Integrated Marketing Communications for Mobile Services Providers - Essay Example

?COMPARATIVE ANALYSIS OF INTEGRATED MARKETING COMMUNICATIONS MIX STRATEGY FOR MOBILE SERVICES PROVIDERS: VODAFONE VERSUS O2 Institution: City and State: Date: EXECUTIVE SUMMARY The UK telecommunication industry plays a huge economic role, and among the key players involved include the Vodafone and O2. Due to the stiff competition, the mobile service operators have embraced innovative marketing strategies with the aim of increasing consumer base and improving financial performance. In addition, companies are diversifying in the data market and expanding their operations in the developing economies. In order to increase its profitability, Vodafone entered into the Indian market, where it initiated the ‘pug’ campaign and thereafter, the ‘zoozoo’ campaign. While Vodafone has embraced creative and viral advertising, O2 has focused on maintaining long-term relationships with the customers. To improve its popularity and brand awareness, O2 should too consider embracing creative advertising, and in this regard the company could use the English Premier League to launch the initiative. Furthermore, O2 should increase the number of one-stop-shops and integrate the pre-sale, sales, and post-sales activities. Table of Contents EXECUTIVE SUMMARY 2 Table of Contents 2 1.Introduction 3 2.Market Review 4 3.Literature review 6 4.Vodafone: Analysis 10 4.1 The zoozoo campaign 10 5.O2 Analysis 11 5.1O2 arena 11 5.2 Integrated communication strategy 12 6.Discussion 13 7.Conclusion 13 1. Introduction The mobile telephony industry is one of the fastest growing sectors, especially in the developing countries. The investment in the industry has been on the increase due to the immense growth opportunities present. Researchers indicate that increased mobile penetration has led to positive outcomes such as improved communication, social inclusion, economic activity and productivity. The available research has also established an econometric relationship between mobile usage and GDP per capita growth. In the UK, the mobile telecommunications market generates more than ?21 billion annually and the leading service providers include Vodafone, O2, and Orange. A significant segment of the mobile telecommunication sectors is dominated by the virtual network operators such as Virgin Mobile, Tesco Mobile, Giffgaff, Asda Mobile, Talkmobile, Vectone Mobile and BT Mobile. This paper examines some of the marketing strategies that the O2 should adopt in order to compete with Vodafone. 2. Market Review For the past two decades, the UK telecommunication industry has recorded phenomenal growth as evidenced by the high number of mobile service providers. The current environment is encouraged by the deregulation of the market, and consumers are able to enjoy many differentiated offerings from the numerous operators. Competition in the industry has forced firms to adopt predatory pricing strategies and invest more in the data market. Currently, the UK has a population sixty million and the mobile penetration stands at around 80%, which means that there is still potential for growth. Furthermore, the threat of new entrants is very low as huge capital is required to set up shop in the UK. In the sector, name awareness is particularly important as it helps firms to associate their products with certain feelings which customers can identify with. At the same time, brand awareness provides customers with a sense of familiarity and as a result, customers are less willing to switch to other competing firms. As Brassington and Pettitt (2000) observe, firms in the mobile service sector promote brand awareness by increasing symbol exposure, publicity and through event sponsorship. Vodafone was established on 1st January 1985, and was the first cellular network company to launch in the UK. A few years later, the company expanded its presence through acquisition of Racal Telecom and Cable & Wireless. In the subsequent years, the company registered huge success and its first high street store was established in 19993. 1n 1990s, the company made huge achievements such as developing low-earth orbiting satellite mobile phone service, launching of data, fax and text messaging services, and introduction of the pay-monthly, analogue packages and per-second billing services. Finally, in 1999 Vodafone Air touch Plc was formed following a merger between Vodafone Group and Air Touch communications Inc. Vodafone was the first mobile company in the UK telecom sector and one of the world’s biggest telecommunication groups. The company is renowned for its pay-as-you-go service and offers its clientele a wide range of quality services. Just like Vodafone, O2 also offers pay-as-you-go packages and has a wide customer base. Vodafone Company has entered into a sponsorship deal with the Manchester United football club and provides its fans with a wide range of accessories such as printed T-shirts, and gifts. Sponsorship deals allow the company to improve the visibility of its brands besides increasing the current revenue stream. The popularity of the Vodafone products in the UK, creates a difficult comparison effect. To compete with the other players in the mobile telecommunication industry, Vodafone relies on the product bundling, hence increasing the sale of its products in Europe and other countries all over the world. In order, to maximize its revenue in the developing countries, the company has resorted to smart data pricing, and to penetrate foreign markets the company offers its customers low-cost smart phones. On the other hand, O2 was formed in 1985 as Cellnet and is a major player in the UK telecommunication industry. Beside offering voice and data services, O2 has diversified into the financial services industry with the launch of the O2 money. At the same time, the company has partnered with Vodafone to pool their network technology, with the aim of reducing the operating costs. 3. Literature review The need for a proper pricing strategy is reinforced in the available literature, and according to the researchers, a poor pricing strategy could lead to bankruptcy. The importance of the pricing strategy is recognised by Kerin (2012) who argues that pricing can help an organisation to attain the necessary competitive advantage. But what differentiates a proper pricing strategy from a poor one? In Kotler and Philip’s (2005) view, a proper pricing strategy should consider the external and internal environments, and should be affordable to the customer. In respect to mobile telecommunication industry, customers are very sensitive to price differences, and so the operators are forced to come up with affordable prices as well as adopt the ‘price bundling’ concept. Product bundling as Kotler and Keller (2012) suggest could be beneficial to organisations operating in competitive markets, and whose objective is to expand their market share. Companies in the telecommunication industry have also adopted the discount pricing strategy to sell a huge quantity of products especially in the developing markets. Appropriate distribution channels allow companies to deliver goods to customers within limited time. In the mobile telecommunication industry, one of the common channel strategy used is direct marketing thus allowing customers to access phones and other accessories from retails stores. Ziethmal (2000) recognises the need of incorporating direct customer interface in the firm’s value chain. The one-stop-shops allow the mobile operators including Vodafone to integrate the pre-seal, sales, and post-sales activities. In addition, the one-stop-shores allow the customers to access a variety of service including consultations, product presentation, contract arrangements and product delivery (Proctor, 2000). The mobile service sector relies on heavily on relationship marketing to popularise various offerings. As competition becomes stiff, firms are being forced to keep loyal customers in order to improve the long-term profitability of the company. The concept according to McDonald (2001) evolved from direct response marketing and emphasises on long-term relationships. The concept replaces the traditional marketing framework, and extends communication beyond intrusive advertising and sale promotional messages. Unlike the traditional marketing framework, this new concept emphasises on customer retention, customer contact, and customer value. In regard to the mobile telecommunications sector, relationship with the customers can be improved by providing them with quality services. The quality of services can be improved by increasing reliability and the capacity of the firms to handle customers’ concerns. Lovelock (2001) observes that other key determinants of quality service include the rate of responsiveness and the degree of empathy accorded to the customer. According to the available literature, good perceived service quality should have the following elements; accessibility and flexibility, service scope, service recovery, reputation and credibility (Vargo and Lusch, 2004). The importance of relationship marketing in the UK mobile phone sector is highly recognised and already companies like O2 and T-mobile have committed themselves to developing long-term relationship. It is assumed that developing enterprise-level systems could help firms to acquire real-time information for the improvement of customer services (Vargo and Lusch, 2004). In addition, such information helps the telecom companies to interact with customers on a regular basis and identify and prospect new leads (Moller and Halinen, 2000). Although mobile service providers are already using relationship marketing to achieve customer loyalty Dev, and Don (2005) believe that they could do more by integrating their systems with call centre operations. Such a strategy will help the firms to collect consumer-related data and use it to meet their needs and wants. The information obtained could also be used to identify consumers’ demographics and their buying pattern and providing personalised services to different consumer segments (Sudhir, 2001). The marketing communication strategy should involve differentiation of products and services. In the modern economy differentiation of products and services can be achieved trough branding. The available literature has recognised the role of branding in the achievement of competitive advantage and giving the company a sustainable position in the industry (Erdem and Baohong, 2002). A brand as Aaker and Joachimsthaler (2000) observe should guarantee customers particular features, benefits and services, and ensure there is consistency. A key component as discussed by Aaker and Joachimsthaler (2000) is brand management which entails managing products and services from the time they are introduced in the marketplace until when they are removed. In the telecommunication industry, firms use all manner of strategies including advertising intangible assets such as quality, shape, colour, and lifestyle compatibility (Cellini and Luca, 2003). A key component of branding is brand equity which is defined as a set of assets and liabilities which are linked to particular product or a service (Jobber, 2001). According to Capon and Hulbert (2000) branding equity influences consumers’ choice of a particular product over another and the willingness of a customer to pay relative more for a product or service. Branding equity provides value to companies by enhancing the value of their marketing programs, and the following components: brand extensions, trade leverage, prices, and competitive advantage. On the other hand, brand equity provides value to the customers by enhancing confidence in purchase decisions, improving satisfaction and increasing the speed at which information is interpreted and processed (Lawrence et al., 2000). In this regard, due to its high brand equity, Vodafone has more trade leverage when bargaining with mobile manufacturers, distributors and retails. Secondly, the company can be able to charge higher prices for its products and services compared to its competitors. Thirdly, the company has been able to establish brand extensions and its brand has high perceived quality. As Blythe (2001) suggests brand equity is closely related to the following concepts: brand loyalty, name awareness, perceived quality, brand association and proprietary assets. As Blythe (2001) further observes brand loyalty is associated with the following constructs: switching costs, satisfaction, liking and commitment. Brand loyalty is very vital in the mobile sector, as it for this reason that firms always strive to ensure the consumers become committed to their products and services (Brassington and Pettitt, 2000). The available literature concurs that when well managed; brand loyalty can lead to positive outcomes such as reduced marketing costs, improved trade leverage and brand awareness (Lewis and Bridger, 2000). Firms should always strive to create product of perceive high quality in order to attract new customers and gain the necessary competitive advantage, the concept, is defined as the perceived superiority of a product or service relative to other alternatives (Patterson, and Ward, 2000). In the mobile service sector, the perceived quality of products is very vital as it increases the switching costs and reduces the customer churn rate. It also gives customers a base on which they can make the purchase decision and differentiates the products from other competing goods. Of-course, as Ellwood (2002) posits, when a brand is perceived to be of high quality, it can command premium prices. Firms can take advantage of this strategy by increasing the existing products lines, which too are likely to attract high prices. Of most importance, branding creates association which are helps the consumers to connect with products and services. To create the right perceptions, a brand needs to be well-positioned. The available literature associates positive brand association with increased loyalty, positive attitudes and feelings (Schultz, 2001). In addition, researchers suggest that firms could take advantage of the brand associations to establish brand extensions, hence improving their bottom-line revenue. As suggested by Wang, Head and Archer (2000) brand associations can positively be impacted on through celebrity endorsements. In respect to branding, Vodafone has created appropriate structures and processes that support its products in different countries, as proposed by the brand leadership model (Kotler and Keller, 2012). In addition, the company’s products are of perceived high quality, hence they are able to command high prices especially in the high end market. To popularise its offerings the company has created an innovative brand –building program which has led to a change in the customer perceptions, while reinforcing positive attitudes. An integrated communications strategy is widely adopted in the telecommunication industry, in which firms use various marketing tools to popularise their products (Chung and Lee, 2003). A Key component of the communication mix is sales promotion which could be carried through below-the-line or the above-the-line advertising (Schiffman and Kanuk, 2006. In the telecommunication industry, sales promotions gives the firms an opportunity to attract new customers and one of the strategies used is offering discounted prices on particular cell phone models for a limited time (Mascarenhas, Kesavan, and Bernacchi, 2006). Secondly, promotion reminds customers about particular products and services, and inform about their associated benefits and functions. The customers could then use the information obtained in making purchasing decisions. 4. Vodafone: Analysis 4.1 The zoozoo campaign In order to popularise it offerings the company uses the integrated marketing communication concept, whereby the marketing campaigns are advertised in different media platforms. A case in point was in India where with the collaboration zoozoo campaign. The effectiveness of the campaign is well highlighted in the article, by Namita (2012) who observes that the integrated communication concept has promoted the penetration of Vodafone’s products in India, and other foreign destinations. The zoozoo ads were not only creative enough, but were placed on televisions, over the internet, billboards, print media and the radio. The zoozoo campaign also utilised social media platforms such as YouTube, Orkut, and Twitter. Use of many advertising channels not only increased the visibility of the brand, but also the popularity of Vodafone products. Use of many advertising channels was also very effective in informing cutomers about the various value-added-services offered by the company. Vodafone Company chose the Indian premier league as the platform to launch the zoozoo campaign and the strategy was an instant success among masses. As suggested by Wheeler (2003) the Zoozoo campaign demonstrates the effectiveness of creative advertising and how it can be used to create demand for different products and services. The extent to which the company relies on creative advertising is well reflected during its entry into the Indian market. Following the successful acquisition of Hutchison Essar in 2007, the company initiated an ambitious campaign using the now popular ‘pug’. The first advertisement features a pug helping a girl to dig a pit while the second one feature shows a pug holding a recipe book for the girl. In the third advertisement, the pug pushes back soap to the cubicle, while in the last ad, the pug signals to the girl when the school administrator is making his daily rounds. The four advertisements, make up what is now popularly known as the ‘happy to help’ campaign and through such ads, the company has managed to promote its various products, and other elements such as Vodafone Mobile stores, mini-stores and self-service stores. 5. O2 Analysis 5.1 O2 arena This function allows the O2 subscribers to obtain priority tickets two days before the general release. The service allows the customers to access the Blueroom bar and the O2 lounge, by inputting special technology barcodes. Likewise, the company has partners with event organisers to give priority to its customers, and a case in point was a partnership with Live Nation and the Academic Music Group. In addition, O2 customers receive many perks such as mobile tattoos, free giveaways by the academy angels, and free music. Giving the customers special services has increased the company’s awareness levels and value market share. In addition, giving priority tickets to customers also contributed to high revenues and profits. Just like Vodafone, O2 has launched a creative campaign dubbed ‘O2: A world that revolves around you’. Following the launch of the campaign, the company reduced the customer churn rate, and increased the user base. Recently, the company launched the ‘Thing Big’ campaign whose objective is to fund innovative ideas and it is expected through this initiative the company will increase the current user base of 21 million mobile and 600,00 board-band customers. 5.2 Integrated communication strategy In the past few decades, the company has emphasised on the long-term relationships to improve its financial performance. In 2004, the customer churn rate was exceptionally high at 35%, and in response, the company decided to launch the ‘O2: a world that revolves around you’ campaign (Young, 2007). The campaign used the traditional media platforms, point-of-sale, websites, e-mail marketing and postcards to popularise various products and services. By December 2005, the response from the customers was phenomenal and the company has succeeded in improving revenue while the pre-pay churn rate has reduced by a third. In addition, the econometric analysis suggests that one million disconnections were avoided by launching this campaign. According to Young (2007) within 4 years, the estimated payback of the campaign was eighty times the advertising investment. However, the success the campaign is incomparable to the Vodafone’s zoozoo campaign. This means that the O2 needs to emulate the various aspects of the zoozoo campaign and could use the English Premier League to launch such an initiative. 6. Discussion Firms in the mobile service heavily rely on the sponsorship deals and in this regard, Vodafone uses this strategy to improve the awareness of its products and services. During sporting events, the attendants are given special offers and other services. Internet marketing is another key component of Vodafone’s communication mix. The use of website –related tools have become prevalent in the modern society as one way of reaching the digital audience and introducing new products in the market. Through web 2.0 platforms, companies are able to inform the customers about their products as well as address any concerns and any questions that may have. In this regard, T-Mobile has a well developed website, where consumers can purchase phones and accessories, and locate stores near them. All the other service providers including O2 too have websites, and have launched social networks, content community forums and content aggregator to reach to as many consumers as possible (Zineldin, 2006). These new channels of advertisements have helped firms in the mobile service sector to reduce the costs of advertisement and improve brand awareness. However, in order to further improve the popularity of its offerings O2 needs to do the following: i) Increase the number of one-stop-shops and integrate the pre-seal, sales, and post-sales activities. ii) Initiate an ambitious campaign such as the popular ‘pug’. The campaign could use animated characters and should be sustained for a long time. 7. Conclusion The UK telecommunication industry is very competitive, hence the need for the companies to adopt creative advertising strategies. 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