Return on Marketing Investment
By
Awais Malik
Head of VAS Division, Mobilink, Pakistan
Pakistan—The Emerging Economy
A Large, Young Market with Untapped Potential
■
The 7th largest country in the world
■
160 million people
Huge Growth Potential
■ 104 million rural and 56 million urban
■
43 million workers employed
■ 56% employed in non agricultural sectors
■
A young nation – people growing into the addressable market
■ 42% of the total population between 15 and 40 years
■ 28% between the age of 5 to 15
■
Private sector consumption for 2004-05 equal to US$ 87 Billion
■ 30% increase over 2003-04
Source: Economic Survey Of Pakistan 2004-05, Company estimates
Pakistan Mobile Communications (Pvt.) Limited
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Rising Per Capita Income
Signs of Emerging Middle-Class
736
750
700
652
650
582
600
526
501
503
2001-02
550
2000-01
Per Capita Income (US$)
800
500
450
2004-05
2003-04
Years
2002-03
1999-00
400
Source: Economic Survey Of Pakistan 2004-05
Pakistan Mobile Communications (Pvt.) Limited
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Expanding GDP Growth
Growth Only Second to China in Asia
9.00%
8.4%
Real GDP Growth (%)
8.00%
7.00%
6.00%
6.4%
6.1%
5.00%
4.9%
4.00%
4.8%
4.0%
3.00%
3.1%
2.00%
1.8%
1.00%
2004-05
2003-04
2002-03
Years
2001-02
2000-01
1990-II
1990-I
1980's
0.00%
Source: Economic Survey Of Pakistan 2004-05
Pakistan Mobile Communications (Pvt.) Limited
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Evolution of the Telecom Industry in Pakistan
The Telecom Industry in Pakistan
Rapid De-regularization
■
Highly Regulated Environment till the late 90’s
■
1990-91 Formation of Pakistan Telecom Corporation (PTCL) – offering fixed line services
(Formerly Posts and Telegraph Department in 1947, and Pakistan Telephone and Telegraph
Department in 1962)
■
1990-91 Issuance of Two Licenses to operate Cellular Services in Pakistan – AMPS
Technology
■
1994 Entry of third operator – Mobilink - in the market. First GSM in Pakistan
■
2001 Entry of fourth cellular operator – Second GSM in Pakistan
■
PTCL’s monopoly ended in December 2002 with deregulation of the sector in January 2003
■
2004 Entry of Third GSM Operator (conversion of an existing AMPS Operator)
■
2005 Entry of Two more GSM Operators under new licenses
■
2005 Privatization of PTCL
Pakistan Mobile Communications (Pvt.) Limited
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Cellular Infancy – The 90’s
Telecom Industry - 1996
AMPS
2%
GSM
1%
Fixed Line
97%
■
Fixed Line dominated the 90’s followed by AMPS
■
GSM was in the initial stages
Source: Telecom Status Report / Economic Survey of Pakistan
Pakistan Mobile Communications (Pvt.) Limited
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The Growth Potential –The early 2000’s
Telecom Industry - 2002
GSM
21%
AMPS
10%
Fixed Line
69%
Source: Telecom Status Report / Economic Survey of Pakistan
Pakistan Mobile Communications (Pvt.) Limited
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2005 – GSM Dominance
Telecom Industry FY-05
GSM
64%
Fixed Line
31%
AMPS
5%
By Mid 2005, GSM subscribers outnumbered the fixed line subscribers by a wide margin
Source: Telecom Status Report / Economic Survey of Pakistan
Pakistan Mobile Communications (Pvt.) Limited
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Cellular Outnumbers Fixed Line
35
30
Subscribers (millions)
Cellular users out numbered
landline in July-04
25
20
15
10
5
Landlines
To Date
Dec-05
Jul-05
Jun-05
Aug-04
Jul-04
Jun-04
Dec-03
Dec-02
Dec-01
Dec-00
Dec-99
Dec-98
Dec-97
Dec-96
0
Cellular
Source: Pakistan Telecommunication Authority (PTA) estimates, Company estimates
Pakistan Mobile Communications (Pvt.) Limited
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Cellular Industry Growth
35
Cellular customers in Pakistan (millions)
The numbers in italics represent %age growth over preceding year
54%
30.6
30
25
140%
20
19.79
15
80%
7.94
10
98%
39 %
5
0.93
0.40
134%
3.30
1.83
Pakistan Mobile Communications (Pvt.) Limited
2005
To Date
Years
2004
2003
2002
2001
2000
0
12
Cellular Penetration—Unexplored Potential
45.00%
Some analysts estimate total market potential at 40%
Penetration Rate
40.00%
35.00%
Thailand Penetration rate; 47%
Philippines Penetration rate; 41%
China Penetration rate: 28%
30.00%
Source; Wireless Intelligence
Huge Untapped
potential
25.00%
20.00%
15.00%
10.00%
5.00%
ec
-1
0
D
ec
-0
9
D
ec
-0
8
D
ec
-0
7
D
ec
-0
6
D
ec
-0
5
D
ec
-0
4
D
ec
-0
3
D
ec
-0
2
D
ec
-0
1
D
ec
-0
0
D
ec
-9
9
D
ec
-9
8
D
ec
-9
7
D
D
ec
-9
6
0.00%
Source: Company estimates, PTA /telecom Status Report ITU
Pakistan Mobile Communications (Pvt.) Limited
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Mobilink—The Growth Engine
Mobilink
1 million new customers added to the network
every month
Population of Islamabad ~627,000
(Capital of Pakistan)
Pakistan Mobile Communications (Pvt.) Limited
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Mobilink— Innovating all the way
Leading The Industry
■
First operator to introduce GSM technology to Pakistan
■
Largest coverage area backed by the largest sales and distribution network
■
First to introduce the franchise concept to Pakistan – still the biggest distribution by far
■
First operator to introduce a prepaid product – dominates the market today
■
First – and only – operator with separate, established Postpaid and Prepaid brands
■
First to reach over US$ 1 billion in investment
■
First-ever GPRS Portal in Pakistan
■
First to introduce low denomination scratch cards in Pakistan
■
First to introduce Blackberry services in Pakistan
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Return on Marketing Investment
Why Measure ROI
■ Optimize the Product Portfolio
■ Optimize the marketing resources allocation
■ Performance measurement of the team
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Limitations of ROI
■ Intangible / Non financial returns difficult to measure and incorporate in
the performance measurement system
■ Time period mismatch of Return and Investment, two building blocks of
ROI formula
■ Goal incongruence for managers: investment by a manager might result
in return in another manager’s tenure. Manager’s might hold back
investment to obtain better ROI figures
■ Long term goals neglected as the ROI drops in the short term upon long
term investments
Pakistan Mobile Communications (Pvt.) Limited
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Long Term investments
Revenue
$
Initial heavy investment results in …
… sustained revenue streams, often after a
considerable lag
Investment
Time
Time period mismatch of Return and Investment
Pakistan Mobile Communications (Pvt.) Limited
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Financial and Non Financial Returns on Marketing Investment
■ Image Building – Attracting new customers
■ Building an image of being Innovative, customer oriented and leading the market
through new VAS services
■ Retention – Holding on to old customers
■ Ensuring customers are hooked on to unique VAS services
■ ARPU – Increasing ARPU
■ Enticing customers to spend more through innovative VAS services
Pakistan Mobile Communications (Pvt.) Limited
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How to Measure ROI in Marketing
■ Marketing Investment results in both financial (tangible) and non
financial (non tangible returns)
■ Traditional ROI analysis excludes the intangible part which is difficult to
quantify and measure
■ A mix of financial and non financial indicators should be used
■ Besides these indicators, every investment should be analyzed on the
estimated contribution towards strategic goals
Pakistan Mobile Communications (Pvt.) Limited
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Mobilink – Employing a Mixed approach
Mobitunes – PRBT service
■ High Financial investment
■ Very high revenue stream from the
month of launch
■ Important % of total VAS revenue
Bolo SMS – a voice messaging service
■ High investment similar to Mobitunes
■ Revenue 20 times less than Mobitunes
■ Very small % of VAS revenue
Pakistan Mobile Communications (Pvt.) Limited
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Mobilink – Employing a Mixed approach
■ Traditional ROI analysis based on financial metrics would not allow for the Bolo
SMS service
■ However, a new category in being developed by Mobilink
■ New user behavior has to be formed
■ Brand image is being boosted as customers consider Mobilink a pioneer in voice
messaging (even when it was second entrant to this area).
■ Market research reveals that people associate the voice message service with
the brand name Bolo SMS
■ Usage and revenue trends of this category might be like SMS in the long run, i.e.
low usage for some time period and then a steep increase (multiplier effect in
the customer base)
All this possible through heavy investment in strategic objectives
Pakistan Mobile Communications (Pvt.) Limited
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Metrics to be used
Action
Result
Nature of Results
Metrics to be used
Brand Building
Intangible and prolonged
Brand Equity indicators
Delayed and Prolonged
Retention
of
Customers
Investment
effect
Brand Loyalty indicators
Immediate measurable
effect,
Higher ARPU
Pakistan Mobile Communications (Pvt.) Limited
ARPU increase
however difficult to
estimate the fall in ARPU in
case of non investment
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Non Financial Metrics
■ Brand Equity Indicators
■ Brand Awareness
■ Brand Image
■ Price premium charged (e.g. compared to industry average)
■ Extra sales and usage volume generated
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Non Financial Metrics
■ Brand Loyalty Indicators
■ Purchase probability studies
■ Price change: impact of actual change / simulated studies
■ Customer Satisfaction metrics
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Financial Metrics
■ ARPU increase on investment
■ Sales / Usage Volume trends
■ In many cases especially in case of free services, ROI would be simply
the number of customers that are retained
■ Lifetime financial value of new customers / retained customers to be
incorporated
Pakistan Mobile Communications (Pvt.) Limited
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Market Research – Role in measuring ROI
■ For financial component of ROI analysis:
■ Market research offers the numeric data about the retained customers, new
customer directly attributable to the services
■ For non financial component of ROI analysis:
■ Market research provides:
■ Brand loyalty and equity data
■ Customer satisfaction data
■ Market research can help in predicting successful services which would
result in higher ROI in the long run
■ Qualitative research would be more relevant in this area
Pakistan Mobile Communications (Pvt.) Limited
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Conclusion
■ ROI in marketing projects is extremely difficult to measure
■ Returns are almost always a mix of financial and non financial
performance
■ Traditional ROI analysis poses many limitations which must be avoided
by customizing the analysis for the marketing issues.
■ Brand indicators and customer satisfaction measures must be included
in the ROI analysis
■ Heavy initial investments have to be made for strategic objectives where
the financial results might be achieved in the long run
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Thank You
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