Marketing Principles
Term Project
For : Dr. Kumarashvari SUBRAMANIAM
Date: December 15, 2012
By
Hadeel AlDossary
200800425
Fadheelah AlSoqair
200900765
Norah AlFahad
200800412
Sukainah AlKhamis
200700527
1
Executive Summary
STC is without doubt the leading telecommunication provider in Saudi
Arabia with a wide variety of services. STC has grown exponentially in the last few years
even though there is increased competition. They use many marketing communication
channels to reach their customer such as TV, radio, online ads amongst others. This
research delves into whether these marketing communication channels are effective and
efficient in reaching their target market. The research brings facts, opinions and customer
opinion into play and makes an informed decision.
2
Table of Contents
Content
Page Number
Executive Summary
2
Introduction
4
Background
5
Literature Review
8
Methodology
10
Data Analysis
11
Conclusion and Implications
17
Bibliography
19
Appendix
21
3
Introduction
All companies work on the basic premise of maximizing shareholder wealth. Each
organization focuses on increasing profitability while maintaining lower costs. In other words its
efficiency that organizations look for. For any organization the most vital component is
customers, whether it is bringing new customers, maintaining existing ones or entering new
markets and getting more customers. The end objective though is to reach customers efficiently
and in a cost effective manner. Marketing focuses on this very objective. Companies have their
target markets and accordingly they make marketing and sales plans. The Objective of this
research is to find out if the marketing communication channels currently being used by Saudi
Telecom Company are efficient in reaching their target markets.
Saudi Telecom Company (STC) was initially a government owned telecommunications
provider, with their product being landline phones. With the rapid development in technology
and with the invention of wireless devices STC ventured into the mobile phone service providing
sector in the year 1998. Operating solely in Saudi Arabia as the only telecom provider STC had a
market share of 100% and profits, unknown but estimated to be very high. In 2004 as Saudi
Arabia joined the World Trade Organization, they had an obligation to open their market to
foreign companies. This helped bring in competition in the Saudi Arabian telecom industry.
Since then STC has been operating in the Saudi Market with Mobily and Zain as their
competitors. As we can see from table1, STC has established itself in more markets than its
competitors and is also the leading service provider in terms of market share.
The company later expanded to nine countries including Indonesia, Kuwait, Turkey and
South Africa thus increasing the total revenues by 32% in 2011. Some of STC’s investment
strategies include non-majority stake purchases and later converting them to stake controls. In
mid-2007, the company spent USD 3 billion for a minor stake in Binariang, an indirect owner of
Malaysian Cellco Maxis Mobile, thus giving it more interest in Maxi’s Indonesian Cellular Arm
Axis. Consequently, STC increased its share by 29.1%-80.1% of the Indonesian firm in April
2011.
4
In January 2008, STC developed more interest in Oger Telecom, a Lebanese controlled
firm, and invested some USD 2.6 billion for a 35% stake in the latter as well as a number of
internet operations within Lebanon and Jordan. These strategic investments marked a significant
growth in its international operations.
Table 1
Landline
STC
Mobily
Zain
A
U
U
Mobile
Phones
A
A
A
Devices
Internet
Television
A
A
A
A
A
U
A
U
U
STC’s Mission : As leaders in a world of constant change, we strive to exceed our customers’
expectations so that, together, we reach new horizons.
Background
Target Markets
Saudi Arabia’s population is estimated to be more than 27 million people of which 8
million are foreign nationals. Of the nineteen million Saudis , 30% are under the age of 15, 67%
are between 15 and 65 and the remaining 3% are 65 years and older. Saudi Arabia’s population
is growing at fairly good speed and with a good portion of the population still under the age of
fifteen, there is a great opportunity for businesses to expand and enter Saudi Arabia’s market.
Although target markets are specific and it’s never safe to say that a particular company’s
target market is the whole nation. In the case of STC though their target market is the entire
population. With a focus on the 67% population that’s between the ages of 15 and 65. STC’s
success throughout the years has been mainly due to the factor that STC has produced services
that cater to all section of the market, regardless of age or income levels. Telephone service has
become the most basic of human needs and STC has done well to cater towards all customers,
whether it is through landlines or mobile services.
5
The claim that STC’s target market is the entire population is based on the fact that they
have a wide variety of services that they offer and at various price levels. This is important since
not all portions of the population can afford all the services. The landline services offered have
basic calling services to advanced services such as call forwarding and caller identification.
These are each based on different prices. Similarly the mobile phone services are divided into
postpaid and prepaid services with different price levels based on usability. The internet services
are similar and are based on usage and speed and so are the television services. Not only does
STC sell the services individually, but they also have bundled packages that target big and small
families alike. By creating these they have effectively gained a major share of the market since
none of their competitors can provide these bundled packages.
STC also targets businesses based on their needs and wants. Telephone, fax, internet and
wireless services are provided at competitive prices by STC. Keeping in mind the large
expatriate population, STC has targeted foreign nationals by providing specialized packages with
discount calling rates to foreign countries. They have also expanded into selling mobile phone
devices, by offering very low prices on phones by selling them with a service and data package,
STC has made buying expensive mobile devices more affordable. With installment plans on the
most commonly used phones STC has taken a bite from the device vendors market share. All this
goes on to reaffirm that STC’s target market is the entire population of Saudi Arabia regardless
of income levels.
Marketing Communication Channels
Marketing communication channels are quite simply are the basic means by which an
organization attempts to inform the customers and hopefully persuade them of the products or
services they offer. There are various Marketing communication channels.
The first is Advertising, STC uses heavy advertising mainly due to the fact that Mobily
and Zain heavily market their products. In order to compete STC has a wide variety of
Advertising platforms. STC uses Televsion advertisements along with program sponsorship to
increase their brand presence. STC also uses radio advertisements to get to more listeners. STC
places regular magazine and newspaper ads as well and has a strong social media presence with
their own facebook, twitter and google plus pages.
6
STC also uses sales promotions to market STC, they have year round offers on different
services such as the aforementioned bundled packages called Jood. They also have seasonal
offers on various services and offers on new products and devices.
The third communication channel is direct marketing. In direct marketing, STC attempts
to reach the customer directly, they do this by placing online ad banners, direct emails to
customer and direct text messages to customers. STC’s online ad placement is very heavy and it
is very common to find their ads in websites when browsing the internet in Saudi Arabia
The fourth communication channel is direct selling. STC has established various
customer service branches all over Saudi Arabia. These branches serve as customer service
centers and also stores from where customers can but their products directly. Part of their
marketing plan is to sell existing customers more of their services and to have salesmen convince
the buyer to upgrade. STC’s direct selling also involves an in detail and interactive website that
lets the user log in and use many of their services such as payments, billing and other
information. The website provides in detail information on all the services on offer.
STC values itself as a community service provider. They use sports events and sporting
teams as an opportunity to market their brand name. STC has shirt sponsorship deals with
famous football clubs such as Al Nasr and Al Ahli. They also have advertising banners in foreign
football leagues that are heavily watched by Saudi viewers. One such example is their
advertising deal with Real Madrid and Manchester United. Other social consciousness programs
include the religious loyalty program, health loyalty program, social loyalty program and the
educational loyalty program.
7
Literature review
Among the many sources that discussed and gave analysis to the Saudi telecom business and
players market share, was this report which is titled, "STC Business Review", it reports that Zain
continues to have an aggressive on pricing offers that made it the leader in the sector in 2012.
According to the report, Zain realized this by converting the users from prepaid (charge cards) to
postpaid and also by the growth of the data segment. The same report compares Mobili's similar
strategy of 12 percent post-paid subscribers with a growth expected in the coming years". While
STC, around 25 percent of post-paid subscribers (STC Business Review, 2011).
This source titled, " Competition Heats up between Saudi Cell Phone Carriers (Operators)"
discusses STC's strategy of focusing on fixed line market especially in international expansion
and the underdeveloped broadband market to have advantage over Mobili and Zain, by offering
FttH services boasting speeds of up to 1Gb/s and offering IPTV services. According to the
source STC plans by year 2015 this strategy will draw 50% of its total revenue, compared with
33% currently (MENA Business Report, 2011).
"Major Players Pricing Strategies on the Track" is an article that gives details on the pricing
competition among Saudi telecommunication three companies as; STC with a PT of SR50.2 with
an increase of 25 percent, and Mobili with a PT of SR75.5, lower than Zain with a PT of SR7
downside
of
37
percent
(Khalan,
2011).
According to the report, a key concern for the sector is continued price led competition,
especially for the international calls segment. But the interesting fact here is that, the pricing
competition negatively affected the three competing companies and put pressure margins on
them this year 2012 both in the telecom market as well as in their stock market.
According to the article, "“Saudi Telecom Company to Launch Motorola Xoom ", it says:
STC is very keen to keep up with the latest technology by offering more than the basic GSM
8
voice service. Therefore, they offer their valued customers additional value added services based
on these new technologies enabling them to partner with STC. STC thrive to maintain the highest
customer satisfaction. The power and flexibility of Aljawal (cell-phone) is available for anyone
for small sum of SR 50~$13 to connect (a one off payment), and a payment each month of SR
35~$9. Aljawal comes with free bundled services included (MENA Business News Network
(n.d.), 2010).
There are sources that discussed the opportunities ahead for all the players in the SAUDI
Telcom’s STC operators saying that, "the Saudi telecom sector is up 29 percent against the
TASI, which is up 19 percent. The market Capital governing body believes the 18-19 percent
gains in STC and Mobili are justified given the strong financial performance of STC in the
domestic market, as well as the increase in dividend quantity and frequency for Mobili. Zain
KSA is up 100 percent YTD NCB Capital believes most of these gains are from speculative
investors taking advantage of the low nominal price of the stock. The article discusses another
important issue, saying: “Despite the strong performance of STC and Mobili, we believe upside
remains on both stocks given the attractive valuation (9.8x 2012e P/E for STC and 7.8x 2012e
P/E for Mobili) as well as continued growth outlook. For Zain KSA, any investment case is
largely based on the successful restructuring of its balance sheet, which is far from certain of
proceeding smoothly. For now, we believe the risks on Zain outweigh the upside potential
(www.arabnews,com.sa , 2012).
Customer satisfaction is the fulfillment of the customer’s expectation and needs toward the
quality of services and products.(Hallowell, 1996; Oliver, 1997 and Zeithamal and Bitner, 2000).
The most important principle purpose of the business is to create satisfied customers (Drucker P
F 1954). A satisfied customer will be willing to pay which will lead to increase the profitability .
In addition, satisfied customers will provide recommendation and this will maintain the customer
loyalty towards the company (Reichheld, 1996).
Customer loyalty is related closely to the level of future growth which means if the growth is
increasing positively and strongly, it will retain the customer loyalty for the company. Fornell C
(1992), When the company has a stable level of profit, the subscription will be reach saturation
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point , the competitors will become fierce and the market will be mature and the most important
thing is to apply a defensive strategy which means retaining most of the existing customers is
more important than an aggressive one (Fornell, 1992 and Ahmad R and Buttle (2002).
transmission services that will enable viewers to watch TV programs with high quality and
clarity, as well as to download the video (VOD) and electronic games and entertainment
services. So, their mission statement is “As leaders in a world of constant change, we strive to
exceed our customers’ expectations so that, together, we reach new horizons”.So, the purpose of
the network at STC is to provide varies and variety of services to clients in Saudi Arabia and
international. Moreover, provide the largest and greatest telecommunication in KSA and around
the world to meet the customers demand and to make their life more easer. In addition to that the
network helps to make the client life easier like instead of going to the STC Central they can pay
by ATM machine or using the STC original website.
Saudi Telecom Company (STC) is the largest telecommunications company by market
capitalization, total revenue and number of employees in the Arab State region. In the last few
years, STC has gone beyond its local borders to the international markets, forming a network of
businesses and investments in a number of GCC countries, Asia and Africa. STC services are
divided into three broad categories: Jawal (mobile network), Hatif (landline network), and
Internet services.
Research Methodology
The purpose of the research is to find out if the existing communication channels are
effective in reaching out to STC’s target market. Since very little resources are available
regarding STC over the internet and in libraries. This research will use the most traditional of
approaches. For this research there will be a survey conducted and an interview.
The survey was conducted with the consumer in mind and was hence a survey distributed
to the general population. The sample size used was 50. The sampling method used was
random/cluster. The survey was divided amongst the members of the group and each member
got some surveys completed at different locations. Such as the university, at supermarkets, at
workplaces etc. This was done to ensure that there is no bias in the research. The survey also
ensured that both female and male are present in the sample. The aim of the survey was to find
10
out if the customers receive the STC advertisements on a regular basis and if the communication
channels used are effective in turning them into future customers.
The second research tool used was an interview. The interview was conducted with the
branch manager of one of STC’s offices in Al Khobar. The person being interviewed was Mr.
Mohammed Al Qahtani. This interview was conducted in order to find out the marketing and
advertising details of STC and the basic strategy they use to market their products. Since a lot of
the information is private, only little information could be received.
Data Analysis
Survey Results:
C1: Age
30
27
25
26
20
25
15
24
10
23
5
22
0
21
15-24
25-35
36-50
50 +
Male
Female
Of the 50 surveyed majority were between the ages of 25-35, with 80% of the surveyed
falling in the ages of 15-35. 28 of the surveyed were male and 22 were female. Another
interesting statistic is that 100% of the users surveyed responded positively “do you use any of
STC’s services”
11
C3: Switched fro other providers to STC in
the last one year
30
25
20
15
10
5
0
yes
no
56% of the surveyed responded positively when asked if they had switched to STC from
another provider in the last one year.
C4: Home Phone
C5: STC Cell phone users
60
25
50
20
40
30
Home Phone
users
20
15
STC Cell
phone users
10
5
10
0
0
Yes
12
No
yes
no
C6: Internet users
C7: Invision users
35
40
30
35
30
25
25
20
internet users
15
20
Invision users
15
10
10
5
5
0
0
yes
no
yes
no
From C 4 we can see that 100% of the surveyed use STC’s land line service. From C5 we
can see that only 50% of the surveyed used STC’s mobile phone service. From C6 we can see
that 62% of the internet users preferred STC. And from C7 we can see that only 30% opted for
STC’s invision service whereas 70% prefferred other services.
C8: Radio
13
C9: Magazine
yes
yes
no
no
C11: online ad
C10: newspaper
yes
yes
no
no
C13: Direct sms
C12: Direct email
yes
yes
no
no
Each and every one of the surveyed, responded yes to having seen STC advertisements
on TV. 34% responded to have heard STC ads on the radio. 52% affirmed to have seen STC’s
ads in magazines. A whopping 92% said yes to having seen online ad banners of STC. Only 18%
responded positively to having received emails from STC and 56% said they received text
messages marketing STC’s products and services. The illustrations C8 to C13 show the above
information.
14
C14: Convince
C15: Website
35
30
25
yes
no
20
15
10
5
0
very
often
often
seldom
never
From C14 we can see that 100% of the ones surveyed were convinced to buy STC
products at some point of time. C15 shows that 62% seldom used STC’s website, 24% used it
often, 2% uses it frequently and 12% never used it.
Interview
Table2
Communication Channels
Percentage of budget for 2012
Advertising
60%
Sales Promotion
25%
Events
10%
Direct Marketing
5%
Table 3
Communication Channels
Percentage of budget for 2011 and 2010
Advertising
60%
Sales Promotion
20%
Events
10%
Direct Marketing
10%
15
Table 4
Advertising
Percent emphasis
TV
50%
Radio
20%
Newspaper
10%
Magazines
10%
Social Networking
10%
Table 5
Direct Marketing
Percent Emphasis
Online Ad Placements
80%
Direct Email
5%
Direct Text Messages
15%
Table 6
Advertising
1
Sales Promotion
2
Direct marketing
3
Events
4
Table 2 shows the emphasis laid by STC in terms of their marketing budget. 60% is
allocated towards advertising, 25% is allocated towards sales promotion and the rest is made up
of direct marketing and events. Table 3 shows the budget division for the years 2011 and 2010.
Table 4 shows the percentage emphasis of different channels within advertising, 50% is on TV
ads, whereas 20% is on radio ads and 10% each on Newspapers, magazines and social
networking. Table 5 shows that 80% of the direct marketing is targeted towards online ad
placements. Table 6 lists the order of emphasis laid by STC on its communication channels. The
interview also informed that STC’s targets have been consistently met over the last five years.
The interview also revealed that the marketing channels are constantly revised based on the
16
competitors strategy and that its very important in determining the marketing channels and
strategies.
Conclusions and Inferences
From the survey and interview we can confer that almost all of the surveyed use at least
one of STC’s services, although the number of cell phone users and internet users is fairly good,
STC is still lacking in invision customers. 56% said they switched from a different service
provider to STC which is an encouraging sign. We can also infer from the interview that the
reason for changing the budget plan for 2012 was because STC changed their sales strategy and
opened a new stream of products. Considering this they allocated more towards the sales
promotion and decreased their budget for direct advertising. This also tells us that direct
advertising was performing well for STC hence they chose to decrease the budget and keep it as
is. Of the advertising techniques television is the most effective followed by online ads and
magazines, the other modes of advertisements yielded fair results with direct emails being the
poorest. With 100% of the surveyed being convinced of STC’s quality and service from their ads
and products it is safe to assume that STC’s marketing plans work well with customers. STC
spends a good deal on their website but not many frequent users are using the website yet.
Correlating the interview questions with the survey we can see that 50% of the
advertising budget is put towards television ads, which yielded 100% of users. This clearly
shows that STC’s television ads are reaching their target market and their money is being used
well. Similarly 80% of the emphasis is laid on online ads and they are the second most effective
form of communication channel for STC. Overall STC’s emphasis on Advertising is paying off
since it is reaching a majority of the consumers.
We can infer that STC is the market leader and leads other competitors in terms of
services and has a monopoly on land line services. This alone gives them an upper hand since
they can provide bundle services. These services are definitely helpful since all surveyed used
more than one of STC’s services at the same time. By getting in the television industry, they
have diversified, but are yet to reach their potential. Considering all of this STC has to follow a
defensive strategy in terms of marketing and they are doing exactly that. In conclusion we can
17
clearly see from the above analysis and data that it can be said that STC’s media communication
channels are efficient in reaching their target market.
18
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Appendix
Survey
1. Gender:
Male ____ Female _______
2. Age Group 15- 24 ________ 25-35 ________ 36 – 50 ______ 51 and above _________
3. Do you use any of STC’s services? Yes ______ No _______
4. Which of the following STC services do you use? (Choose all that you use)
Home Phone______
Cellular Phone _________
Internet _______
In vision ________
5. Have you switched from another service provider in the last one year?
Yes____
No ____
6. How did you hear about STC’s different offers and services? (choose all relevant)
TV_____
Radio _____
Magazines_____
Newspapers ______
Online Ads _____
Direct Emails ______
Direct Text messages _______
7. Did STC’s advertising and promotions convince you to buy their products?
Yes _____
No ______
8. How often do you use STC’s website?
Very often _____
Often ______
Seldom _______
Never used _____
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