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MARKETING i-mode
Overview
This case study looks at:
◗ the marketing strategy for the launch of i-mode and
◗ the target market and positioning of i-mode within
O2’s product portfolio.
MOBILE COMMUNicATIONS
& LAUNCH OF i-mode
O2 is a leading mobile communications provider with
operations in Ireland, Germany, the UK and the Isle of
Man. O2 began operating in Ireland in 1997 as part of BT
Cellnet. In 2000, BT decided to demerge its mobile
communications operations and to create a separate
company. Thus, the O2 brand was created and launched
across its European markets.
Today, O2 is a major international brand serving almost
24 million customers and offering roaming services in
160 markets. In Ireland, O2 is the second largest player in
the market with over 1.53 million subscribers and 40%
market share. For the year ending March 2005, O2
revenues in Ireland were €816 million.
THE MOBILE
COMMUNICATIONS
MARKET
There are currently four mobile phone operators in
Ireland; O2, Vodafone, Meteor and 3. O2 and Vodafone
together account for 91% of the market. The market is
highly competitive with all players competing strongly
for new customer acquisitions. This means that
advertising, promotion and innovation play an important
role in this industry.
To stay ahead of its competitors, O2 must continue to:
◗ encourage ‘more-often and for-longer’
mobile phone usage,
◗ win over new customers, and
◗ provide new services.
In 2004, the mobile communications
market was worth €1.7 billion in the
Republic of Ireland alone. More than 96% of
adults own a mobile phone, some own
multiple phones for different purposes e.g.
personal and business phones.
The highest rate of ownership is in the 15-24 year old age
group where penetration is at 93%. This group is a major
driver in the growth of SMS text messaging in Ireland where
over 1 billion messages were sent in 2004. To find out more,
see the O2 Case Study from the Irish Times Business 2000
8th edition: O2 and the Rise of Mobile Communications.
Business 2000
ninth edition
www.business2000.ie
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THE O2 PRODUCT PORTFOLIO
O2’s product portfolio comprises of three main categories:
◗ Voice Services: voice calls, roaming services, O2 Assistant,
groupconferencing, voicemail.
◗ Data Services: (SMS) text, (MMS) picture messaging, video
messaging, O2 Active, email, O2 Data Cards.
◗ Online Services: O2.ie mail, My Account, Webtext, online
shopping.
As phone ownership and usage is so high, the communications
market is considered to be at the mature stage of the product life
cycle. Future growth will come from non-voice services such as SMS
and picture messaging, Internet downloads and web communication.
This formed the foundation for O2’s planned introduction to i-mode,
which enables their customers to access selected Internet sites faster
and more easily than before.
Business users
The number of business users is smaller but among this segment
mobile phone usage is much higher. In 2004, this segment
accounted for almost €635 million in Ireland. The majority of
these users are bill-pay customers. Within this segment there are
two main groupings:
◗ SMEs: (Small/medium sized enterprises). These are companies
which have between 1-199 employees. These include start-ups
and young companies still growing. These businesses are more
budget-conscious and an increasing number are availing of
pre-paid deals.
◗ Corporate: These are larger companies employing over 200
people. These organisations have very specific requirements
and have greater demand for non-voice products. They are the
major users of the Data Card developed by O2 which provides
always-on Internet and email access.
TARGET MARKETING
What is i-mode?
i-mode is a service which allows
customers fast access to sites on the
Internet that have been optimised for
their mobile phone at the push of a
button. i-mode technology is easy to
use and able to host a huge range of
top Internet sites. i-mode was
developed by NTT DoCoMo in Japan
in 1999 and is now used by over 43
million subscribers there. In October 2004, O2 announced they
had formed a strategic alliance with NTT DoCoMo and would
launch i-mode on their markets in late 2005.
MARKET SEGMENTATION
The mobile communications market has two main segments:
personal users and business users. These users also fall into further
important classifications: pre-paid and bill-pay. Pre-paid users pay
for their calls in advance using cards and top-up options. Currently,
this is the largest segment accounting for over 74% of the Irish
market. 6% of customers who bill-pay are personal users, so
business customers mainly use this method of payment.
Personal users
◗ Young Professionals: They tend to use their
mobile instead of a landline, living in rented
accommodation or first homes. Those who use
mobiles for texting, off-peak calls and emergencies
are generally quite budget-conscious and may fall
within lower income groups.
◗ Second/Third Level Students: This group is
comfortable with technology and use their phones
for downloading video clips, games, ringtones and
picture messaging.
◗ Teenagers: This group of technically savvy users is
interested in games, ringtones and downloads being
an important part of the product offering.
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Marketing i-MODE
Clearly, all of these groups have different requirements and O2
targets them in different ways. Target marketing is the process of
dividing the market into identifiable segments (or groups) based on
behaviour or other shared characteristics. Businesses must then
select which segments they can serve best and most competitively.
These then become the target market(s) for the company.
TARGET MARKETING STRATEGIES
Companies can target markets in four main ways:
◗ Undifferentiated marketing: The ‘mass market’ approach
where one marketing mix is developed for the whole market
e.g. ESB, as the same service is provided for everyone.
◗ Differentiated marketing: A separate marketing mix for each
target market e.g. O2 BlackBerry for business customers and
phones with parental security for children.
Concentrated
marketing: One segment only and the business
◗
specialises in serving that one target market e.g. Ferrari only
target high income consumers.
◗ Focused marketing: One customer segment. This is primarily
the case with business-to-business (B2B) marketing e.g.
developing specialised software systems for a large bank.
i-mode Market Research
Market research carried out
by O2 showed the primary
target market for i-mode to be
25-34 year old male and
female young professionals
with a high disposable income
living in urban areas. This
group uses the Internet as part
of their daily lives. They would
typically access sites like
airlines, music, banking, news,
entertainment, classifieds and
health websites.
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DIFFERENTIATION
Differentiation gives a product/service a unique advantage setting
it apart from competitors’ products. This advantage is recognised
by consumers and they are willing to pay a higher price for it.
As the mobile communications market moves into maturity,
companies must find new ways to stay ahead of the competition.
In mobile communications this is done largely through marketing
and innovation. Companies develop differential advantage by
improving the design of handsets and/or by developing new
technologies to create new benefits for customers. O2 can
differentiate their products and services according to which benefit
they are satisfying.
How is i-mode different?
i-mode runs on a different technology called chtml (a subset of
html) which makes it quicker to access and more user friendly. The
main customer benefits of i-mode are:
◗ Fast access to a range of services through an i-button on the
phone.
◗ Easy for content providers to create an i-mode site.
◗ More services available. Already there are almost 90,000 i-mode
sites worldwide, including news, weather, search engines,
banking, cinema listings and music ring tone downloads.
◗ i-mode is designed to be "walk-out working", i.e. the phone
comes fully operational and customers have no further hassle
with set-up.
◗ Pricing is clear and transparent so customers know exactly
how much they are spending.
i-mode provides customers with all the benefits of the Internet on
their mobile phone. It is the first mobile Internet communications
system to do this, therefore the challenge for O2 is: How to inform
the market of the benefits of i-mode? To achieve this, the
positioning and the launch strategy of the new service is crucial.
POSITIONING
Positioning relates to the consumer’s perception and image of a
product/service. It involves developing a unique position for the
product/service in the mind of the consumer. Positioning may be
based on the features, benefits, occasion of use or even the type of
user for the particular product/service. It is important that
companies select one major basis on which to position a
product/service so that consumers develop the desired image of
and attitude towards it.
Positioning i-mode
To understand how consumers were likely to perceive i-mode, O2
carried out market research. The findings helped them to
understand the key benefits for consumers and position its
marketing strategy. Some key issues were:
◗ Communication: O2 must show how significantly different
i-mode is to other services. Customers will need to be educated
in this.
◗ Access: Customers must understand how easy it is to use i-mode.
◗ Handsets: Design of handsets is crucial to product appeal, so
i-mode will need to be launched with exciting new handsets.
◗ Pricing: Customers are concerned they may run up bills without
knowing, so this pricing must be communicated clearly.
◗ Services: Research showed O2 which services customers
would prefer to have available. This is important, not only for
the launch, but also helps determine which companies should
be approached to become i-mode partners.
Given the target market already identified, it became clear that
i-mode should be positioned as pioneering (new and exciting),
status (lifestyle and "cool" factor), and fun.
Business 2000
ninth edition
O2
Marketing i-MODE
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LAUNCH STRATEGY
ACTIVITy
Your class is competing in the Young Scientist of the Year
competition and your team has developed a software
programme called ‘Homework Helper’. You have
become aware of O2’s new i-mode service and believe
this to be an exciting vehicle for your programme.
However, you need to convince O2 to host the site.
The class is divided into teams of 4 – 6 persons. Each
team competes for the prize of becoming an i-mode
partner site.
When all tasks have been completed each team will give
a formal presentation to ‘pitch’ the product to O2 – the
business teacher and one member from each of the other
teams will represent O2 at the presentation.
Marketing Mix
The campaign to launch i-mode carried the message: i-mode is
exciting, fun, easy-to-use and allows customers to access any
Internet service they require at the push of one button on their
mobile phone. This message was carried to its two main targets:
consumers and retailers.
It was important also for O2 to inform retailers of the i-mode
launch in advance to create excitement about the potential business
i-mode would generate for them. Retailers were invited to launch
events, received training on i-mode and were given exciting
interactive POS (point-of-sale) displays and handsets.
The comprehensive campaign included TV advertising, print ads
(newspaper and magazines) and outdoor advertising such as
billboards, bus stops, as well as on-street activity. Online marketing
was important too, including banner ads, interactive games etc. on
partner sites like Google (Ireland).
CONCLUSION
i-mode is an exciting new method of mobile internet technology,
giving customers fast and easy access to a wide variety of services
and sites, of both global and local interest. For O2 to successfully
introduce i-mode into the Irish market they had to research the market
to correctly identify their primary target market and then develop a
positioning strategy which ensured consumers developed the desired
image of the service. Finally, the service had to be launched
successfully, and this was carried out by means of integrated
marketing communications to ensure that all targeted consumers
were reached, and that one message was consistently delivered.
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1. Segment the market for your service.
2. Decide on a target marketing strategy. Define the
segment(s) chosen, justify the selection and give
reasons for your strategy.
3. Develop a positioning strategy for your target
market.
4. Develop a communications/launch strategy for the
product.
5. Prepare a presentation to pitch the product to O2. All
team members must participate in the presentation.
After each presentation there will be a Q&A session
where O2 can question the strategy. After all
presentations O2 will make a decision
Find out more
For more information on O2:
◗ Click on the website www.O2.ie
While every effort has been made to ensure the accuracy of information contained in this case study, no liability shall attach to either The Irish Times Ltd. or Woodgrange Technologies Ltd. for any errors or omissions in this case study.
The launch of i-mode began in October 2005. The campaign was
designed to create interest, anticipation and curiosity in the target
market. Crucially, the campaign was designed to be fully
integrated - where all communication channels sent the same
message to consumers. The objectives of this campaign were:
◗ To create awareness of the i-mode brand.
◗ Communicate the benefits and educate the consumer on
i-mode services.
◗ Demonstrate the key i-mode services.
◗ Motivate consumers to go to the store to experience – and
then purchase – i-mode.
Business 2000
ninth edition