Optus Prepaid Customer Marketing - Case Study Example

Optus Prepaid Customer Marketing Name: Tutor: Course: Date: Executive Summary The report provides detailed information on marketing with regard to positioning and segmentation strategies. It also explores on marketing mix and the competitor forces. The first section establishes the strategies used by the organization to outweigh its competitors and it observes that differentiation with focus on the product lifecycle is essential. It also underscores the use of Blue Ocean Strategy to gain entry into uncharted waters. The second section outlines the marketing mix which covers the product and services, pricing, distribution channels and advertising and promotion strategies employed. The last section looks at the competitive forces likely to influence competitors, suppliers and customers. These are three of the five Porters forces. Table of Contents Executive Summary 2 1.0 Marketing Strategies for Optus 5 1.1 Differentiation with Product Life Cycle Focus 5 1.2 Competitor Perception Position Map 5 1.2 Blue Ocean Strategy 6 1.2.2 Path 1: Alternative industries 7 1.2.3 Path 2: Strategic Groups within industries 7 1.2.4 Price corridors of the Masses 8 2.0 Market Positioning 8 3.0 Marketing Mix 10 3.1 Products and Services 10 3.2 Optus's differentiation of products and services in prepaid market 10 3.3 Pricing 11 3.4 Distribution Channels 11 3.5 Advertising and Promotion 11 4.0 Cooperative Strategies 12 5.0 PESTEL Analysis 12 6.0 Porter’s Five Forces 13 7.0 Porters Generic Forces 14 14 Figure 4: Porters generic strategies 14 Optus prepaid rewards seek to become the cost leader by pursuing proprietary technology and low economies of scale. All sources of cost advantage will arise from low cost production. Sustenance of leadership in the overall will be above average as they command prices (Porter, 2008). By differentiation, the firm will be unique and valued by buyers. The firm positions to as caring and unique hence rewarded for premium pricing. Focus is the choice on narrow scope in competition such as the youth or young adults and excludes others (Subhash, 2006). The target is both cost advantage in its young adults and also differentiation in this segment. 14 References 15 1.0 Marketing Strategies for Optus 1.1 Differentiation with Product Life Cycle Focus OPTUS has the potential of gaining competitive advantage through product differentiation with high awareness, excellent design, product extenders and easy accessibility. The designs remain exciting and fresh after developing Research and Development competency. The services will be priced above average while capacity expansion is anticipated to generate high demand (Hein, 2004). OPTUS has a vision of using prepaid rewards to be the most recommended and most loved service brand in Australia. The goal is to make customers feel genuinely appreciated in the form of rewards. The business objectives are; to continually enhance the prepaid rewards space within the next two years and how to enhance the rewards space with an engaging customer involvement plan. The company finds it expensive to launch prepaid rewards program at the beginning. The size of the market is still small at 3 million customers. Marketing costs, Research and Development costs and consumer testing remain high. Between 2014 and 2016 there will be strong sales growth as the company expands to win the 7 million new customers. More money generated is used in promotional activities (Henry, 2008). In 2016, the prepaid rewards program will have reached maturity and seeks to maintain a market share after 10 year market dominance since 2005. Beyond 2016, the prepaid programs will be on a decline as new innovative programs emerge. Winning the market during the decline stage requires the use of Blue Ocean Strategy. Perceptual mapping of telecommunications companies in Australia. 1.2 Competitor Perception Position Map The perceptual map establishes the perception of the customer about the brand. Optus prepaid rewards is perceived alongside the brand, Optus. From the perceptual map in figure 1, Optus prepaid reward program is highly valued and appreciated. The same applies to its close competitor, Telstra. The brands also attract increased loyalty among the beneficiaries. The other competitors such as boost, Lycamobile and virgin mobile describe loyalty and trust in a personalized service. Vodafone and amasym reign on trust but low on offering a valued and appreciated service as compared to Optus products. Figure 1: Customer Perceptual Mapping of Australian Telecommunications companies 1.2 Blue Ocean Strategy OPTUS needs to re-invent the prepaid rewards by not stealing customers from Vodafone and Telstra or competing within the boundaries of the existing industry. The strategic canvas is the tagline which in the known market space captures the current state-of-play. The strategy as shown below is about risk minimization and not in risk taking. 1.2.1 Strategy Canvas of Optus prepaid rewards Figure 2: Strategic canvas of Optus prepaid rewards Optus will not diffuse all its efforts throughout the competition but will look for the alternatives. It will differentiate its profile from the average profile of the industry. The model is Eliminate-Reduce-Raise-Develop actions (Porter, 2008). The tagline is clear to show the strategic profile. It advertises and offering truthfully and delivers clear messages to maintain interest and trust among customers. 1.2.2 Path 1: Alternative industries The company will have to create an uncontested space to make the competitors irrelevant. This is through pulling new group of customers conventionally non-customers such as professionals and newly employed youth who have turned into gambling and gaming to win bets (Subhash, 2006). They will be ready to spend more than the common prepaid reward tickets for a new experience. 1.2.3 Path 2: Strategic Groups within industries Optus new universe will be defined by two distinct strategic groups which are mobile phone manufacturers and retailers. The red oceans represent the known market space for existing industries as mentioned above (Philip & Turner, 2003). The boundaries are accepted and defined and the rules are well understood for banks during betting and prize awards. Companies jostle for the crowded market share making the competition to turn water bloody. Optus will have to be represented in the blue ocean where the market space is unknown and not tainted by competition. Growth will be profitable and rapid if the company creates a blue ocean from the red ocean by adoption of out of category rewards such as Movie rewards and Network Value different from the ‘recharge and win’ coupons. New customers will be pulled in while existing ones will have a relentless desire of being continually enhanced (Porter, 2008). 1.2.4 Price corridors of the Masses Optus can vary prices for the masses by involving two steps as identifying the price corridor of the masses and specifying the right level within the corridor. The price corridor can; buying a ticket of $19.95 to win 1000-3000Mb’s. The specific prices within the corridors will have upper level pricing of $29.95 to win 3000Mbs 5GB, $24.95 for 2000Mbs at 5GB and $14.95 to win 1000Mbs at %GB data. The price bandwidth captures the largest target buyer groups in the price corridor of the masses. 2.0 Market Positioning Optus at the moment stands as a cost leader in its product lifecycle. The company has been leading in marketing budget optimization. Currently, the marketing budget stands at $2 million per year of which 50 percent goes to awareness, 30 percent for customer access/enrollment and reward costs, and 20 percent for customer consideration. The company is positioned as genuinely appreciative through rewards (Srivastava & Thomas, 2010). The performance of the two major competitors is as shown below; Company Strengths Weakness Telstra Top 20 most recognized brand internationally Market leader in network coverage over Optus Has effectively leveraged on broadband offering and triple-play Dominates the Service in Operation Market share at 40% by reducing on customer churn Brilliant marketing campaigns such as the ‘Brilliant Connected Future’ and ‘Thanks loyalty programme’ which are brand marketing programs. Dedicated and qualified staff and growth avenues such as the Telstra marketing graduate program Steady focus on growth, core revenue and customer service excellence Greater efficiency by integrating marketing and IT departments called ‘Virtual Marketing Technology Unit’. Has the best leadership after ‘poaching’ the chief marketing officer from CBA Shift of 40 percent marketing budget to Customer Relationship Management (CRM) Reduced spending on marketing Legal tussles with Optus over marketing strategies Vodafone Australia Increased synergy after acquisition of ‘3’ mobile communications Customer service is localized and of high quality New network expansion has yielded a faster and reliable experience to customers Obtains $2 billion for upgrades, advertising and marketing in 2012 Reduced levels of revenue and shrinkage becoming vulnerable to competition Speculation and loss of employee morale over job cuts in the marketing division. Departure of more qualified and experienced managers Loss of customers Mixture of network technologies caused network problems Significant debt was added when it merged with Hutchinson. Management not inclined to study market trends due to poor skills and experience Figure 3: Operational market share on customer mobile services 3.0 Marketing Mix 3.1 Products and Services Optus provides mobile phones, tablets, broadband services, home phones, internet bundles and TV access (Young, 2005). These products have been innovative and significant in the global market with more recent developments in the sales of Samsung Galaxy S4 and S5. With increased competition, these products are undergoing incremental changes every year. Optus seeks to delight its customers through innovative and reliable products and services. The prepaid rewards program is an innovative service to secure a greater market share through product differentiation strategies (Subhash, 2006). 3.2 Optus's differentiation of products and services in prepaid market Optus Company enhances product differentiation in prepaid market through innovative paradigm based on distinct years with different profile. In regards to 2005 to 2006 Optus accentuates its product differentiation with Recharge and Win. Optus improvise its product profile in 2008 to 2012 by emphasizing that on recharge the customer will always win. The differentiation model of Recharge and always wins emphasis the essence that every time of recharging there is assurance of wining. The dynamic changes of market condition rekindle the diversification of product differentiation. In 2013 to 2014 Optus products was supersede demarcation is surprise & delight Choices (Tired Tenure Based). The inconsistence of the product differentiation enhances competitiveness of the company’s product in the market. 3.3 Pricing Optus Internet connection, mobile phones and plans alongside fixed line services are based on plan speed, prepaid data and IP. It employs psychological pricing strategies. The three plans include 10GB at $34.95, 15GB at $54.95 and 20GB at $74.95 which is similar to that of Vodafone and iiNet. There is a cost of $15/month on top of the plan for customers preferring Mini WiFi modem allowing up to five devices sharing connection. Optus has no option of bundle pricing but exploits its cheaper service-plus-modem plan. Telstra provides higher prices for a contract of 12 to 24 months and discounted by $10 for HomeLine Plus fixed services customers. It does not charge for excess data but slows the connection upon reaching the monthly limit. 3.4 Distribution Channels Payments of Optus products and services can be done through cash or credit cards. The supply of its prepaid reward services is mainly on B2C basis but sales of mobile phones and home phones are undertaken on B2B via authorized dealers. The distribution channels are effective with land and sea and air transport used. The products are light and non-perishable hence does not incur higher freight costs and storage (Weinstein, 2004). E-commerce has assisted in increasing the efficiency of the channel and in procurement and settling payments. Products are mailed to individual customers within days of order. 3.5 Advertising and Promotion Advertising and promotion of internet and broadband services is effective using traditional media since people of all ages are accessible to the TV, radio and newspapers. However, prepaid rewards from Optus are best marketed through the social media such as Facebook, Twitter and MySpace. These promotional sites are cheaper and mostly frequented by the youth and young adults who double as the target group for the prepaid rewards programme (Schept, 2010). Promotion will involve bundling and offers or seasonal prices to be won. The rewards of the promotion include free photo books, bonus talk time and 2 for 1 movie fun. The sports TV channels are also favorite avenues to air the rewards program since most of the target users watch soccer and cricket. 4.0 Cooperative Strategies Synergies are built through collaboration and partnerships. Optus can form strategic alliances with non-competitors like iiNet which offers 4G services, manufacturers of mobile phones and homephones like Samsung and Apple (Smart phones, 2010). This cooperation between suppliers, strategic partners, customers or dealers and regulatory bodies will engender improved image and firm reputation. The company has implemented the Enterprise Resource Planning to secure the relationships between its distributors, customers and suppliers (Weinstein, 2004). The company is in trade association with Samsung. It is also in working relationship with iiNet, Virgin Group, Vodafone Group Plc, TPG Telecom and Telstra. The company has been engaged with sponsorships such as FFA and digital rights agreement. The Victorian government necessitated the conclusion of Australia-Malaysia Free trade agreement which will benefit Optus and other telecommunications firms. Optus and FOXTEL found to have breached the Trade practices act of 1974 (Commonwealth). 5.0 PESTEL Analysis Australia is a tightly close community with socio-cultural diversity. It also has one of the largest immigrant communities in the world with moderate population and high rate of employment. The fairly monogamous families are in constant communication with parents and their children party calling the shorts in mobile communications. Many loves sport especially cricket and soccer and would spend time at drinking joints and clubs to follow such events. The federal government supports the film and media industry to flourish (Weinstein, 2004). Their culture is largely the Western Anglo-Celtic and the American Popular culture through television and cinema. The purchasing power parity is very high with high GDP and low poverty rates enhances by the country’s higher rate of employment. Higher rate of employment as a macroeconomic factor accentuates higher income thus increase in Optus product sales. The Housing prices are high and so is the house-hold debt. There is a general shift from manufactured goods to exported commodities. A 10% Services and Goods Tax (GST) was introduced in July 2010 as an indirect tax system. Financial, telecommunications, tourism and education sectors account for more than 70% of the GDP (Collis, 2008). The government is the main regulator of telecommunications companies. The country is semi desert to desert conditions with increased threat of human activities. Environmental protection is a major issue in political circles. Licensing of service providers and carriers is undertaken by Australia Communications and Media Authority. Telco is currently lobbying the Tony Abbot labor government to repeal roaming regulations (Tchorek, 2011). Telecommunications companies are internally financed and distribute its budget to meet financial goals. 6.0 Porter’s Five Forces Barriers to entry: The challenges of entry are huge since it requires huge capital base for infrastructure and operations. Entry fees and regulations are also tough. This makes it difficult for new entrants to enter and exit the telecommunications market (Bogdan & Biklen, 2007). Internal rivalry: Rivalry is quite high with unhealthy competition for customers. At some point, Telstra took Optus to court for making a claim on the same geographical customers. Price wars are also high with each party trying to impress customers. This has increased consumer power (Schept, 2010). Innovation and creativity has also been increased due to differentiation of products and services. Substitute Products: The main substitutes are freebies and gift vouchers from other rival companies. The substitutes have also helped in increasing the power of suppliers since they compete in offering quality products to business companies. These substitutes increase loyalty to the company as does the prepaid rewards (Bogdan & Biklen, 2007). 7.0 Porters Generic Forces Figure 4: Porters generic strategies Optus prepaid rewards seek to become the cost leader by pursuing proprietary technology and low economies of scale. All sources of cost advantage will arise from low cost production. Sustenance of leadership in the overall will be above average as they command prices (Porter, 2008). By differentiation, the firm will be unique and valued by buyers. The firm positions to as caring and unique hence rewarded for premium pricing. Focus is the choice on narrow scope in competition such as the youth or young adults and excludes others (Subhash, 2006). The target is both cost advantage in its young adults and also differentiation in this segment. References Bogdan R C & Biklen, S K 2007, Qualitative Research for Marketing: an Introduction to Theories and Methods (5th ed.), Pearson Marketing, Boston, Mass. Collis, M 2008, Corporate Strategy, a Resource-Based Approach. Boston. Hein, K 2004, Brand Loyalty 2004, Sydney. Henry, A 2008, Understanding Strategic Management, New York: Oxford University Press Philip K, R E & Turner R 2003, Marketing Management- seventh edition. Porter, M E 2008, Strategic Competitive forces that shape strategy. Harvard Business Review. 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