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Omnitel Pronto Italia

Group A10

Situation
European Telecom Industry : $150 billion industry

TIM had a monopoly till July 1995 97% share


OmniTel a private player focused on Customer Service According to Market Research : Only 19% of the present users were Service Sensitive By May 1996 OmniTel had only 4% market share Italy Fashion conscious Cell phones subsidy would not impact the sales Move from Push strategy to Pull strategy Introducing Libero to reduce Monthly fixed costs without getting into a price wars with TIM Increase number of subscriptions Volume of usage

Competitive Advantages OmniTel


1. Customer Service
A personal/polite operators Minimized the waiting time to less than 20sec No transfers

2. Customer Satisfaction
Endeavored to minimize the Churn rate to 10-15%

Libero Potential targets


Low/No monthly charges : Pay only when you use Targets customers with High Sensitivity to Monthly Charges High peak charges Targets customer with Low Sensitivity to Peak charges High off-peak charges Target customer with Low Sensitivity to off-Peak charges
Factors
Brand Activation Monthly Charge Peak Tariff Off Peak Tariff Special Tariff H L L

Sensitivity to factors

Service

Target Segments
Considering the Market Research & going by the required characteristics of target segments. Focus segments:
Existing : Monthly/Peak 35% Prospect : Cost Sensitive 30% Rejectors : Monthly Cost 33%

Targets approx. 1/3 of each of the market

Recommendations
Introduction of a new plans to cater to the target segments. These plans should also retain existing customers Do not provide subsidies on cell phones as it would cover only 25% of the rejectors.
Reducing covers monthly charges targets 33%.

Advertising campaign : $25 million over less than 3 months

New Plans
2 new plans should be introduced: New Plan 1 (with NO monthly costs & lower peak charges) New Plan 2 (Normal) Omnitel Free-time
Operator/Plan Monthly Cost Peak Charges Off-Peak & Holidays No. of Minutes (Peak) No.of Minutes (Off Peak) Revenues per Average Customer Omnitel Free-Time 10000 1524 170 38 150 93412 Omnitel Night/Day 20000 795 265 38 150 89960 Omnitel LIBERO New Plan 1 (LIBERO) 0 1595 195 38 150 89860 0 1200 300 38 150 90600 New Plan 2 (NORMAL) 10000 1524 170 38 150 93412

New Plan 1 (Libero)


Targets Existing Customers with TIM and sensitive to Monthly/peak rates Targets Rejectors sensitive to Monthly Costs

New Plan 2 (Normal)


Targets Cost Sensitive Prospective customers as the off-peak charges are kept the same Retains old customers

Libero Risks
TIM Price War New Proposed plans are equal to or less than the TIM Plans People buy phones but dont use it High involvement decision Not subsidizing phones Dealer commission Same reason as above