Vodafone: An Analysis of the Marketing Mix - Essay Example

? Vodafone: an analysis of the Marketing Mix Number Word Count: 2,916 0 Introduction: The profitability of any enterprise is determined not only by uniqueness or usefulness of its product but the actual market demand that exists for them. A novel idea may be able to generate significant revenue over the short term but the long term growth and sales are only possible when the customer perceptions are successfully shifted positively in a firm’s favor by using the correct marketing mix of: product, price, place and promotion. Profitable businesses have to give equal strategic importance to all these four aspects of marketing if they want to compete for a greater share in increasingly tumultuous markets. In this age of increasing and accessible media technology, the customer has become even more demanding about what they will buy or not given. There is excess information readily available to compare and contrast various business offerings and any complaint or minor discrepancy about a certain brand can be communicated to the mass marketplace very easily. In such conditions, claiming to be the best business in any sector is no small feat but Vodafone, British’s top most mobile network service provider and the world’s second biggest brand by both revenue and subscribers (intangible business, 2008, pg 10) has managed to attain and maintain this position for quite some time. Launched in 1982 as a joint venture between Racal Electronics plc's subsidiary Racal Strategic Radio Ltd along with Millicom and the Hambros Technology Trust; Vodafone Group was born as a separate brand and business in 1991 with the divergence of Racal Telecom from Racal Electronics (cellnet, 2012). Over the past two decades, the telecommunications giant has pursued an aggressive expansion strategy combined with emotional and relatable marketing campaigns to cement their brand; “Its brand is the most geographically spread and is the second most valuable telecoms brand in the world, worth $22.1bn.” (intangible business, 2008, pg 10) Intagible business, 2008. The World’s Most Valuable Mobile Telecoms Brands 2008 [Online]. Pg 14 In this research done by intangible business, an analysis of the world’s largest telecom brands was done through publicly available information.500 operations were studies to provide the top 100 rankings based on brand value for share holders. In a heavily congested market with little to no differentiation between the product offerings, businesses have to rely on the strength of their brand to retain loyal customers, encourage trial by new customers and lead to steady revenue and profit growth. Vodafone brand value was determined as $22.1Bn in 2008. 2.0 Vodafone network The previous year was an extremely fruitful one for the mobile network “Vodafone beat expectations to report a 4.1% rise in revenues to ?23.5bn, with 9.4 million new customers joining its network in the last six months.” (Garside, 2011). Analyzing the strategic and marketing policies followed by the company can help in identifying the reasons for their continued profitability 2.1 The British Market The business is headquartered in Newbury, Berkshire, England, though through expansion and acquisition they have managed to form strong markets in many different countries. Vodafone’s started aggressive brand growth in the 1990s, when the business began to consolidate itself on the British high-street. Starting from 1996, Vodafone acquired the two thirds of Talkland it did not already own for ?30.6 million. Later the same year, Vodafone purchased Peoples Phone for ?77 million in a defensive move. The 181 store chain provided Vodafone with the necessary physical assets to strengthen their presence and distribution channels for further growth. Soon it added Astec Communications, a service provider with 21 stores, in the acquisition portfolio by purchasing 80% of the company (cellnet, 2012). With its presence secured in the British market, Vodafone went on to concentrate on enhancing its brand image, services and products to ensure high customer satisfaction and profit growth. Vodafone topped 2010’s  Brand Finance list of the 50 most valuable brands of British origin (Costa, 2010), as well as winning the UK Mobile Industry award for Best Network in 2011, as the judges felt that in a time of recession “Vodafone is providing the right basic products at the right price and that is what really matters to customers in tough economic times” (Noble House, 2012). Over the years Vodafone has strived to convey an image of stability and reliability for their British customers through its communication and services. 2.2 Expansion in International Markets As Vodafone grew across borders, their strategy evolved to provide a unified image to the world, even as they kept true to some of the local elements in different markets to create trust with the customers. Their international strategy greatly influenced Vodafone’s future marketing campaigns – most apparent is the adoption of the new corporate Speechmark logo in 1997. Beginning from the late 90’s and continuing on in the first decade of the 2000, Vodafone started the move into the European and overseas markets. Vodafone bought 35% share of Mannesmann, owner of the largest German mobile network and took over Eircell (part of eircom) in Ireland. An agreement Bell Atlantic Corp led to the merger of Vodafone’s U.S. wireless assets to form Verizon Wireless in 1999. Moving forward in 2001 Vodafone introduced the idea of ‘Partner Networks’ which could introduce Vodafone international services to the local market, without the need of direct investment by Vodafone. This streamlined the process making it faster for the brand to penetrate in the new markets. Currently Vodafone has a strong presence in Asia Pacific Middle east, Africa and the Americas. The company has attempted to integrate its communication and brand presence in all these locations even if the product, pricing and placement are of different structure as per the local demands. 2.3 Financials of the Company: Vodafone has shown stellar performance in the past few year, even in the face of the financial and Euro Sovereign debt crises.  In 2011 UK revenues rose 2.7% to ?2.6bn, and pre-tax profits rose 5.7% to ?633m. Service revenues grew 3.7% to ?11bn in UK, and 19.5% in India. Germany had strong growth for the company, with 804,000 net new customers; similarly in the US high profits allowed them to announce an expected ?2.8bn dividend for Verizon Wireless in January 2012. (Garside, 2011) While the year 2012 has shown some problems for the brand, especially in the European region the company is still positive (though realistic) about their aspects. Vodafone had to write off the value of its assets in Italy, Spain, Portugal and Greece by ?4bn but Revenue across the group rose by 1.2% to ?46.4bn. "Given larger regulatory reductions than previously envisaged, we now expect organic service revenue growth in the 2013 financial year to be slightly below our previous medium term guidance range," Vodafone said. (BBC news, 2011). The focus will remain on superior network quality and an improved customer experience and utilizing their brand equity to maintain their market position. 3.0 Vodafone: the Global Brand Identity For a telecom brand spread on a global scale, a unified branding strategy provides both advantages and risk factors. On one hand for product in new markets the brand image can be easily transported and the information accessibility means that people might be more willing to try a brand which is already well-known in developed markets. But the danger lies in the attitude of the market- often local tastes and needs have to be catered to before the consumers will adopt the product or services. For Vodafone their marketing strategies have revolved around a single logo and theme, with communication and overall brand offerings differing from region to region. The name Vodafone comes from ‘Voice’ and ‘Data’- two factors which increasingly drive communication in the modern world. “What do telecommunications companies actually do? Very simply connect people to talk, yet our global audit revealed businesses that looked more like they were manufacturing technology” (Broadbent, 2012) Their rapid expansion had led to a brand which had good products but a very disjointed perception for the customers. In 1997, Vodafone underwent a re-branding process, the new core brand idea was to be a key driver for advertising, sponsorship and facilitate Vodafone's strategy for global acquisitions. Vodafone introduced their new Speechmark logo to be unrolled in all the markets they were present in. Symbolizing the single quotation mark which comes at the beginning and end of each speech, the logo clearly told the customer that Vodafone was primarily there to help them connect with the other people in their lives. Along with the logo, the company introduced new holistic guidelines covering all aspects of future marketing and communication including the use of the creative use of their logo in photography, sponsorships etc. From the country of origin, their trademark has translated beautifully into other cultures and regions. The re branding strategy was a resounding success. Company representatives claim that prior to launch of the new identity over a three year period Vodafone enjoyed growth of 38% but Post launch, over three years this increased to 509%. (Broadbent, 2012). The colors and the logo of the company is instantly recognizable for the customers and provides a source of familiarity- the use of lifestyle branding in above-the-line and below-the-line advertisements makes them relate to the brand and encourages new customers to try it out. The market offerings of Vodafone have been carefully designed to support this brand appeal and perception. To get a good insight about the company, we have to discuss both the way it operates in the UK (and other developed countries like Australia etc) where the mobile market has reached its maturity point and its presence in the developing markets such as India and the South Africa. It is important to note that positive brand equity in either of these demographics can lead to an impact on Vodafone’s international operations. 3.1 Product Offerings: (Product, Price, Placement) Within the mature markets Vodafone is following a product-led strategy with the marketing aim to retain its market position (leadership in the case of UK). The company is constantly developing new products and services which utilise the latest technological advances to appeal to a younger customer base which demands the more stylistic and modern products and has a very high involvement buying pattern when to comes to their electronics. Vodafone categorize their products as following: Business Solutions Marketing Solutions Business Ideas Mobile Solutions These consist of the latest cell phone hardware and software comparable to, prepay and post pay network plans, basic services of text messaging, calls, video conferencing etc and the premium service offers for businesses and organizations which include their marketing plans (through text messaging) and media packages. Vodafone attracts almost 600M customers in over 70 countries and they tailor the services and products to suit their needs, as well as act as the link between these consumers and other businesses. The focus in all their offerings is the increasing ease and efficiency of communication. For maximum effect Vodafine further designs mobile telecommunications products and services for three major groups of customers: Private individuals Small businesses Large organizations. (The Times 100, pg3) Keeping with current trend of consumer electronics and internet connectivity, Vodafone is also moving towards ‘Data’. Group chief executive Vittorio Colao said: "Data represents the single biggest opportunity to Vodafone and the industry over the next few years, and we intend to continue to be at the forefront of stimulating data adoption among our customers." (BBC News, 2012). In 2011 revenues from data – mobile internet traffic – for Vodafone went up 27% or ?336m to ?1.6bn. Nearly 22% of Vodafone's European customers now use smartphones. (Garside, 2011). Vodafone offers comparable products for this customer base at competitive market rates but with the assurance of their brand speaking for quality and service. In countries like Australia Vodafone is investing in superfast LTE services and is in the middle of rolling out a state-of-the-art store refit programme to negate the complaints customers had about slow speeds, low network availability due to increased demand of the service. All their new equipment is tuned to the new 850 megahertz (MHz) which is available for people purchasing the new smartphones or modems. Vodafone had to spend about $750 million in 2011 alone to upgrade their technology in Australia- but it was necessary in order to satisfy their customers. (Battersby, 2012). Within UK, Customer rewards such as Vodafone VIP events The Freebees campaign are used to keep attracting customers. The freebees campaign was Vodafone’s re-entry in the prepay market offering massive bundles of free texts, web access and international calls for as little as ?10 per month, with ?15m in advertisement budget to raise consumer awareness (Noble House, 2012). The brand has always used ample communication with its pricing strategies; the brand attempted to inform their customers about ways to opt out of existing contracts through press releases in response to a backlash to the increase in monthly bills by up to 2.4% for millions of customers on "fixed" contracts; though the company blamed the increase in monthly bills on rising costs mid-term, the customers were not pleased(Jones, 2012). While expensive campaigns and high end merchandise is becoming Vodafone’s forte in the matured markets, for the developing countries their products are offered mainly with the idea of more-for-less positioning. Vodafone offers Low-cost mobile for such communities, bringing them accessibility to internet in a cost efficient manner. A $30 cellphone easily provides the social and economic benefits of communications for emerging societies. Another product M-Pesa is a non conventional method of money transfer through mobile phones. M-Pesa gives access to financial services to millions of people without bank accounts in emerging markets, there are around 32 million registered users of it in seven markets (Vodafone, 2012, p3). Through smart programs and the easy availability of hardware and software, Vodafone has become a partner in advancing sectors such as Agriculture, Education, Financial services, Smart working and Health in countries like India, South Africa and the Americas (Vodafone, 2012, p4). They have the technology and the capital to play their part in developing these societies and they do so while forming a huge and loyal marketplace for their products 3.2 Promotion Brand Finance chief executive David Haigh claimed that “Vodafone has been growing strongly outside the UK, but it has a tough battle in its home market”. The competitors are getting tougher and the customers smarter. At this point, branding is their main focus. “From an economic perspective, Vodafone has a ruthless, iconic way of treating its brand identity” (Costa 2010).  The company spends a lot to ensure that customers treat Vodafone like a part of their lives, from airports to bus stations and everywhere in between the Vodafone logo is ubiquitous in its red and white colors. The brand is also associated with events such as London Fashion Weekend and F1 racing in order to create a brand perception of being in-touch, trendy and hip. More than just a mobile service provider, Vodafone is a part of the youth lifestyle. Bart Michels, managing director for brand consultancy Added Value, one of Vodafone’s agencies talked about the recent recession and why Vodafone felt that they had to keep up with their advertising campaigns. As one of the most successful UK business, people consider Vodafone as a source of inspiration and security “people trust it because it gives a sense of being solid and reliable. And in tough economic times, where people want to deal with brands they trust, Vodafone gives that sense of reassurance” (Costa 2010). Vodafone has tapped into such customer emotions and used them very effectively in past marketing campaigns as well. One of their more popular brands associations was with the popular football club Manchester United. In February 2000 and Vodafone UK announced a commercial alliance, with Vodafone being principal sponsor as well as the telecommunications and equipment service partner of the club. ManU has a massive supporter base as well as a global appeal. Catering to their fans allowed Vodafone to introduce new line of 'Reds' phones and accessories, a range of Manchester United phone covers and cases with different designs. “manUmobile“ was a mobile service for ManU fans, including text alerts giving fixture lists, match information, match incidents and news flashes. This was strategically sound campaign, which enhanced the brand and introducing new technologies to an informed and enthusiastic target audience (The Times 100, pg7). In the past years, Vodafone has also recruited sportsman David Beckham as a brand ambassador, a move which proved popular in the markets. As a well-liked personality, idolized by both young men and women and a family person, Beckham was uniquely suited to promote Vodafone and its brand values. For Vodafone, the appeal of their brand comes from forging an emotional relationship with their customers. They make the right products for each market, with personalized objectives in mind and then employ wide scale and integrated promotion campaigns to entice and maintain their customer base. The campaign with Beckham, for example was featured in TV advertisements, billboards, company slogans, internet communication and others to have a full impact. 4.0 Conclusion : For the most profitable businesses, marketing strategy is the crux of all their strategies. Only by gaining customer insight and designing products which they need, at the value they are willing to price the product at and communicating with them at a relatable level was Vodafone able to cement its profitability. Even with their expansion strategy going strong, the firm still felt the need to consolidate their image under one brand and logo and it has continued to be one of their strengths. Bibliography Garside, J., 2011. Vodafone profits rise as 9.4 million new customers sign up The guardian, 8 Nov [Online]. 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Available at: < http://www.guardian.co.uk/money/2012/oct/05/vodafone-fixed-contracts-outrage > [Accessed 23 Nov 2012] Read More