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Impact of Advertising in Indian Telecom Industry

5003 words (20 pages) Essay in Marketing

16/01/18 Marketing Reference this

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Impact of Advertising in Indian Telecom Industry on Its Customers

The research is to study the Advertising in Indian Telecom Industry and its Impact on Customers. For this research the attempt is made to understand the Telecom Industry of India. . I will also complement this with the internal study of companies. By studying their history, growth, market share and advertising strategies adopted by Vodafone, Airtel, Reliance communication, BSNL and Idea cellular.

India telecommunication industry is one of the fastest telecom market in the world. The mobile sector has grown from around 10 million subscribers in 2002 to reach 250 million by early 2009 registering an average growth of over 90%.

The project is based on advertising so I will first explained about advertising, its importance, managing advertising decisions and types of advertising. I have analyzed the growth in ad volumes of telecom sector, share of telecom sector advertising, segment wise growth in telecom sector, share of key players in advertising, new brands advertised in telecom equipments and service and share of sales promotion in telecom sector.

The sources of data collection used in the study are both primary and secondary in nature. We are going to conduct a survey to know the impact of advertisements of telecom industry on customers which is part of primary data. The real aim of the project is to study the effectiveness and response towards advertisements provided by major players.

Primary data has been collected in which focus group study had been conducted to design the customer survey questionnaire with a sample size of 200 respondents. This survey has been conducted in gujarat. Secondary data is to be collected through websites, newspapers, magazines and books.

Research objectives.

The objective of the project is an attempt to understand the consumer preference for telecom and how it is been affected by the advertisement done by the telecom industries main players.

It will be done through a comparative study of all telecom operators which are available in Ahmedabad; we want to understand the impact of advertisement on the customers of all the segments in Ahmedabad.

We have also divided our objective into two categories to make it more clear, which is as follows:

Primary objective

The primary objective is to know the impact of advertisement by telecom industry on customers. And to study the effectiveness and response towards advertisement provided by the major players. Also to understand the improvement and customers preference in telecom sector. And to study the service provider and their service quality in telecom sector.

Secondary objective

Other than the above primary objective, the other secondary objective behind this project is to find out who is the best preferred telecom company who has the attracted maximum customers through its advertisement. This could be done by studying the performance of telecom industry in India.

Literature review

For literature review we are going to undertake a deep study of marketing management by Philip Kottler, his contribution to the field of marketing is noteworthy, as we all know he is considered as the marketing guru. And more over we also going to include some basic definitions from various marketing books like Advertising and Marketing in Rural India:  Tej K. Bhatia, Macmillan Publishers India, Marketing and Sales Management:  S P Sharma and Dilip B Joshi, Paradise Pub, Marketing:  M. Vidhya, MJP Pub, these books will help me to know how the telecom companies are promoting their brand in rural market of India. Even the management book named organizational theory, change, and design by: Richard L.Draft will help me to understand the potters five force model and diamond model for the telecomm companies. Newspaper likes ‘The Times Of India’, ‘economic times’, will provide us relevant materials that can help us in our research.

Even I am going to study regarding TRIA that is Telecom Regulatory Authority of India.   TRAI’s mission is to create and nurture conditions for growth of telecommunications in the country in a manner and at a pace which will enable India to play a leading role in emerging global information society.   One of the main objectives of TRAI is to provide a fair and transparent policy environment which promotes a level playing field and facilitates fair competition.   In pursuance of above objective TRAI has issued from time to time a large number of regulations, orders and directives to deal with issues coming before it and provided the required direction to the evolution of Indian telecom market from a Government owned monopoly to a multi operator multi service open competitive market.   The directions, orders and regulations issued cover a wide range of subjects including tariff, interconnection and quality of service as well as governance of the Authority.   To know regarding the telecom sector in India I have studied various papers and journal written by many journalist and economist which are as follow:

Anand (1999), in his article named “India’s economic policy reforms” says that India

was embarked on economic reforms in July 1991, in the wake of a balance of payments crisis. In this article, an attempt is made to review two books and a set of World Bank reports concerning the progress of these reforms. Issues concerning economic policy, impact of the reforms on poverty, sectoral issues relating to agriculture, industry and infrastructure are briefly discussed. As reforms enter a more difficult phase, several challenges remain. Some of this fall under the “economic agenda” of measures needed to maintain economic growth; others can be termed the “development agenda” – of improving human development. Progress with regard to the former is not sufficient to produce results concerning the latter.

Bhattacharya (2000) constructs a vision of the Indian telecommunication sector for the year 2020. The paper aims at isolating agents of change based on international experiences and situates India in the development continuum. The agents of change have been broadly categorized into economic structure, competition policy and technology.

Das (2000), in her paper described the Liberalisation of the Indian telecommunications services which started in mid nineties with no change in the existing public monopoly structure, entirely controlled by Department of Telecommunications (DoT). In order to evaluate any proposed industry structure, it is essential to analyse the production technology of DoT so as to determine the rationale of liberalisation and sustainability of competition. Accordingly, the researcher estimates a frontier multi-product cost function for DoT, where the cost function has been duly modified to account for the production technology of a public monopoly. The study finds that although DoT displays high allocation inefficiency, it is still a natural monopoly with very high degree of sub additively of cost of production. This study implies that the choice of any reform policy should consider the trade-off between the loss of scale and scope economies and cost saving from the reduction in inefficiency of the incumbent monopoly in the event of competition.

Rao (2000), in her article named “Internet service providers in India”, provides a broad view of the role of an Internet service provider (ISP) and the factors to be considered before entering the ISP market. Describes the Internet/ISP scene within India and discusses the configuration of local, regional and national level ISPs, and the supporting infrastructure. She also identifies the various success factors. The global Internet scenario is discussed regarding the phases of the Internet in India, i.e. pre and post commercialization. The main players are described: ERNET, NICNET, STPI, VSNL, MTNL, Satyam Infoway and Bharti-BT. The financial and legal implications are highlighted in the Indian context. Many companies entered the nascent ISP business in Nikam, Ganesh, Tamizhchelvan (2004), analyses that changing face of India in bridging the digital device. He reiterated – “India lives in villages” said the Father of the Nation, Mahatma Gandhi. With 1,000 million people and 180 million households, India is one of the biggest growing economies in the world. With the advent of the Information, Communication and Technology (ICT) revolution, India and its villages are slowly but steadily getting connected to the cities of the nation and the world beyond. Owing to the late Rajiv Gandhi, India is now a powerful knowledge economy, and though India may have been slow to start, it certainly has caught up with the West and is ahead in important respects. The Government, the corporate sector, NGOs and educational institutions have supported rural development by encouraging digital libraries, e-business, e-learning and e-governance. The aim of this paper is to touch upon and highlight some of the areas where, by using ICT, the masses have been reached in this way. A follow-up paper will outline collections of significant cultural material which, once national IT strategies are fully achieved, could form part of a digitally preserved national heritage collection.

Dey (2004), in her article talks about the discussions between the Federal Communications Commission (FCC) and communications policy makers and regulators in other countries and how they have gleaned several clusters of issues where further research would directly benefit them. Recently, there have been two notable shifts. First, as the acceptance of the competition model over the monopoly model for telecommunications markets takes deep effect in regulators all over the world, questions regarding process and procedure for regulation are becoming ever more urgent. This paper discusses current questions regarding decision making, enforcement, and understanding consumer issues that arise often in the FCC’s discussions with other regulators. Second, technological change is potentially shifting market definitions. In the FCC’s discussion with other regulators over the last two years, the overlap of wireline telecom, wireless telecom and cable television has become more pronounced.

Singh (2005), in his article “The role of technology in the emergence of the information society in India” describes the role that information and communication technologies are playing for Indian society to educate them formally or informally which is ultimately helping India to emerge as an information society. Though India has a huge population, the illiteracy rate is also huge in this country. The paper has taken an approach to find the historical situation and present the prevailing scenario as well as the change that are taking place with the application of ICT to the advantage of the society in different areas including daily life. India is making all out efforts to be counted among the developed nations of the world. The article also describes the considerable attention India is taking for application of technology, development of infrastructure and human resource for meeting national needs. Basically India is building an information society. Technology has helped society to cut across the traditional boundaries for getting converted into anemerging information society. The study concludes that The Indian software and services industry has significantly helped to boost the Indian economy. In IT-enabled services too, India has been clearly perceived to be the dominant hub. The Indian software sector is being recognized as the single largest contributor to incremental market capitalization in India but the sector is still small in terms of contribution to GDP, especially when compared to other large sectors in the economy like agriculture and manufacturing. Similarly, the telecommunication sector has contributed a lot but still has a considerable way to go. The paper also enforces that comparisons of India’s telecommunication statistics with those of developed and other emerging economies show that the country is still far behind its contemporaries.

Mr. Banka (2006) gives an overview of the mergers and acquisitions in the telecommunication industry. According to him Governments decision to raise the foreign investment limit to 74% is expected to spur fresh rounds of mergers and takeovers in India. He foresees a sector that represents humongous opportunity waiting to be tapped by Indian and foreign conglomerates.

Thomas (2007), in his article describes the contribution made by telecommunications in India by the state and civil society to public service, this article aims to identify the state’s initial reluctance to recognize telecommunications provision as a basic need as against the robust tradition of public service aligned to the postal services and finds hope in the renewal of public service telecommunications via the Right to Information movement. The article follows the methodology of studying the history of telecommunications approach that is conversant with the political economy tradition. It uses archival sources, personal correspondence, and published information as its research material. The findings of the paper suggests that public service in telecommunication is a relatively ”new” concept in the annals of Indian telecommunications and that a de- regulated environment along with the Right to Information movement holds significant hope for making public service telecommunications a real alternative. The article provides a reflexive, critical account of public service telecommunications in India and suggests that it can be strengthened by learning gained from the continual renewal of public service ideals and action by the postal services and a people-based demand model linked to the Right to Information Movement. All studies done by the researcher suggests that the right to information movement has contributed to the revitalisation of participatory democracy in India and to a strengthening of public service telecommunications.

Cygnus Business Consulting & Research Pvt. Ltd. (2008), in its “Quarterly

Performance Analysis of Companies (April-June 2008)” has analysed the Indian telecom

industry in the awake of recent global recession and its overall impact on the Indian economy. The analysis is done in the background of wake of global recession and rising inflation. Cygnus estimates, the Indian telecom industry is expected to maintain the growth trajectory in the next quarter as well. With almost 5-6m subscribers are being added every month, and the country is witnessing wild momentum in the telecom industry.

Maheshwari (July-September 2008), in her report analysed the Indian telecom industry and ascertain that Indian telecommunications has been zooming up the growth curve at an mounting pace, and India is has surpassed US to become the second largest wireless network in the world. This growing subscriber base is basically created by tapping into rural India, which is an emerging market for the industry. The estimate for the next five to ten years is that the rural market will form 40 % of the subscriber base. The study has analysed the human resource management process of the industry, and specially the latest trends of recruitment of this massively growing industry.

Anderson (2008), in his single executive interview titled “Developing a route to market strategy for mobile communications in rural India An interview with Gurdeep Singh, Operations Director, Uttar Pradesh, Hutch India” suggests that managers need to go beyond traditional approaches to serving the poor, and innovate by taking into account the unique institutional context of developing markets. His practical implication says that the experience of Hutchison Essar in India provides some important lessons for mobile network operators (MNOs) and other firms in other developing markets who are hoping to serve the rural poor: Hutchison has recognized the value of corporate and non- corporate partners. The company has proactively established relationships with individual entrepreneurs, and has provided has provided development support to other partners such as distributors. The company has recognized the value of leveraging existing local institutions, and has seen gaps in local infrastructure or missing services as potential opportunities rather than barriers to growth. The company has seen the rural market as an opportunity – not just an obligation to be served because of universal service obligations. Also this article demonstrates that MNOs can deliver availability and affordability to achieve increased individual or household penetration through business model innovation.

Mani (2008) addresses a number of issues arising from the growth of telecom services in India since the mid-1990s. It also discusses a number of spillover effects for the rest of the economy and one of the more important effects is the potential to develop a major manufacturing hub in the country for telecom equipment and for downstream industries such as semiconductor devices. The telecom industry in India could slowly become an example of the service sector acting as a fillip to the growth of the manufacturing sector. A beginning towards this has been made. The formation of a Telecom Equipment Export Forum and the announcement of the Indian Semiconductor Policy 2007 are steps in this direction. Success crucially depends on the response of the private sector to these incentives. Given the importance that a regulatory agency can play in this crafting, no effort should be lost in strengthening the powers of the TRAI. The benefits to the Indian economy from having both a strong services and manufacturing segments in the telecom sector cannot be undermined.

Narayana (2008) estimates the contribution of telecommunication (or telecom) services to aggregate economic growth in India. Estimated contribution is distinguished between public and private sectors to highlight the impact of telecom privatization on economic growth. Knowledge of policy determinants of demand of telecom services is shown to be essential to enhance growth contribution of telecom services. Using a recent sample survey data from Karnataka State in South India, price and income determinants of demand for telecom services are estimated by capacity of telephone exchanges. Estimation results offer evidence for significant negative own price elasticity and positive income elasticity of demand for telecom services.

Sharma (2009) deals with the major challenges faced by India’s telecom equipment manufacturing sector, which lags behind telecom services. Only 35% of the total demand for telecom equipment in the country is met by domestic production. This is not favourable to long-term sustained growth of the telecom sector. The country is also far behind in R&D spending when compared to other leading countries. India needs to see an increase in R&D investment, industry-academia-government partnership, better quality doctoral education and incentives to entrepreneurs for start-ups in telecom equipment manufacturing. In 2006-07, 65% of the total consumption of equipment was met through imports. This trend has far-reaching implications for the economy and should not be allowed to continue for long. In a country like India which has a problem of massive unemployment, the manufacturing sector should be promoted to create more employment opportunities.

Shah (February, 2009), has analysed Indian telecom industry and studied the sector keeping in mind three companies; namely Bharti, R.Comm and idea in the background of recent global meltdown. The study suggests that though there is no sign of slowdown in this sector, but surely a strong turmoil is going on in the industry. The study states that the sector is fairly immune from the current economic downturn & does provide a good defensive bet in medium term. With the help of newer technologies, wireless penetration is expected to increase in the near future, which is basically fuelling the growth of the sector. While the 3G / Broadband adoption would ensure long term growth momentum, the article has thoroughly investigated about the intense competitive scenario, pricing pressure, high capital intensity & substantial regulatory uncertainties currently faced by the industry. The article has also described the cause of being relatively safe of this industry. The causes described by Shah are increasing rural coverage, rising affordability, declining handset/subscription costs, substantially low tariffs & established brand/distribution. However, the study also cautions the telecom industry that a steeper economic slowdown could start impacting the subscriber usage patterns as well as operator capital investments & thereby could substantially restrict revenue growth rates going forward.

GLOBAL

OVERVIEW

World telecom industry is an uprising industry, proceeding towards a goal of achieving two third of the world’s telecom connections. Over the past few years information and communications technology has changed in a dramatic manner and as a result of that world telecom industry is going to be a booming industry. Substantial economic growth and mounting population enable the rapid growth of this industry.

The world telecommunications market is expected to rise at an 11 percent compound annual growth rate at the end of year 2010. The leading telecom companies like AT&T, Vodafone, Verizon, SBC Communications, Bell South, Qwest Communications are trying to take the advantage of this growth. These companies are working on telecommunication fields like broadband technologies, EDGE(Enhanced Data rates for Global Evolution) technologies, LAN-WAN inter networking, optical networking, voice over Internet protocol, wireless data service etc.

Economical aspect of telecommunication industry: World telecom industry is taking a crucial part of world economy. The total revenue earned from this industry is 3 percent of the gross world products and is aiming at attaining more revenues. One statistical report reveals that approximately 16.9% of the world population has access to the Internet.

Present market scenario of world telecom industry: Over the last couple of years, world telecommunication industry has been consolidating by allowing private organizations the opportunities to run their businesses with this industry. The Government monopolies are now being privatized and consequently competition is developing. Among all, the domestic and small business markets are the hardest

INDIAN

OVERVIEW

Today the Indian telecommunications network with over 375 Million subscribers is second largest network in the world after China. India is also the fastest growing telecom market in the world with an addition of 9- 10 million monthly subscribers. The tele- density of the Country has increased from 18% in 2006 to 33% in December 2008, showing a stupendous annual growth of about 50%, one of the highest in any sector of the Indian Economy. The Department of Telecommunications has been able to provide state of the art world-class infrastructure at globally competitive tariffs and reduce the digital divide by extending connectivity to the unconnected areas. India has emerged as a major base for the telecom industry worldwide. Thus Indian telecom sector has come a long way in achieving its dream of providing affordable and effective communication facilities to Indian citizens. As a result common man today has access to this most needed facility. The reform measures coupled with the proactive policies of the Department of

Telecommunications have resulted in an unprecedented growth of the telecom sector.

The thrust areas presently are:

1. Building a modern and efficient infrastructure ensuring greater competitive environment

2. With equal opportunities and level playing field for all stakeholders.

3. Strengthening research and development for manufacturing, value added services.

4. Efficient and transparent spectrum management

5. To accelerate broadband penetration

6. Universal service to all uncovered areas including rural areas.

7. Enabling Indian telecom companies to become global players.

Recent things to watch in Indian telecom sector are:

1. 3G and BWA auctions

2. MVNO

3. Mobile Number Portability

4. New Policy for Value Added Services

5. Market dynamics once the recently licensed new telecom operators start rolling

out

6. Services.

7. Increased thrust on telecom equipment manufacturing and exports.

8. Reduction in Mobile Termination Charges as the cost per line has substantially

reduced

9. Due to technological advancement and increase in traffic.

 

Research Strategy and methodology.

Primary research:

The research design is Descriptive studies. Descriptive studies are well structured, they tend to be rigid and its approach cannot be changed every now and then. Descriptive studies are undertaken in many circumstances:When the researcher is interested in knowing the characteristics of certain groups such as age, profession. When the researcher is interested in knowing the proportion of people in given population who have behaved in a particular manner, making projection of certain things. The objective of this kind of study is to answer the why, who, what, when and how of the subject under consideration. I have taken descriptive because my research includes the knowing the behavior of customer towards advertisement. I have analyzed how people of various age groups respond to different advertising or their perception towards advertisement. Also my survey is related to companies like Vodafone, Airtel, Reliance communications, BSNL and Idea cellular.

This report Is going to be an comparative research so we have to undergo and primary research such as questionnaire’s, college gate interaction, personal interviews etc., but mostly I am think of undertaking the help of questionnaire so that we get an accurate result and that will help us to analyse in a systematic way. The questionnaire would be having very simple to understand questions, the questions would be

Open format,

Dichotomous questions

Close format,

Leading questions,

Importance questions,

Liker choice,

Bipolar questions,

In this report we are going to totally relay upon statistical data that can only be obtained with the help of questionnaire, and more we have seen in the past that Indians are very good at answering the questionnaire and are very non bias. Moreover my target respondents would students aged

16-18

18-21

21+ because this are the people who make the most use of mobile phone either to text or call or to use GPRS.

I would be utilising this primary research as the base of research as these are going to be fact figure, here we cannot temper the primary data as we can do in secondary data. And it is said that if you want an accurate result you have to undertake a primary research.

Secondary research:

While if we talk about the secondary data, I would be collecting it from the official website of Telecom Regulatory Authority of India which will provide me the various insight of the laws and regulation regarding the telecomm sector of India. This website will also give me the information regarding the various incomes coming from these private telecom sectors. And their contribution to the Indian economy. Even the secondary source would be the journals and the magazines issued by the Indian government. The secondary research will also be the information provided by the various retailers regarding the sale of different private telecomm companies from their store. This will help me to know the demand of various companies among the people.

Major players in telecom industry

The Top five companies, on the basis of ‘Market Share’ as on 31st January, 2010

are:

Bharti Airtel Ltd.

Reliance Communications Ltd.

Vodafone Essar Ltd.

BSNL

Idea Cellular + Spice

Advertising by telecom industry on TV :

2007

Telecom sector advertising on TV grew by 61 per cent during 2007 Telecommunication Services segment had more than 60 per cent share of overall Telecom sector advertising on TV.

Telecommunication Services has seen a rise of 108 per cent in TV advertising, whereas Telecommunication Equipments saw a rise of 17 per cent during 2007 over 2006.

Bharti Airtel Ltd was the number one advertiser under Telecommunication Services and Nokia Corporation led Telecommunication Equipments advertising on TV during 2007.

2008

TV advertising of Telecom sector saw a rise of 99 per cent during January – August 2008 compared to January – August 2007.

‘ Telecommunication Services’ garnered a high share of Telecom sector advertising on TV during January – August 2008.

TV advertising of ‘Telecommunication Equipments’ saw a growth of 45 per cent and that of ‘Telecommunication Services’ grew by 127 per cent during January – August 2008.

Nokia Corporation’ leads in advertising of ‘Telecommunication Equipments’ and ‘ Vodafone Essar Ltd’ was number one advertisers for ‘Telecommunication Services’ on TV during January – August 2008.

‘ R Madhavan’ had the maximum ad volumes of Celebrity Endorsement of Telecom sector on TV during January – August 2008.

2009

Telecom sector has seen a decline of 16 per cent in its TV ad volumes during Jan – Mar ’09 compared to Jan – Mar ’08. High share of ‘telecommunication services’ advertising on TV during Jan- Mar ’09.

‘Sony Ericsson (India)’ was the top advertisers under ‘telecommunication equipments’ and ‘Bharti Airtel Ltd’ leads in ‘telecommunication services’ advertising on TV during Q1 ’09.

‘Sony Ericsson W595’ and ‘Sony Ericsson F305’ were top two new brands advertised under ‘telecommunication equipments’ on TV during Q1 ’09.Virgin vGlide Phones (slider) topped the chart of new ‘telecommunication services’ advertised on TV during Q1 ’09.

Growth in ads volumes of telecom sector:

There is a growth of 27% in TV ads compare to 2009 in 2010. Which is shown in figure.

Share of segments of telecom sector

2010

With 68% per cent share ‘telecommunication services’ leads in advertising of ‘telecom sector’ on TV, followed by ‘telecommunication equipments’ and ‘corporate brand image’ with 11 per cent and two per cent share respectively during Q1 ’10

Growth in ad vol.s of segments of telecom sector

‘Telecommunication services’ have seen a increased by 2% in its TV ad

Volumes during Jan – Mar ’10 compared to Jan – Mar ’09. TV advertising of ‘telecommunication equipments’ recorded a increase by 172 percent during Q1 ’10 compared to Q1 ’09.

Top five advertisers under the telecom segments :

‘Bharti Airtel Ltd’, ‘Idea Cellular Ltd’and ‘Bharat Sanchar Nigam Ltd’ the top three key players of ‘telecommunication services’ together accounted for 65 per cent share on TV during Q1 ’10.

During Q1 ’10, top three advertiser together contributed for 46per cent of overall ‘telecommunication equipment’ TV advertising share viz., ‘Nokia Corporation’ , ‘samsung India electronics Ltd” and ‘LG Electronics India Ltd’.

Questionnaire

“IMPACT OF ADVERTISING IN INDIAN TELECOM INDUSTRY ON ITS CUSTOMERS”.

Top of Form

1. Gender:

Male

Female

2. Age:

15-25

26-35

36-45

46 and above

3.Education:

marticulate

Intermediate

Graduation

post graduation

4.Who is your current service provider?

Airtel

Vodafone

Idea

Reliance

BSNL

other

5.For how long you are using this mobile connection?

Le

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