Consumer Segment Analysis of Mobile Phone Market

Anthony Nolan

Size of current Market

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According to the Commission for Communications Regulation (COMREG) (Q4, 2015), household broadband penetration rate for both fixed and mobile services was at 83% which is higher than the EU average by 3%.

Mobile device minutes in communications stood at a massive 73.8% of the market, leaving on 26.2% for fixed line communications. Mobile minutes showed an increase of 1.4% from the previous quarter.

There was an annual increase of 56.6% of mobile users actively using the 4G standard on the same period in 2014.

Subscriptions to mobile networks increased by 0.36% on the previous quarter however broadband subscriptions saw a decrease of 4.5% on quarter three. This is probably due to many providers now bundling a broadband “allowance” in with subscription offers.

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Finally in the last quarter of 2015, average revenue per user was on a downward trend compared to the same quarter in 2014. Mobile users spent an average of £24.62 per month in the final quarter compared to £25.00 per month a year previously. Again, this is believed to be a result of package bundling affecting revenue intake according to ComReg (2015)

Structure and Nature of the Current Market

The four main mobile phone operators in Ireland are Vodafone, O2 (owned by the 3 network), Meteor and the 3 network stand-alone operator (separate from O2) (ComReg 2015). The five smaller providers available are PostPhone (An Post), Tesco Mobile, Dixons/Carphone Warehouse ID Mobile, LycaMobile Ireland and Blueface Mobile.

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All four (Vodafone, O2, Meteor and 3 Network) of the main providers purport to supply the following to consumers according to ComReg (2015):

• Prepay and post-pay services to both personal and business customer segments.
• Voice, SMS and data services to a stated 99% of the public, meaning they claim to have the whole of Ireland and outlying islands covered with their network signal.

Each of the four main networks supply second generation (2G), third generation (3G) and fourth generation (4G) technology to their users.

All five of the smaller mobile providers in Ireland (PostPhone, Tesco Mobile, Dixons/Carphone Warehouse ID Mobile, LycaMobile Ireland and Blueface Mobile) do not have their own infrastructure networks. Instead they utilise the current main network providers and rent a “mobile virtual network operation” (MVNO) which gives them the ability to offer their own branded retail service to consumers.

Tesco Mobile Ireland has entered into an MVNO commercial arrangement with O2 (Hutchison 3 Ireland) to allow its traffic to be carried on the O2 network. Tesco Mobile Ireland is available to personal customers only. (ComReg 2015)

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An Post PostPhone has entered into an MVNO commercial arrangement with Vodafone to allow its traffic to be carried. Unlike other providers PostPhone does not have a unique prefix and instead effectively resells minutes carried from Vodafone and then differentiates (Re Brands) those minutes at the retail level. PostPhone is available to personal customers only. (ComReg 2015)

Like Tesco Mobile Ireland, LycaMobile has an arrangement with O2 Ireland. LycaMobile offers by the minute rates and bundle packages for subscribers. They do not offer traditional pre-pay or bill pay options. (ComReg 2015)

Blueface Mobile has entered into an MVNE (Mobile Virtual Network Enabler) with X-Mobility Limited, which is a sub-division of Hutchison 3 Ireland. Blueface sells both prepay and post-pay subscriptions to Business Only consumers. Like PostPhone, Blueface is reselling 3 Network minutes under its own brand. (ComReg 2015)

Dixons/Carphone Warehouse ID Mobile is an MVNO of Hutchison 3 Ireland. ID offers a pay-monthly option which comes with a handset (Billpay) over a fixed term and also offers a sim-only thirty day rolling subscription. (Siliconrepublic, 2015)

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Expected Technological Trends for the next Decade (2016-2025)

Looking to the future, there are some expected and some predicted advances that will be made. The list is not endless and some of the most useful advances are listed here:

• Cloud Storage: Right now cloud storage is available but Chris Nickson of atechnologysociety.co.uk predicts that ALL mobile phone storage in the future will be “off-device”.
  • Everything from storing photographs and video to uploading video and audio from one’s computer will go to the cloud.
  • A potential fall off of people buying peripherals like SD Cards.
  • Smaller hard drives on phones
  • More space within the phone case leading to potentially smaller devices
  • Software (Apps) installed and stored on the cloud
  • Greater phone security through central servers (Cloud)
  • Contacts stored on the cloud
  • Access anywhere in the world
  • Possible cost issues for finance required to upgrade cloud servers and security
  • Cost savings on handset manufacture as a result of less hardware required within the handset.

(Nickson, C. 2013)

• Solar powered handsets: In developing countries, solar power could conceivably actually charge the handset with the use of just a small solar panel. (Nick T, 2015)
• Augmented Reality (AR)
  • One will be able to open the camera app and point it anywhere in the street to be shown a list of businesses and establishments on-screen overlaid on the display. (Poe, M. 2015)

• Organic Light-Emitting Diode (OLED) technology.
  • Wafer thin screens that can be folded and which can show different output media on either side. One could show a video to a friend on the “back” of the phone while inputting data on the front.
  • Due to physical flexibility, this technology could also be worn as a wristwatch and taken off, and “unfolded” to become a mobile device. (Poe, M. 2015)
• In-Built Projector
  • Mobile phones that can project images and/or video directly onto a wall or screen (Poe, M. 2015)
• 3D Screens and Holograms
  • Making an image or video projection appear to be separate from the device actually emitting it. (Poe, M. 2015)
• 5G and beyond.
  • Using less bandwidth than 4G
  • Using less power than 4G
  • Enabling a broader spectrum of frequency for connection
  • Faster connection speeds to Internet

(Gregory, M.A., 2015)

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• Kinetic Thermal Power
  • Using bodily movement and heat to recharge mobile devices (Levars, N. 2016)

• Discarded Mobile Phone Technology a problem: Developing countries like those in Africa are currently a dumping ground for the World’s discarded mobile detritus. As we progress in the first world, these dumps will get larger and larger. A solution may be needed in the more distant future (Nickson, C. 2013)

Demographic and Psychographic Description of the Younger Sub-Segment of the Consumer Market

“Currently, smartphone ownership is biased towards the younger age groups but with the increasing penetration in the market, this could very well change in the near future.” (Red C, 2012)

That survey by RED C was taken in 2012 and what was true then is doubly true today in 2016. Back in 2012 some 32% of Irish people owned a smart phone (Red C, 2012). Today that number has increased to 96% and that is just in one segment, the 15 to 35 year old bracket. (Thinkhouse Mobile, 2015)

SO, what do people in the 18 to 25 year old segment use their smartphone for?

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According to the latest survey from Thinkhouse (2015), the Youth Communications Agency, the following statistics ring true:

In 2015, the following uses were made of mobile phones from 18 to 25 year olds:

Type of Mobile Phone Subscription:

• 56% of 18-25 Year Olds opted for Bill Pay subscriptions.
• 44% of 18-25 Year Olds opted for the Pay As You Go option

General Use:

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• 66% used for email
• 23% used on traditional SMS messaging (*Down from a peak of 66% in late 2011)
• 59% used for YouTube
• 30% used for online television from paid subscription sites such as Netflix or Love Film.

Social Media Use:

• 92% of mobile phone users in the 18-25 year old demographic used their phones for Facebook
• 36% used for Twitter

Commercial Use:

• 4% of people in this segment pay for online purchases on their mobile. The other 83% opted to pay on their computer. 13% did not conduct online purchases.
• 78% of people compared the price of products online before proceeding to buy the product in-store

Content:

• 63% of this demographic prefer non-gaming apps. They prefer apps that serve a purpose for them.
• 37% of this demographic prefer to have fun while using apps, either playing games or watching entertainment

(All data supplied by Thinkhouse Mobile Youth Survey 2015.pdf, except *, by ComReg, 2015)

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It is also stated in this review by Thinkhouse media that the primary use of a mobile phone for this segment is to send text messages. However this is contradictory to the research submitted by ComReg (above). ComReg state that SMS sending is down some 43% from 2011. The difference can be explained by the arrival of apps that send messages for free such as Facebook Messenger and Viber, among many others. (Inner-Active, 2011)

Market Research Suggestion for the Next Five Years

Tel-Eir should look to glean as much information as possible before deciding on phone tariffs, prices, bundles and pay as you go or bill pay options.

As this company is starting out the first thing that needs to be known is, primarily what the public’s appetite is for a new provider and secondarily what the public want from a new phone network provider. Whether Tel-Eir can deliver upon the public’s desires will be a case of understanding the research results.

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Initial Research Method

Having thought about the best types of research and studied many methods, it has been decided to advise Tel-Eir to carry out “Personal Interviewing” (Kotler et al, 2012) initially in order to get an understanding of what the public:

• Like about the currently available providers
• Don’t like about the currently available providers
• Like to do on their handsets
• Are not bothered with doing on their handsets
• Think about the hardware and limitations of their handsets
• Would desire if they had the chance to choose option plans for a provider
• Think about the costs involved with owning a mobile phone
• Feel is the main reason for owning a mobile phone
• Would need to switch to a different network

This information is required so that Tel-Eir’s marketing staff can use the information on Buyer Decision Making processes to form an educated opinion of what angle to enter the market at.

According to Donald S. Tull and Del I. Hawkins in their book, Marketing Research: Measurement and Method (1993), Personal Interviewing, while being expensive is the best way to glean a lot of information quickly. They state that Personal Interviewing:

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• Is Excellent for Flexibility
• Is Excellent for Quantity of data received
• Good for control of sample
• Good for speed of data collection
• Good for response rate
• More expensive than other methods of collecting information

By sending personal interviewers out into the busy thoroughfares of the five main Cities in Ireland, it is expected that a lot of accurate opinions can be acquired and from that information Tel-Eir will be better placed to formulate a strategy for market entry.
Ongoing Research

Going forward, it is believed that Tel-Eir should continuously keep an eye on both competitors’ movements and new offers in the market and also on the changing demographic that are purchasing its product.

It is advised that every year, Tel-Eir should partake in:

• Sales Forecasting, to know what the future holds for people continuing to purchase new handsets and plans
• Ongoing Segmentation Research, to determine the demographic, psychographic, cultural, and behavioural characteristics of potential buyers. (Wikipedia, 2016)
• Brand Equity, in order to get a “feel” for what the public think of our brand
• Customer Satisfaction, in order to understand our current users’ feelings about our product
• Demand Estimation, so that Tel-Eir can plan ahead and possibly tweak the offers and bundles being made to the public

Main Product Offering

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Having already completed some market research on current mobile phone network operators it is felt that Tel-Eir should not use a Mobile Virtual Network Operation (MVNO) in which Tel-Eir “piggybacks” upon a network that is currently owned by a larger company like Vodafone for example. Purchasing statistics for such network providers is not good and it is felt that only by gaining its own licence can Tel-Eir truly become competitive in the market. (Irish Independent, March 2016)

According to research, Tel-Eir’s targeting of the youth segment (18-25 Year olds) should include the following attributes:

1. Both Bill Pay and Pay as you Go should be offered
2. High End and Low End handsets should be offered
3. Free Internet minutes should be a major section of any bundles offered
4. Traditional Text Messaging (SMS) is not as important as it once was and should not be paramount to offers.

1. Offering Both Bill Pay and Pay as you Go Bundles

This should take the form of long term Bill Pay contracts with an offer of a free handset (slightly outdated) or a cheaper handset (a little more recent) or an expensive handset (latest on the market).

It is also advisable that the price of the handset while signing up for a long term bill pay contract should be connected to the monthly contract price. As an example, if one wants a handset from the latest range but with a cheap monthly contract, then one pays more initially for the handset. However, if one wants an expensive phone with an expensive monthly contract, then the phone could be offered free of charge, depending upon the length of contract signed up to. It is advised that for the latter, a two year contract be set as the minimum. In this way the cost of the handset can be recovered over the duration of the contract.

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It is advised that Tel-Eir offer a month by month rolling contract. This new style of attracting customers has proven popular amongst the low waged and unwaged. Tel-Eir should offer an internet allowance and perhaps a text message (SMS) allowance with this. As SMS is decreasing in popularity, offering unlimited SMS messages will appear to be a good offer but in reality will not be used as much as it may have been previously.

Tel-Eir, in order to be competitive should offer Pay As You go top up options in the following amounts:

• £5 top ups for the unwaged and those in education
• £10 top ups for the unwaged and low waged but slightly better off, such as single parents on social welfare, those in college receiving a grant, and those who are on schemes and low paid jobs who may not be able to afford larger top ups.
• £15 top ups for convenience and as a bridge between the low waged and unwaged segment and those in gainful employment
• £20 top ups with added data and SMS allowances for those that use this option.
• £25 and £50 top ups for the business customer who is too busy to top up very often and does not like to use bill pay. This is expected to be rare, but having it available will be a new option for the public.

All of the above tariffs are guides only. It is of course understood that an unwaged person will on occasion top up by £50 and that a business user will on occasion top up by £5 or £10. The points made are specifically aimed at those segments that will predominantly spend in the stated behaviours.

It should be allowed that all top ups and bill pay options can be paid by Credit/Debit Card and that a facility exists for both online payment and direct debit.

(All above information gained from ComReg, 2015)

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2. Handset Choice

The variety of handset offered is paramount in importance for the sale of Tel-Eir’s network product. The profit is in the sale of the different tariffs and bundles. However that sale will not happen unless Tel-Eir sells the hardware that the public have come to expect and associate with popular and successful network brands.

Therefore, it is advised that Tel-Eir sell all of the latest handsets from all of the most popular manufacturers.

It is also advised that Tel-Eir try to get exclusive rights to an upcoming handset from a major supplier. Even short term exclusivity would be beneficial.

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3. Free Internet Minutes

From research already collated, it is clear that connection to the Internet is of paramount importance to the public. There are so many things that a mobile phone user can do from being connected to the Internet. This is also paramount in lessening the use of the network throughput from SMS messages. Using the Internet will allow people to send instant messages using apps through third party servers, lessening the load on Tel-Eir’s hardware.

Having a good Internet allowance package available to them, will give the public the freedom to use their phones as they have been used to with the current major brands on the market. Tel-Eir should look to compete very favourably in this area. (The Atlantic, 2014)

4. Lessening Importance of SMS Messages

As users turn to third party “apps” for sending instant messages over the Internet, they are turning away from the traditional “paid for” SMS messages. It appears as though this trend will continue into the future. As a result of this, Tel-Eir should offer generous SMS bundles with offers secure in the knowledge that these will sell a product to a potential subscriber but once sold, will not be used very much at all. It is all about the offer appearing to be good value for money.

Positioning and Promotion

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“Positioning is not what your company physically does to a product-it is what your company does to a target customer‘s mind” (marsdd.com, 2015).

The above statement is the most important thing to keep in mind when presenting Tel-Eir’s new product to the market.

The fundamentals of “positioning” the product effectively in the market must be adhered to. These fundamentals are:

• A customer decides to buy a product based upon the positioning of that product
• All customers have an idea of what the market presents, by using a “mental map”
• Positioning is not something that exists in the product but in the mind of the customer
• Once a customer’s mind is made up about product positioning, it is not easily changed
• Positioning’s first task is to present the relevance of a product.
• If one makes the product easier to purchase, then the product will be easier to sell. (marsdd.com, 2015)

With the above tenets in mind therefore, Tel-Eir should pay particular attention to the following:

• Why does this product solve the consumer’s problems?
• What product offering will appeal the most to the consumer?
• What do consumers want the most from this type of product?
• What do consumers not want from this type of product? (brainmates.com)

From the above presented problems one must come to the conclusion that “Communication” is the key to positioning and promoting a product. How does a company get from positioning to communication? See Fig 1.1 (next page)

Therefore using the image in Fig 1.1 the company must decide upon its best avenue for answering these questions.

Fig 1.1 (marsdd.com)

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Known Variables

• It has been decided that Tel-Eir will target the 18-25 year old market segment initially.

Questions and Answers

• What will be the compelling reason for Tel-Eir’s customer’s to buy?
  • From market research the compelling reason will be based upon a sound Internet usage (data allowance) strategy. This is will enable the youth market consumers to use our product exactly the way that the evidence points to them wanting to use it.
• What will be Tel-Eir’s initial product placement strategy in order to get the product into the minds of the target segment?
  • Firstly, Tel-Eir will come up with an excellent slogan and product package. The packaging will be of paramount importance. The logo of the brand and the words used are no less important. The statement used in promoting the product should include the primary appeal of the package offering.
  • Taking into account the age group of the target segment, Tel-Eir will promote the product through the following channels:
    • Creation of an interactive website
    • Brochures in existing technology shops and phone shops that sell all network carriers
    • Potential customer email campaigns
    • Social Media advertisement campaign
    • Star Actor television advertisement
    • Billboard advertising for viewing by this segment as they travel in day to day pursuits
    • Attempt to get product used in a broadcast venture such as a soap opera or a feature film
    • Give away a limited amount of the product to various organisations such as Written and Broadcast media for use in competitions and to colleges and schools again as possible competition prizes
    • Attend trade fairs and extol the virtues of the product
    • Attend third level college events and provide “brand stretching” items such as key fobs and perhaps some academic motivators such as rulers, paper, calculators and the like. Perhaps also give away tee shirts at such events. Also include product literature.
• What will the product’s key benefit be as promoted to the customer?
  • A key benefit will be a ground breaking offer on Internet data allowance. Tel-Eir will offer all customers an never before seen amount of data for all users regardless of top up amount or bill pay tariff. Naturally the amount will be incrementally more the more a consumer spends. However even at the lowest spend, consumers should see an unequalled (in the market) amount of data being supplied.
  • A key benefit will be the offering of free text (SMS) bundles. The higher a consumer pays the more free SMS messages they receive up to a maximum of completely free SMS messages.
  • A key benefit will be Tel-Eir’s competitive offers of new and recent handsets at either free or very low priced amounts.
  • Tel-Eir will also offer an insurance incentive for handsets sold
  • Tel-Eir will also allow all consumers to top up or pay bills online, at various pay points, by direct debit or over the phone using customer service

• What competitor will be closest to Tel-Eir’s offering in the market?
  • Both Vodafone and Meteor will resemble Tel-Eir’s offering however it is believed that Tel-Eir will be able to supply an even better product offering that both of those competitors.
• What is the key difference between Tel-Eir’s offering and the chief competitors’?
  • The intended key differences will be:
    • Tel-Eir will offer more data allowance for similar prices
    • Tel-Eir will offer free SMS (varying) amounts at ALL top up or bill pay levels
    • Tel-Eir will offer handsets at lower prices than the competition.

Positioning Statement

Finally, Tel-Eir will pay particular attention to its selling statement for consumers. The statement will include the most important variables:

• It will clearly and effectively identify the target segment
• It will make the product offering effective, convincing, compelling and will be backed up by credible evidence
• It will reflect the target segment’s needs and locale
• It will be explainable in a very few words

The positioning statement will take the format of:

For (target segment or customer) who (a compelling reason to buy) our product is a (product’s placement) that provides (key benefit that directly addresses the compelling reason to buy), unlike (primary competitor of the same benefit) our product (key difference).
(marsdd.com)

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Bibliography

Book References

• Principles of Marketing, Kotler And Armstrong (2012), Pearson Prentice Hall, P110.
• Marketing Research: Measurement and Method, 7th edition, Donald S. Tull and Del I. Hawkins, (New York: Macmillan Publishing Company, 1993)
• Marketing Plans (6th edition), McDonald, Malcolm (2007), Oxford, England: Butterworth-Heinemann
• Marketing Research: A Decision-Making Approach, Malhotra, Naresha K. (2002), Upper Saddle River, NJ: Prentice Hall

Publication References

• Irish Independent Newspaper, 1^st July 2014 edition, Business Technology Section, Independent News and Media 2014

Online References

• http://www.comreg.ie/_fileupload/publications/PR10032016.pdf
• http://www.comreg.ie/_fileupload/publications/ComReg1246.pdf. P22 et al
• https://www.siliconrepublic.com/comms/2015/07/02/id-is-irelands-latest-mobile-operator-and-its-out-soon. P17 & 18
• http://www.atechnologysociety.co.uk/cloud-computing-future.html. (Chris Nickson 2013)
• http://www.phonearena.com/news/Did-you-know-that-Samsung-launched-the-first-solar-powered-cell-phone_id67493 (Nick T, 2015)
• http://www.hongkiat.com/blog/future-smartphone-features/. (M.Poe 2015)
• http://phys.org/news/2015-04-5g-wireless-technology.html. (Mark A. Gregory, 2015)
• http://www.gizmag.com/energy-harvesting-shoes/41796/. (Nick Levars, 2016)
• http://inner-active.com/2011/08/10/5-reasons-the-new-facebook-messenger-app-will-kill-sms-and-5-reasons-it-wont/ (Hillel Fuld 2011)
• https://en.wikipedia.org/wiki/Marketing_research
• http://www.comreg.ie/_fileupload/publications/ComReg1617a.pdf
• http://www.theatlantic.com/politics/archive/2014/01/why-texting-is-dying-out/441507/
• https://www.brainmates.com.au/how-to/%E2%80%9Chow-to%E2%80%A6-%E2%80%9D-position-a-product
• https://www.marsdd.com/mars-library/positioning-creating-an-image-of-your-product-inyour-target-customers-mind/

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