Outrageous, flamboyant, unconventional maverick entrepreneur Richard Branson is all that, and more. So it really wasn't too surprising when the billionaire chairman and founder of the Virgin group decided to fling himself down from the roof of a Mumbai five-star hotel last month.
The bungee jump was his way of launching the Virgin Mobile brand in India. "There is no point in Virgin doing anything, unless we can make a difference," a sherwani-clad Branson told Business Standard at the launch.
It will take a lot more than Branson's quirky stunt for Virgin Mobile to inspire customers to take a similar plunge. The mobile services market in India is already crowded -- operators offering GSM and CDMA services account for about 250 million subscriptions (source: Trai) and the category leaders have had a decade to build their brand equity. High-decibel launches, ad campaigns and lower-than-you tariffs may not be enough to win customers. So what is Virgin's plan for the Indian cellular market?
Two sides to the story
For Virgin Mobile, the crowded but high-growth market is a mixed blessing. The bad news first. Mobile penetration in urban India may be in excess of 40 per cent (according to management consultancy The Boston Consulting Group), but the heavy-use customers are already tied to one network or the other.
And given the lack of number portability -- retaining your mobile number even if you change the service provider -- Virgin's chances of persuading these high spenders to switch service providers are pretty slim.
The good news? Virgin need not be everything to everybody, and chase volumes like the bigger players. "We are not pursuing scale for scale's sake," Branson declared last month. In some ways, this confidence stems from the fact that Virgin's business model is different from the rest.
While other players offer services from networks that they own and operate, the Virgin Mobile network is owned by Tata Teleservices, which has a brand franchise agreement with Virgin.
The result: unlike, say, Bharti Airtel or Reliance, Virgin does not require significant capital investments to set up networks. For instance, analysts point out that a smaller player like Virgin would require a capital investment of at least $1.5-2 billion (Rs 6,000-8,000 crore) every year.
Instead, Virgin will either have a revenue sharing agreement with the Tatas or pay for usage of the network. (There isn't much clarity on the business model as yet; the Cellular Operators Association of India has written to the Department of Telecommunications seeking clarifications on Virgin Mobile's operational status).
At the launch, Virgin Mobile executives were at pains to clarify that the arrangement with Tata Teleservices is not a Mobile Virtual Network Operator (MVNO) -- which is not allowed in India -- but rather, a simple brand franchisee model.
Even as competitors try to catch Virgin on the wrong foot, the mobile operator is going ahead with its plans. "We believe existing operators are all pursuing the same strategy: to get as many subscribers as quickly as possible. Our strategy is to deliver a more tailored, more relevant offering for a single, distinct segment," said Branson.
That segment is the Indian youth. There are 215 million Indians aged between 14 and 25 years, of whom 70 million own mobile phones. Over the next three years, Virgin executives expect this segment to add another 50 million new mobile phone subscribers.
Why is this segment so important? Young subscribers may account for less than 30 per cent of the total, but they contributed over 50 per cent of the telecom industry's Rs 50,000 crore (Rs 500 billion) revenues in 2007-08. By 2010, this group is expected to earn the industry over Rs 35,000 crore (Rs 350 billion).
Virgin Mobile hopes to capture at least 10 percent of the incremental market (that is, five million subscribers) within three years. How? Chief Marketing Officer Prasad Narasimhan says that the distinct mobile phone usage habits by the young users present a huge advantage. A pre-launch, nationwide consumer insights study offered some interesting insights into the habits of young customers.
To begin with, they make more and longer out-bound voice calls, which means huge billing potential for service providers. Then, they have large circles of friends for both making and receiving calls -- which offers a revenue opportunity not just from the entire group switching to a common service provider but also from customised services like closed user groups and so on.
The youth are also significant users of SMS and are potentially large customers for other value added services (VAS). The VAS market was in excess of Rs 4,800 crore (Rs 48 billion) in 2007, with SMS making up 40 per cent of revenues, followed closely by ringtones.
Younger customers also have a shorter handset upgradation cycle -- under 12 months, compared to two years for those over 25 years.
With its target customer clearly defined, Virgin had to ensure its offerings were tailored to suit the group's preferences. The last insight, for instance, was a potential problem. Frequent handset changes fits in better with GSM technology.
In CDMA technology (which Tata Teleservices and, therefore, Virgin offers), the SIM card is usually embedded in the phone. Which means a handset upgrade involves an entirely new connection, complete with new number.
Virgin Mobile worked around it by introducing CDMA phones with RUIM (removable user identity module) technology, similar to GSM phones, offering users the convenience of upgrading their phones without having to change their number or re-entering their address book.
Then, it was important to be pocket-friendly -- young customers aren't likely to have huge disposable incomes, although they will demand cutting-edge technology and style.
Virgin's handsets are therefore named and priced to appeal to its target audience -- vKewl retails at Rs 3,999, while vBling sells for Rs 2,500, which is about half the price at which competitors will sell similar handsets. "We looked at a combination of looks, features and more affordable handsets as the youth need style but also value," confirms Narasimhan.
According to Virgin's homework, nearly 95 per cent of young users are pre-paid subscribers, who typically run out of both talktime and recharging money by the month-end.
The solution? Get paid to receive calls: Virgin offers its customers a 10-paise credit for every minute of incoming call, regardless of the originating network. Competitors dismiss the plan, saying it has limited potential, but Narasimhan is unfazed. "This is a viable proposition for both customers and the business," he says.
Phone a friend
To communicate these offerings Virgin Mobile's advertising agency Bates David Enterprise (BDE) studied the role of the mobile phone in the lives of young customers.
"The category sits exactly at the cusp of the freedom and the leash," says Dheeraj Sinha, Vice President, strategic planning, BDE. He explains with an example: mobile phones enable youngsters to go out more at night, as parents are confident that their children are just a phone call away.
But, as BDE Executive Vice President Sandeep Pathak adds, "For the current silver-spoon generation, everything is easily accessible." In this scenario, the challenge was to find a need that Virgin Mobile could fulfill.
BDE's research came up trumps: while Indian youngsters had a carefree spirit, there was a lurking desire for legitimacy in whatever they did.
Pathak says that if Virgin became the brand that helped youth "find a way around, rather than a way against", it could find a place in the lives of its target customers.
In the two-week launch campaign, Virgin aired two commercials where youngsters find ways to win approval in sticky situations. In one ad, a girl shocks her parents saying she is not interested in men.
She cuts a call from a male friend in front of her anxious parents announcing, "I don't want to go to Goa with them," as if to reinforce the point. In a volte face that takes even them by surprise, her parents insist she goes on the trip -- which, obviously, is what the girl was aiming for, all along.
In the second TVC, a young man who has broken traffic rules wins the sympathy of the policeman when his angry father asks for him to be shown no mercy. The 'father' is later shown to be his collegemate.
In both ads, the cellphone plays a cameo role. No tariff plans are mentioned, although Virgin Mobile's tagline "Think hatke" is prominently displayed. Narasimhan says future campaigns will talk about schemes -- like the 'get paid to receive calls' ad that is currently on air. Its ads for Virgin cellphones will be released in the near future and joint promotions with Virgin's airlines, radio channel and mobile retailing businesses will follow.
Branson's harness ensured he came to earth safely. For Virgin Mobile, the safe landing is still some way off.