Issue 1: Overview
Vodafone Hutchison Australia (VHA) is a mobile network operator, competing in Australia's mobile services market. It was established on 10June2009, following the merger of the Australian operations of Hutchison Whampoa Limited and Vodafone Group plc. The merger means VHA operates two brands - Vodafone and '3' - and provides sales and distribution through a third brand, 'Crazy John's'.
VHA's mission is: "to be the most recommended mobile operator because each of us offers value to our customers by delivering simple, affordable innovation at the lowest cost". The company's mission statement passes most aspects of the SMART test (MM 2009, p. 1.26). It is specific, measurable, actionable and relevant. It expands on the 'actionable' test by articulating how to achieve the mission - deliver 'innovation at the lowest cost'. The final SMART test, time-bound, is not explicitly captured by the statement but is reflected in the company's internal communications.
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Despite a large marketing department, VHA adopts a selling orientation toward its marketing activities (MM 2009, p. 1-15). VHA's marketing mix - price, product, place and promotion - focuses on customer acquisition and growing subscriber market share, rather than the stated corporate objective of becoming 'most recommended'. For example, the company places a strong emphasis on controlling its distribution network, reflected in Vodafone's decision to purchase Crazy John's, which has 105 retail stores (The Australian 2007) and VHA's recent decision to bring 208 'Vodafone' branded stores back in-house (ARN 2009).
VHA's selling orientation is also evidenced through its willingness to compete on price. For example, when the prepaid mobile broadband starter kit was not meeting sales expectations VHA dropped the price from $149 to $129 in July 2009 (Vodafone 2009f), and then dropped the price to $99 in October 2009 (ITWire 2009). The second price drop was accompanied by extensive promotion on television, the Internet and in the print media.
VHA primarily provides mobile voice and data services to retail and business customers. The products offered to customers are split into two categories - prepay and postpay. Postpay products require the customer to sign a 12 or 24 month contract, with a minimum spending commitment over that time. Generally, a mobile phone is bundled with the contract with the cost of the handset partially subsidised by VHA.
'Brand' plays an important role in the organisation. For example, VHA aims to create brand insistence by creating a brand essence that inspires its customers and compels them to 'Make the most of now' (Vodafone 2009a, MM 2009, pp. 2-33-2-34). The two main brands, Vodafone and '3' operate across many international markets, with Vodafone ranked the 9th most valuable global brand in the Brandz Top 100 (Millward Brown Optimor 2009). The global branding assists with synergies in promotion through, for example, the sponsorship of a Formula 1 car racing team.
Issue 2: The 5C's - company, customers, collaborators, competitors and context
Company. VHA has 6.3 million customers and generates over $4billion in revenue (Hutchison 2009a). Its strength is its ability to leverage the global purchasing power of its parent companies to acquire network equipment and handsets. For example, Vodafone secured exclusive distribution to the Blackberry Storm2 across its international markets (APC 2009). VHA's weakness is its lack of network coverage relative to its competitors, Telstra and Optus. For example, Telstra's coverage is at least twice as much as VHA when measured by land area (Telstra 2009).
Customers. Buyer behaviour is different between prepay and postpay products. Typically, the information search and information evaluation stages (MM 2009, pp.3-6-3-8) of the purchase decision take longer for postpay customers. Prospective postpay customers consider price, network coverage and the choice of handset before making a purchase. By contrast, the information evaluation stage for prepay customers is shorter as prepay customers do not always purchase a handset.
Collaborators. Collaborators impact most parts of VHA's business, with the company outsourcing many elements of its service delivery. For example, Ericsson and Nokia Siemens Networks are responsible for network delivery and management, and vendors such as Nokia, Apple, HTC and Samsung provide mobile phones. The company works with Leading Edge on brand strategy, and Roy Morgan Research on market intelligence and market research. The outsource strategy ensures VHA has a flexible approach to service delivery.
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Competitors. Porter's 'five forces' (Porter 1980) provides a useful framework for VHA's competitor analysis. The analysis of the 'five forces' is set out in Table 1.
Issue 3: Information gathering activities
VHA uses internal and external marketing information systems to collect, sort, analyse, interpret and dissemination information about the 5Cs.
The primary mechanism for gathering information about what customers want is through the Australian Mobile Market Report published by Roy Morgan Research. The survey-based report provides market intelligence on consumer and business trends disaggregated by carrier, service type or customer segment (see Table 3).
The report is useful for illuminating the 'problem recognition' element of the customer's purchase decision process (MM 2009, 3-4). For instance, it compares the importance that customers ascribe to network coverage against their preference for bundling a particular mobile phone with postpay plan.
A limited amount of market research is undertaken to assess customer wants. For example, Roy Morgan Research was previously engaged to investigate the propensity of customers to substitute from fixed line services to mobile and how likely customers were to use a mobile phone if they had the option of using either a mobile phone or a fixed line phone. The study was to assess options for a marketing mix aimed at customers who were considering discontinuing their fixed line services.
The strategy and marketing teams collect information on the threats posed by our competitors. For example, internal information is used to prepare weekly reports on gross additions, churn, call minutes and mobile number porting. When competitors launch new products our marketing team analyses this data to assess whether there has been any impact. The Strategy team analyses the financial results of Telstra and Optus, providing an assessment of their performance and competitive advantages.
The context for VHA is impacted by changes in technology or Government policy. The primary means of gathering market intelligence about context is through direct engagement. For example, VHA meets regularly with its network collaborators to discuss emerging technology trends. The information is supplemented by third party on, for instance, the impact of Google Voice (Analysys Mason 2009).
Issue 4: Segmentation, targeting and positioning
VHA identifies six retail customer segments within the market (see Table 4). VHA's segmenting dimensions can be determined from its description of each segment. The descriptions emphasise the psychographic motivations of each segment and include several demographic factors (for example, age or income).
Geography can be an important segmentation factor for mobile service providers due, for example, to differences in coverage and capacity between metropolitan and regional areas. However, geographic factors are not explicitly used as part of VHA's segmentation strategy.
VHA has four broad choices for selecting targets: prime target; build competency; opportunistic pursuit and de-select (MM 2009, p. 5-26).
The 'Messaging mate' and 'Simplicity seeker' are prime targets. VHA pitches many of its promotional material at this segment. For example, Vodafone's latest television campaign (Youtube 2009b) focuses on price sensitive customers with high usage of their mobile phone and target customers in both the younger and older parts of the market. The '3' brand places more emphasis on the 'Messaging mate' segment through, for instance, the promotion of Skype on mobiles. ('3' 2009b). The promotional material indicates that VHA wants to position its brands and products as 'cheeky', innovative and trendy to differentiate itself from the more conservative branding of both Telstra and Optus.
VHA is building competency in the 'Practical talker' segment. VHA's network coverage lags Telstra and, in some cases, Optus which reduces its ability to compete in this segment. The company needs to improve its network coverage if it wants to improve its competitive position in this segment. The '3' brand has partly overcome this problem through its roaming agreement with Telstra ('3' 2009a), but the reliance on a competitor for coverage can lead to an inferior value proposition.
VHA is also building competency in the 'Stylish techie' segment. The segment is attractive because of its high spending trendsetters. Smartphones such as iPhone or the HTC Magic are important to the 'Stylish techie' segment but the additional data traffic slows the network, which can impair the user experience. With this segment, VHA wants to position itself as a 'high tech' company through its association with the latest handset (or software) innovations.
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As VHA does not provide fixed line services to retail customers, segments that value bundled offerings are less likely to find its products attractive. Moreover, network capacity constraints may not meet the requirements of high data users. This means the 'Family organiser' and 'Super user' are an opportunistic pursuit for VHA as its ability to compete with Telstra and Optus for these segments is limited.
Issue 5: Evaluating VHA's marketing strategy
VHA's selling orientation means that the company focuses on customer acquisition at point of sale. The focus on selling has come at the neglect of a key element of the purchase decision process - the post-purchase decision making (MM 2009, p.3-4). This has led to significant dissatisfaction among VHA's customers. For example, of the major mobile service providers, the '3' brand had the most complaints per subscriber escalated to the Telecommunications Industry Ombudsman (TIO 2009). Given that most studies show that only 4per cent of dissatisfied customers complain, the TIO statistics are particularly worrying (MM 2009, p. 3-15).
The selling orientation does not make sense for VHA. Its relationship with its customers is not constrained to the point of sale it extends for at least the duration of the customer's postpay contract or prepay engagement. As such, VHA should shift its marketing strategy from a selling orientation to a marketing orientation.
Monitoring and analysis of the 5Cs
VHA is highly effective at monitoring and analysing the 5C's. For example, the Finance division, which includes the Business Intelligence team, regularly updates the business on the company's performance. It collects and analyses internal information on the company and its customers. The Strategy and Marketing divisions support this analysis, with market intelligence from external sources such as Telsyte, Ovum and Roy Morgan Research to provide a comprehensive overview of the company, customers and our competitors. Information on collaborators and context generally through the direct engagement the Technology, Regulatory and Strategy teams have with vendors, the Government, regulators and industry peak bodies such as the Communications Alliance.
Monitoring and analysis of marketing strategies
VHA is effective at monitoring and analysing its existing product propositions. The company collects information and provides a weekly report on how its products are performing across each of its distribution channels. This allows VHA to respond quickly if its marketing strategies are failing to meet its corporate objectives. For example, Vodafone quickly withdrew the Blackberry Storm when it failed to meet customer expectations.
VHA should put more emphasis on market research to identify potential opportunities or threats, particularly with respect to new products. Many of VHA's product launches outside its core voice and data services have failed to meet expectations. For example, according to Analysys Mason (2008) the launch of Skype by '3' has "so far had a limited impact on the market". Similarly, the launch of Vodafone's MusicStation (Vodafone 2009c) and its location-based, social network mobile software, Pocket Life (Vodafone 2009d) has generally been disappointing. Better market research prior to the product development stage may have provided an earlier warning about the lack of consumer appetite for these products.
VHA operates two strong brands however the company faces a challenging brand positioning and preference issue. The shareholder agreement between Vodafone Group plc and Hutchison Telecommunications (Australia) Limited indicates that VHA's telecommunication services will eventually be marketed under the 'Vodafone' brand (Corrs Chambers Westgarth 2009). This means migrating about 2million customers from the '3' brand to the 'Vodafone' brand. Many '3' customers have a strong connection with the brand. For example, '3' has the highest customer satisfaction levels in the Australian mobile services market (Roy Morgan Research 2009a). VHA will have to migrate customers carefully to avoid dissatisfaction and defection in its '3' customer base.
In the past, Vodafone Australia has placed too much emphasis on 'Brand' partly due to its global marketing approach. For example, the UK version of the 'Mayfly' campaign was well-aligned with the European strategy of building brand insistence, but the local version of the advertisement was ill-suited to Vodafone's positioning for Australia, where the challenge was still to establish brand preference (Youtube 2009c, 2009d and MM 2009, p. 2-33).
The 'Mayfly' campaign sought to promote the brand essence, expressed through the tagline 'Make the most of now', but subsequent market research indicated that the message was too sophisticated for Vodafone's target segments in Australia. VHA's latest promotional television advertisements and print material have changed the emphasis of the tagline by adding 'What are you waiting for' before 'Make the most of now' (for example, Youtube 2009a). The campaign also strikes a more appropriate balance between the brand essence and the value offered to customers.
VHA's STP strategy for retail customers is effective. The segments that VHA targets - Messaging mate and Simplicity seeker - are the 'right' customers for the company to target. VHA is capable of offering an effective marketing mix to target these segments. For example, the segments are both price sensitive and VHA can compete on price without damaging its value proposition in other segments.
VHA is 'missing' out on the medium to large business customer market. VHA was previously not able to compete in this market because it did not offer bundled fixed and mobile services and it lacked network coverage. The company has recently overcome this obstacle by partnering with an existing fixed line play, AAPT, to offer an integrated solution for the business customer market through Vodafone Business One (Vodafone 2009b). VHA is addressing its coverage issues through its 3G network expansion program (Vodafone 2009e). Finally, VHA has not traditionally focused on this segment so it must establish brand recognition within the business customer market.
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