Ace Institute of Management eMBA, Second Semester, 2011

Marketing Management

Case Study #1
Tata Skys Marketing Strategies

Submitted to: Mr. Ashish Tiwari Submitted by: Ananta Mallik

Date: June 08, 2011

1. Introduction:
Tata Sky, a leading India-based Direct To Home (DTH) service provider (launched in 2006) had crossed the three million connections mark in a period of 20 months, thus retaining its position as the fastest growing direct-to-home service provider across the globe. It is a joint venture between Tata Group that owns 80% and STAR Group that owns a 20% stake. It currently offers close to 196 channels (as of December 2010) and some interactive ones; this count includes some numbers off HD channels offered by Tata Sky (as Tata Sky - HD) and interactive services. Currently TATA Sky has roped in Aamir Khan as its brand ambassador. Aamir Khan would feature in all TATA Sky brand and product communication, including advertisements in TV, print and radio. Further, tie ups with ITC E-Choupal and Godrej Aadhar give it wider rural reach. Also for its distribution, TATA Sky has a tie up with ITC International Business Division. The 24X7 guru.com has joined hands with TATA Sky to provide content for Active Learning. Tata Sky has adopted a 360 degree marketing campaign approach that encapsulates television, print, outdoor and radio along with on-ground activities and marketing on the digital platform. Tata Sky plans tie-ups with Sony Pictures, Fox for content- Pay per View service for exclusive events. Tata Sky has targeted to have about eight million connections by 2012.

2. Analysis of Growth Strategies of Tata Sky over the years:

The success or failure of any business depends on the strategy that they adopt to grow. In this case, in spite of the fierce competition in Indian DTH market, Tata Sky is able to increase its subscriber base by 1-2 million each year. They are able to position bestvalue brand image among the customer. The growth strategies behind their success can be analyzed based on the two generic growth strategies viz i) Internal Growth Strategy a. Intensive Growth Strategy (Market Penetration, Market Development and Product Development) b. Diversification Strategy ii) External Growth Strategy a. Integrative Growth Strategy (Vertical integration Forward/Backward integration & Horizontal integration) i.e.

In order to evaluate the Internal Growth Strategy of Tata Sky, lets analyze based on the framework of Ansoffs Matrix (Product-Market grid):

Market
Existing Market Existing Product New Market

Product
New Product

1. Market Penetration Strategy 3. Product Development Strategy

2. Market Development Strategy

Diversification Strategy

As per the case study, we can visualize that Tata Sky has adopted all the three Intensive Growth Strategies viz. Market Penetration Strategy, Market Development Strategy and Product Development Strategy as the Internal Growth Strategy. This can be further analyzed as described below: Market Penetration Strategies: Tata Sky is seeking to achieve growth with existing products in their current market segments, aiming to increase its market share. In order to increase the market penetration, they are trying to increase both the number of customers as well as number of uses. To increase the number of customer they are doing massive ad campaign like 360o ad campaign using TVC, Radio, OOH (out of home), internet etc, several promotional offers like 50% discount on installation, , recharge and win offer, friends and family program, Tata Sky with a Nano car, reduced price of digicomp, super save pack, a-la-carte offer etc. Similarly to increase the number of usage they have introduced many value added services like interactive gaming, VoD (video on demand-Pay Per View) service etc. Similarly they are also showing new usage of DTH to their customers by showing DTH is not just for TV product but also like computer/game console. As the result, by introducing new usage they are attracting more customers/converting non users to users. Their constant effort on quality control is also churning few of the other competitors customer to their network. Market Development Strategies: Tata Sky is seeking growth by targeting its existing products to new market segments. Though they have started with the target of urban customers but like Airtel and other DTH operators Tata Sky also has started expanding their network to village and suburban areas throughout India, from North to South, from East to West. As a result they have strengthen their distribution network to 35,000 outlets and 5,000 towns across India. Moreover they have started SSD (sales and service dealer) across semi urban and rural markets. This helped the company to
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increase its presence in those areas very quickly. In order to develop a new market, Tata Sky has made a very wide distribution network. For Rural/Sub-urban areas they have agreement with ITCs e-Choupal, Godrej, Indian Oil Corporation etc. where as for urban areas they have tie-up with Tata Indicom, Pantaloon etc. This network is helping them a lot for new market development (geographical expansion). Similarly, to attract new edge segmentation they have also started ad campaign for gaming and video streaming (without changing the product, expanding segment). Product Development Strategies: Tata Sky is also developing new products targeted to its existing market segments. For example to attract the urban busy customers they launched a new product in October 2008 called Tata Sky+, where consumers can record their favorite program (up to 45 hours) while watching another channel, record/pause/rewind program etc. They had introduced a premium set top box with a personal video recorder (PVR), first time in India. Similarly they have upgraded their picture format to latest MPEG4 technology in Tata Sky+ by introducing innovative interactive services like Active Sports, Active Khabar, cooking, matrimonial, games and bilingual programming guide. In March 2009, Tata Sky received the ISO 27001:2005 accreditation, an internationally accepted standard for Information Security. Thus to attract new customer and retain their current customer Tata Sky seems to be able to keep their pace with time. Similarly, Tata Sky also has adopted Integrative Growth Strategy as an External Growth Strategy. Especially it has focused on Forward integration as the vertical integration e.g. distribution channel as Tata Indicom (a subsidiary of Tata group) in urban area. This is how with all the above aggressive marketing strategy Tata Sky is adding more that 1million customer every year. 3. Analysis of Marketing Mix of Tata Sky: In order to meet all the above growth strategies, Tata Sky has adopted all types marketing mix. Lets analyze it based on 7Ps of Marketing Mix as shown below: i) Product: It has adopted the DTH service based on 3Cs viz. Choice, Control and Convenience. It is offering almost 200 channels choice with DVD picture quality and CD sound quality. Its user have control over channel to watch simultaneously (recording one channel while watching another one). For customer convenience they give a program schedules for all channels and reminders for favorite program, which available in their website as well. In order to retain their existing customer and attract new segments they are constantly improving picture quality (e.g. MPEG
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4), adding new channels (approx 200), new features (e.g. interactive services), new schemes like Value Pack, Jumbo Pack, a-la-carte etc. As a negative feedback from customer sometimes the set top box get hanged or bit low quality in some channels specially Z-channels. These things shall be rectified/improved. ii) Pricing: In order to catch the market Tata Sky has offered variety of price schemes to catch different segments of customers. In order compete with other DTH operators & attract more customers, time to time Tata Sky gives discount and launches various schemes like reduced digicomp and subscription fee, Super saver pack with various price option packages or a choice of a-la-carte (pay as you view) etc. Recently it has launched Rs 999 package to attract low income group/economic segment. Though Tata Sky is claiming their price to be very reasonable, but still customer feel their price is higher than other operator. They argue that Tata Sky had removed some important channels from the base packages and put those as separate package. Thus Tata Sky shall clear this issue and try to provide the service at very attractive rate.

iii)

Promotion: As described above Tata Sky has adopted various promotion scheme to attract new subscriber as well as retain the existing customers. For example it has adopted 360o Ad campaign, Customer awareness program about DTH, attractive ads by using famous brand ambassador like Amir Khan, association with famous ad agencies like Rediffusion, Y&R, Ogilvy & Mather etc. It has also used various offers like Recharge to win, Fun learning Pack Promotion etc. Sometimes its ad get criticism e.g. its Third ad about the picture quality, which was very obvious to the customers and the advantage was well known. This campaign was criticized as a step backwards, giving the brand a more generic messaging. This they should try to avoid this kind of mistake.

iv)

Place: They have made wide distribution network. They have reached to 5000 towns and 35,000 outlets thorough agreements with ITCs eChoupal, Godrej etc. for rural areas and Tata Indicom and Pantaloon for city area retailer.

In order to catch the customers of new area Tata Sky has to expand its network to Rural area and expand its network even to neighboring countries like Nepal, Bangladesh etc. v) People: - employee (internal customer): Their internal customers seem to be satisfied with their job. Their engineer seems to be very prompt on their responsibilities e.g. short installation time. Physical evidence: - forms of presentation e.g. good ambience, layoutThis is also good, their outlets seems to be attractive with good ambience (as per website). Process management: -managing customer e.g. touch point (leaflet, website, helpdesk etc.). This also seems good e.g. they have good touch points like help desk, website where a customer can get his required information without any hesitation. Some of the information given in their website is not very clear or can be improved. For example the packaging choice of various choice doesnt give cumulative amount while we go on selecting different channels as ala-carte basis.

vi)

vii)

4. Analysis of Challenges that Tata Sky can face in the near future: Here are some of the major challenges that Tata Sky can face in the near future: 1. IPTV provides superior technology if implemented. MTNL & BSNL has already planned to tap this line. So, it can be a considerable threat due to its new level of interactivity. 2. Cable Set top Boxes provide easy switching due to negligible switching costs. 3. Increasing Competition internally. 4. Dependency on CPE suppliers to some extent. 5. High dependence for transponders on ISRO 6. Dependency on broadcasters for their channel content and thus increase in cost. 7. Videocon may enter DTH by building its own set top boxes. 8. Cap on Investment (20%) 9. Interoperability Regulations 10. ARPU is reducing, but government/regulator is not relaxing any Tax fee.

5. Recommendation: Here are few recommendations for Tata Sky to overcome above challenges: PRODUCT: 1. Use common Dish per house for Multiple Television sets 2. Combined Product with Television - Rural Areas, especially and Niche Segment Targeting if Combined with LCDs 3. Connectivity with other digital Monitors like Laptops for Commercial Usage 4. Guide can be displayed in Multiple Regional Languages 5. Voice over in Multiple Languages (Currently limited availability in for some programs) 6. Interactive Video Games (with consol) 7. Inclusion of Radio Reception. Development of Visual Radio service. 8. Variety in Movie Listing with Bollywood, Hollywood and Regional Channels 9. Special channels for Songs Request like Jukebox could be launched 10. Stock Market related interactive service on Active PRICE: Competition has increased many fold with completion providing freebies and slashing prices. The following price related strategies could be adopted, which may lead to a short term loss but a medium term break even and profit: 1. Free Set Top: Following the line of Dish TV, Set top Boxes can be given free while ensuring lock in by providing base pack free for limited time duration, thus inducing update to next level. 2. Lock in of 1 year: Ensure long term lock ins by providing incentives for pre payment of long term charges. Continue with current strategy of providing 2 months free on payment of 10 months services. 3. Multiple Connections: Provide discounts for consumers buying second Tata Sky Connection (up to 50% off) 4. Encourage References: Provide discounts on Monthly charges if reference from existing consumer becomes a new customer. 5. Regional Disparity: Provide free regional packs in local areas to ensure switch from Cable TV to DTH service, i.e. provide free south Jumbo pack for customers in all Southern States. 6. Community Dish: Provide Incentives in the form of Free Months charges for first 3-6 months and reduce the Installation charges per flat.
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7. Payment Options: Allow multiple points of payment, ensuring timely payment and convenience to the customer Credit Card through Website (implemented), Pre Paid cards from Retail shops to be activated using Telephone (Implemented) and Drop Boxes at Societies. 8. Postpaid: Some clients depending upon few background check criteria can be given Billing service i.e. Payment at end of Month PLACE: There is a lot of scope of increase in the number of customers across all the states. Here are some recommendations: 1. Include the local cable operators as distributors. Staff of cable operators can be made the distributors for Tata Sky (familiarity with people). Attractive options can be given to them to become distributors. 2. More target on rural market. Because the Rural TV households is growing by 3-4 million each year, but only 2-3% of them have access to cable(55 million TV sets in rural area). Strategies for the rural sector can be like Customizing offering, Educational Package, appointing the village head as Distributor and this can be supplemented by giving the connection to village head free for initial period. 3. Setting up Mini Theatres in rural sector to promote the Product with events like Cricket matches, movies etc. and can be the Point of Sales for Tata Sky. PROMOTION: The promotional strategies suggested are: 1. Packages for Special Events like the cricket World Cup 2. Targeting Tata employees could be a useful way pr promoting the product 3. Give the option of instalments and other promotional schemes to the new users 4. Tie up with real estate developers to target the new constructions 4. a. The number of old buildings being demolished and being reconstructed are also on the rise. 5. Door to door marketing should be used to heighten the awareness levels as well. 6. Local Games Sponsorships can also be used to increase the awareness levels. 7. Another way could be using the prominent part of the Building for placing Hoardings of Tata Sky Ads. 8. Finding the strategic building in the locality. 9. Consideration can be in form of cash payment to the Housing society. 10. Providing free connections to Households in these buildings. 11. Another new avenue that can be explored is the railway stations e.g. Posters on railway station roofs, Tickers at Major suburban Railway stations.

12. Use of Internet- Applications which involve sharing of videos on how one consumes TV, benefits of DTH over cable TV, etc. across social networking sites like facebook, Orkut, ibibo, etc. 13. 'Ek-pe-Teen and Do-pe-Paanch' the offer entails three months of free subscription on the purchase of one connection, and five months of free subscription on purchase of two or more connections. 14. Tata Sky launched an interactive game quiz featured around MS Dhoni to coincide with the MARKET PENETRATION Tata Sky can penetrate the market by: 1. Proving Competitively Priced Services (because customers feel Tata Skys price is bit higher than other DTH operators) 2. Innovative and Superior Technology 3. Interactive Services 4. Better customer Support MARKET DEVELOPMENT Tata Sky can enter new markets by entering: 1. Expansion in Rural Markets 2. Entering Neighboring Countries (provided license available), Enter Commercial Space Offices , Coffee Shops, etc. 3. Enter Travel Area a. Long Distance Buses e.g. Tie up with Raj Travels b. Niche Car Segment PRODUCT DEVELOPMENT The product can be further developed with evolving time: 1. Combined with TV 2. Combined Dish for multiple Television (Society or Each Flat) 3. Target at educational needs in Rural areas where it could be used. 4. Stock Market Ticker and analysis can be included in Active Reference: 1. 2. 3. 4. 5. Article on Tata Skys Marketing Strategies Marketing Management, By: Philip Kotler & Kevin Lane Keller (13th Edition) www.indiadth.in www.indian-voice-over.com www.tatasky.com
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