Telefnica UK Limited and Vodafone's Marketing Strategies - Case Study Example

? Marketing Communications Executive Summary The marketing communication helps to define the relationship of an organization with its s. Studies have shown that the success of a firm is greatly dependent upon the quality and depth of communication. In addition, the communication medium chosen for the same also plays a crucial role. Brands exist in the minds of the consumers, not only due to its experience by the customer, but principally due the long term impact of communication. Traditional marketing models have failed to capture the intricacy of consumer behaviour and as a result of that, established communication models were actively used by the markets. This not only allowed compliance with the marketing plans, but also succeeded in directly addressing the issue of consumer behaviour. This study emphasizes on the strategic significance of communication and the long term effect on the consumers. In this study, one of the biggest telecommunication companies of UK, O2, has been chosen to evaluate its communication mix. In addition, a comparative study between O2 and one of its arch rivals, Vodafone, has also been carried out. The key findings were that both O2 and Vodafone use almost all the elements of communication mix, except direct and personal selling. Although, it has been found that Vodafone is currently enjoying a better position in the market with its strong promotions and better plans, but the study has also shown that O2 has the potential to outshine Vodafone. In this context, the company can use its wide range of offerings to compete with Vodafone. One of the major limitations of the study was that it has been able to carry out secondary research only. It is believed that some kind of primary research along with this would have increased its credibility. Table of Contents 2 Introduction 4 Competition between two Brands 5 Literature Review 8 Market Overview 10 Research Methodology 11 Analysis and Discussion 11 Conclusions & Recommendations 17 Appendix 19 Introduction This paper looks into the marketing strategies of O2 and presents an evaluative study of the current strategies adopted by the company in contrast to its competitor, Vodafone. However, prior to that, brief overview of both the companies will be presented. O2 Telefonica UK Limited, commonly known as O2, is a UK based Telecommunication Company and is owned by Telefonica. The company is considered as the second largest telecommunication company of UK, right after Vodafone. O2 is presently headquartered at Slough, Berkshire, United Kingdom. It was founded in the year 1983 and Cellnet was its predecessor. Apart from the telecommunication services, the company also operates in financial service industry and internet service providing industry. Ronan Dunne serves as the present CEO of the company. Since his takeover from the previous CEO, the company has managed to do very well and has also succeeded in maintaining high revenue. O2 offers 2G, 3G and 4G services across the country and in some other parts of Europe. Furthermore, along with the wireless services, the company is proactive in fixed line services as well. The company uses its name as the logo and tries to portray an image where it acts as oxygen to the consumers with its name O2. The company is also active in the fields of charity and for that, it has tied up with groups. One of them is Academy Music Group. Partnering with them, the company has established O2 academy. Vodafone Vodafone Group is a telecommunications company based in London (Vodafone, n.d.). The company has the registered office in Berkshire. The company has influential operations in the international market and occupies the position of the third-largest mobile telecommunications company, after China Mobile and Singtel in terms of total number of subscribers (Celtnet, 2013). In June 2011, the company had 381.72 million subscribers (Rediff, 2011). The company has expanded its operations in more than thirty countries. Additionally, it has network of business partners in more than forty countries, apart from those in which it operates. In terms of turnover, the company has moved to the top position in the telecommunications industry and has maintained the position for the last few years (Pan, 2010). Over the last 30 years, the company has made various moves that have increased visibility of the company. The company has adopted different strategies and has experimented with them in order to implement the most effective policy. The company has been successful in increasing its share in the UK mobile telecommunication market (Celtnet, 2013). Until 1997, the company used to use the logo with its name written. Its former logo is as shown below. Figure: Vodafone company logo (Source: Celtnet, 2013) In the 1990s, the company has been involved in several strategic acquisitions in different countries. In 1997, the company introduced a “new corporate Speechmark logo” (Celtnet, 2013). Figure: Vodafone speechmark logo (Source: The hub, 2013) The new logo consists of “a quotation mark within a circle” (Celtnet, 2013). The 'O's in Vodafone logo represent the “opening and closing quotation marks” (Celtnet, 2013) that is indicative of a conversation. The company maintains clear focus on the marketing activities of the company and emphasizes on maintaining excellent relationship with customers all across the globe. Competition between two Brands Digital communication has become one of the integral parts of the lives of common man worldwide. In both developed and developing economies, communication facilities are developing fast with the advancement of technologies. In the modern day scenario, cell phones have become indispensible for the people engaged in all kinds of mainstream activities. This is one important reason that increases the total value of market share at the global level. In 2012, in the United Kingdom alone, there were more than 82 million people that had made subscriptions to different mobile service providers. In addition, it has been also found that along with mobile phone subscribers, the number of internet users is also increasing at a rapid rate. The amount of data traffic has been found to double in this year compared to the last year. In the UK market, a number of players operate in this segment, among which Vodafone and O2 are the two renowned names. Both O2 and Vodafone have similar kinds of products and they act as a competitor to each other. When Vodafone had launched its 4G services in UK, there were hardly any companies who could compete with it. However, with the arrival of O2’s 4G services, the market became more fragmented and competition levels within the industry reached a new height ((O2, 2004). The pricing was also done in such a manner that O2 could easily act as a direct competitor. A survey carried out by shinyshiny.tv regarding the company which is mostly favoured by the customers in terms of internet packages. The study revealed that consumers mostly preferred Vodafone owing to its better network connectivity and at the same time, better offerings. However, there is a set of customers who prefers using O2 because of the wide range of available options (Gov, 2013). It has been analysed that O2 can compete effectively with the variation in offerings of their data plans with Vodafone. The diagram below will highlight the price and data offering differences between the two companies: - SWOT ANALYSIS VODAFONE Strength Rich tradition and high Brand value. Quality. Has been operating in the market since long and thus, has been able to create a name for itself and has simultaneously succeeded in generating a sense of trust among the consumers. The financial situation of the company is also stable. Weaknesses Sometimes Vodafone faces the issue of PR crisis. Issue of pricing. Less number of offerings. Opportunities Rising demand and extension to new target segments. Upgrading opportunities to 5G network. Threats • Competition • Threat of pressure from the government and public related to reduction of prices and use of spectrum. O2 Strengths The products are designed elegantly and the service offerings are exactly as per the requirements of the consumers. Technologically competent and strong R&D facilities. Weakness • Low market penetration. • The company only operates in UK and some parts of Europe. Opportunities • The company has the opportunity to expand into the Asian market. • The company can launch 5G services and tap consumers who prefer data browsing at rapid pace. Threats • New entrants and existing players are always a threat for the firm. • Government laws pertaining to spectrum and environment can act as a threat. A number of researches confirm that O2 has enough potential to beat Vodafone in UK markets. However, it is also true that the task will not be easier as Vodafone, being one of the oldest telecommunication companies, offers the most contemporary products at affordable prices. The only loophole which can be targeted by O2 is the variety in offerings. A comparison of the offerings between the two companies is presented below: - (Source: Woollaston and Eccles, 2013) Literature Review The international market for telecommunications services has become increasingly competitive in the last decade. This is because of the rapid technological advancements, which are leading to the development of modern tools and channels of communication. Xavier and Ypsilanti (2008) opine that in this era of varying communication tools, adopted by marketers as well as consumers display various motivations behind their decisions to purchase services from some particular mobile service provider. Companies therefore, engage in a widely diverse process of devising customer attractions and retention strategies. The diagram below will elucidate the points clearly. Figure 1 – Promotional Mix Model Hence, it is evident that a number of factors are considered while promoting a product or service. The theory is supported by Xavier and Ypsilanti (2008), where the authors state that the quality of promotion depends upon several factors. They also state that, to appeal to a mass segment, a comprehensive promotional tool needs to be put into practise. Anwar (2003) emphasized on the fact that the significance of promotional mix is much more for a telecommunication company, as the level of awareness generation acts as the key to success. According to some old models of mobile phones service marketing, there are four important factors that the marketers are required to take care of while making marketing strategies. These factors are consumer satisfaction level, reasons of consumer dissatisfaction, availability of alternative choices and impact of information asymmetry or systematic bias on consumer decision making process (Xavier and Ypsilanti, 2008; Sutherland, 2009). According to K?m?loglu, V. Nas?r and S. Nas?r (2010), it is important to identify and study in detail the behavioural pattern of customers and divide the market segment according to these characteristics. Jallat and Ancarani (2008), in this context, have stated that depending on the amount of information available to customers, they can develop a certain notion about the company, its products and service offerings. This leads to the development of systematic bias, which affects the company’s market performance. In this context, the behavioural aspects of the target customers would have to be considered. O2 has an effective team and has a separate market research department to monitor the pattern of customer’s demand. In addition, the company embraces a strong marketing team who has the ability to frame various strategies, which would in turn help the company to place them as one of the most competitive market player in UK as well as the world (Xavier and Ypsilanti, 2008). Market Overview The telecom industry of UK is often dubbed as one of the most competitive markets of Europe. Studies have shown that UK alone has added over 3 million connections in the year 2008. Presently, the company caters to around 22 million customers (Hoovers, 2013). This shows that the market has enough potential and the ability to offer better opportunities to each player. Some of the key players of this industry are O2, Vodafone, T-mobile and Virgin mobile. The business activities undertaken by O2 are purely meant for maintaining and strengthening their market presence. In the UK, this company owns the maximum market share and holds a position ahead of other companies such as, Vodafone, Virgin or T-Mobile. One of the key factors towards the success of O2 is that the company puts huge emphasis on its customers. Customer preferences and choices are considered to be one of the primary factors that affect overall decision making process for the management. Figure 2 - UK Mobile Marker Share (Source: Gsmaintelligence, 2012) However, there is concern over the fact that trend is shifting and Vodafone with its intelligent pricing strategy and adequate offerings are trying to gain more market share. The company has faced severe losses in the last quarter 2012 due to switch-over tendencies of customers. As a result of that, the marketers of O2 have framed its media marketing strategies with the aim of increasing confidence of the customers on the brand. Due to increased competition from Vodafone, Virgin or T-Mobile in the telecommunications industry, customers have a number of options available at their discretion. This phenomenon has led the company to revise its marketing strategies and make it suit the current requirements of the market more precisely. With the help of digital creativity, the company website has improved in terms of both design and contents. Online selling has also been stressed on. These activities have helped to develop a good image in the minds of the customers about the company (Whalley and Curwen, 2013). With greater interaction with its customers, the company can access the information about its rival companies’ performance. This has enabled the company to retain some of its old customers that had decided to switch brand. Also, the company can attract new customers through these new channels of marketing. Research Methodology The study has used both primary and secondary data to address the level of competitiveness between the two firms. The data has been collected through internet research only and no primary survey was done. The collected data was then analysed qualitatively. In addition to internet research, the study has also made use of scholarly journal articles in order to increase the authenticity of the research. Analysis and Discussion Promotional Mix Tool Vodafone O2 Advertising Yes Yes Personal selling No No Public Relations Yes Yes Direct Marketing No No Sales Promotions Yes Yes Internet and Online Marketing Yes Yes Sponsorships & Events Yes Yes The chart above shows how both the companies manages their promotional activities. In addition, the above chart also illustrates the medium of communication used by the companies to communicate with the customers. Advertising Vodafone uses various kinds of advertisements to attract the consumers. The company aims at showcasing their provided facilities to the customers through their advertisements. One of the key features of their advertising strategy is the period change of the advertisements. The medium used is generally social media and television. In addition, podcast sites are also used. O2, on the other hand, uses different kinds of advertisements. The company uses celebrities to endorse their product and focuses heavily on the festive times. Public Relations Both the companies have appointed public relations officers to deal with the issue of relationship management with the consumers. In addition, they also initiate several programs. The only difference is that their approaches are different. For example, Vodafone maintains good relationship with the media, whereas the PR activities of O2 are directed towards the consumers. Sales Promotions Vodafone uses different strategies to promote their products. For example, they make use of Vodafone stores as well as other retail stores to manufacture their products. In addition, short term promotional techniques are also used by Vodafone. On the contrary, O2 believes in establishing positive relationships with the consumers and sells through retailing and wholesale distribution. Making the customers aware of the good offers is also a technique followed by the company. Slogans Vodafone uses the slogan “Power to you” and O2 uses “We’re better, connected”. The slogans used by the companies also help them in positioning themselves in the market place. For example, Vodafone position itself as a company offering additional support to an individual in the form of better service. On the contrary, O2 position itself as a company offering greater connectivity. The analyses have shown that their strategies and communication modes are working well so far and this reflects in their current market position and market share. However, to further improve their performance and increase competitiveness, the following are the communication strategies which can be applied: - 1. The company is recommended to make use of a comprehensive communication method to communicate with each stakeholder groups. The following chart will illustrate it clearly. Target Audience Communication Method/Vehicle Local and regional stakeholders Public notice; Media Vehicles. Local community Workshop; small event sponsorship; Public Relations. Audience at national and international levels TV, Internet and Social media promotions. 2. The company is also recommended to frame a coherent action plan to highlight the goals and objectives and along with that a tentative time frame. This will also help the company in monitoring their progress. Conclusions & Recommendations The study was meant for analysing the significance of communication mix in an organization and the extent to which communication strategies play a role in the progression and development of the same. The study made it evident that communication strategies chosen by an organization plays an imperative role. The UK market for mobile phones is expanding at a rapid paced, which provides opportunity for the telecom service providers to expand their business activities as well (Kallio, Tinnila and Tseng, 2006). This report deals with O2 and its competitor, Vodafone. It has been observed that O2 makes use of advertising, public relations, sales promotions, internet and online marketing and event sponsorships to communicate with the consumers. Hence, with comprehensive marketing communication strategy, it is believed that the company has great opportunities to outshine its rivals. On comparing the company’s communication strategy with Vodafone, it has been found that the strategies are almost similar, but the greater financial stability and presence in the market for longer period of time gives Vodafone an upper hand over the competitors. Moreover, Vodafone is one of the most successful companies in the telecommunications sector and it acts as the market leader in the UK. Now, in order to compete at the highest level with Vodafone, the following are the recommendations: - O2 has already taken several steps to bring a greater proportion of the sub-urban population within the target customer base (Pan, 2010). However, despite wide range of offerings, the company is facing loses due to shifting of customers to other providers offering lower per unit cost. Hence, it is strongly recommended that pricing strategy of O2 needs to be modified in order to maintain its competitive positioning. The company has to choose the appropriate positions for placing its kiosks, so that they can be accessed by maximum number of customers on a per day basis (Khanna, Voordt and Koppels, 2013). The Vodafone kiosks are placed in busy areas and hence, O2 must also keep their Kiosks or set up shops at the city centres. Additionally, the company also has to improve its training and development programs to facilitate staff members perform with greater elegance and knowledge and simultaneously, offer quality services. Appendix The rivalry of these companies has reached an extent where they have also involved third parties. For example, two famous clubs of UK i.e. Manchester United and Arsenal are arch rivals. 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