Omnitel Pronto Italia- Creating Customer Value

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Marketing Management

Diagnosis: Telecom Italia Mobile (TIM) had a monopoly over the Italian Communications Market. It generated 97% of Italy‟s 7.5% market penetration, also until Omnitel‟s entrance into the market because of the lack of the competition, TIM didn‟t incur the huge marketing costs. TIM‟s marketing strategy was primarily directed towards the uppers echelons of Italian society. Omnitel entered the market in Feb 1995 but they could start the commercial services in December 1995 with network coverage of 40% of the Italian territory. Ominitel thought of its superior customer care as its competitive advantage over TIM, however they could only acquire 1,80,000 subscribers by May 1996. Omnitel was looking for methods to differentiate itself from TIM but at the same time avoiding a price war. Problem Identification The problem was twofold, that of building Omnitel‟s market share while avoiding a price war with TIM, and differentiating brand Omnitel from brand TIM.

5 C Analysis
Company Background:      Omnitel was able to obtain GSM license after liberalization and paid Lit.750 bn in Dec „94 to become Italy‟s second GSM operator and launched its commercial service in Dec. 95. They started with a network coverage of 40% of Italian territory. Market share was 4% of the total Italian telecom market. Initially they offered plans similar to TIM but prime focus was on its high-quality customer service, which led to „happy‟ customers and low churn rates. Financial strength of Omnitel was not as strong as their competitor i.e TIL, hence they avoided getting into a price war situation.

Competitor Analysis:  The major competitor was Telecom Italia Mobile (TIM) formed in July 1995 after divested from Telecom Italia and was listed separately on Italian stock exchange.  The customer base was over 4 million by the end of first quarter of 1986 and had strong roots in Italian Cellular market.  They offered two types of tariffs: o Euro Family o Euro Professional  They enjoyed monopoly over Italian telecommunication market until Omnitel‟s recent entrance; the marketing costs had been lower than its European counterparts.  The distribution channel of TIM was very strong as it had 1,500 exclusive dealers, 20 TIM- owned shops and 150 Telecom Italia stores, but after the entrance of Omnitel they became more aggressive.  Its marketing strategy was to cater primarily to the high end segment of the Italian society touting cellular phone as a status symbol.

Marketing Management | 7/1/2010


Customer Analysis    The Italian customer market was different from other markets as the people were willing to pay handsomely as they like to show off as they liked show off. It was noticed that the customers were not interested in paying activation fees, instead they want to pay only when they use the phone. The customers wanted a different set of tariffs for local calls, long distance calls and international calls and they did not mind paying more.

Collaborator Analysis   The shops that sold consumer electronics goods and telecommunication goods and services sold Omnitel‟s handsets which were 2000 in number. They paid a commission of Lit 40,000 for each account they activated and Omnitel didn‟t make any profit on the handsets sold.

Context Analysis:  In 1993, the European Commission declared that by January 1998, all member states would have to open their markets and guarantee competition in telephony markets but under pressure from business interests, the EC liberalized the cellular telephony by January 1994, subjected to interpretation by the country involved. Cellular penetration rates were relatively modest. “Value for Money” of the service continued to increase because of reduced costs and improved quality. All cellular operators in Europe had adopted the GSM digital standard. Many European countries began to have multiple...
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