UPC strategy approach

I. Table of contents:

II. Introduction

The mobile phone market in Ireland has seen the fastest growth in Europe in recent years.
The Irish population seems to be very comfortable with the current technologies.
However, for companies who want to compete in this area, opportunities are very few.
That is why, during this report, we are going to understand not only the Mobile Phone Market in Ireland but also the consumer behaviours, to finally have a better understanding of the opportunities and then establish an appropriate strategy.

“UPC wishes to enter the mobile market with a Consumer Billpay proposition targeting its own customers. The organisation’s goal is to achieve 100,000 mobile customers within two years of launch.”

Who are the potential customers for UPC mobile?
What customers are seeking when they subscribe a mobile phone contract?
What kinds of offer do UPC has to set to stop this inertia?

Those questions are questions that we are going to try to answer in this report.
Let’s start the report with a brief biography of UPC.
An analysis of the Mobile Phone Market in Ireland will follow; to finally talk about the strategy we found the more appropriate to UPC’s goal.

III. Company biography

UPC Ireland is « Liberty Global Europe 's » telecommunications operation in Ireland.
Liberty Global was created in 2005 when Liberty Global and UGC (United Global Com) merged.
Liberty Global is the main provider in 14 different countries: Belgium, Chile, Czech republic, Germany, Hungary, Netherlands, Poland, Australia, Romania, Slovakia, Switzerland, UK and Ireland. (Liberty global, Ventures, 2013)
Liberty Global currently own 7 brands: Virgin Media, UPC, Unity media kable bw, Telenet, Vtr.com, liberty and Chello media)

UPC Ireland focuses on three key areas: cable television, broadband and telephone.

UPC Ireland is the largest digital cable television provider within Ireland. UPC Ireland provides video, broadband Internet, and digital telephony (VoIP) services to 1.0 million service subscribers.

IV. Proposition

Since the economic downturn, companies have difficulties to establish themselves durably. Therefore, the mobile phone industry is still competitive thanks to an innovative environment. Innovations are not only about technology. This is also about how you manage your company.
Companies can’t have competitive advantages through product anymore, because they almost all sell the same product, they are now trying to be more competitive through their strategy.
More precisely around the customer service or after sale service. (Mintel, Mobile Phone, August 2009)

Irish customers prefer contract mobile phone instead of pre-paid card. (Mintel, The telecommunications market, August 2012).
This trend is an advantage for the market, because customers want to be loyal.
That’s why they are always looking for more promotions, better phones (more functional) etc.

“The level of Irish consumers with a mobile phone subscription increases year on year helping to drive demand for telecoms services, while increased uptake of smartphones is driving demand for data. “ Mintel, The telecommunications market, August 2012
Now that we have had a look at researches, we have to understand what kind of external factors could influence the market.

Political influences
Economic influences

There are no particular political influences on the MVNO market in Ireland.
Ireland doesn’t have special laws or regulations concerning the mobile-phone market.
Infrastructures that are going to be use are already set. They are going to us the O2 network.

The MVNO market has a lot of economic influences.
First of all, In Ireland the mobile market still increase thanks to all the recent technological developments. MVNOs are reducing the numbers of employee in the country with 13.2% of unemployment rate (Central Statistics Office Ireland published in tradingeconomics.com, October 2013).

Social influences
Technological influences

The social influences are mostly that the phone are currently part of our life, they are more than just phones. (Mintel, telecommunication-Ireland-August 2012)

There are loads of technological influences in the mobile phones market thanks to a high level of innovation. These innovations are due to the need that customers have for more and more functional phones.
V. The potential audience for UPC mobile.
A. Their traits, needs, motivations & behaviours.

To know how UPC could interest customers, we firstly need to understand their motivations and what are they looking for when they subscribe with a mobile provider. For this purpose we are using the UPC mobile research (April 2013).
Companies need to understand which motivations drive customers, to target most efficiently the segment they want to target. The Ipsos research on UPC Mobile (April 2013) show 3 main customer motivations:
-The price (24%)
- Special free call/message to family or friends offer (on same network)(20%)
-The coverage and the promotion (13%)

Moreover, an Australian survey show that 16% of customers have switched their mobile provider since 2011 and that 41% wanted to do it but didn’t. (Assuming that the Australian market is representative of the Irish market)
This survey also shows the reasons why the customers have changed their mobile provider:
- Poor coverage: 39%
-Want a new handset: 30%
-They used their mobile phone more than they anticipated and needed a 
new plan: 22%
-Friends and family on a different network: 17%
-Their mobile was being used less than anticipated: 17%

(Macquarie-University-report-State-of-the-Mobile-Nation)

Even if there are a lot of different reasons why customers are switching mobile provider, we can notice that the price is very often one of the main motivation.

Very often customers move to a certain mobile provider because they will have a better handset than if they go to another. All brand have a specific bestseller because of their offer (The Ipsos, UPC Mobile research April 2013).
The mobile phones providers are trying to create tension between what customers have and between what they would like to have.
The companies’ goal is to always fulfil an unfulfilled need.

In addition, today 's consumers have an excessive use of mobile phones; it is more an “all the time use” throughout the day. Mobile phones are seen as an essential part of life. (Mintel, telecommunication-Ireland-August 2012)

And therefore consumers have an increasing tendency to choose phone with free internet access, because it is an opportunity for them to remain continuously connected with the flow of information, social networks, etc.
(Mintel, telecommunication-Ireland-August 2012)
B. What values the customers are seeking from the brand/product.

Customers firstly want to trust their phone providers; they want to be sure that they made a good choice by choosing one or another brand. To win confidence from the customers, companies have to be simple and clear.
Customers want to have the feeling that the time and money they invested worth it.
They foresee that the company’s services are efficient and good.

Others values may be important for customers in the decision making process, for example if the company is up to date in term of innovations, how is the coverage from this mobile provider? If the company can offer them the product they seek or if the company is sensitive to the environment problems.

Concerning products, the values expected by customers are different; it might be quality, after sale service, insurance, and (mostly) price. They are seeking the lower price.

C. What values UPC are seeking to gain from these customers?

Loyalty, that’s what UPC Mobile is seeking to gain from these customers.
The more loyal are the customers, the more UPC is credible against the competition and in the perception of others customers. “Building trust starts with our customers having confidence in our products. We aim to have our brands occupy a respected and trusted position in the marketplace”
(Liberty Global brochure 2013)
VI. Insight-based strategic approach - shift the inert.

« In 2012 there is an estimated 6.6 million mobile phone subscriptions in Ireland » (Mintel, Telecommunications 2012) with a penetration rate higher than before, people can have more than one subscription/phone.

According to the researches analysed above, customers are seeking low prices and they also pay big attention at the coverage quality. In our current society, with the technologies’ evolution, Phones have become real fashion tools. We can almost do whatever we want with it (photo, video, videogames, internet, shopping etc.). (Mobile phones, August 2009).
With those constant new technological innovations the mobile phone market is still very dynamic. That’s why the market is not likely to decrease yet. (Mobile phones, August 2009 and Telecommunications, August 2012).

What is the inertia?

« Inertia is the strong persistence of existing form and function. »
(Precis of Inertia and Transformation - Richard P. Rumelt)

How to make it change?

UPC needs to create a strategy that overcomes the inert behaviour of his competitors’ customers.
According to a study conducted in the European Union in 2011 50% of customers thought that it was relatively easy to switch mobile carriers and only 11% had actually switched suppliers. In sum, there is a segment of customers who will stay and will resist switching unless the switching costs or benefits derived from switching are exceptional. (Macquarie- University report State of the Mobile Nation)

What strategy UPC should adopt?

As we can see above, most of the customers are not ready to switch unless there is a valuable advantage from going from a mobile provider to another. UPC needs to bring that something extra to the customers.
Nod to Porter and his generic strategies, which are for companies who want to gain competitive advantages, the “cost leadership strategies” could be the strategy to adopt.

The cost leadership strategy is all about reducing cost of production. And then decrease prices of the products or services that you sale. In this case, UPC has to create contracts at the lowest-price as possible. To be among the competitor’s price to set UPC as a leader in term of price. (Mindtools-Generic strategies Porter)

However, we are aware that there are risks that UPC has to consider strongly.
For example UPC can lose credibility by providing low cost contracts, customers may think that if the price is low, the customer service or the coverage are not going to be as good as they expect. But we assume that UPC has a credible brand image for the customer as there are on the telecommunication market for a long time.

See appendix 1 for the different offers.

To acquire cost advantages, companies have to improve their process efficiencies at all the level. They have to try to avoid extra costs.
The main costs that are easy to reduce are all the costs for the Advertising. We will talk about that in the next section.

VII. Proposed channels to reach the target audience.

We just said above that UPC has to reduce his costs.
Advertising costs are the first costs that are cut when a company need to save money.

To keep low price, UPC will have to use the “free medias” such as Internet.
The use of advertisement in social medias will be UPC’s main advertising campaign.
To be efficient, UPC will have to stay focus on just one ad with a clear message. That they now provide mobile phone contracts.

The use of UPC’s website is also very important, when customers will go on the website, they have to be aware of all the new offers that UPC has set.
A large part of the service will be organized from Internet; the demands for subscriptions will be only through Internet. Customers will order their cards from Internet by submitting all their personal information. (Delivery address, bank information etc.)
This concerns only the “smartphone offer” and the “keep it simple” offer (see appendix 1)

Considering that the “sale service” is going to work through Internet, it is not going to be necessary to set up stores.

Current customers, such as customers for the TV, Broadband and phone are also concern by the offers, that’s why they are going to receive leaflets about the offer that concern them. (See appendix 1, the “all inclusive pack”).

VIII. Proposed outcome – what does success look like?

To have an overview of the success that UPC could have, let me explain you the success that Free Mobile had in France a little bit than two years ago.

The Irish market may be compared to the French market.
There is an oligopoly with 3 main providers, such as Meteor, Vodafone and O2.
In France the situation was the same with SFR, Orange, and Bouygues Telecom.
Both of those providers, Irish and French had very high prices.

In France, the coming of Free Mobile in 2012 has completely upset the current market.
18 months after the launching of its mobile offer, the Operator already release a gross margin of 54 million euros.
“Any mobile operator in the world has ever been profitable that fast” LaTribune.com 2013
They currently have more than 10% of market share.

Even if the UPC’s goal is not the same (100 000 customers), based on the Free Mobile success and the situations of both French and Irish markets.
We can say that if UPC adopts the cost leadership strategy, the outcome of this strategy could be a huge success.

IX. Conclusion

In a country where the economic situation is difficult and where the mobile market is very closed, with an oligopoly of a few brands. The opportunities are very rare.

Following our analysis of the market, our knowledge of the latter is now sufficient to determine what customers expect and establish a strategy in consequent.
The "generic strategies" of Porter, more precisely the "cost leadership strategy" is a strategy to consider by UPC to reach its goal of 100,000 customers after two years.
The latter would allow UPC to bring this major asset that will make move the “price sensitive customers”.
Moreover, the notoriety gained by UPC over time makes the offers more credible.

However, UPC can expect a reprisal of the competitors, this is why UPC must continually reduce its costs, whatever they are, to be able to keep this competitive advantage.

If UPC succeeds to keep this competitive advantage over time, then UPC could improve their outlook for the next two years.

X. Bibliography

http://www.upc.ie
Central Statistics Office Ireland published tradingeconomics.com, October 2013.

(http://www.anderson.ucla.edu/faculty/dick.rumelt/Docs/Papers/berkeley_precis.pdf)

(http://www.mindtools.com/pages/article/newSTR_82.htm)

http://www.latribune.fr/technos-medias/20130902trib000782757/free-mobile-recettes-d-un-succes-eclairhellip-mais-fragile-.html

Liberty global, Ventures, 2013 http://www.libertyglobal.com/about-us.html Liberty Global brochure 2013 http://www.libertyglobal.com/PDF/countries/liberty-global-brochure-2013.pdf Macquarie-University-report-State-of-the-Mobile-Nation

Mintel, Mobile Phone, August 2009

Mintel, The telecommunications market, August 2012.

The Ipsos, UPC Mobile research April 2013.

Mobile phones, August 2009.

XI. Appendix

APPENDIX 1 : OFFERS

The all-inclusive pack: This is for customers who already use UPC, for the TV-Broadband-Telephone, such as all the « Triple Play » subscribers. In addition to the current pack, we would like to add a mobile phone to their bill. One cell phone contract for 14,99€ with all inclusive such as free calls and free texts (in Ireland) plus 3G of Internet data.
If customers want to subscribe more cell phone contracts, the price for each subscription would be 19,99€.
This contract will be a post-paid bill, an easier way for customers to have only one clear bill per month with everything on it.
This cell phone contract is an option to all the “Triple Play” customers, so if they want to resign their cell phone contract the can, there is no engagements.

We know that those customers are only a little part of our target market.
For other customers, those who don’t have the “triple play”, or are not in the UPC customer database, we are going to create an offer quite similar.

The “smartphone” offer, it is a pre-paid card, the price is 20€.
This offer concerns customers who have a smartphone already and are just seeking a new network provider. It consists in 2hours of calls, free texts between UPC’s mobile phone customers and unlimited Internet.

The « keep it simple » offer cost 5€, again it is for people who have a phone already.
The offer consists in 2hours of call in Ireland. Free texts between UPC customers. No Internet connection

Bibliography: http://www.latribune.fr/technos-medias/20130902trib000782757/free-mobile-recettes-d-un-succes-eclairhellip-mais-fragile-.html Liberty global, Ventures, 2013