Value added service challenges and opportunities in India


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Value added service challenges and opportunities in India

  1. 1. International Journal of Marketing and OF MARKETING AND (IJMHRM), INTERNATIONAL JOURNAL Human Resource Management HUMAN ISSN 0976 – 6421 (Print), ISSN 0976 – 643X (Online), Volume 4, Issue 1, January - April (2013) RESOURCE MANAGEMENT (IJMHRM)ISSN 0976 – 6421 (Print)ISSN 0976 – 643X (Online) IJMHRMVolume 4, Issue 1, January- April (2013), pp. 21-27© IAEME: ©IAEMEJournal Impact Factor (2012): 1.5321 (Calculated by GISI) VALUE ADDED SERVICES – CHALLENGES AND OPPORTUNITIES IN INDIA Dr. Vinit Dani Associate Professor Symbiosis Institute of Management Studies (SIMS) Range Hills Road, Kirkee, Pune-411020 Mrs. Vanishree Pabalkar Assistant Professor Symbiosis Institute of Management Studies (SIMS) Range Hills Road, Kirkee, Pune-411020 ABSTRACT Value Added Services (VAS) is non-core telecommunication service for which suppliers add value to the customers information by enhancing its form or content by providing for its storage and retrieval. VAS has evolved in the long way and has tremendous potential in the emerging market and can alter the scenario of Telecom industry by creating more of opportunities to drive average revenue per unit (ARPU) by way of Innovation in the VAS. Organizations are emphasizing on Global markets for revenue generation, since Indian telecom operators continue to keep bulk of VAS revenues from their subscribers. The subscribers, when avail VAS services, like on-line data processing, on-line data base storage and retrieval, electronic data interchange, voicemail etc. the subscribers pay the telecom operator for the services used. The operator, in turn, keeps 60-70% revenues and the remaining goes to VAS companies. The exploratory research paper explores the role played by stakeholders in creating value and challenges faced by them. It further talks about benefits derived by offering VAS to Indian consumers. Key words: VAS, Telecom, Innovation, Market, Storage, Service 21
  2. 2. International Journal of Marketing and Human Resource Management (IJMHRM),ISSN 0976 – 6421 (Print), ISSN 0976 – 643X (Online), Volume 4, Issue 1, January - April (2013)1. INTRODUCTION The impact technology has had on India cannot be denied. It is observed that in thelast two decades, there have been many technological advancements happening all over theWorld. With the entry of World Wide Web (www) in the early 1990’s, the huge potential ofgrowth was foreseen by the experts. Such advances in the technology have enabled theOrganizations not only to serve the customers in a better way with increased customerservices, and streamlines processes but also pave way to foster new collaborative partnershipswith other Organizations. Introducing products and services to the consumer has come a long way sinceMontgomery Ward carried his catalogue of products from door-to-door in 1872 (Schneider,2009). Service providers have evolved in their service promotions channels with multipleadvancements in the technical devices that they are infinite to count on. In 2005, Informationtoday reported that cell phone use in India already surpassed cell usage in the United States(159 million). Service providers have realized that it is beyond customer expectation he has to reach,to ensure the customer does not deflect, thereby controlling the churn ratio. VAS like theSMS, MMS, Voice-calling, Mobile Banking etc to name a few, are the key elements in theVAS, which the customer looks out for today. Hence conveying about this VAS to thecustomers is equally important. The global VAS industry is growing at about 40-50 per cent,but the Indian VAS market has seen growth rates of 60 percent in recent years. It is estimatedto touch 251 billion rupees ($5.5 billion) in 2009/10, on the back of a pool of more than 500million mobile customers.1.1 Department of Telecommunications (DOT) categorizes different VAS as underElectronic mail: The Electronic mail is the email service that the subscriber can avail. Usingthis service the user can automatically receive his emails on his mobile phone, as a normalSMS and does not require any GPRS connectivity.Voice mail: Voice mail facilitates the customers to connect to their contacts through Voice.This can be for a temporary phase or permanently, unreachable via SMS, such as on landlinephones and mobile phones on networks without SMS messaging.Audiotex service: Audiotex services are, as a rule, provided at nine-digit numbers in thefollowing format: 90X AB CD ZZ, where: X defines the type of the provided service and canbe any number between 0 and 9 in accordance with the numbering plan. AB determines theper-minute rate charged to the end user including VAT, the rate may also be charged percall.CD ZZ these numbers are allocated by the Czech Telecommunications Office.Direct Access Code Dialing: With Direct access Code dialing, the access is provided for thesubscriber to prefix the required code to follow by the number, to call from one country to theother.Bulletin Board Service: A bulletin board system is software which enables the customers toconnect and login to the system that uses the terminal program. After successfully loggingonto this software’s, the user can download content, read news and bulletins, send andreceive e mails, through live chat. 22
  3. 3. International Journal of Marketing and Human Resource Management (IJMHRM),ISSN 0976 – 6421 (Print), ISSN 0976 – 643X (Online), Volume 4, Issue 1, January - April (2013)Videotex Service: Videotex service is a system that enables users to have interactive contentand displays it on a television, typically using modems to send data in both directions.Videotex can be used to refer to services, including the Internet, bulletin boards, onlineservice providers, and even the arrival/departure displays at an airport.Video Conferencing: Videoconferencing is the system which allows communicationbetween two or more locations simultaneously.Morning Alarm Service: Morning Alarm service allows the users to download their favoritering tones and set them for morning alarm.2. OBJECTIVES a. To understand role played by handset manufacturers and mobile phone operators in value chain b. To understand challenges faced for providing VAS c. To determine the benefits derived from VAS by consumers in India.3. LITERATURE REVIEW Turel et al. (2007) found that customers’ adoption decision of the service providerdepends on the quality offered and the price of the service provided. Researchers and experts have different reports regarding the relationship betweendimensions of Value added Services and customers satisfaction. Kim et al. (2004) discoveredthat core quality, value added services and customer support had a definite impact on thelevel of satisfaction of customers in cellular service companies which finally brings loyalcustomers to the company. Since it is the overall Service quality that determines the customer satisfaction, it isonly through Value added Services which act as a rationale of differences betweenexpectation and competence along the important quality dimensions. Parasuraman, Zeithamland Berry, identified ten requirements useful for customers’ evaluation of the quality ofservices: reliability, responsiveness, tangibles, communication, credibility, security,competence, courtesy, understanding the customers and service accessibility. Liberalization has paved ways to the Indian economy. The process of liberalization inthe country began in the right earnest with the announcement of the New Economic Policy inJuly 1991. Telecom equipment manufacturing was de-licensed in 1991 and value addedservices were declared open to the private sector in 1992, following which radio paging,cellular mobile and other value added services were opened gradually to the private sector.This has resulted in large number of manufacturing units been set up in the country. As aresult most of the equipment used in telecom area is being manufactured within the country.Basically, the Cellular Mobile, Paging and Value Added Service, and Global Mobile PersonalCommunications by Satellite, Composite FDI permitted is 74% (49% under automatic route)subject to grant of license from Department of Telecommunications subject to security andlicense conditions, as per FDI Policy circular 1/2010 of DIPP. 23
  4. 4. International Journal of Marketing and Human Resource Management (IJMHRM),ISSN 0976 – 6421 (Print), ISSN 0976 – 643X (Online), Volume 4, Issue 1, January - April (2013) • FDI up to 100% permitted in respect of the following telecom services: - • Infrastructure Providers providing dark fibre (IP Category I): • Electronic Mail; and • Voice MailSubject to the conditions that such companies would divest 26% of their equity in favor ofIndian public in 5 years, if these companies were listed in other parts of the world.Telecom Sector has witnessed significant growth in the last two decades. The increase in thesubscriber base from 22.8 million in the year 1999, it has grown today to 926.53 million inDecember 2011, which is 78.86% of Tele-density, according FICCI report on ContentTechnology. With Low tariffs, Low ARPU and with advancement in Technology, subscribers aremotivated to upgrade the VAS from the service providers. Adding to this is the significantproof of the value of technological advancement it the growth in world economies. In 2005,India had one of the lowest per-capita annual income ratings in the national rankings;however, as access to technology increased annual incomes increased as well. Economists are now viewing India not as a developing country but as an "emergingeconomic superpower”. In spite of growth observed in the telecom sector through VAS, itsapplication and opportunities that prevail a challenge to identify the impact that VAS has oncustomer satisfaction. This fact can further be substantiated by referring to Haque et al.(2010), who in their research have concluded that service quality directly affects thecustomers perceptions in selecting mobile telecom operators. Further, it has been frequentlypointed out that once customer has been acquired and connected to the network of aparticular operator, their long term relations with the operator are of greater importance forthe success of the company, considering that this industry has a lot of competition. (Grepottet. al, 2001). This is mainly due to the fact that cellular service providers do not differentiatefrom each other. Therefore in such a competitive scenario, the marketers do understand that in order tohave the market sustenance, one has to enhance the quality of the services provided.4. RESEARCH METHODOLOGY The research paper presented here is an exploratory paper the data for which iscollected from various secondary resources like research papers, journals, magazines, articlesfrom other databases. In addition to this, various other data sources from DOT, FICCI, Indianeconomic overview, TRAI are used.5. DATA ANALYSIS5.1 Role of Handset Manufacturers Depending on their position and interest in a given market mobile manufacturers play avariety of roles across the mobile VAS value-chain. The roles hand set manufacturers playwould depend on their ability to provide functionalities that are inherently integrated into themobile handset. For instance, Nokia Life is an application that is integrated into certain typesof Nokia handsets. Thus handset manufacturers play crucial role in driving the distribution and 24
  5. 5. International Journal of Marketing and Human Resource Management (IJMHRM),ISSN 0976 – 6421 (Print), ISSN 0976 – 643X (Online), Volume 4, Issue 1, January - April (2013)uptake of mobile applications. Handset manufacturers can embed applications and nativecontent into a handset. Through partnerships with mobile network operators, handsets are soldin markets according to different subsidy and pricing models. Impact on market positioningand sales would depend on supply-side partnerships with handset manufacturers. On otherhand, applications can help drive product differentiation from a demand-side. Value is derivedin three principal ways. a. Application uptake and usage can help in capturing end-user revenue. b. Data analytics can be leveraged for informed marketing and advertising. c. Increased sales and brand visibility in the market can help realize indirect value.5.2 Role of Mobile Network Operators Mobile network operators impact the value chain by creating, collecting and deliveringrelevant content to mobile phone users in more than one area. Mobile network operators cantailor and deliver content that is easy to use as it is integrated with the device. They also controlhow their products are marketed to different consumer groups, a key point in the chain. Mobilenetwork operators can drive uptake of its services and differentiate from peer competitors byintegrating a particular product, like a toolbar on a phone that displays weather or exchangerates. Usage is increased when mobile network operators develop mobile VAS to increase theways in which users can interact with their phones. Brand differentiation is brought byreinforcing services. This is done either through mobile VAS products that are focused onuniversal products that are available to the overall subscriber base or by concentrating onspecific subscriber segments. The products can be developed by mobile phone operators eitherby partnering with other segments of the value chain or developing own products. Improvedcustomer segment acquisition and reduction in churn can be achieved by differentiation in themarket or from direct service revenue (e.g. ringtones) and marketing.5.3 Business Challenges As each market is unique sizing and assessment of specific business challenges in eachmarket is based on the potential impact achieved if a mobile VAS solution were to beimplemented to address the business challenge. Based on unique features of each individualmarket, sizing and ranking has been categorized as follows: a. Reliability: Basically means accessibility of entrepreneurs in each market to relevant resources. An example would be the reliability of the market data made available to an entrepreneur based on the frequency the data is updated. b. Quality: Availability of quality of resources to an entrepreneur in each market. An example of this would be if market data were available to an entrepreneur, the quality and detail would need to be of a specific standard to facilitate in making an informed business decision. c. Availability: Level of resources available to an entrepreneur in each market. An example of availability would be the amount of market data available to an entrepreneur in a specific market data in order to make an informed decision on the pricing of their product/service. 25
  6. 6. International Journal of Marketing and Human Resource Management (IJMHRM),ISSN 0976 – 6421 (Print), ISSN 0976 – 643X (Online), Volume 4, Issue 1, January - April (2013) d. Affordability: Cost involved in accessing/acquiring specific resources from each market. An example would be the cost associated with acquiring market data in order for an entrepreneur to make an informed business decision. e. Social Stigma: Constraint associated with socio-cultural stigmas. An example of this would be the social stigma attached to a woman entrepreneur negotiating prices with a male counterpart. f. Latency: Accessing relevant resources in each market within a given time and with ease by the entrepreneurs. An example of this would be the abundant availability of market data but a high level of difficulty associated with accessing this data.5.4 The role played by VASTechnology Impact on consumer offers and experience in IndiaIn the global marketplace advancing technologies are providing companies with new customers everyday by developing more affordable gadgets. With advancements in the technology, the customer’sexpectations also keep varying. Service providers have to therefore continuously strive for excellencein the services. Information processing systems make sharing information faster, easier, andincreasingly more widespread. According to research firm Gartner ‘mobile applications with moneytransfer via short message service’ lead the list of top 10 most used mobile applications, followed by‘mobile search’ to drive sales and marketing opportunities on the phone, ‘mobile browsing’, ‘mobileadvertising’ and ‘mobile music’. Most kids in rural India do not have access to formal education and often end up working onthe farms during the day. So to help reach out to these children, an inspiring project, Millee, is underconsideration, which uses mobile gaming technology to enhance access to literacy among children ofschool-going age in the developing world. “Another very interesting project is farmers using a phoneto water their farmland in Gujarat.” In December 2009, Infosys announced the launch of Flypp, an application platform that hasdelighted digital consumers with a host of ready-to-use experiential applications across a universe ofdevices. Mapmyindia, in partnership with Sygic, has launched mobile apps that give the user streetlevel directions, and lets them search across points-of-interests (PoI) on their mobiles without the needfor a data plan. That’s not all… mobile trading will soon be a reality, and India’s markets regulatorSEBI is currently working on the final guidelines. Already, Nokia has partnered with ITC e-Choupal to offer personalized agri-services on theNokia Life Tools to e-Choupal network. And, information giant Thomson Reuters’ latest offering forfarmers, Reuters MarketLite, is already “all the rage” among the village folks who use information onseeds, weather and other farm inputs regularly. Recently, IMImobile, the global service creation partner for operators, media providers andenterprises launched DaVinci Social, a white-labeled service that enables people to easily managetheir mobile digital social life. It is apparently the first Bollywood streaming application ready onNokia s60 5th edition devices and streams Bollywood songs, movie tailors, director’s cuts etc.6. CONCLUSION A recent study by consultancy Informate Mobile Intelligence revealed that mobile users spend15-20 minutes on messaging activities daily, while 40-45 minutes are spent on entertainment whereusers listen to a minimum of 2-3 songs and click 15-18 photos in a month. The study also revealedthat card and puzzle categories are the most favored among gamers in India. With its mobilesubscriber base growing rapidly, advertisers in India are also adopting innovative ways of reachingout to the consumer on their mobiles. While basic promotional SMS alerts are used by everyone- fromsmall businesses to national-level politicians, advertisers are focusing on more complex mediumssuch as embedding promotions within mobile games. 26
  7. 7. International Journal of Marketing and Human Resource Management (IJMHRM),ISSN 0976 – 6421 (Print), ISSN 0976 – 643X (Online), Volume 4, Issue 1, January - April (2013) With intense competition driving down tariffs, mobile operators in India areincreasingly focusing on VAS to generate revenues. VAS, which covers the entire gamut ofservices from downloads of movies and music, to SMS and MMS, ringtones, caller tunes andgames, has been on a solid footing globally, but given the low base and the familiarity withinformation technology, it is witnessing exponential growth in India. Although most Indianconsumers are not very comfortable with non-voice usage of their mobile phones, that trendis gradually reversing, helped by the entertainment sector, with music and film companies,game makers and television channels aggressively entering the mobile content market.Around 60 percent of all VAS revenue currently comes from music downloads and ringtones,and driven by a huge youth market, demand for gaming, mobile imagery and streaming audioand video is rising. Indian telecom firms currently draw only a small portion of their revenues from VAS,but this will likely grow in future. The ARPU from non-voice services, including data cardaccess and SMS, is expected to rise from 9 percent now to about 25 percent. Data servicesshould see a surge in adoption and usage. High-speed applications will open up a lot ofpossibilities of innovative VAS enabling diverse infotainment service opportunities in thisfilm and cricket-focused country.BIBLIOGRAPHY 1. (Online), in 21st September 2012 2. (Online), 22 September 2012 3. (Online), 25th October 2012 4. (Online), 25th December 2012 5. (Online), 27th February 2013 6. (Online) Services-digital-report.pdf, 27th February 2013 7. TRAI report 8. African Journal of Business Management Vol. 4(16), pp. 3457-3462,18 November, 2010 9. Booz&Co 10. IJBIT, Volume 3, Issue 2, April-September 2010 11. International Journal of Research in Finance & Marketing 12. V.A. Parasuraman, A. Zeithaml, L. Berry. A Conceptual Model of Service Quality and Its Implications for the Future Research. Journal of Marketing. 1985 13. V. A. Zeithaml, L.L. Berry and A. Parasuraman, “The Behavioral Consequences of Service Quality”, Journal of Marketing, 1996. 14. Dr. Vinit Dani and Mrs. Vanishree Pabalkar, “Impact of FDI: Banana Republic or Miracle Growth” International Journal of Management (IJM), Volume 4, Issue 1, 2013, pp. 157 - 162, ISSN Print: 0976-6502, ISSN Online: 0976-6510, Published by IAEME. 15. Nitin Panwar and Mahim Sagar, “Can Value Added Services be a Point of Purchase Differentiator?” International Journal of Management (IJM), Volume 1, Issue 1, 2010, pp. 88 - 103, ISSN Print: 0976-6502, ISSN Online: 0976-6510, Published by IAEME. 27