The Art of Killing an Industry.

price competitionYou might have read about various arts to perform activities never thought of, but today we are talking of something strange. Not just the art of killing customers, employee confidence or a whole company, we are looking today at the art of killing the whole industry! That’s the only way we can discuss about the state of Indian telecom sector.

Why does it matter”, you ask? Indian telecom has been one of the major growth drivers of the economy and Foreign investment in India. We have seen the first movers who swallowed as much as possible and then there were the laggards who pitched in, to get a few drops from this ocean of users. Once an industry is bogged by several key players only 2 things can happen. Either an awesome healthy competition that in a way serves all the key players is established OR a fearsome unhealthy competition that kills and bleeds most of them. The latter seems to be prevalent now.

India as other developing countries is frugal and thrifty, and this thriftiness is the prime reason that price here is finally the deciding factor in any business for India Inc. The same is true for telecom. Its obvious that the laggards have to pay the price of not being proactive in getting into the game first. Out here in India, what they have decide is a fearsome price war. To provide the service at a cost too low for the customer to ignore. What bothers more is that the key players are reacting to it? When your competitor who has no knowledge base of the market tries to compete on just 1 factor, what can you do? I believe one can leverage its abilities, value proposition and right marketing mix to kick out the competition. But it seems the honchos in Indian telecom have no such plan. With the new trend of per second billing, one cost per call, one cost across nation, what the service providers assure is minimum billl for the consumer (1 paise billing per second which is 0.0022 US dollars). For the customers its  a treat with pay for what you consume, for the industry I believe the saturation is just round the corner and the Telecom industry has peaked.

There are certain figures in this game worth noticing. Same as many other rocking consumer industries the subscriber head count can increase at amazing rates only at a certain level. It has to halt there, remain still or fall steep based on many things like the market conditions, purchasing power, disruption etc. You cant expect exponential growth throughout life of an industry. Apart from the subscriber count, the average revenue per user is also decreasing. With cheaper rates usage gets increased. But will the usage follow rates decrease to any levels. This is unlikely. You cant keep on eating more and more if the price of food keeps on falling. Can you ?

Where are the laggards going completely wrong? Yes we talked about what the key players should have done. But we even need to know what the laggards should do to profit. At a  broader perspective couple of things strike to me. Firstly, India is yet to see the Bottom of Pyramid growth in telecom. If the right value proposition can be offered to the rural India, there is an untapped market waiting to be captured. The other growth is in value added services. Things like caller tunes, ring tones and applications are popping out but there is no single winner. All seem to copy every strategy the competitor follows. GPRS usage is increasing day by day but no ones luring those customers. There is no differentiation in services. No brand building for a target or niche! How can the laggards than establish themselves. There was a time when Reliance entered the market with 500 Rs phones, approx 2 years back. Today I was expecting someone to provide free phones! No really, today there is no player providing exclusive cheap phones via any tie up (this can be a key deciding factor for rural India). And even though there is some action, the same is not marketed well. Do you expect the laggards to even establish in such a condition and which such stale techniques?

So here we are in the ‘dog eats dog’ world. Where all the providers understand is to reduce price and fancy users. I believe its time to grow up and understand the 4 Ps of Marketing once again. A call charge if reduced by one paisa  or two will not change the buyers decision. There will be a point where fixed charge/month will be finalized but I believe before that there will be more bleeding which will end up in consolidating the laggards. Innovation and differentiation still has scope else we will simply kill this industry. What do you think about it ?

“Too many people today know the price of everything and the value of nothing.” – Ann Landers

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{ 1 comment }

Tamahome Jenkins November 25, 2009 at 3:48 pm

I think it’ll work itself out eventually. Once upon a time in the U.S. there was peak-time, roaming, and per-minute billing. As the market grew and people realized not all services were created equal, the surviving telecoms changed. Now the argument is over strength of the service, breadth of phones available, etc. I don’t think the Indian telecom industry will die because of the current techniques, though, because people need it. It’ll just be painful for the technophiles that want to see an emphasis on technology, not on price.

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