Impact of Reliance Jio's adventurism on incumbent players
“Never venture, never win!” — A quote by Sun Tzu, The Art of War, describes the pulse prevalent in the telecom market after the launch of Reliance Jio. The game has clearly changed.
All players now need to venture out of their comfort zones and strategically place their bets in order to come out as a winner. Those who don’t do it or don’t do it swiftly enough would lose out in the inundate scrambling for market share.
Over the last few days, there have been numerous viewpoints and pre-mature declarations of winners and losers of this new game. However, it is too soon to pass a verdict or write any form of corporate obituary for anyone. We are only on the first lap of this mega race where new contours have been defined:
Price sensitivity: Making voice 100% free, unlimited data free till Dec 31 Customer delight: No blackout days, unlimited data at night, eKYC Targeting heavy data users: Extra 25% data to students, free bouquet of apps for a year Product substitution: Substituting voice services with data for common man Expanding affordability net: Offering low cost handsetsJio as a challenger has created a massive buzz in the market. It has forced competitors to look at what they are offering and forced consumers to look at what they are paying.
Competition is always good for all stakeholders involved. For customers, it allows reduced prices and more choices. For the industry, it forces innovation, lowers cost of operations and provides boost to peripheral sectors like handsets, SIM providers and others. There might be short-term challenges but if dealt with right intent and strategy, benefits outplay the losses.
In the current scenario, immediate term impact would be: Increase in dual SIM users – consumers can purchase a Jio SIM but won’t give up the old SIM
Data adoption is expected to go up which can also drive up sale of 4G handsets Data revenues are expected to nearly double over the next two to three years for the industry as a whole
Medium average revenue per user (ARPU) and youth segment may shift faster than higher ARPU customers. High ARPU customers may use it as second SIM for data usage only
Single leg voices users may consider this as a lucrative option Boost to overall industry ARPU after expiry of promo period as start-up pack is at Rs 149
This competition however cannot be won only based on price. It will be critical to balance ‘customer vs competition orientation’, where former drives profits, latter drives market share. Different strategies may be adopted in various combinations to combat each other in the market place.
Price wars: Freebies and drop in prices are on constant offer. While price wars enable market share gain or retention in short-term, it is not a sustainable method from profitability and differentiation perspective. In current scenario, tariff revisions, promos and freebies may continue for few months but may get supplemented by service excellence and customer segmentation strategies. Also, over a period of time, price drops may get replaced by innovative pricing including easy financing schemes to drive up affordability for 4G handsets.
Customer awareness: India is a heavily voice dominant market with over 65% of subscribers still on feature phones (non 4G enabled). Many subscribers may not know the difference between 2G, 3G, 4G. As a result, making customers aware and helping them take a prudent decision shall be a critical strategy. Through various touch-points such as retailers, ATL/BTL campaigns, call centers etc., telcos should now educate customers about 4G and its benefits. They need to proactively reach out to target segment and communicate product features and benefits as applicable to them.
Service excellence: Customer experience will become a focal point for gaining or retaining market share. Telcos with faster adoption of new technology, more customer friendly processes (application based subscriber registration and proof submission, crowd sourcing for customer query resolution, loyalty rewards) and superior network quality can win over customers based on customer delight. It is crucial for Jio to manage teething issues like inventory run downs, system downtimes and limited awareness of front line with swiftness. At the same time existing players need to be agile, despite their behemoth size and make operations lean and customer savvy.
New usage: Customer behaviour data is oil for new age telecom marketing. With access to customer usage pattern —what, where, when – telcos have rich insights on customer behavior that can be used to design specific offers and drive usage. While segmented marketing is almost a decade old in the industry, traditionally it has worked in silos for voice, data and other services. The current market dynamics require integrated segmentation enabling cross selling across voice, DTH, broadband etc
New users: Telcos need to proactively hunt for new users - B2B segment, semi urban and rural markets still provide an opportunity to increase overall market size and bring in new users in the market. However, this strategy is likely to be successful only if the focus moves away from what product customer buys to why does customer buy.
Diversification and innovation: Leading global telcos in mature markets today recognise themselves as digital media or technology company. Telcos cannot command premium by only providing pipes of communication. As a result, there is heavy investment required in new revenue streams such as B2B offerings, M2M and IoT platforms. Through new business units and revenue streams, Indian telcos can command back market leadership.
We will see some exciting times in future marked by innovative products, pricing, acquisition and retention strategies. We have a potential market of over 1.2 billion users. Existing levels of competition may drive consolidation and create a healthy space for five to six players. However, their position will be based on how effectively they play out their competitive strategies. Overall, the industry is standing on the brink of another evolution.
