Omnitel entered as a cell phone operator in the Italian market in December 2000. The company introduced its service with plans that were very similar to the incumbent service provider, TIM. Omnitel’s perceived competitive edge was customer service focused on the areas of personal touch, low waiting time and one-stop calling for all questions. With this perceived advantage, Omnitel was targeting high value customers who wanted a better quality customer service than TIM what could provide. In the 6 months after the launch of their service, Omnitel was able to acquire 180,000 customers which accounted for a disappointing 4% market share. The launch resulted in low market shares because customer service, which Omnitel perceives as its competitive advantage, is not a deciding factor for most consumer segments in the Italian market. 1) 46% of TMI’s existing customers did not rate customer service as a very important factor in their cell phone purchase and use experience. Therefore, the value proposition of Omnitel did not appeal to these customers 2) 19% of TIM’s existing customers were very unsatisfied with the cost, but were unwilling to switch to a private operator. 3) The customers who were willing to switch mobile operators (Monthly/Peak segment) accounted for 35% of TIM’s current user base. But service, although an important factor for the segment, was not one of the 3 most important factors in their decision making. In essence, Omnitel entered the Italian market with a value proposition based around customer service which was not one of the most important decision factors for most consumers in the market at that time. This was an underlying reason for their disappointing results in the first 6 months.
Revenue comparison between Current plan and LIBERO (per customer per month) (Lit.)
Monthly Usage Fee
LIBERO is a new plan that Omnitel is planning to introduce to the Italian market. Under LIBERO, a customer pays no monthly fee and only pays per usage of the cellular service. This is an incentive for customers to switch to LIBERO as most consumers in Italy view monthly fee as a tax. When combined with the exceptional customer service that Omnitel adds to the equation, LIBERO has the potential to appeal to a number of customer segments.
In the conjoint analysis, customers rate the most important factors in their decision making when choosing a cell phone service. We will identify the most lucrative customer segments for Omnitel in the Italian market and highlight the reasons for choosing that customer segment.
1) Personal Users
The Monthly/Peak segment constitutes 35% of the current user base. This segment is not influenced by Brands in their decision making and are willing to switch operators. A lack of monthly charges is their top decision influencer and therefore they are a prime target segment for LIBERO. In addition, off peak rates are not an important factor for the segment and the slightly higher off peak rates in LIBERO should not be a deal breaker. This segment also values customer service, although it is not a top 3 priority for them. This segment also has a healthy outgoing/total calls ratio at 36%.
The Service customer segment constitutes 33% of the prospective market. This is a segment that highly values customer service and desires a lack of monthly charges for their cell phone usage. In addition, the segment places very low value on brand and also is not very sensitive to off peak pricing. LIBERO promises most of the value propositions that this segment desires. This segment constitutes customers who are 25-44 years old and are mid class. The mid class segment in this age range is projected to grow as urbanization...
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