sales promotion in telecom industry

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Sales promotion in

telecom sectorHow does sales promotions affect switching

This research paper is an effort to understand the consumer behavior in the pre-paid

connection segment. It highlights the effects of sales promotions on customer switching.

Group 10Shwetabh Chandra G012

Tanay Chitre G013

Spandana G G019

Purva Ganediwal G020

Harsh Shah G052

Mats Fournier-Fach P070

Mathilde Houtart C070


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Sales promotion in telecom sector

Sales Promotion | Group 10 1

Sales promotion in telecom sectorHow does sales promotions affect switching

Index

Contents

Index .............................................................................................................................................................. 1

Abstract .......................................................................................................................................................... 2

Introduction/Background .......................................... ........................... .......................... .......................... .... 2

Limitation of the study .......................... ......................... .......................... ......................... .......................... . 2

Literature Review.......................................................................................................................................... 2

Formulation of hypothesis ............................................. ......................... .......................... ........................... 3

Methodology for study .......................... ......................... .......................... ......................... .......................... . 4

Analysis ......................................................................................................................................................... 5

Findings and conclusions .......................... ......................... ........................... ......................... ...................... 6

References ...................................................................................................................................................... 8

Annexures ..................................................................................................................................................... 9


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AbstractIn today’s highly competitive telecom industry in India, customer acceptance is very important. With

the launch of 4G services by limited players in the industry, the way the telecom companies will

approach the customers would be interesting. Telecom companies have relied heavily on promotions to

engage their consumer and to draw new customers. The aim of this research paper is to determine theimpact of sales promotion on the customer switching behaviour. The research included qualitative as

well as qualitative surveys. A sample of 79 was studied through this method. The results highlight the

fact that sales promotions do not have a significant impact in the switching behaviour of the customers.

Introduction/BackgroundThe Indian telecom subscriber base has crossed the 988.6 million mark in August 2015 according to

data made available by TRAI. It is the second largest subscriber base in the world after China. The

major reasons that have led to this growth low handset prices combined with low tariffs for usage. In

the mobile users of India, in the year 2014, 21.2% of the mobile phone users in the country used a smart

phone. 84% of all the smartphone owners and 92% of the feature phone owners have prepaid

connections.

The industry has put in a lot of resources to improve the telecommunication technology so as to give

best possible service to the telecom customer. However, this has now plateaued as every major

provider in the country offers the same level of facilities. In a bid to distinguish themselves from one

another, telecom providers are now resorting to sales promotions. Sales promotion, from the

customer’s perspective is a marketing activity to improve temporarily t he value of the brand by

offering a short-term additional incentive to buy. Sales promotions therefore identify some specific

consumer need and meet the need with corporate products and promotional activities. As thecustomers who buy a prepaid connection are thought to be sensitive to price, the study on sales

promotion in the telecom industry forms an interesting study.

Limitation of the studyThe consumers surveyed were majorly of the Sec A of the SEC classification. 80 respondents were

surveyed for the qualitative and quantitative research. The results that have been proved for the

sample have been assumed true for the population.

Literature ReviewAccording to Kotler (2003), Sales Promotion is a key ingredient in marketing campaigns and consists of

a diverse collection of incentive tools, mostly short term designed to stimulate quicker or greater

purchase of particular products or services by consumers. Whiles Haugh (1983) Sakara & Alhassan

defined sales promotion as “a direct inducement that offers an extra value or incentive for the product

to the sales force, distributors, or the final consumer with the primary objective of creating an

immediate sale”.


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Monetary sales promotions provide the instant benefits to the customers while non-monetary are non-

transactional in nature and tend to be more relationship based (Campbell & Diamond, 1990). Monetary

sales promotions have a negative impact on the brand value of a product. The price reductions may

enforce the customer to switch to other brand and thus it may eliminate the criteria of the quality and

develop price elasticity in the purchase of the product (Aaker, 1996). The monetary promotions aremore preferred over non-monetary because of their power to persuade the customer to change their

purchase decisions (Luk and Yip, 2008). Sales promotion also has an impact on the level of commitment

shown by the customer. Mariole and Elina (2005) argues that the customers who are less committed

exhibit the high level of attention towards the sale promotion and those who are highly committed

show lower level of influence.

However, the true results of a sales promotion are still under debate by many researchers. Dodson &

Taybout, (2001) that promotion acts as an external stimulus and there is less probability that the

customers will repurchase the products after the campaign is over. It may change the customer attitude

to purchase the product on the normal price. Price discounts may also encourage low-probability

purchasers to try. However they are customers who are not likely to make repeat purchases and thus

the promotions have a negative impact on long-term sales. Price is used as a measure of quality for

many service consumers. In certain situation, the price cuts sometimes devalue the worth of brand in

the mind of the customers.

Formulation of hypothesisSignificance of the study

The study on the impact of the sales promotion on the customer loyalty in the telecommunication

industry is of significant value because:It is very useful for the telecom service providers to recognize how their sales promotion campaigns

influence customer behaviour

It may provide support to the academic researchers to understand the customer behaviour of the

telecom industry by filling the gap in the literature by investigating the relationship between sales

promotion and customer loyalty.

Research Hypothesis

The sales promotion seems to have double edged impact on consumer behaviour that merely depends

on the level of commitment of the consumer on a certain brand/product. The certain kind of responseopens a new insight into the effect of sales promotional efforts. Gedenk, K., & Neslin (1999) further

explored that the sales promotion can create a decrease in the brand loyalty and led the customers to

display more variety seeking behaviour. This thought has created the need for more research.


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That’s why it is propose that:

Ho: Sales Promotion influence switching operators in the telecom industry

Ha: Sales Promotions does not influence switching operators in the telecom industry

Methodology for studyThe carried out study is based on the quantitative research. The survey research design is intended to

collect samples from a particular population for the purpose of analyzing the behavior and interaction

of the variables that are relevant to a specific study. The study started by going through research

papers on telecom and sales promotion based on which the hypotheses were framed. This was

followed by a questionnaire-survey and qualitative interviews.

Target Population and sampling methodThe sampling framework of this study was drawn from the prepaid users of telecommunication

services. The target group for the study are SEC A categorized. Simple random sampling was used as a

sampling method in order to ensure equal participation apart from gender, age and background biases.

Data Collection methods

Self-administered questionnaire served as a research instrument that was distributed among 79

respondents. Options for the questions were not shared with the respondents and their responses were

recorded by our teammate on the basis of his/her answer. The survey was filled as if it were an

interview with the respondent. This was done to avoid any biases that would have been formed in the

mind of the respondent after looking at the options. First part of the questionnaire was about his

switching behavior w.r.t network service and promotions. The second part dealt with questions like

places where he gets his recharge, his perception about sales promotion and questions on hedonic and

utilitarian benefit. Top-of-the-mind responses were recorded. 4 questions regarding sales promotions

offered by the telecom companies were non-compulsory. Every respondent was asked about just one of

the sales promotion activity from price-offs, free coupons, free talk-time and free data.

Data Analysis methods

The data was analyzed using Microsoft Excel. 1-dimensional and 2-dimensional results were analyzed

by using pivot tables. For questions regarding switching behavior w.r.t network coverage, customerservice and the sales promotions, which were on a likert scale of 1-5, the mean was taken for

interpretation of results. On the question regarding hedonic and utilitarian benefits, the options were

identified as H (hedonic) or U (utilitarian) and the mean of the likert scale responses were taken. Based

on this it was identified whether a particular respondent feels he gets more of H over U or vice-versa.

For the qualitative responses, all the qualitative responses were analyzed and clubbed together based

on their similarity with each other and then presented.


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AnalysisThe survey was floated to 79 people belonging to SEC-A category, 59% of which were male. Majority

(~96%) of the respondents lied in the age group of 22-30 years.

The survey covered consumers from all the major telecom operators of India with a majority of them

being Vodafone customers.

The initial part of the questionnaire asked the customer about what are the good features that their

telecom operator offers them and why are they associated with the brand, almost half of them said it is

because of the network coverage.


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Free data and free talktime were the top recalls when consumers were asked about what kind of

promotions do the telecom operators currently offered them.

Findings and conclusionsNetwork coverage and customer service have a higher impact on customer switching as compared to

sales promotion offers. The importance of the following factors when it comes to switching in the

telecom sector is as follows:

Network coverage>Customer Service>Free Data>Free talktime>Price-offs>Free coupons

Among the sales promotion options given to the respondents, we found that free talktime and free data

had a much higher impact on switching as compared to price-offs and coupons.

The primary reason for this being that talktime and data are related to the product itself whereas price-

offs and coupons have no benefits associated with the product.

Another reason for this is that the customers get instant gratification on receiving free talktime and

data whereas in case of coupons, the gratification is delayed and the customer has to make higher

efforts.

Thus, the above conclusion negates our null hypothesis H0. Sales promotions do not influence

switching in the telecom sector.

73.42% of our respondents realized utilitarian benefits over hedonic benefits while availing promotions

in the telecom sector. The reason being that the price-offs and other promos offered per recharge are ofa very small value which does not translate into a hedonic benefit.

We expected that the ladies would get a hedonic benefit from the sales promotion while the males

would get a utilitarian benefit. However, 81% of the ladies said that they got utilitarian benefits out of

the sales promotions. We dug deeper to find out why. A response from a consumer was "yeh 10-15 rs


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mein paise bach jaate hai thode se. agar kuch contest mein trip de ya spa treatment de de toh maza aa

jaaye"

When asked about what kind of sales promotion do you think your telecom operator gives you, free

talktime and free data had the maximum recall. Thus, it is evident from this that these two are the most

likely of the sales promotions offered by telecom operators.

Majority of the people get their recharges done at online platforms like PayTM, Freecharge or the

telecom operator’s app. The combined percentage of users using these platforms to recharge is 78%.

Contrary to popular belief, users get recharges done at online platformd because of the convenience

and trust. 50% of the consumers cited this as a reason. Coupons and cashback came next in the list

From our analysis, sales promotions are not effective in getting customers to switch networks.

However, that being said, it is necessary to maintain parity with competitors when it comes to sales

promotions or pricing. Our qualitative survey gave us the insight that one Vodafone loyalist customer

while purchasing a new SIM card, opted for Airtel over Vodafone because the monthly charges forairtel were lesser for Airtel than Vodafone. This might happen for sales promotions too where a

customer might opt for a network that offers better promotions.

We also found out that sensitivity to sales promotion decreases with age.

Some of the major consumer insights that we derived as a part of this exercise are:

“Changing the telecom operator just for the network coverage is too a lengthy process. The

customer service eats up my head when I am changing it. Better stick to the same operator”

“If network coverage and customer service is same, I will change the operator if I m getting

more talktime in the other connection. but the switch from one operator to another has to be

hassle-free”

Thus, the customer wants to avoid the long procedure and the paperwork involved in switching a

telecom network. Thus, switching is far too less in this industry.


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ReferencesAbedin, Z., & Ferdous, L. (2015). Promotional Strategies of Telecommunication Industries and Customers

Perception: A Study on Airtel Bangladesh Limited (Vol. 15).

Adjei, K., & Denanyoh, R. (2014). Determinants of Customer Loyalty among Mobile Telecom Subscribers in

the Brong Ahafo Region of Ghana. International Journal of Business and Social Research (Vol. 4).Retrieved from http://www.thejournalofbusiness.org/index.php/site/article/view/366

Gautam, A., & Group, I. (2013). “ A study on ( below the line ) promotion strategies of telecom industry in

western ( Up ) circle ( India ) with special reference to Reliance Communications ” (Vol. 5).

Nalini, K., A, S. T., & Karthikeya, S. V. (n.d.). Impact Of Sales Promotional Activities Of Airtel Broadband.

Saeed, Dr. Rashid, Fareeha Nisar, Rab Nawaz Lodhi, D. M. A., & Arshad, D. H. M. (2013). Impacts of

Sales Promotion on the Consumer Loyalty in the Telecommunication Industry in Pakistan (Vol. 3).

Retrieved from http://www.textroad.com/pdf/JBASR/J. Basic. Appl. Sci. Res., 3(5)901-907, 2013.pdf

Vandana Mittal, & Brijesh Kishor Goswami. (2013). Sales Promotion in Telecom Industry of India. BEST:

International Journal of Management, Information Technology and Engineering (BEST: IJMITE) (Vol. 1).

Retrieved from

http://www.bestjournals.in/view_archives.php?year=2013_14_2&id=14&jtype=2&page=2


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Annexures

Questionnaire


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Analysis details

Row Labels Count of Telecom

operator

Airtel 22

BSNL 3Idea 8

MTNL 1

Reliance 2

Tata 5

Vodafone 38

Grand Total 79


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Row Labels Count of Gender of therespondent

Female 32

Male 47

Grand Total 79

Respondents asked about:

price-offs 23

free tt 20

free data 20

free coupons 16

Total 79

Switching because of: Mean

network coverage 3.21

customer service 2.62

price-offs 1.875

free tt 2.09

free data 2.3

free coupons 1.75

Row Labels Price-offs Free TT Neetwokr

coverage

Free data Coup

ons

Custo

mer

Female 2.125 1.428571429 3.5625 2.222222

222

2 2.7187

5Male 1.75 2.428571429 2.978723404 2.363636

364

1.4285

71

2.5531

91

Grand Total 1.875 2.095238095 3.215189873 2.3 1.75 2.6202

53

Row Labels Count of PayTM, Free

charge

Count of

Telecom

operator app

Count of

Local shops

Count of

Telecom

operator'

s storeCashbacks/Discount/scheme

s

37.29% 27.27% 36.36% 0.00%

Ease of Recharge 47.46% 20.45% 22.73% 60.00%

Free coupons 11.86% 9.09% 9.09% 20.00%

Trusted source 3.39% 0.00% 0.00% 0.00%

(blank) 0.00% 43.18% 31.82% 20.00%


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I get my recharges

at:

No. %

PayTM 59 45.38461538

telecom app 44 33.84615385

local store 22 16.92307692

telecom store 5 3.846153846

Total 130 100

Row Labels Count of What's so good about your telecom

operator?

Customer

Care/Service

16.07%

Good deals 12.50%

Network coverage 50.89%

Nothing is good 0.89%Pocket friendly 10.71%

Value added

services

8.93%

Grand Total 100.00%

Row Labels Count of What kind of promos do

you think your telecom operator

does to influence your recharge?

Cashbacks 13.73%Contests/Road

Shows/Sweepstakes

7.84%

Free data 29.41%

Free gifts 1.31%

Free restaurant coupons 5.88%

Free talktime 37.25%

None 2.61%

Other 1.96%

Row Labels Count of What kind of promos do you think your telecom operator does

to influence your recharge?

Cashbacks 13.73%

Contests/Road

Shows/Sweepstakes

7.84%

Free data 29.41%

Free gifts 1.31%


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Free restaurant coupons 5.88%

Free talktime 37.25%

None 2.61%

Other 1.96%

Qualitative responsesQualitative. Ask whatever you want to

promotions aren't very attractive

Network coverage is most important to me. I don't care much about any kind of sales

promotion.

No, I would not like to change the operator, because I get the best deals such as free

talkative and free data

No, I wont switch the telecom operator, because the network coverage is good

Sales promotion is less important to me than network coverage.

I prefer PayTM over Freecharge, because Freecharge has lot of issues while transacting. I

will not switch the operator because I have been using this for more than 5 years and its agood deal.

More full talktime offers on reacharges

Network coverage is the main reason for sticking to Airtel currently

Good deal in the corporate plans of Idea

Loyal with Airtel just because of network coverage. Network coverage is main criteria and

more important than any other sales promotion

Customer service of Vodafone is irritating and DnD does not work..so dont want

promotions information by calling frequently

Difference between two operators is negligible in terms of promotion so dont want to take

the hassle to switchChanged from Vodafone to airtel only coz of customer service

Ability to have custom made plans influence me a lot

Ease of switching is very important

have often changed telecom operator if the customer service pisses him off. has seen this in

the case of data card.

Changing the telecom operator just for the network coverage is too a lengthy process. The

customer service eats up my head when i am changing it. plus the formalities. better stick

to the same operator

network coverage is the only thing that matters. no other promotions define loyalty to

him. isiliye for all the utilitarian and hedonic benefits, he said it's 1 for all.. it hardlymattered to him

Airtel has not tied up with Freecharge and PayTM, so no cash back is offered for any

recharge.

I wont change the telecom operator unless I shift to an area where there is a network

coverage issue

Got back lost sim card in 3 hours, Plans are very customer centric, n I wont change the


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telecom operator

I would not change my telecom operator, because network coverage is what is important

to me and I am satisfied with it. Sales promotions does not matter to me much now. Its

because I am earning and don't think much on where I can save 10 or 20 rupees..

Don't care much about sales promotions. Just want ease of recharge, good coverage.

Happy with network coverage

Network coverage, good deals on talktime on my current operator so dont want to switch

Happy with the services of current operator

The local recharge shops are convenient for me as he knows my needs and informs me of

schemes that suit them.

I do not think any of the above promotions could make me change my network provider. I

have been with airtel from the start, won't change unless I fsce network issues and I am

hence unable to use their services

Good is Pan India coverage. Don't like call drops

Pretty satisfied with the current operator. Haven't found any major flaw to change it.

Customer service is good of current operator and Not likely to switch due to promotionsas others also do the same

Not switching due to inconvenience in changing

using it just coz it was her first connection. network and customer servie acha hain toh

promoions doesnt matter. promotions are temporary

using it just coz it was her first connection. switching in telecom is a pain. wont take the

pain to switch.

Not many promotional schemes for STD calls for current operator, not changed it yet

because of good network

I think current operator overcharges me at times..but there is no viably different option..all

are more or less the same..so sticking with itGreat network and good schemes already

Higher data recharges price is not good with current operator

Want more sales promotion activity from Airtel

Promos dont matter! the hassles of switching a telecom operator, nobody wants to go thru

it

dont think too much. my father pays the bill currently. it is too costly. extremely low

involved customer. his opinions dont matter much. as good as zero

for me call rate is most important. call rate acha ho, toh switch maruga. vodafone currently

offers me awesome plans

i am unhappy with airtel. Its network coverage is poor but so is the case with all theoperators. So makes no point switching networks even though some operators are offering

me promotions

if network coverge and customer serivce is same, i will change the operator if i m getting

more talktime in the other connection. but the switch from one operator to another has to

be hassle-free

sales promotion in telecom industry

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