Omnitel_Case

Sonam Shah 9/28/11 Strategic Marketing, Planning & Management Professor Erdem: Omnitel Pronto Italia Case 1. What was Omnitel’s competitive advantage when the service was launched in December of 1995' * Omnitel’s strategy to position itself as a telecom company that provided exceptional customer service * First, the operator’s approach was very friendly and polite to each and every caller * Second, the company tried minimizing the customers’ waiting time during a call; Most customer service calls were answered within 20 seconds * Third, Omnitel tried to offer one-time calling to limit the number of times a customer was transferred to different specialists * Omnitel also strived to maintain a low churn rate of about 10% - 15% a year 2. Why did the launch not perform to expectations' * There was a state-owned competitor, TIM, already in place and many customers were loyal to the brand * TIM had positioned cellular phones as a thing of status – if you have one, you are a “somebody.” This position was the general idea among the Italian market and not everyone could afford a cellular phone. * Price was too high to get the phone and then be bound in a contract. * Customers hesitant to pay the monthly fee, which they saw as a tax. Along with the monthly fee and activation charges 3. What are the economics of LIBERO' * OLD REVENUE = [38 minutes X Lit. 1,524] + [150 minutes X Lit. 170] + [Lit. 10,000 for monthly fee] = Lit. 93,412 * LIBERO REVENUE = [38 minutes X Lit. 1,595]+ [155 minutes X Lit. 195] = Lit. 90,835 * Revenue Shortfall = Lit. 93,412 - Lit. 90,835 = Lit. 2,577 * Possible ways to overcome the shortfall: target a segment of cellular phone users, increase peak hour/non-peak hour usage, offer different price points for different types of calls 4. Why is the churn rate so high for many European countries' * Market penetration is much higher in some European countries than others and which so many customers being serviced, many are bound to be unsatisfied and thus discontinue their services. * These countries also have a variety of cellular phone service providers. Price sensitive customers often sign up for services and then drop the costly service. Many of these types of consumers bounce around from service to service in trying to get the best deal. * The cellular phone is positioned as a high end/premium product. High end users have the money to spend and because this is more of a status and fashion issue for many, they are likely to drop whatever is “uncool” * Customer Service for many providers is impersonal causing users to drop 5. Do you expect the churn rate to increase or decrease with the launch of LIBERO' * I expect the churn rate to decrease with the launch of LIBERO. * With the omission of monthly fees, high end customers might drop the service because they think that the quality of service will become lower * However, many new cost sensitive consumers will sign up for the service as LIBERO is now being positioned as a product for the masses and many unsatisfied TIM users might switch to LIBERO as their will be no monthly fees * Therefore the amount dropping the service will be much, much lower than those adopting the service. 6. What do you learn from consumer research (see Exhibits 5 to 8)' * Personal Users are much more brand loyal than prospective users and the rejectors. These younger users, who are late adopters are well satisfied with the cost and brand image of their product and therefore are unwilling to switch * 35% of the personal users value are cost sensitive. These 25-34 year old working professionals, the early adopters, are willing to make the switch * The Prospects are cost sensitive, tariff sensitive and service sensitive. They are the young, educated, mid to high class people willing to switch as they are unsatisfied with Telecom’s services and prices * The rejecters, the ones that were considering cellular phones and recently rejected the notion, are sensitive to monthly cost, activation fees and traffic cost. Once again, these are the young, educated and mid to high-class people. * The research shows a wide-open opportunity for LIBERO/Omnitel. LIBERO should be positioned as a product of need marketed towards young, educated, working professionals raging from 25-54. With an affordable price, it can also position its customer service as one of their main products because that is its competitive advantage. 7. Will LIBERO lead to a price war' If yes, what would OMNITEL do to avoid one' * No, I do not think it will lead to a price war because LIBERO is not offering a subsidy on handsets and is actually increasing the price per usage (by minute). * However, TIM may perceive the monthly fee cut as a price war. To avoid one, Omnitel can position itself as a product of the masses (especially the middle class users) rather than something for the high end users. It can be a product of need rather than status. * Also target a different segment of the market: the 25-54 year old professionals that value service and are cost sensitive. TIM’s brand loyal crowd is of less sophisticated 18-24year olds. LIBERO can market itself to the practical young professionals rather than the brand loyal ones. 8. If you were Fabrizio Bona, what changes would you make to LIBERO and why' * In the marketing plan, I would create a catchy and memorable logo for LIBERO as well as advertisements targeting the 25-54 educated, professionals. Their current advertisement is just fireworks, which is appropriate as they just launched, but for LIBERO the logo and advertisements need to represent its target market. * In order to differentiate itself even more from TIM, LIBERO can offer a plan including different pricing for the different types of calls users can place. Their customer analysis shows that consumers want this. LIBERO can define the distances for local calls, long-distance calls and international calls and price them accordingly from Lit. 170 to Lit. 200 as users do not mind this range. This will also attract the tariff sensitive users that are with Telecom. * Since a huge portion of LIBERO’s target market is professionals, it can also market itself towards a cellular phone service for businesses. This is the case in Norway; Telenor, which holds 65% of the market is the provider for large companies while Netcom Asa, which holds 65% for the market is the provider for small and mid-size companies. This is a huge opportunity to capture on.