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Vivo Company: Analysis and breakdown

Paper Type: Free Essay Subject: Marketing
Wordcount: 3785 words Published: 8th May 2017

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Vivo is a mobile telecommunications service provider – mobile phone services, data transmission and Internet – that has been in operation since 2003 in the telecommunication industry. The company’s main focus is to provide more and better products and services of mobile communication, bringing innovation and advantages in order to make customers’ life easier and enjoyable. Currently, the company holds about 30% market share and a customer base of 50 million users in the Brazilian market.

The following Situation Analysis will describe the current conditions surrounding Vivo and its products. It includes detailed information on the company’s products and services, an analysis of the market, an evaluation of Vivo’s competitors and distributors, historical results of marketing efforts, an industry-wide financial analysis, and macro environment information.

This marketing plan intends to address a new and revolutionary opportunity within a saturated mobile market. Operating in a highly competitive industry makes companies pursue new strategies in order to differentiate themselves from competitors. It has been difficult to distinguish from the pack only using voice and standard data (as short messages). Moreover, Vivo has always been concerned about being an innovative company aiming to make life easier to its customers.

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For that reason, this assignment is based on a new product development known as mobile-payment. This method basically consists on financial transaction using mobile phones as a way of payment, replacing credit/debit cards, money and checks. It has been identified that there is a great opportunity for the parallel market and small financial transactions which are not attended by financial institutions. In additional, this service aims to facilitate customers’ lives since mobile phone became an indispensible gadget for majority of people. Vivo will take advantage of these opportunities by developing a new service which could provision that need.



Vivo Participacoes S/A (Vivo) is a Brazilian mobile telecommunication service provider, controlled by two European companies: Portugal Telecom and Telefonica. The joint venture was established in April 2003 and since then it is the largest mobile operator in the Southern Hemisphere and one of the largest in the world. It is a leading mobile phone market with a share of 29.9% and a base of about 50 million subscribers and roughly 10,500 direct employees. It has national coverage and it is the only operator in Brazil that offers wireless services in developed two key technologies used in the world – GSM and CDMA. Also it is the only one that offers services of third generation, 3G and CDMA EVDO.

For the third consecutive year, Vivo’s brand has been regarded as the Country’s most valuable mobile phone brand in the ranking organized by the British consulting firm Brand Finance, recording a value of R$ 5.8 billion. The company is continuously focused on expanding and improving connectivity among individuals, a commitment that has been summarized in the expression “Vivo – Quality Signal”. For this purpose, it has been investing in the development and improvement of technologies and services, as well as in policies geared to customer satisfaction. As a result, Vivo has been offering to its customers a broad and innovative portfolio of voice and data products and services.

Vivo’s main goal is to provide more and better services for customers to be able to connect themselves – whenever they wish, however they wish, from wherever they wish, every time more. Thus, it manages to stimulate a networked society, which brings along a huge source of opportunities for people to develop progress and live better. Accordingly, Vivo feeds a virtuous cycle which is reflected on the self-sustainable evolution of its own business.

In 2009, the company recorded a net income of R$ 16,4 Billion, a 5% growth over the previous year. The company shares have been traded at the Sao Paulo Stock Exchange (BM&F Bovespa) since 2006. These shares are also listed on the New York Stock Exchange.


The mobile phone industry is one of the fastest growing industries in Brazil. In 2009, about 23 million new mobile phones started operating and according to Anatel (regulation institution), the year ended with 175 million mobile phones in operation, a growth of about 16% in a year. Vivo estimates that until 2012 the number of mobile phones in Brazil will exceed 200 million. This means, on average, each Brazilian person will have a mobile phone of his/her own. These days, mobile phones have been considered as part of consumers’ lives, a necessity rather than a luxury. People can forget their wallets but not their mobile phones.

Due to a high rate of penetration (almost 94%), mobile phone operators have been struggling to find new alternatives to increase their profits and retain their customers. Making profit from new subscribers or voice revenues is becoming more and more challenging, since the market is almost saturated and voice revenues have become a commodity. Bearing this in mind, Vivo has been seeking applications that would allow them to provide long-term services for its customers. Besides, Vivo recognizes that offering additional services can attract new customers and stabilize its subscriber base. Data revenues growth is one of the answers that mobile phone operators came up with to avoid decrease in ARPU (Average Revenue per User). In Brazil, non-voice revenues represent only 13% of total ARPU. Though, Vivo is also the leading mobile phone company regarding data ARPU revenues -18.4% on the last trimester of 2009. Mobile operators in mature wireless markets such as South Korea and Japan have already reached 19% and 29% of ARPU respectively.

On the other hand, customers are constantly searching for convenience and added value services. They have become extremely demanding, taking advantage of the highly competitive market that mobile companies are inserted in. Moreover, people expect companies to develop products that exceed their expectations. Considering this scenery, Vivo spotted a great opportunity to overcome those issues using its technology to develop a service called Mobile Payment.

Mobile payment shows signs of being on the verge of enormous growth and, as such, offers several strong incentives for mobile phone operators – including a new source of incremental revenue and an incentive for customers to remain with a provider instead of switching.



Vivo currently offers mobile phone services to customers in its target market. Its core products are voice-services (calls) and non-voice services (sms, media messaging, internet etc.). Those services meet the needs of its market by offering the best quality from the customers’ view point. Most consumers purchase Vivo’s services through stores (self-owned and dealers), internet, telemarketing and consultants (corporative).

Its products gave it a competitive edge because Vivo has invested in the expansion of its network across Brazil and in the improvement of its operations so that they could offer customers greater coverage and a better signal quality. In the last few years, they have centered all their resources and efforts in all that matters to the customers: services, customer relations and billings/recharges.

Voice traffic is still the main source of income. In 2009 the total service’s revenue was R$ 15,006 millions (around £5,000 million) and voice contributed with R$ 12,000 millions and internet data with the remaining – R$ 2,000 million.

The reason for this panorama is basically price. Internet access is still expensive compared to voice tariffs.

Macro environment Analysis

Mobile phone providers, banks, brokerages, credit card companies and technologies businesses have been investing over the years in payments services over the phone. Several pilot projects are being tested. The stimulus could not be better. The number of mobiles phones in Brazil reached 175 million last year.

The mobile money transfer and payment sector represents a significant prospective market for mobile operators, financial service organizations, governments, retailers, and end users, especially in developing markets like Brazil.

In the recent past, the whole Latin America was affected by hyper-inflation, resulting in the desire for methods of fast money transfer in Brazil.

The desire to extend electronic payments to a convenient device like the ubiquitous and personal mobile phone is high and, with mobile payments, the transaction can occur in real-time – also desirable in a country with fluctuation inflation.

The rapid growth in access to mobile telecommunication in Brazil has created great opportunities to provide secure, low-cost financial services using the local mobile networks.

Furthermore, mobile payments could also improve the economy and leverage financial transactions since millions of people do not have bank accounts.

Even though this seems to be more beneficial then harmful, there is still no legislation which could regulate this service over mobile phones. Though, the Federal Bank has already been following this issue.

Industry Analysis

The mobile phone industry is one of the fastest growing industries in Brazil. In 2009 about 23 million new mobile phones started operating and, according to Anatel (regulation agency), the year ended with 175 million mobile phones in operation, a growth of about 16% in a year.

Regarding the mobile phone rate payment plans, the prepayment plans continued to lead. They are adopted by 80% of the whole domestic base. Meanwhile, post payment plans reached 28 million subscribers, that is, 20% of the total number.

Vivo estimates that until 2012 the number of cell phones in Brazil will exceed 200 million. This means, on average, each Brazilian person will have a mobile phone.

The voice traffic is becoming saturated. More and more, people are demanding new services and mobile phone providers have been trying to come up with new ideas. Services which could improve its revenues as well as delivering services that can create value for customers.

The focus of this product development is about micro-payments. A high volume of transactions of low amounts should attain economy of scale. Payments among people, door-to-door businesses, delivery, loyalty programs and parallel market selling are some examples of opportunities which mobile payment could tap into.

Mobile phone providers already have enough knowledge and technology to develop this service. Their main advantage is that they could use their own network, avoiding extended costs. In addition, they can benefit from its vast customers base.

The mobile payment service has a potential for rapid expansion, since the platform widely used is SMS, compatible with any device. In the future, technology must be replaced by the NFC, where the debt in the cell is done by passing the device in a sensor. In Japan, a pioneer in mobile payment, this technology is already used for those using the phone as a transportation vouchers, similar to the Oyster card system. There are already about 55 million mobile phones acting as “electronic wallet” and the market grows 70% per annum and should reach 190 million people in 2012.

In Kenya, the mobile has become the main means of transferring money. The M-Pesa, used by 8 million people, equivalent to 18% of the population, is an alternative which was found to overcome media precarious existence, how to send money by mail or bus drivers, in a country where the population is little exposed to banking. This case shows how the telephone operators, who generally have a range in the low income population much larger than the banks, can exploit this opportunity to offer various financial services.

In Brazil, this is the keynote of the strategy of Oi Paggo , the only provider of mobile payment service in the country where the service penetration is still low, but the potential is high. To the public with access to credit card, the mobile payment functions are more practical and safe. As for the pyramid’s base, it is the gateway to the same convenience similar to what a bank could offer. The fact that the mobile POS payment is the shopkeeper’s own cell phone becomes a great advantage because of the low cost of implementation, scope and practicality, since even the seller of coconut water on the beach could use the phone as means of payment. The opportunities are endless.

Critical Success Factors

Differentiate in a highly competitive market by developing innovative services which ease peoples’ life and add value

Being recognized as the best mobile phone provider regarding service and signal quality

Distinctive Competency

Strong brand image

Leader in Market share

Knowledgeable staff – people


Based on the analysis of our target market, competition, and the opportunities available in our market, Vivo has developed marketing objectives and financial objectives for its marketing efforts. In the end, these objectives support the company’s mission statement.

This section includes the objectives for this marketing plan, along with the keys to success and critical issues that are associated with these objectives.

Corporate Objectives

The ultimate goal for this marketing plan is to improve the bottom line and increase shareholder value. Financial objectives are in four categories: Sales, Margins, Profits, and Ratios.

To provide more and better services that foster a network society and to create potential opportunities of development and progress – for people, corporation, society and country.

Quality services – Efforts to ensure that customers have access to quality services at the time and where desired.

Customer services – Ensure customer satisfaction. Investing in training and systems which provide an integrated view of information available on the customers.

Increase shareholders revenues – constant improvement in the company’s corporate governance practices

Keep its leadership in the Brazilian mobile phone market – innovative solutions and increasing coverage network.

Marketing Objectives

Increase the ARPU (average revenue per user) by 15%, within the next 2 years.

Retain the most active and profitable customers on the market – reducing the churn rate by 10% within the next 2 years – annualized 31.3% in 2008.

Continue reducing acquisition expenses investing in segmented markets – from R$ 102 (£ 34) in 2007 to R$ 77 (£ 26) in 2009 (per customer).

Introduce a new and revolutionary service that will ease customers’ life, creating another way of payment (Mobile Payment) – register 2.5 million customers by the end of 2010 and increase 10% every month on the following year.


Vivo and its competitors have always been pursuing differentiation and innovation to get and retain customers. Having this in mind, in the last few years Vivo has worked hard on its market development, expanding its coverage nationally.

At the moment, in order to achieve its future goals, the most appropriated growth strategy is one of product development. This could be achieved by enabling a revolutionary service, which would add value for the company and for its customers.

The chosen competitive strategy was Differentiation. Vivo seeks to be unique in its industry developing services that are widely valued by customers.

Segmentation, Targeting and Positioning

The segmentation analysis (showed below) demonstrates how customers are classified within the company. These clusters were identified through behavioral measures. It includes service usage and actual behavior such as buying patterns, usage data, channel, ownership, quantities, brand loyalty, attitudes, etc. They have the following segmentation:

“Descomplicado” (Uncomplicated) – interested only in talking on the phone. Do not care about the device and is highly price sensitive.

“Multifuncional” (Multifunctional) – interested in technologies, but in a moderate way. Wishes to use every functionality of the device, such as email, agenda, video and photos in order to facilitate their lives.

“Fashion” (Fashion) – concerned about individualization. Wants to be different and modern. Focus on beauty than practicality.

“High-tech” (High-tech) – interested mainly in new technologies. Wants to have the latest models. Little price sensitive.


The marketing mix approaches product, price, place, promotion, people, process and physical evidence in the following ways:


Our main service, mobile payment, enables customer to benefit from convenience, facility and an innovative service. This product will be the focus for targeting the “multifunctional” and “high-tech” customers segments as it addresses the customers’ needs.

This is an intangible product and consists of 2 layers explained on the graphic below:

Here are some reasons to develop this product:

Retain and acquire new (profitable) customers

Continue to improve brand image

Increase non-voice services revenues


The pricing of our product is based on Intermediate pricing. Our market is fairly developed and has many competitors; therefore, our pricing strategy should be in line with competition.

A similar service has already been offered by one of our competitors (Company named Oi). However, this company has a different approach of target, and the strategy used is slightly different from ours. Besides, they haven’t reached great market share and its product is not known of the public – 0.8% of its customer base is registered to use the service. For that reason, we still considered our product as a USP.

Based on surveys and research of our target market, customers seem to be normally sensitive to pricing of our products. We should price our product slightly above our competitors following our strategy of having premium products.

The chart below shows details of our Pricing positioning.


The main distribution channels for our products are through our own stores, dealers, internet and telemarketing.

We want our product to be seen as an added value product, so it makes sense that it would be available in every distribution channel. The distribution strategy adopted will be Direct and Indirect Distribution.

The motives for choosing those two strategies is that we would like to have control of our services, identify customers’ trends/behavior as well as using intermediates channels to enhance marketing penetration.


Launching a revolutionary product, we must communicate clearly with our customer and prospects customers, it is important that we present a consistent marketing message between the different marketing channels. Effective communication is vital to ensure that our service generates significant impact within industry.


There are 4 objectives to promote our products known as DRIP – Differentiate, Reinforce, Inform and Persuade. Our main objective is to create awareness of our service. As mentioned before, a similar service is offered by one of our competitors, but has not been wide spreading. Therefore, it is still considered a new product to consumers and market.


The company will implement both “push” and “pull” promotional strategy. However, we will do this in 2 phases. At the beginning, we will focus on push strategy in order to better analyze the response. Then, we can go to a more aggressive strategy, investing in heavy advertising and campaigns.

Extended Marketing Mix

Since Vivo is considered as a major service category of company, there are some limitations regarding tactics strategies which is more easily find in companies that deal with tangible products. Services have four distinctive characteristic that greatly affect the design of marketing programs: intangibility – cannot be seen, tasted, felt, heard or smelled before they are bought; inseparability – services are typically produced and consumed simultaneously; variability – services are highly variable, depends on who provides them; and perishability – services cannot be stored. To overcome those limitations we need to use the extended P’s (People, Process and Physical Evidence).

One of the most important competitive advantages of the company is being recognized as the best mobile phone provider regarding service quality. Therefore it is highly important to aggregate the extended mix in our tactics.


Staff (front desk and back office) will be trained to build knowledge of the new product

Presentations and demonstrations will be made to the company – every employee should be able to manage and explain the new product


Systems will be totally integrated to deal with this new service

Rules and procedures will be develop to avoid failures and overcome with possible problems

Physical Evidence

Procedures will be standardized in our branches and web sites to avoid disconnected information

Manual and leaflets will be created to demonstrated how the service works, step-by-step


Using the strategy and objectives in this marketing plan, Vivo has established milestones to ensure that this plan is implemented successfully.


Controls are being established to cover implementation and the organization of our marketing activities


Sales target – register 2,500,000 customers within the end of the first year

Customer service


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