Key Challenges Faced By Airtel

Introduction:

Bharti Airtel Limited, the mobile telecom leader in India and Indian Farmers Fertilizer Cooperative Ltd. announced the launch of a joint venture company IFFCO Kisan Sanchar Ltd. that will provide a major boost to the use of mobile technology in rural India. This joint venture aims at harnessing the power of telecommunication for growth in agriculture and empowers the rural farmer so that it can enhance his life by providing him vital information and thereby provide a major boost to rural economy.

Innovation to be discussed:

The right mix of product and pricing, strengthened by a vast and a unique network of over 25,000 centers to service customers.

Key Challenge faced by Airtel in undertaking this project:

To keep its leadership intact by expanding into rural markets, which needed a totally different strategy, products and services standards.

Discussion:

The Indian telecom scenario is over heated with 14 competitors and overcapacity even if India’s world telecom industry is one of the fastest growing telecom industries in the world with 635.51 Million mobile phone connections as of June 2010. Also the metro and other big cities are 100 or more percent penetrated, while rural India which accounts for more than 60 % of new customers is still only 20 % penetrated. In aggregate terms rural India represents material opportunity across many categories and its salience driven by wide range of stimuli. Initiatives like higher minimum support prices for crops, the farm loan waiver and factors like good monsoon have helped farmers become more prosperous. The increasing prosperity of such a large population (around 700 million) accompanied by above statistics creates an enticing growth potential.

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But as mentioned above, going rural for Airtel came with its own set of challenges – distribution, service, product knowledge, affordability and so on. Still, Airtel has been able to crack this code. As soon as Airtel began its journey in rural market in 2004 it learnt some things instantly. Globally and in Indian cities mobile telecommunication helps consumers travel while they talk. In rural India, the need was far more basic than this: Communication. It broke their many misconceptions that rural Rajasthan with its poor infrastructure, sparse population and large open deserts was a poor market for telecom. However, Airtel found that this factors would not lend to mobility supported a communication paradigm.

Offering Innovation: This involves changes to the functionality of the product/service. This is where nearly always conventional innovation starts. And there is an important role to play for incremental innovation (refreshing a product on annual or more frequent basis) can keep customers returning and taking advantage of continuous technology advances. Companies like Bharti Airtel aims to conquer a new market or radically reshape their position need to think bigger and differently.

Product system Innovation by Partnership with Nokia: Even after understanding this Airtel had to cross a lot of hurdles to become number one. Firstly, it had no problems putting telecom towers there. There was a very scant presence of handset distributors in rural areas. Thus, Airtel entered into what turned out to be a very profitable partnership with Nokia to bundle a handset with a connection. Another thing favoring this partnership was that both Airtel and Nokia had same powerful brand ambassador, Shah Rukh Khan. Reason for partnership with Nokia given by Sanjay Kapoor, Chief Executive, Bharti Airtel was that rural consumers were highly brand aware, they would pay a bit more and get a top brand rather than a cheaper brand.

In the above study, we found that product system innovation demonstrates the ways in which several industrial products connect with one other to create a bigger system, which can lead to enhanced functionality. This functions help in bridge gap between constraints imposed by availability and helping individuals fulfill requirements.

Service Innovation: On the service aspect Airtel has introduced SMS – based self – service systems in nine vernacular languages. It is now piloting call centers dedicated to rural customers in Tier III and Tier IV towns with Interactive Voice Response (IVRS) options in 16 local languages.

Thus one can see from case study that companies also innovate on value they provide to the customers that follows the purchase of the core product. Thus, Service innovation is typically focused on helping the customers receive the full value of products they purchase and use.

Finance Innovation: Innovative companies are those that succeed by defining new economic models and create a more permeable sort of enterprise: One that aligns incentives across a broader network to creating and capturing new value. Innovative companies are finding new ways to position themselves within a non – linear work network. Network provides a way for companies to leverage each other’s offering, customers and capabilities.

Networking finance innovation: The next big hurdle was the ‘validity’ one. Rural consumers could hardly afford to pay the steep validity charges (the money customer has to pay to stay connected to the network). In 2004 – 2005, a typical monthly prepaid recharge would cost Rs. 333, of which Rs. 33 was tax, Rs. 175 the validity charge and airtime only Rs. 125. So, Airtel started playing around with its recharge schemes helped by regulations imposed by government and other regulators. Recharge rates came down, eventually ending in ‘lifetime validity’ as low as Rs. 99 and micro – recharges where users could top up as much as they needed in multiples of Rs. 10.

Delivery Innovation: How a company gets its services to customer is the domain of delivery. There are three facets of delivery where innovation can yield disproportionately better results: Channel, Brand and Customer Experience.

Channel Innovation by partnership with IFFCO and using young entrepreneurs: To increase reach and distribution (not just for initial customer acquisition but for recharge and service requirements), Airtel decided to create a two – tiered structure with rural super – stockists (approximately 2000) and Rural Distributors among them. The Rural distributors were young entrepreneurs (around 30,000 at last count) who were allocated territories around a few mobile towers and were responsible for customer acquisition. Airtel also entered into an alliance with Indian Farmers Fertilizer Cooperative Ltd., IFFCO, which helped it sell connections through 35,000 agricultural societies. Similar alliances were also set up in various micro financing institutions. It built an enabling system that allowed 7, 00,000 rural outlets to sell recharge through mobile device.

Thus, we can see from above that channel innovation encompasses all the way Airtel gives its customer access to its offering. Successful channel innovation used an ideal mix (retailers of all sorts, wholesalers and warehouses, distributors, call centers, catalog etc.) to permit customers to buy what they want.

Customer service Innovation: For service requirements, in addition to the challenges faced posed by distance, consumers had a fear of technology. They weren’t willing to deal with call – centers. Airtel created 25,000 Airtel Service Centers (ASCS) across rural India. This involved training a specific retailer in village to handle service requirements in addition to selling new connections and recharge – the retailer gained higher credibility leading to increased walk – ins while Airtel provided a face to face service interactions. Moreover, a dedicated helpline or call – centre in each circle provided real time back – up support to these. Over time Airtel has derived more out from its rural initiative. It introduced value – added services like fixed duration music radio, job alerts and for consumers buying connections through IFFCO joint venture – information about product prices and tips on crop management.

Airtel strongly believes that how your customers feel after interacting with the company and its offerings can be a powerful source of differentiation that creates a long lasting emotional attachment.

Thus, one can see Airtel growth through rural India has been powered by local talent. This allowed Airtel to cross challenges posed by languages and dialects and even ‘shyness’ of some customers. As products are serviced and produce by local people one can even argue that this has Airtel’s brand loyalty in these highly competitive times.

Process Innovation: The activities a company performs or the capabilities it leverages in order to deliver its products and services.

Core Process innovation: Airtel decided to create a two – tiered structure with rural super – stockists (approximately 2000) and Rural Distributors among them. The Rural distributors were young entrepreneurs (around 30,000 at last count) who were allocated territories around a few mobile towers and were responsible for customer acquisition. For service requirements, in addition to the challenges faced posed by distance, consumers had a fear of technology. They weren’t willing to deal with call – centers. Airtel created 25,000 Airtel Service Centers (ASCS) across rural India. This involved training a specific retailer in village to handle service requirements in addition to selling new connections and recharge – the retailer gained higher credibility leading to increased walk – ins while Airtel provided a face to face service interactions. Moreover, a dedicated helpline or call – centre in each circle provided real time back – up support to these.