STP Analysis Sem1

Marketing Management – IFaculty: Mr. A. Srikant

STP Analysis

Page

MARKETING MANAGEMENT-1 [ ]

Table of Contents

Executive Summary.......................................................................................................................4

Introduction....................................................................................................................................6

Overview of the Telecom Industry.................................................................................................7

Highlights...................................................................................................................................7

Competitors................................................................................................................................9

Marketing Strategies......................................................................................................................9

Service & Handset- Buy One, Get Other Free...........................................................................9

Customer Generation - Tapping in to Internal Resources.......................................................10

Advertising – Educating Masses and Evoking Passions.........................................................10

Market Segmentation..................................................................................................................11

Segmentation Strategy of reliance communications...................................................................13

Market Segmentation Strategy................................................................................................13

Measurable, Accessible, Substantial, Differentiable and Actionable Market.......................14

Targeting......................................................................................................................................17

Targetting Full Market Coverage.............................................................................................17

Positioning for Competitive Advantage....................................................................................17

Positioning Strategy.................................................................................................................19

Product Differentiation..........................................................................................................19

Service Differentiation..........................................................................................................20

Personnel Differentiation......................................................................................................20

Channel Differentiation.........................................................................................................21

Image Differentiation............................................................................................................21

Conclusion……………………………………………………………………………………………….22

Page


EXECUTIVE SUMMARY

Reliance Communication stimulated telecommunication growth in India by challenging many of

the conventional practices in product design, distribution, sales, advertising and pricing.

Reliance Communication fashioned a strategy which was conceptually simple but

sweeping in its impact. While the competitors focused on the top segment of the market,

by charging a premium, Reliance Communication sought to reduce the cost to the

consumer, thus focusing on a market driven by volume. While others saw weaknesses of

India as a market – widespread poverty and low levels of telecommunication penetration – and

Reliance as an old economy firm focusing on oil production and business-to-business clients –

Reliance Communication realized that these actually were strengths which it could tap into.

Reliance Communication’s managers saw that telecommunications would be much valued by

the poorer sections of society if it could be used to create opportunities and offered at affordable

prices. The company tapped into its strong political and financial clout to build up a strong

organization that could push it through the legal and regulatory system. Reliance

Communication is planning to consolidate its telecommunication revolution through three

phases:

Firstly, the mobile revolution now reaching 17 million customers will expand to 640,000 villages

and to over 5,000 cities and towns. This revolution will create the potential for every individual to

talk, learn, shop, bank, transact, entertain and be informed, while on the move.

Secondly, an enterprise Netway revolution will bring the possibility to provide broadband

experience to every desktop and device in half a million enterprise buildings initially and

eventually to millions of commercial buildings. This will create the potential to empower every

enterprise by making transactions efficient, functions seamless and new economic opportunities

abundant.

Thirdly, a convergence revolution will provide high-speed networks to millions of homes. This

revolution will offer every home access to a wide range of television channels, high-speed

telephony, audio conferencing, videoconferencing and video on demand.

With this we conclude that Reliance communication has an enormous opportunity of growth with

a firm financial backing from its other business units and a political lobby supporting its

Page


strategies. Our group observed that RCOM will lead the Indian Telecom industry by 2010

because TRAI is supporting the CDMA technology in future.

Page


INTRODUCTION

“We will leverage our strengths to execute complex global-scale projects to facilitate leading-

edge information and communication services affordable to all individual consumers and

businesses in India. We will offer unparalleled value to create customer delight and enhance

business productivity. We will also generate value for our capabilities beyond Indian borders

and enable millions of India's knowledge workers to deliver their services globally.”

The Late Dhirubhai Ambani dreamt of a digital India — an India where the common man would

have access to affordable means of information and communication. Dhirubhai, who single-

handedly built India’s largest private sector company virtually from scratch, had stated as early

as 1999: “Make the tools of information and communication available to people at an affordable

cost. They will overcome the handicaps of illiteracy and lack of mobility.”

It was with this belief in mind that Reliance Communications (formerly Reliance Infocomm)

started laying 60,000 route kilometers of a pan-India fiber optic backbone. This backbone was

commissioned on 28 December 2002, the auspicious occasion of Dhirubhai’s 70th birthday,

though sadly after his unexpected demise on 6 July 2002.

Reliance Communications has a reliable, high-capacity, integrated (both wireless and wire line)

and convergent (voice, data and video) digital network. It is capable of delivering a range of

services spanning the entire infocomm (information and communication) value chain, including

infrastructure and services — for enterprises as well as individuals, applications, and consulting.

Today, Reliance Communications is revolutionizing the way India communicates and networks,

truly bringing about a new way of life.

Page


OVERVIEW OF THE TELECOM INDUSTRY

HIGHLIGHTS

Indian Telecom services industry accounts for 1.5 per cent of GDP. Telecom services

market is growing at 20 per cent per annum. Cellular segment growing at 70 per cent.

Major Segments of Telecom Services – Basic Fixed Line services, National Long

Distance, International Subscriber Dialing and Cellular Mobile services.

Policy framework for this segment governed by the National Telecom Policy (NTP). NTP

1994 allowed private participation. NTP 1999 set target of tele-density of 15 telephone

connections per 100 persons by 2010.

Basic services still largely monopolized by state owned players - MTNL and BSNL, even

though private participation allowed in 1994. Total fixed line connections are estimated

at around at 28 million as on 31 October 2000. They are expected to go up to 75 million

by end of March 2006.

National Long Distance (NLD) service was opened up for private participation during

FY2001. The revenue from this service is expected to be INR 151 billion in FY2002 and

INR 239 billion by FY2005.

Overseas service is monopolized by VSNL at present. However VSNL which is already

an internet service provider will also participate in NLD and other broadband services.

Cellular mobile services, started in 1995, are amongst the fastest growing segment.

After a slow start, this sector grew at compound annual growth rate of more than 70 per

cent.

Future issues include implementation of Calling Party Pays principle, passage of the

Convergence bill and greater consolidation through mergers and acquisitions.

Page


Figure 1

Figure 1 shows the structure of the Indian Telecom Industry. The Company Reliance

Communications that we are focusing on lies under Private operators providing fixed line and

cellular services.

Page


CompetitorsThe major competitors of Reliance Communications are as follows:

Airtel

Vodafone

IDEA:

BSNL

Tata Indicom

Spice

Virgin

Aircel

Alkatel

MARKETING STRATEGIES

Reliance Communication radically redefined marketing models in India and engaged homes and

enterprises directly by having the ability to deliver physical and virtual products and services as

part of one system. Reliance Communication through its aggressive, unconventional tactics

changed the rules of the mobile marketing game.

Service & Handset- Buy One, Get Other Free

Handsets were to be purchased separately since the operators until then offered only services,

and never dealt with handsets. For a customer this meant dealing with two suppliers – one for

the service and another for the handset. Reliance Communication, for the first time in India,

offered handsets free of charge, along with the service.

Page


Customer Generation - Tapping in to Internal Resources

Reliance targeted internally as it looked for the first set of customers. Officials of Reliance

Communication realized that an employee base of more than 50,000 and a shareholder base of

about 3.3 million was the best place to start as far as customers were concerned.

Advertising – Educating Masses and Evoking Passions

The Reliance mobile brand was branded as IndiaMobile to cash in on patriotic feelings.

Bundling of handsets along with the service – a first time in India – allowed Reliance

Communication to resort to a co-branding exercise with the handset makers.

Business Units of Reliance Communication

Wireless Broad Band Global RTIL

GSM Internet Data Center (IDC) Services ILD* Tower

Business

CDMA Internet Bandwidth (ISP) Voice Carrier

PCO

Page


Core Strengths:

Brand: provides high level of branding and visibility

Distribution: Retail presence through 16,50 exclusive stores in 700 towns

Contact Centers : 6000 seat multilingual, multi location

Continuous Innovation: e.g. innovative lifetime plan, all India Plan

Network architecture and capability

Strongly positioned for accelerating market growth (*ILD – International long distance calling )

MARKET SEGMENTATION

a. Markets consist of buyers. These buyers may differ in their wants, resources, locations,

buying attitudes, and buying practices. Through market segmentation, companies divide large,

heterogeneous markets into smaller segments that can be reached more effectively with

products and services that match their unique needs.

Segmenting Consumer Markets

b. There is no single way to segment a market. Marketers must try different segmentation

variables, alone and in combination, to find the best way to view the market structure.

1. Geographic segmentation divides the market into different geographical units, such as

nations, regions, states, counties, cities, or even neighborhoods. A company may operate in

one or a few geographic areas, or it may operate in all areas but pay attention to geographical

differences in wants and needs.

2. Demographic segmentation divides the market into groups based on variables such as age,

gender, family size, family life cycle, income, occupation, education, religion, race, generation,

and nationality. Consumer wants, needs, and usage rates often vary with demographic

variables. Demographic variables are also easier to measure than other variables.

Page


Psychographic segmentation divides buyers into different groups based on social class,

lifestyle, or personality characteristics. People in the same demographic group can have very

different psychographic makeups, and marketers often segment by common lifestyles.

7. Behavioral segmentation divides buyers based on their knowledge, attitudes, uses, or

responses to a product.

i. Occasion segmentation groups buyers according to occasions when they get the idea to buy,

actually make the purchase, or use the purchased item.

ii. Benefit segmentation requires finding the major benefits people look for in the product class,

the kinds of people who look for each benefit, and the major brands that deliver each benefit.

iii. User status groups buyers according to whether they are nonusers, ex-users, potential users,

first-time users, or regular users of the product.

iv. Markets can also be segmented according to usage rate—light, medium and heavy product

users.

v. Loyalty status looks at the level of loyalty to brands, stores, and companies.

Page


SEGMENTATION STRATEGY OF RELIANCE COMMUNICATIONS

In the words of Dhirubhai Ambani himself, “My vision is to provide the latest telecommunication

facilities to every Indian at the price of a post card”.

Market Segmentation Strategy

Reliance has always been known for its “unconventionalism” in dealing with various activities of

the management, from advertisement and promotion to identifying potential customers to the

actual selling of the product. It was also instrumental in increasing the mobile phone penetration

in India to grow from 0.25 percent in early 2001 to about 7.53 percent till date.

Reliance Communication stimulated telecommunication growth in India by challenging many of

the conventional practices in product design, distribution, sales, advertising and pricing.

Reliance Communication fashioned a strategy which was conceptually simple but sweeping in

its impact. While the competitors focused on the top segment of the market, by charging a

premium, Reliance Communication sought to reduce the cost to the consumer, thus focusing on

a market driven by volume. While others saw weaknesses of India as a market – widespread

poverty and low levels of telecommunication penetration – and Reliance as an old economy firm

focusing on oil production and business-to-business clients – Reliance Communication realized

that these actually were strengths which it could tap into. Reliance Communication’s managers

saw that telecommunications would be much valued by the poorer sections of society if it could

be used to create opportunities and offered at affordable prices. The company tapped into its

strong political and financial clout to build up a strong organization that could push it through the

legal and regulatory system.

Page


Measurable, Accessible, Substantial, Differentiable and Actionable Market

Reliance estimated that there are around 320 million [people in] households with an annual

income of Rs 1.5 lakh (US$3,333) [and above]. Of that, half are in rural areas with similar

purchasing power. And this segment is expected to grow to 500 million by 2008 and to 602

million by 2010. This presented a substantial chunk of potential buyers for Reliance products.

Besides, the segment was also easily accessible, that is, it could be easily sought and

encouraged to buy Reliance mobiles considering their extremely economical cost.

Since its very inception to becoming one of the market leaders in the field of

telecommunications, Reliance has adopted a number of strategies and introduced a variety of

products to cater to the needs of various market segments. On a broader note, Reliance has

segmented the market on the following major criteria:

Geographic Segmentation

On the basis of geography Reliance Communication has always believed

in uniting India as a whole and considering it as a single entity and

consequently divided it’s services under two major broad categories (in

both prepaid and postpaid) schemes --- National and International. One of

the best examples in this context is that of the ONE India Plan which

allows you to call any phone, anywhere in India for just ONE RUPEE per

min.

Besides, it also come up with national and international roaming plans and STD and world

calling cards to cater to the needs of different people spread across different geographical

locations. The Reliance Global Calling Card is available in 5 denominations — Rs.115, Rs.225,

Rs. 575, Rs.699, Rs.1,130, Rs.1,900, Rs.2250. You can make ISD calls from any Reliance

phone, be it postpaid (Reliance Mobile / Fixed Wireless phone) or Reliance Mobile prepaid. The

prepaid Reliance STD Calling Card offers very affordable rates for local and national long

distance (NLD) calls. This is a rechargeable account-based prepaid card that can be used from

Reliance phones (Reliance fixed, fixed wireless and mobile – postpaid or prepaid) only and

cannot be used from a PCO. With this card, NLD calls can be made even from Reliance phones

without an NLD facility.

http://www.reliancecommunications.co.in/Communications/Rm/rm_onenation_postpaid.html

Page


Demographic Segmentation

Reliance has also segmented the market based on the demographic attributes of the customers

such as age, gender, income group, occupation, etc. Thus it has come up with a variety of plans

such as the JOY PLANS on postpaid which can help in significantly cutting call costs and the

ON –NET TALKTIME PACK which allows 1000 min. of free usage to all reliance mobiles and

wireless phones within circle absolutely free. This allows it reach a large chunk of population

with different needs and different financial backgrounds and in the process, makes its services

affordable to everyone.

Psychographic Segmentation

Different people have different value systems, varying personality traits, beliefs, attitudes,

separate self image or self concept and an altogether different way to look at life (lifestyle). As a

result their needs and preferences also differ accordingly. Reliance Communication has kept

this aspect in mind while designing it’s wide range of mobile phones to appeal to different

audiences and in a way suit their self – image (self concept). From lower end simple and sober

handsets like the CLASSIC series to the little stylish multimedia enabled handsets such as LG,

Kyocera and Nokia to the ultra – stylish UT Star PPC and TELESON handsets, Reliance offers

something for everyone.

Behavioral Segmentation

Customers exhibit varying behavioral patterns towards different products. Different customers

have different perceptions about different products and hence weigh the value derived from

each product differently. Reliance was quick to realize this and hence tried to segment the

market on the basis of the behavioral patterns of its customers. Here it looked at whether there

was increased buying during special occasions, whether a substantial chunk of population

looked for a specific class of benefits to be derived from its products, what was their user status

(current or ex user of its products), how heavily or lightly was a specific product used (usage

http://www.reliancecommunications.co.in/Communications/Rm/handsets_classic702.html

http://www.reliancecommunications.co.in/Communications/Rm/handsets_Jinpeng.html

http://www.reliancecommunications.co.in/Communications/Rm/handsets_lgrd6000.html

http://www.reliancecommunications.co.in/Communications/Rm/handsets_pda-ppc6700.html

Page


rates), loyalty towards a particular category or product, readiness to adapt to new technology

and the general attitude towards the product.

Subsequently on 20 September, 2003, the 1st day of Navaratri, --- a multimedia mobile phone

service offering ringtones, greeting cards, pictures and video clips of Navaratri Festival was

introduced on R- world and over 10 million downloads were reported. Other than this Reliance

also continues to offer several schemes to customers based on their usage rates such as small

amount prepaid tariff cards for lower end users to Broadband services for corporate and high –

end individual users. Further it also offers plans of free subscriptions, gifts and extra talktime to

regular (loyal) users of its products.

Page


TARGETING

Target Marketing involves breaking a market into segments and then concentrating your

marketing efforts on one or a few key segments. Target marketing can be the key to a small

business’s success. The beauty of target marketing is that it makes the promotion, pricing and

distribution of your products and/or services easier and more cost-effective. Target marketing

provides a focus to all of your marketing activities.

TARGETING FULL MARKET COVERAGE

Today Reliance Communications has established itself as one of the top telecom service

providers in India offering a wide range of services such as CDMA and GSM services in both

prepaid and postpaid flavours, Broadband services through R – Connect, Reliance Hello

schemes, Reliance PCO, interactive TV, Data Center, etc. Because of the enormous gamut of

services offered across various product categories, (be it selling mobile phones or new

connections or broadband services) and market segments (both high end commercial usage to

lower end individual use), the Strategic Business (SBU) Units caters to almost all product

categories across all market segments. Thus the company targets the full Telecom Industry

market rather than any specific segment leaving no segment untargeted. Hence we can safely

conclude that the market segment targeted by the SBU is that of FULL MARKET COVERAGE.

Positioning for Competitive Advantage

a. A product’s position is the way the product is defined by the consumers on important

attributes; it is the place the product occupies in consumers’ minds relative to competing

products. It involves implanting the brand’s unique benefits and differentiation in customers’

minds.

b. To simplify the buying process, consumers organize products, services, and companies into

categories and “position” them in their minds. A product’s position is a complex set of

perceptions, impressions, and feelings that consumers have for the product compared with

competing products.

Page


c. Consumers will position products with or without the help of marketers. So marketers must

plan positions that will give their products the greatest advantage in selected target markets,

and then must design marketing mixes to create these planned positions.

Page


POSITIONING STRATEGY

As already mentioned before, Reliance Communications (previously Reliance Communication)

has believed in introducing innovative techniques and practices in all its marketing strategies ---

be it segmenting, targeting or positioning itself in the market. Starting from the 1st of its kind ---

the Dhirubhai Ambani offer to the present day offer of connecting the entire India through ONE

INDIA PLAN, Reliance has always believed in making its services affordable to the people

while not compromising on the services offered and at the same time getting substantial

profit margins to sustain its growth. This principle forms the primary basis of Reliance

Communications product’s positioning strategy.

Among the major positioning strategies adopted by Reliance are:

Product Differentiation

Reliance offers its customers a wide range of products such as both high

end and low end mobile phones at prices which are much less costlier

than its competitors. A few of these mobile phones have already been

shown in the previous pages. These handsets differ both in their looks as

well as their style quotient when compared to other brands and are available with a variety of

schemes and features which are substantially different from other products of the same range

offered in the market. Thus both form and design differentiation can be easily made out.

Other than this, Reliance Communication used was product differentiation by mixing data

applications with voice. Through RWorld – an inbuilt Java enabled data feature of all Reliance

phones - the company guaranteed download speeds of up to 144 kbps from an applications

suite which has over 120 applications ranging from interactive Guides such as TV programme

guides and City Guides, Live News and TV news clips from channels like NDTV, CNBC, Aaj

Tak and India TV to contests, video songs, Ring Tones, Cricket Information, Women's World

and KidzWorld.

It introduced numerous applications like news, streaming audio and video of movies and music

clips, city & TV guides, exam results, astrology and stock prices.

http://www.reliancecommunications.co.in/Communications/Rm/handsets_telson.html

Page


Service Differentiation

Reliance has also differentially positioned its products in the market through an entire range of

services offered by it which includes the ability to procure its products easily (ordering ease),

easy delivery mechanisms, installation procedures, appropriate guarantee/ warranty associated

with its products, financing schemes, appointment of customer training personnel, and adequate

after sales services. To achieve this, Reliance Communication started retail outlets in prime

commercial and residential areas ranging between 800 and 2000 sq ft, in major Indian cities,

district headquarters and towns that would number over 500, and set up WebWorlds. At the

WebWorlds the customer could interface directly with the company officials, see, touch and try

the products and then buy. At the phone stores, the customers could buy the phones directly

across the counter. The company envisaged that ultimately there would be at least one

WebWorld in all the towns where Reliance Communication has a presence. To ensure that the

product was available at the customer's doorstep, Reliance stocked its handsets in about

15,000 outlets across the country, while 70,000 outlets sold the recharge coupons. It also

appointed 600 exclusive distributors who sold only the pre-paid offering. Retailers like FabMall,

PlanetM, HP, Music World and Timex started to bundle their products along with Reliance India

Mobile. Phones were distributed at discount prices with many products the consumer bought.

Additionally the company conducted nationwide product demonstrations and announced that

the Pioneer Scheme would be a limited period offer, which further enhanced the interest of the

consumers.

Personnel Differentiation

Reliance ensured that the staff at Webworlds was competent and courteous enough towards

customers besides being well – trained, responsive and reliableand possessing good

communication skills. In essence it ensured that the customer went satisfied after each visit and

this gave it sufficient competitive advantage over its competitors.

Page


Channel Differentiation

In the case of marketing channels, instead of resorting to the tried and tested means, Reliance

Communication created a completely new model. As a tribute to Dhirubhai Ambani, Reliance

Communication fostered a new breed of entrepreneurs, as channel partners. The Dhirubhai

Ambani Entrepreneur Programme began with an aim of enrolling 200,000 individuals who are

committed to acquiring new customers and creating a new experience for them, based on

flawless service and feelings of satisfaction. About 50,000 individuals were recruited in a matter

of weeks who were guided and supported by 900 Reliance executives across the country. In

673 towns and cities, Reliance trained these entrepreneurs in basic skill sets, so that they are

able to deliver value to customers at their doorsteps. Reliance Communication envisaged

spending over Rs.1000 million (US$22.2 million) per year in training and competency building

programmes for these entrepreneurs. Through this programme, in addition to contributing to

society by encouraging other enterprises, and creating economic opportunities for millions of

young Indians, Reliance leveraged goodwill and networks.

Image Differentiation

The Reliance mobile brand was positioned as IndiaMobile to cash in on patriotic feelings. The

Reliance Communication brand name embossed on every handset gave it a unique cachet,

while the costs of many of the advertisements were discounted since they were also borne by

the handset makers. A mega advertising campaign was launched across the media to mark the

launch. The blitzkrieg coincided with the world cup cricket tournament, ensuring a huge

audience. The main theme of the first campaign built on the vision of Reliance Communication

in bringing the power of telecommunication to every person. This campaign helped to educate

people on the importance of telecommunication services. The next set of campaigns talked

about the innovative product features which differentiated Reliance Communication from its

competitors. The advertisements announced that Reliance IndiaMobile was 'Kabhi mobile, kabhi

computer' (Sometimes Mobile, Sometimes Computer). In the subsequent campaigns Reliance

started riding on movies and cricket as themes.

Page


CONCLUSION

Market segmentation, target marketing and Positioning are the key factors for any service or

product to be successful. A mélange of consumer segmentation variables, including geographic,

demographic, psychographic and behavioral characteristics is a prerequisite for any

product/service to reach out to its customers, as it is the use of multiple segmentation bases.

The importance and reasons for segmentation, targeting and positioning can be very well

portrayed through several examples of Fortune 500 companies. Segmentation outlines the

company’s opportunities, but target marketing is where the marketing manager makes his or her

money. Turning the segmentation opportunities into real markets is the real focus. Methods of

evaluating the market segments are the various levels of targeting: undifferentiated or mass

marketing; differentiated marketing; concentrated marketing; and micromarketing. Choosing the

target marketing strategy is described as dependent on many variables, such as company

resources, how variable the product is, and the stage of the product life cycle. But while a

company is targeting important segments, it must take care not to cause any controversy or

concern. For instance, companies that have targeted their premium cereals primarily to children

have been called to task for their practices, as have cigarette companies that seem to have

targeted the youth market in their chosen advertising vehicles. Finally, a company has to figure

out the best way to position itself for competitive advantage. Positioning involves implanting the

brand’s unique benefits, and differentiation in customers’ minds.

Documents

STP Analysis Sem1