O2 Mobile Phones, Broadband & Sims from the UK's - Case Study Example

O2 Mobile Phones, Broadband & Sims from the UK's i) Part ‘1’- The product/brand’s macro and competitive environments – 33% O2, a cell phone operator and telecommunications provider in the United Kingdom, was founded in 2002 and it has over sixteen million active subscribers (Mobile Phones Industry Profile, 2010, p.1). In 2005, O2 proved that it is indeed the cell phone giant and its competitors were yet to catch up with it (Mobile Phones Industry Profile, 2010, p. 23). During this time,O2 raised its predictions for growth in its major United Kingdom market. The company’s consumer base increased to more than fifteen million for the first time in the company’s history. In the first quarter of 2005, O2 managed to add over two hundred and thirty customers and four hundred thousand more in the following three months. In 2005, O2’s success story was revealed when it overtook Vodafone and became the top cell phone operators in the United Kingdom.The company’s active clients totaled up to sixteen million during this time. Despite the stiff competition present in the market, O2 has managed to stand out from the race. The company’s success can be attributed to its unique strategy which has attracted more customers and retained existing ones. In an interview, Peter Erskine, the chief executive of O2 stated that the company will continue to perform well even in the extremely competitive environment (Nick, 2005, p.25). The chief executive stated that the company had managed to attract more than fifteen million consumers and the industry was expected to deliver an increase in net income ranging between six to nine percent for that year. The chief executive added that the company’s main concern was to ensure that its powerful momentum was being maintained in both before pay and contract deals. The company was also interested in ensuring that the consumer retention programs implemented at the begging of 2005 were yielding fruits (Mobile Phones Industry Profile, 2009, p.11) Erskine noted that most new industries had learnt from personal customers and minor companies that large company consumers had remained aggressively competitive in the market. Customers have preferred to stay with the company rather than look for other services in other corporations. The ability of the company to maintain customer loyalty is as a result of the “compensation program,” which gives back ten percent of their additional payments after every three months (Precision Marketing, 2003, p.2). The company also grants contracts ranging between twelve to eighteen months. Most clients however, prefer the eighteen months contracts since they have better value. O2 also assists companies such as Tesco to run their virtual network. In 2005,Tesco managed to attract seven hundred consumers in the quarter of the year and these are not among the fifteen million customers that O2 already serves. O2 has been predictedby analysts to be among the top three well performing mobile companies in the United Kingdom. The chief executive added that the second quarter of 2005 had been very competitive and this is due to the fact that the company’s rival specifically firms in Germany, were launching promotions and reducing product prices almost every week. Despite these challenges,O2 competed favorably and forged on to the subsequent part of the year. O2 continues to introduce third generation services and consumers are busy testing whether live television can be broadcasted on their phones in the Oxford region. O2 introduced i-mode services to its customers and this threatened Japan since the nation was finding it hard to access internet. The company is also trying to find means of launching high speed internet which is nearly four times faster in sending mails and opening web pages. However, this service is extremely inadequate and only those customers who come first will be able to access it(Nick, 2005, p.5).There are also conditions that customers must met in order to access the high speed internet service. Only clients who have utilized O2 services from the month of May 2010 and have a mobile phone or broadband affiliated to the company will be able to get the up-to-date internet service. This clearly shows how the company has inadequate stock. The company’s competitors have not just sat back and done nothing. They have definitely gone out and began to trade iPhones in large numbers. Vodafone for instant is offering the apple cell phone to every passionate client. Vodafone is also not selective in terms of new and existing customers. Those consumers willing to join Vodafone will be able to obtain the latest iPhone as long as the stock is available. Vodafone has also not indicated the level of iPhones to its users hence costumers have no reason to get discouraged. However, the existing Vodafone customers may feel that the company does not value their loyalty hence may get dispirited. An additional network provider company known as “Three” has not also disclosed the number of iPhones available and the company’s strategies to enhance the sale of this particular product are also not known (Mobile Phones Industry Profile, 2008, p.1). There are high chances that “Three” might do everything it can to meet the demands of a large market size. It is ironical that T-Mobile, another renowned network providing company, has not reacted on this new wave in the market. The company’s spokesman stated that nay announcements will be made. O2 therefore struggles to cope with the emergence of smartphones in the market. O2 also faces problems with networking such that its customers at times are unable to make calls or connect to the internet. This is due to the strain that applications such as Twitter experience when managing data. Since the beginning of the year, O2 has experienced an increase in data traffic and has invested huge amounts of money just to fix the problem. The company’s competitors have taken advantage of this problem and bragged about their efficiency in network provision. Orange having the biggest 3G network renders it a stiff competitor of O2. Vodafone on the other hand has invested greatly in network provision which covers a wide population. Analysts predict that mobile operators and telecommunication providers will face stiff competition with regard to network provision and performance. Despite all these strategies, O2 continues to face stiff competition in the market (Evening Standard, 2006, p.8). In 2006, Vodafone, O2’s rival, announced its half year revenue which was considerably high (Mobile Phones Industry Profile,2008,p.23).Following this particular announcement, O2 went ahead to warn that its profit levels were likely to go down yet this is not what the company intended. Analysts also expected 02 to exhibit a downward performance during that time. The fight to sign up for new customers in the United Kingdom continues to heighten. The sole reason as to why the competition is becoming tighter for O2 is because of the pricing pressure not only from Vodafone but Orange and T-Mobile as well. This is indeed exciting to customers since they have an opportunity to access mobile phone services at a lower price from companies such as Orange and T-Mobile. However, this is a crucial threat to O2 which is yet to adjust its pricesthus the company might experience low profit margins. It is important to note that lower margins affect the price of adding more consumers. O2 and Vodafone compete in terms of revenue and subscribers. Whereas O2 has a considerable number of subscribers, Vodafone generates high revenues. Nevertheless, O2 still out performs its rivals providing the United Kingdom with forty percent net additions. In Ireland, the company experienced a fall in revenue in 2006 and an increase in the new formed Czech Republic. ii) Part ‘2’ - The marketing programme elements (marketing mix elements) currently employed – 33% In just one and a half years after the company was founded, O2 managed to attain a high number of customers. Among the strategies that the company employs to attract and retain customers is what is known as “O2 More”. “O2 More” is an integrated a marketing strategy that offers advertisers with highly modified campaigns. It is also important to note that the intergartaed compaign teagets youths aged between sixteen to twenty five years. The aim of the compaing is to facilitate awareness and drive uninterrupted response. The cpompaign entails widespread open-air and ambient action. O2 also received support from the Agency Republic which established an online compaign based on the “O2 More” strategy. The compaign posters,adverts placed tacfully on cabs and a slip that can be taered off easily containing details on how customers can sign up for the new service. The company also offers affordable rates for those calling from home. Consumers are onlyasked to regioster their home postcards in order to sign up for the service. Complicated technology therefore directs calls made from home to an affoiradable tariff (Precision Marketing, 2003, p.2).O2 customer data bases are used to infer the client location and phone utilization. O2 has also signed up for more than one thousand brands with Tesco and Honda being included. This move not only enables business to attain its goals and objectives but also allows consumers to appreciate the promotions and offers. For instance, O2 partnered with Starbuck and produced a weighty campaign across the United Kingdom. This campaign entailed voucher recovery which witnessed a reaction rate of around thirty four percent (Marketing Direct, 2008, p.10). The managing media director of O2 stated that the strategy aimed at meeting the specific needs of its customers. The company’s media director added that the fact that millions of customers had responded is a clear indication that O2 was delivering its promise. Through “O2 More” the company manages to new and effective communication for various brands. The company noted that the best way to reach out to customers is through sending texts via mobile phones. This develops an actual engagement with the customers. “O2 More” intends to create an exciting experience with clients supported by some of the United Kingdom’s valued brands (Precision Marketing, 2003, p.2).The main reason as to why O2 decided to opt for new marketing strategies is because of the fact that in 2002 when it was still known as BT Cellnet, the company experienced huge losses to its competitors (Mobile Phones Industry Profile, 2009, p.33). The devastating performance initiated the need to create a new brand with new strategies and that is when O2 was launched. There was also an urgent need to succeed in the highly competitive business environment hence this led to the quick establishment of O2. O2 was in needed to be informed maximally in the shortest time possible. Therefore O2 was established in a way that it would cater for the needs of all customers. The company was intended to be all round. Moreover, only a comprehensive assimilation strategy would allow the company to achieve its goals. O2 was like a new brand in the market. The more attractive the brand was the more successful and mature it became in a constantly commoditized market (Mobile Phones Industry Profile, 2009, p.33). From the beginning, customers have been the sole interest of O2 unlike other companies which prioritize their products. Studies had revealed that consumers were now tired of false promises and wanted something that would materialize. Consumers were hungry to utilize technological aspects that were readily available and important. O2 therefore provided ways in which consumers can communicate, work and even have fun .The company commenced with a brand advert which introduced the trademarks philosophy to consumers. This was then followed by a series of adverts regarding the product which were enfolded in the brand. With most of the population owning a mobile phone, company growth needed to do a lot (Mobile Phones Industry Profile, 2008, p.32). Rupi (2007, p.8) state that brand affinity, pricing and service provision have become the major areas of growth and expansion. O2 realized that there was need to appreciate its customers rather than concentrating on acquiring more clients (Mobile Phones Industry Profile, 2010, p.1).The company recognized that this strategy was more rewarding and fulfilling. This approach was condensed in the inauguration of a campaign labeled “Our World that revolves Around You’ which took place in the first quarter of 2005. Consumer loyalty and retention has been one of the company’s most significant inventions. Concentrating on rewards, decreasing the rate of defection and brand loyalty has enabled O2 to thrust into market leadership. A more recent campaign was launched in order to accelerate customer, loyalty (Mobile Phones Industry Profile, 2009, p.1). The campaign was named ‘it’s Your O2. See What You Can Do’. In just a short period of time, O2 has achieved a lot thus the brand is dominating. Even in the competitive market, O2 continues to pay bonuses and its strategy has paid sixty times with an outstanding profit margin. The value of the company continues to go up since its launch and analysts state that it is the most accomplished mobile launch ever. It is again important to note that over half of the targeted customers responded to the campaign. In the past three years, O2 has been categorized as the fastest growing company in the United Kingdom. It is also the only company that exhibits annual growth through both contract and prepay clients. O2 has done everything it can to step up the competition from its rivals. iii) Part ‘3’ - Your fully justified recommendations in respect of the revised marketing program elements needed to improve market size and/or profitability – 34% Establishing an effect market strategy is one of the most important things that business can venture in if they intend to realize profit. Marketing affects every operational aspect in any business or organization. According to Best (2000,p.65), marketing entrails a series of actions created in order to identify and meet the needs of consumers. Other than satisfying customer needs, marketing is also aimed generating profit on quality service and goods. Appropriate marketing entails actions such as research, pricing, advertising, product creation, promotions, locality, consumer service, competition and several others (Hill & Gareth, 2007, p.89). Just like O2, any business ought s to establish a market strategy in order to boost performance. For O2 to undertake effective marketing, first, it needs to conduct marketplace research. It is important for the company to clearly and specifically identify its market. It is important for the company to understand the size of the market and the kind of features that will impress and satisfy customers fully. Reflecting on the above discussion,the O2 high internet speed offer to its customers was not well calculated. The offer was being offered on first come first serve basis which did not sound inventive. Other corporations such as Vodafone did not select the kind of customers to offer the new iPhone. Analysing the target market for O2 simply reveals that this particular company was not creative enough (Marketing Direct, 2008, p.10). The target market of O2 which comprised of youths aged between sixteen to twenty five years necessitated that the company needed to develop more products. The age bracket of the target market reveals that the company was indeed aiming at individuals who form the highest population. Therefore it is clear that O2 did not conduct proper market research in terms of size. Understanding the market size will assist the company to come up with a more focused strategy. Another element that is necessary in order to improve market size and profitability is competition. Hill and Jones (2009, p.72) explain that it is essential for any business to deeply know who its competitors. This does not just mean identifying competitors but it entails knowing how strong these rivals are. In this case,O2 needs to know its strong competitors in order to know how to manage its operations. O2 needs to analyze its top competitors in the market by classifying their resemblances and differences. O2 also needs to pinpoint the pros and cons of its competitors. Through this, the company will be able to identify appropriate methods with which to improve company operations better than those of its competitors. Another important aspect that O2 needs to adjust is pricing. There are several pricing approaches that the company can adopt in order to achieve the intended objective. When O2’s rival firms were launching promotions and reducing product prices, competition heightened and the company experienced major losses because it had not adjusted its product costs. This was an indication that O2 had not strategized pricing appropriately. O2 therefore needs to employ scanning or skimming, follower valuing and market penetration pricing approaches. Scanning concerns itself with setting the product value high in order to evaluate demand in the market. Emerging business ought to focus on reinforcing sales but never at the expense of revenues. Scanning will enable O2 to realize high revenue primarily. Nevertheless, this particular approach becomes unsuitable since it permits competition to come into the marketplace beneath the high valuing technique (Walker, 2003, p.112). The approach therefore can only work if the company is protected by a solid plan to make as much revenue as possible and then jump to the next opportunity. The follower valuing approach on the other and entails adjusting prices in reaction to all key business rivals. O2 therefore has to maintain minimum costs it wishes to compete favorably in the market. If any company or organization fails to control its prices, then competitors will definitely take advantage of such an action. Market penetration entails inclusive persuasive campaign where the business might for instance lessen the price of the products beneath the competition for the sole purpose of establishing a powerful entrance into the market. In the early stages of the business, this strategy might reduce profits. It is hence necessary for the business to determine whether it has enough revenue to sustain it until it fully attracts a large market. The business might profit from offering enhanced customer service. This kind of strategy is really sensitive such that it impacts business profits especially during the primary phases of company growth. It is again important for the business to observe how competitors react to the new strategies thus make the necessary improvements. Another significant aspect in marketing is advertising. Advertising entails knowing the companies clients and selecting the correct media to influence the target group or audience. The secret is to use various kinds of media in order to reach the target audience. Some advertising strategies might work while others will fail. Due to this,it is appropriate for the business to evaluate the adverting calendar every now and then. Those advertising approaches that prove inefficient should be done away with. O2’s advertising event proved fruitful though it had the potential of yielding much more revenue if careful consideration was given to the event. It should be note that O2 only focused on educating customers regarding its products which was a good move though a lot more can be done to realize maximum profits. The company therefore could have taken advantage of the fact that it was a new corporate and included celebrities in the endorsement its products and services. Including celebrities in advertisements attract large media coverage hence many customers can be reached. The cyclical aspects of a company’s products and services also matter a great deal. The sluggish and eventful times must all be considered when deciding the kind of media to utilize. Customer service is also fundamental when it comes to marketing. Customer service provides customers with a certain perception regarding the business in question. Most clients or rather all enjoy a welcoming and well-mannered service. Appropriate customer service defines the outcome of any business campaign. Consequently, O2 should include appropriate customer service in its campaign programs in order to remain at the top. Fulfilled consumers stick with the business and even introduce their friends and families to the company. Locality is also very significant in marketing. Advertising a business using word of mouth sounds cumbersome though it is rewarding. O2 focused mainly on written communication due to customer locality issues, though the company would have performed even better if verbal interaction was utilized. The company could have identified a location that was highly exposed to passersby since such areas have high resident promotions. If O2 had combined this particular strategy with written communication, then it would have reached out to a wide population. The remaining marketing strength would have been utilized in developing consumer demands, which raise profit margins and expands the business. However, it should be noted that some businesses do not need verbal campaign during marketing since their products are relatively unique. All in all, O2’s products can be marketed verbally using sales executives. Bibliography Best, R. 2000, Market-based management: strategies for growing customer value and profitability. California: Prentice Hall, p.65 Evening Standard, 2006,CUT-THROAT COMPETITION HOLDS BACK 02.11/13/2006, p8, 1/8p; Reading Level (Lexile): 1220 Hill, C. & Gareth, R. 2007, Jones. Strategic Management: An Integrated Approach. New York: Cengage Learning, p.89 Hill, C. &Jones, G. 2009. Strategic Management Theory: An Integrated Approach. New York: Cengage Learning, p.73 Marketing Direct (1366896X), 2008, Mobile phone companies. p10-10, 1/6p Marketing Direct (1366896X, 2008, Mobile phone brands. p10-10, 1/3p Mobile Phones Industry Profile, 2010, Mobile Phones Industry Profile: United Kingdom. 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