TABLE OF CONTENTS

TABLE OF CONTENTS

21Introduction

32Developing New Market Offering Vodafone Greece

32.1The New Product - VF Double Play Plus

42.2Product Attributes and Marketing Objectives

53Identify Market Opportunities The Demand Side

53.1The Market and the Customers

63.2The Greek Telecoms Market Characteristics

63.2.1The Mobile Market Overview

73.2.2The Fixed Market Overview

73.2.3The Internet Market Overview

83.3Assessing Market Potential an emergence from the customer side

93.3.1The Market Trends and its Impact on the Market

103.3.2The Customer Challenge

103.3.2.1The voice of the customer

113.3.2.2Identifying the key customers needs

113.3.2.3The Determinant Gap Map

134Consumer Segmentation and Targeting

134.1Vodafone Convergent Segmentation

164.2Targeting Households

175Evaluate Market Opportunity The Product Side

175.1The product-market fit

185.2Marketing Audit/Internal

195.3The Product Future

205.4Mind the Gaps

216Conclusion

22APPENDIX A

23APPENDIX B

24REFERENCES

1 Introduction

The present study constitutes the market analysis for the convergent proposition made by Vodafone Greece, in July 2007. It provides an insight of the customers in the telecoms market and aims to shed light to the market opportunity for Vodafone from the demand side.The marketplace is not what it used to be. It is changing radically as a result of major societal forces such as technological advances, globalization and deregulation. These major forces have created new behaviors and challenges; customers increasingly expect higher quality, new services and customization (Kotler 2003, p27-28).

The Vodafones offering will be analysed from the customer perspective, focusing on the demand that emerge from the market; market trends and people needs and expectations. The present market research demonstrates also the market segments and how the company markets its product to the people most likely to buy them. Analysis will be based on the marketing theories, implied by textbooks and management literature, so as to generate evidence of what is implied in theory is proved by succeeding in practice.2 Developing New Market Offering Vodafone Greece

2.1 The New Product - VF Double Play Plus

In the context of managing the development process of new market offerings, companies seek to provide an idea of the product to offer to the market. Consumers though do not buy product ideas, but product concepts. A product idea may be turned into several concepts, by posing the following questions: Who will buy this product? What primary benefit will this product provide? (Kotler 2003, p359). The primary idea for Vodafone Greece was to provide its customers with total communication solutions The Mobile Plus - as implied by its strategic objectives. The first phase of the Mobile Plus Program roadmap included the development and launch of a bundle product, named as VF Double Play Plus. The product idea was formed as:

Thanks to Vodafone Double Play Plus you can be anywhere without leaving your home!

The new bundle product offers, for just 35 per month, ADSL Internet - Vodafone ADSL - at speeds up to 24Mbps, and 1200 inclusive minutes to call - Vodafone@Home - Greece, abroad, as well as Vodafone mobile numbers, with no additional OTE monthly access fee.

The Vodafone@Home brings a new era for all households; consumers are able to experience communication solutions with Vodafone at home tariff plans and Vodafone calls to fixed tariff plan that offer inclusive time to all national fixed networks and to selected international fixednetworks. The user must only select a service compatible telephony device, use a SIM card, and connect the device wire to the plug. His/her calls are served by the Vodafone network.

From the customer side the interpretation was:

With Vodafone, I can call and access Internet as much as I want

With Vodafone, I am getting products from a single provider in a best price

With Vodafone, I am able to use services together

2.2 The Product Attributes

Product attributes are of three types; features, functions and benefits (Crawford and Benedetto 2000). The new Vodafones offering aims at providing:

A bundle product of combining fixed and mobile voice, and fixed and mobile broadband services.

Fast broadband connection - up to 24 Mbps download and up to 1 Mbps Upload speed - with unlimited usage

Voice communication solutions at home tariff plans two numbers; the mobile number and a fixed line home number. The customer can use the mobile phone to answer to all calls even those directed to his fixed line home number

Attractive Pricing at home home tariff plans/ the calling party will continue to pay according to the tariff for wireline termination One single provider and a unified billing approach

The best available broadband offer

Cheaper mobile rates

Simplicity and Convenience - One simple standard device

Easiness in activation and installation of the product

3 Identify Market Opportunities The Demand Side

The marketplace is changing radically as a result of major societal forces such as technological advances, globalization and deregulation. These major forces have created new behaviours and challenges. Furthermore, customers increasingly expect higher quality and service and some customization (Kotler 2003, p27-28).In this section, Vodafones product will be examined from the customers side, as an opportunity or necessity of the market demand. According to Kotler (2003), the Market Demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program.

3.1 The Market and the CustomersA market is the set of all actual and potential buyers of a market offer. For the Telecoms industry, this implies:

1 The users of fixed telephony services form the Fixed Telecoms Market

2 The users of Internet service form the Internet Telecoms Market

3 The users of mobile telephone services form the Mobile Telecoms Market

Vodafone is an international organization offering mobile voice, data and value added services. The decision to enter the fixed world constitutes its movement from the mere Mobile Telecommunications Market to the Fixed Telecommunications Market, while trying at the same time to create the convergent telecoms market, where a single provider will offer all communication solutions.

3.2 The Greek Telecoms Market Characteristics

3.2.1 The Mobile Market Overview

The Mobile Telephony, introduced in the early 1990s, has undergone major changes during the last decade. Mobile phones are not simple devices used for voice and text messages services; sophisticated services, such as internet access, email, MP3 music, TV and video services are offered. The Mobile Telecoms Market is a very promising market in Greece, with the four key players Cosmote, Vodafone, Wind and Q-telecom- which are competing for the market share. All operators seek to increase their customer base by offering a variety of complementary services in lower prices and higher personalisation. Since 2000, almost every household possesses at least one mobile phone, while it is very common for all family members including children to own their own handset. The number of users continues to grow as depicted in the figure below

Figure 3.1 The Growth of the Mobile Telephone Users (2002 2007) - Source: EETT Market Overview 20063.2.2 The Fixed Market Overview

In landline telephony, digital lines replaced analogue lines, making telephone calls faster and more reliable.

Figure 3.2 The Growth of the Access Lines (2000 2006) - Source: EETT Market Overview 2006

3.2.3 The Internet Market Overview

The internet is also a promising market, as Greece is still one of the least developed EU countries in terms of internet penetration. The introduction of ADSL in 2004 is gradually replacing the traditional PSTN & ISDN lines and has made internet access faster and cheaper and therefore more attractive to consumers.

ADSL is a relatively new service in Greece; most households still use ISDN, or even PSTN, connections, while ADSL connections are more popular for business purposes and applications.

Figure 3.3 The Growth of the Internet Subscribers (2000 2006) - Source: EETT Market Overview 2006

Figure 3.4 Source: www.eiu.com 2006

3.3 Assessing Market Potential an emergence from the customer sideAt this point, an analysis of Vodafones value proposition will be conducted, so as to identify the market opportunity for Vodafone as emerged from the customers side. If the company uncovers what the customers want, designs a product that meet those needs and is able to build and distribute it at an acceptable cost, there is high possibility of succeeding (Stein 1996, p25). 3.3.1 The Market Trends and its Impact on the MarketCustomers are becoming more demanding, in terms of requirements for an increasing range of products and services (Lal and Strachan 2007, p25)

The need for reforming the Telecoms market and developing new product portfolio has been implied by the new market trends: Customers are more and more seeking for mobility and personalisation of their communication services. This creates the need for the telecommunication operators to develop a new portfolio of products and services that will offer a unified way of communicating and flexibility in customizing the product according to the customers needs.

At the same time, customers are much concerned in speed and availability issues in the daily usage of their communication services; quality, speed and coverage issues require great attention from the operators, so as to retain existing customers and attract new ones as well. One of the most popular market trends is that of accessing communities. As such, operators seek and provide the proper technology so as to support this opened community based environment (use of Web 2.0 and APIs).

The increasing number of advanced users, in terms of usage and knowledge levels of the Internet and the Telecoms market constitutes a group that wants to experience new technologies and applications, is keen on trying new products and innovative services. Sometimes those may become the market makers. Operators have to be prepared for prompt responses and high-level of quality deliverables to the customers, in order to satisfy even the particular group of users.

Least but not last, today customers retain their basic needs of value and simplicity. This implies that telecoms companies should be able to offer the new products at fair prices and to ensure convenience of getting all services/products from a single provider.

As people are becoming acquainted with the advantages offered by the new mobile and internet technologies they abandon traditional communication methods, which are old-fashioned and time-consuming. This trend is stronger among the younger generations and also young and middle-aged adults who are occupied in technological fields. On the other hand, older people, especially after the age of 50 years, are not able to handle easily these technological advances and they are not likely to do so in the future.

3.3.2 The Customer Challenge

3.3.2.1 The voice of the customer

Taking into consideration the market trends, as identified and described above, we may construct the framework of the basic customers needs and the product values (Figure 3.5). The framework aims at giving a picture of the "voice of the customer". This refers to the stated and unstated customer needs or requirements. (http://www.npd-solutions.com/voc.html).

Figure 3.5 Customer Needs and Product Values Source: Vodafone 2007 figure developed my authorBut even within the same market, there are multiple customer voices. Two major categories can be identified for the market under investigation; the business and the residential customers (Ovum 2004, p.15). For the purpose of the current study, the residential customers will be further examined.The Demand from the Consumers (Households)There are indications that customers show continued interest in having one handset and one number on which they can be reached anywhere. Since users are essentially neutral on technology and business models, differentiation must be based on the result of convergence; the solution either needs to be more convenient or cheaper than their existing combination of fixed-line and mobile services. However, customers express their fear of loosing the personal and individually paid mobile telephone.3.3.2.2 Identifying the key customers needs

Once customer needs are gathered, they then have to be organized (http://www.npd-solutions.com/voc.html). The bundle of services, offered by Vodafone, aimed at providing value to the customer, in terms of Functionality, Simplicity and Cost Saving. But which of them are more important for customers?

The European market research, conducted on 2007, indicated that the cost is the key motivator for customers to adopt Fixed Mobile Convergent solutions. More precisely, customers are highly concerned about saving money on mobile calls at home and on fixed calls at home, whereas they perceive that the new product, offering a combined subscription, will provide a better deal for them. Second motivation, in terms of importance for the customers, is the simplicity and convenience of having one provider and one bill.

3.3.2.3 The Determinant Gap Map

The product values, as identified to be the most important for the customers, may constitute the two dimensions of what so called determinant gap map for the telecoms market.

Figure 3.6 Gap Map for telecom products Vodafone Source figure developed by authorThe open space of offering both high convenience and low cost communication services constitutes for Vodafone a great potential. However, many maps can be prepared, each with a different pair of attributes, or even a three-dimensional map (Crawford and Benedetto 2000, p115). The present Gap Analysis aims at discovering gaps and not demand; but gaps often exist for a reason (Crawford and Benedetto 2000, p125), which represent what people want. 4 Consumer Segmentation and Targeting

While many companies engage in continuous innovation to maintain their market share, an innovation in itself does not guarantee success. Given these strategic shifts, traditional methods of segmentation are inadequate, especially in markets driven by flexible information and communication technologies (ICT) (Gilbert and Han 2004, p.327). Vodafone has moved from the traditional segmentation methods to the Convergent Segmentation.4.1 Vodafone Convergent Segmentation

Segmentation is essentially the identification of subsets of buyers within a market who share similar needs and who demonstrate similar buyer behaviour (http://www.marketingteacher.com/Lessons/lesson_segmentation.htm).

For Vodafone, market segmentation is a way to be in the shoes of the customers, a way to build a less generic proposition that customer can create and an input for designing new product services.

The Vodafone Convergent Segmentation identifies the following segments:

The Practical Talker I use my mobile a lot to organise and run my day The Messaging Mate I use text messages to communicate The Family Organiser I hardly text and I do not use any mobile phone during the evening

The Stylish Techie I use VF Live! and MMS Services

The Simplicity Seeker I want to call my children everyday The Super User I want high quality and innovative services to organise my jobOne view of the Vodafone Segmentation shows that neither price nor quality is considered to be differentiating factors. Again the two-dimension map below illustrates the aforementioned.

Figure 4.1 Telecoms market segments Vodafone Source figure developed by author

Researchers in the field of market segmentation have used categorization of mobile users by exploring congruencies and differences in demographics, technology and service use, and technology-service requirements (Constantiou, 2007, p52). Vodafone Convergent Segmentation is based on the criterion of customers expectations. Two different backgrounds and attitudes towards the @Home proposition can be overseen; the Simple/Beginner Users and the Advanced Users Groups.

Figure 4.2 Vodafone Convergent Segmentation Vodafone Source figure developed by author

The characteristics of those groups, in terms of behaviours, needs and expectations, are summarized in the table below.Simple/Beginner UsersAdvanced Users

Behaviour Characteristics

Family PersonSelf-oriented Person

Non experienced UsersAlready used to advanced usages

Seek for simplicity of the interfacesSeek for exhaustive content

Driven by the balance of Cost, Services and CareDriven by integrated and complex environments

Innovation is not so importantInnovation is very important

Do not want to loose timeReady and Willing to spend some time

Very low churn, if reliability of the service is ensuredHigh churn, because of curiosity or no churn if fully satisfied

Not trendy orientedTrendy oriented for most

Needs and Expectations

Attracted by saving on communications

Extreme fear of being fooledKnow what they want, but still eager to learn more

No experience in integrated Telcos servicesSometimes they are market makers

Seek simple explanationsSeek for exhaustive explanations

Look for simple and easy helpExpect clear and detailed presentation of the product/services offerings

Conduct price comparison within the overall marketSeek for price advantage

Need a long period to decide and purchase

High expectations

Basic Service Expectations

Fix voice offers as much unlimited as possible

Interested in basic convergent servicesInterested in advanced convergent services

Interested in good internet bandwidth up to 10MbInterested in best internet bandwidth up to 24Mb

Table 4.1 Users Groups Behaviour, Need and Expectations Vodafone Source table created by author4.2 Targeting HouseholdsThe companies that are looking to differentiate themselves with integrated solutions need to focus on segmentation. However, each segment has its own challenges and different value propositions resonate with different segments. The VF Double Play Plus product, as a bundle of voice and internet services, as well as Vodafone@Home and Vodafone ADSL products, as separate services, offered a new era in communication for the households. Once companies understand the structure of the consumer demand, they have to decide which segments they want to serve and how (Silk 2006, p.88). Vodafones main target is to provide communication solutions to all segments (user groups). It adapts multi-segment approach, by offering the flexibility of selecting product(s), features and pricing schemes, through the make your plan offer (see APPENDIX B for the product plans). Users groups, and sub-segments inside them, are provided with a wide range of offerings features and prices - that can map their expectations and needs.

Figure 4.3 Vodafones Product Proposition and Potential Target Segments developed by authorThe figure above aims at illustrating potential segments for each of the combinations of VF@Home and VF ADSL products. This constitutes a generalized map of target segments and the different plans, available to the broad consumer segment.5 Evaluate Market Opportunity The Product Side

One major reason for undertaking marketing research is to identify the market opportunities and understand customer needs so as to convert those needs into solution (Kotler 2003, p143). At this point the market opportunity will be evaluated with regards to:

whether the product actually met the customers needs which product do customers buy most

what would the product future be5.1 The product-market fitThe matrix below aims at visually representing correlations among particular attributes and customers needs. More specifically, it illustrates the correlation between the customer needs (rows) and the product attributes (column headers). The tick boxes reflect the product-market fit, whereas those marked with an x constitute signs of product failure to meet the customers needs.Product Attributes

Vodafone Branded ProductA bundle product of combining fixed, mobile & broadband servicesFast broadband connectionOne simple standard device "Plug and Play"Attractive pricing at homeCheaper mobile ratesOne single provider and a unified billing approach

Consumers' Needs

Should be of high reliability and quality

Should be offered in fair and low prices

Should be simple to install and use

Should provide communication everywhere

Should provide convenience

Should be from a brand I trust

Should not jeopardize private communication issues, that the mobile offersx

Should not be hard to track what is paid for each servicex

Table 5.1 Mapping Product Attributes and Customers Needs developed by author5.2 Marketing Audit/InternalThe @Home proposition was a greatsuccessand outperformed all the sales targets; four months only after its commercial launch, the service had acquired more than 75K customers with the sales now reaching over 120K. On the other hand, the VF ADSL product seemed not to follow such a success; the customer base is around 25-30K. In order to achieve first-to-market advantage, Vodafone offers broadband services using the infrastructure of another ISPs network. As such, many problems were encountered related to technology (systems interoperability) and to customers service issues. Consequently, it seems that sales expectations were vastly met, especially for the @Home product. Due to limited information regarding the exact sales targets for the @Home and ADSL propositions, no further analysis can be conducted.Although the new product was a fixed proposition from a mobile operator, it has so far a great appeal to the market. This can be attributed to Vodafones strong brand and to the high reliability levels that it offers to the customer.

However, in general, telecom service purchase decision is determined primarily by perceived need. Consumers said they would be quite willing to try almost any service if they saw a clear benefit. But once they try a telecom service, it often proves to be more useful than anticipated; it has some important benefits that seemed not be communicated successfully before and at the time of purchase (Batt and Katz 1998).

5.3 The Product FutureVodafone is planning to enhance the current product proposition, by launching VoIP, IPTV and High Speed DSL services and finally combine all the previous value propositions with a mobile subscription. Offering convergent services must always be aimed at generating additional benefit or cost savings to the customer (Ovum 2004, p17,18). As such, telecom operators should seek for maximizing demand. This can be achieved by developing solutions to address the four Cs: convenience, cost, convention and choice. Convenience: solutions easy to explore, understand, install and set up.

Cost: cost is always a critical gating factor for consumer adoption

Convention (habit): the challenge for the consumer is that migrating to these solutions will require a change in their calling patterns

Choice (options): provide the consumers with multiple options of services and devices that meet their needs and budget (Barrabee et. al 2004, p17)

Furthermore, according to Batt and Katz (1998) cost and variety have more influence on purchase than does the number of services offered.

To achieve this, the company must proceed to in-depth analysis of consumers, so as to expand its market as well as retain current customers, by formulating better positioning of its products and services. (Mazzoni et al. 2007, p645)5.4 Mind the GapsOn its trip of the new product development process, Vodafone has to carefully consider the following: Segments are unlikely to be stable over time (Mazzoni et al. 2007, p645). This implies that during the future product development process, the company must regularly re-discover its market segments and re-evaluate value propositions and positioning.

Furthermore, a significant point is that the company should take into consideration that the adoption of a new mobile service does not automatically lead to abandonment of the previous ones. Instead, new mobile services are adopted in addition to existing ones due to complementarities. Furthermore, many mobile services are not valuable if used in isolation due to network effects (Constantiou 2007, p52)

Another critical issue is the cost-benefit equation that the company should be aware of. Even for simple FMC bundles and services, with no single bill or network/handset integration, integration services cost significantly. Thus, the company should always carefully consider the cost and level of integration versus the benefits that the convergent services actually bring to the customer (Ovum 2004, p17-18).6 Conclusion

This study provided a market analysis of the new Broadband @Home proposition, launched on July 2007 by Vodafone Greece. It identified the market opportunity for the company by focusing on the market trends and the customers needs and expectations regarding communications. The telecommunication market factors implied the substitution and convergence of the mobile and fixed communication services and products, which constituted Vodafones new strategic objective. On the other hand, users are more and more advanced in their usage and knowledge of the internet/telecom market. The market potential was examined as an emergence from customer side, so as to show that the fixed mobile convergence is not only a solution in search of a problem, but it seems that customers really want it (Engebretson 2005, p31).

In the context of the new value proposition, the approach of market segmentation, targeting and positioning adapted by Vodafone has been examined, as an evidence of the companys success to create products that fit the needs and wants of customers (Liao et. al, 2008).APPENDIX A

Vodafone ADSL product features

Fast broadband connection - up to 24 Mbps download and up to 1 Mbps Upload speed - with unlimited usage.

Flat monthly fee.

Free wired ADSL2+ Router (Wi-fi modem router as an option).

2 free e-mail accounts.

Advanced anti-virus and anti-spam protectionAPPENDIX BVodafone provides the following differentiating features in specific pricing schemes (http://www.vodafone.gr/portal/resources/media/res1500.pdf):

VF@Home Plans:

VF@Home 500 Greece 500mins free to Greek destinations

VF@Home 500 Greece & Abroad 500mins free to all destinations

VF@Home 700 Greece 500mins and 200mins free to Greek destinations and Vodafone Mobiles, respectively.

VF ADSL Plans:

VF ADSL X6 - up to 6 Mbps / 1 bps (download/upload)

VF ADSL X24 - up to 24 Mbps / 1 Mbps (download/upload)

VF ADSL X24* (fully provided by OTE) - up to 24 Mbps / 1 Mbps (download/upload)

Vodafone Double Play Plus:

With Vodafone Double Play Plus for just 35 per month, you have ADSL Internet at speeds up to 24Mbps, and 1200 inclusive minutes to call Greece. The offer includes: 1200 mins per month and VF ADSL X24.REFERENCES

ARTICLES

1. Barrabee, L., Marshall, P., Griffin,K., October 2004, The Yankee Group Report: Paths to Wireline/Wireless Convergence Diverge. Available from: http://www.yankeegroup.com. [Last accessed October 2005]

2. Constantiou, I.D.,Damsgaard, J. and Knutsen, L., 2007. The Four Incremental Steps Toward Advanced Mobile Service Adoption. Communication of the ACM, 50(6), pp. 51-55

3. Engebretson, J., 2005. Fixed Mobile Telecoms Challenge. Americas Network, pp.29-33

4. Gilbert, A.L and Han H. 2005. Understanding Mobile data services adoption: Demography, attitudes or needs?. Technological Forecasting and Social Change, 72, pp. 327-337

5. Lal, D. and Strachan, D. 2007. Understanding Strategising in the telecommunications industry: lessons for global telecoms firms. Journal of General Management, 32(3), pp.19-43

6. Liao, S-H., Hsieh, C-L. and Huang, S-P., 2008. Mining product maps for new product development. Science Direct, pp.50-62

7. Mazzoni, C., Castaldi, L. and Addeo, F., 2007. Consumer behavior in the Italian mobile telecommunication market. Telecommunications Policy, 31, pp.632-647

8. Ovum, February 2004. Fixed-Mobile convergence: The opportunity assessed. Available from: http://www.ovum.com. [Last accessed October 2005]

9. Stein, E. 1996. Product Development: A Customer-Driven Approach. Harvard Business School, pp.25-48

10. Vodafone, 2008. Broadband@Home Proposition: Marketing & Launch Plan Due Diligence. Company Confidential document available to the author.

BOOKS

1. Crawford, M. and Benedetto, A. 2000. New Products Management, 6th ed., Boston: McGraw Hill.

2. Kotler,

3. Silk, A.J., 2006. What is Marketing., Boston: Harvard Business School Press.WEBSITES

1. Economic Intelligent Units, 2006. Available from: http://www.eiu.com [Accessed 15/05]2. National Committee for Post and Telecommunications web site, Available from: http://www.eett.gr [Accessed 10/05]3. New Product Development Solutions, 2008. Available from: http://www.npd-solutions.com/voc.html [Accessed 15/05]4. Vodafone Web site, 2008. Available from: http://www.vodafone.gr [Accessed at 15/05]

_1272543655.vsdIncumbent Customers

Quality

Cost

Low

High

Low

High

Vodafone Convergent Segmentation

Cheap ISP Customers

_1272635647.vsdBeginners Group

VF ADSL X24 up to 24 Mbps

VF ADSL X6 up to 6 Mbps

VF@Home 500 Greece & Abroad

VF@Home 700 Greece

VF ADSL X24* (Full)

VF ADSL PLANS

VF Double Play Plus

Beginners Group

Beginners Group

Advanced Users

Beginners Group

Advanced Users

Beginners Group

VF@Home Plans

Advanced Users

Advanced Users

Advanced Users

Advanced Users

Advanced Users

VF@Home 1200

VF@Home 500

Advanced Users

_1272639098.vsdConvenience

Low

Cost

High

Low

High

MobileTelephony

FixedTelephony

Fixed Mobile Substitution

Open Space for satisfying Customers Needs

_1272544828.vsdSimplicity

Professionalism

Low

High

Low

High

Simplicity Seeker

Practical Talker

Family Organizer

Super User

Messaging Mate

StylishTechie

The Simple/Beginner Users Group

The Advanced Users Group

_1272532002.vsdtext

Customers wantsimplicity regardless of underlying technologies

Customers want one personalized service wherever they are

Customers value the mobile handset design and feature set

Customers want high speed accessto key applications

Cheaper Price

Simplicity

Functionality

Functionality

Simplicity

Customers Basic Needs

Cost Saving

Functionality