Describe the general trends for cellular telephones and cellular telephone usage in Europe in 1995.
In general, customers in a variety of markets wanted better services and lower fees. This meant that deregulation was forcing the large state owned entities to become privatized and diversify from their old models. The result is that there were increased amounts of competition and the sector began to see firms provide customers with better services and lower prices. However, the problem was that customers were happy with the services they were receiving and did not want to switch to new carriers. This made it challenging for new organizations to enter the marketplace and effectively reach out to a larger demographic of consumers. During this time, there was a total penetration rate of 5% for 250 thousand subscribers. (Lal, 2002)
Describe the Mobile telephony market in Italy and the nature of competition.
The market in Italy went from being highly centralized to one that encouraged greater amounts of competition. This encouraged firms such as Omnitel to compete directly against Telecom Italia. They felt that the organization could provide better services, lower costs and a more competitive range of products. To reach out to consumers, they began marketing through a total of 4 thousand different shops around the country. In this case, the telephony market was beginning to experience greater amounts of competition. However, the costs of acquiring new subscribers was considerably higher. At the heart of their strategy, was to offer customers with free phones based upon a one year contract. This resulted in variety of people switching to these services. During this period, the market was experiencing greater amounts of competition utilizing a model that offered customers with something for free. Yet, they had to agree to use them for a specified amount of time. (Lal, 2002)
Describe the Mobile telephony market in Italy and the nature of competition.
The competition inside Italy became intense. This is because subscribers wanted to utilize their phones more, they demanded lower fees and better quality of services. The combination of these factors led to Omnitel introducing the no monthly fee model. This had a dramatic impact on other organizations, with them able to take cliental from competitors. These factors had a dramatic impact on the strategies that were utilized to attract new customers and standout against other firms. (Lal, 2002)
Describe the product offering and the multipart pricing scheme for Telecom Italia Mobile as well as the results in terms of market penetration and churn. (Note you should include an analysis of channel pricing as well as end user pricing). What was the number one competitive issue for Caio and why?
The product offering utilized by Telecom Italia Mobile focused on giving customers with certain times they could use the phone to talk for lower rates. This meant that they had to pay a higher monthly fee and were exposed to greater charges for the amount of time they used during peak hours (i.e. 9:30 AM to 8:30 PM). The result is that they were able to dominate the marketplace and had a churn rate of less than 8%. This is because the channel and user pricing kept most customers with the firm from having limited alternatives available to them. (Lal, 2002)
The biggest issue Caio was concerned about was a pricing war. This is because if they eliminated the monthly fee, there is the possibility of Telecom Italia following suit and undercutting them on other costs. If this were to happen, they could reduce the number of customers they were losing and maintain control of the marketplace. (Lal, 2002)
What was Omnitel’s initial strategy? Use a 4-P analysis to describe that strategy.
Omnitel’s strategy was to offer them with something different. This occurred through providing better products / services (i.e. products / services), having a place where customers could go to (place), effective pricing (price) and showing how they are offering something different (promotion). Offering better products and services occurred through enabling customers to have access to the latest phones for free. To market themselves and offer cliental with something more, they established 4 thousand locations throughout Italy. At the same time, more effective pricing was utilized by having lower fees and eliminating the unpopular monthly costs. Offering something different; is when Omnitel was able to demonstrate how their dealers can help to provide customers with a phone and a competitive plan that is customized for them. This enabled cliental to talk anytime for much lower costs. (“The Marketing Mix and the 4Ps,” 2013) (Lal, 2002)
How did Omnitel determine customer needs? Briefly describe those needs.
The customer’s needs were determined based upon the amounts of time they spent on the phone and their current costs. These factors enabled Omnitel to create a customizable strategy that was more focused in meeting these objectives. It is at this point, when they were able to address the needs of cliental. (Lal, 2002)
What were Omnitel’s two competing “pricing” strategies? (Note you should include an analysis of channel pricing as well as end user pricing). Which would you favor? Defend your conclusions.
The two competing pricing strategies utilized by the firm concentrated on eliminating the monthly fee and the pay as you go model. This enabled the firm to offer them with a competitive channel and end user pricing by customizing to the needs of the client. The model that is most favored is the customizable approach. This is because it allowed them to create solutions which addressed their underlying needs and provide cliental with substantial savings. (Lal, 2002)
How can you use this approach or other pricing approach you have seen in this course to help your company?
In this case, the approach utilized by Omnitel is illustrating how firms need to be more flexible inside the marketplace and understand what is important to consumers. In this case, these insights can help my firm to create solutions which are more responsive to these needs. Those who are able to do this, will realize an increase in cliental from offering them with something more for less money. (Lal, 2002)
- The Marketing Mix and the 4Ps. (2013). Mind Tools. Retrieved from: http://www.mindtools.com/pages/article/newSTR_94.htm
- Lal, R. (2002). Omnitel Pronto Italia. Harvard Business School.
