Safaricom - Target Market, Price, Place, Promotion, People, Process - Case Study Example

Contents 1.Introduction 2 1.1.Objective 2 1.2.Background 2 2.Analysis 3 2.1.Description of the target market 3 2.2.Product theory and application 5 2.3.Price 6 2.4.Place 7 2.5.Promotion 9 2.6.People 10 2.7.Process 11 2.8.Physical evidence 12 3.Conclusion 12 References 13 1. Introduction Safaricom is a Kenyan telecommunications company that primarily offers mobile services to the Kenyan people. The company’s profile comes out as a near monopoly with a customer base that constitutes almost 77% of all mobile phone owners in the country. The company also majors in the provision of data services having the first 4g network in Kenya. It has the most creative offers in the Kenyan market thus making it the leading service provider in the country and a force to reckon with in Africa. The company rates as the most innovative in Africa according to the Forbes magazine The Ten Most Innovative Companies In Africa, Samantha Sharf. 1.1. Objective This study seeks to analyze the service provisions of East Africa’s leading telecommunication company, Safaricom. The study will use the Seven Ps methodology to review its services and give a recommendation on how they might be improved. 1.2. Background Safaricom began in 1997 as a subsidiary of Telkom Kenya. A United Kingdom based company; Vodafone then bought 40% stake and management responsibility of the company. Safaricom’s breakthrough came about when the company launched the first mobile money transfer service M-Pesa in 2007. This service allows customers to send money via the phone in the form of text messages. The company has many creative offers that it unleashes on the regular which makes it relevant at the forefront of service provision in the country. The company’s offers often become copied by other mobile telecommunication companies that compete with it. This makes it one of the reasons as to why it Safaricom appears to be a monopoly in the Kenyan mobile telecommunications industry. 2. Analysis 2.1. Description of the target market Safaricom’s target market consists of mobile phone owners, users of data services, commercial markets and the whole population at large. This stems from the diversity of the service provision offered by Safaricom. Originally the target market constituted mobile phone owners. The company profited from the sale of airtime cards whereby an amount of airtime becomes consumed per minute. This consumption varies. This depends on the company to which the recipient of the call belongs. The call rates become higher if the recipient of the call belongs to a different service provider other than Safaricom. This method of regulating call rates according to the recipient’s service provider features as the main way of controlling competition. Safaricom has over 12 million registered customers who use mobile services accounting for over 71.02% of all registered mobile owners in the country. For a long time, competitive cost cutting deals from other telecommunication service providers did not affect the company. Most recently the competition grew to another level. The companies now rely on other methods. In order to woo customers they provide data services. Nowadays Safaricom’s services range from hosting sports events to being a secondary Internet Service Provider. The company currently cites the provision of data services as its main source of income. This is due to the increasing number of internet users in the country and the decreased call rates due to reduced rates from rival companies. The provision of data services takes place through providing customers with access to the internet at a fee. The internet services can be received through a modem, or an internet enabled phone. Previously the company used to provide unlimited daily, weekly and monthly internet services at a fee till its termination. The company’s CEO Bob Collymore cited the reason behind this as losses emancipating from data users taking advantage of the offer way too much. The example he gave explained a situation whereby a customer would download over 35 GB of data. This download happened at a cost far much lower than the price the company bought it. Currently the company offers data services through data bundles, which customers buy according to their mode of usage. These consist of the daily and monthly data bundles which expire after a day and a month respectively. The other form of market that the company involves hosting an annual rugby sporting event whereby rugby teams from across the country participate for the grand prize. This event goes on for 3 days and pulls a wide range of players and spectators. The motive of the event hangs around promoting the sport in the country whereby young players participate alongside professional and national team players. The mode of selecting the participants involves getting the most recognized players from each category. For example, national high school games have teams from each province. The best two players from each team participating in the nationals gets to participate in the Safaricom 7s. Additionally the best players in colleges and universities category whose teams have participated in the national level also get to be chosen. Members of the national team also become invited to participate in the event. In the competition, all players get to be grouped into teams then the teams compete for the grand prize. This competition registers the highest number of fans in the country. The glamour and glory behind it goes on to be widely publicized. This arises from the lack of bias in the mode of selection and involves all age groups legible to participate from high school level to national team members. The company reaps from ticket sales of the event and credibility for hosting a successful national sporting event with the highest fan base in the country. This publicity gives the company a significant boost for advertising their wide range of services. The other target market for the company lies in the Commercial Sector. The company owns the largest mobile banking service hence giving it a crucial boost in partnering with other commercial services. Among the partners who line up to benefit from the mobile banking services in partnership with Safaricom ranges from banks to electricity and water companies. The first mode of partnership involved Equity bank, which boasts of being the biggest bank in Africa by number of customers. This partnership enables customers of both Safaricom’s M-Pesa and Equity bank to be able to merge their accounts. If one owns an account on either, he/she can establish an account on the other service. This move sought to enable customers to transfer their money to the bank from M-Pesa since the service allows a maximum amount of Kshs. 100,000. This partnership led to more banks partnering with Safaricom and other telecommunication companies. Other forms of partnerships include the country’s primary distributor of electricity KPLC. This allows customers to pay their electricity bills through Safaricom’s M-Pesa services. These partnerships keep the company as the country’s leading service provider. 2.2. Product theory and application The products offered by Safaricom fall in the category of voice, messages, data and commercial services Safaricom Offers, Anon. The biggest drawback to Safaricom’s services arises from their almost unreachable customer care services. This situation led to numerous complains of which the company got into action and solved it. All their other products have splendid services. Their data services have the highest internet speeds with 4G networks the first of its kind in the country and the region. The only setback revolves around the price of the 4G internet services. This service can be afforded by neither the lower class nor middle class Kenyan hence only live in the form of a dream to many. Another setback that haunts Safaricom arises from the extremely high prices used to charge customers using the M-Pesa services. Their withdrawing rates can be as high as 15% whereas the most of the local do not charge anyone for either withdrawal or depositing. Given that the other competitors do not have well established mobile money transfer services the company takes comfort in the high pricing. This situation leaves the company as a monopoly rather than a service provider. Another product offered comes in the form of multimedia. Safaricom has an offer branded as Skiza (Swahili for listen) tune. This service involves a song which a caller can listen to before the recipient of the call picks up the phone. This Skiza tune serves to be entertainment in place of the droning of the phone that lets the caller know that the phone on the other end is ringing. The most used Skiza tune among the local songs usually wins a prize for most popular Skiza tune of the year. The multimedia service provision also goes as far as teaming up with local musicians to sell their music via the company. The sale usually takes place through the use of text messages. 2.3. Price The prices charged by Safaricom happen to be the highest in the market. This mode of marketing mainly comes about because of the near monopoly hold of the market. Given that the company boasts of a 71% share of the market means that they can exploit it to their own benefit. Other companies charge the user at rates that range from Kshs. 1 to Kshs. 3 per minute to other networks. The company charges its customers more than Kshs. 4 in calls within the same network. This move makes the majority of the customers who own a Safaricom sim card to have another sim card from another company. The reason behind this lies in the fact that most customers like to retain their Safaricom sim cards which bear their main identity. Others maintain their Safaricom sim cards for services such as M-Pesa which many people highly depend on. Safaricom’s M-Pesa has a withdrawal rate that ranges from 15% to 3%. This withdrawing rate marks an extremely high drop from the previous borrowing rates which used to be as high as 25%. The main source of the high withdrawal rate arises from the sending fee of Kshs. 30, which becomes deducted every time an M-Pesa to M-Pesa transaction takes place. These multiple sim card scenarios may be a threat to the company if the other competing companies catch up in customer base and quality of services. Recent research in the telecommunication market shows that Safaricom’s share may reduce significantly over time. The making of this conclusion comes from the fact that last year Safaricom’s customer base was 77% of the market which reduced to 71.02% this year. Additionally Orange Telecommunication Company made more sales of sim cards, followed by Airtel and in third position came Safaricom. The research also showed that the younger population mainly made up of high school and college students preferred Essar’s Yu Mobile. The preference for the Yu among the young came from its high affordability which favors them since they belong to the dependents’ category. The reason cited for the big shift in priority of service providers appeared to be a preference for more customer friendly prices. These statistics show that Safaricom's dominance may be highly endangered. The recommendations that may save Safaricom's dominance in the markets will be to reduce their prices. This reduction should be at par with the prices of the other companies. The reduction, however, should not be as low as Essar's Yu since their prices happen not to be competitive. This reduction of prices should also be applied in the M-Pesa withdrawal rates. These may improve the number of M-Pesa transactions. 2.4. Place The place utility most favors Safaricom in regards to customer service. The company’s widespread influence goes as far as the marginalized areas in Kenya whereas its competitors only try to market themselves in the major towns. In terms of competition Safaricom outplays the rest of the companies by maximizing on the place. For example, Orange gives the biggest competition to Safaricom in terms of data services. The company, however, has their 3G network covering only the main cities; Nairobi, Mombasa and Kisumu. The company still provides the popular unlimited internet service which Safaricom withdrew. Orange, however, does not threaten Safaricom’s leadership in being the most desirable data service provider in the country. To add insult to injury, the data service from Orange receives numerous complaints about not being effective Safaricom Unlimited Internet Bundles to be Scrapped off, Mathias Kinyoda. This happens after customers buy their modems. What seemed to be Safaricom’s biggest threat in data service Airtel suffered the same problem of coverage. The company which follows Safaricom as the second biggest in regards to customer base unleashed the fastest internet in the country on a 3.75G platform. This internet service, however, only covers the capital city. Areas as close as 40 kilometres away from the city do not enjoy the service. The main capital generating areas of the country consist of the capital city and its environs such as Central Kenya, the Western lakeside and the Coastal region around Mombasa city. The diversity of these areas makes other networks to be reluctant in investing in those areas. Given that Safaricom’s customer base spreads country wide without bias of the population, the company taps into the market in these places. Other telecommunication companies, however, do not have the advantage of accessing this market mainly due to their interest in the market found in the major towns. The market in the main towns mainly prides itself with being the source of income in the country. This factor makes the competing companies downplay the market potential of these areas thereby they do not invest in them. This choice makes Safaricom the primary and only source of communication for them hence gaining even wider acclaim of the country’s telecommunication market. Market potential, however, does not make lack of diversity of services as the main reason for not preying the market in the said areas by the other companies. Fewer resources than Safaricom make it an enormous challenge for them to explore these markets. Given that Safaricom owns a bigger proportion of the market than all the other companies combined, the companies may not be as bold to invest in such an unfamiliar territory. 2.5. Promotion The company’s method of promotion falls under various categories. The most persistent method of promotion involves the use of mass media. The company’s advertisement feature almost all commercial breaks within the most popular TV and radio stations. This mostly happens when the company needs to promote a new service or offer. This frequent mode of advertising makes the company's services and offers widely known hence keeping their customers occupied. The offers mainly come about as newly invented services that end up being exciting and immediately used. The source of excitement mainly arises from their originality. The main reason as to why the company still retains most of its customers emerges from their creative offers. These offers then become copied by their competitors. This method of promotion proved exceedingly useful ever since the launch of M-Pesa. After its launch, all the other companies adopted the mobile money transfer service. This did not stir as much hype since it was usable and common among Safaricom customers. The other method of promotion adopted involves the use of the internet. Social media play a significant role in Safaricom's advertising. When one accesses most of the websites that allow local adverts, one in every five adverts belongs to Safaricom. Currently the advert that has the widest circulation involves the oncoming Safaricom 7s scheduled to take place on the 21st to the 23rd of September. This rampant advertisement by Safaricom in the internet mostly occurs when the company tries to promote a new service, offer or upcoming event. The method of advertisement proves to be effective since as previously mentioned the Safaricom 7s registers the most attended sporting event in the country. Safaricom more often than not uses the interactive method of advertising. Most of advertising that takes place uses the interactive method. This involves the use of events such as concerts, sports and promotional tours. As mentioned above the company hosts the most attended sporting event in the country. The company also organizes musical concerts, which feature the most popular musicians in the country. Through this platform, advertising becomes easier since the MCs usually interactively advertise their products in those events. The events mainly have phases of competition whereby the attendees have chances of winning prizes. This mix of competition and concert usually aims at reducing the formality of advertising to a younger generation. Promotional tours also have popular musicians. The difference between the concerts and the promotional tours lies in the mobility involved and location. Promotional tours usually involve travelling through the countryside with stop overs in different towns. The musicians hired to entertain the crowds usually comprise of vernacular, popular musicians who can connect with the less urban crowds. These tours often take several days. 2.6. People Safaricom has over a little over 1,000 employees. These employees serve the more than customer 12 million customers. Although most of the customers do not directly communicate with the employees the customer to employee ratio raises concern. This comes about due to the constant complaints by customers about the unavailability and inefficiency of the Safaricom customer care. At one time, the service of the customer care had deteriorated to extremes. A customer could entirely be unable to access the customer care for a whole day even he/she kept trying throughout the day. This inefficiency of the Safaricom customer care attracted wide mockery from the population at large for their inefficiency. At this time, the value for their customers was doubted. The service provision of the customer care continues to be slack, but the situation has highly improved from what it used to be. It would be wiser for the company to improve further on its customer relations since other competing companies treat their customers with extremely high regard. Accessing a customer care agent only needs one trial whereas, in Safaricom, it may take two or three attempts. This negligence may cost the company customers since the calling customers may be new customers who need guidance on how to use their services. This exasperation of unsatisfied customers may also lead to a change of service providers. Given that the company has a wide customer base it would be wise for them to employ more customer care agents to cater for the customers. This is especially after considering that of the 1,000 employees not all are customer service agents. 2.7. Process The process used by Safaricom involves alerting through text messages. This involves sending a request through a text message and receiving a reply the same way. The reply can be either affirmative or refusal to deliver the service due to several reasons that may be cited in the same. Most of the times the process of service to customers has a high efficiency, but at times it can be time consuming. For example, one can request to buy airtime via the M-Pesa service and a message may appear to cite difficulty in providing the service. The delays seldom occur and may be as a result of congestion in the network for the same request by other customers. Safaricom has proven to be efficient in solving problems that involve congestion. The services have significantly improved since the time when calls could not go through due to congestion. This problem's solution made it unheard of again. The recommendation that may apply for this situation involves the company having several trials for congestion in service requests before launching it in the mass. This may prevent future delays. 2.8. Physical evidence The physical evidence offered by Safaricom amount from the many M-Pesa kiosks all over the country. The green colored kiosks almost meters apart from each other serve as a physical evidence of the popularity of the company's services. These kiosks serve as the withdrawal and deposit points for the mobile money transfer service. Safaricom's physical evidence also appears in the main events either hosted or promoted by it. Almost all locally produced programs on television receive a significant financial boost from Safaricom. This may be a form of advertising but physical evidence nonetheless. 3. Conclusion In conclusion, Safaricom has a large customer base which goes on to prove the quality service that it has offered and continues to offer over the years. This, however, does not mean that the company does not face any real danger in the form of competition. In the contrary, the company faces stiff competition from other telecommunication companies that are hell bent on gaining a fair share of the market. The company, therefore, needs to continue promoting their services and unleashing new offers in order to maintain their relevance. The company also needs to improve on its public relations and services at fair costs. This should ensure that they do not to lose their lower class and middle class customers. These customers may not afford some of their highly priced services. All in all the company’s brilliance and innovation in regards to service provision make it a force to reckon with internationally. 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