THE 2002 STUDENT DIRECT MARKETING COMPETITION
CASE STUDY
1.0
Introduction
This case
study has been written by Orange Communications Plc and Lowe Live with the help
of the Institute of Direct Marketing. Information about Orange and Lowe Live
and from other sources has been provided solely for educational purposes and
should not, under any circumstances, be used for any other purposes. Permission
must be gained from the IDM and its partners prior to the use of these
materials outside the context of the IDM National Student Direct Marketing
Competition. Certain assumptions have been made (in both the brief and task) in
order to cover sensitive data.
All queries
regarding the case study must be made in the first instance to the IDM’s
Educational Department whose details are included on page 11 of the Rules and
Regulations booklet. Orange Communications Plc and Lowe Live MUST NOT be
approached without first contacting the IDM.
2.0
Company History
On 28 April
1994 Orange joined the mobile phone market as the fourth network following
Vodafone, BT Cellnet and One 2 One. Since Orange’s inception, the business has
been led through a number of changes from its initial flotation in June 1996
with 500,000 customers, through to when Mannesmann acquired Orange in October
1999. In February 2000 Vodafone Airtouch acquired control of Mannesmann and
Orange was de-merged. In October 2000 Orange announced the completion of agreed
acquisition by France Telecom.
From the
beginning, Orange chose to differentiate itself from the competition.
The company
launched with confidence and a vision of a bright future. In a marketplace
crowded with confusion with existing services, it promised to be consumer friendly
by removing unnecessary jargon, focus on customer service and to lead the way
in innovation. Amongst a number of these it was first to offer minutes included
in the monthly charge, per second billing, Answer Phone as standard and free
itemised billing.
The Orange
vision is to create a better future where people can communicate wherever,
whenever and however they wish. It aims to become the first global wirefreeÔ
communications brand that wherever they operate or the brand is licensed they
will be the first for service, the first for quality, the first for innovation
and the first for choice.
This is marked
by a number of awards over the years. In May 2001 for the fourth year running,
Orange was ranked the number one Mobile Telephone Service for Customer
Satisfaction in the United Kingdom[1].
Orange have also won awards for their customer services.
Orange now has
over 12 million customers, 31% of which are on pay monthly packages and 69% are
on pay as you go. Orange now provides a wide range of services in over 100
countries overseas. Orange France is currently the largest and fastest growing
operator in France during 2000 and ended the year with a market share of 48%
and approximately 14.3 million customers. At the end of 2000 Orange had over 30
million customers worldwide. As well as France and the UK, Orange controls
operations in The Netherlands, Switzerland, Belgium, Denmark, Romania and
Slovakia. It has joint ventures in Italy, minority interests in Germany,
Austria and Portugal, as well as interests in 7 countries beyond Europe.
At launch
Orange was the fourth and last entrant to the mobile communications market.
Orange is now the largest network in terms of active customers and was the
fastest growing operator in the 18 months to leading to March 2001.
2.1 Market Growth
The UK mobile
market now totals 45 million registered subscriptions (users) and is considered
to be close to saturation at 76%. Pay as you go is estimated to account for
32.2 million or 71% of the total market penetration.
However, after
a significant increase in the last three years, and potentially reaching market
saturation, growth is beginning to slow down. In a reaction to this, it is
likely that the focus of future communications from all networks will therefore
be on retaining customers and generating loyalty through increased usage of
services – thereby improving profit levels. In addition to this, after a huge
influx of pay as you go customers mobile networks are also beginning to
concentrate on higher value customers, many of whom are on pay monthly
packages. Taking market saturation into consideration, it is extremely likely
that any new customers acquired already own a mobile phone and will be
switching from another network.
Within this
market there are four direct competitors to Orange as detailed below:
Vodafone
Vodafone,
launched in 1985. With 25% share, it is a strong competitor. It is the largest
company in Europe by market capitalisation and the largest mobile
telecommunications company of its kind anywhere in the world. Vodafone has a significant share of the
business market.
BT Cellnet
BT Cellnet
also launched in 1985 and has 26% share. BT Cellnet has the highest share of
WAP phone users but the lowest percentage who use WAP.
One 2 One
Launched in
September 1993 and has 20% share. One 2 One has the lowest coverage of all the
4 networks with 98% of the UK population. As with other networks, One 2 One
have found that recent connections to the network have been predominantly pay
as you go customers, resulting in a decline in pay monthly customers.
Virgin
The new kid on
the block, launching in November 1999. Although classed as a mobile phone
provider it operates on the One 2 One network. Virgin currently has 1 million
subscribers. It only offers pay as you go services.
Total Market
Share (ending 30 June 2001)
|
Network |
Market share (%) |
|
Orange |
28 |
|
BT Cellnet |
26 |
|
Vodafone |
25 |
|
One 2 One |
20 |
Total mobile
phone subscribers for all networks (Q2 2001)
|
Categories |
Total (million) |
|
UK |
45,301 |
|
Pay as you go |
32,208 |
|
Contract |
13,093 |
3.0
Orange Customers and the Orange Database
In 2000 Orange
customer growth outperformed the competition in its key markets of both France
and the UK.
In December
1999 Orange had 2.1 million customers. This more than doubled a year later
reaching 4.9 million in December 2000, and finally hitting 9.8 million
customers in February 2001. Orange currently has over 12 million customers registered
as active subscribers to the customer database.
In order for
Orange to develop into a life services brand it now offers its customers
additional services. These new value
added services have been developed in line with consumer needs and the need by
Orange to develop additional revenue streams.
This will help Orange to continue to grown in line with customers needs
in the future market. A topline overview as to the broad demographics of the
base, and approximate percentages as to how the customer segments are split in
size, is as follows:
|
14-16[2] |
10% |
|
16-18 |
17% |
|
18 – 25 |
22% |
|
25- 35
without children |
17% |
|
25 – 35 with
children |
15% |
|
35 – 55 |
10% |
|
55+ |
9% |
3.1 The Orange
Database
The following
details information currently captured on the database for all existing
customers
·
Title
·
Name
·
Address
·
Postcode
·
Mobile Number
·
Date of Birth
·
Sex
·
Date of connection
to Orange
·
Orange Service
Plan – pay monthly or pay as you go
·
Monthly Spend
·
International
Roaming activated – yes or no
·
Sales channel
they connected to Orange through
There is a
database team who control all database activity for Orange customers and
prospect customers. Customer data is used for forecasting, for billing, for
OFTEL reporting and to de-dupe names against prospect mailing lists. The
database is built and cleansed using data from campaign responses, collated
from people who attend our events, and from lifestyle data list rental.
As well as
having over 12 million existing customer records on the database, there are
also 2.5 million names and addresses of (warm) prospects who have responded to
previous campaigns, but have not yet joined the network. A further 3 million
names have been acquired from a lifestyle data list – these records confirm
that the names bought currently own a mobile phone on a competitor network.
They have not yet received any communication from Orange.
4.0
The Orange Brand
From the
outset, the Orange brand broke the mould of traditional mobile phone companies.
The brand was developed with the flexibility to cross borders and to challenge
the conventions of mobile telephony. All communications are led by the five brand
values: straightforward, refreshing, dynamic, honest and friendly. The overall
tone of all communications is optimistic.
The great
assets of Orange are its vision, its market leading levels of technical and
network quality, its customer service and value, its culture of innovation and
restless energy, and its brand, which stands for all these qualities.
Orange is now
one of the world's leading communications brands.
5.0 Orange’s main products and tariffs (personal market)[3]
Product Range and
information
Orange offers
two types of Service Plans to our customers, depending on their lifestyles,
they can choose from pay as you go or pay monthly.
1. Pay as you go from Orange means that
there is no monthly charge, no bills or credit check. Only the price of the
call is paid for. Once the customer has chosen their pay as you go phone they
can top up their talk time using a top-up card, or by buying vouchers from any
Orange Shop or high street stockist (retail outlet). Standard calls cost 25p
for the first three minutes each day, and 5p per minute thereafter. Text
messaging, Answer Phone and Orange WAP services cost 10p per minute. (Non
standard calls are charged at your Service Plan rates).
2. Pay monthly Service Plans include :
Orange Everytime, Talk 60, Talk 150 and Talk 500.
Orange Everytime is a new service plan for people who
want to keep things simple. Standard calls are 10p per minute whatever time of
day a call is made. Calls to Orange phones, standard UK fixed line numbers,
Orange WAP services and Answer Phone are all 10p per minute. Text messages cost
10p to send and the Service Plan includes 20 minutes of inclusive talk time
each month. (Calls to other mobile networks cost 35p per minute fixed rate).
Orange Talk
Plans provide a choice of monthly charges. Each Talk Plan provides inclusive
minutes of talk time as standard. The monthly charge not only covers these
inclusive minutes, but also subscription to Orange and many other Orange
benefits.
The Orange
Value Promise means that if any customer thinks a popular digital tariff
currently offered by another network suits them better, Orange will provide the
equivalent on their network. The customer can simply choose the tariff that
suits them and enjoy all the benefits of being an Orange customer[4].
New customers switching from another network can also bring their existing
number with them.
Connecting to
an Orange Service Plan includes:
·
Answer Phone
·
per second
billing
·
Caller id
·
itemised
billing
·
Call Divert
·
3 year
warranty / 12 month insurance / 24 hour replacement[5]
·
Call Hold
·
Call Waiting
·
Every Phone
·
14 day money
back
·
Network
Performance Promise
·
Directory
Enquiries
5.1 Orange Value
Added Services
277 Services
277 Text Media
Information is a text based content service that allows you to receive
information / alerts as a text message to your Orange phone. You can choose from:
·
the latest
sports news and results
·
up to the
minute stock prices
·
football
results including - goal flashes (i.e. know the latest score from kick-off
through to the final whistle. Text updates can also be sent whilst the customer
is abroad so they can stay up to date all season).
·
news updates
·
horoscopes
This
information can be a one-off request where a short code is sent (via text) to
277 and information is returned immediately or an ongoing watch where updates
are sent until the customer sends a code to 277 to end the updates. The service is free to set up.
Customers are
charged on receipt of a message, there is no charge to request the
information. Sports and lifestyle
information costs 12p[6],
financial information costs 30p per message.
177 Voice Media
This is an
alternative service to the text based version (277) as it allows you to listen
to all the latest news and information.
Customers can call 177 from their Orange phone and follow the prompts to
select the service that they are interested in.
With Orange
Voice Media you can find out the lastest sports news and headlines as well as
weather forecasts, traffic information (customers can listen to updates on the
latest delays) or get information on UK club guides.
Calls to 177
Voice Media are charged at 20p per minute whatever time of day you call.
Orange International
Calling
Orange phones
can be used to call abroad from the UK and make calls from abroad. Customers
can now also send text messages from up to 60 countries around the world.
It is free to
enable your phone for making and receiving calls whilst you are abroad.
Customers may be asked for a deposit but there is no connection fee. The number of countries in which you can
make and receive international calls depends on whether you have a single, dual
or tri band phone.
Pay as you go
phones have recently been enabled so that customers can use their phones in
certain parts of Europe (again depending on whether the phone is single, dual
or tri band).
Text Messaging
Text Messaging
allows you to send messages of up to 160 characters in length to anyone with a
mobile phone. Text messages are free to receive in the UK, the cost of sending
a text message depends on your Service Plan rates. All customers can send and receive text messages.
Orange WAP Services
WAP lets you access selected information via your
Orange WAP phone. The information
available includes the national, world & business news headlines, the
latest sports news and results, the latest music news and reviews, games such
as X-men and DinoIsland, what’s on TV or at the local cinema, film reviews,
your daily horoscope, share prices, banking (Abbey National customers only),
traffic and rail information, city guides, holiday information and motoring.
If you also have set up an Orange Internet email
account on orange.co.uk you can use your WAP phone to send and receive email as
well.
Usage
9% of
subscribers or 9.5 million subscribers have a WAP phone. Of these around 38%
use their phone to access the internet/WAP sites suggesting that handset
adoption is not driving uptake of WAP services. Following the initial over
promise of its capabilities there is still some way to go for all networks to
increase adoption of WAP, however, this is now re-establishing itself and the
future looks promising.
Orange share
of WAP phone owners is 20% however 48% of Orange WAP phone owners have used
their phone to access the internet/WAP sites suggesting the weekend WAP
promotion (free weekend WAP calls) has encouraged usage. Orange needs to promote WAP usage.
Students and
adults aged 25 - 35 without children are most likely to have a WAP phone/use
WAP - Orange and One2One has a higher presence of these groups. These groups are also prospects for 3G
services (allowing faster access to internet services) and Orange needs to
maintain this position to ensure its future success.
WirefreeÔ Gaming
Mobile and
online gaming are seen as one of the key future platforms for the gaming
industry. In terms of technology, wireless gaming is a relatively new concept
with phones being able to connect to the web, via WAP, delivering basic game
play like boxing, casino, text-based adventure games and simple action games. All
next generation consoles including Playstation II, Nintendo, X-Box and Sega
will have a connection to mobile handsets from their home console by 2002.
Orange is set to become a key player in the wirefreeÔ gaming arena.
Both analysts and major publishers predict that mobile gaming will generate
considerable revenue for companies involved in it’s development.
What % of
customers are using services now?
Generally
apart from text messaging and use of Answer Phone, penetration of the services
is low. The heaviest users are most likely to be students or 25–35 without
children whereas 55+ tend to be the lightest users. Heavier users are also more
likely to be male and to have owned their phone for longer. Social class
appears to have no impact on the volume of usage.
Usage varies
greatly on the various segments, however we can assume the following adoption
rates :
55% Text
messages (personal)
15% 277/177
information
25%
International Calling
What extras do users
have to pay for and how much
Phones and accessories
cost extra, although from time to time certain phones are provided at no extra
charge as part of a promotion[7].
6.0 Sales Channels for Orange phones
Orange
products are distributed across three main channels direct to Orange:
Orange Direct
The direct
selling arm of Orange. Orders come via telephone (0500 80 10 80) and the
internet www.orange.co.uk.
Orange Shops
Connections
can also be made by purchasing directly from one of the 125 Orange Shops across
the country.
Retail
In addition to
the three channels exclusive to Orange, many connections are also made through
retail channels. There are numerous dealers throughout the country i.e. The
Carphone Warehouse as well as various high street stores such as Boots,
Woolworths.
All channels
have the ability and authority to enable the value added services to be sold.
APPENDIX
Standard
Industry Response Rates:
|
Media |
Response
Rate (%) |
|
Direct Mail
(cold acquisition) |
1.5-2 |
|
Direct Mail
Pack (warm prospects) |
3-5 |
|
Inserts |
0.1-0.2 |
|
Press:
Horizontal |
0.2 |
|
Press:
Vertical |
0.7 |
|
Email: cold
acquisition |
1.5-2 |
|
Email: warm
prospects |
3-5 |
|
Direct
Response Television |
0.05% |
|
Telephone |
5-10% of completed calls |