Reference no: EM133299393

Case study

Carefully read the article below and answer ALL the following questions.

Airtel Magic - Selling a Pre-Paid Cellphone Service: Casting the Celebrity Magic

Cellular telephony was introduced in India during the early 1990s. At that time, there were only two major private players, Bharti (Airtel) and Essar (Essar) and both these companies offered only post-paid services. Initially, the cellular services market registered limited growth. This was primarily due to the high tariff rates charged by the companies (about Rs 16 per minute for outgoing calls). Indians who were used to paying much lesser amounts (Rs 1.20 for 3 minutes) for landline telephone calls found these to be very expensive. However, as there were only two players, a monopoly regime prevailed. The tariff rates as well as the prices of cellular phone handsets (instrument) available in that period continued to remain high. Hence, cellular phone services during that period were regarded as a luxury and companies mostly targeted the elite segment of the society. Moreover, these services were mostly restricted to the metros.

Other factors such as lack of awareness among people, lack of infrastructural facilities, low standard of living, and government regulations were also responsible for the slow growth of cellular phone services in India. Although the cellular services market in India grew during the late 1990s (as the number of players increased and tariffs and handset prices came down significantly) the growth was rather marginal.

This was because the cellular service providers offered only post-paid cellular services, which were still perceived to be very costly as compared to landline communications. Following this realization, the major cellular service providers in India, launched pre-paid cellular services in the late 1990s. The main purpose of these services was to target customers from all sections of society (unlike post-paid services, which were targeted only at the premium segment). On account of the benefits they offered (Refer Exhibit I), prepaid cellular card services gained quick popularity during the late 1990s.

Between the late 1990s and early 2000s, tariff rates declined 75%. Reportedly, Indian cellular players were offering the lowest cellular tariffs in the world (Rs 1.99 for 60 seconds). By October 2002, of the 8.5 million cellular phone users in the country, 65% belonged to the pre-paid segment. Also, an estimated 80% of the new add-ons were prepaid card subscribers.

Bharti, being one of the early entrants in the industry, (Refer Exhibit II for a note on Bharti), launched its own pre-paid cellular service under the Magic brand in January 1999. Magic was first launched in Delhi and later in other circles3 in India (where the company offered cellular services under its flagship brand, Airtel).

In 2002, the leading Indian telecommunications company, Bharti Cellular Limited (Bharti) signed the famous cricket player Saurav Ganguly and leading movie stars, Madhavan and Kareena Kapoor as endorsers for its brand, Airtel Magic (pre-paid cellular card). Its objective was to create the highest recall for Magic in the pre-paid cellular telephony segment by cashing in on the two biggest passions of India - movies and cricket. Bharti also changed the tagline for Magic from 'You Can Do Magic' to 'Magic Hai To Mumkin Hai' (If there is Magic, it's possible).

The move attracted considerable media attention, as it was unusual for a company to spend so lavishly to promote a single brand. In October 2002, Bharti launched a television commercial (TVC), featuring Shah Rukh Khan (leading actor, already endorsing Magic since a couple of years) and Kareena Kapoor. The TVC, developed by one of India's leading advertising agencies, Percept Advertising, was the first of the series of four TVCs for Magic's new campaign. According to Bharti, the TVCs aimed at attracting young adults in SEC B and C categories of the Indian market1.

Commenting on the new developments, Hemant Sachdev (Hemant), Director, Marketing and Corporate Communications, Bharti Enterprises, said, "The aim is to be relevant to the masses and make all their dreams, hopes and desires come true instantly, at Rs 3002 per month." However, industry observers felt that these actions were necessiated by the intensifying competition in the pre-paid cellular card segment in India in the early 21st century (Refer Exhibit I for a note on cellular telephony).

Many new players (national as well as international) had entered the segment and the competition had become quite severe. Besides Magic, the major players in the pre-paid card segment in 2002 included Idea (Tata, AT&T and Birla Group), Speed (Essar), Hutch (Hutchison), Wings (RPG), Cellsuvidha (Fascel) and Yes (Usha Martin) CASE STUDY QUESTIONS- Answer all questions

Question 1

Assume that Bharti Cellular Limited (Bharti) is faced with the challenge of a low sales volume despite engaging endorsers. As a research consultant you have been assigned the task of establishing the problem that could be the root cause of the low sales volume.

Identify any five key points that you will keep in mind while defining the research problem facing Bharti Cellular Limited.

Question 2

Describe two common research fallacies that a researcher should avoid when handling research work for companies such as Bharti Cellular Limited.

Question 3

Assume that Bharti Cellular Limited wants to conduct an intensive examination of customers' response to its products and also examine the effectiveness of its strategies in attracting customers. What research design would you recommend for Bharti Cellular Limited? Provide justification for your answer.