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Virgin Mobile Retail strategy for entering the Indian Handset market

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Page 1: Virgin Mobile India Strategy

Virgin Mobile

Retail strategy for entering

the Indian Handset market

Page 2: Virgin Mobile India Strategy

An Update

On 1st March 2008, Virgin Mobile has entered

the Indian Market, tying up with Tata Tele-

services.

Virgin is primarily an MVNO company, and

retail distribution is only a part of the overall

strategy.

Page 3: Virgin Mobile India Strategy

However, it is a very important piece.

Even for an MVNO like Virgin, having a finely

crafted retail strategy can mean the difference

between a strong subscriber uptake rate or a

mediocre showing among the target audience.

Page 4: Virgin Mobile India Strategy

Agenda

Virgin Mobile - Company Brief

The Indian Opportunity

Competition and Positioning

The Indian Consumer

VM’s Entry Strategy Review

Analysis and Recommendations

Page 5: Virgin Mobile India Strategy

Virgin Mobile

The Company

Page 6: Virgin Mobile India Strategy

Global Reach

Page 7: Virgin Mobile India Strategy

As a customer, there’s nothing more frustrating than dealing with a faceless bureaucracy or a member of staff who tows the party line. A little something extra can really go a long way to improve a their experience and their opinion of Virgin. E.g. A Virgin Trains manager took all the placemats from First class and folded them into fans for the passengers caught in an unpleasantly hot carriage when the air-conditioning failed.

To add a personal touch to our customer experience: the little extras….

Virgin Mobile Charter

Page 8: Virgin Mobile India Strategy

Speak from the heart, not a script. Talk to people the way they prefer to be talked to – with warmth and humanity. When Virgin Money sends people letters about their financial services they recognise it’s the customer’s money, not theirs. They don’t write in jargon but as one human being to another

To offer an experience that’s 100% human, treating customers with respect.

Virgin Mobile Charter

Page 9: Virgin Mobile India Strategy

Organizational Mission

Keep it simple

Do what you say

Take the leap of faith

Keep on checking

Stay true to your values

Love the locals

Page 10: Virgin Mobile India Strategy

Virgin’s New Venture Strategy

When we start a new venture, we base it on hard research and

analysis. Typically, we review the industry and put ourselves in the

customer's shoes to see what could make it better. We ask

fundamental questions: Is this an opportunity for restructuring

a market and creating competitive advantage? What are the

competitors doing? Is the customer confused or badly served?

Is this an opportunity for building the Virgin brand? Can we

add value? Will it interact with our other businesses? Is there an

appropriate trade-off between risk and reward?

Page 11: Virgin Mobile India Strategy

The Indian Opportunity

Market Size, Structure and Segments

for Handset Retail

Page 12: Virgin Mobile India Strategy

Mobile Retail - The Numbers

New Connections per month = 60,00,000

Handset Retail = 3,50,00,00,00,000

Airtime + Accessories + Handset = 7,50,00,00,00,000

Page 13: Virgin Mobile India Strategy

The Demographics

50%

Page 14: Virgin Mobile India Strategy

What Virgin Needs To Know

No Bundling - Handsets sold directly so far, not by

operators. This works in the favor of retailers, though it

has begun to change.

7-9 Models added every month.

Replacement sales account for as much as 60%.

People are replacing handsets every 18-24 months

Page 15: Virgin Mobile India Strategy

Organized Retail

There are 95000 retail outlets in all

Only 1% of these are organized retailers

By Sales, organized retail has a share of 7%

Page 16: Virgin Mobile India Strategy

The Future - Growth Rates

Handset retail market has been growing at a CAGR of

60%

Overall, the Mobile retail market is growing at 20%

According to Gartner figures for Sep 07, India recorded

the fastest growth in mobile handset sales

Page 17: Virgin Mobile India Strategy

The Future - Volumes

0

100

200

300

400

500

600

2004200520062007200820092010

Year

Retail Size (Rs. Crore)Subscribers

Handsets

Page 18: Virgin Mobile India Strategy

The Potential - Handset RetailHandset Retail Growth

0

20000

40000

60000

80000

100000

2004200520062007200820092010

Year

Retail Size (Rs. Crore)Organized

Unorganized

Page 19: Virgin Mobile India Strategy

The Future - Trends

Saturation in the urban market

Rural India will drive growth, accounting for 35-38% of

total handset market.

Aggressive promotions to get more common

Low priced handsets and handset bundle offers.

Page 20: Virgin Mobile India Strategy

PEST – Politico-Legal Environment

Politically stable country. However, there are certain

parties with vested interests that act as bottlenecks.

FDI allowed upto 24% for foreign players w.e.f. April,

2008

Availability of cheap as well as professional labour

Weak consumer protection laws

Increasing recognition of the potential in the retail space

by the government.

Page 21: Virgin Mobile India Strategy

PEST - Economic Environment

7-9% growth rate; mobile retail growing at 20%.

Credit Sales have started, and Cell Phones are being sold on EMI.

The Monetary policy aims to contain inflation close to 5.0% in

2007-08 while conditioning expectations in the range of 4.0-

4.5%.

Indirect taxes like service tax on immovable property adds to the

costs. The retailers want to move the service tax on rent,

telephone, etc to sales tax.

Consumer confidence in the organized retail format is high and

encouraging.

Page 22: Virgin Mobile India Strategy

PEST - Social Environment

21.5 crore people between the ages of 14 – 25 years

Demographics - A lot of demand is coming from Rural

India, as as much as half of the newly added subscriber

are from rural areas.

Growing middle class and youth with an increasing

propensity to save.

Changing attitude- live for today

Page 23: Virgin Mobile India Strategy

PEST - Technological Environment

The mobile sector has grown more than tenfold from

2001 to around 6 crore subscribers by mid-2005.

10% of the ISPs have 90% of the subscribers

The country’s mobile market stands at Rs. 35,000

crores and is growing at an annual rate of 60%.

Page 24: Virgin Mobile India Strategy

Porter’s Five Forces

New Entrants

Competitive Rivalry

Threat of Substitution

Supplier Power

Buyer Power

Threat from New Entrants: High Rising cost of retail real estate makes nationwide competition difficult, but numerous national and foreign players are interested to enter

Supplier Power: Moderate Suppliers have strong brands and often have a presence in retail themselves Network Operators are able to push cheaper brands (e.g. Reliance Classic)

Buyer Power: Buyers Demanding greater variety at lower prices Threat of Substitution: Second hand phone market and unorganized retail is strong. Most demand is from rural areas – where organized retailers don’t have a presence.

Competitive Rivalry: Moderate Margins are thin at mere 4%. Pressure from Second hand sales makes it worse.

Page 25: Virgin Mobile India Strategy

Porter’s Five Forces

Threat from New Entrants: High

Rising cost of retail real estate makes

nationwide competition difficult, but numerous

national and foreign players are interested to

enter

Page 26: Virgin Mobile India Strategy

Porter’s Five Forces

Competitive Rivalry: Moderate

Margins are thin at mere 4%. Pressure from Second

hand sales makes it worse.

Buyer Power: High

Buyers Demanding greater variety at lower prices

Page 27: Virgin Mobile India Strategy

Porter’s Five Forces

Supplier Power: Moderate

Suppliers have strong brands and often have a

presence in retail themselves

Network Operators are able to push cheaper

brands (e.g. Reliance Classic)

Page 28: Virgin Mobile India Strategy

Porter’s Five Forces

Threat of Substitution: High

Second hand phone market and unorganized

retail is strong.

Most demand is from rural areas – where

organized retailers don’t have a presence.

Page 29: Virgin Mobile India Strategy

Competitive Landscape

Players, Positioning and Strength

Page 30: Virgin Mobile India Strategy

Existing Players

Nokia

Samsung

Sony World

ConvergeM (Future Group)

Mobile Store (JV between Essar and Virgin)

MobileNxt

Univercell

Hotspot (Spice Telecom)

RPG Cellucom

Subhiksha

M Bazaar

Page 31: Virgin Mobile India Strategy

Nokia

Around 50% market share in Indian mobile market

Focus on “Mother Brand” than on “Another Brand”

Addressed all five needs “REAPS” of Indian

Consumer

Strong focus on distribution network

Reduced their prices to counter the grey market

Page 32: Virgin Mobile India Strategy

Mobile Store

Essar Group venture - entered Jan 2007

Target Segment - 18 to 45 years

Eyeing 10% market share, 2500 stores, 600 cities, and

breakeven by 2010

Plans to invest 1250 cr by 2010

3 Formats - large medium and compact, in 20:60:20

ratio

Against Franchising - dilutes brand value

Page 33: Virgin Mobile India Strategy

Positioning Map

Page 34: Virgin Mobile India Strategy

Consumer Need Analysis

Segments, Buyer Behavior and Gaps

Page 35: Virgin Mobile India Strategy

Consumer Segments

I want everything from my mobile and I want it now

My phone means I belong amongst

my peers

My life is a juggling act – my mobile

keeps me connected

I want a phone that makes me look good - even when I can’t

afford it

To stay ahead of the game you need the

best tools

New experiences, new possessions, new technologies – that’s what I want

I’ll adopt new technologies if you show me a good

reason

I’ll carry a mobile if I need to…

Pioneer Youth

Mainstream Youth

In-touch Organizers

Mainstream Materialists

Careerist

Experiencers

Family Phoners

Basic Phoners

Page 36: Virgin Mobile India Strategy

The Indian CellPhone Buyer

Replace handsets every 18-24 months

High demand from upgraders

Price Sensitive - bulk of demand from sub

5000 price range

VAS such as Texting very popular among

Urban, Young customers

Page 37: Virgin Mobile India Strategy

The Opportunity

Urban youth: Distinct mobile needs

More and longer out-bound voice calls

Large calling circles for both making and receiving calls

Large users of SMS

Both the earliest adopters and highest users of value-added

services

Higher usage for both voice and SMS at weekends

Page 38: Virgin Mobile India Strategy

Urban Youth: More Than Just A Segment

India has 21.5 crore people between the ages of 14 – 25

years old.

Incremental urban youth subscribers between 2008 and

2010 will be more than 5 crores.

Urban youth mobile service revenues > Rs. 35,000

crores by 2010

Mobile as a badge of self-expression: brand and style

very important

Page 39: Virgin Mobile India Strategy

Indian Market Entry Strategy

Target Segment, Positioning and

Objectives

Page 40: Virgin Mobile India Strategy

Virgin India Strategy

Target Segment - Urban Youth

Sales Objectives

Revenues of Rs. 35000 Crores by 2011 (including

connections, handsets and accessories)

Image Objectives

Establish the brand name

Market Share Objectives

10% of the market in 3 years

Page 41: Virgin Mobile India Strategy

Positioning - Seeking Youngistan

Mainstream Youth and Materialists

14-25 years

Young executives / students / Youthful Adults

Page 42: Virgin Mobile India Strategy

Virgin India Strategy - Differentiation

Win a 10% share of the urban youth market by…

Delivering imaginative solutions that offer

Value for money & flexible tariffs that reflect their unique

needs

Innovative, game-changing value-added services

Great handsets at great prices

Personalized customer care

Page 43: Virgin Mobile India Strategy

Virgin India Strategy - Cost

Whilst achieving a low operating cost per customer through

Sharp focus on India’s top youth markets

Fewer, stable propositions with low support and service

costs

Imaginative, eye-catching advertising & PR that gets youth

talking

A lean, enthusiastic team supported by simple processes

Page 44: Virgin Mobile India Strategy

Differentiation Strategy - Customer Care

Taking the hassle out of buying a cell phone

Try before you buy

Real conversations: no scripts

End-to-end ownership of problems: same Champ call-back

Champ empowerment: authorized to resolve issues on the

spot

Welcome calls: all customers are personally welcomed to

Virgin Mobile

A real returns policy

Page 45: Virgin Mobile India Strategy

Returns Policy

q. Lost my charger, battery fell off and someone threw

my phone…gasp!

a. Tension nahin leneka. Whatever your problem you can walk

into any service center and get replacements for faulty* items

in your pack. Here’s a list of our service center .

*conditions apply. But don’t get scared about it.

Page 46: Virgin Mobile India Strategy

Differentiation Strategy

Value for Money and Flexible Service Offerings

Page 47: Virgin Mobile India Strategy

Differentiation Strategy - First Time In India

Get paid to receive calls

50 paise to any local network

TGI the weekend Bolt-on

One Touch access to V-Bytes

Unlimited access to V-Bytes for a simple daily charge

‘100% colour, 100% FM’ handsets

Easy Handset upgrades

Personalised Care

Safe Secrets

Page 48: Virgin Mobile India Strategy

Virgin India Strategy - Promotions

Think Hatke Campaign

10 paise every minutes on incoming

Page 49: Virgin Mobile India Strategy

Virgin India Strategy - Location And Ownership

“You have to be in front of the right

people.”

Howard Handler

CMO, Virgin Mobile

Page 50: Virgin Mobile India Strategy

Virgin India Strategy - Location

Shop in Shop and Kiosks

Non exclusive, extensive coverage, lower costs

The one commonality all of the retailers share

is they are places where teens shop, because

that's Virgin's core market.

Page 51: Virgin Mobile India Strategy

A Virgin Kiosk

Page 52: Virgin Mobile India Strategy

Virgin India Strategy - Expansion Plans

To begin with, Virgin Mobile services were launched in

50 cities with 15,000 handsets & 40,000 top-up outlets.

Also, with 55 Virgin Mobile kiosks & Shop-in-Shops.

Plan to expand to 1000 cities by 2008-end

Aims to acquire 50 lakh subscribers over the next 3

years, by when it would be profitable.

By the end of 2008, when the new GSM players start

rolling out their services, Virgin Mobile aims to offer

similar services on GSM as well.

Page 53: Virgin Mobile India Strategy

Virgin Mobile

Analysis and Recommendations

Page 54: Virgin Mobile India Strategy

South African Experience

Virgin entered as a 50-50 partnership with Cell C, H1,

2006

Classified itself as an ESP, since MVNO’s are illegal in SA

Premium Pricing, supported by a strong brand, superior

customer service and pricing plan simplicity

Page 55: Virgin Mobile India Strategy

Singapore Experience

Entered through a tie-up with SingTel

Exited the market - citing premium pricing and

crowded market

Customers placed more premium on Price

SingTel tariffs too high - texting too expensive

Page 56: Virgin Mobile India Strategy

Strategic Choices for Mobile Retailers

Price

Vo

lum

e

Low High

Hig

h

Low Cost Strategy-

Viable

Low Cost Strategy- Unviable

Not sustainable

Premium Positioning-

Viable

Page 57: Virgin Mobile India Strategy

BRAND ENGAGEMENT CAN BE THE ONLY DIFFERENTIATOR

OFFER SIMILAR ACROSS RETAILERS

ASSORTMENT EXPECTED

CONSUMER MORE EVOLVED

PRICE COMPETIVENESS SHORT LIVED

Positioning Virgin

Page 58: Virgin Mobile India Strategy

200 companies worldwide, employing 48 500people, an annual Virgin Group turnover of £10.8bn/US$20.4bn

….one of the most exciting brands in the world

Page 59: Virgin Mobile India Strategy

SWOT

Opportunities India a growth story - 20-30%

CAGR, highest handset sales

volumes.

Organized Retail mere 7% by

revenue, 1% by outlets.

Most entrants are new, few

established competitors

Threats Rising Retail Costs

Lack of number portability -

switching barriers

Unclear Government Policy on

MVNO

Falling Handset prices - lower

margins

Saturation - Mobile penetration in

excess of 40%.

Page 60: Virgin Mobile India Strategy

SWOT

Strengths

Strong Global Brand

Limited overlap with Tata’s

existing customers

Very low fixed costs as it leases

Network Time

Not tied to a particular

Technology

Weaknesses Dependent on Partners for

pricing, capacity

Non serious image may not go

well with conservative Indian

consumer.

Limited understanding of India

Market

Page 61: Virgin Mobile India Strategy

Capitalizing On Strengths

Into retailing + service provider

If the GoI allows MVNOs then after tying up

with GSM players, can beat Reliance

Good brand recall

Structured pricing of airtime serves as a

loyalty incentive, encouraging active use

Page 62: Virgin Mobile India Strategy

Making Weaknesses Irrelevant

People not familiar with the MVNO concept

Tata Teleservices does not have a good brand

image

Confusion in the minds of consumer about the

Virgin-Tata deal- a re-branding exercise by

Tata Teleservices?

Page 63: Virgin Mobile India Strategy

Recommendations

Key advantage over other (non-operator)

retailers - presence in both retailing and

airtime

Key advantage over operators - not tied to

technology (as an MVNO)

Page 64: Virgin Mobile India Strategy

Recommendations

Forge deal with a GSM player

Offer bundled plans - subsidize handset costs

with Airtime

Offer for both CDMA and GSM - greater

assortment

Offer plans for 2 years, with upgrade options

Page 65: Virgin Mobile India Strategy

Recommendations

VM is moving in the right direction but time is still not

ripe for a big bang entry into handset retailing

Need to see the response to Airtime and expand in

other cities

Continue tie-ups with existing Mobile retailers like

Univercell, Hotspot, M Bazaar, M Port, Vishal, etc.

Page 66: Virgin Mobile India Strategy

Thank You !!