Omnitel Pronto Italia Case

Case: Omnitel Pronto Italia

Executive Summary

Omnitel, the 2nd GSM mobile operator in Italy has two alternative product offerings to launch into the Italian market. Additionally, their consumer research points to multiple consumer needs and pricing expectations. In order to increase their market share, Omnitel has to offer multiple tariffs and a use combination of both the subsidized contract plan and the no-monthly fee plan to meet the consumer's requirements.

Omintel Mobile: Launching Against An Incumbent Monopoly

Following the 1995 liberalization of the mobile operators market in Europe, Omintel acquired the license to become the 2nd mobile GSM provider in Italy. Their competitor Telecom Italia Mobile (TIM), had a monopoly of a 4 million strong customer base. Due to its dominant position and its strong retailer presence TIM was able to keep its marketing costs low. TIM aimed their phones at high-end personal consumers and business users, marketing them as an exclusive accessory.

Omnitel entered the Italian mobile market in 1995, launching a similar priced product to TIM, with "American" customer services values as their competitive advantage, They aimed to gain a large market share from TIM, but not to start a price war with them, due to TIM's financial strength. Their perceived competitive advantage seemed to match the requirements of the current high-end Italian consumer and business market, who expected quality customer service in return for their monthly fees. The cornerstones of Omnitel's customer service was polite customer service operators who could help customers with all their issues and reducing the waiting time to speak to an operator to near zero.

In signing up only 180,000 customers in the first year, Omnitel's strategy failed due to having a near identical product and pricing strategy to that of TIM and they were unable to differentiate themselves in a monopolistic market, where TIM had first mover advantage and better funding.

Shaking Up The Market: No-Monthly Fee Product

The plan being proposed by Omnitel, LIBERO, is a radical change to both the current Italian domestic market and the entire European mobile market. The unique marketing mix was differentiated around the product:

Product: Unlike other European providers and TIM, Omnitel aimed to offer a no-monthly fee plan, which was free from taxes and from free minutes. They would charge full price for the handset and charge based solely on usage. The differentiation of not having to pay a monthly should ensure a large gain of customers from TIM, as they perceive a pay-as-you-go model to be a cheaper option for their use. It would also attract new customers who wanted a mobile for limited use and were put off by the monthly fee. The plan did hold major risk as monthly customer revenue is not guaranteed and it could attract a "low quality" customer, who through limited usage will also decrease revenue.

Promotion: The promotion plan to back the product launch was massive, with a 40 billion LIT planned advertising campaign over just a 3 month period, double that of TIM. Such a large advertising budget, used correctly, was sure to drive product adoption. Yet new customers could tail off drastically once the campaign has ended.

Place: Selling on the product differentiation, backed by a large advertising and not increasing retailer commission, would avoid a retailer commission war with TIM.

Price: The Pay-As-You-Go plan is estimated to have the return per customer every month below, with a one-time setup of cost of 10,000 LIT. Surprisingly, this estimate represents an increase in usage of 5 minutes per user every month compared