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Diagnosis: Telecom Italia Mobile (TIM) had a monopoly over the Italian Communications Market. It generated 97% of Italy‟s 7.5% market penetration, also until Omnitel‟s entrance into the market because of the lack of the competition, TIM didn‟t incur the huge marketing costs. TIM‟s marketing strategy was primarily directed towards the uppers echelons of Italian society. Omnitel entered the market in Feb 1995 but they could start the commercial services in December 1995 with network coverage of 40% of the Italian territory. Ominitel thought of its superior customer care as its competitive advantage over TIM, however they could only acquire 1,80,000 subscribers by May 1996. Omnitel was looking for methods to differentiate itself from TIM but at the same time avoiding a price war.
 Problem Identification
The problem was twofold, that of building Omnitel‟s market share while avoiding a price war with TIM, and differentiating brand Omnitel from brand TIM.

hence they avoided getting into a price war situation.750 bn in Dec „94 to become Italy‟s second GSM operator and launched its commercial service in Dec.  Market share was 4% of the total Italian telecom market.  Financial strength of Omnitel was not as strong as their competitor i. which led to „happy‟ customers and low churn rates. 95.  They started with a network coverage of 40% of Italian territory. .Company Background  Omnitel was able to obtain GSM license after liberalization and paid Lit.e TIL.  Initially they offered plans similar to TIM but prime focus was on its high-quality customer service.

 They offered two types of tariffs:  Euro Family  Euro Professional  They enjoyed monopoly over Italian telecommunication market until Omnitel‟s recent entrance.500 exclusive dealers. 20 TIM.  The distribution channel of TIM was very strong as it had 1.owned shops and 150 Telecom Italia stores. .  Its marketing strategy was to cater primarily to the high end segment of the Italian society touting cellular phone as a status symbol. but after the entrance of Omnitel they became more aggressive.Competitor Analysis  The major competitor was Telecom Italia Mobile (TIM) formed in July 1995 after divested from Telecom Italia and was listed separately on Italian stock exchange.  The customer base was over 4 million by the end of first quarter of 1986 and had strong roots in Italian Cellular market. the marketing costs had been lower than its European counterparts.

. long distance calls and international calls and they did not mind paying more.  It was noticed that the customers were not interested in paying activation fees.  Collaborator Analysis  The shops that sold consumer electronics goods and telecommunication goods and services sold Omnitel‟s handsets which were 2000 in number.  They paid a commission of Lit 40. instead they want to pay only when they use the phone.000 for each account they activated and Omnitel didn‟t make any profit on the handsets sold.Analysis  Customer Analysis  The Italian customer market was different from other markets as the people were willing to pay handsomely as they like to show off as they liked show off.  The customers wanted a different set of tariffs for local calls.

the EC liberalized the cellular telephony by January 1994.Analysis: (Continued)  Context Analysis:  In 1993.  Many European countries began to have multiple players resulting in increased marketing.  All cellular operators in Europe had adopted the GSM digital standard.  Competitive Advantage  Focus on Customer service  Polite Operator  Minimum waiting time  One stop calling – trained operator . the European Commission declared that by January 1998. subjected to interpretation by the country involved.  “Value for Money” of the service continued to increase because of reduced costs and improved quality. all member states would have to open their markets and guarantee competition in telephony markets but under pressure from business interests.  Cellular penetration rates were relatively modest.

40 bn for advertisement Usage Peak Hours Min Charge utes Total Value 20735 Off Peak Hours Minutes 80 Charges 195 Total Value 15600 Outgoing (93 minutes) 13 1595 Setup Costs: 10.335/- . 46.LIBERO  No monthly fee  No increase in commission to distribution channels  Increase in demand  Creating and promoting the brand image  Spending of Lit.000 Total Revenue generated per customer: Lit.

They also conducted a conjoint analysis to uncover the preferences of their customers for alternative product design and pricing option. none of which provided such variety in tariffs. 170/min)  No handset subsidies. The following three alternatives were proposed:  Alternative 1  LIBERO: A plan free from taxes and monthly fees.  Per minute charge of Lit 195/min (higher than TIM‟s Lit.  No increase in dealer commissions  Extensive campaigning to create demand so as to facilitate increase in customer base. at that time had only two plans. The results indicated that customers wanted a different set of tariffs for local calls. The results reflected that customers were not particularly happy with the concept of monthly fee. TIM.Alternatives Omnitel conducted a market research interviewing more than 5000 current and potential customers to understand their expectations. long distance calls and international calls. .

successful in several countries. depending on the no. multiplied a suitably increased block rental plan so as the net revenue generated out of all categories of customers. For example 3 hourly (8 blocks /day) or 2 hourly (12 blocks/day).  Alternative 3    Monthly rental calculated at the end of the month based on usage Time period of the day divided into time blocks. of active blocks. Tried and tested strategy.guaranteed constant revenue. Handset subsidies in exchange for signing a contract.  .Alternatives (Continued)  Alternative 2    Recurring monthly fee . By definition. A missed call or a rejected call doesn’t qualify in this category. to entice more no. taken together is an affirmative figure. The rental is calculated at the end of each month. of customers. active means when one makes a call or receives/attends a call. Customer pays rental only for each time block during which his phone is “active”.

Evaluation of Alternatives  Alternative 1 is risky because it is most likely to trigger an immediate price war with TIM. As has been stated in the case. . as they will no longer have to pay a fixed monthly fee. this strategy has worked successfully in other countries. They will pay only for the time blocks in which they are using the operator‟s services. it is highly probable that subscribers will switch to TIM. The costs will easily be covered through careful selection of the time block rental value and call charges. it might work in this case as well. TIM slashes its rates. it has nothing new to attract the existing TIM subscriber base to itself. This is based on the findings of the conjoint analysis (exhibit 6) which revealed a low brand loyalty of 25% as compared to cost sensitivity of 35% among the customers. if after the launch of LIBERO. Since LIBERO does not involve any monthly fee. Also. However.  Alternative 3 appears to be the best solution for Omnitel. It will appeal to the potential subscribers psychologically. although the extent to which it is successful might be less. Omnitel might suffer very heavy losses.  Alternative 2 on the other hand is safer as compared to alternative 1.

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