Executive Summary
2Degrees is a new entrance infrastructure based telecommunication company owned by the U.S. and Britain in New Zealand. The company has built over 280 new cell sites in Auckland, Queenstown, Wellington, and Christchurch. It is the largest new private sector infrastructure project since it committed $280 million in investment in the building of the company. The company was launched in august 2009 as the third entrance in the telecommunication sector. It gained over 206000 subscribers in its first six months of operation.
The company’s mission is to challenge the incumbent nature of the telecommunication industry, to bring New Zealand greater value in terms of mobile pricing along with a range of innovative new products and services. It focuses on adopting international best practices, which include public safety in the spectrum use. The company managed to attract over 5million mobile phone customers taking over the New Zealand cell phone market. It competes with Vodafone and Telecom XT telecommunication companies.
Introduction
Marketing is principle to any organization that desires to achieve maximum profits. It sells the organization’s products to the consumer. Marketing defines the nature of the business of the organization. A vital business activity such as marketing requires proper planning. It is proper planning that largely contributes to the success of any undertaking.The marketing plan is amongst the key plans in any organisation. However, different organisations tackle this vital sector differently. The recent past has witnessed enterprises placing emphasis on product oriented market plans in that the business produces what it can to the best of its ability. Focus shifted from product oriented plans to customer oriented. The current trend is a marketing plan that is market oriented (Bach 2000, p. 165).
This report tries to analyze and investigate strategic marketing for 2Degrees by looking at the marketing mix strategies, analyzing the environment and adopting positioning strategies by segmenting the relevant market between years of its entry January 2009 to May 2011. Eric Hertz, the CEO who has seen the company through its launch and successful product rollout of unique mobile applications for the company requested the research to measure its past, current, and future performance. The analysis is through research from scholarly books, conference proceedings and articles with relevant data and report released on June 28, 2011.
Current Strategies
Due to the expansive growth and influence on technology, 2Degrees Company has committed $250 million in building the third mobile network in Zealanders. It has hired competitive employees for example, Eric Hertz, who has more than 30 years experience in telecommunication and mobile wireless industry to cater for the increased complexity of decisions. The Company has also adapted the policy of delivering low carbon economy to cater for the increased government and society interventions (Two Degrees Mobile Limited 2011, para.2).
Macro-environment
They are legal, political, social-cultural, technological changes, demographic, and natural forces influence the external and uncontrollable factors like competitors, changes in interest rates, cultural factors, and government regulations (Hooley 2004, p.17).
Social-Cultural Environment
Social-cultural environment includes institutions and other forces that affect the basic values, behaviors and preferences of the society (Kotler 2007, p.37).The young people in New Zealand engage in many transactions that need a lot of mobile usage. 2Degrees target them as they establish their houses, buildings, and businesses. Customers of telecommunication in New Zealand demand for reduction in the terminal rates through establishment of a competitive market to reduce their expenses on mobile charges. 2Degrees had to decide to regulate their termination rates to attract customers and to satisfy their loyal customers (Two Degrees Mobile Limited 2011, par.2).
Economic Environment
The economic environment involves those factors that affect the purchasing power and spending patterns of consumers. Given the current economic recession, both corporate and individual consumers are shoppers that are more careful (Reed 2007, p.185).
Given that 2Degrees is relatively new in the mobile network market, there is shallow local capital market in New Zealand. This affects a new entrant’s access to capital, local research and development (R&D), new services development and capital-intensive infrastructure building. The company has insufficient infrastructure and at the same time competition problems that leads to low productivity, employment and growth. The company has realized that customers spend little money in calling and internet charges; this limits the growth of the company. 2Degrees is even campaigning for a national infrastructure units plan in New Zealand (Two Degrees Mobile Limited 2011, par.1).
Political Environment
The political environment involves the pressure groups, government agencies and legislations that limit the activities of an organization. It is a constitutional duty of governments to draft public policies that govern commerce. Recent legislations focus towards protecting companies from each other, buffering consumers from unfair business practices and shielding interests of society against unrestrained business behavior (Bach 2000, p.134).
In New Zealand, decision making regarding spectrum management and competition policy maintained within the stake industry groups but the 2Degrees Company needs it done in the central government agencies to ensure competition in the telecommunication industry. It is lawful in New Zealand for telecommunication industry to engage in mischievous spectrum interference with international radio regulations (Two Degrees Mobile Limited 2011, par.4).
Technological Environment
Technological environment consists of forces that affect the technology of creating new products, markets and opportunities in organizations (Bach 2000, p.192). The company has launched its fastest and most powerful smart phone, which has LG Optimus x2. It has launched mobile games for its customers. The “company established national 3G services and a range of data plans to meet New Zealanders growing demand for more affordable mobile broadband”(Two Degrees Mobile Limited 2011, par.3).
Demographic Factors
Demographic factors include the study of human population in terms of size, location, race, and occupation. New Zealand has 27 member States and a population of 4.35 million people. The 2Degrees Christ church network restores to meet the needs of customers to reduce network congestion. The company has invested more than $100 million in network in agreement with global communication provider Huawei (Two Degrees Mobile Limited 2011, par.4).
Market Analysis
Market Size
Market size is the number of buyers and sellers in a particular market. The size of a market is of great importance to emerging enterprises or existing companies that are launching new products or services. Large markets mean more competition whereas small markets limit the volume of goods (Kotler 2009, p.56).
According to research done in 2011, 2Degree revealed an increase in the number of customers from 206 000 in February 2010 to more than 580,000 on 22 march 2011. The company began offering services in August 2009 and Vodafone has been able to make 46% and telecom 41% of their customers with remainder made up by smaller Telco’s. In 2007, it recorded 15,500 customers who had switched from other companies, and 53,000 in 2010.This is a clear evidence that 2Degrees has had impact in terms of consumer choice and competitive offering (Two Degrees Mobile Limited 2011, par.5).
The table below shows the market size statistics in New Zealand (Paul Budde Communication Pty Ltd 2011, par.1).
Opportunities
A market opportunity is a newly identified market trend that a company can exploit because the competitors have not exploited it. The ability of the company to reward existing and new customers through the fly buys will offer it a chance to stand out from other companies and offer a positive exposure opportunity to the 2Degrees brand. Their customers have an opportunity to earn points by topping up their accounts and purchasing their phones and accessories. This helps the company retain its customers. The company’s has brought new value to New Zealand mobile users, which has led to more than 200 000 customers giving it potential for long-term sustainable relationship with its customers (Two Degrees Mobile Limited 2011, par.4).
Threats
Threat is declaration of an intention or determination to cause problems or defeat. New Zealand has a problem with infrastructure development for telecommunication but at the same time a low competition and usage of mobile airtime and services making it difficult for the company to grow. It is also difficult for the company to explain how their standards of services and infrastructure match with other countries. To ensure their campaign for national infrastructure units plan is fit for purpose. The company is also facing competition in mobile software innovation in both New Zealand and other countries (Two Degrees Mobile Limited 2011, par.4).
Market Segmentation
Marketing segmentation enables the marketing strategy to focus on subsets of customers and prospective likely to purchase your product (Bach 2000, p. 154)
Market Segmentation 1
Geographic Segmentation
This segmentation divides the market into different geographical units that include; neighborhoods, cities, countries, or world regions (Reed 2007, p. 37).
Use of Rural Broadband Initiative
A proposal is set that the company together with the government should finance a greater rural broadband. It is important for 2Degrees to deliver the competitive pressure of the company in the rural sector. They aim at improving their service provision in the rural areas as much as it is in the urban sector. 2Degrees Company Limited has set their target being the schools, healthcare services and businesses in the rural areas as their key target to this rural broadband deployment. This deployment targets approximately 13.8% of the population that is located in the rural areas. The company has laid an estimate of about 2.4 billion dollars to make this investment effective (Two Degrees Mobile Limited 2011, par.5).
Market Segmentation 2
Behavioral Segmentation
This segment divides the market into groups based on the knowledge, attitude, uses, and responses to the product (Reed 2007, p. 39).
Introducing 3G Internet on Mobile Phones
This strategy has greatly improved the activities of residents in New Zealand by increasing internet circulation in New Zealand thus information on the internet becomes more available and cheaper for all its residents. The only requirement for one to access this internet service is an internet-enabled phone. This ensures that browsing is cheaper and faster in New Zealand. Consumers in New Zealand have taken advantage of this opportunity to use internet services by seeking this service (Two Degrees Mobile Limited 2011, par.3).
Regulating Termination Rates and On-Net Pricing
This strategy creates customer demand levels and elasticity through improving their interest and opinions on mobile usage. This enhances satisfaction of their customers through them communicating frequently to their friends, relatives and business partners (Two Degrees Mobile Limited 2011, par.5; Kotler 2007, p.22).
Other Strategies Include:
According to Two Degrees Mobile Limited (2011) “the established dual-core technology, which enables customers to enjoy twice the power of a regular handset by processing high definition photos” (par.5). 2Degrees has restored Christ church network to reduce network congestion to meet the needs of customers.
Market Segmentation Technique
The above market segments are different in their own ways. First, the market segmentation procedure called the rural broad banding is a market strategy, which tries to bridge the gap between the rural and urban areas about telecommunication (Hooley 2004, p.9).
For instance, rural areas are slower in development compared to the urban areas. 2Degrees Company Limited is on a verge of trying to find out ways in which it can improve its market power in the economy. This therefore, makes them to come up with ways in which it can increase its influence in the rural areas. It has considered introducing the wireless telecommunication technology in these areas (Two Degrees Mobile Limited 2011, par.5).
On the other hand, 2Degrees wants to introduce a variety of products and services to attract and maintain more customers while creating a competitive environment in the market since individuals want to identify with a mobile service provider that focuses on the social network (Two Degrees Mobile Limited 2011, par.3).
Impacts on the Strategic Marketing Process
Firstly, rural broad banding will greatly act as a beneficial investment to the 2 Degrees Company Limited. This is because it will ensure an increase in the number of its subscribers. This increase will greatly increase the company’s general performance resulting to an increase in the profits realized by the company. This is highly beneficial to 2Degrees since it will work towards seeing the company into being a dominant company in New Zealand (Bach 2000, p. 86; Two Degrees Mobile Limited 2011, par.2).
While introducing products and services that suit different customer needs in the mobile sector not only increases the number of subscribers but also increases the sales in terms of mobile phones and accessories. This is also a positive move to effect the shifting of customers from other network to a network offering high quality services at a cheaper price (Two Degrees Mobile Limited 2011, par.2).
Market Segmentation Technique
The consumer and the business differ in their category of needs. Despite the fact that they both seek out for similar need; to satisfy a communication need, the purpose for communication is entirely different. Individuals want to identify with a mobile service provider that focuses on the social network. The incoming generation (ages 9-18) needs focuses on fast internet access, a great ability to chat easily with friends whether be it through sending of short service messages, Face book or Twitter. They are also drawn to easy access to music, both audio and video (Keegan 1997, p. 39; Two Degrees Mobile Limited 2011, par.2).
Positioning
Positioning strategies involve the identity of a product in the market. It translates in the picture that a particular company wants to paint in the mind of its customers. When a customer thinks of a particular brand what they visualize. In designing a positioning strategy, therefore one looks at the position of the product against competing brands, a benefit that is unique in relation to the market situation and the kind of customer that is targeted (Ries 2000, p. 193).
In order for 2Degrees to remain at the top position in the market of communication industry, it need to introduce products and services that suit different lifestyles as a strategy that works well and effectively (Ries 2000, p. 193).Introducing products and services that suit different customer needs and wants strategy. This positioning strategy is for the individual customer that thrives on social networks: “Connecting friends and family”.
The above positioning strategy places 2Degrees in its market of influence based on the product’s attributes and gives the product a particular purpose. It places 2Degrees as the ultimate choice when one wants to communicate to family and friends. Considering that communicating to family and friends includes lengthy conversations over issues deemed important, the above statement communicates that 2Degrees offers flexible and affordable rates for its customers. The product’s attributes are that it is affordable and convenient to use whereas the purpose is communication to loved ones (Two Degrees Mobile Limited 2011, par.5).
The above statement is also flexible and alters to fit various brands within 2 degrees and product differentiation without changing the original intent and message conveyed to customers. “Connecting with loved ones has never been easier” to market cheaper call rates or “Talk to all your loved ones at once” to sell the concept of conference calls to consumers (Two Degrees Mobile Limited 2011, par.5).
Competitive Analysis
Due to the expansive growth and influence on technology, 2Degrees committed $250 million in building the third mobile network in New Zealand. It hired competitive employees for example, Eric Hertz, who has more than 30 years experience in telecommunication and mobile wireless industry to cater for the increased complexity of decisions. The company has also adapted the policy of delivering low carbon economy to cater for the increased government and society interventions (Two Degrees Mobile Limited 2011, par.5).
Marketing Mix Strategies
Price
The company has removed charges on customers switching from other companies to their company to attract customers from their competitors. It has also reduced call charges and offers the cheapest standard prepay calling in New Zealand. The offer of the first pack of 50 MB of mobile data for $6 makes it cheaper for customers to use internet over their phone (Two Degrees Mobile Limited 2011, par.1).
Product
The company allowed customers to top up their SIM cards by use of online top up, voucher, credit card or visa credit cards, auto top up, and use of USB modem. The company provides unique product attributes that makes it highly competitive in the market. For example, they introduced IDEOSX5 Smartphone; the third and highest in the companies’ range of handsets which provides outstanding mobile experience, Android 2.2 operating system and a 2 GB user on board memory. They also introduced a broadband data pack, which provides the best value data on the network (Two Degrees Mobile Limited 2011, par.1).
Place
The company established its networking in the main city centers of Auckland, Wellington, Christchurch, and Queenstown. It connects to places with large exposure of customers yielding large profits at the same time. It has plans to increase the number of its own branded retail outlets and additional call centers to cater for the high demand of data and the long-term growth potential of the company (Two Degrees Mobile Limited 2011, par.2).
Promotion
The company campaigned MED to pass spectrum management to the commerce commission since they conflicted with the fiber network deployment. This reduces prejudice of New Zealand consumer interest to improve telecommunication competition policy, which leads to reduction of call charges. 2Degrees has become a partner of fly buys which is the largest and most successful loyalty programme in New Zealand so that its customers can collect points by top up and while purchasing phones and accessories. It is the only telecommunication partner in the fly buys programme loyalty New Zealand. Chief executive Lance Walker announced that 2Degrees is a dynamic and exciting brand which maintains and attracts a large number of new customers (Two Degrees Mobile Limited 2011, par.3).
Conclusion
Customers nowadays have a clear perception of what they want. Most companies that previously had adopted product-oriented strategies are now shifting to the market oriented approach. Stake industry groups decision-making leads to open and public threats to price increase, delayed innovation and investment makes customers to get confused on what value matches the quality of their demands. This reduces their purchasing power.
Recommendations
2Degrees being an emerging company pushing its way against the cutting throat competition of the market dominating mobile service providers; needs to draw its focus on establishing its uniqueness in the market rather than tackling the competition head on. New Zealand telecommunication companies need to reduce their terminal rates and advance their network investments in order to allow customers to call and called by anyone, anywhere, any time or from any network to improve its service delivery to its customers and open up competition.
Research Contribution
The study provides various aspects that when followed would lead to growth and advancement of the existing knowledge. It acknowledges the existence of failure and explains different ways of overcoming it. After carrying out the survey, it will be possible to prove mathematically the validity of the study. The 2Degrees company has been able to include their culture of innovation towards products as well as in their internal processes. They have been able to survive in the market despite competition from other companies. Good analysis of the market helps to realize new opportunities, allocate marketing resources based on relative market potential and improve the company’s profits. The study will advocate for values control, stability, and customer relationship and loyalty (Two Degrees Mobile Limited 2011, par.3).
Identification of Limitations
There is generalization of the study based on theoretical approaches. Failure of knowledge on the management and implementation of the company limits research to theory. Validity depends mostly on data collected and analysis done which might be different depending on the theory available (Kotler 2009, p. 46)
It is also difficult to measure the knowledge and its management. Indentifying and investigating the knowledge management on the development of the company is difficult. There is no standard measurement in the different companies depending on the differential in the services or products offered. The study however will measure this by looking at the impact in the resources, people, growth of the company and budget of the company (Kotler 2009, p. 46).
Observing marketing in action
A monopolistic market prevents any to-any connectivity and full utility of services. Firms in a monopolistic market have control over their prices, but usually small, because the products are close substitutes. For example, incumbents in New Zealand threats to increase prices or otherwise the investments on infrastructure will reduce. According to macro environment analysis, 2Degrees is at risk of low utility within a short period due to the high off-net price premiums charged on competitor customers’ call to 2Degrees customers (Practice Marketing and Management 1999, p. 14).
List of References
2Degrees limited 2011, 2Dgegrees: Two degrees mobile limited, Web.
Bach, S 2000, Personnel management: A comprehensive guide to theory and practice, Wiley-Blackwell, Hoboken.
Hooley et al 2004, Marketing strategy and competitive positioning: Instructor’s manual, Pearson Education Limited, New York.
Keegan, W 1997, Principle of global marketing, Prentice Hall, Upper Saddle River.
Kotler, P 2007, Marketing, Pearson Prentice Publishers, Upper Saddle River.
Kotler, P 2009, Principles of marketing, Pearson Education Australia, Sydney.
Practice Marketing and Management 1999, American Health consultants, vol.12, no.11, pp.1-10.
Paul Budde Communication Pty Ltd 2011, New Zealand-mobile communication-statistics, analysis and major operations. Web.
Reed, P 2007, Strategic marketing, Select Knowledge Ltd, South Melbourne.