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Virgin Mobile
Retail strategy for entering
the Indian Handset market
Presented By :Ghanshyam Gupta
An Update
On 1st March 2008, Virgin Mobile has entered
the Indian Market, tying up with Tata Tele-
services.
Virgin is primarily an MVNO company, and
retail distribution is only a part of the overall
strategy.
However, it is a very important piece.
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.
Agenda
Virgin Mobile - Company Brief
The Indian Opportunity
Competition and Positioning
The Indian Consumer
VM’s Entry Strategy Review
Analysis and Recommendations
Virgin Mobile
The Company
Global Reach
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….
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.
Virgin Mobile Charter
Organizational Mission
Keep it simple
Do what you say
Take the leap of faith
Keep on checking
Stay true to your values
Love the locals
Virgin’s New Venture Strategy
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?
The Indian Opportunity
Market Size, Structure and Segments
for Handset Retail
Mobile Retail - The Numbers
New Connections per month = 60,00,000
Handset Retail = 3,50,00,00,00,000
Airtime + Accessories + Handset = 7,50,00,00,00,000
The Demographics
50%
What Virgin Needs To Know
No Bundling - Handsets sold directly so far, not by
operators. This works in the favor of retailers, though it
has begun to change.
7-9 Models added every month.
Replacement sales account for as much as 60%.
People are replacing handsets every 18-24 months
Organized Retail
There are 95000 retail outlets in all
Only 1% of these are organized retailers
By Sales, organized retail has a share of 7%
The Future - Growth Rates
Handset retail market has been growing at a CAGR of
60%
Overall, the Mobile retail market is growing at 20%
According to Gartner figures for Sep 07, India recorded
the fastest growth in mobile handset sales
The Future - Volumes
0
100
200
300
400
500
600
Year
Reta
il S
ize (
Rs.
Cro
re)
Subscribers
Handsets
The Potential - Handset RetailHandset Retail Growth
0
20000
40000
60000
80000
100000
Year
Reta
il S
ize (
Rs.
Cro
re)
Organized
Unorganized
The Future - Trends
Saturation in the urban market
Rural India will drive growth, accounting for 35-38% of
total handset market.
Aggressive promotions to get more common
Low priced handsets and handset bundle offers.
PEST – Politico-Legal Environment
Politically stable country. However, there are certain
parties with vested interests that act as bottlenecks.
FDI allowed upto 24% for foreign players w.e.f. April,
2008
Availability of cheap as well as professional labour
Weak consumer protection laws
Increasing recognition of the potential in the retail
space by the government.
PEST - Economic Environment
7-9% growth rate; mobile retail growing at 20%.
Credit Sales have started, and Cell Phones are being sold on EMI.
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%.
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.
Consumer confidence in the organized retail format is high and
encouraging.
PEST - Social Environment
21.5 crore people between the ages of 14 – 25 years
Demographics - A lot of demand is coming from Rural
India, as as much as half of the newly added subscriber
are from rural areas.
Growing middle class and youth with an increasing
propensity to save.
Changing attitude- live for today
PEST - Technological Environment
The mobile sector has grown more than tenfold from
2001 to around 6 crore subscribers by mid-2005.
10% of the ISPs have 90% of the subscribers
The country’s mobile market stands at Rs. 35,000
crores and is growing at an annual rate of 60%.
Porter’s Five Forces
New Entrants
Competitive Rivalry
Threat of Substitution
Supplier Power
Buyer Power
Threat from New Entrants: High Rising cost of retail real estate makes nationwide competition difficult, but numerous national and foreign players are interested to enter
Supplier Power: Moderate Suppliers have strong brands and often have a presence in retail themselves Network Operators are able to push cheaper brands (e.g. Reliance Classic)
Buyer Power: Buyers Demanding greater variety at lower prices Threat of Substitution: Second hand phone market and unorganized retail is strong. Most demand is from rural areas Š where organized retailers donÕt have a presence.
Competitive Rivalry: Moderate Margins are thin at mere 4%. Pressure from Second hand sales makes it worse.
Porter’s Five Forces
Threat from New Entrants: High
Rising cost of retail real estate makes
nationwide competition difficult, but numerous
national and foreign players are interested to
enter
Porter’s Five Forces
Competitive Rivalry: Moderate
Margins are thin at mere 4%. Pressure from Second
hand sales makes it worse.
Buyer Power: High
Buyers Demanding greater variety at lower prices
Porter’s Five Forces
Supplier Power: Moderate
Suppliers have strong brands and often have a
presence in retail themselves
Network Operators are able to push cheaper
brands (e.g. Reliance Classic)
Porter’s Five Forces
Threat of Substitution: High
Second hand phone market and unorganized
retail is strong.
Most demand is from rural areas – where
organized retailers don’t have a presence.
Competitive Landscape
Players, Positioning and Strength
Existing Players
Nokia
Samsung
Sony World
ConvergeM (Future Group)
Mobile Store (JV between Essar and Virgin)
MobileNxt
Univercell
Hotspot (Spice Telecom)
RPG Cellucom
Subhiksha
M Bazaar
Nokia
Around 50% market share in Indian mobile market
Focus on “Mother Brand” than on “Another Brand”
Addressed all five needs “REAPS” of Indian
Consumer
Strong focus on distribution network
Reduced their prices to counter the grey market
Mobile Store
Essar Group venture - entered Jan 2007
Target Segment - 18 to 45 years
Eyeing 10% market share, 2500 stores, 600 cities, and
breakeven by 2010
Plans to invest 1250 cr by 2010
3 Formats - large medium and compact, in 20:60:20
ratio
Against Franchising - dilutes brand value
Positioning Map
Consumer Need Analysis
Segments, Buyer Behavior and Gaps
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
The Indian CellPhone Buyer
Replace handsets every 18-24 months
High demand from upgraders
Price Sensitive - bulk of demand from sub
5000 price range
VAS such as Texting very popular among
Urban, Young customers
The Opportunity
Urban youth: Distinct mobile needs
More and longer out-bound voice calls
Large calling circles for both making and receiving calls
Large users of SMS
Both the earliest adopters and highest users of value-added
services
Higher usage for both voice and SMS at weekends
Urban Youth: More Than Just A Segment
India has 21.5 crore people between the ages of 14 – 25
years old.
Incremental urban youth subscribers between 2008 and
2010 will be more than 5 crores.
Urban youth mobile service revenues > Rs. 35,000
crores by 2010
Mobile as a badge of self-expression: brand and style
very important
Indian Market Entry Strategy
Target Segment, Positioning and
Objectives
Virgin India Strategy
Target Segment - Urban Youth
Sales Objectives
Revenues of Rs. 35000 Crores by 2011 (including
connections, handsets and accessories)
Image Objectives
Establish the brand name
Market Share Objectives
10% of the market in 3 years
Positioning - Seeking Youngistan
Mainstream Youth and Materialists
14-25 years
Young executives / students / Youthful Adults
Virgin India Strategy - Differentiation
Win a 10% share of the urban youth market by…
Delivering imaginative solutions that offer
Value for money & flexible tariffs that reflect their unique
needs
Innovative, game-changing value-added services
Great handsets at great prices
Personalized customer care
Virgin India Strategy - Cost
Whilst achieving a low operating cost per customer through
Sharp focus on India’s top youth markets
Fewer, stable propositions with low support and service
costs
Imaginative, eye-catching advertising & PR that gets youth
talking
A lean, enthusiastic team supported by simple processes
Differentiation Strategy - Customer Care
Taking the hassle out of buying a cell phone
Try before you buy
Real conversations: no scripts
End-to-end ownership of problems: same Champ call-back
Champ empowerment: authorized to resolve issues on the
spot
Welcome calls: all customers are personally welcomed to
Virgin Mobile
A real returns policy
Returns Policy
q. Lost my charger, battery fell off and someone threw
my phone…gasp!
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 .
*conditions apply. But don’t get scared about it.
Differentiation Strategy
Value for Money and Flexible Service Offerings
Differentiation Strategy - First Time In India
Get paid to receive calls
50 paise to any local network
TGI the weekend Bolt-on
One Touch access to V-Bytes
Unlimited access to V-Bytes for a simple daily charge
‘100% colour, 100% FM’ handsets
Easy Handset upgrades
Personalised Care
Safe Secrets
Virgin India Strategy - Promotions
Think Hatke Campaign
10 paise every minutes on incoming
Virgin India Strategy - Location And Ownership
“You have to be in front of the right
people.”
Howard Handler
CMO, Virgin Mobile
Virgin India Strategy - Location
Shop in Shop and Kiosks
Non exclusive, extensive coverage, lower costs
The one commonality all of the retailers share
is they are places where teens shop, because
that's Virgin's core market.
A Virgin Kiosk
Virgin India Strategy - Expansion Plans
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.
Plan to expand to 1000 cities by 2008-end
Aims to acquire 50 lakh subscribers over the next 3
years, by when it would be profitable.
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.
Virgin Mobile
Analysis and Recommendations
South African Experience
Virgin entered as a 50-50 partnership with Cell C, H1,
2006
Classified itself as an ESP, since MVNO’s are illegal in SA
Premium Pricing, supported by a strong brand, superior
customer service and pricing plan simplicity
Singapore Experience
Entered through a tie-up with SingTel
Exited the market - citing premium pricing and
crowded market
Customers placed more premium on Price
SingTel tariffs too high - texting too expensive
Strategic Choices for Mobile Retailers
Price
Vo
lum
e
Low High
Hig
h
Low Cost Strategy-
Viable
Low Cost Strategy- Unviable
Not sustainable
Premium Positioning-
Viable
BRAND ENGAGEMENT CAN BE THE ONLY DIFFERENTIATOR
OFFER SIMILAR ACROSS RETAILERS
ASSORTMENT EXPECTED
CONSUMER MORE EVOLVED
PRICE COMPETIVENESS SHORT LIVED
Positioning Virgin
200 companies worldwide, employing 48 500people, an annual Virgin Group turnover of £10.8bn/US$20.4bn
….one of the most exciting brands in the world
SWOT
Opportunities India a growth story - 20-30%
CAGR, highest handset sales
volumes.
Organized Retail mere 7% by
revenue, 1% by outlets.
Most entrants are new, few
established competitors
Threats Rising Retail Costs
Lack of number portability -
switching barriers
Unclear Government Policy on
MVNO
Falling Handset prices - lower
margins
Saturation - Mobile penetration in
excess of 40%.
SWOT
Strengths
Strong Global Brand
Limited overlap with Tata’s
existing customers
Very low fixed costs as it leases
Network Time
Not tied to a particular
Technology
Weaknesses Dependent on Partners for
pricing, capacity
Non serious image may not go
well with conservative Indian
consumer.
Limited understanding of India
Market
Capitalizing On Strengths
Into retailing + service provider
If the GoI allows MVNOs then after tying up
with GSM players, can beat Reliance
Good brand recall
Structured pricing of airtime serves as a
loyalty incentive, encouraging active use
Making Weaknesses Irrelevant
People not familiar with the MVNO concept
Tata Teleservices does not have a good brand
image
Confusion in the minds of consumer about the
Virgin-Tata deal- a re-branding exercise by
Tata Teleservices?
Recommendations
Key advantage over other (non-operator)
retailers - presence in both retailing and
airtime
Key advantage over operators - not tied to
technology (as an MVNO)
Recommendations
Forge deal with a GSM player
Offer bundled plans - subsidize handset costs
with Airtime
Offer for both CDMA and GSM - greater
assortment
Offer plans for 2 years, with upgrade options
Recommendations
VM is moving in the right direction but time is still not
ripe for a big bang entry into handset retailing
Need to see the response to Airtime and expand in
other cities
Continue tie-ups with existing Mobile retailers like
Univercell, Hotspot, M Bazaar, M Port, Vishal, etc.
Thank You !!