Omnitel Case Study
Executive Summary
Omnitel Pronto Italia (Italy’s second mobile phone service provider) is faced with an opportunity to introduce a new market driven strategy. One problem it faces is in differentiating itself from Telecom Italia Mobile (TIM), a state owned and operated provider who until Omnitel’s entrance into the market had a monopoly over the Italian telecommunications market. The second issue is implementing a pricing strategy and plans that TIM will not view as price cuts, ultimately setting off a price war.
In an effort to propose a pricing strategy that will create value at the corporate, product and executional levels, Team N has been asked to assess a wealth of market research and data. After thorough evaluation, the team has concluded that the best way for Omnitel to distinguish itself from TIM without creating a price war would be to continue to maintain and increase its level of customer service, not subsidize its handset, direct efforts to alter customer perception around the cell phone and finally, modify its strategy to target the middle to middle/upper class, leaving TIM its existing high-end customer base. This paper will summarize findings from recently conducted market research and recommend a strategy that will help meet these objectives.
Introduction
Omnitel entered the Italian communication market in February 1995. It offered plans similar to TIM’s. In the hopes that superior customer care would be its competitive advantage, Omnitel focused on high quality customer service. However, after several months’ data proved that although customers were pleased with the quality of service, the strategy did not result in a corresponding increase in market share. Only 4% of the market was gained as a result of this initiative. In January 1996, Omnitel reported 60,000 subscribers (its first month of service) and by May, their coverage had extended to 50% of the territory.
Omnitel charged customers a monthly fee in addition to
Omnitel Pronto Italia (Italy’s second mobile phone service provider) is faced with an opportunity to introduce a new market driven strategy. One problem it faces is in differentiating itself from Telecom Italia Mobile (TIM), a state owned and operated provider who until Omnitel’s entrance into the market had a monopoly over the Italian telecommunications market. The second issue is implementing a pricing strategy and plans that TIM will not view as price cuts, ultimately setting off a price war.
In an effort to propose a pricing strategy that will create value at the corporate, product and executional levels, Team N has been asked to assess a wealth of market research and data. After thorough evaluation, the team has concluded that the best way for Omnitel to distinguish itself from TIM without creating a price war would be to continue to maintain and increase its level of customer service, not subsidize its handset, direct efforts to alter customer perception around the cell phone and finally, modify its strategy to target the middle to middle/upper class, leaving TIM its existing high-end customer base. This paper will summarize findings from recently conducted market research and recommend a strategy that will help meet these objectives.
Introduction
Omnitel entered the Italian communication market in February 1995. It offered plans similar to TIM’s. In the hopes that superior customer care would be its competitive advantage, Omnitel focused on high quality customer service. However, after several months’ data proved that although customers were pleased with the quality of service, the strategy did not result in a corresponding increase in market share. Only 4% of the market was gained as a result of this initiative. In January 1996, Omnitel reported 60,000 subscribers (its first month of service) and by May, their coverage had extended to 50% of the territory.
Omnitel charged customers a monthly fee in addition to