1st Phone Card.com –Social Media Promotion Project

http://www.1stphonecard.com/default.aspx

Harry DENG

Qian HUAI

1stPhoneCard.com is an online prepaid phone card reseller funded in

February 1999 by Dr. Harry DENG. It is making prepaid phone card

available to anyone who has Internet access. Over the 15 years, it

focused on honesty and quality principle to make customers happy and

they became return customers. In the last 5 years, the telecom

industry underwent change to VoIP. Even though the voice quality of

these services is poor, they are free. New companies, such as Skype

and Vonage are attracting customers away from 1stPhoneCard.com. A

Chinese new comer, iTalkBB, also went after Vonage model with the

addition of low cost Chinese TV contents. These new comers are

disturbing the market for prepaid international calls to China and other

high volume countries.

The business model of 1stPhonecard.com of keeping existing customers

happy is not enough to fight off the churns. A new marketing model

and integrated marketing and communication is necessary. In addition,

new products will also be of help, such as content delivery.

Industry Analysis

There are several ways to consider what industry should we use to

cover 1stPhoneCard.com. A simple way is to consider prepaid

international calling card as an industry. This is too narrow. A prefer

way to conside our competitor is to consider the whole international

call as a compelte industry. Our competitior is Skype and or anyone

who provide international communication services, including facetime

by APPLE.

Threat of new entrants is low.

Since the deregulation of US telecom industry, there is no shortage of

new players in the prepaid calling card industry. There is no technology

barrier. The financial barrier is relatively low. The only barrier is the

cost of acquiring new customers.

Capital requirement for telecom company is very high, access to

and maintaining of optical fiber network needs huge cost.

Calling card market is mature, average Revenue Per User is only 3-

3.5 dollars, managing bottom-line at such low levels of revenue

per user will prove to be a challenge for new entrant. (1) They

would prefer to develop new telecom products especially the

internet telephony than enter this declined industry.

Threat of substitute products or services is very high

New generation prefer to use internet telephony than the phone calls

for casual talk, under the condition of developed internet covering.

They are normally free and can satisfice the basic need for voice quality.

As a matter of fact, international prepaid calling card spending peaked

in 2006 at $2.2 billion. Since then, some migration to Skype and other

VoIP services has cut into the calling card market. There was a modest

decrease in the number of international minutes from 2007 to 2009.

We expect the decrease to become more significant starting in 2010. (2)

Internet telephony is the biggest treat for calling card, we will precise it

in the competitors’ analysis.

Bargaining power of customers (buyers) is high

Buyers in Telecom industry can be divided in two categories: Individual

and enterprise customers. There are big number of telecom providers

in the market with big product variance and cheaper prices which gives

buyer many options to select different telephony tool and thus have a

large bargaining leverage.

Individual customers’ big size and low concentration of

consumption gives a lower leverage to buyer power, while the

enterprise customer accrues high buyer power with a big size and

high concentration

Customer switch cost is very low, even I haven't used up the

minutes in the calling cards, the loss can be small, normally new

users to other operators have big discount.

With the high pace of development of social networking, high

advertising through TV, internet, it becomes easier and easier for

customers to receive information, buyers are well informed about

the substitute products with better offerings, urban and rural

areas.

Bargaining power of suppliers is low

In the calling card sector, differentiation of products is low and

they are almost the same, there is a fierce price fight among

them, the cost is from 1.4 to 2.5 cents in dollars per minute.

Most of the calling cards are sold in the supermarkets and

other small selling channels, the existence of Intermediary

makes the supplier power low.

Intensity of competitive rivalry is high

There are more and more online shops selling the calling cards

instead of traditional distribution ways, companies encounter a

trade-off between saving website management cost and more

advertising exposure to customers, the competition between

online and offline players exist

The space of innovation results from the use of calling card, in

order to use the card, customers should type a lot of numbers and

keep these information in mind, which makes the experience not

relax. Creation of APP will have a potential big effect to the

current users.

Main Competitors Analysis

Skype

Since 2006, In the United States and Europe, people like to use

Skype, it is popular because it is the first VoIP client based on

peer-to-peer technology. We think that three factors are

responsible for its increasing popularity. First, it provides better

voice quality than MSN and Yahoo IM clients; second, it can work

almost seamlessly behind NATs and firewalls; and third, it is

extremely easy to install and use. (3)

This is a huge shock to the calling card industry, because with

internet, Skype can be easily used. If you want to call the Fixed

telephone, price is also low, for example $1.19 per month 120

minutes package for the calls to China. This give customers no

reason to use calling cards anymore, they are going to decline as

predicted.

We chat

In the recent years, more and more APPs emerge as young people

realize the value of social media and begin their entrepreneurship

based on these tools. They say: “even it is free, when you have

enough number of followers, making money can be easy.” We

Chat is an incredible and fantastic creation from China and is

expanding all around the world. Combining all the customers’

need together and ensure the timeliness, it can be a new black

horse revolution of telecom that can beat Skype.

It is similar to What’s up because you can send both text and

voice to other users, individually or by groups. However, the

stickers are much diversified and interesting that What’s up:

It is similar to Skype, you can use both voice call or video call,

even a live chat session!

It is similar to Facebook ans twitter, you can post your life in the

moments, with photos, mini videos, more important is the privacy

protection- Only your friends’ can see your friends’ comments, if

A ans B are not friends, they can not see each other’s comment.

Last but not least, it is a perfect tool for lonely people to make

new “friends”. When you use the “look around” function, you can

find the other users who are nearby and see hello to them:

With all these functions, people are easily getting addicted to We

chat. Another important phenomenon about social media products

is: Follow the friends. When most people in your network are using a

certain tool, you have no choices but only following them. They

have predicted the potential competition from similar telecom

products and prevented it by satisficing all the needs of customers.

These internet telephony products are the strongest competitors to

the whole calling card industry and it is a predictable trend that the

calling cards are being replaced by internet telephony, their only

problems probably is the voice quality, which can be the rest

opportunities for calling cards.

SWOT Analysis of 1st Phone card

Strength:

Compared to the other calling card providers, our strength is the

lower price and APP that simplifies the use of cards. Compared to

the internet telephony, our advantage is the higher voice quality.

Weakness:

Of course we are not free, when customers don't have a high

need for voice quality, they would definitely choose the free

ones. The business mode decides that charging fees is our only

source of profit, thus this weakness can’t eliminate as long as

we don't have other profit models.

Without a lot of cooperation advertising and independent

online sales instead of supermarket exposure, many customers

don’t hear about us, the first thing becomes “Customer

realizing”.

Opportunities

The multinational enterprise customers need high voice quality

for their business and internal organization, our strength can

be cherished by them- low price and high voice quality.

However, in order to make use of this chance, we should

provide them easiest way to use it

APP is popular resulting from the smart phone development,

however, leading users to get used to the APP can be a

challenge

- Threat:

Once the products are made, the cost is sunk, which means the

percentage of tangible asset is high and the exit barrier is high.

However it is more flexible for the internet telephony to enter and

exit, once they build the platform, no matter how many users

increase, the cost doesn’t change a lot and the profit can be

ensured.

New project- 1000 free cards

This year, in order to attract new customers, 1st phone card has

prepared 1000 free international calling cards, each valued 5$. The idea

is to advertise our existence and advantage to the potential customers

in United States, then stimulate them to make consumption after the

using experience. The challenge here is how to identify the potential

customers of our samples, getting rid of invalid distribution such as

“Receive, throw”.

1, Target customers

As we have analyzed, people living in United States - which is covered

by developed internet - prefer to choose internet telephony, but a lot

immigrants or international students have friends or family outside USA

and have no access to internet telephony any time anywhere. Thus

they have need to contact them with phone. Firstly, we target

international Students from developing countries where internet is not

mature.

Enterprise customers need high voice quality, which is a shortcoming of

internet telephony because of the limited volume. Secondly, we target

the business calls market and need to do some advertising directly to

these customers.

2, Channels

- International student Associations

1st step: UCI, UCSD We chat promotion

Negotiation

Qian is a member of UCI CSSA, a Chinese students association that have

a significant effect to the Chinese students in UCI. They have an official

website (4) and other social media platform such as Facebook, Wechat,

WEIBO etc. As wechat is the most popular tool among Chinese students

in United Stated, and UCI CSSA’s Wechat public account has around

1000 followers, we choose it as the first step.

We have two options of cooperations:

o First is to be involved in the existing list of discount business

entities and give the new customers 10% off, no other charge

o Second is to have an independent Ads publication and pay a

sponsor fee to CSSA as exchange.

As we are doubt about the result of this first step and limited budget,

we decide to be involved in the list and make use of the receivers’

attention to other business entities in the list. 10% off is not predicted

by 1st phone card, however, we should always keep in mind that this

project’s objective is to attract new customers, the concern is not too

much consumption but no consumption.

Here is our We chat ads of first step:

翻译

When the receiver click the link in the ads, http://www.1stphonecard.com/Productdetails.aspx?ProductID=6, they can see

the page for this project:

They need to register in the following page, ensuring us to have the

contact information and prevent the possibility that one person repeats

the process many times.

Once they validate the account, an email will be sent to them to

confirm the distribution of free card. If they want to make consumption,

filling the promotion code ucicssa or sdcssa can be OK.

Other detail points:

o Sponsor or not sponsor?

UCI CSSA has proposed that as a sponsor, we can have more frequent

and diversified advertising exposure like distribution of ads in the

students’ events, Ads on all the different kinds of social media of CSSA

every month, etc. Considering the budget problem of 1st phone

card.com and the limited return of random distribution, we eliminated

this option temporarily while it is not impossible to be a long-term plan,

once we receive the information about potential customers among

chinese students.

o How to filter the potential clients

Concerning the specialty character of calling card, we recognize that

only the students who really need it will click the link to receive the free

card, deciding whether they will make consumption after the sample

using. Students and their family overseas who have been used to use

internet telephony have a low possibility to change habits.

Consequently, how many free cards can be applied will give us an

approximate data about this market.

2nd Step: Other student organizations

China is developing rapidly in the internet network cover, last

generation is learning to use smart phone and computers. Until the end

of 2013, more than half of Chinese people use internet and 50% . With

the launch of 4G services, mobile phone users continue to maintain

good growth momentum, reached 500 million, an annual growth rate

of 19.1%, the phone continues to maintain its position as the largest

Internet terminal. (5) The same story will happen in many other

developing countries, thus our market will become smaller and smaller.

The strategy can be making use of the rest opportunities and begin the

R&D of new products as soon as possible.

3rd step: New trimester promotion on campus

We recognize that the customers of telecom have consumption inertia,

which means once they begin to use one telephony tool, they have a

lag to abandon that even they have found better substitute products.

This is why many phone operators choose the new trimester as the

golden advertising period. New students have a higher possibility to

buy the calling card, then they will probably keep that habits for a long

time.

4th step: Bank distribution

We plan to distribute a flyer at a table top at a US Bank branch or

branches. The flyer will have QR codes for customers to scan and

download free apps to make direct international calls from their smart

phones. We will also include a QR code for getting a free trial phone

card for their app: $5 Smart Phone Card. There will also be a coupon

code of “USBANK” to give them 5% additional discount for purchasing

at 1stphonecard.com. This coupon code will be used to track how

many people purchased from this channel of communication.

5th step: Youtube video:

We will produce video instructions on frequently asked questions.

These questions include how to download CALL4LESS app, how to use

this app to make international calls, and other instructions. These

video will make it easier for customers to learn to use a calling card to

save time and money on international calls.

6th step: Wechat public account

As Wechat have more and more users all around the world, we would

apply for a public account and build it as a soft ads platform. The topic

is about the life of studying overseas and the relationship with family

overseas, the style is warm and touched, and the objective is to attract

young people to communicate more with their family and friends in the

other countries. This can help our products to some extent, if it

becomes a popular account, we would also find a new business model

with that.

Sources:

（1） Akash Agamya, “Porters five force analysis for telecom industry”

（2） TIA’S 2010 ICT MARKET REVIEW AND FORECAST

（3） Salman A. Baset and Henning Schulzrinne “An Analysis of the Skype Peer-to-Peer

Internet Telephony Protocol”

（4） http://ucicssa.org/new-announcement/discount-card/

（5） http://tech.sina.com.cn/i/2014-01-16/14289102299.shtml