‘ promises or ads and the customers‘ interpretation of the communication. ? It is an extension of the communications act. Here the customer interprets the message sent across by the company‘s external communication in the wrong way. ? In the telecom sector one may see many advertisements that fail to bring out the essence of the service, making it difficult for customer to interpret the ads easily.
Example:
? The Idea ad campaigns started of well with the “What an idea sirji” as their
tagline, but extending it to their 3G campaign seems to have been so costly that they have been unable to invest in idea generation, leading to the disastrous “get 3G” ads, with Abhishek Bachchan - the brand ambassador’s clones representing 2 dull service providers and the third 3g guy offering solutions. The ad is confusing and lacks creativity. Also the population control ad clearly shows lack of content going overboard with the advantages of having 3G services, garnering a lot of criticism for the company from ad makers.
6.6.1.6.1 Gap Handling: ? Handling this gap can be expensive as it means reinvesting in communicating the right message and doing it repeatedly to erase the wrong perception set in the mind of the customer.
6.6.1.7
Service Gap:
? The last gap is a result of all the other gaps mentioned above. ? It is caused due to the snowballing effect of other gaps. ? Like every other sector service gap occurs in the telecom sector as well if there are any discrepancies. Service gaps are bound to occur but what is essential is to learn from them and fix them so that they are not repeated.
6.7 Service Recovery
Service recovery is a term used for systematic efforts by a firm in order to correct the problem following a service failure and to retain a customer‘s goodwill. The goal of service recovery is to identify customers with issues and then to address those issues to the customers' satisfaction to promote customer retention. It is a positive approach to complaint handling. Complaint handling has serious negative connotations; whereas, service recovery has positive connotations. It creates positive word-of-mouth about your company and minimizes the bad spin that lack of service recovery practices can create. A service recovery needs to have the following factors in order to be effective.
6.7.1 Apology:
Whenever things go wrong the service personnel must acknowledge the error and apologize for the trouble caused to the party.
6.7.2 Urgent Reinstatement:
Followed by an apology genuine efforts should be made to rectify the problem.
6.7.3 Empathy:
Understanding the problem from the customer‘s point of view and express it.
6.7.4 Symbolic atonement:
Conveying to the customer that the solution to his/her problem has or might get delayed by intimating them in periodic intervals.
6.7.5 Follow up:
To check with the customer that everything is working fine and whether or not he/she is satisfied with the service provided.
CASE STUDY 5:
SERVICE RECOVERY IN TELECOM SECTOR
Here is a case of Service recovery in the telecom sector:
A customer had a fault with his phone line so he reported it to his service provider online. As soon as he reported the fault on the Friday morning, he received a mail apologizing for the grievances. The customer service called him back 3 times on his alternate number on Friday just to let him know about how they were proceeding with the fault. The customer knowingly or unknowingly felt good somewhere that his problem was being taken care of by those customer service guys. The customer got a phone call on Saturday on his so called faulty phone line which was now fixed and he was asked if there was anything else they could help him with and hopefully that was all to call it a day. A week later that customer gets a call from that telephone company just to check with him that everything was working properly.
Chapter 7: Conclusions and Recommendations
7.1 Conclusion
India has one of the world‘s largest telecommunication networks. The telecom story continues to be the best evidence of the efficacy of the reforms process. In just six years, the number of mobile subscribers has gone up from just about one million to 100 million, a subscriber base that only four other countries China, the US, Japan and Russia can boast of. None can doubt the correlation between this explosive growth in numbers and the steep decline in the cost of the mobile phone and of its usage. Effective tariffs have dropped from over Rs 14 a minute to Re 1, bringing the phone within reach of people even below the middle-class. The Government may have, therefore, landed itself a winner in the mobile phone service providers, but the task of taking telecom to the other 90 per cent of the population will call for even greater innovation in policymaking, technology and marketing. Still three-fourths of the land mass is not
illuminated by a cellular signal and the price of the instrument is beyond the reach of a substantial section of the population let alone the charges for its use. These issues, of course, can be resolved by decisive policy action, such as a creative use of the Universal Services Obligation fund that now has over Rs 70 billion, releasing adequate spectrum to operators in the metros, and a proactive investment policy that invites many more equipment manufacturers to set up base in this country. The number portability issues will solve many
problems and will help the end users, which will change the whole scenario of competition and will make the game tougher for the service providers. Looking at the competition trend, it seems that soon in future, rural schools will be having broadband and internet facilities as their part of studies as well as routine lives. There is availability of internet facility in many villages. But soon it will be taught in secondary and higher secondary schools in all villages and various technologies like 3G and various VAS have made the market more competitive and made easy for the users. Implementation of number portability and 3G technologies have solved many problems and made easy and comfortable for the customers.
7.2 Recommendations
The following recommendations can be concluded for the telecom industry: ? Lowering the tariff plans of service providers will increase more competition. ? In order to allow technological upgradation, segment policies should be technology-neutral, and not specifically prescriptive. ? Resolve spectrum allocation and create need-based licensing of spectrum bandwidth to facilitate the policy of unlimited new entrants in basic services. ? Pass rules on number portability (service migration) to allow free market conditions for fixed line consumers, without taxing new entrants or consumers for moving away from a monopoly service provider. ? Bringing more upgradation in VAS for the betterment of the users. ? Improvement of network infrastructure in both the urban and the rural areas. ? Reducing the STD and ISD charges for the users. ? More FDI inflows can be enhanced. ? More Direct To Home (DTH) services will give benefits to the customers. ? CDMA technology providers i.e. Tata and Reliance are slowly coping up with the competition with GSM operators which gives a good benefit to the end users. These operators should also indulge into providing various services. ? Mobile banking is a new concept which is recently adopted by Airtel and it provides recharge from mobile phone by tie ups with banks. This new concept will bring a new revolution in case of inventions. ? Broadband services can be more focused more if the spectrum issues are solved. Still there are many rural areas where broadband services are not available. ? Companies can provide new and different schemes to their customers. ? Enhance data services on fixed and wireline services. ? Increase in internet speed on mobile can be the criteria for the operators. After talking to the Sales Executives of various companies’ outlets, the following recommendations can be concluded as a part of the strategies for acquiring or retaining new customers in telecom industry:
? The telecom operators should take less time for the solving customer‘s queries. ? Majority of the operators focus on the special occasions to launch new schemes but they can also launch schemes on weekly or monthly basis to attract new customers. ? TV media is more effective for the operators as per the findings. But they should also focus on radio and newspapers for more effectiveness. ? Customer care executives should concentrate more on pre-paid connections for the price sensitive customers and post-paid connections for business class people or high class people. They should use their media tools accordingly. ? They should concentrate more on the attributes like talk-time facility, network, voice clarity etc apart from SMS, VAS and schemes. ? They should focus more on VAS like GPRS facilities, games, astrology, and music for young people and business news for business people. ? They should also focus on new technologies like 3G. ? They should also focus on pilot projects before launching a product, especially in case of rural areas.
BIBLIOGRAPHY
References:
? Dot Annual Report: 2010-11 ? National Telecom Policy: 2011 ? Results Framework Document (RFD) for Department of Telecommunication: 20112012 ? DoT, Ministry of Communications & IT, GoI, Strategic Plan: 2011-15 ? TRAI Report: 2010-11 ? REPORT ON MOBILE VAS IN INDIA: 2010 ? IBEF Report 2007-08: Telecommunication - MARKET & OPPORTUNITIES.
Books:
? Zeithaml, V. A., Berry, L. L. and Parasuraman, A., (1993). Delivering quality service: Balancing customer perceptions and expectations. New York: New York Free Press. ? Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988). SERVQUAL: A Multiple Item Scale for Measuring Consumer Perceptions of Service Quality. Journal of Retailing. ? Dr. C. S. G. Krishna & Dr. R. Lalitha, Innovation Management, Himalaya Publishing House, Mumbai, 2007. ? C. Bhattacharjee, Service Sector Management: An Indian Prospective, Jaico Publishing House Mumbai, 2007.
Websites:
? http://rru.worldbank.org/documents/toolkits/labor/toolkit/module3/benchmarking.htm ? http://www.managementparadise.com/ ? http://www.economywatch.com/world-industries/telecommunications/telecomindustry-in-india.html ? http://rru.worldbank.org/documents/toolkits/labor/toolkit/module3/benchmarking.htm ? http://www.icmrindia.org/casestudies/ ? http://www.sciedu.ca/journal/index.php/ijba/article/view/567/275 ? http://www.trai.gov.in/ ? http://www.telecomindiaonline.com/ ? http://www.dot.gov.in/ ? http://www.cci.in/pdf/surveys_reports/ ? http://www.mobiles.in/mobile-service-providers.htm ? http://www.telecomcircle.com/ ? http://www.indiantelevision.com/tamadex/y2k10/june/tam23.php ? http://www.equitymaster.com/ ? http://www.tutorialspoint.com/telecom-billing/products-services.html
doc_235755835.docx