Marketing Management Lecture

Sept 19th, 2020

Study-case

Omnitel Pronto Italia

Muhammad Zaki Ramadhan – 29120158

Kaspito Gabriel Hutagalung – 29120146
Brilliant Trirahmanova – 29120293
Anjaritha A. R. Parijadi – 29120163
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Outline

1. Overview
2. Case Summary
3. Case Problem
4. Relevant Theory
5. Answer the Questions
6. Conclusions

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Overview

The case study “Omnitel Pronto Italia” describes the company’s situation
soon after the launch of its mobile telecommunication offerings in Italy in
1995. Omnitel had decided to focus on improvements on the quality
dimension in competing against the Italian monopoly (TIM). However, the
results were not very positive. Therefore, Omnitel conducted various
marketing research activities in order to create a new business strategy.
Various needs of the individual customer segments were identified. Omnitel
now had to decide whether the new service plan, “LIBERO”, was the right
move to attack a new segment and improve on prior performance.

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Case Summary

- 4% market share in 1996 by 180,000 subscribers

- Cellular penetration  7.5% in 1996
- First private sector in Italian telecom market GSM license in
December 1994 with network coverage of 40% of Italy territory.
- Offered similar plans as of TIM during initial period
- Avoided price ware with TIM as it was not financially strong
- High quality customer service as differentiator

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Case Problems
COMPETITION WITH STATE OWNED
(TIM)

POLITICAL ISSUE
- Policy Makings
- Political Stability Changing of Consumer Behavior
and Social Patterns
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Relevant Theory
Porter’s Five Forces Analysis

The threat of new entrants (Low)  High Capital requirements, high levels of differentiation , access to
the retailers and distributing, customer loyalties and perceptions

The threat of substitute products or services (High)  There are always different alternatives or
substitutes for various products that lead an industry.

Bargaining Power of Buyers (Moderate)  Multiple product offerings by buyers also increase buyer
power.

Bargaining Power of Suppliers (Moderate)  There are numerous independent suppliers within the
industry, and all comprise of a few pretty small operations that lead to weakened overall supplier power.

Competitive Rivalry among Existing Firms (High)  The market is never too concentrated, and as a
result, it has players of varying size of operation – from very small to big players.

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Relevant Theory
SWOT Analysis

• Strong brand image

• Premium prices for most portfolio products
• International distribution network
• Fighting the challenge of imitation
• Strong investment in research and
development, and high focus on
innovation
• Focus on market research

• Expansion in emerging markets • Price wars by competition

• Partnerships with different firms • Increased competition
• Independent players

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Answer the Questions
1. What was Omnitel’s competitive advantage when the service was
launched in December 1995?
Fabrizio Bona , Omnitel marketing director, had drawn up an innovative
but radical proposal that Omnitel to compete effectively with telecom
Italia Mobil (TIM). TIM is the state-owned which had monopoly over the
Italian communication market until February 1995.

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Answer the Questions
2. Why did the launch not perform to expectations?
During its initial six months of operations, Omnitel offered plans similar
to TIM’s but had focused primarily on its high-quality customer service.
Additionally, as a new entrant into telecom market, Omnitel had no
intention of reducing prices.

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Answer the Questions
3. What are the economics of LIBERO?
LIBERO as the new proposal seemed like a perfect name with some
meaning which are “free” in Italian. This proposal plan brings “free of
taxes and monthly fees” as a new concept brought by Della Valle and
Bona. LIBERO eliminated the monthly fee completely from “free time”
and let customers pay only when they used their cellular phones.

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Answer the Questions
4. Why is the churn rate so high for many European countries?
Churn rate is the annual rate of customers unsubscribing a product or
leaving a job. The reason behind the churn to be higher in the European
region might be that when mobile got introduced into the market, it was
a status symbol, and most people use to show off with their expensive
cell phones. By the passage of time, new companies entered the market,
the competition got stirred up, and people started using the mobile
phone more than ever considering it a necessity. And when it comes to
necessity, people always go for cheaper and more convenient goods, and
that’s why they tend to switch from one good to another resulting in
higher churn rate.
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Answer the Questions
5. Do you expect the churn rate to increase or decrease with the launch of
LIBERO?
With the launch of LIBERO, I expect the churn to increase because
although LIBERO provides the people what they want and people
certainly never like to pay extra money for something that they are not
using and monthly charges, taxes, and activation charges fall into that
category.

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Answer the Questions
6. What do you learn from consumer research? What do you learn from
the results of conjoint analysis presented in exhibits 5 to 8?
Market research and consumer research are conducted in an effort to increase
the Omnitel market share, by interviewing more than 5,000 current and potential
customers. By doing so, Omnitel will get a better understanding of the minds of
the customers; what their expectation was from a new entrant like Omnitel, and
what they thought about Omnitel's positioning in terms of customer service. The
results of the conjoint analysis indicated that an overwhelming majority of those
surveyed resisted paying monthly fees. And the customers wanted a different set
of tariffs for local calls, long-distance calls, and international calls. But the
customers were happy with Omnitel's customer service.

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Answer the Questions
7. Will LIBERO lead to a price war? If yes, what could Omnitel do to avoid
one?
Eliminating monthly fee in LIBERO proposal possibly will trigger TIM to
decrease its fee also, and when that thing happens, of course Omnitel
would sacrifice losing of the main resources of income and their existing
customer who feel TIM’s call charge were lower than Omnitel’s. But
Omnitel could avoid those risk if they change their pricing strategy from
peak – off peak hours classification to distance-based classification (local,
long distance, international). So that, Omnitel would have different
pricing methods with TIM.

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Answer the Questions
8. If you were Fabrizio Bona, what changes would you make to LIBERO
and why?
Beside eliminating monthly fee, LIBERO must be modified its strategy pricing from
peak – off peak hours classification to distance-based classification (local, long
distance, international), so that they does not have to face to face with TIM. They
should not have to subsidize the handset cost because this strategy does not suit
with Italians personality & will push churn rate higher like in UK. Besides, they
have to consider setting price in range Lit. 170 – 200, the range where customers
still willing to pay easily. The Advertising budget should be distributed to dealers
because Omnitel still lack in distribution channel rather than TIM, so that they
have to pay this weakness out in the beginning to attract new customer, worked
by the dealers who could bring the perception “Celullar phone were more flexible
than fixed line”.
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Conclusions
To increase their competitive advantage, tactical strategy that Omnitel’s LIBERO
should choose as follows:
• Product
Their product was covered by excellent customer service
• Price
Omnitel does not have monthly fee, and the price strategy should depends on distance-
based strategy (local, long distance, international)
• Place
Facing the numbers of TIM’s distribution channel, Omnitel should make sure dealers
promoting their product, so that they have to give commission or another incentive to
dealers. The needs of budget would be same as advertising budget that they would spend
in LIBERO programme
• Promotion
Rather than acquisition TIM’s customer, Omnitel could chase fixed line customer to move
to cellular phone with the perception “Celullar phone were more flexible than fixed line”
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Marketing Management Lecture
Sept 19th, 2020

Thank You for Your Attention!

Muhammad Zaki Ramadhan – 29120158

Kaspito Gabriel Hutagalung – 29120146
Brilliant Trirahmanova – 29120293
Anjaritha A. R. Parijadi – 29120163
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