Executive Summary
Orange is a leading mobile phone network service provider in UK. The company has succeeded in the market due to its strong brand image, ability to offer a variety of products and the use of innovative distribution channels. UK’s mobile phone industry is characterized with intense competition, high regulation, saturation and slow growth.
These threats have negatively affected mobile phone network operators. Orange for instance, has experienced a reduction in subscriptions and market share. Thus, Orange should implement an effective marketing strategy in order to improve its competitiveness. In particular, appropriate marketing objectives should be pursued, the marketing mix, as well as, segmentation, targeting and positioning should be improved.
Marketing Strategy for a UK Branded Mobile Phone Network Provider
Introduction
In this report, a marketing strategy will be developed for Orange Ltd. Orange is a leading mobile phone network provider in the United Kingdom (UK). The essence of the report is to enable the management of Orange to understand the dynamics of the UK mobile phone market. It will also help in developing products that will enable the company to remain competitive and profitable. The report begins with a situational analysis of the UK mobile phone market. Recommendations on how to adapt Orange’s marketing strategy to the current situation will then be highlighted.
Terms of Reference
Background
The UK mobile phone market is characterized with intense competition and slow growth. Consequently, mobile phone network providers must develop effective marketing strategies in order to overcome the competition.
Purpose
In this report, a situational analysis will be conducted on the UK mobile phone market. Based on this analysis, recommendations will be made on how Orange can enhance its competitiveness through an effective marketing strategy.
Scope
The report will include a detailed analysis of the external environment, as well as, the internal environment of Orange. The recommendations will focus only on the marketing strategy.
Methodology
The external environment will be analyzed using the PESTEL framework, while the internal environment will be analyzed using the SWOT analysis. Recommendations will be made with the aid of marketing concepts such as 7 P’s, segmentation, targeting and positioning. Secondary data will be used for the analysis.
Limitations
The main limitation is the difficulty in finding accurate and latest information about Orange and the UK mobile phone industry. Thus, the statistics used in the report are assumed to be accurate.
Situational Analysis
PESTEL Analysis
PESTEL analysis is a tool used by marketers to study the macro-environmental factors that influence competition in a given industry. These factors include political, economic, social, technological, environmental and legal factors.
Political Factors
Political factors are the government policies that affect the operation of businesses in a given country. The UK is one of the most politically stable countries in Europe (Jain 2007, pp. 471-492). The country is governed through a constitutional monarchy. The political stability enhances investments since it minimizes risks such as wars which can negatively affect businesses.
In order to promote rapid economic growth, the government supports local businesses through subsidies, removal of tariff barriers to trade, bailouts and effective regulation. Currently, the government has implemented economic stimulus packages and austerity measures in order to promote economic growth.
Economic Factors
UK has the sixth largest economy in the world and the third largest in Europe, according to nominal GDP measures. In January 2010, UK left the recession it entered into in 2009, following the 2008/2009 global financial crisis (Michael 2011, pp. 420-431). UK recorded an increase in GDP by 0.8% in 2011 and is expected to record a GDP growth of 1.2% in 2012.
Hence, the business cycle of UK is at its recovery stage. UK’s GDP per capita is $39,604, according to 2011 estimates (Dungey 2011, pp. 123-130). In January 2012, UK’s inflation rate was 3.6%, down from 4.2% in December 2011. The Bank of England lowered its interest rate to 0.5% in 2011 in order to enhance economic growth.
Thus, unemployment rate has since reduced from 11.9% in 2009 to 8.1% in 2011. Nearly 60% of UK’s population is made up of median income earners, while 14% lives below the poverty line. The implication of these statistics is that UK has a large consumer market with a high purchasing power.
Social Factors
According to the 2001 census, UK’s population is estimated to be 60 million people. Approximately two thirds of the population consists of individuals between the age of 15 and 60 years. This age group consists of the youth who spend their leisure time on entertainment through hand-held devices such as smart-phones.
It also consists of the working class that highly depends on mobile phones for communication, organization of personal schedules and entertainment (Khuong 2011, pp. 357-372).
Generally, consumerism remains very high in UK, despite the decline in economic growth. This has resulted into high consumption of luxurious and high quality goods and services. For instant, in 2011, the rate of mobile phone penetration in UK was 130%. Over 90% of the population has access to mobile phones, hence the high demand for mobile phone network services.
Technological Factors
UK invests approximately 3% of its total GDP on research and development (R&D). The government promotes R&D through incentives such as tax credits and direct investments (Antolin & Manez 2011, pp. 641-659). UK has a high rate of technological transfer as illustrated by the sharp increase in the number of patents, copyrights and licenses issued in regard to new discoveries in the last decade.
Emerging technologies such as 3G/ 4G network, cloud computing and broadband internet, have enabled mobile phone network operators to offer new services. The operators have also been able to use efficient distribution channels and offer excellent customer services through these technologies.
Environmental Factors
Environmental factors such as weather patterns impact provision of mobile phone network services. For example, floods and earthquakes can destroy network infrastructure or equipment. They can also interfere with the quality of network signal. Environmental risks are low in UK since the country is less susceptible to natural calamities such as floods and earthquakes (Fudge 2011, pp. 789-808).
Legal
UK has an effective legal framework that guides business activities. Business regulation focuses on consumer protection and promotion of fair trade. The mobile phone industry is highly regulated. The government regulates the content of data services provided by the mobile phone network companies.
The government also controls calling rates through price caps (Ward & Woroch 2010, pp. 18-32). Licenses for operating on new technologies such as 4G are obtained at exorbitant fees from the industry regulator. The high regulation impacts negatively on the revenues of mobile phone companies.
Orange’s Differential Advantage
Differential advantage refers to “the benefit(s) of a product that customers value and believe they can not obtain anywhere else” (Peters & Donnelly 2010, p. 67). Sustainable differential advantage can be achieved by emphasizing psychological, as well as, functional values of a product. A differential advantage enables a firm to increase its market share and profitability.
Orange’s differential advantages include the following. Orange is the best provider of online entertainment services via mobile phones. The company offers over 50 entertainment channels which cover cinemas, sports and music. The services are of high quality since they are based on high definition (HD) and 3D technology (Orange 2012, 10-600).
Orange is also one of the few UK companies that have applied for 4G network technology license. The new network will enable the company to provide the best signal quality and the fastest internet access. Finally, Orange has introduced new services that suit the lifestyles of its customers.
For example, it introduced contactless payment services which enable customers to pay for their shopping using their mobile phones. In a nutshell, Orange’s unique selling point includes high quality products, as well as, a variety of tailor-made products. By differentiating its products on the basis of quality, Orange has been able to achieve a competitive edge in UK.
Competitive edge refers to “the ability to gain advantage over the competition in terms of one or more elements of the marketing mix that is valued by the potential customers” (Dhar & Winer 2010, p. 76). The competitive edge has enabled Orange to increase its customers, thereby becoming the third largest firm by market size in the industry. Additionally, the firm has been able to maintain an average growth of 10% on profits in the last three years.
SWOT Analysis
SWOT analysis is a tool used by marketers to analyze a firm’s internal and external environment. In particular, it enables the firm to identify its weaknesses and strengths, as well as, the threats and opportunities in the industry.
Strengths
Orange has the following strengths. First, Orange has a large customer base that consists of over 16.5 million mobile phone service subscribers (Orange 2012, 10-600). Second, Orange has formed a joint venture with T-mobile. The joint venture has enabled Orange to reduce its operating costs and to access additional capital for investments.
Additionally, Orange has been able to access more customers, thereby increasing its profits. Third, Orange has a strong brand image that is recognized for high quality and a variety of services (Orange 2012, 10-600). Finally, the company has innovative distribution channels that improves customer satisfaction and lowers distribution costs.
Weaknesses
First, Orange has been experiencing a reduction in broadband subscriptions. Initially, Orange was operating on 2G and 3G networks which had a relatively slow internet connection. This led to high customer dissatisfaction.
Second, Orange’s market share has reduced in the last three years due to high competition. Finally, the joint venture with T-Mobile will limit Orange’s control over its operations and services in UK (Orange 2012, pp. 10-600). Lack of full control over operations might deny Orange the opportunity to implement strategies that will enable it to overcome competition.
Opportunities
Orange has the following opportunities. First, the contactless payment segment of the market has not been fully exploited since only a few firms serve it. Thus, Orange has the opportunity to increase its revenue by serving this segment. Second, the launch of 4G technology in UK is an opportunity for Orange to increase efficiency; to launch new products and to improve the quality of existing products (Giachetti & Marchi 2010, pp. 1123-1150).
Threats
First, UK’s mobile phone industry is approaching its maturity or saturation stage. Consequently, there will be very little or no chance for growth in the future. Second, the economic crisis in Europe can negatively affect UK, thereby reducing expenditure on mobile phone services (Michael 2011, pp. 420-431). Third, high regulation, especially, on prices is likely to reduce Orange’s revenues. Finally, high competition is likely to reduce Orange’s market share and profits.
Recommendations
Orange can enhance its competitiveness by leveraging its strengths and exploiting the opportunities available in the industry. Additionally, it should minimize its weakness and the risks posed by the threats in the industry. This can be achieved by considering the following recommendations.
Segmentation, Targeting and Positioning
Segmentation refers to “the process of grouping people or organizations within a market according to similar needs, characteristics or behavior” (Bradley 2005, p. 54). It helps marketers to identify the kind of customers that exist in a market and their needs. Orange should embark on market segmentation because it is often difficult if not impossible to satisfy all tastes and preferences.
Additionally, firms that focus on a particular market segment are often more profitable. Orange can segment its market based on the following variables. To begin with, the company can focus on demographic factors (Hassan & Craft 2005, pp. 81-89). Different age groups have different needs in regard to phone usage.
For example, the teenagers are more likely to use phones for entertainment than adults. The working class is likely to use mobile phones for business transactions. Additionally, expenditure on mobile phone services varies across income groups. Thus, it is necessary to offer products that are tailor-made for every segment. For instance, more TV channels can be provided to target the teenagers, while low cost call services can be introduced to target low income earners.
Segmentation can also be based on the benefits sought by the customers (Simkin 2007, pp. 464-474). For example, fast internet and data services can be provided to the business community, while contactless payment services can be provided to shoppers. Orange can also segment its market based on behavior.
In this case, the company should focus on building brand loyalty in order to retain its customers. Finally, usage rate and user status can be used to segment the market. For example, relatively cheap services can be offered to heavy users of the network to enhance their loyalty. Additionally, customers can be group as post-paid and pre-paid clients in order to provide flexible service payment options.
Targeting is the process through which one or more segments are selected. Targeting should take into account the extent to which existing segments are being served (Bradley 2005, p. 77). It will be much easier for Orange to appeal to customers in the internet/ data and contactless payment services since these segments have not yet been fully exploited.
The size of the segment should also be taken into account since it determines profitability. In this context, the middle class that forms 60% of the population should be targeted. Specific groups within this segment such as the working class and the business community should be targeted with tailor-made products.
Finally, Orange must take into account its ability to serve the selected segments. Currently, Orange is financially stable and has a well established brand, especially, in data and call services. Hence, it is capable of offering tailor made services for new and existing segments.
Positioning, involves using marketing techniques such as advertising to create a mental image of a product in the customer’s mind (Kalafatis, Tsogas & Blankous 2000, pp. 416-437). Orange should position itself by emphasizing the service features that are valued by each segment. For example, Orange can position itself as the provider of the fastest and cheapest internet in the data segment. It can also position itself as the provider of a variety of high quality entertainment services.
Marketing Objectives
Marketing objectives help a firm to address its weaknesses and to take advantage of available opportunities. Marketing objectives should be specific, measurable, attainable, relevant and time-bound. Thus, Orange can consider the following marketing objectives:
- To improve customer satisfaction (broadband services) by 20% in the next 2 years
- To increase market share by 5% in the next 2 years
- To provide 99% 4G network coverage in the next 12 months
- To increase contactless payment service subscription by 15% in the next 18 months
Marketing Mix: 7P’s
The 7P’s refers to “product, price, promotion, place, packaging, positioning and people” (Bradley 2005, p. 91). The 7P’s are used as benchmarks for evaluating the effectiveness of the marketing strategy. Orange should assess its existing products to determine if they meet the needs of the customers.
Products should be improved regularly in order to adapt them to the changing needs of the customers. Given the high competition in the market, Orange should focus on penetration pricing to increase its market share. Additionally, it can charge premium prices for high quality products that target high income earners. This will help in increasing profits.
Promotion refers to the activities and techniques used to inform customers about a product. In this context, Orange’s adverts should emphasize the main features of its products. Additionally, a variety of advertising media such as print and electronic media should be used to reach many customers.
Place refers to the actual location where the products are sold (Bradley 2005, p. 92). In order to increase sales, Orange should distribute its products through a wide range of channels such as online sales, retail shops and supermarkets. Packaging refers to the appearance of the product. In this case, the company should focus on including the features that are valued by the customers in its products.
Given the high competition in the industry, Orange should position itself on the basis of service quality, variety, and excellent customer services. Finally, talented people should be hired and entrusted with the various marketing activities. This is because a marketing strategy can only be as good as the people who developed and implemented it.
Conclusion
The situational analysis reveals that UK’s mobile phone market is characterized with intense competition, high regulation and slow growth. These trends are the main threats in the industry. Orange’s main strengths include a strong brand image and financial stability (Orange 2012, pp. 10-600). Its main weakness is declining subscriptions, and market share. The introduction of 4G technology and new segments are the main opportunities in the industry.
The current situation is likely to have a negative impact on Orange’s competitiveness if an effective marketing strategy is not put in place. The marketing strategy can be improved by enhancing the segmentation, targeting and positioning; setting appropriate marketing objectives and improving the 7P’s of marketing.
References
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