The Importance of Marketing Department in Telecommunication Business - Essay Example

? The Importance of Marketing Department in Telecommunication Business This report will try to highlight importance of marketing department in telecommunication business. The study will try to analyze business strategy from the view point of value delivery network. The report will try to understand importance of marketing department from the view point of value proposition offered by the company. Analysis of the key factors of a successful marketing plan will be part of the study. The report will try to understand potentiality of target market from the view point of product centric segmentation. Finally the study will try to prove the importance of marketing department to create a successful business strategy. Understanding marketing strategy in terms of 3V’s approach will be an important part of the study. Table of Contents Table of Contents 3 Marketing Department 4 Telecommunication Business 5 Understanding Telecommunication Business 6 Decision Making 7 Successful Business Strategy 9 Marketing 10 Importance of Marketing Department 10 Marketing Strategy 11 Marketing plans 13 Importance of Marketing Department for Telecommunication Business 15 Productivity 15 Success 15 Profit & Growth 16 Conclusion 16 Marketing Department Every organization needs a well designed marketing department to create brand equity among customers. Strategic marketing works as a deciding force for a company to survive in hyper competitive business environment. Marketing works as a promotional and distribution tool for company. Marketing strategy differs according to the nature of product. Marketing department of any company focuses on four things to create a successful offering which can be classified as 1-Product (manufacturing product, maintaining the quality standard of product, optimum utilization of resources during production process), 2- Price (deciding the price of the product in accordance with the demand among customers, setting high price or low price for the product is an important part of pricing strategy), 3-Place (designing distribution network for the product. Company creates distribution network to expand the reach of the product. Appointing c&f agents, stockiest, wholesalers, retailers is a part of distribution strategy), 4- Promotion (company uses direct marketing, sales promotion, advertising and public relation activities to create awareness about the product among people. Above the line promotion and below the line promotion is part of advertising strategy). Marketing strategy for service industry comprises of additional three types of activities. 1-People (customer relationship management plays a cordial role to increase customer base for any particular brand. Staff of the company is the important assets for any company. They are responsible for providing value for money services to customers and they can help the company to increase service efficiency), 2- Process- (company needs to maintain a proper system of service delivery to be successful in long run. Companies take help of different software systems like RFID, Enterprise Resource Planning, Tally, Oracle to deliver efficient service to customers, 3- Physical Evidence (well designed interior of service delivery place creates a positive brand image of the company from the view point of aesthetics. Restaurants use physical evidences to create the wow factor among customers. Chinese restaurants in America use dragon framework to design interior of the food store. They do it to increase visibility factor of the service among customers). A business can not fulfill demand of all customers due to lack of resources (Financial, Human Resource, Technology etc). For this reason any company needs to identify their potential customer. Segregating the whole customer group into smaller division with more or less common requirements and further filtering down customers in terms of their potentiality (purchase power, urgency of requirement, buying behavior) is known as segmenting and targeting. Perception of a brand in the mind of customer is known as positioning (Kotler, Keller, Brady, Goodman, & Hansen, 2009). Connection between customer and product emphasizes on customization of product according to demand of customer. Innovation in the field of product design is driven by the need of customers. Telecommunication companies invest huge amount of capital in research and development to manufacture a product in accordance with customer demand (Moorman, & Rust, 1999). Telecommunication Business In telecommunication industry technology plays a pivotal role to determine dynamics of business. E-commerce has emerged as latest technological development in the field of telecommunication business. Companies use e-commerce in the field of business to business transaction, supply chain management and customer relationship management (Regency, n.d.). Telecommunication business is one of the most dynamic industries in terms of innovation (wireless connection, 5G connection, invention of VoIP technology and data collocation service, Apple’s iPhone and iPad and integration of android technology with mobile software are few examples of latest innovations in the field of telecommunication) and flexibility. Innovation in telecommunication industry can be bifurcated into two major classes. 1- Innovation for new product and services (manufacturing product with state of art technology and improving the design of integrated circuit (IC) used in various devices). 2- Innovation in the field of network infrastructure design (telecommunication operators decide extent of adaptation required to design new wireless network. Telepecefic is an American telecommunication company. They adapted 1PVPN technology to design VoIP services for vendors (Bourreau, & Dogan, 2011). Understanding Telecommunication Business Mankind has witnessed revolutionary changes in the field of mobile service and other telecommunication services. If any company wants to start telecommunication business in china then they need to revive service delivery process in order to survive from local market competition. China is largest market for mobile telecommunication services. Telecommunication industry is showing upward growth trend for last 5 years in china (Gao, & Damsgaard, 2007). Many telecom giants are using fourth generation technology in wireless connection to cater to the demand of customer. AT&T has increased the capacity of routers to provide better wireless network services to customers. Telecommunication business runs on QSP model. QSP stands for Q (quality of the service and innovation in service delivery. New product development is a must needed requirement to retain customer base.), S (service delivery should be fast and efficient. Many telecommunication companies in USA provide fast internet connection service with the help of 1Pvpn technology to customers.), P (price of the telecommunication service should not be high enough to create a negative image of the brand in the mind of customers. Many telecommunication giants use competitive pricing model to sustain in oligopolistic market. Apple uses premium pricing technique for products to create a niche image of the brand in the mind of customer). Decision Making Making the right choice in terms of designing suitable product portfolio is important for any business to be successful in long run. At first, the telecommunication company needs to take decision about new product portfolio. They can choose suitable products from large array of product system (wireless network application, PCs, smart phone and tablets, fiber optics or voice solution integrated with internet application) to enter telecommunication business. The company needs to enter business segment of tablet and smart phones for the following reasons. Mobile advertising contributes only one percent of advertisement cost but it can create ten percent of media attention. Many digital marketers use mobile as advertising medium. Smart phones can be configured in terms of usage pattern, internet application and media file allocation. The company can integrate smart phone features with digital marketing medium to penetrate the market. According to D&AD (Design and Art Direction), smart phones are the future of digital marketing (Ting, 2012). The following figure shows the relationship between media attention and advertisement cost. (Source The Atlantic, 2012) Statistics shows that there are only 835 million users of smart phone in contrast to 5.6 billion users of normal phones. There is a huge gap between technical adaptations in phone against budget allocated for each device. The smart phone market is growing with a rate of more than fifty percent annually. More than 4 billion phones are non recyclable and after few years they will need up gradation. The company has the opportunity to capture the market of 4 billion potential customers with smart phones offered in affordable price (maintaining price equilibrium between smart phone and normal phones). There are few major telecom players who decide the direction of market equilibrium and market competition. In 2012, various telecom companies have done more than 106 million smart phone shipments. Contribution (for shipment) of top players can be described in following manner: Samsung (17.3 million), Apple (20.3 million), Research In Motion (12.4 million), Nokia (16.7 million), HTC (11.7 million) and others (28.1 million). The market for smart phones is not much competitive for a new player. The company has the opportunity to enter market with upgraded smart phone solution (Burns, 2012). Successful Business Strategy Multi dimensional market forces (demand of telecommunication equipment supplier, demand of state of art technology, purchasing power of buyer, market competition index, threat from copy cats and counterfeits) run impetuously through the telecommunication industry. The telecom company needs to find suitable combination keys to unlock future opportunities in terms of innovation and technical advancement. Flexibility, adaptability and speed are three important requirements for any telecom business to be successful. The company can establish partnership with telecom giants to enter market. Companies need to invest huge amount of capital to capture state of art technology. Telenet, a reputed telecom company invested $14 billion to enter mobile virtual network operator (MVNO) business. They did an agreement with Alcatel-Lucent before entering mobile virtual network operator (MVNO) business. In the same way the telecom company can enter smart phone market with the help of partnership with big telecom players. Samsung is the largest supplier of mobile equipments for Apple although they compete face to face in smart phone market. The company needs to select strategic business partner carefully. Strategic business partner should have possess three qualities, 1- providing equipments required to manufacture smart phone in a competitive price. The company can outsource the procurement process from china and they can open production units in china. Chinese suppliers are able to supply equipment at lowest market price and by taking help of them the company can reduce manufacturing cost of smart phone. 2- partners must have prior knowledge of existing market competition. The company can take help (by doing strategic partnership) of giant telecom players like Samsung, Nokia, Blackberry to understand market dynamics. 3- strategic business partner should have the capacity to take risk. They must have the capital power to counterbalance the risk factor associated with new product development (Killeen, 2010). The company needs to take strong action against copy cats or counterfeits. There are many telecommunication companies who try to manipulate market competition with counterfeit products. Many reputed players also try to imitate features and applications of competitor’s product to win market competition. Apple has won a law suit of $1.05 billion against Samsung for infringement of patent, design, software patent recently (Newman, 2012). Marketing Importance of Marketing Department World’s best product also requires the help of marketing department to create awareness among customers. Marketing department of the company decides the service communication strategy. Communication is required to create awareness about service among customers. Marketing communication is essential requirement to create a successful marketing strategy. Product planning and distributing the product through retail counter is required to expand the reach of the product. Finally communication strategy decides positioning of the product in the mind of the customer. Marketing Strategy The telecom company wants to enter smart phone market. They need to segment the market according to product usage. They can segment the market into six clusters. Six clusters are explained below (Wind, & Bell, 2007). Segments Purchase Pattern Tech Evangelists Customers prefer to use phones with state of art technology. They are the early adopter for the company. Impulse Buyers They purchase product to satisfy immediate needs. The telecom company can use well designed advertisement to attract them. Experimental Adopters They purchase product according to personal need. They are the late adopters for the company. Pragmatic Purchasers They purchase product after sufficient research on available alternatives. The company needs to use state of art technology and applications to attract pragmatic purchasers. Green Buyers Purchase decision depends on environmental impact of the product. They are not the targeted segment for the smart phone maker during early stage (Green buyers are very small in percentage and at the initial stage telecom company will not take the risk to invest huge capital developing environment friendly phone). Disengaged Functionalists They are price sensitive customer. They give emphasis on functionality of the phone rather than applications. Smart phone might not attract them due to its technical complexities. Marketing plans The company needs to create marketing plan to achieve the objectives of marketing strategy. The telecom company needs to use four P’S of marketing to create a distinctive image in the mind of consumer. The company will use competitive pricing to enter market. They will launch product for USA market in the initial stage but after two year they will launch product outside USA. There are only hundred smart phone manufacturers with respect to nineteen thousand mobile makers in the world. SWOT analysis for the company can be integrated with the marketing plan to understand future business scope. Strength- the company needs to be innovative in terms of product design (implementing windows phone concept). The smart phone should work like all in one device. Weakness- the company is new in the market and in the starting phase they will face the problem low brand awareness. Threat- big telecom players can reduce manufacturing cost by using economies of scale concept. The company is trying to enter market with limited resources and for this reason they might not be able to use economies of scale concept. Opportunity- the company can use upgradable software to manufacture phone. Windows phone concept can help the company to push the brand. The telecom company can expand business by opening exclusive retail stores across various part of the country. They need to open at least 50 retail outlets within next two year. They can aim to capture two percent of market share of smart phones within next twelve months. Market penetration of ten percent will be the target for them in the second year. They need to use integrated marketing communication mix to create awareness about the product. Integrated marketing communication (IMC) is a strategic marketing communication technique and it represents four types of marketing communication modes. 1. General Advertising- general advertising creates awareness about the brand and provides information to customers about different aspects and applications of the product offered by the brand. 2. Direct Marketing- this is an approach to create relationship with customers and delivering information about products to customer. Direct marketing also helps to close sales cycle in a structured manner. 3. Sales Promotion- this is not a long term process. Incentives are there for both consumers and traders in the process.4.Public Relation- companies can go for organizing public events or news paper editorial about their new product (Jones, 2012). They need to use proper advertising budget to plan the promotional activity. The organization requires taking help of above the line promotion to create mass awareness about the product. Digital marketing through social media (Facebook, Likedin, Twitter) can become a useful tool for them to promote product. They need to spend at least 8 percent of total annual sales on promotional activity. The company needs to increase promotional budget every year by one percent (Pagliarini, 2011). Advertisement budget can be subdivided in the following manner. Annual Sales $ 10 million (1st year) $ 50 million (2nd year) Sales Promotion $ 0.1 million $ 1 million Digital Marketing $ 0.2 million $ 1 million TVC’S $ 0.4 million $ 2 million Telemarketing $ 0.05 million $ 0.5 million Below the line activity $ 0.15 million $ 1 million Total Communication Budget(Annually) $ 0.9 million $ 5.5 million Importance of Marketing Department for Telecommunication Business Marketing department helps the company to earn revenue from existing product line. Generally customers do not purchase any product until they have the knowledge about the product. The marketer helps to create awareness (in marketing awareness is equivalent to knowledge) about the product among customers. Distribution channel of the company helps to create availability of the product in the retail store. Annual revenue collected by any product has direct relationship with the pricing strategy adopted by the company for it. The following examples will try to prove the importance of marketing department to create successful telecommunication business. Productivity Apple used strategically designed marketing mix to establish the brand image of iPhone and iPad in the mind of customers. Apple launched iPad in the year of 2001. iPod was a flop for first three years with sales volume of only three hundred thousand units. Apple changed the product strategy (first component of marketing mix) in the year 2004 by introducing second generation iPod (compatible with Microsoft windows operating system and Mac operating system). Change in marketing strategy helped them to increase market share by double margin for next few years. As of now, the company has almost twenty million iPod users. This is how marketing strategy can help any company to increase productivity. Success Nokia is Finnish telecommunication giant. They entered into Asian market with wide range of product portfolio. They use penetration pricing to enter subcontinents. Nokia 1100 and Nokia 3250 were priced according to the purchasing power of Asian customer. The strategy was very much successful for Nokia. Low priced phones help the company to achieve market penetration of more than seventy percent during early 2000’s in the Asian region. This is another example of success story created by well crafted marketing strategy. Profit & Growth Telepacific is an American telecommunication company. They increased the distribution network for VoIP technology across various parts of California, Nevada and Texas. They used suppliers and vendors as agents to increase the reach of distribution network. The company increased the router network (by fifty percent) to maintain efficiency of information access points. The company used place (important element of marketing mix) strategy to expand business in America. The organization has achieved sales volume of $ 450 million in the year 2011. Growth rate for the company was almost more than 50 % in the early 2000’s. Market share of the company is more than 65 % in the internet network application business. The place strategy of Telepecefic is example of success story created by well designed marketing strategy. Conclusion Telecommunication business is dynamic in terms of market competition and constant effort of competitors to innovate new products. Marketing department is not solely responsible to create successful business strategy for various organizations. Any organization must integrate other departments (production department, financial department, technical department and human resource department) with marketing department to increase the efficiency in value delivery process. Successful marketing strategy of any company can be described from the view point of value delivery network. 3V’s approach (value segment, value proposition and designing value network) is a useful way to understand the functionality of marketing department. Telecommunication companies use 3V’s approach to increase the depth of service delivery process. Synchronization between segmentation and 3V’s approach is a must requirement for any telecommunication business to satisfy demand of customers. References Bourreau, M., & Dogan, P. (2011). Regulation and Innovation in the Telecommunications Industry. Retrieved from http://warrington.ufl.edu/centers/purc/purcdocs/papers/0211_bourreau_regulation_and_innovation.pdf. Burns, E. (2012). Apple Becomes Top Worldwide Smartphone Manufacturer. Retrieved from http://www.allbusiness.com/apple-top-smartphone/16438265-1.html#axzz256sCG32a. Gao, P., & Damsgaard, J. (2007). A Framework for Understanding Mobile Telecommunications Market Innovation: A Case of China. Retrieved from http://www.csulb.edu/web/journals/jecr/issues/20073/Paper2.pdf. Jones, S. (2012). Creative Strategy in Integrated Marketing Communications. Retrieved from http://www.the-dma.org/dmef/researchsummit/HandoutCreative.pdf. Killeen, R. (2010). Reinventing Telecom Business Strategies. Retrieved from http://www2.alcatel-lucent.com/enrich/en/v4i2/editors-blog-reinventing-telecom-business-strategies/. Kotler, P., Keller, K., Brady, M., Goodman, M., & Hansen, T. (2009). Marketing Management. London: Pearson Education. Moorman, C., & Rust, R.T. (1999). The Role of Marketing. Retrieved from http://www.rhsmith.umd.edu/marketing/pdfs_docs/Article%20Rust%20JM%201999.pdf. Newman, J. (2012). What the Apple vs. Samsung Verdict Means for You (Hint: Don’t Panic). Time Techland. Retrieved from http://techland.time.com/2012/08/27/what-the-apple-vs-samsung-verdict-means-for-you-hint-dont-panic/. Pagliarini, R. (2011). The Changing Trends of the Internet as an Advertising and Marketing Medium. Retrieved from http://redwood.colorado.edu/pagliarr/images/trends1.pdf. Regency. (No Date). Telecommunications & Business. Retrieved from http://www.regency.org/t_in_act/pdf/english/business.pdf. Ting, R. (2012). Why Mobile Will Dominate the Future of Media and Advertising. The Atlantic. Retrieved from http://www.theatlantic.com/business/archive/2012/06/why-mobile-will-dominate-the-future-of-media-and-advertising/258069/. Wind, Y., & Bell, D.R. (2007). Market Segmentation. Retrieved from https://marketing.wharton.upenn.edu/files/?whdmsaction=public:main.file&fileID=566. Read More