PRICING STRATEGIES OF AIRTEL DIGITAL TV

SUBMITTED BY:

Team name - THE MARKET MONARCH

Members

Ashwini Kumar -28

Vaibhav Agrawal -03

Sachin Shetye –

Mukul Ovalkar –

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Samurdhi Soparkar-

Mohit Singh -50

Bharti Airtel Limited, usually referred to simply as "airtel", is a Indian telecommunications company that operates in 19 countries across South Asia, Africa and the Channel Islands. It operates a GSM network in all countries, providing 2G or 3G services depending upon the country of operation. Airtel is the fifth largest telecom operator in the world with over 200 million subscribers as of October 2010. It is the largest cellular service provider in India, with over 143 million subscribers as of September 30, 2010. Airtel is the 3rd largest in-country mobile operator by subscriber base, behind China Mobile and China Unicom. It has a 29.00% market share of the GSM mobile service in India.

Airtel also offers fixed line services and broadband services. It offers its telecom services under the Airtel brand and is headed by Sunil Bharti Mittal. Bharti Airtel is the first Indian telecom service provider to achieve this Cisco Gold Certification. To earn Gold Certification, Bharti Airtel had to meet rigorous standards for networking competency, service, support and customer satisfaction set forth by Cisco. The company also provides land-line telephone services and broadband Internet access (DSL) in over 96 cities in India. It also acts as a carrier for national and international long distance communication services. The company has a submarine cable landing station at Chennai, which connects the submarine cable connecting Chennai and Singapore.

It is known for being the first mobile phone company in the world to outsource everything except marketing and sales and finance. Its network (base stations, microwave links, etc.) is maintained by Ericsson, Nokia Siemens Network and Huawei. business support by IBM and transmission towers by another company (Bharti Infratel Ltd. in India). Ericsson agreed for the first time, to be paid by the minute for installation and maintenance of their equipment rather than being paid up front. This enabled the company to provide pan-India phone call rates of Rs. 1/minute (U$0.02/minute). Call rates have come down much further.] During the last financial year [2009-10], Bharti has roped in a strategic partner Alcatel-Lucent to manage the network infrastructure for the Telemedia Business.

The company is structured into four strategic business units - Mobile, Telemedia, Enterprise and Digital TV. The Telemedia business provides broadband, IPTV and telephone services in

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89 Indian cities. The Digital TV business provides Direct-to-Home TV services across India. The Enterprise business provides end-to-end telecom solutions to corporate customers and national and international long distance services to telcos.

In January 2010, company announced that Manoj Kohli, Joint Managing Director and current Chief Executive Officer of Indian and South Asian operations, will become the Chief Executive Officer of the International Business Group from 1 April 2010. He will be overseeing Bharti's overseas business. Current Dy. CEO, Sanjay Kapoor, will replace Manoj Kohli and will be the CEO, effective from 1 April 2010.

Airtel digital TV

Airtel Digital TV(Bharti Telemedia Limited)

Type Television Service Provider

Industry DTH Pay TV

Founded 2008

Headquarters Mumbai, India

Area served India

Key people Sunil Mittal

Products Direct broadcast satellite

Parent Bharti Airtel

Subsidiaries Bharti Telemedia Ltd.

Website www.airtel.in/digitaltv

Airtel Digital TV is the brand name for Bharti Airtel's DTH (Direct to Home) service in India. It uses MPEG-4 digital compression with DVB-S2 technology, transmitting using

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INSAT 4CR 74°E. Airtel digital TV service was launched on 8 October 2008. It currently has over 4.2 million subscribers.

Technical information

Airtel digital TV's standard definition broadcasts are in MPEG-4 with Interactive Service (ITV) and 7-day EPG (electronic programme guide). Interactive Service (ITV) of Airtel digital TV includes an add-on service that allows a user to shop, book movie tickets etc. A universal remote is included in the package that can, over IR frequencies, control both the TV and the DTH box. Like other DTH service providers, it also provides a Video on demand interactive service that includes a catalogue of movies in Hindi.

Digital TV recorder

A premium DVR Digital Video Recorder allows recording of live TV on a 160 GB hard disk with MPEG 4 picture clarity.This DVR is also HD ready(576p) and will receive HD channels and Airtel is providing HD top up for DVR customers.[

Digital TV HD

Airtel digital TV HD provides channels in their native resolution of 1080i or 720p with 16:9 aspect ratio. The STB is compatible with 7.1 CH Dolby digital Plus surround sound as well and is in fact the first HD STB in India to be compliant with Dolby digital Plus.[citation needed]

Mobile Vehicle solution

Airtel digital TV on Oct. 2010 launched a new way for people to enjoy live TV on the move, in form of in-bus entertainment.A multi TV screen Mobile Vehicle DTH solution with installation of its connections in RSTC Super Luxury Volvo buses plying on Delhi – Jaipur Highway

Airtel Digital Tv

The market for DTH services is very competitive with all the operators offering the same

product and the same channels ,hence the only factor on which the companies can compete

is the pricing of the set-top box and the channel plans and the mix of channels and

interactive services offered to the customers.

Customers have become more demanding and they want customized channel packages and

interactive services at the lowest possible rental per month. Customers also seek superior

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service in terms of maintenance of the hardware supplied and instant access to interactive

voice response system of the various operators so that they can change their plans

according to their needs .

So we see that this being a service business and inseparability, variability and perishability

comes into play so customer satisfaction is very important and the whole pricing strategies

of various operators depend upon customer expectations and the competitors move with

basic objective being expanding the market share and acquiring the existing customers of

other players.

Airtel digital tv offers customized pricing ,that is, the customer can choose from various

plans according to his needs and affordability airtel also uses value pricing as in it offers free

subscription of three/four months, free installation along with every new purchase of dth

set-top box. It also offers additional discounts on availing multiroom connections.to increase

the perceived value of the service airtel offers free three months subscription on purchase

of new connection instead of just offering the stb at a price and asking the consumer to get

the plan of channels according to his needs

Market structure of DTH service in India

In earlier days there was only one TV channel in India the “Doordarshan”, Channel doordarshan was owned and operated by government of India. In those era every home which had a TV set used to have its own antenna to capture the signals.

The Cable Television Ordinance Law was passed in January 1995. This enabled cable operators to feed channels and later on private companies were allowed to air their own channels and this led to the explosive growth in number of TV channels and number of cable operators.

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The growth of TV channels & cable operators created a big industry and market opportunities.

Until few years back there were as many as 1,00,000 cable operators across India. However the services provided by cable operators were poor. The strikes, increase in tariff plan, selective broadcast and poor services were major cause of dissatisfaction among the customers. This has created an opportunity for DTH, which serves an immediate threat to the high-end cable networks. Some of the key player in the industry are DishTV by Zee group, TataSky joint venture of Tata & Star TV, Big TV by Anil Dhirubhai Ambani Group, Digital TV by Bharati Telemedia, SUN Direct from the promoters of Sun TV. There are some other companies who are contemplating to start their own DTH like Videocon.

There is an immense opportunity for DTH in the Indian market. The opportunity in India almost 10 times that in developed countries like the US and Europe. For every channel there is a scope for broadcasting it in at least ten different languages. So every channel multiplied by ten, that is the kind of scope for DTH in the country.

Analysis of Indian DTH industry:

Indian DTH industry is still at nascent stage. In the year 2003 DD Direct+ was launched since DD Direct+ is non commericial and free DTH service hence we would focous our discussion on private players in the industry.

As of now DishTV, TataSky, BigTV, AirTel Digitel TV, Sun Direct are in the industry. Since there are only 3 major players and the market concentration is very high Indian DTH industry is oligopolistic.

Entry Barriers in DTH industry

The DTH industry is a high tech industry and it require lot of capital investment. The initial cost of setup for the company itself is very high, it requires transponders and other high tech equipment. The following entry barriers exist in DTH industry

1. High initial setup cost of satellite, transponder and other hi-tech equipment : The initial cost of setup for broadcaster is high so this acts as a big entry barrier.

2. DTH is a low margin and high volume industry: DTH though is a lucrative business however it is a low margin and high volume industry. For a new entrant to succeed it

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has to ensure that it builds customer base soon other wise it will not be possible to make profit.

3. Cost of a set top boxes: The cost of setup box installed in a homes is stil very high and the cost of a set top box is a significant entry barrier. Higher number of subscriber can bring down the cost incrementally.

4. Pricing has to be competitive versus cable: For a new entrant to be successful it is going be very difficult as they entrant will to compete with local cable operators as well as existing DTH service provider. There are already established players in the market and the price war has already started.

5. Differentiation through content: There are hundreds of TV channels in India and as per the industry reports there are close to 150+ channels waiting for approval, this take the numbers to 400 different TV channels. So providing the right content to the right consumer will also play a critical role in success of new entrant, differentiation through content is must.

6. Customer Service: The quality of customer service will be a key differentiator. As Indian consumer are habitual of calling the cablewalah whenever there is some issue. A new entrant will face challenges in two fronts; One to ensure that it is providing better customer service than local cable operators and on the other hand it has to provide better customer service than existing DTH service provider.

7. Multicultural & Multilingual Gepgraphy: India being a multicultural,multrilingual society it is very important for the new entrant to ensure that it maintains a fine balance between the regional and nation flavor.

8. Long gestation and break even period: It takes lot of time to for a new entrant to stabilize and grow in this industry. Even achieving the break even period is comparatively high. The Dish TV from Zee which was launched in 2003 will reach break even in 2009(6 years ) and TataSky launched in 2006 hopes to break even in 5-7 years. This long break even period is a significant barrier for new entrant.

9. High Cost of content: The cost of content is high in this industry and poses a serious challenge for the service provider.

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Airtel Digital TV SDU and MDU Dish

PRICING STRATEGIES

What is pricing strategy?

Importance of pricing strategy

Pricing practices have changed significantly in recent years .many firms are buckling the low

price trend and have been successful in trading consumers up to more expensive products and

services by combining unique product formulations with engaging marketing campaigns.

How companies price

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Companies do their pricing in a variety of ways. in small companies ,prices are often set by

the boss. In large companies, pricing is handled by division and product -line managers .Even

here, top management sets general pricing objectives and policies and often approves the

prices proposed by the lower levels of management.

Consumer psychology and pricing

Marketers recognize that consumers often actively process price information ,interpreting

prices in terms of their knowledge from prior purchasing experience, formal

communications ,informal communications ,point-of-purchase or online resources .

Purchase decisions are based on how consumers perceive prices and what they consider

the actual price to be-not the marketer’s stated price .Customers may have a lower price

threshold below which prices signal inferior or unacceptable quality, as well as an upper

threshold above which prices are prohibitive and seen as not worth the money.

Setting the price- CONSEDERABLES

1) Selecting the pricing objective that is what are the packages to be offered and mix of

channels to be provided

2) Determining the demand for dth services and variety of channels to be provided

3) Estimating costs

4) Analyzing competitors’ costs ,prices, and offers

5) Selecting the final price

Pricing strategies for Airtel DTH

In this project we will be doing the Pricing strategies analysis of Airtel on two bases

On the base of pricing for SET TOP BOX

&

On the basis of pricing for popular channel packets

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Analysis on the basis of pricing for SET TOP BOX

Company name

Airtel DTH RELIANCE BIG TV

TATA SKY DISH TV

Price of set top box

a- Rs.999 with Rs 221 STV b-Rs.1590 c-Rs.250 discount on credit card payment

1190 999 999

Free with set top box

With( b) option 4 months economy

pack free

Silver pack for two months-133 channels

No free No free

Competitive advantage for Airtel in Set top box pricing is due to it`s unique packaging of set top box price with different plan which makes it comparably much cheaper than others.

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On the basis of pricing for Popular Channel Packets

This is the second base for the pricing strategy analysis of Airtel DTH and the most important one as in the market the customer don`t buy any DTH service due to price of set top box but they buy due to the tariff rates of channel packets. Although the price of SET top box is one of the inducer for the purchase but what matters is the channel tariff rates.

Here Airtel is the winner as it was launched in the arena after disc tv , DD direct and sun tv ,it got the advantage of learning curve and already exposed expenses and risks so the winning is obvious.

In the channel packets packages pricing, the main things which has to be consider are :-

Channel expenses (per channel expense)

Satellite rights rent rates

Sales and distribution expenses

Various technical expenses

Set top box cost

Competitor pricing, etc

The main channel packages available for customer:-

Economy Class-

Medium Rate Package

Premium Pack

Special Sports Pack

South Devoted Pack

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Regional Pack, etc

With the different names and tags every brands keep these above pack with more or less differentiations,

Listing of different brands packages

Airtel Digital TV Pack Channels Services Amount Super South Value Sports 97 1 130 Economy pack 135 1 200 South Mega Pack 151 1 275 Mega Pack 155 1 275 Ultra Pack 161 2 330

Dish TVPack Monthly Channels

North Silver 135 155 Silver Saver 160 155 Silver Saver Cricket 195 155 Gold 225 165 Gold Saver 270 165 Platinum 325 165 Pack Monthly Channels

South South Silver 125 147 South Silver Saver 160 155 South Gold 225 155 South Gold Saver 270 165

TATA Sky Pack Channels Monthly 6 months annually

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South 61 150 850 1650 Economy 74 150 850 1650 Supreme 92 220 1250 2420 Grand 129 350 2000 3850 Optional pack ranges from Rs. 10 to Rs. 45 per month Regional Packs contain 8 languages for Rs.25 each per month TATA sky set top box cost Rs. 999

Reliance BIG TV Offer Name Price Free Months Free Pack No. of Channels 1490 1490 1590 1590 2 Silver 135 1990 1990 3 Diamond 161 3990 3990 12 Diamond 161 4490 4490 12 Platinum 165

The above are the list of main channel packs associated with different strong brands.

As in today`s arena although lots of companies are emerging but the main competition is between 4-5 companies only and the above are the main competitors.

Airtel pricing strategy

Selecting the pricing objective:

Survival:as this industry is highly competitive the focus is on survival and profit making in the long run

Maximum market share: Airtel aims at ever increasing its market share which could increase its ARPU and help achieve early break-even.

Determining demand:

Demand is determined primarily by estimates of the sales force,statistical methods and price sensitivity of consumers.

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Estimating costs:

Costs are estimated by taking into account license fee, infrastructure costs, cost of set-top box and other administrative and selling and distribution costs and accordingly cost per unit is calculated.

Analyzing competitors’ costs ,prices, and offers:

Prices of the packages are mostly determined by competitors prices as there is very high competition in this segment and the consumer is highly price sensitive.

Selecting a pricing method:

Mark-up pricing is used for pricing the initial package taking into account various costs.

Perceived-value pricing :airtel is using this as in it is giving 4 months subscription of economy pack free along with set-top box and remote and installation at rs.1590 which was priced 1690 earlier and additional rs.250 cashback on online purchase whereas the competitors are giving the same product at rs.999 but no free subscription.

Going-rate pricing: prices of packages are more or less the same for all the competitors.

Selecting the final price

Final price is selected after taking into account various factors like costs,advertising costs,consumer behaviour,channel behaviour and competition.

Offers,discounts and promotions:

Airtel

Set-top box and remote and free installation along with 4 months economy pack of channels at rs.1590.additional Rs.250 cashback on online purchase.

2 month ultra pack or 3 month mega at rs.1390

12 month mega pack of channels for rs.3500 and 12 month ultra pack for rs.3990

High-definition airtel digital tv for rs.3090 with 3 month mega pack plus installation and set-top box and remote.

Airtel digital tv recorder now HD capable with free HDMI cable worth rs.1200 +2 month free HD top up +free subscription+free installation for just rs.5490

TATA SKY

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Set-top box and remote +installation for rs.999.Activation charges of Rs.200 extra for one month economy pack.

Big tv

2 months silver pack free with 1590 along with set-top box and installation or 3 months diamond for rs.1990

Subscribe to the 3 months English Action Pack (FX and Fox Crime) at 75+ taxes and get a chance to win many exciting prices including an all expense paid trip for two to Bangkok.

Whatever is the plans and subscription rate but the main profit comes from the add in services in which Airtel is is really a leader,with add in services Airtel is making good money and profit.

Main add in- interactive services , IPTV ,games , radio,etc

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Interview with the marketing manager (post name-young leader)

Abhimanyu Singhi - young leader Airtel

Questionnaire for company`s

Dealer/marketer

Q-1) What are the main basics for your pricing strategies? Which are the main consideration factors?

The price of the product is determined mainly by the report provided to us by the Research & development department. The report contains all the information about the product production cost, time of production and various other information.

The report is made every quarter and the decision is taken every quarter about the price to be quoted. Other factors which are considered are:-

Competition and competitor’s price

Cost of manufacturing

Cost of providing services

Profit Margin

2) How do you study competitors` pricing and how much weight age you give to the competitors` pricing strategies when company prepares own pricing strategies?

We analyse each and every move of the competitor’s. Every move of all the competitors is analysed like what are the modification they are making in their product, the change in the price of their product, the new services they are providing, and the distribution strategy they are using for their product.

All these factors are also considered while making the pricing strategy.

3) In the selling promotion how much emphasis is given to discount and other schemes like volume and cash based trading?

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We have good sales department who gives us a monthly report of the competitor’s offers and promotion and based on this report we make our promotion strategy, and apart from that we have good festive season offers for the festivals.

We give preference to cash based trading as there are many frauds taking place.

4) What is your opinion about the importance of pricing strategies in a marketing mix and marketing strategies?

Setting the right price of the product will generate the revenue for the company. The price of the product has to be sync with the marketing mix and the marketing strategies. Pricing is also necessary for the attraction of customer pool and in the long term strategies it is necessary also.

5) What do think about the effect of pricing strategies in consumers` behaviour and to attract customers towards the product?

In the Indian scenario price is given prime importance, the customers get attracted to the product once they see the low price and maximum benefits, so we try to put the thought in the minds of the customers about what is the USP of our product and what are the services which are provided by only by our product. And last but not the least the brand name which we have in the market also attracts a great number of people for our product.

6) Role of pricing strategies in Positioning and branding (brand perception) in target customers?

Pricing strategy plays a very important role in positioning and branding of the product. We try to target the entire market.

7) Any special thing about Airtel DTH?

Airtel is special for its technology (mp4 & remote) , its disc size, rapid service and trust of customer in it, so it gets the edge over others.

8) Your message for “Retail Management” students?

Retailing in India has a great future ahead with various companies the retail sector. The students really have great opportunities in this sector as it’s a fastest growing industry in India. I wish them great luck and good wishes for their future.

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You are welcome here.

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