Trinity College Dublin

BU2510a – Marketing Management Marketing with respect to Vodafone Ireland

Stephen Denham, David Doran, Eoin Sheehy and Luke Verdon Word Count: 3243 words

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Abstract

In recent years, there have been two major global developments: the rise

of social networking and the global economic recession. If there is one

thing that these dramatic changes have in common, it is that the world

today is more connected than ever.

The marketing framework as we know it must be revisited in this context,

and what better a context to put it in, than to look at marketing to the

future generation of connected individuals, from the point of view of a

highly branded, highly priced network provider?

This essay analyses and defines the marketing framework, viewing it

through the work of Vodafone Ireland to target the student market.

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Table of Contents

Introduction ................................................................................................................................ 3

Marketing, in a Contemporary Context ....................................................................................... 3

Understanding Consumer Behaviour ......................................................................................... 5

Market Research ........................................................................................................................ 7

Segmentation, Targeting & Positioning ...................................................................................... 8

The Marketing Mix - 7 Ps ..........................................................................................................10

Product ..............................................................................................................................10

Price ...................................................................................................................................11

Place ..................................................................................................................................11

Promotion...........................................................................................................................11

Process ..............................................................................................................................11

Physical Evidence ..............................................................................................................12

People ................................................................................................................................12

Conclusion ................................................................................................................................12

References ...............................................................................................................................13

Appendix ...................................................................................................................................15

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Introduction

Founded in 1984, Vodafone (formed from Voice Data Fone) is currently the world‟s

largest telecommunications company in terms of revenue and second in terms of

subscribers (322 million) behind China Mobile. Vodafone made a profit of over £8.6

billion in 2010. Currently Vodafone is ranked 5th in the top 10 global brands

(BrandDirectory.com, 2011a) and 1st among telecoms brands (BrandDirectory.com,

2011b). This essay outlines the contemporary marketing in which Vodafone operates.

How they understand and research their consumers in order to apply an appropriate

marketing mix to ultimately improve their market share.

Marketing, in a Contemporary Context

Modern marketers compete in a harsh commercial landscape and must be prepared to

present a convincing argument about the value of their product. Companies and

marketers face an uphill battle not only because of an ongoing recession (the very

mention of which can deflate buyer confidence) but also because of the modern social

and technological environment.

A tempting simplification of the recession challenge is to view the consumer as seeking

the lowest price for the product or service they desire. Doing so may, however,

precipitate a race to the bottom in which suppliers compete primarily on price and

undercut margins across the industry. The competent marketer will present an offering

to the consumer with the correct pricing and branding to appear an attractive recession

purchase. The prescient marketer will carefully adjust pricing and positioning so as to

maintain the brand‟s image, with a view to weathering the recession without sacrificing

profit margins. Doing so maintains profits, but most importantly reinforces the perceived

value companies place on their products and services.

The digital age is competitive and fast-paced, and presents unique challenges and

opportunities. Every two days as much data is created as was created from the dawn of

civilization up until 2003 (Siegler, 2010). This data includes news, photographs,

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“tweets”, emails, among thousands of forms of data. Some of this data is of direct

interest to marketers: surveys, comment cards, satisfaction ratings, and returns

statistics. These data explicitly inform the marketer about the consumer. Much of these

concepts are not new, though they have been brought forward into the digital age.

The real difference in the digital age is the wealth of passive feedback being generated.

Passive feedback is not written to the company or brand but about the company or

brand. This form of feedback has a number of properties: it is unsolicited, it is informal

and often expressive, and it may be read by a wide audience. Passive feedback is a

double-edged sword, as negative commentary may spread further and/or faster than

positive commentary. Attempts to suppress negative feedback may be met with mass

dissemination in revolt, termed the „Streisand effect‟ (Greenberg, May 11, 2007).

Much of this passive discussion happens on social networks. Social networks are

increasingly pervasive, with over 50% of United States residents active on a social

network (Wire, March 19, 2010). With social networks, consumers can tap the power of

the „network effect‟: the more users of a social network, the larger the possible audience

to whom grievances can spread. Conversely for companies and brands, popular social

networks are becoming key places for brands and customers to interact through special

offers, „fan‟ pages and targeted advertising. Companies engaging on these platforms

must at least appear to be transparent; communication and trust are key (Patrick

Barwise, 2010).

It is forecasted that by 2020, forty percent (40%) of the population of the US, Europe

and the BRIC counties (economically advancing Brazil, Russia, India and China) will be

made of newly named Generation C. Generation C are those born after 1990. They are

connected, communicating and computerized (Roman Friedrich, 2011).

Vodafone Group plc, as a telecommunications company, is uniquely concerned with

how the population converses and shares information. Vodafone, through its products

such as Vodafone 360, attempts to facilitate rich communication and sharing by its

users. The fact that Vodafone is enabling millions of subscribers to engage on social

networks shows what an integral part of life they have now become.

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Understanding Consumer Behaviour

‘Consumer behaviour is the study of how individual or groups buy, use and dispose

products, services, ideas or experience to satisfy their needs and wants’ (Kotler, 2009).

Solomon (2009) defines the evoked set as the „alternatives to a product that a customer

knows about‟. From the point of view of Vodafone, a consumer‟s evoked set is all

mobile networks in Ireland: 3, Meteor, O2 and Vodafone (plus minority networks such

as Tesco). This can be narrowed down even further to a consideration set which is the

options a consumer would actually consider before ultimately purchasing a product or

service. Certain options may not survive this downsizing process if the customer has

had a bad experience with the product or service or if the product or service is outside

their budget. Vodafone seeks to be in a consumer‟s consideration set by remaining

competitive on price without eroding profit margins. When targeting students, Vodafone

must be careful with this particularly price-aware group (Solomon, 2009). Companies

such as Vodafone try to comprehend the purchasing steps to gain a better

understanding of the consumer (Kotler, 2009).

The following are the five steps of purchasing, and how they relate to Vodafone:

Problem recognition is the first step, when the customer realises they have a problem or

need. In the mobile market, customers are likely to remain with their current provider

unless they experience some particular difficulty. While a customer may be satisfied

with their current service, Vodafone may use advertising to highlight problems with the

customer‟s current provider. In doing so, Vodafone may stimulate customers into

reconsidering their service provider.

After problem recognition, consumers begin the information search. Vodafone must

understand what information channels students utilise and their relative importance. For

example, there would be little reason for Vodafone to advertise to students in a

broadsheet newspaper if only a small percentage of students actually read broadsheets.

As social networks are now commonly used for discussion, and search engines are

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extensively used for product research, the majority of the information search is done

online. Consumers can read the opinions of their peers and view reviews from

numerous publications and websites online. In this way, consumers can start to build a

consensus opinion on the products they are researching.

Having gathered (relatively) objective information, consumers attempt to evaluate the

alternatives. Consumers weigh up the pros and cons of the products in the

consideration set and try to determine which one provides the most benefit to them (on

some value metric). Vodafone try and sway customers at this stage by promising a

robust network with nationwide coverage, a range of modern phones and competitive

pricing.

The purchasing decision is the commitment step. The consumer has weighed their

options and must now decide whether to part with their money. „The amount of

perceived risk varies with the amount of money at stake, the amount of attribute

uncertainty and the amount of consumer self confidence‟ (Kotler, 2009). Vodafone aims

to reduce the amount of perceived risk to a consumer. This can be achieved by having

a national brand name (Kotler, 2009), which Vodafone has (BrandDirectory.com,

2011a).

A consumer may grow doubtful after making their purchase. This post-purchase

behaviour may be due to a bad experience (such as the product‟s box missing an item)

or due to a friend espousing a competing product. Consequently, new and existing

customers must be reassured, which the auto industry does by spending most heavily

on advertising after their busiest season (Brady, 2011). Consumer attrition (or, churn) is

the reason companies focus on post-purchase behaviour: ‘It costs five times more to

attract a new customer than it does to keep an existing one,‟ (Kandampully, 1999). An

existing consumer is more likely to purchase again from the same brand as opposed to

switching. Puccinelli (2009) termed this „storage in memory‟ which occurs after a

positive shopping experience.

„Marketing is about identifying and meeting social needs‟ (Kotler, 2009). Abraham

Maslow proposed a hierarchy of basic needs that every human being follows which was

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later used by marketers to discover a pattern in consumer behavior (Solomon, 2009). It

is possible to summarise how Vodafone may view these needs in relation to their

service for students. While the physiological and safety needs don‟t apply here, it could

be argued that the other three needs do. They are:

Belonging, where a mobile service provider makes the customer feel as though they are

part of a community. In Vodafone‟s television advertisements the company tries to

create a sense of belonging. The latest Vodafone slogan is an appropriate example of

this: “We‟re the blackberry boys”.

Esteem (self-concept), where consumers strive to have the latest phone and services to

keep up with their peers. By promoting popular phones with student-friendly packages

Vodafone can entice students to maintain social status and remain with the network.

Self-actualisation, where the other needs are catered for consumers may come to see

their phone (and mobile service) as enabling them to meet their full potential.

Vodafone‟s global slogans “Make The Most Of Now” and “Power to You” show that the

company believes self-actualization is a real motivating force for consumers.

Market Research

If a company realises the importance of understanding consumer behaviour and

attempting to satisfy their needs it follows that a company realises the importance of

market research (MR). Market research is a system relating to the design, collection

and subsequent analysis and reporting of data regarding a specific marketing situation

facing a company (Kotler, 2009). This provides a company with the data required for

strategic decisions in regards to how a product/service is presented at all levels to the

customer. Without this a company is merely relying on „gut instinct‟ which is certainly not

thinking „customer‟. This said, the pertinence of MR cannot be underestimated.

The market research process demands a clear definition of what problems a company

faces and what information is necessary. „Marketing managers must be careful not to

define the problem too broadly or too narrowly for a market researcher‟ (Kotler, 2009).

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Too vague a definition will result in useless data, wasting time and money. Too narrow

and key elements may be missed. Vodafone must ask questions like “will our customers

be willing to pay X a month for Wi-Fi and will it be profitable?” Other pitfalls of poor MR

include “poor framing of the problem, uneven calibre of researchers, late and

occasionally erroneous findings and personality and presentational differences” (Kotler,

2009). What companies must strive for is MR that adopters a creative, but ultimately

well-disciplined, cost-effective and scientific approach to collecting and analysing data,

(Kotler, 2009).

When Vodafone attempts to gather MR on students the accumulation and manipulation

of the data will take the steps: data, information, knowledge and wisdom (see Appendix

I). The raw „data‟ a company collects will provide „information‟ which gives Vodafone the

basis to answer questions like who and where. The answers to these questions will tell

the company how certain things occurred previously which leads to the next step:

„knowledge‟. This will give an appreciation of why those events occurred which is truly

„understanding‟ the target market. Only with this understanding can Vodafone attain

„wisdom‟ which is the (final) stage at which a company can make informed decisions in

the future (Ackoff, 1989).

If this process is carried out correctly the data gathered will be absolutely invaluable and

will „allow an organisation to suitably shift its focus to specific factors that might provide

it with an industry-specific edge‟ (Fleisher, 2008).

Segmentation, Targeting & Positioning

Segmentation, Targeting & Positioning is the process of analysing customer behaviour

and market research, in order to break down markets into subsets which have similar

buying patterns (Kotler, 2009). As basic telecommunication services are required by a

large population, the company needs to segment their customers both in terms of

adjusting their services, and their marketing mix. This is clearly evident with the number

of marketing campaigns a telecommunications company runs at any given time.

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In 1986, Howard Moskowitz reinvented the

spaghetti industry. As a result, Prego made 600

million dollars in the following ten years. Moskowitz

was a Psychophysicist and a food science

consultant. At the time there were two types of

spaghetti sauces: plain and spicy. Moskowitz

discovered that a third of Americans preferred extra

chunky sauce, but would never admit to it when

asked. By creating a number of sauces that

appealed to different customer groups Moskowitz

increased customer satisfaction by embracing

diversity.

(Gladwell, 2007)

Students have grown up in a “Marketing Society”, therefore they are more sceptical

towards advertising so companies like Vodafone has a hard time convincing students to

connect with them. However,

as mentioned in the „esteem‟

need in Maslow‟s hierarchy,

students view goods and

services they use as a way of

becoming socially accepted

and expressing their identities.

This is exploited by companies

by showing what can be

referred to as an „in‟ group

using the company‟s product

(Michael Solomon, 2006). As

(James E. Katz, 2006) found,

consumers do not adopt a new

technology solely to make life

more convenient but also as a

status symbol.

Due to the current pricing trends to other networks, group of friends who are in frequent

contact, are very likely to converge to one network. This makes social groups (or

networks) work nearly like a buying centre, but not in the traditional sense. Marketers

should start to focus on early adopters, because their uptake will spread virally and they

are the ones who care the most (Godin, Feb 2003).

Some have even stated that using a mobile phone as a fashion statement was its

primary function (James E. Katz, 2006). This gives Vodafone further reason to target

early adopters as they are easily swayed toward a network if that network is perceived

by them to be fashionable. According to Vodafone‟s position on the business/student

orientation graph it is not a fashionable network provider in comparison to Meteor for

this target market. Meteor have reached this position after many years of targeting the

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youth market with activities such as sponsoring the (Meteor) Ireland Music Awards

(Appendix G).

Although Vodafone campaign to target the student, the company is careful not to

damage the work done to establish itself to the business market. The Appendix D

shows the company‟s positioning on the student/business orientation scales. These

markets have polar opposite focuses (fun, social, cool vs. professional, performance-

based), as well as service orientations (pay-as-you-go, weekend calls vs. national calls,

phone conferencing facilities, land-line options, peak-time rates).

It must be noted that when marketing is taken in its contemporary form, there is a need

to be wary of possible negatives of STP. The world today is more connected via social

networking and so brands, though targeted to individual groups, must be accessible to

other potential customers.

It is important to repeat that if Vodafone were to follow Meteor and target the younger

market primarily this may affect their business orientation adversely.

The Marketing Mix - 7 Ps

Ivy defined the marketing mix as „a set of controllable marketing tools that an institution

uses to produce the response it wants from its various target markets‟.

The final stage of the marketing framework is the marketing mix. Once the STP has

been established the next step is to cater the marketing mix to the needs of the selected

target market. Winning companies satisfy customer needs and surpass their

expectations

Product

Vodafone is a global telecommunications company, providing traditional telephony

services and a host of digital services. These services include mobile broadband, the

Vodafone 360 digital suite, and even World Calling Cards. This essay focuses on the

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company‟s student offerings, particularly the prepaid “Pay as you go” product. As the

world‟s largest telecommunications company (in terms of revenue) Vodafone is heavily

invested in all aspects of the industry.

Price

The pricing of prepaid mobile services is highly competitive for a number of reasons,

including that face that the services provided are weakly differentiated and switching

cost is low for customers.

Mobile networks have two main elements of their service to price: the individual per-call

and per-SMS rates, and the minimum top-up amount that qualifies the customer for the

„free deal‟. Commonly, this deal gives the customer free SMS messages to others on

the network.

Place

A product or service cannot succeed if consumers can‟t get access to it so it‟s essential

for Vodafone to always be in arm‟s reach of its target market. Vodafone does this by

operating over 300 stores in the UK (see appendix), and by selling through independent

retailers such as Carphone Warehouse.

Promotion

Promotion is a large part of Vodafone‟s marketing strategy. Vodafone has used celebrity

endorsements in the past including David Beckham, Manchester United and Ferrari. In

order to promote this particular marketing mix, Vodafone has increased its promotion to

the Irish student market considerably.

Process

Process refers to the way in which a service system operates overall (Brady, 2011).

The majority of this occurs with Vodafone on customer care phone lines and by

speaking to in-store representatives. 43,000 employees (over half of Vodafone‟s

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workforce) work in customer care, which shows the importance of process and

maintaining custom satisfaction.

Physical Evidence

Physical Evidence is concerned with the sense evoked by a company‟s tangible assets.

Vodafone stores are very similar in style to an Apple store, and also to that of their

competitor O2. The stores try to instil the sense that Vodafone are a state of the art

brand.

People

Vodafone‟s people refers to its staff and what they do for the customer. In the Trinity

College Dublin and University College Dublin „Freshers‟ Weeks‟ of 2010, Vodafone

employed students as promoters to entice their fellow students to switch to or join

Vodafone (Appendix E). The importance of the company‟s stores is again emphasised:

customers will appreciate expertise in person when faced with important decisions such

as which bill pay option is best for them.

Conclusion

While keeping faithful to their initial target market of big businesses Vodafone has still

managed to achieve customer migration and take steps to move into the student market

which has been dominated by Meteor in recent years. The example mentioned earlier of

the company promoting heavily during fresher‟s week in Trinity College shows exactly

how they understood the best way to reach students while at the same time not

alienating their other customers which may have happened through extensive television

advertisements. It may be possible for Vodafone to further improve their marketing

strategy by targeting early adaptors in the future. It is quite an achievement for

Vodafone‟s marketers that, in an industry that is simply indispensable to society, this

company has remained the strongest.

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Appendix

Appendix A: Marketing Framework (Brady, 2011)

Appendix B: Price/Quality Positioning Diagram

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Appendix C: Student/Business Positioning Diagram

Appendix D: Vodafone.ie Store Locator

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Appendix E: Vodafone Ambassadors at Trinity College Dublin Fresherss Week

Appendix F: Vodafone Banner Ad on trinityents.ie

Appendix G: Meteor Ireland Music Awards 2008 Logo

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Appendix H: Data/Wisdom Hierarchy

Appendix I: Maslow’s Hierarchy of Needs