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Final virgin


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Final virgin

  1. 1. Virgin Mobile Retail strategy for entering the Indian Handset market Presented By : Ghanshyam Gupta [email_address]
  2. 2. An Update <ul><li>On 1st March 2008, Virgin Mobile has entered the Indian Market, tying up with Tata Tele-services. </li></ul><ul><li>Virgin is primarily an MVNO company, and retail distribution is only a part of the overall strategy. </li></ul>
  3. 3. <ul><li>However, it is a very important piece. </li></ul><ul><li>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. </li></ul>
  4. 4. Agenda <ul><li>Virgin Mobile - Company Brief </li></ul><ul><li>The Indian Opportunity </li></ul><ul><li>Competition and Positioning </li></ul><ul><li>The Indian Consumer </li></ul><ul><li>VM’s Entry Strategy Review </li></ul><ul><li>Analysis and Recommendations </li></ul>
  5. 5. Virgin Mobile The Company
  6. 6. Global Reach
  7. 7. Virgin Mobile Charter 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….
  8. 8. Virgin Mobile Charter 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.
  9. 9. Organizational Mission <ul><li>Keep it simple </li></ul><ul><li>Do what you say </li></ul><ul><li>Take the leap of faith </li></ul><ul><li>Keep on checking </li></ul><ul><li>Stay true to your values </li></ul><ul><li>Love the locals </li></ul>
  10. 10. Virgin’s New Venture Strategy <ul><li>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? </li></ul>
  11. 11. The Indian Opportunity Market Size, Structure and Segments for Handset Retail
  12. 12. Mobile Retail - The Numbers <ul><li>New Connections per month = 60,00,000 </li></ul><ul><li>Handset Retail = 3,50,00,00,00,000 </li></ul><ul><li>Airtime + Accessories + Handset = 7,50,00,00,00,000 </li></ul>
  13. 13. The Demographics <ul><li>50% </li></ul>
  14. 14. What Virgin Needs To Know <ul><li>No Bundling - Handsets sold directly so far, not by operators. This works in the favor of retailers, though it has begun to change. </li></ul><ul><li>7-9 Models added every month. </li></ul><ul><li>Replacement sales account for as much as 60%. </li></ul><ul><li>People are replacing handsets every 18-24 months </li></ul>
  15. 15. Organized Retail <ul><li>There are 95000 retail outlets in all </li></ul><ul><li>Only 1% of these are organized retailers </li></ul><ul><li>By Sales, organized retail has a share of 7% </li></ul>
  16. 16. The Future - Growth Rates <ul><li>Handset retail market has been growing at a CAGR of 60% </li></ul><ul><li>Overall, the Mobile retail market is growing at 20% </li></ul><ul><li>According to Gartner figures for Sep 07, India recorded the fastest growth in mobile handset sales </li></ul>
  17. 17. The Future - Volumes
  18. 18. The Potential - Handset Retail
  19. 19. The Future - Trends <ul><li>Saturation in the urban market </li></ul><ul><li>Rural India will drive growth, accounting for 35-38% of total handset market. </li></ul><ul><li>Aggressive promotions to get more common </li></ul><ul><li>Low priced handsets and handset bundle offers. </li></ul>
  20. 20. PEST – Politico-Legal Environment <ul><li>Politically stable country. However, there are certain parties with vested interests that act as bottlenecks. </li></ul><ul><li>FDI allowed upto 24% for foreign players w.e.f. April, 2008 </li></ul><ul><li>Availability of cheap as well as professional labour </li></ul><ul><li>Weak consumer protection laws </li></ul><ul><li>Increasing recognition of the potential in the retail space by the government. </li></ul>
  21. 21. PEST - Economic Environment <ul><li>7-9% growth rate; mobile retail growing at 20%. </li></ul><ul><li>Credit Sales have started, and Cell Phones are being sold on EMI. </li></ul><ul><li>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%. </li></ul><ul><li>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. </li></ul><ul><li>Consumer confidence in the organized retail format is high and encouraging. </li></ul>
  22. 22. PEST - Social Environment <ul><li>21.5 crore people between the ages of 14 – 25 years </li></ul><ul><li>Demographics - A lot of demand is coming from Rural India, as as much as half of the newly added subscriber are from rural areas. </li></ul><ul><li>Growing middle class and youth with an increasing propensity to save. </li></ul><ul><li>Changing attitude- live for today </li></ul>
  23. 23. PEST - Technological Environment <ul><li>The mobile sector has grown more than tenfold from 2001 to around 6 crore subscribers by mid-2005. </li></ul><ul><li>10% of the ISPs have 90% of the subscribers </li></ul><ul><li>The country’s mobile market stands at Rs. 35,000 crores and is growing at an annual rate of 60%. </li></ul>
  24. 24. Porter’s Five Forces
  25. 25. Porter’s Five Forces <ul><li>Threat from New Entrants: High </li></ul><ul><li>Rising cost of retail real estate makes nationwide competition difficult, but numerous national and foreign players are interested to enter </li></ul>
  26. 26. Porter’s Five Forces <ul><li>Competitive Rivalry: Moderate </li></ul><ul><li>Margins are thin at mere 4%. Pressure from Second hand sales makes it worse. </li></ul><ul><li>Buyer Power: High </li></ul><ul><li>Buyers Demanding greater variety at lower prices </li></ul>
  27. 27. Porter’s Five Forces <ul><li>Supplier Power: Moderate </li></ul><ul><li>Suppliers have strong brands and often have a presence in retail themselves </li></ul><ul><li>Network Operators are able to push cheaper brands (e.g. Reliance Classic) </li></ul>
  28. 28. Porter’s Five Forces <ul><li>Threat of Substitution: High </li></ul><ul><li>Second hand phone market and unorganized retail is strong. </li></ul><ul><li>Most demand is from rural areas – where organized retailers don’t have a presence. </li></ul>
  29. 29. Competitive Landscape Players, Positioning and Strength
  30. 30. Existing Players <ul><li>Nokia </li></ul><ul><li>Samsung </li></ul><ul><li>Sony World </li></ul><ul><li>ConvergeM (Future Group) </li></ul><ul><li>Mobile Store (JV between Essar and Virgin) </li></ul><ul><li>MobileNxt </li></ul><ul><li>Univercell </li></ul><ul><li>Hotspot (Spice Telecom) </li></ul><ul><li>RPG Cellucom </li></ul><ul><li>Subhiksha </li></ul><ul><li>M Bazaar </li></ul>
  31. 31. Nokia <ul><li>Around 50% market share in Indian mobile market </li></ul><ul><li>Focus on “Mother Brand” than on “Another Brand” </li></ul><ul><li>Addressed all five needs “REAPS” of Indian Consumer </li></ul><ul><li>Strong focus on distribution network </li></ul><ul><li>Reduced their prices to counter the grey market </li></ul>
  32. 32. Mobile Store <ul><li>Essar Group venture - entered Jan 2007 </li></ul><ul><li>Target Segment - 18 to 45 years </li></ul><ul><li>Eyeing 10% market share, 2500 stores, 600 cities, and breakeven by 2010 </li></ul><ul><li>Plans to invest 1250 cr by 2010 </li></ul><ul><li>3 Formats - large medium and compact, in 20:60:20 ratio </li></ul><ul><li>Against Franchising - dilutes brand value </li></ul>
  33. 33. Positioning Map
  34. 34. Consumer Need Analysis Segments, Buyer Behavior and Gaps
  35. 35. 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
  36. 36. The Indian CellPhone Buyer <ul><li>Replace handsets every 18-24 months </li></ul><ul><li>High demand from upgraders </li></ul><ul><li>Price Sensitive - bulk of demand from sub 5000 price range </li></ul><ul><li>VAS such as Texting very popular among Urban, Young customers </li></ul>
  37. 37. The Opportunity <ul><li>Urban youth: Distinct mobile needs </li></ul><ul><li>More and longer out-bound voice calls </li></ul><ul><li>Large calling circles for both making and receiving calls </li></ul><ul><li>Large users of SMS </li></ul><ul><li>Both the earliest adopters and highest users of value-added services </li></ul><ul><li>Higher usage for both voice and SMS at weekends </li></ul>
  38. 38. Urban Youth: More Than Just A Segment <ul><li>India has 21.5 crore people between the ages of 14 – 25 years old. </li></ul><ul><li>Incremental urban youth subscribers between 2008 and 2010 will be more than 5 crores. </li></ul><ul><li>Urban youth mobile service revenues > Rs. 35,000 crores by 2010 </li></ul><ul><li>Mobile as a badge of self-expression: brand and style very important </li></ul>
  39. 39. Indian Market Entry Strategy Target Segment, Positioning and Objectives
  40. 40. Virgin India Strategy <ul><li>Target Segment - Urban Youth </li></ul><ul><li>Sales Objectives </li></ul><ul><ul><li>Revenues of Rs. 35000 Crores by 2011 (including connections, handsets and accessories) </li></ul></ul><ul><li>Image Objectives </li></ul><ul><ul><li>Establish the brand name </li></ul></ul><ul><li>Market Share Objectives </li></ul><ul><ul><li>10% of the market in 3 years </li></ul></ul>
  41. 41. Positioning - Seeking Youngistan <ul><li>Mainstream Youth and Materialists </li></ul><ul><li>14-25 years </li></ul><ul><li>Young executives / students / Youthful Adults </li></ul>
  42. 42. Virgin India Strategy - Differentiation <ul><li>Win a 10% share of the urban youth market by… </li></ul><ul><li>Delivering imaginative solutions that offer </li></ul><ul><li>Value for money & flexible tariffs that reflect their unique needs </li></ul><ul><li>Innovative, game-changing value-added services </li></ul><ul><li>Great handsets at great prices </li></ul><ul><li>Personalized customer care </li></ul>
  43. 43. Virgin India Strategy - Cost <ul><li>Whilst achieving a low operating cost per customer through </li></ul><ul><li>Sharp focus on India’s top youth markets </li></ul><ul><li>Fewer, stable propositions with low support and service costs </li></ul><ul><li>Imaginative, eye-catching advertising & PR that gets youth talking </li></ul><ul><li>A lean, enthusiastic team supported by simple processes </li></ul>
  44. 44. Differentiation Strategy - Customer Care <ul><li>Taking the hassle out of buying a cell phone </li></ul><ul><li>Try before you buy </li></ul><ul><li>Real conversations: no scripts </li></ul><ul><li>End-to-end ownership of problems: same Champ call-back </li></ul><ul><li>Champ empowerment: authorized to resolve issues on the spot </li></ul><ul><li>Welcome calls: all customers are personally welcomed to Virgin Mobile </li></ul><ul><li>A real returns policy </li></ul>
  45. 45. Returns Policy <ul><li>q. Lost my charger, battery fell off and someone threw my phone…gasp! </li></ul><ul><li>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 . </li></ul><ul><li>*conditions apply. But don’t get scared about it. </li></ul>
  46. 46. Differentiation Strategy <ul><li>Value for Money and Flexible Service Offerings </li></ul>
  47. 47. Differentiation Strategy - First Time In India <ul><li>Get paid to receive calls </li></ul><ul><li>50 paise to any local network </li></ul><ul><li>TGI the weekend Bolt-on </li></ul><ul><li>One Touch access to V-Bytes </li></ul><ul><li>Unlimited access to V-Bytes for a simple daily charge </li></ul><ul><li>‘ 100% colour, 100% FM’ handsets </li></ul><ul><li>Easy Handset upgrades </li></ul><ul><li>Personalised Care </li></ul><ul><li>Safe Secrets </li></ul>
  48. 48. Virgin India Strategy - Promotions <ul><li>Think Hatke Campaign </li></ul><ul><li>10 paise every minutes on incoming </li></ul>
  49. 49. Virgin India Strategy - Location And Ownership <ul><li>“ You have to be in front of the right people.” </li></ul><ul><ul><ul><ul><li>Howard Handler </li></ul></ul></ul></ul><ul><ul><ul><ul><li>CMO, Virgin Mobile </li></ul></ul></ul></ul>
  50. 50. Virgin India Strategy - Location <ul><li>Shop in Shop and Kiosks </li></ul><ul><li>Non exclusive, extensive coverage, lower costs </li></ul><ul><li>The one commonality all of the retailers share is they are places where teens shop, because that's Virgin's core market. </li></ul>
  51. 51. A Virgin Kiosk
  52. 52. Virgin India Strategy - Expansion Plans <ul><li>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. </li></ul><ul><li>Plan to expand to 1000 cities by 2008-end </li></ul><ul><li>Aims to acquire 50 lakh subscribers over the next 3 years, by when it would be profitable. </li></ul><ul><li>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. </li></ul>
  53. 53. Virgin Mobile Analysis and Recommendations
  54. 54. South African Experience <ul><li>Virgin entered as a 50-50 partnership with Cell C, H1, 2006 </li></ul><ul><li>Classified itself as an ESP, since MVNO’s are illegal in SA </li></ul><ul><li>Premium Pricing, supported by a strong brand, superior customer service and pricing plan simplicity </li></ul>
  55. 55. Singapore Experience <ul><li>Entered through a tie-up with SingTel </li></ul><ul><li>Exited the market - citing premium pricing and crowded market </li></ul><ul><li>Customers placed more premium on Price </li></ul><ul><li>SingTel tariffs too high - texting too expensive </li></ul>
  56. 56. Strategic Choices for Mobile Retailers Price Volume Low High High Low Cost Strategy-Viable Low Cost Strategy- Unviable Not sustainable Premium Positioning-Viable
  58. 58. 200 companies worldwide, employing 48 500 people, an annual Virgin Group turnover of £10.8bn/US$20.4bn … .one of the most exciting brands in the world
  59. 59. SWOT <ul><li>Opportunities </li></ul><ul><li>India a growth story - 20-30% CAGR, highest handset sales volumes. </li></ul><ul><li>Organized Retail mere 7% by revenue, 1% by outlets. </li></ul><ul><li>Most entrants are new, few established competitors </li></ul><ul><li>Threats </li></ul><ul><li>Rising Retail Costs </li></ul><ul><li>Lack of number portability - switching barriers </li></ul><ul><li>Unclear Government Policy on MVNO </li></ul><ul><li>Falling Handset prices - lower margins </li></ul><ul><li>Saturation - Mobile penetration in excess of 40%. </li></ul>
  60. 60. SWOT <ul><li>Strengths </li></ul><ul><li>Strong Global Brand </li></ul><ul><li>Limited overlap with Tata’s existing customers </li></ul><ul><li>Very low fixed costs as it leases Network Time </li></ul><ul><li>Not tied to a particular Technology </li></ul><ul><li>Weaknesses </li></ul><ul><li>Dependent on Partners for pricing, capacity </li></ul><ul><li>Non serious image may not go well with conservative Indian consumer. </li></ul><ul><li>Limited understanding of India Market </li></ul>
  61. 61. Capitalizing On Strengths <ul><li>Into retailing + service provider </li></ul><ul><li>If the GoI allows MVNOs then after tying up with GSM players, can beat Reliance </li></ul><ul><li>Good brand recall </li></ul><ul><li>Structured pricing of airtime serves as a loyalty incentive, encouraging active use </li></ul>
  62. 62. Making Weaknesses Irrelevant <ul><li>People not familiar with the MVNO concept </li></ul><ul><li>Tata Teleservices does not have a good brand image </li></ul><ul><li>Confusion in the minds of consumer about the Virgin-Tata deal- a re-branding exercise by Tata Teleservices? </li></ul>
  63. 63. Recommendations <ul><li>Key advantage over other (non-operator) retailers - presence in both retailing and airtime </li></ul><ul><li>Key advantage over operators - not tied to technology (as an MVNO) </li></ul>
  64. 64. Recommendations <ul><li>Forge deal with a GSM player </li></ul><ul><li>Offer bundled plans - subsidize handset costs with Airtime </li></ul><ul><li>Offer for both CDMA and GSM - greater assortment </li></ul><ul><li>Offer plans for 2 years, with upgrade options </li></ul>
  65. 65. Recommendations <ul><li>VM is moving in the right direction but time is still not ripe for a big bang entry into handset retailing </li></ul><ul><li>Need to see the response to Airtime and expand in other cities </li></ul><ul><li>Continue tie-ups with existing Mobile retailers like Univercell, Hotspot, M Bazaar, M Port, Vishal, etc. </li></ul>
  66. 66. Thank You !!