VOIP market is expending rapidly due to generalization of internet usage. Other than
Skype, there are many notable companies out the VOIP market: Vonage, Windows Live
Messenger and Yahoo Messenger. Also, other than the competitors in the VOIP market itself,
there is a relevant old strong-base market that is corroding this infant market - mobile companies,
such as Fido and Rogers, or Telecom companies such as Telus. The main competitors are briefly
Vonage, Windows Live Messenger, Yahoo Messenger
Vonage is a commercial company that provides all kinds of phone line services. It is
funded in New Jersey in 2001 and rapidly expended through North America and United
Kingdom. The main services are fax service, enhanced 411 dailing (for U.S.), softphone. What
makes Vonage most attractive is "virtual numbers" for a monthly fee. For example, a subscriber
in British Columbia may choose a number with Alberta area code, allowing callers from
Vancouver Calgary will be billed only for a local call. Last year, there has been a widespread of
reports of Vonage’s VOIP 911 system. Company has difficulty direct the 911 service based on IP
address. By focus on this problem, Vonage are trying to standardize IP address with landline area
Windows Live Messenger
Windows Live Messenger is an instant message freeware provided by Microsoft. It was
first released in 1999 with basic messaging function. Right now it has been enhanced with much
valuable function: mobile text message (SMS), voice chat, and off-line message. Since
Windows Live Messenger is released, its usage is all over the world because of Microsoft’s
monopoly market. However, this software only supports Microsoft Windows system. Mac,
Linux, Unix, or other operating system users must find alternative software. Also, its “filter
function” is problematic because it often block out many normal file transaction between two
Yahoo Messenger is an instant message client provide by Yahoo, a large search engine
company. It has similar function to Windows Live Messenger such as text message and voice
chat. Two things that make Yahoo Messenger different from Windows Live Messenger is that it
provides PC-to-phone call and Yahoo has developed an alternative version for Mac and Unix.
However, its connections quality tends to be unsatisfactory due to constant Yahoo server
problem. Recently Yahoo Messenger has announced partnership Windows Live Messenger. The
clients from either software can send instant message to each other. This takes over
approximately 70% of VOIP market.
Fido and Rogers
Fido and Rogers are two main mobile companies in the lower mainland. According to
Statistic Canada, 63% of Canadian between age of 15 and 69 own at least one mobile phone.
Also, the monthly fee has been pressed lower due to universality of mobile phone. Both reasons
gain most people’s favour on using telecommunication rather than VOIP.
Major Implication by Competitor Analysis
As a competitor, Skype need to refocus on its advantage and competitors’ weakness.
Skype has ability to provide a better quality of live and webcam chat. It is possible to expend
more services. Also, it is important to find out competitors’ weakness and develop their
weakness into our competitive advantage. For example, while Skype enhance PC-to-phone
service, 911 services can be listed into consideration and make sure the mistake that Vonage has
made does not occur in Skype.
Analysis of Macro Environment
The VoIP industry has boomed in 2005 unexpectedly. VoIP has become the hot
technology and the latest buzzword in the industry. In North America, wholesale VoIP sales
were estimated to approach well over $400 million. However, this is an immature market. There
are large potential to develop and expend. The reason is because consumer has low awareness on
Number of internet user is increasing, as well wireless internet connection location.
Places such as SFU or UBC has wireless network and this service increases number of laptop
users due to convenience. While using laptop, people turn on chatting software as a regular habit.
This creates a need VoIP because they tend to favour chat online.
People who use chat rooms are mainly teenagers. While a quarter of internet users claim
to have used chat rooms, this activity substantially decreases after age of 25. This trend
demonstrates that other than telecommunication, internet chat has large potential to become a
large segment of VoIP market. Because teenagers are likely to have economic concern,
sometimes they use less mobile phone but VoIP software for socialization.
The major customer segments are teenagers and people with age of early twentieth. They
are considered as early adopter segments of the VoIP market. There’s a trend that some device
companies and service provider, especially online organizations, start to use VoIP as
“competitive differentiators” to retain customers.
Customer Trends and need
In the early 80s, consumers were satisfied with a single home-phone line. After a decade,
not just a phone line, consumers began to concern about the quality of connection and
convenience of phone. This is how wireless phone line becomes populated. Right now, by going
through the rapid growth of information technology, using desktop and laptop becomes part of
our daily lives. A lot of people use computer for chatting and meeting purposes.
VoIP is always being marketed as a traditional phone product. Now it appeals to more
price-sensitive and tech-savvy segments. There is several problems regard to Skype’s overall
performance that customer concern: connection quality, complexity, security, and technology
Connection Quality, Security and Privacy, Complexity, Technical Knowledge
While using live chat, users may feel delay or discontinuous voice reception. This
occurs when bandwidth is insufficient. Also, firewall may block out some signal TCP port
and that will slow down the connection between two clients.
Skype requires a computer and software. If a person is outside he will probably use cellphone to
talk instead of setting up the computer and finding the connections. In this case, Skype is not
Security and Privacy
Clients have an enormous worry on this. Skype does not provide encryption process. Not
just people on the Skype list, anyone who has Skype are able to make connection with any other
Skype user. Besides, ssomeone may attempt to decrypt a Skype-based voice conversation, such
Many senior aged people, such as baby boomers, think Skype is difficult software to
learn. The main reason is because unlike generation X and Y, they do not have sufficient IT
background. On Skype, there’s no similar feature as phone line, such as night digit dial bottoms.
The next goal Skype can be enhanced is to make progress towards the less technologically
Targeting Older People/ Targeting IT Illiterate People
• Society may perceive our company as a “caring” company since we focus on those
people who might be abandoned by other competitors.
• Costly, since we have to spend lots of money to provide experts and training to our new
• Time consuming for our target customers to adapt with our new product.
• Large senior age population.
• Other competitors may not notice this potential target market segment.
• Other competitors may have gone ahead of us.
• Older people may not be interested in our new innovation.
• Our company may be seen as a customer oriented company which provides high quality
• Since Skype is one of VOIP Market Company, increasing bandwidth should not pose any
• By increasing bandwidth, it’s going to increase our costs and decrease our profit margins.
• Decrease available resources that can be used for improving other divisions.
• Increased validation from customers since they perceive us as a customer oriented
• It could eliminate other competitors since we have provided a high-quality product.
• Other participants who have greater financial support may have gone ahead of us.
• Since our company is an early innovator, we are protected by patent so we can capitalize
• Large market potential because it is a brand new product.
• Since it is new, it may not work properly( need to be improved)
• Since it is portable, more people will use our new innovation.
• Open up lots of future potentials, such as, integration of Skype and cell-phone companies.
• Although our product has potential, it doesn’t mean that the product will be accepted well
by the society.
1. Potential Competitor: check out if there’s any same type of product currently existed in
VoIP market. If so, how will new Skype product going to make difference.
2. Time Schedule: Setting up schedule a product being conceived until its being available
3. Supplier cooperation: marketing department need to find an IC chip developing company
agree upon innovating chips that fit our device.
4. Copyright confirmation: One IT product may requires to order hundreds technical related
patents. Skype has to make sure the any technical innovation does not violate the law.
5. Conduct Beta Testing and Marketing Testing: Hiring testers for product and release news
about new Skype product and see how public will respond.
6. Make adjustments where necessary: New Skype device will be sell in a test market area
to determine customer acceptance
7. Set Price: Skype need to consider what price range for the device and monthly fee is able
to compete with other VoIP and mobile company.
8. Product on-line advertisement: When consumer sense of Skype, they will think of online
software before they notice there is actually a “Skype device”. They are unlikely to pay
attention on “Skype commercial poster”. Thus, advertise on-line will be a convenient and
Budget and Projected Profit and Loss Statement
This Year Next Year
Marketing -plan budget $10,000,000 $50,000,000
Sales $60,000,000 $200,000,000
Profit $31,000,000 $110,000,000
Market share 14.40% 35%
ROI 10% 25%
Market Segmentation Strategy
Skype will focus more on seniors and other computer illiterate segments, as we
believe that by capturing the uncharted territory, we can gain competitive advantages over other
companies. In addition, we are interested in raising the awareness of public on our services.
Other companies seemed to focus more on innovations, but we’ll be focusing more on getting
our services to be accessible not only by tech-savvy segment but also the non tech-savvy
We will still offer our services to all other segments. It’s just that we will thrive more
to enable the segments that were once unavailable to us, because of technical knowledge, to be
part of our loyal customers. This could be done by coming up with a product that is user friendly
and usable without the need of a computer, such as a compact Skype product.
One way to improve our existing product is to by solving the technical issues to our
product. Current connection quality, security and privacy should be improved and complexity
should be kept to a minimum. In addition our services should be user-friendlier. All these
converged to one main problem: reliability (is it user friendly, is it secure, etc).
One strategy is to partner up with major telecommunication company such as Telus
and Shaw. Those companies could provide us with the bandwidth and security that we need and
in return we could share our customer pool with them. In addition, those companies usually have
the knowledge and ability to offer secure communication line. It’s a win-win situation for both.
Most of our problems will be solved. We could provide more reliable services and we could also
have access to the telecommunication companies’ customers. Maybe both of our services could
be offered as a bundle to customers.
Another strategy is to innovate a product that is extremely user-friendly. The idea is to
have a compact, easy to use and carry around item such as the current compact mp3 players. This
new product should look like a cell-phone but with the capability of VOIP services. We believe
that this will work because nowadays Internet is getting more and more common to the people
and many will have access to them. It will prove to be very convenient, cheap and appealing
especially to a traveling businessman who is always within Internet connections and needs to
conduct lots of conferencing with his/her partners.
Last but not least, an integrated cell phone and Skpe is a very viable strategy. The
ability to use both normal phone calls and VOIP services will be very attractive to the market.
Our goal is to offer cheap conferencing and long distance calls. Therefore we would
strive to offer these calls at a rate of as low as possible while maintaining reliability.
Channel of Distribution Strategy
Skype will partner up with a major Telecommunication Company should we choose to
pursue to increase our bandwidth and security.
Skype will offer our hardware product sales at all major electronic outlets should we choose
to pursue the innovation of a new user-friendly compact product.
Skype will offer a 24 hrs toll-free and online assistance to our customers. By offering good
customer services, we are hoping that word of mouth will alleviate our brand in the market.
Pricing Strategy Marketing Communications Strategy
Skype will try and increase public awareness by posting banner ads on major websites such
as Yahoo, Download.com, Google, etc
Skype will be recognized as the user-friendliest product on the market.
Marketing Plan Control:
Skype will use several tools to control and evaluate the marketing plan. First, we’ll look
at our trend of sales analysis to see how well our product is being adopted and subsequently how
well our marketing plan is. Skype will take necessary corrective actions if needed.
In addition, we will evaluate from the number of warranties / guaranties claimed by our
customers. This will indicate how well our products are made or how much reliability do they
offer to our customers. Products recall will be on standby if the products are just way too lower
quality than expected.
On the other hand, we will also monitor and evaluate customers’ problems and feedbacks
from our toll-free help center or online help regularly to identify and solve problems to keep our
Last but not least, we will conduct a marketing plan audit semi annually to evaluate how
effective the marketing plan was. By conducting audits we can identify the areas that need to be
improved and what the problems were. After the audits, we can try and work on ways to improve
the marketing plan’s efficiency and effectiveness.