Marketing Plan for O2 Company - Case Study Example

Contents Topic Page Executive Summary 2 Introduction 2 About O2 2 4G Services of O2 3 Situation Analysis 3 PESTEL Analysis 3 SWOT Analysis 4 TOWS Matrix 5 VRIO Framework 6 Value Chain 6 Porter’s Five Forces Framework 7 Product Life Cycle 8 Industry Life Cycle 8 Segmentation 9 Target Market 9 Positioning Map 10 Objectives 10 Strategy 11 Control and Evaluation 12 Marketing Mix 12 Conclusion 13 Marketing Plan for O2 Company Executive Summary Telefónica is a leading telecommunications company with well-known brands like O2, Movistar and Vivo in its repertoire. The present paper details a marketing plan for the 4G services of O2. The paper carries out a comprehensive internal and external analysis. On the basis of this analysis, the strengths, weaknesses, opportunities and strengths of the company have been determined and the TOWS matrix has been created. The basis of market segmentation has been enumerated and the target market has also been identified in the paper. A modest attempt has been made to make the marketing mix for the brand. Finally, the CSR, financial and communication objectives have been set and an explanation is provided as to how the company will achieve and measure these objectives. Introduction Telefónica is a leading telecommunications company with a subscriber base of 341 million customers spread over 21 countries across the world. The company strives to provide top-notch services in mobile, fixed and broadband networks and revolutionary digital solutions. Telefonica’s well known brands include Movistar, O2 and Vivo (Telefonica.com, 2015). About O2 Telefonica’s commercial brand O2 is well entrenched in the United Kingdom. The brand offers 2G, 3G and 4G networks to its customers. O2 continually upgrades its technology to provide faster and smarter internet access to the subscribers. O2 offers a vast array of services including games, media messaging, music and video. TU Go, the free app, enables users to call and text on the phone. The company has hundreds of O2 Wifi hotspots which enable customers to access the Internet while on the move (O2.co.uk, 2015). Ofcom, the autonomous supervisory body and competition authority for the communications industries in the United Kingdom, cited the O2 brand as having the highest customer satisfaction (O2.co.uk, 2015). 4G Services of O2 4G, short for fourth generation, is the latest technology in the field of telecommunications. 4G provides extremely fast internet access and enables users have a seamless experience while watching videos and playing games on the phone. Downloading heavy files and videos that seem to take eternity on 3G will take just a few seconds on 4G. O2 has ambitious growth plans for its 4G network. The company intends to provide the technology to 98 percent of the people residing in the United Kingdom. O2 already spends £1.5 million every day to provide extra capacity and flawless access that consumers need (O2.co.uk, 2015). Situation Analysis  PESTEL Analysis A stable political environment is essential for the smooth running of an organization including O2. If the government is positively inclined towards business, companies tend to prosper. Consumers tend to purchase services if they have high disposable income. During recession, consumers tend to postpone purchases or opt for lower priced options (Zogby, 2010). Thus if the economic environment is not conducive, sales of O2 will decline. The social environment will have minimal impact on O2’s market offering. Technological factors have the maximum impact since they determine the quality of services received by the subscribers. As a part of its CSR endeavors, O2 has already taken initiatives to protect the environment. Last but not the least, O2 will have to adhere to the law of the land and abide by all rules formulated by the regulators. SWOT Analysis Strengths Weaknesses Strong brand name 800MHz-powered 4G network Dominance restricted to UK Spectrum does not support huge data transfers Opportunities Threats Rural Coverage High penetration in existing markets Intense competition. Low switching costs for customers Strengths O2 is a well established brand. The company can leverage in this brand equity to attract the customers in rural UK. The company will operate the 4G on 800MHz band which is ideally suited for the target region. Weaknesses The operations of O2 have hitherto been restricted to the United Kingdom. International expansion may thus be a problem due to lack of exposure in overseas markets. The 800MHz spectrum does not support heavy data transfers which may prove to be a problem especially in the long run. Opportunities O2 can increase its market share by penetrating in the existing markets or by foraying into rural markets. The company’s price penetration strategy will stand in good stead to capture new markets. Threats The intense competition poses as the biggest threat to O2. Since customers have low switching costs they tend to be less brand loyal. TOWS Matrix SO (Maximum-Maximum Strategy) O2’s 800MHz-powered 4G network will provide coverage even in remote rural areas. This spectrum has lower data carrying capacity but provides great coverage even indoors (Gibbs, 2013). The 800MHz frequency band was earlier used to provide analogue television signals. The television’s switch to digital freed this band for mobile telephony. ST (Maximum-Minimum Strategy) O2 will use the 800MHz-powered 4G network which, in a way, by passes the competition. Other companies operate on different bands as well. O2 will provide economical annual plans so as tie in customers for a longer duration and thus increase their switching costs. WO (Minimum-Maximum) Focus on rural areas minimizes the weakness of low data transfer on O2’s 4G network. WT (Minimum-Minimum) O2 will consolidate its position in UK. If the company decides to venture in some other markets, it will purchase additional spectrum to conduct its business in a smooth manner. VRIO Framework Valuable O2’s 2X10MHz 800 MHz spectrum is definitely valuable as the company will offer its 4G services through this band. Rare The resource is not rare as other competitors like EE, Three and Vodafone also possess the same spectrum. It is noteworthy to mention that EE is the best placed company with access to 800 MHz, 1.8 GHz and 2.6 Hz bands (4G, 2015). Costly to Imitate Companies bid for spectrums at auctions. The resource comes at a huge price and is therefore costly to imitate. Organised O2 has the basic infrastructure in place to expand its 4G services. The company is committed to its growth objectives and is therefore well organised to cash in on the 4G opportunity. Value Chain The value chain of an organisation consists of five primary activities and four secondary activities. O2 is a service brand and therefore the primary functions of operations (network) and service hold the key to success. These functions have to be ably supported by technology development and procurement of the material needed to carry out the business. The most important linkage in the O2’s value chain is the technology development and the network operations. Porter’s Five Forces Framework Intensity of Rivalry amongst Existing Players The competition amongst existing players is pretty intense. Vodafones 4G network in UK is still fledging and covers only 50 percent of the region. The behemoth is however committed to build scale and increase traction in the market (Temperton, 2015). EE currently claims to have covered 80 percent of the region. EE has divulged its plans to invest £1.5 billion to ramp up its high speed mobile network and cover 90 percent of UK’s territory by 2017. In terms of population penetration, EE intends to target 99 percent of the people living in the region (Lomas, 2015). Bargaining Power of Buyers The bargaining power of buyers is high since there are many renowned service providers of 4G services including Vodafone and EE. Consumers can easily shift to low priced, better service alternatives if O2 falters in rendering top-notch services. Threat of Substitutes The threat of substitutes is moderately high. Customers aspiring to use 4G are not really interested in speed. They are more concerned about infallible service quality (Collins, 2015). Thus customers will migrate to reliable options and maybe downgrade to 2G or 3G if the service is not up to the mark. Bargaining Power of Suppliers The suppliers to this industry include the equipment and technology vendors. The supplier power is moderately reduced as existing telecom players collaborate and share resources. O2 has already inked an alliance with Vodafone whereby the two companies share masts even as they remain two distinct networks (O2.co.uk, 2015). The government too acts as a supplier to this industry as it controls the spectrum allocation. 1800MHz provides a balance between coverage and speed while 800MHz has the potency to carry HD voice and high speed data to far flung areas (Beavis, 2013). Threat of New Entrants The threat of new entrants is low as the business involves huge capital outlays. During the 2013 spectrum allocation auction, a base price of £550,000,000 was set for 2 x 10 MHz of 800 MHz. Meanwhile the base price for 2 x 10 MHz of 800 MHz, 2 x 20 MHz of 2.6 GHz and 1 x 25 MHz of 2.6 GHz was £790,761,000 (Davies, 2015). It is expected that only the existing telecom players will adopt the 4G technology. A company with no experience in the telecom sector is not likely to jump in the fray. Product Life Cycle (PLC) The concept of PLC states that the products and services pass through four distinct stages namely introduction, growth, maturity and decline (Productlifecyclestages.com, 2015). At this juncture, the 4G services are in the introduction stage as the service providers are investing huge amounts in building the requisite infrastructure. The 4G penetration in the UK is only 7 percent (Styles, 2013). The service is however well poised to enter the growth stage shortly as companies plan to ramp up promotion and target the untapped market. Industry Life Cycle Akin to products and services, the industry too passes through distinct stages. The telecom industry in the UK is in the maturity stage (Banks, 2014). People have access to Internet in some form or the other. When the service providers achieve their targets of providing 4G services to more than 90 percent of the population, services like 2G and 3G will enter the decline stage of the product life cycle. This illustrates the fact that the industry and the products and services being offered in that industry can be in different life stages. Segmentation The plan is to market the O2’s 4G service in rural areas in UK. The market will be segmented on multiple variables. Initially, the segmentation will be done on the basis of geographical locations. Thereafter appropriate demographic, economic and psychographic variables will be used to segment the market. An area is termed as ‘rural’ if it falls outside of settlements but has a population of more than 10,000 residents (Gov.uk, 2013). The UK market will then be segmented on the basis of economic profiles and age groups. Target Market Target Market Explanation All Rural Areas Fitment with Resources and Capabilities The East of England (Primary Target) High Standard of Living Specific Towns Highest Market Potential Age Group Aged Between 13 and 45 Years. O2’s resources and capabilities are best suited to tap rural markets. The East of England has the maximum number of rural areas where people enjoy high standard of living (Straus, 2015). This region will thus be the prime focus for O2. Specifically speaking, O2 will strive to gain maximum traction in areas like Rutland where average weekly income is £623 (Straus, 2015). Likewise, Orkney Islands, Hambleton, Chiltern and Monmouthshire will provide a lot of market potential. In terms of demographic and psychographic profiles, it is estimated that teenagers and young adults are more tech-savvy and embrace new technology faster. It is in this light that O2 will strive to target consumers in the age group of 13-45 years. Positioning Map Objectives CSR As a part of its CSR initiatives, O2 will pay back to the communities in which it operates to make a positive impact on the lives of local people. The objective will be achieved by setting aside 1 percent of the revenue generated from these areas. O2 will collaborate with local NGOs and train 5000 youth in attaining basic skills and make them more employable. Financial O2 is in sound financial health. Telefónica UK has benefitted by earning higher Average Revenue per Customer (ARPU) from 4G LTE contracts. The company raced rough weather in late 2012 and early 2013 because of a squeeze in consumer spending. It however bounced back in the July to September, 2013 quarter and registered revenue of £1.47 billion and profit of £374 million (Titcomb, 2013). The objective is to increase revenue by 10 percent by making inroads in rural UK. Communication The objective is to create a buzz about the brand so that the rural folk talk about O2 and the brand benefits from a positive word-of-mouth (WOM). The print and electronic media will be used to expose the target market to the O2 brand at least a couple of times during the next two months. Strategy CSR O2 is already at the forefront when it comes to discharging the corporate social responsibility. The brand actively advocates greener products and services. It strives assiduously to increase its day-to-day efficiency and cut carbon emissions (O2sustainability.co.uk, 2015). The company will continue the good work and contribute meaningfully in the rural areas where it intends to expand the 4G network. Financial O2 will resort to various sales promotion schemes to create the pull factor. The company will adopt price penetration so that a large number of customers are attracted to the service. Communication The communication will be made through the traditional media as well the social media which has gained a lot of prominence in recent times. O2 is already present on Facebook and Twitter which act as a means to indulge in meaningful dialogue with the target market. O2 will use out-of-home media in rural areas. The company will carry out road shows and also hold certain contests for the target market. Control and Evaluation Objective Measurement Train 5000 youth and make them more employable. Training to be imparted in lots of 1000 people every year spread over a 5 year period. Performance will be reviewed every quarter. Increase revenue by 10 percent Sales data is easily available in the organisation. Revenue will be monitored every month Expose target audience to the O2 brand twice in two months A survey will be carried out to gauge the effectiveness of the promotional campaign. Marketing Mix There is an extended marketing mix in the service sector. In addition to the conventional 4Ps namely, product, price, place and promotion, the service firm has to take into consideration physical evidence, processes and people. There are thus 7Ps in the services marketing mix (BusinessDictionary.com, 2015). O2 will use the tools of the marketing mix to strike the right chord with the target market. The service is appropriate for rural areas as it can reach a large area even if there are no masts. In terms of pricing, O2 will offer monthly plans as well as annual plans so as to suit the pocket of all consumers. Strategic partnerships and alliances help the company achieve its strategic objectives. O2 will ink exclusive distribution pacts with prominent retailers in the rural areas. Sales will also be made online. The promotion will be done in the newspapers and magazines that have maximum readership. O2 will also rely on its own stores to enhance the physical evidence. The people employed in these stores will be friendly and courteous. They will be specifically trained to cater to the needs of the rural people. Last but not the least; O2 will invest in making fool-proof processes and procedures so that customers have a good experience. Conclusion O2 is a well established brand and is well poised to adopt a growth strategy. O2’s resources and capabilities suggest that the plan to market 4G services in rural UK will succeed. The environmental analysis reveals that the 4G market is lucrative. Moreover, O2 has the requisite strengths to cash in on the opportunity. The company has designed an appropriate marketing mix that will attract the target market and help the company achieve its objectives. References Beavis, G. (2013). What the 4G auction means for you: which networks won and lost?. [online] Tech Radar. Available at: http://www.in.techradar.com/news/phone-and- communications/mobile-phones/What-the-4G-auction-means-for-you-which-networks- won-and-lost/articleshow/38892926.cms [Accessed 2 Apr. 2015]. 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