Cellular marketing strategy

Abstract

The case gives an insight into the various promotional strategies implemented by the major cellular service providers in the Indian cellular market. The GoI’s decision to liberalize the telecom sector in 1994 transformed the entire telecom industry, with many private companies foraying into the sector. With the consequent grant of licenses for providing cellular services, there was a surge in the number of cellular services providers which continued till the late 1990’s. By the year 2000, stiff competition between players in the cellular market prompted each player to formulate more novel strategies in order to retain their market share. Most of the promotional strategies revolved around capturing the younger generation who formed a major part of the target market. Celebrity endorsements, special season offers, festival discounts, and innovative advertisement campaigns were used by the cellular service providers as tools to push back the competition and increase their market share.

What other operators have achieved in one to two years, Bharti has done in just over a month. In July 2002, one out of every two people buying a mobile across India chose AirTel. We are truly proud to be spearheading the mobile revolution in the country."

- Sunil Bharti Mittal, Chairman, Bharti Tele-Ventures in 2002.

"It is the technology advantage and not the lower rates that is attracting more and more customers to Reliance India Mobile."

- Kaushik Roy, Head of Marketing, Reliance India Mobile in 2003.

INTRODUCTION

After the liberalization of the Indian Telecom Sector in 1994, the Indian cellular market witnessed a surge in cellular services. By 2005, there were a total of 12 players in the market with the five major players being Bharti Tele-Ventures Limited (Bharti), Bharat Sanchar Nigam Limited (BSNL), Hutchinson-Essar limited (Hutch), Idea Cellular limited (Idea) and Reliance India Mobile (RIM) (Refer Exhibit I).

All the players except RIM offered services based on the Global System for Mobile (GSM) technology. RIM provided services based on Code Division Multiple Access (CDMA) technology as well as GSM.

As competition in the telecom arena intensified, service providers took new initiatives to woo customers. Prominent among these were - celebrity endorsements, loyalty rewards, discount coupons, business solutions and talk time schemes. The most important consumer segments in the cellular industry were the youth segment and the business class segment. The youth segment was the largest and fastest growing segment and was therefore targeted most heavily by cellular service providers.


Bharti Tele-Ventures adopted celebrity endorsement as its chief promotional strategy. By 2004 it emerged the unprecedented leader commanding the largest market share in the cellular service market. (Refer Exhibit II). Hutch implemented the celebrity endorsement strategy partially, relying primarily on its creative advertising for the promotion of its brand. BSNL, on the other hand, attracted the consumer through its low cost schemes. Being a state owned player, BSNL could cover rural areas, and this helped it increase its subscriber base. Reliance was another player that cashed on its innovative promotional strategies which included celebrity endorsements and attractive talk time schemes. Idea, relied heavily on its creative media advertising sans celebrities.

BACKGROUND NOTE

The Department of Telecommunications (DoT) was set up by the Government of India (GoI) in the 1980s. Its function was to manage all telecommunication services within the country. In 1986, the GoI sought to modernize the telecommunications facilities in the country, and established Mahanagar Telephone Nigam Limited (MTNL) to look after services in Bombay and New Delhi, and Videsh Sanchar Nigam Limited (VSNL) to handle overseas services.

The rest of the nation's services were to be run by the DoT. In 1994, India ranked sixth in the world in terms of number of installed fixed lines. The GoI introduced the National Telecom Policy (NTP) in 1994 with a view to improving India's position in global telecommunications.

The introduction of the NTP led to a metamorphosis of the industry as it allowed the private sector to invest in telecommunications. In the course of liberalization, licenses were granted for providing cellular mobile service in the metro cities of Delhi, Mumbai, Kolkata, and Chennai.


To avoid overlaps, the NTP stated that not more than two cellular providers could operate in a given telecom circle. In 1997, the Telecom Regulatory Authority of India (TRAI) was established to regulate all telecommunication services. The NTP of 1999 further relaxed the norms for cellular providers. Service providers were now free to provide all types of mobile services including voice and non-voice messages and data services in their service area of operation.

Bharti, a part of Bharti Enterprises , was the first to launch its cellular service on July 7, 1995. Bharti's cellular services were launched under the brand name 'AirTel' and were categorized as pre-paid services and post-paid services. The postpaid service was launched under the brand name "AirTel" whereas its prepaid services were launched under the brand name "Magic". As of March 2005, the company operated in 23 telecom circles and had the largest subscriber base of all service providers at over 9.8 million.

In 1995, came Hutchinson Max Telecom - a joint venture between Hutchinson and Max India Limited. Hutchinson Max Telecom launched its cellular services in Mumbai under the brand name "Max Touch". In 2000, Hutchinson entered into a joint venture with Essar called Hutchinson-Essar to further expand its operations in India.........