Price

Price is the element of the marketing mix that produces revenue ;The other elements produce
costs .Pricing decisions are complex and difficult. Holistic marketers must take into account
many factors in making pricing decisions the company , the customers , the competition
and the marketing environment and the pricing decisions must be consistent with the firm`s
marketing strategy and its target markets and brand positioning
Telecom Industry is an Oligopoly with top 3 players having a Revenue Market Share of 73%
, thus there is fierce competitiveness in pricing and firms try to differentiate themselves
through non price competition i.e Network quality & coverage , Customized offers ,
Customer care service , Advertisements etc .
Evolution of pricing in Telecom Sector
Indian Telecom Service Provider`s pricing evolved over three phases
1) 1995-2000 where the incoming and outgoing calls are prices at a whooping Rs 14 / Min
making it a luxury service , eventually outgoing calls dropped to Rs 9/ Min and Incoming
Rs 9 /Min .
2) 2000-2005 where the outgoing calls rate dropped to Rs 2/Min and incoming calls were
free. This is the period where the players faced the heat of the competition due to reliance
as it set the new benchmarks for pricing and forced competitors to adopt similar pricing
patterns.
3) From 2005 to present the call rates became very competitive and in fact currently tariffs
in India are the lowest among the world !. Entry of Tata Docomo changed the face of the
industry by introducing per second billing plans and forced others to follow the same
suit.
The service providers maximize their revenue using various Product Mix Pricing methods-
Product Line Pricing - Companies normally develop product lines rather than single
products and introduce price steps. The main purpose of this is to create class distinctions
though the core product is same .
Ex- Docomo`s Product Line Pricing

Airtel`s Product Line Pricing

In horizontal extension the company charges same amount but offers different features under
each plan for example Freedom 249 has low call rates while Turbo 249 ,though dont have
low call rates has low data tariff .
Optional Feature Pricing - Many companies offer optional products, features, and services
along with their main product. The automobile buyer can order electric window controls,
defoggers, light dimmers, and an extended warranty. Restaurants face a similar pricing
problem. Customers can often order liquor in addition to the meal. Many restaurants price
their liquor high and their food low. The food revenue covers costs, and the liquor produces
the profit.
Similarly Telecom Service providers offer Optional features and services along with main
product- Ex- Entertainment Packs, 3G Packs , GPRS Packs , Message Packs etc . As these
VAS and Data services have more margins these act as a margin lever for the provider.
Two Part Pricing - Service firms often engage in two-part pricing, consisting of a fixed fee
plus a variable usage fee. Telephone users pay a minimum monthly fee plus charges for calls
beyond the minimum number.
Post-Paid Connection Pre-Paid Connection
Rent Rs1500/month , Free A-A 1500
Minutes , after 1500 minutes 10p/min call
rate
Recharge Rs21/month , Night A-A 20
minutes , after 20 minutes , call rate 1p/sec


Product Bundling Pricing Sellers often bundle products and features. Pure bundling occurs
when a firm only offers its products as a bundle. In mixed bundling, the seller offers goods
both individually and in bun-dles. When offering a mixed bundle, the seller normally charges
less for the bundle than if the items were purchased separately.
Mixed Bundling
Occurs when seller offers multiple products in a bundle
Airtel Mobile connection + Nokia Handset
Pure bundling
Occurs when a firm offers its products only as a bundle.
Buy 1 connection , Get 1 free
Vodafone has special promotional offers for the buyers of specific editions of Nokia ,
Samsung and Blackberry.

Evaluation Metrics
A telecom service provider`s effectiveness of its various pricing methods coupled with other
marketing mix factors can be evaluated through 3 metrics i.e ARPU,ARPM,DRPM


42.5
47
49.7
35.3
36.8
38.2 38.2
41.1
47.4
FY 2013 FY 2014 FY 20115E
ARPM(Average Realization Per Minute)-Paisa/Min
Vodafone Airtel Idea
Rent Rs999 , Free A-A 999 Minutes , after
999 minutes 30p/min call rate
Recharge Rs.121,month , 1500 minutes A-
A free , after 1500 minutes , call rate
10p/30



Clearly Vodafone is the leader in Data Realization and Airtel is the front runner in Revenue
per user .
Price Comparison in 3G space

190
201.1
205.2 206.3
215.4
223.1
164.2
175.1
179.3
FY 2013 FY 2014 FY 2015E
ARPU(Average Revenue Per User)-Rs/User
Vodafone Airtel Idea
31.5
32.2
33.1
29.3
32.1
28.5
30.1
30.7
31.2
FY 2013 FY 2014 FY 2015E
Data Realization-Paisa/MB
Vodafone Airtel Idea
Place
Vodafone Airtel Tata
3 G Coverage In India
Ref- vodafone.com , Tataindicom.in, Icra.in

Place in case of services determine where is the service product going to be located. The best
place to open up a petrol pump is on the highway or in the city. A place where there is
minimum traffic is a wrong location to start a petrol pump. Similarly a software company will
be better placed in a business hub with a lot of companies nearby rather than being placed in
a town or rural area.
Vodafone has a significant presence in 23 countries and has its network coverage all through
out the country . Its services are available through exclusive vodafone stores & offices and
other third party outlets.
Bharti Airtel ,the third largest telecom service provider in the world, has presence in around
22 countries and offers its 2g services to all parts of the country and 3g services in 13 circles.
The direct touch point to the the customers is through its relationship centres, money outlets .
Tata , Reliance , Idea dont have an international presence. However has wide and extensive
presence even in the remotest areas.



Key Metrics used in analysing distribution of telecom products distribution are number of
1) Unique Electronic Top Up Outlets
2) Unique activating outlets
3) Daily activating outlets
4) Data Selling outlets
5) Distributor sales executives