Chapter 4- The Marketing Environment

Target Market

 

The introduction of prepaid as a price plan made mobile services available on a mass market scale. This innovation turned what was considered a luxury item in the early 1990s into an iconic item for both youth and adults by the turn of the century.

The relative popularity of prepaid versus postpaid is informative. In St. Lucia and most of the Caribbean prepaid mobile represents around 65-80%.  Digicel pushes its prepaid product as a way to introduce mobile services into progressively lower ARPU (average revenue per user) customer segments in the market. The prepaid opportunity continues to grow around the world and is expected to reach an approximate net worth of US$822 billion by 2017. The popularity of prepaid is driven by its unique and practical ability to solve almost any payment need. Its “pay as you go” concept an automatic spending control that came from the blocking of services when credit runs out helps users feel “in control”.

Traditionally, Digicel and its competitors alike, marketed the prepaid product to the younger demographics and lower income brackets.  However, today Digicel   incorporates its prepaid product in the offer to Corporate entities as well Small Business enterprises (SME)

Why has this become necessary to do so? The absence of ongoing financial commitment without monthly fees or contractual lock-ins in a challenging Economy has made prepaid price plans more attractive to Business and persons who may have once fell into the higher income bracket but now have irregular incomes or having difficulties managing their finances, as well as to those who were not convinced that they needed to use their mobile service on a regular basis.  

Digicel recognizes that the prepaid mobile market has moved beyond the credit challenged market and has become mainstream for many segments including the cost conscious user. For many, prepaid mobile is a hassle free, simple, less expensive alternative to establishing a post-paid plan. In addition, prepaid does not have the same sigma it once had as Digicel and many other prepaid mobile service providers offer smart phones and advanced feature phones to their customers. Currently 100% of Digicel postpaid smart phones are also available on the prepaid plans, additionally 85% of services offered on postpaid plans are available for prepaid users.

 
Segments

The customer/market segments are best summarized in the pie charts herewith, 67% postpaid and 31% prepaid

 

 

 

 

 

 

Market Segment

A further look at Digicel’s customer base, though not totally can be segmented as follows:

 

 

 

 

 

 

31% -General Public

21%- Corporate

17%- Teenagers

11%- Young Professionals

11%- SME

9% -  2^nd & 3^rd Level Students

Buying Behaviour

The simplified registration process and absence of credit history checks for Prepaid service promotes “impulse buying”, thereby extending the channels through which both devices and services are sold beyond Digicel retail channels to include supermarkets, convenience stores and other general retailers.




Remote Environment Analysis

 Political

St. Lucia is a parliamentary democracy modeled on the Westminster system. The head of state is Queen Elizabeth II, represented by a governor general, appointed by the Queen as her representative. The governor general exercises ceremonial functions, but residual powers, under the constitution, can be used at the governor general's discretion. The actual power in St. Lucia lies with the prime minister and the cabinet, usually representing the majority party in parliament.   

At the private sector level there is an active and vocal Chamber of Commerce in comparison to the civil society sector which lacks organisation and coordination for impact. The political environment is very stable with no major political pressure groups.

Legal Framework

The Eastern Caribbean Telecommunications Authority (ECTEL) is the regulatory body for telecommunications in its Member States.

The NTRCs – National Telecommunications Regulatory Commissions – are the Telecommunications regulators at the national level in each Member State. They are responsible for the processing of applications and advising the Minister on the award of licenses. The NTRC’s functions include but are not limited to advising the Minister on the formulation of national policy on telecommunications matters; receiving and reviewing applications for licenses and proposed interconnection agreements between telecommunications providers and advising the Minister accordingly; ensuring compliance with standards, regulations and conditions attached to licenses; management of radio frequency spectrum; and investigating and resolving any dispute relating to interconnections or sharing of infrastructure between telecommunications providers; investigating and resolving complaints.

Current Economic Environment

 

St. Lucia’s economy relies primarily on the revenue generated from tourism, banana production, with additional input from small-scale manufacturing.

The level of island households living at or below the poverty level increased from 18.7 to 21.4 percent from 1995 to 2005. (As of 2006) another 16.2 percent of the island's population is vulnerable to economic shocks that could easily push them below the poverty line.

The Implementation of the Value Added Tax (VAT) in October 2012 brought about its own challenges. St. Lucians and local business are adversely feeling the effect of VAT as many small businesses has shut its doors, as they just can’t afford increases in rental space, duties and other related costs that attract VAT. 

Economic and Political Challenges: As a result of the existing economic profile and the political and governance structure the main economic and political issues can be summarized as follows:

·       Economic vulnerability caused by an open economy which is heavily dependent on external trade and one or two sectors with the absence of strong and sustainable backward and forward linkages;

·       High unemployment among the youth which has been linked to the rise in crime in the last decade;

·         Growing public sector debt;

·         High vulnerability to hurricanes and other natural disasters

Social Stratification

Although in recent years a middle class has developed, the disparities between rich and poor are extreme. Rural prosperity based on banana cultivation is now seriously threatened. The growth of suburban areas around Castries is indicative of the economic primacy of the capital; village areas continue to be marked by poverty and substandard living conditions.

Race remains an important social marker, but it is probably of less consequence than in former times.


Marketing Research

 

It is no secret that in the Caribbean people are crazy about their cell phones.

Marketing Research conducted by Digicel indicates that the mobile market in the Caribbean continues to be among the most dynamic in the world, approximately 83% mobile penetration. In terms of both revenue and service adoption, the region will continue to be among the fastest growing in the world in the 2009-2016 period, behind only to Africa & the Middle East and Asia-Pacific. Telecoms remains one of the Caribbean’s major growth industries, particularly in the mobile telephony and data sectors with high expected rates of subscriber and revenue growth which can attract  other operators to the Caribbean

At entrance into the market in 2001, Digicel had done extensive ground work and market research in terms of what customers were looking for from a new mobile entrant, i.e. cheaper mobile plans and handsets.  There was cry in St. Lucia for competition; customers were eagerly anticipating a day where every St. Lucian could afford a mobile phone.  After 10 years of operation Digicel has taken over from the incumbent and is now the market leader with a 67% market share.

Digicel bases all business decisions on proper market research including the use of focus groups, surveys and comparing the current trend and offerings to Industry standards.

Current local research conducted by Digicel indicates that more increasingly, both consumer and corporate customers are looking for cheaper options in mobile usage.  As aforementioned, it is for this reason that Digicel is now tailoring prepaid plans for corporate customers to include closed user group options where both postpaid and prepaid users on a Business account (Corporate or SME) can call each other from the allotted bundled minutes on a account.  This customization allows Business houses to opportunity to avail themselves of prepaid services where it ties into the postpaid corporate account. 

Digicel recognizes the need to be flexible in its offerings, especially at a time when the economy is facing some serious challenges.  From the onset Digicel pinned the St. Lucia market as being predominantly prepaid based on the economic environment and spending power of the people.