Trinity College Dublin
BU2510b - Marketing Management Marketing with respect to Vodafone Ireland
Stephen Denham, David Doran, Eoin Sheehy and Luke Verdon Word Count: 3243 words
BU2510b – Marketing Management 2011
Abstract In recent years, there have been two major global developments: the rise of social networking and the global economic recession. If there is one thing that these dramatic changes have in common, it is that the world today is more connected than ever. The marketing framework as we know it must be revisited in this context, and what better a context to put it in, than to look at marketing to the future generation of connected individuals, from the point of view of a highly branded, highly priced network provider? This essay analyses and defines the marketing framework, viewing it through the work of Vodafone Ireland to target the student market.
Page 1 of 18
BU2510b – Marketing Management 2011 Table of Contents Introduction .................................................................................................................................3 Marketing, in a Contemporary Context ........................................................................................3 Understanding Consumer Behaviour ..........................................................................................5 Market Research.........................................................................................................................7 Segmentation, Targeting & Positioning .......................................................................................8 The Marketing Mix - 7 Ps ..........................................................................................................10 Product ..............................................................................................................................10 Price...................................................................................................................................11 Place ..................................................................................................................................11 Promotion...........................................................................................................................11 Process ..............................................................................................................................11 Physical Evidence ..............................................................................................................12 People................................................................................................................................12 Conclusion ................................................................................................................................12 References ...............................................................................................................................13 Appendix ...................................................................................................................................15
Page 2 of 18
BU2510b – Marketing Management 2011 Introduction Founded in 1984, Vodafone (formed from Voice Data Fone) is currently the world‟s largest telecommunications company in terms of revenue and second in terms of subscribers (322 million) behind China Mobile. Vodafone made a profit of over £8.6 billion in 2010. Currently Vodafone is ranked 5th in the top 10 global brands (BrandDirectory.com, 2011a) and 1st among telecoms brands (BrandDirectory.com, 2011b). This essay outlines the contemporary marketing in which Vodafone operates. How they understand and research their consumers in order to apply an appropriate marketing mix to ultimately improve their market share.
Marketing, in a Contemporary Context Modern marketers compete in a harsh commercial landscape and must be prepared to present a convincing argument about the value of their product. Companies and marketers face an uphill battle not only because of an ongoing recession (the very mention of which can deflate buyer confidence) but also because of the modern social and technological environment. A tempting simplification of the recession challenge is to view the consumer as seeking the lowest price for the product or service they desire. Doing so may, however, precipitate a race to the bottom in which suppliers compete primarily on price and undercut margins across the industry. The competent marketer will present an offering to the consumer with the correct pricing and branding to appear an attractive recession purchase. The prescient marketer will carefully adjust pricing and positioning so as to maintain the brand‟s image, with a view to weathering the recession without sacrificing profit margins. Doing so maintains profits, but most importantly reinforces the perceived value companies place on their products and services. The digital age is competitive and fast-paced, and presents unique challenges and opportunities. Every two days as much data is created as was created from the dawn of civilization up until 2003 (Siegler, 2010). This data includes news, photographs, Page 3 of 18
BU2510b – Marketing Management 2011 “tweets”, emails, among thousands of forms of data. Some of this data is of direct interest to marketers: surveys, comment cards, satisfaction ratings, and returns statistics. These data explicitly inform the marketer about the consumer. Much of these concepts are not new, though they have been brought forward into the digital age. The real difference in the digital age is the wealth of passive feedback being generated. Passive feedback is not written to the company or brand but about the company or brand. This form of feedback has a number of properties: it is unsolicited, it is informal and often expressive, and it may be read by a wide audience. Passive feedback is a double-edged sword, as negative commentary may spread further and/or faster than positive commentary. Attempts to suppress negative feedback may be met with mass dissemination in revolt, termed the „Streisand effect‟ (Greenberg, May 11, 2007). Much of this passive discussion happens on social networks. Social networks are increasingly pervasive, with over 50% of United States residents active on a social network (Wire, March 19, 2010). With social networks, consumers can tap the power of the „network effect‟: the more users of a social network, the larger the possible audience to whom grievances can spread. Conversely for companies and brands, popular social networks are becoming key places for brands and customers to interact through special offers, „fan‟ pages and targeted advertising. Companies engaging on these platforms must at least appear to be transparent; communication and trust are key (Patrick Barwise, 2010). It is forecasted that by 2020, forty percent (40%) of the population of the US, Europe and the BRIC counties (economically advancing Brazil, Russia, India and China) will be made of newly named Generation C. Generation C are those born after 1990. They are connected, communicating and computerized (Roman Friedrich, 2011). Vodafone Group plc, as a telecommunications company, is uniquely concerned with how the population converses and shares information. Vodafone, through its products such as Vodafone 360, attempts to facilitate rich communication and sharing by its users. The fact that Vodafone is enabling millions of subscribers to engage on social networks shows what an integral part of life they have now become. Page 4 of 18
BU2510b – Marketing Management 2011 Understanding Consumer Behaviour ‘Consumer behaviour is the study of how individual or groups buy, use and dispose products, services, ideas or experience to satisfy their needs and wants’ (Kotler, 2009). Solomon (2009) defines the evoked set as the „alternatives to a product that a customer knows about‟. From the point of view of Vodafone, a consumer‟s evoked set is all mobile networks in Ireland: 3, Meteor, O2 and Vodafone (plus minority networks such as Tesco). This can be narrowed down even further to a consideration set which is the options a consumer would actually consider before ultimately purchasing a product or service. Certain options may not survive this downsizing process if the customer has had a bad experience with the product or service or if the product or service is outside their budget. Vodafone seeks to be in a consumer‟s consideration set by remaining competitive on price without eroding profit margins. When targeting students, Vodafone must be careful with this particularly price-aware group (Solomon, 2009). Companies such as Vodafone try to comprehend the purchasing steps to gain a better understanding of the consumer (Kotler, 2009). The following are the five steps of purchasing, and how they relate to Vodafone: Problem recognition is the first step, when the customer realises they have a problem or need. In the mobile market, customers are likely to remain with their current provider unless they experience some particular difficulty. While a customer may be satisfied with their current service, Vodafone may use advertising to highlight problems with the customer‟s current provider. In doing so, Vodafone may stimulate customers into reconsidering their service provider. After problem recognition, consumers begin the information search. Vodafone must understand what information channels students utilise and their relative importance. For example, there would be little reason for Vodafone to advertise to students in a broadsheet newspaper if only a small percentage of students actually read broadsheets. As social networks are now commonly used for discussion, and search engines are Page 5 of 18
BU2510b – Marketing Management 2011 extensively used for product research, the majority of the information search is done online. Consumers can read the opinions of their peers and view reviews from numerous publications and websites online. In this way, consumers can start to build a consensus opinion on the products they are researching. Having gathered (relatively) objective information, consumers attempt to evaluate the alternatives. Consumers weigh up the pros and cons of the products in the consideration set and try to determine which one provides the most benefit to them (on some value metric). Vodafone try and sway customers at this stage by promising a robust network with nationwide coverage, a range of modern phones and competitive pricing. The purchasing decision is the commitment step. The consumer has weighed their options and must now decide whether to part with their money. „The amount of perceived risk varies with the amount of money at stake, the amount of attribute uncertainty and the amount of consumer self confidence‟ (Kotler, 2009). Vodafone aims to reduce the amount of perceived risk to a consumer. This can be achieved by having a national brand name (Kotler, 2009), which Vodafone has (BrandDirectory.com, 2011a). A consumer may grow doubtful after making their purchase. This post-purchase behaviour may be due to a bad experience (such as the product‟s box missing an item) or due to a friend espousing a competing product. Consequently, new and existing customers must be reassured, which the auto industry does by spending most heavily on advertising after their busiest season (Brady, 2011). Consumer attrition (or, churn) is the reason companies focus on post-purchase behaviour: ‘It costs five times more to attract a new customer than it does to keep an existing one,‟ (Kandampully, 1999). An existing consumer is more likely to purchase again from the same brand as opposed to switching. Puccinelli (2009) termed this „storage in memory‟ which occurs after a positive shopping experience. „Marketing is about identifying and meeting social needs‟ (Kotler, 2009). Abraham Maslow proposed a hierarchy of basic needs that every human being follows which was Page 6 of 18
BU2510b – Marketing Management 2011 later used by marketers to discover a pattern in consumer behavior (Solomon, 2009). It is possible to summarise how Vodafone may view these needs in relation to their service for students. While the physiological and safety needs don‟t apply here, it could be argued that the other three needs do. They are: Belonging, where a mobile service provider makes the customer feel as though they are part of a community. In Vodafone‟s television advertisements the company tries to create a sense of belonging. The latest Vodafone slogan is an appropriate example of this: “We‟re the blackberry boys”. Esteem (self-concept), where consumers strive to have the latest phone and services to keep up with their peers. By promoting popular phones with student-friendly packages Vodafone can entice students to maintain social status and remain with the network. Self-actualisation, where the other needs are catered for consumers may come to see their phone (and mobile service) as enabling them to meet their full potential. Vodafone‟s global slogans “Make The Most Of Now” and “Power to You” show that the company believes self-actualization is a real motivating force for consumers.
Market Research If a company realises the importance of understanding consumer behaviour and attempting to satisfy their needs it follows that a company realises the importance of market research (MR). Market research is a system relating to the design, collection and subsequent analysis and reporting of data regarding a specific marketing situation facing a company (Kotler, 2009). This provides a company with the data required for strategic decisions in regards to how a product/service is presented at all levels to the customer. Without this a company is merely relying on „gut instinct‟ which is certainly not thinking „customer‟. This said, the pertinence of MR cannot be underestimated. The market research process demands a clear definition of what problems a company faces and what information is necessary. „Marketing managers must be careful not to define the problem too broadly or too narrowly for a market researcher‟ (Kotler, 2009). Page 7 of 18
BU2510b – Marketing Management 2011 Too vague a definition will result in useless data, wasting time and money. Too narrow and key elements may be missed. Vodafone must ask questions like “will our customers be willing to pay X a month for Wi-Fi and will it be profitable?” Other pitfalls of poor MR include “poor framing of the problem, uneven calibre of researchers, late and occasionally erroneous findings and personality and presentational differences” (Kotler, 2009). What companies must strive for is MR that adopters a creative, but ultimately well-disciplined, cost-effective and scientific approach to collecting and analysing data, (Kotler, 2009). When Vodafone attempts to gather MR on students the accumulation and manipulation of the data will take the steps: data, information, knowledge and wisdom (see Appendix I). The raw „data‟ a company collects will provide „information‟ which gives Vodafone the basis to answer questions like who and where. The answers to these questions will tell the company how certain things occurred previously which leads to the next step: „knowledge‟. This will give an appreciation of why those events occurred which is truly „understanding‟ the target market. Only with this understanding can Vodafone attain „wisdom‟ which is the (final) stage at which a company can make informed decisions in the future (Ackoff, 1989). If this process is carried out correctly the data gathered will be absolutely invaluable and will „allow an organisation to suitably shift its focus to specific factors that might provide it with an industry-specific edge‟ (Fleisher, 2008).
Segmentation, Targeting & Positioning Segmentation, Targeting & Positioning is the process of analysing customer behaviour and market research, in order to break down markets into subsets which have similar buying patterns (Kotler, 2009). As basic telecommunication services are required by a large population, the company needs to segment their customers both in terms of adjusting their services, and their marketing mix. This is clearly evident with the number of marketing campaigns a telecommunications company runs at any given time.
Page 8 of 18
BU2510b – Marketing Management 2011 Students have grown up in a “Marketing Society”, therefore they are more sceptical towards advertising so companies like Vodafone has a hard time convincing students to connect with them. However, as mentioned in the „esteem‟
In 1986, Howard Moskowitz reinvented the
need in Maslow‟s hierarchy,
spaghetti industry. As a result, Prego made 600
students
view
goods
and
services they use as a way of becoming
was a Psychophysicist and a food science
accepted
consultant. At the time there were two types of
and expressing their identities.
spaghetti sauces: plain and spicy. Moskowitz
This is exploited by companies
discovered that a third of Americans preferred extra
by
socially
million dollars in the following ten years. Moskowitz
showing
what
can
be
chunky sauce, but would never admit to it when
referred to as an „in‟ group
asked. By creating a number of sauces that
using the company‟s product
appealed to different customer groups Moskowitz
(Michael Solomon, 2006). As
increased customer satisfaction by embracing
(James E. Katz, 2006) found,
diversity.
consumers do not adopt a new (Gladwell, 2007)
technology solely to make life more convenient but also as a status symbol.
Due to the current pricing trends to other networks, group of friends who are in frequent contact, are very likely to converge to one network. This makes social groups (or networks) work nearly like a buying centre, but not in the traditional sense. Marketers should start to focus on early adopters, because their uptake will spread virally and they are the ones who care the most (Godin, Feb 2003). Some have even stated that using a mobile phone as a fashion statement was its primary function (James E. Katz, 2006). This gives Vodafone further reason to target early adopters as they are easily swayed toward a network if that network is perceived by them to be fashionable. According to Vodafone‟s position on the business/student orientation graph it is not a fashionable network provider in comparison to Meteor for this target market. Meteor have reached this position after many years of targeting the Page 9 of 18
BU2510b – Marketing Management 2011 youth market with activities such as sponsoring the (Meteor) Ireland Music Awards (Appendix G). Although Vodafone campaign to target the student, the company is careful not to damage the work done to establish itself to the business market. The Appendix D shows the company‟s positioning on the student/business orientation scales. These markets have polar opposite focuses (fun, social, cool vs. professional, performancebased), as well as service orientations (pay-as-you-go, weekend calls vs. national calls, phone conferencing facilities, land-line options, peak-time rates). It must be noted that when marketing is taken in its contemporary form, there is a need to be wary of possible negatives of STP. The world today is more connected via social networking and so brands, though targeted to individual groups, must be accessible to other potential customers. It is important to repeat that if Vodafone were to follow Meteor and target the younger market primarily this may affect their business orientation adversely.
The Marketing Mix - 7 Ps Ivy defined the marketing mix as „a set of controllable marketing tools that an institution uses to produce the response it wants from its various target markets‟. The final stage of the marketing framework is the marketing mix. Once the STP has been established the next step is to cater the marketing mix to the needs of the selected target market. Winning companies satisfy customer needs and surpass their expectations
Product Vodafone is a global telecommunications company, providing traditional telephony services and a host of digital services. These services include mobile broadband, the Vodafone 360 digital suite, and even World Calling Cards. This essay focuses on the
Page 10 of 18
BU2510b – Marketing Management 2011 company‟s student offerings, particularly the prepaid “Pay as you go” product. As the world‟s largest telecommunications company (in terms of revenue) Vodafone is heavily invested in all aspects of the industry.
Price The pricing of prepaid mobile services is highly competitive for a number of reasons, including that face that the services provided are weakly differentiated and switching cost is low for customers. Mobile networks have two main elements of their service to price: the individual per-call and per-SMS rates, and the minimum top-up amount that qualifies the customer for the „free deal‟. Commonly, this deal gives the customer free SMS messages to others on the network.
Place A product or service cannot succeed if consumers can‟t get access to it so it‟s essential for Vodafone to always be in arm‟s reach of its target market. Vodafone does this by operating over 300 stores in the UK (see appendix), and by selling through independent retailers such as Carphone Warehouse.
Promotion Promotion is a large part of Vodafone‟s marketing strategy. Vodafone has used celebrity endorsements in the past including David Beckham, Manchester United and Ferrari. In order to promote this particular marketing mix, Vodafone has increased its promotion to the Irish student market considerably.
Process Process refers to the way in which a service system operates overall (Brady, 2011). The majority of this occurs with Vodafone on customer care phone lines and by speaking to in-store representatives. 43,000 employees (over half of Vodafone‟s Page 11 of 18
BU2510b – Marketing Management 2011 workforce) work in customer care, which shows the importance of process and maintaining custom satisfaction.
Physical Evidence Physical Evidence is concerned with the sense evoked by a company‟s tangible assets. Vodafone stores are very similar in style to an Apple store, and also to that of their competitor O2. The stores try to instil the sense that Vodafone are a state of the art brand.
People Vodafone‟s people refers to its staff and what they do for the customer. In the Trinity College Dublin and University College Dublin „Freshers‟ Weeks‟ of 2010, Vodafone employed students as promoters to entice their fellow students to switch to or join Vodafone (Appendix E). The importance of the company‟s stores is again emphasised: customers will appreciate expertise in person when faced with important decisions such as which bill pay option is best for them.
Conclusion While keeping faithful to their initial target market of big businesses Vodafone has still managed to achieve customer migration and take steps to move into the student market which has been dominated by Meteor in recent years. The example mentioned earlier of the company promoting heavily during fresher‟s week in Trinity College shows exactly how they understood the best way to reach students while at the same time not alienating their other customers which may have happened through extensive television advertisements. It may be possible for Vodafone to further improve their marketing strategy by targeting early adaptors in the future. It is quite an achievement for Vodafone‟s marketers that, in an industry that is simply indispensable to society, this company has remained the strongest.
Page 12 of 18
BU2510b – Marketing Management 2011 References ACKOFF, R. L. 1989. From Data to Wisdom. Journal of Applied Systems Analysis, 16, 3-9. BRADY, M. 2011. RE: Marketing Management Lectures, Trinity College Dublin School of Business. BRANDDIRECTORY.COM
2011a.
The
BrandFinance
Global
500.
http://brandirectory.com/global_500_2011.html. BRANDDIRECTORY.COM 2011b. The BrandFinance Top 500 Telecom Brands. http://brandirectory.com/telecom_500_2011.html. FLEISHER, C. S. 2008. The Role of Insight Teams in Integrating Diverse Marketing Information Management Techniques. European Journal of Marketing. GLADWELL, M. Year. What we can learn from Spaghetti Sauce. In: TED Talk, 2007. http://www.youtube.com/watch?v=iIiAAhUeR6Y. GODIN, S. Year. Sliced Bread and Other Marketing Delights. In:
TED, Feb 2003.
http://www.youtube.com/watch?v=xBIVlM435Zg. GREENBERG, A. May 11, 2007. Forbes. Frobes. JAMES E. KATZ, S. S. 2006. Mobile phones as fashion statements: evidence from student surveys in the US and Japan, new media & society. SAGE Publications, 8, 321377. KANDAMPULLY, J., DUDDY, R. 1999. Relationship marketing: a concept beyond primary relationship. Marketing Intelligence & Planning, 17. KOTLER, P., , KELLER, K., BRADY, M., GOODMAN, M., HANSEN, T. 2009. Marketing Management, , Pearson Education.
Page 13 of 18
BU2510b – Marketing Management 2011 MICHAEL SOLOMON, G. B., SOREN ASKEGAARD, MARGARET K. HOGG 2006. Consumer behaviour: A European Perspective, Prentice Hall. NANCY M. PUCCINELLI, R. C. G., DHRUV GREWAL, ROBERT PRICE, PRIYA RAGHUBIR, DAVID STEWART 2009. Customer Experiance Mangement in Retailing: Understanding the Buying Process. Journal of Retailing, 85, 15-30. PATRICK BARWISE, S. M. 2010. The One Thing You Must Get Right When Building a Brand. Harvard Business Review. ROMAN FRIEDRICH, M. P., ALEX KOSTER 2011. The Rise of Generation C. Strategy+Business - Booz & Co. SIEGLER, M. 2010. Eric Schmidt: Every 2 Days We Create As Much Information As We Did Up To 2003. TechCrunch.com. SOLOMON, M. R. 2009. Consumer behaviour: Buying Having, and Being, Pearson. WIRE, N. March 19, 2010. Global Audience Spends Two Hours More a Month on Social Networks
than
Last
Year
[Online].
Available:
http://blog.nielsen.com/nielsenwire/global/global-audience-spends-two-hours-more-amonth-on-social-networks-than-last-year/ [Accessed].
Page 14 of 18
BU2510b – Marketing Management 2011 Appendix Appendix A: Marketing Framework (Brady, 2011)
Appendix B: Price/Quality Positioning Diagram
Page 15 of 18
BU2510b – Marketing Management 2011 Appendix C: Student/Business Positioning Diagram
Appendix D: Vodafone.ie Store Locator
Page 16 of 18
BU2510b – Marketing Management 2011 Appendix E: Vodafone Ambassadors at Trinity College Dublin Fresherss Week
Appendix F: Vodafone Banner Ad on trinityents.ie
Appendix G: Meteor Ireland Music Awards 2008 Logo
Page 17 of 18
BU2510b – Marketing Management 2011 Appendix H: Data/Wisdom Hierarchy
Appendix I: Maslow’s Hierarchy of Needs
Page 18 of 18