Amman, Jordan, 4 – 7 December 2006 Strategic Management – Part II Forecasting Lecture 7

1. Amman, Jordan, 4 – 7 December 2006 Strategic Management – Part II Forecasting Lecture 7 Investigating the Potential Demand for Different Market Segments ITU/BDT/ HRD Strategic Management / Forecasting

2. Large Enterprise Corporate MediumBusiness Business Small Business SOHO Consumer Residential Market Segments ITU/BDT/ HRD Strategic Management / Forecasting

3. Methods for determining the potential demand Specific studies should be undertaken for the main segments Appropriate methods are : • Penetration depending on the income of households • Market research • Geomarketing • Focus groups • International comparisons (e.g. Jipp curve) ITU/BDT/ HRD Strategic Management / Forecasting

4. Residential market Population Number of people per household Households Residential density : percentage of households who are customers Residential customers Number of lines per customer Residential main lines ITU/BDT/ HRD Strategic Management / Forecasting

5. Example : Penetration rate / Income range Income Range 1 Income Range 2 Income Range 3 Income Range 4 Income Range 5 Inputs Year 2000 D1 = 0,20% 0,40% 0,80% 1,00% 2,00% Year 2011 D2 = 7,00% 8,00% 9,00% 9,50% 9,90% Saturation S = 10,00% 10,00% 10,00% 10,00% 10,00% Parameter k = 0,431 0,415 0,422 0,467 0,544 Parameter T0 = 2009,0 2007,7 2005,8 2004,7 2002,5 Outputs 2000 2002 2004 2006 2008 2011 Income Range 1 0,2% 0,5% 1,0% 2,1% 3,9% 7,0% Income Range 2 0,4% 0,9% 1,8% 3,3% 5,4% 8,0% 0,8% 1,7% 3,2% 5,2% 7,2% 9,0% Income Range 3 Income Range 4 1,0% 2,2% 4,2% 6,5% 8,2% 9,5% Income Range 5 2,0% 4,3% 6,9% 8,7% 9,5% 9,9% ITU/BDT/ HRD Strategic Management / Forecasting

6. Penetration rate / Income range ITU/BDT/ HRD Strategic Management / Forecasting

7. Percentages of the Households equipped with Phones per Household Income 90% 80% 70% 60% <35 50% 35-50 50-70 40% 70-100 30% >100 20% 10% 0% 1997 1998 1999 2000 2007 ITU/BDT/ HRD Strategic Management / Forecasting

8. Percentages of the Households equipped with Mobile Phones per Household Income ITU/BDT/ HRD Strategic Management / Forecasting

9. TeleworkingDSL Business Market SegmentsExample ARPU $ per month Corporate 10,000 0.01% Mediumbusiness 0.2% 1,000 Business Small business 1% 500 250 SOHO office 10% 100 Households 89% Consumer 40 ITU/BDT/ HRD Strategic Management / Forecasting

10. Segmentation 0 to 9 : micro Size 10 to 49 : small 50 to 249 : medium SME and SOHO segmentation principles SME and SOHO DSL market Industry and Energy Construction Sector Trade … Needs ITU/BDT/ HRD Strategic Management / Forecasting

11. Market Research • Market Research involves collecting and analysing all types of information that will help in strategic decision making. • Expectations about new services for each subscriber category and in each type of area. (field surveys) • Impact of the substitute effect of some new technologies regarding the use of basic services (e.g. Voice over IP, mobiles vs. fixed lines, mail vs. fax) • Identification of major accounts with their individual characteristics, analysis of their needs, follow-up of income • Developing Customer Profiles ITU/BDT/ HRD Strategic Management / Forecasting

12. Why Market Research? • Important to understand your current and potential customers’ needs and demands • Allows interaction and involvement from customers and employees • Establishes relationships with customers • Information will give you new ideas and ways to solve problems • Allows for analysis of customer groups • Impact of potential competitors on the market shares ITU/BDT/ HRD Strategic Management / Forecasting

13. Market research studies • Questionnaire about the behavior of the current customers for the current services. • Identification of major accounts with their individual characteristics, analysis of their needs, follow-up of income • Demand forecasting about new services for each subscriber category and in each type of area. (field surveys) • How much the customer is ready to pay? • What is the quality level expected by the customer • Impact of the substitute effect of some new technologies regarding the use of basic services (e.g. Voice over IP, mobiles vs. fixed lines, mail vs. fax) • Impact of potential competitors on the market shares ITU/BDT/ HRD Strategic Management / Forecasting

14. Types of Analytical Questions: • Questionnaire about the behavior of the current customers for the current services. • Who is your customer base ? • What are their needs and demands? • Where are they located geographically? • What factors influence their behaviour? • How much are they willing to spend? • What is the quality level expected by the customer • What types of products and services ? • Percentage of business vs. household? ITU/BDT/ HRD Strategic Management / Forecasting

15. Customer satisfaction and the effect on customer loyaltyImportance of churn in a competitive environment Zone of loyalty 100 80 Loyalty 60 Zone of indifference (Retention) 40 20 Zone of defection 10 Poor Fair Good Excellent Satisfaction Score Source: JL Heskett ; The Free Press; New York 1997 ITU/BDT/ HRD Strategic Management / Forecasting

16. Business Churn Analysis 100% 90% How customers respond to a decrease of their satisfaction? 80% 70% Probability of Defecting 60% 50% 40% 30% 20% 10% 0% 0 10 20 30 40 50 60 70 80 90 100 Customer Satisfaction Index Score ITU/BDT/ HRD Strategic Management / Forecasting

17. Customer satisfaction Surveysfor residential customers • Quality of communications • Quality of directory services • Quality of additional services and features (ease of use) • Quality of services by operators • Quality of after sale service • handling of fault reports, • fault clearance reliability • billing credibility • bills are detailed and easy to understand • Quality of reception in the commercial outlets ITU/BDT/ HRD Strategic Management / Forecasting

18. Customer satisfaction Surveysfor business customers • Quality of professional products (leased lines, modems, fax, internal cabling and other CPE when installed by operator). • Quality of customised commercial offers (special package, discount / volume) • Quality of customised billing • Quality of relationship with commercial representative • Quality of monitoring of individual performance indicators ITU/BDT/ HRD Strategic Management / Forecasting

19. Customer Satisfaction Survey«Moments of truth» To interview customers just after a transaction with the operator (less than 8 or 10 days) when applying a new demand when the new line has been connected when requesting a modification of the demand when requesting an inquiry at a service by operator when signalling a fault on his line when the fault has been repaired when claiming at a wrong bill ITU/BDT/ HRD Strategic Management / Forecasting

20. Observation: Watch the way customers behave • How do they use the telephones? • How long do people spend on the phone? • traffic data per category of customer • percentage per category of destination • call duration • hourly and daily profiles • How do they pay? • Is it convenient? A lot of interesting data about customers are kept in technical or administrative files without being used for marketing purpose ITU/BDT/ HRD Strategic Management / Forecasting

21. Observation : billing Billing data histograms by amount of income list of the top 50 or top 100 largest customer By crossing billing and other files : locations of key customers / telecoms service areas (where are our best customers) total revenues per telecom service area ITU/BDT/ HRD Strategic Management / Forecasting

22. Feedback from customers • Feedback from customers and employees = a valuable means of gathering information • Different methods of obtaining feedback: • Ask them! Train telecom representatives to listen and learn what the customers expect • Customer Cards! Make available a form for customers to write any queries, complaints, or compliments about the organization ITU/BDT/ HRD Strategic Management / Forecasting

23. Questionnaires • To know the customers sensitivity to : • price • quality of product • packaging, ease to use • customer care and front line employee behaviour • after sales service and troubleshooting • product reputation • technology characteristics • high tech image ITU/BDT/ HRD Strategic Management / Forecasting

24. Typical action plan: Field survey Objective : to anticipate the future demand and to extend the network at the right dimension, at the right place, and at the right time. A field survey determines the possible number of fixed lines to be installed in the future, based on the penetration of telephone lines in the houses and the business buildings that are surveyed. Surveyors scan local service areas, street by street, and count the number of houses and business buildings by category. A penetration rate is assigned at each category. Same approach for the dimensioning of BTS for mobile networks. ITU/BDT/ HRD Strategic Management / Forecasting

25. Focus groups • Focus groups are in-depth, qualitative interviews with a small number of carefully selected people who discuss their experiences, needs, and perceptions • Atmosphere must be relaxed and open (e.g. the «breakfast» in a nice place ) • Well formulated open-ended questions (to be prepared in advance on sensitive issues) • Can be used for large clients, small business owners, urban or rural subscribers (samples, chambers of commerce, associations, syndicates) ITU/BDT/ HRD Strategic Management / Forecasting

26. Composition of focus groups • The composition of a focus group is usually based on the homogeneity or • similarity of the group members. • Bringing people with common interests or experiences together makes it easier for them to carry on a productive discussion. • A wide range of information can be gathered in a relatively short time span. • The moderator can explore related but unanticipated topics as they arise in the discussion . • Focus groups do not require complex sampling techniques. • The sample is neither randomly selected nor representative of a target population, so the results cannot be generalized or treated statistically. • The quality of the data is influenced by the skills and motivation of the moderator. ITU/BDT/ HRD Strategic Management / Forecasting

27. Advantages of focus groups • To enable marketing officers to have a direct contact with customers and to get what they can’t get with quantitative surveys. (such direct contacts are rare in telecoms sector) • To focus on key issues • To realise what is important or not important for customers • To favour straight talking on some hidden aspects of the reality • Not very expensive, not time consuming, no IT tools needed ITU/BDT/ HRD Strategic Management / Forecasting

28. Lessons learned from focus groups • Are our major performance indicators consistent with the point of view of our customers ? • example : • the number of faults repetition may be more important than the number of faults itself; • people are very demanding on an accurate and reliable appointment for an installation or for a repairing. ITU/BDT/ HRD Strategic Management / Forecasting

29. Lessons learned from focus groups • People are perhaps not confident about our billing, they are rumours against its reliability. • Customers are not informed enough on our tariffs. • Business customers don’t know the contents of their contracts (especially the end-users) • Some business customers expect from the PTO services which must be fulfilled by their CPE vendors ITU/BDT/ HRD Strategic Management / Forecasting

30. 100 90 80 70 60 50 40 30 20 10 0 0 5 000 10 000 15 000 20 000 25 000 30 000 International comparison JIPP curve for mobiles (2004) Bahrain Emirates Cellular density Kuwait Malta Qatar Except kuwait & qatar Saudi Arabia Tunisia Morocco Oman Palestine Jordan Lebanon Syria Algeria Egypt Yemen Djibouti GDP per inhabitant ITU/BDT/ HRD Strategic Management / Forecasting

31. International comparison JIPP curve for fixed lines (2004) Emirates Bahrain Fixed lines density Qatar Except kuwait & qatar Kuwait Lebanon Syria Saudi Arabia Egypt Tunisia Jordan Oman Palestine Algeria Morocco Yemen Djibouti GDP per inhabitant ITU/BDT/ HRD Strategic Management / Forecasting