The Pricing Strategies and Programs of Etisalat - Essay Example

? The Pricing Strategies and Programs of Etisalat BY YOU YOUR SCHOOL INFO HERE HERE The Pricing Strategies and Programs of Etisalat Background on Etisalat Etisalat is a telecommunications company headquartered in the United Arab Emirates. It was founded in 1976 under the name Emirates Telecommunications Corporation, a joint-stock venture between various Emirates partners and a once-large British company called International Aeradio Limited. In 1983, the company changed its ownership structure when the United Arab Emirates government took over a 60 percent share of the company, giving it majority ownership, with the other 40 percent of stock offered to the public. Today, this company operates under the brand Etisalat. The firm is a diverse multinational company that operates in 18 countries throughout the Middle East, Africa, The United States, and Africa (etisalat.ae, 1). Etisalat services over 100 million customers in these countries and has achieved annual net revenues of AED 30.83 billion in 2009 (etisalat.ae, 1). The company is a major telecommunications provider to the private citizen and to corporate entities, with mobile services, voice and data services over satellite and fixed-lines. The business also is involved in providing managerial and technical training support services to enterprises as well as SIM card manufacturing, voice and data transit services, and even telecommunications in submarines (etisalat.ae, 1). The business is a major broadband hub for Middle East businesses and consumers with a very broad trans-national network. It provides also roaming and data services for corporate entities. In addition, Etisalat provides iPhone services and Blackberry services exclusive to these products. Major competitors of Etisalat include Vodafone, MobiNil, Singapore Telecommunications and China Mobile. (BBC News, 1). Current regulations reductions in the UAE and other countries have also reduced barriers of new market entry for competition, thus the business faces even more competition from global and regional telecommunications companies as they are now allowed to enter the UAE and other Middle Eastern markets with less tariffs, taxations, and less governmental involvement. Data on the Chief Executive Officer of Etisalat The CEO is currently Mohammed Khalfan Al Qamzi who has held this position since 2006. Al Qamzi has an excellent track record of bringing innovative solutions to Etisalat founded on years of business management and investment experience. Mohammed Al Qamzi is a graduate of Spokane Community College, attended from 1999 to 2002. Most of Al Qamzi’s experience is in real estate, with involvement in Jumairah Golf Estate, Palm Jabel Ali, and currently works as the director of real estate venture Palm Jumairah (linkedin.com, 1). The CEOs credentials include vast knowledge of logistics, security, environment and sustainability practices, document management and project control (linkedin.com, 2). His vast resume of business success has brought Etisalat considerable market presence and growth opportunities over the last five years. Marketing Principles for Etisalat Etisalat understands the importance of marketing for brand-building and also to secure differentiation among competitors who offer similar products at similar pricing structures. Targeting for the company involves a blend of strategies. First, Etisalat considers geographic segmentation based on volume of citizens in a region and urban population and infrastructure. Targeting considers gender (considering most Mid-Eastern countries are male-dominated), literacy levels of international and domestic consumers, specific customs and traditions, the income levels of potential consumers, and the current level of brand recognition of potential customers (marketingmixx.com, 2). Literacy is a significant factor when considering how to target advertising since this region does not support the highest literacy levels when compared to other developed countries across the world. The company’s marketing mix has extensive variables. In relation to product, the business offers its broadband and mobile services, along with specialty device services (such as the iPhone) and other consumer networking systems. Extended products include real estate sales, Etisalat information services, training through the Etisalat Academy, the Emirates Data Clearing House, and 3D television (marketingmixx.com, 3). In addition, products offered include governmental and geotechnical systems to assist in telecommunications. The company selects its place carefully when determining the best sales channels to ensure long-term revenue production. Place is a major factor that includes major retail marketplaces, the online sales environment through independent and joint venture websites, and also independent branded outlets under the Etisalat brand name (marketingmixx.com, 3). Promotion is conducted in a variety of ways, using websites, television advertisements, direct marketing efforts, and newspaper advertisements (marketingmixx.com, 3). Promotion is a significant factor in order to reach multitudes of different demographics across the world and domestically in the UAE. In fact, in 2009, Etisalat spent USD $17.1 million on all of its advertising, which was an increase of over 4.5 million dollars from the previous year (Ramat-Gan, 1). Positioning is about defining an idea related to the Etisalat brand in the minds of consumers. The company accomplishes a positioning strategy based on price, offering a variety of discounts and other price-related incentives to undercut competition and attempt to seize their market share in multiple foreign and domestic markets. Where other competition, such as Vodafone, positions based on quality or exclusivity, Etisalat realizes that many of its customers are extremely price-sensitive and thus has chosen pricing as its most effective positioning strategy. Pricing objectives Etisalat seeks to raise revenues yearly by 5 percent (etisalat.ae, 1). The Senior Vice President of the company states, “Reduced rates affirm Etisalat’s commitment to offer the best possible service at the most affordable cost to our business customers” (etisalat.ae, 1). Pricing flexibility is the objective, using a variety of incentive-based promotions, to gain more consumer interest from its many price-sensitive buyers and business clients. Says the Vice President, “Through various options, promotion offers additional flexibility and choice to our customers, to opt for the plan most suited to their requirements” (etisalat.ae, 1). The objective is to gain more brand loyalty based on pricing incentives and limited-time discounting to ensure a higher volume of subscribership and purchases of Etisalat branded products and services. Price Setting and Pricing Strategies The price setting structure of Etisalat is too complex to describe in absolute detail, considering there is always a new promotional scheme underway, depending on which division of its many products is underperforming. However, the business performs environmental analyses on competitor pricing and then determines whether it is competitive and meeting the needs of price-sensitive demographics across the world. This comparative structure requires revenue analysis and also environmental scanning to determine the activities of competition as it relates to pricing. Once this has been established, Etisalat then creates structured incentive programs related to each of its service offerings and product sales. For example, the company launched a method to simplify roaming prices on its many mobile services to make it easy-to-understand and also to simplify its pricing approaches while satisfying consumers. Etisalat has created a fixed international roaming charge policy with a flat rate that is applicable to SMS mobile messaging as well as voice and video calling from anywhere in the world (albawaba.com, 1). This promotion is targeted at Gulf countries, Arab countries, and everywhere else in the world that Etisalat services with mobile calling. All the customers have to do is dial *111 on their mobile devices to allow them to stay connected to international and domestic recipients and enjoy the reduced calling rates (albawaba.com, 2). The company also provides fixed rate pre-paid calling prices, a 2-for-1 offering, on many of its mobile services to the lower-income consumers (Etisalat, 20). Pricing steps are to increase the volume of prepaid customers and constantly adjusting rates based on revenue performance in this division of sales and marketing. Cash flow analysis is one method by which pricing occurs and is changed to meet the demand of business customers and general social consumers. There are also 2.5 million broadband customers currently as part of the Etisalat family (Detecon International, 1). The business is constantly adjusting pricing on broadband services as part of incentives-based marketing and also as part of corporate social responsibility, such as offering discounts to the disabled consumer. This gives the business more public relations presence, a stronger brand, and also lures its price-sensitive consumers to choose Etisalat over other competition with more fixed price programs and less promotional incentives. Table 1 reflects the pricing strategies of Etisalat as it relates to mobile subscription, under the Global System for Mobile Communications. Rates are reflected in AED, the country’s Dirham currency value, which is equal to 0.2722 USD for 1 Dirham. Table 1: Current Pricing for Postpaid Mobile Plans for GSM Source: Etisalat (2011). http://etisalat.ae/index.jsp?lang=en&type=content¤tid=6d88e15c0b56a010VgnVCM1000000a0a0a0a____&contentid=52c2cd8a75abc210VgnVCM1000000c24a8c0RCRD&parentid=249def484523a010VgnVCM1000000a0a0a0a____ Price Changes and Competitor Pricing Changes to Etisalat’s pricing structure is ongoing and constant as part of their entire marketing focus, thus describing price changes is a difficult task considering the volume of products offered and the many different wireless and mobile services provided, as reflected by Table 1. However, in an effort to boost corporate-based revenues, Etisalat launched a Global Business Plan which was a savings promotion valid for three months that enables businesses to enjoy discounted rates on international calling for only 1 AED per minute on ISDN, PRI and ISDN BRI land-lines (etisalat.ae, 1). This is one example of how pricing shifts as part of incentives-based sales and advertising. Price changes occur based on new revenue expectations, cash flow analyses, and environmental analysis of underperforming business divisions that require more pricing adjustments or promotional sales plans to ensure subscribership and customer loyalty. Continuous technological upgrades and competitor technology innovations are what drive pricing structures and the response to competitor pricing. “New pricing plans are introduced to differentiate the offerings for the general, youth, and other segments” (Etisalat, 20). The company stays a step ahead of competition by comparing competitor rates and then adjusting pricing on broadband, wireless, satellite services, and even 3D television subscribership as a means to experience revenue-building advantages. With growth in competition occurring due to reduced market entry regulations in the UAE, it is necessary to constantly scan the external pricing environment to witness what is driving competitor strategy and then attempting to meet or beat these plans to gain preferred brand loyalty. Largely, outside of this environmental scanning process, discounted cash flow analysis based on prices from current market conditions and against regulatory-accepted pricing models is conducted (Etisalat, 46). Proposed Changes to Pricing Methods Because the company wants to position based on price rather than quality or exclusivity like some competition, there are not many changes that could be recommended to better their position. Etisalat is currently a revenue leader domestically and in foreign telecommunications marketplaces because of their aggressive incentive-based programs in sales. However, the business relies heavily on public relations as part of its corporate social responsibility efforts. For example, Etisalat Nigeria works to educate individuals about how to control malaria and other health-related efforts. The business also provides computers for village schools in key under-developed regions with a target to improve technology in over 300 additional schools by 2015 (etisalat.ae, 2). Pricing methods should be given more promotional awareness using the same press release format that currently offers significant value in promoting its CSR efforts internationally. In the UAE, the company has developed a rewards program known as More Rewards that gives customers loyalty points when they purchase Etisalat products and services online. Rewards are valid for 3000 different products and services on over 400 brands related to shopping, donations, raffles, auctions and travel (etisalat.ae, 1). The business has found considerable consumer acceptance and usage of this rewards system that gives the business a better brand reputation in the UAE. As a recommendation, the company should consider developing an international rewards system that offers discounted incentives based on reward point accumulation that further discounts their services over time. For example, the company currently charges, as reflected by Table 1, 499 AED on the iPhone 2 services as an upfront payment for merchandise and services. Etisalat would likely find more fast revenue building if such services included a rewards structure, such as applying reward points for volume of usage that accumulate over time. If, after three months, a high volume of reward points have been earned, this can be applied as a discount coupon for other Etisalat branded products and services to ensure more subscribership. A system where 1,000 reward points = 100 AED off, it would provide upfront sales revenues from interested buyers and maintain their customer loyalty for long-term subscribership to much more than just mobile technology but could expand to wireless services or 3D television services as well. Since the company already has a well-developed Internet presence and sales support team, it would only require a one-time investment in information systems architecture to ensure the company gains more customer revenues in the long-term. Summary of Findings Etisalat has very well-skilled executive leadership that understands the tangible realities of what drives business success or failure, related to market conditions and market preferences both consumer and business. This gives them much leverage in determining new pricing strategies that fit the price-sensitive buyer and also outperform competition routinely. Leadership is a key competitive advantage in the telecommunications industry and other industries as well and Etisalat gains much from innovative leadership that is very much in touch with their buyer markets and preferences. The vast variety of products and services offered, though many, are commonly found with competition including Vodafone and China Mobile. Therefore, the company must find a method to differentiate in order to stay competitive and seize market share to boost revenue production. By focusing on pricing as the ultimate positioning and promotional tools, the company stays a revenue leader in international and domestic markets. Incentives-based marketing is the most effective method for this business and Etisalat is on track with its current strategies to satisfy customers with diverse product offerings at a reasonable price that fits their clients’ budgetary needs. Pricing structures that are unique and ever-changing to invite more subscribership and interest in the Etisalat brand are serving the company well. It is the price-sensitive buyer that is driving most of their business philosophy when it comes to establishing pricing structures and there is no better way of doing this than to use promotional schemes that are always ongoing. Limited-time offers appeal to the fear of loss in buyers and Mid-Eastern buyers build a sense of identity with their technology usage and knowledge, based on their collectivist values and how they view the self compared to peers in society. Etisalat serves these psychological means by providing incentives to purchase services and products to keep in-line with what other peers in society are doing with mobile services and wireless Internet services. Because the business truly understands what drives buyer sentiment and price flexibility, promotional incentives that fluctuate with revenue needs and changing market conditions is the most effective method of ensuring long-term loyalty to the Etisalat brand. Other than the rewards strategy recommended for further pricing discounts, the company is well on its way to success in pricing and promotion. Works Cited Albawaba.com. “Albawaba”, 2010. Accessed October 20, 2011 at www.albawaba.com. BBC News. “UAE Firm in Pakistan Phone Sale”, 2005. Accessed October 20, 2011 at http://news.bbc.co.uk/2/hi/business/4111222.stm Detecon International. “To be continued: Interview with Mohammed Khalfan Al Qamzi CEO, Etisalat (UAE), etisalat“, DMR – The Magazine for Management and Technology, 2011. Accessed October 19, 2011 at http://www.detecon-dmr.com/en/article/interview-with-mohammed-khalfan-al-qamzi-ceo-etisalat-uae-etisalat_2007_12_12/page/4 Etisalat.ae. “Corporate Social Responsibility”, 2011. Accessed October 21, 2011 at http://www.etisalat.ae/assets/docs/financial/2010/flash/review_csr.html Etisalat.ae. “Corporate Profile”, 2011. Accessed October 21, 2011 at http://etisalat.ae/index.jsp?lang=en&type=channel¤tid=a79a8e621187b010VgnVCM1000000c24a8c0____&parentid=249def484523a010VgnVCM1000000a0a0a0a____ Etisalat. “Engaging People and Business – Annual Report 2010”. Accessed October 20, 2011 at http://etisalat.ae/assets/docs/financial/2010/pdf/EtisalatAR10-eng.pdf Etisalat.ae. “Etisalat launches Global Business Plan Promotion”, 2011. Accessed October 20, 2011 at http://etisalat.ae/index.jsp?lang=en&type=content¤tid=6d88e15c0b56a010VgnVCM1000000a0a0a0a____&contentid=784073bf1d723310VgnVCM1000000c24a8c0RCRD&parentid=249def484523a010VgnVCM1000000a0a0a0a____ Etisalat.ae. “Etisalat Partners with Cobone.com to Create Exclusive Daily Deals Website”, 2011. Accessed October 20, 2011 at http://etisalat.ae/index.jsp?lang=en&type=content¤tid=6d88e15c0b56a010VgnVCM1000000a0a0a0a____&contentid=82fc655020752310VgnVCM1000000c24a8c0RCRD&parentid=249def484523a010VgnVCM1000000a0a0a0a____ Linkedin.com. “Mohammed Al Qamzi”. 2011. Accessed October 21, 2011 at http://www.linkedin.com/pub/mohammad-al-qamzi/7/a39/324 Marketingmixx.com. “Marketing Plan of Etisalat”, 2011. Retrieved October 23, 2011 at http://marketingmixx.com/marketing-plan-2/187-marketing-plan-of-etisalat.html Ramat-Gan, A. “Etisalat Spent $17.1 Million on Ads”, Info-Product Research Middle East, July 20, 2009. Read More