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Mobile Phone Service Providers and the Market in Singapore

Introduction

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            Mobile phone services are gaining popularity in Asia. As a result several mobile phone service providers are competing for different types of consumers in the market. Singapore has three main mobile phone service providers: SingTel, M1, and Starhub. They have different pricing strategies and offers.

            Singtel (2008) has seven mobile plans for consumers. These vary according to price and services offered. (1) iOne Super Value offers 80 minutes talk time, free incoming calls and 50 free SMS at $15 per month. (2) iOne Plus offers 100 minutes outgoing talk time and 500 free SMS at $25.68 per month. (3) iTwo Value offers 300 minutes outgoing talk time and free 500 SMS at $48.15 per month. (4) iTwo Plus offers 700 minutes outgoing talk time and free 500 SMS at $82.93 per month. (5) iThree Plus offers 2000 minutes outgoing talk time and free 2000 SMS at $192.60 per month. (6) Red Pac Supplementary Plan offers free 150 SMS and free calls between parent and child up to a value of $160.50 per month. The price is $10.70 a month. (7) Lastly, there are also prepaid plans to choose from.

            On the other hand, M1 (2008) has several plans, too. Sunsaver Plan has 100 minutes talk time and free 500 SMS at $25.68 monthly. Sunsaver Plus offers 300 minutes talk time and free 500 SMS at $48.15 while SunMax offers 700 minutes talk time with free 500 SMS. M1 also has a customizable plan called D.I.Y at $16.05 monthly with 50 minutes talktime and 150 free local SMS. Any additional features would entail additional cost. Lastly, their Talk All U Can Plan costs $201.16 but it has a lot of features such as unlimited outgoing call talk time, free local SMS, free incoming calls, plus a free $500 handset upgrade discount. M1 also has a prepaid plan.

            Starhub’s (2008) mobile services are not very different from M1 and SingTel. PowerValue 80 costs $20.33 with 80 minutes talk time, Powervalue 100 costs $25.68 with 100 minutes talk time. Powervalue 300 costs $48.15 with 300 minutes talk time and Powervalue 700 costs $82.93 with 700 minutes talk time. All plans come with free 500 SMS. Powercall Plan costs $29.96 with 160 minutes talk time but no free SMS. Powerplay II costs $29.96 with 80 minutes talk time and 300 free SMS while PowerConnect costs $53.50 with 300 minutes talk time and free 500 SMS. For heavy mobile phone users, PowerTalk II costs $94.16 and offers 680 minutes talk time and 300 SMS and PowerTalk Ultimate offers 2000 minutes talk time and 2000 free SMS. For heavy SMS and MMS users, PowerChat 100 costs $29.96 and offers 100 minutes talk time and 900 SMS while Powerchat 300 costs $51.36 and offers 300 minutes talk time and 900 free SMS.

Types of Consumers

            Based on the pricing plans of these three mobile phone service providers, five types of mobile service consumers may be identified: light personal user; light business user; moderate personal user, moderate business user and the heavy user. The level of usage may be determined by several factors. Among these are the economic capacity, the need for the mobile service and the perceived value of the mobile service plans.

            Light users would most likely settle for plans below $50 or the prepaid plans. This will give them a mobile phone to use for communicating with classmates, business partners and other social acquaintances. Since, their telecommunication needs are not very great, they may spend more than their plans only during cases of emergencies.

Moderate users on the other hand have a greater need for mobile services than the light-users. They tend to have a mobile lifestyle and need to communicate much with other people. The phones they will select will range from $50 to $120. This group of consumers is not prepared to spend too much on their mobile services because they would not see the need for it. Lastly, heavy users tend to choose mobile plans that costs $120 and above because of their business transactions, heavy demands on travelling and business transactions.

Differences in Price Plans

            For a single mobile services provider, there are different price plans. These plans vary according to the features being offered such as the length of talk time, the number of SMS/MMS being offered together with the plan, and additional perks and features of the mobile plan. There are several drivers in determining the differences in price plans.

            The three main competitors in Singapore, however, tend to have a convergence of prices. The price plans of M1, Singtel and Starhub are either the same or the differences are not very great. This means that there is a semblance of oligopolistic competition in the market (Corocher & Zirulia, 2005). Because of this convergence of prices, the price plans are not determined so much by competition but by the value that consumers will get out of the mobile phone deals.

            The difference in price plans would be determined by the needs of the different market segments and their capacity to pay. In addition to this, the costs associated with the features of the mobile phone service and the corresponding technology also determines the price level. The taxes imposed and the tariffs also play a role in setting the price. Additional promotional and marketing activities are also included in the price level of each mobile phone plan.

Starhub and Profitable Pricing

            Starhub’s pricing is more complicated than M1 and SingTel’s. The price of the plans can become confusing to the average customer. Yet, Starhub’s price plans are generally cheaper than M1 and SingTel’s. Starhub’s pricing could be changed so as to become more profitable. There are several assumptions in order to ascertain this.

            1. Starhub could not easily raise its prices without losing some of its customers. The customer base of Starhub has relied on its pricing. Any increase in its regular price would make its customers consider its competitors.

            2. Customers are looking for value for their money. Hence, they are looking for inexpensive mobile service while maximizing the benefits that they could enjoy. It follows therefore that raising prices might be detrimental to the customer base of Starhub.

            3. Raising profits is not the only way to maximize profits. By lowering production and technology costs, Starhub can generate more profits. This means that the number of features being offered in each price plan might be reduced. This calls for a thorough review of which features are used and enjoyed by majority of Starhub’s customers. Features that are not very used extensively may be removed, thereby reducing costs.

            4. Customers are looking for additional value. If Starhub could provide value added services without extra costs, then customers will develop a stronger sense of loyalty for the company and they will not turn to competitors.

            5. Starhub can offer additional services without additional burden to the customers. If they can do this, the customers will feel better treated and they will remain as loyal customers of Starhub.

            Based on these assumptions, what Starhub can do is to offer more flexible terms of mobile plan services. This way, the customers can have more power and they will appreciate Starhub’s basic and extra services.

Non-price Strategies for the Market

            Cell phone providers also use non-price strategies to get more customers. Depending on the demographics, their marketing communication tools package their products to make more desirable. SingTel packages its cell phone plans as hip and youth friendly. As such, the lower level plans can be easily affordable to young professionals and students, alike. This non-price strategy tends to tap into the peculiar needs and perceptions of the market demographic being targeted.

            Given these non-price strategies, Starhub also needs to study its target markets more closely and develop effective marketing communication strategies. If such strategies will be effective, the effect of a higher price will be secondary to the kind of image and brand that Starhub will project. With an effective public relations approach, Starhub can still gain control of the market for cellphones in Singapore. With effective branding and mixing together different features for flexibility, the customers will be satisfied with the service even with a higher price.

Overall Pricing and Non-Price Strategy of Starhub

            On the whole the pricing strategy of Starhub seems complicated and may induce confusion on the part of customers. Nonetheless, it is an effective and powerful pricing strategy. Starhub offers a better array of products and a combination of the features available for consumers. If their pricing strategy could be simplified, the company can enjoy better sales in the short run. In addition to this, with the flexibility being offered in their pricing, customers may feel empowered and they will become more knowledgeable which plans they want to select from Starhub’s available plans.

            To maximize profitability, Starhub can afford to increase the price of its higher level mobile services plans. Since it has the lowest price for higher level plans in the market, it would still be offering a value plan for heavy mobile phone users in the market without compromising its customer base. In addition to this, it can also reduce the number of features being offered in its products for light and moderate users. This will reduce costs and will ensure greater profitability.

            In the long run, however, Starhub needs to work on its public image and branding as part of its non-price strategies in maximizing profitability. By engaging in effective marketing communication strategies, the company can establish a better brand that people can choose even if it is slightly more expensive than other brands. This is a long-term strategy that requires company resources. It may also be a risky venture. But if the company is willing to grow, then it should take on such risk

Reference

M1 Website (2008). Retrieved 11 August 2008 from http://m1.com.sg/M1/site/M1Corp/menuitem.e2f30a2a1a1860b609b422103f2000a0/?vgnextoid=c62035f49cbb8110VgnVCM100000695a230aRCRD&vgnextfmt=pdate:0808111126:.

SingTel Website (2008). Retrieved 11 August 2008 from http://home.singtel.com/singtel/index.html.

Starhub Website (2008). Retrieved 11 August 2008 from http://www.starhub.com/portal/site/Mobile/menuitem.a0ea4137255c4bb530710a608324a5a0/?vgnextoid=5584c57b15604110VgnVCM100000464114acRCRD.

Corrocher, N. & Zirulia, L. (2005). Switching costs, consumers’ heterogeneity and price discrimination in the mobile communications industry. Retrieved 10 August 2008 from ftp://ftp.unibocconi.it/pub/RePEc/cri/papers/WP166CorrocherZirulia.pdf.

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