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Marketing Management – IFaculty: Mr. A. Srikant
STP Analysis
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Table of Contents
Executive Summary.......................................................................................................................4
Introduction....................................................................................................................................6
Overview of the Telecom Industry.................................................................................................7
Highlights...................................................................................................................................7
Competitors................................................................................................................................9
Marketing Strategies......................................................................................................................9
Service & Handset- Buy One, Get Other Free...........................................................................9
Customer Generation - Tapping in to Internal Resources.......................................................10
Advertising – Educating Masses and Evoking Passions.........................................................10
Market Segmentation..................................................................................................................11
Segmentation Strategy of reliance communications...................................................................13
Market Segmentation Strategy................................................................................................13
Measurable, Accessible, Substantial, Differentiable and Actionable Market.......................14
Targeting......................................................................................................................................17
Targetting Full Market Coverage.............................................................................................17
Positioning for Competitive Advantage....................................................................................17
Positioning Strategy.................................................................................................................19
Product Differentiation..........................................................................................................19
Service Differentiation..........................................................................................................20
Personnel Differentiation......................................................................................................20
Channel Differentiation.........................................................................................................21
Image Differentiation............................................................................................................21
Conclusion……………………………………………………………………………………………….22
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EXECUTIVE SUMMARY
Reliance Communication stimulated telecommunication growth in India by challenging many of
the conventional practices in product design, distribution, sales, advertising and pricing.
Reliance Communication fashioned a strategy which was conceptually simple but
sweeping in its impact. While the competitors focused on the top segment of the market,
by charging a premium, Reliance Communication sought to reduce the cost to the
consumer, thus focusing on a market driven by volume. While others saw weaknesses of
India as a market – widespread poverty and low levels of telecommunication penetration – and
Reliance as an old economy firm focusing on oil production and business-to-business clients –
Reliance Communication realized that these actually were strengths which it could tap into.
Reliance Communication’s managers saw that telecommunications would be much valued by
the poorer sections of society if it could be used to create opportunities and offered at affordable
prices. The company tapped into its strong political and financial clout to build up a strong
organization that could push it through the legal and regulatory system. Reliance
Communication is planning to consolidate its telecommunication revolution through three
phases:
Firstly, the mobile revolution now reaching 17 million customers will expand to 640,000 villages
and to over 5,000 cities and towns. This revolution will create the potential for every individual to
talk, learn, shop, bank, transact, entertain and be informed, while on the move.
Secondly, an enterprise Netway revolution will bring the possibility to provide broadband
experience to every desktop and device in half a million enterprise buildings initially and
eventually to millions of commercial buildings. This will create the potential to empower every
enterprise by making transactions efficient, functions seamless and new economic opportunities
abundant.
Thirdly, a convergence revolution will provide high-speed networks to millions of homes. This
revolution will offer every home access to a wide range of television channels, high-speed
telephony, audio conferencing, videoconferencing and video on demand.
With this we conclude that Reliance communication has an enormous opportunity of growth with
a firm financial backing from its other business units and a political lobby supporting its
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strategies. Our group observed that RCOM will lead the Indian Telecom industry by 2010
because TRAI is supporting the CDMA technology in future.
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INTRODUCTION
“We will leverage our strengths to execute complex global-scale projects to facilitate leading-
edge information and communication services affordable to all individual consumers and
businesses in India. We will offer unparalleled value to create customer delight and enhance
business productivity. We will also generate value for our capabilities beyond Indian borders
and enable millions of India's knowledge workers to deliver their services globally.”
The Late Dhirubhai Ambani dreamt of a digital India — an India where the common man would
have access to affordable means of information and communication. Dhirubhai, who single-
handedly built India’s largest private sector company virtually from scratch, had stated as early
as 1999: “Make the tools of information and communication available to people at an affordable
cost. They will overcome the handicaps of illiteracy and lack of mobility.”
It was with this belief in mind that Reliance Communications (formerly Reliance Infocomm)
started laying 60,000 route kilometers of a pan-India fiber optic backbone. This backbone was
commissioned on 28 December 2002, the auspicious occasion of Dhirubhai’s 70th birthday,
though sadly after his unexpected demise on 6 July 2002.
Reliance Communications has a reliable, high-capacity, integrated (both wireless and wire line)
and convergent (voice, data and video) digital network. It is capable of delivering a range of
services spanning the entire infocomm (information and communication) value chain, including
infrastructure and services — for enterprises as well as individuals, applications, and consulting.
Today, Reliance Communications is revolutionizing the way India communicates and networks,
truly bringing about a new way of life.
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OVERVIEW OF THE TELECOM INDUSTRY
HIGHLIGHTS
Indian Telecom services industry accounts for 1.5 per cent of GDP. Telecom services
market is growing at 20 per cent per annum. Cellular segment growing at 70 per cent.
Major Segments of Telecom Services – Basic Fixed Line services, National Long
Distance, International Subscriber Dialing and Cellular Mobile services.
Policy framework for this segment governed by the National Telecom Policy (NTP). NTP
1994 allowed private participation. NTP 1999 set target of tele-density of 15 telephone
connections per 100 persons by 2010.
Basic services still largely monopolized by state owned players - MTNL and BSNL, even
though private participation allowed in 1994. Total fixed line connections are estimated
at around at 28 million as on 31 October 2000. They are expected to go up to 75 million
by end of March 2006.
National Long Distance (NLD) service was opened up for private participation during
FY2001. The revenue from this service is expected to be INR 151 billion in FY2002 and
INR 239 billion by FY2005.
Overseas service is monopolized by VSNL at present. However VSNL which is already
an internet service provider will also participate in NLD and other broadband services.
Cellular mobile services, started in 1995, are amongst the fastest growing segment.
After a slow start, this sector grew at compound annual growth rate of more than 70 per
cent.
Future issues include implementation of Calling Party Pays principle, passage of the
Convergence bill and greater consolidation through mergers and acquisitions.
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Figure 1
Figure 1 shows the structure of the Indian Telecom Industry. The Company Reliance
Communications that we are focusing on lies under Private operators providing fixed line and
cellular services.
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CompetitorsThe major competitors of Reliance Communications are as follows:
Airtel
Vodafone
IDEA:
BSNL
Tata Indicom
Spice
Virgin
Aircel
Alkatel
MARKETING STRATEGIES
Reliance Communication radically redefined marketing models in India and engaged homes and
enterprises directly by having the ability to deliver physical and virtual products and services as
part of one system. Reliance Communication through its aggressive, unconventional tactics
changed the rules of the mobile marketing game.
Service & Handset- Buy One, Get Other Free
Handsets were to be purchased separately since the operators until then offered only services,
and never dealt with handsets. For a customer this meant dealing with two suppliers – one for
the service and another for the handset. Reliance Communication, for the first time in India,
offered handsets free of charge, along with the service.
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Customer Generation - Tapping in to Internal Resources
Reliance targeted internally as it looked for the first set of customers. Officials of Reliance
Communication realized that an employee base of more than 50,000 and a shareholder base of
about 3.3 million was the best place to start as far as customers were concerned.
Advertising – Educating Masses and Evoking Passions
The Reliance mobile brand was branded as IndiaMobile to cash in on patriotic feelings.
Bundling of handsets along with the service – a first time in India – allowed Reliance
Communication to resort to a co-branding exercise with the handset makers.
Business Units of Reliance Communication
Wireless Broad Band Global RTIL
GSM Internet Data Center (IDC) Services ILD* Tower
Business
CDMA Internet Bandwidth (ISP) Voice Carrier
PCO
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Core Strengths:
Brand: provides high level of branding and visibility
Distribution: Retail presence through 16,50 exclusive stores in 700 towns
Contact Centers : 6000 seat multilingual, multi location
Continuous Innovation: e.g. innovative lifetime plan, all India Plan
Network architecture and capability
Strongly positioned for accelerating market growth (*ILD – International long distance calling )
MARKET SEGMENTATION
a. Markets consist of buyers. These buyers may differ in their wants, resources, locations,
buying attitudes, and buying practices. Through market segmentation, companies divide large,
heterogeneous markets into smaller segments that can be reached more effectively with
products and services that match their unique needs.
Segmenting Consumer Markets
b. There is no single way to segment a market. Marketers must try different segmentation
variables, alone and in combination, to find the best way to view the market structure.
1. Geographic segmentation divides the market into different geographical units, such as
nations, regions, states, counties, cities, or even neighborhoods. A company may operate in
one or a few geographic areas, or it may operate in all areas but pay attention to geographical
differences in wants and needs.
2. Demographic segmentation divides the market into groups based on variables such as age,
gender, family size, family life cycle, income, occupation, education, religion, race, generation,
and nationality. Consumer wants, needs, and usage rates often vary with demographic
variables. Demographic variables are also easier to measure than other variables.
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Psychographic segmentation divides buyers into different groups based on social class,
lifestyle, or personality characteristics. People in the same demographic group can have very
different psychographic makeups, and marketers often segment by common lifestyles.
7. Behavioral segmentation divides buyers based on their knowledge, attitudes, uses, or
responses to a product.
i. Occasion segmentation groups buyers according to occasions when they get the idea to buy,
actually make the purchase, or use the purchased item.
ii. Benefit segmentation requires finding the major benefits people look for in the product class,
the kinds of people who look for each benefit, and the major brands that deliver each benefit.
iii. User status groups buyers according to whether they are nonusers, ex-users, potential users,
first-time users, or regular users of the product.
iv. Markets can also be segmented according to usage rate—light, medium and heavy product
users.
v. Loyalty status looks at the level of loyalty to brands, stores, and companies.
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SEGMENTATION STRATEGY OF RELIANCE COMMUNICATIONS
In the words of Dhirubhai Ambani himself, “My vision is to provide the latest telecommunication
facilities to every Indian at the price of a post card”.
Market Segmentation Strategy
Reliance has always been known for its “unconventionalism” in dealing with various activities of
the management, from advertisement and promotion to identifying potential customers to the
actual selling of the product. It was also instrumental in increasing the mobile phone penetration
in India to grow from 0.25 percent in early 2001 to about 7.53 percent till date.
Reliance Communication stimulated telecommunication growth in India by challenging many of
the conventional practices in product design, distribution, sales, advertising and pricing.
Reliance Communication fashioned a strategy which was conceptually simple but sweeping in
its impact. While the competitors focused on the top segment of the market, by charging a
premium, Reliance Communication sought to reduce the cost to the consumer, thus focusing on
a market driven by volume. While others saw weaknesses of India as a market – widespread
poverty and low levels of telecommunication penetration – and Reliance as an old economy firm
focusing on oil production and business-to-business clients – Reliance Communication realized
that these actually were strengths which it could tap into. Reliance Communication’s managers
saw that telecommunications would be much valued by the poorer sections of society if it could
be used to create opportunities and offered at affordable prices. The company tapped into its
strong political and financial clout to build up a strong organization that could push it through the
legal and regulatory system.
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Measurable, Accessible, Substantial, Differentiable and Actionable Market
Reliance estimated that there are around 320 million [people in] households with an annual
income of Rs 1.5 lakh (US$3,333) [and above]. Of that, half are in rural areas with similar
purchasing power. And this segment is expected to grow to 500 million by 2008 and to 602
million by 2010. This presented a substantial chunk of potential buyers for Reliance products.
Besides, the segment was also easily accessible, that is, it could be easily sought and
encouraged to buy Reliance mobiles considering their extremely economical cost.
Since its very inception to becoming one of the market leaders in the field of
telecommunications, Reliance has adopted a number of strategies and introduced a variety of
products to cater to the needs of various market segments. On a broader note, Reliance has
segmented the market on the following major criteria:
Geographic Segmentation
On the basis of geography Reliance Communication has always believed
in uniting India as a whole and considering it as a single entity and
consequently divided it’s services under two major broad categories (in
both prepaid and postpaid) schemes --- National and International. One of
the best examples in this context is that of the ONE India Plan which
allows you to call any phone, anywhere in India for just ONE RUPEE per
min.
Besides, it also come up with national and international roaming plans and STD and world
calling cards to cater to the needs of different people spread across different geographical
locations. The Reliance Global Calling Card is available in 5 denominations — Rs.115, Rs.225,
Rs. 575, Rs.699, Rs.1,130, Rs.1,900, Rs.2250. You can make ISD calls from any Reliance
phone, be it postpaid (Reliance Mobile / Fixed Wireless phone) or Reliance Mobile prepaid. The
prepaid Reliance STD Calling Card offers very affordable rates for local and national long
distance (NLD) calls. This is a rechargeable account-based prepaid card that can be used from
Reliance phones (Reliance fixed, fixed wireless and mobile – postpaid or prepaid) only and
cannot be used from a PCO. With this card, NLD calls can be made even from Reliance phones
without an NLD facility.
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Demographic Segmentation
Reliance has also segmented the market based on the demographic attributes of the customers
such as age, gender, income group, occupation, etc. Thus it has come up with a variety of plans
such as the JOY PLANS on postpaid which can help in significantly cutting call costs and the
ON –NET TALKTIME PACK which allows 1000 min. of free usage to all reliance mobiles and
wireless phones within circle absolutely free. This allows it reach a large chunk of population
with different needs and different financial backgrounds and in the process, makes its services
affordable to everyone.
Psychographic Segmentation
Different people have different value systems, varying personality traits, beliefs, attitudes,
separate self image or self concept and an altogether different way to look at life (lifestyle). As a
result their needs and preferences also differ accordingly. Reliance Communication has kept
this aspect in mind while designing it’s wide range of mobile phones to appeal to different
audiences and in a way suit their self – image (self concept). From lower end simple and sober
handsets like the CLASSIC series to the little stylish multimedia enabled handsets such as LG,
Kyocera and Nokia to the ultra – stylish UT Star PPC and TELESON handsets, Reliance offers
something for everyone.
Behavioral Segmentation
Customers exhibit varying behavioral patterns towards different products. Different customers
have different perceptions about different products and hence weigh the value derived from
each product differently. Reliance was quick to realize this and hence tried to segment the
market on the basis of the behavioral patterns of its customers. Here it looked at whether there
was increased buying during special occasions, whether a substantial chunk of population
looked for a specific class of benefits to be derived from its products, what was their user status
(current or ex user of its products), how heavily or lightly was a specific product used (usage
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rates), loyalty towards a particular category or product, readiness to adapt to new technology
and the general attitude towards the product.
Subsequently on 20 September, 2003, the 1st day of Navaratri, --- a multimedia mobile phone
service offering ringtones, greeting cards, pictures and video clips of Navaratri Festival was
introduced on R- world and over 10 million downloads were reported. Other than this Reliance
also continues to offer several schemes to customers based on their usage rates such as small
amount prepaid tariff cards for lower end users to Broadband services for corporate and high –
end individual users. Further it also offers plans of free subscriptions, gifts and extra talktime to
regular (loyal) users of its products.
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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.
TARGETING FULL MARKET COVERAGE
Today Reliance Communications has established itself as one of the top telecom service
providers in India offering a wide range of services such as CDMA and GSM services in both
prepaid and postpaid flavours, Broadband services through R – Connect, Reliance Hello
schemes, Reliance PCO, interactive TV, Data Center, etc. Because of the enormous gamut of
services offered across various product categories, (be it selling mobile phones or new
connections or broadband services) and market segments (both high end commercial usage to
lower end individual use), the Strategic Business (SBU) Units caters to almost all product
categories across all market segments. Thus the company targets the full Telecom Industry
market rather than any specific segment leaving no segment untargeted. Hence we can safely
conclude that the market segment targeted by the SBU is that of FULL MARKET COVERAGE.
Positioning for Competitive Advantage
a. 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.
b. 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.
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c. 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.
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POSITIONING STRATEGY
As already mentioned before, Reliance Communications (previously Reliance Communication)
has believed in introducing innovative techniques and practices in all its marketing strategies ---
be it segmenting, targeting or positioning itself in the market. Starting from the 1st of its kind ---
the Dhirubhai Ambani offer to the present day offer of connecting the entire India through ONE
INDIA PLAN, Reliance has always believed in making its services affordable to the people
while not compromising on the services offered and at the same time getting substantial
profit margins to sustain its growth. This principle forms the primary basis of Reliance
Communications product’s positioning strategy.
Among the major positioning strategies adopted by Reliance are:
Product Differentiation
Reliance offers its customers a wide range of products such as both high
end and low end mobile phones at prices which are much less costlier
than its competitors. A few of these mobile phones have already been
shown in the previous pages. These handsets differ both in their looks as
well as their style quotient when compared to other brands and are available with a variety of
schemes and features which are substantially different from other products of the same range
offered in the market. Thus both form and design differentiation can be easily made out.
Other than this, Reliance Communication used was product differentiation by mixing data
applications with voice. Through RWorld – an inbuilt Java enabled data feature of all Reliance
phones - the company guaranteed download speeds of up to 144 kbps from an applications
suite which has over 120 applications ranging from interactive Guides such as TV programme
guides and City Guides, Live News and TV news clips from channels like NDTV, CNBC, Aaj
Tak and India TV to contests, video songs, Ring Tones, Cricket Information, Women's World
and KidzWorld.
It introduced numerous applications like news, streaming audio and video of movies and music
clips, city & TV guides, exam results, astrology and stock prices.
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Service Differentiation
Reliance has also differentially positioned its products in the market through an entire range of
services offered by it which includes the ability to procure its products easily (ordering ease),
easy delivery mechanisms, installation procedures, appropriate guarantee/ warranty associated
with its products, financing schemes, appointment of customer training personnel, and adequate
after sales services. To achieve this, Reliance Communication started retail outlets in prime
commercial and residential areas ranging between 800 and 2000 sq ft, in major Indian cities,
district headquarters and towns that would number over 500, and set up WebWorlds. At the
WebWorlds the customer could interface directly with the company officials, see, touch and try
the products and then buy. At the phone stores, the customers could buy the phones directly
across the counter. The company envisaged that ultimately there would be at least one
WebWorld in all the towns where Reliance Communication has a presence. To ensure that the
product was available at the customer's doorstep, Reliance stocked its handsets in about
15,000 outlets across the country, while 70,000 outlets sold the recharge coupons. It also
appointed 600 exclusive distributors who sold only the pre-paid offering. Retailers like FabMall,
PlanetM, HP, Music World and Timex started to bundle their products along with Reliance India
Mobile. Phones were distributed at discount prices with many products the consumer bought.
Additionally the company conducted nationwide product demonstrations and announced that
the Pioneer Scheme would be a limited period offer, which further enhanced the interest of the
consumers.
Personnel Differentiation
Reliance ensured that the staff at Webworlds was competent and courteous enough towards
customers besides being well – trained, responsive and reliableand possessing good
communication skills. In essence it ensured that the customer went satisfied after each visit and
this gave it sufficient competitive advantage over its competitors.
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Channel Differentiation
In the case of marketing channels, instead of resorting to the tried and tested means, Reliance
Communication created a completely new model. As a tribute to Dhirubhai Ambani, Reliance
Communication fostered a new breed of entrepreneurs, as channel partners. The Dhirubhai
Ambani Entrepreneur Programme began with an aim of enrolling 200,000 individuals who are
committed to acquiring new customers and creating a new experience for them, based on
flawless service and feelings of satisfaction. About 50,000 individuals were recruited in a matter
of weeks who were guided and supported by 900 Reliance executives across the country. In
673 towns and cities, Reliance trained these entrepreneurs in basic skill sets, so that they are
able to deliver value to customers at their doorsteps. Reliance Communication envisaged
spending over Rs.1000 million (US$22.2 million) per year in training and competency building
programmes for these entrepreneurs. Through this programme, in addition to contributing to
society by encouraging other enterprises, and creating economic opportunities for millions of
young Indians, Reliance leveraged goodwill and networks.
Image Differentiation
The Reliance mobile brand was positioned as IndiaMobile to cash in on patriotic feelings. The
Reliance Communication brand name embossed on every handset gave it a unique cachet,
while the costs of many of the advertisements were discounted since they were also borne by
the handset makers. A mega advertising campaign was launched across the media to mark the
launch. The blitzkrieg coincided with the world cup cricket tournament, ensuring a huge
audience. The main theme of the first campaign built on the vision of Reliance Communication
in bringing the power of telecommunication to every person. This campaign helped to educate
people on the importance of telecommunication services. The next set of campaigns talked
about the innovative product features which differentiated Reliance Communication from its
competitors. The advertisements announced that Reliance IndiaMobile was 'Kabhi mobile, kabhi
computer' (Sometimes Mobile, Sometimes Computer). In the subsequent campaigns Reliance
started riding on movies and cricket as themes.
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CONCLUSION
Market segmentation, target marketing and Positioning are the key factors for any service or
product to be successful. A mélange of consumer segmentation variables, including geographic,
demographic, psychographic and behavioral characteristics is a prerequisite for any
product/service to reach out to its customers, as it is the use of multiple segmentation bases.
The importance and reasons for segmentation, targeting and positioning can be very well
portrayed through several examples of Fortune 500 companies. Segmentation outlines the
company’s opportunities, but target marketing is where the marketing manager makes his or her
money. Turning the segmentation opportunities into real markets is the real focus. Methods of
evaluating the market segments are the various levels of targeting: undifferentiated or mass
marketing; differentiated marketing; concentrated marketing; and micromarketing. Choosing the
target marketing strategy is described as dependent on many variables, such as company
resources, how variable the product is, and the stage of the product life cycle. But while a
company is targeting important segments, it must take care not to cause any controversy or
concern. For instance, companies that have targeted their premium cereals primarily to children
have been called to task for their practices, as have cigarette companies that seem to have
targeted the youth market in their chosen advertising vehicles. Finally, a company has to figure
out the best way to position itself for competitive advantage. Positioning involves implanting the
brand’s unique benefits, and differentiation in customers’ minds.