Part A: Case study [40 marks]

Carefully read the article below and answer ALL the following questions.

Airtel Magic - Selling a Pre-Paid Cellphone Service: Casting the

Celebrity Magic

Cellular telephony was introduced in India during the early 1990s. At that time, there were

only two major private players, Bharti (Airtel) and Essar (Essar) and both these companies

offered only post-paid services. Initially, the cellular services market registered limited

growth. This was primarily due to the high tariff rates charged by the companies (about Rs

16 per minute for outgoing calls). Indians who were used to paying much lesser amounts

(Rs 1.20 for 3 minutes) for landline telephone calls found these to be very expensive.

However, as there were only two players, a monopoly regime prevailed. The tariff rates as

well as the prices of cellular phone handsets (instrument) available in that period continued

to remain high. Hence, cellular phone services during that period were regarded as a luxury

and companies mostly targeted the elite segment of the society. Moreover, these services

were mostly restricted to the metros.

Other factors such as lack of awareness among people, lack of infrastructural facilities, low

standard of living, and government regulations were also responsible for the slow growth

of cellular phone services in India. Although the cellular services market in India grew

during the late 1990s (as the number of players increased and tariffs and handset prices

came down significantly) the growth was rather marginal.

This was because the cellular service providers offered only post-paid cellular services,

which were still perceived to be very costly as compared to landline communications.

Following this realization, the major cellular service providers in India, launched pre-paid

cellular services in the late 1990s. The main purpose of these services was to target

customers from all sections of society (unlike post-paid services, which were targeted only

at the premium segment). On account of the benefits they offered (Refer Exhibit I), prepaid

cellular card services gained quick popularity during the late 1990s.

Between the late 1990s and early 2000s, tariff rates declined 75%. Reportedly, Indian

cellular players were offering the lowest cellular tariffs in the world (Rs 1.99 for 60

seconds). By October 2002, of the 8.5 million cellular phone users in the country, 65%

belonged to the pre-paid segment. Also, an estimated 80% of the new add-ons were prepaid

card subscribers.

Bharti, being one of the early entrants in the industry, (Refer Exhibit II for a note on Bharti),

launched its own pre-paid cellular service under the Magic brand in January 1999. Magic

was first launched in Delhi and later in other circles3 in India (where the company offered

cellular services under its flagship brand, Airtel).

In 2002, the leading Indian telecommunications company, Bharti Cellular Limited (Bharti)

signed the famous cricket player Saurav Ganguly and leading movie stars, Madhavan and

Kareena Kapoor as endorsers for its brand, Airtel Magic (pre-paid cellular card). Its

objective was to create the highest recall for Magic in the pre-paid cellular telephony

segment by cashing in on the two biggest passions of India - movies and cricket. Bharti

also changed the tagline for Magic from 'You Can Do Magic' to 'Magic Hai To Mumkin

Hai' (If there is Magic, it's possible).

The move attracted considerable media attention, as it was unusual for a company to spend

so lavishly to promote a single brand. In October 2002, Bharti launched a television

commercial (TVC), featuring Shah Rukh Khan (leading actor, already endorsing Magic

since a couple of years) and Kareena Kapoor. The TVC, developed by one of India's

leading advertising agencies, Percept Advertising, was the first of the series of four TVCs

for Magic's new campaign. According to Bharti, the TVCs aimed at attracting young adults

in SEC B and C categories of the Indian market1.

Commenting on the new developments, Hemant Sachdev (Hemant), Director, Marketing

and Corporate Communications, Bharti Enterprises, said, "The aim is to be relevant to the

masses and make all their dreams, hopes and desires come true instantly, at Rs 3002 per

month." However, industry observers felt that these actions were necessiated by the

intensifying competition in the pre-paid cellular card segment in India in the early

21st century (Refer Exhibit I for a note on cellular telephony).

Many new players (national as well as international) had entered the segment and the

competition had become quite severe. Besides Magic, the major players in the pre-paid

card segment in 2002 included Idea (Tata, AT&T and Birla Group), Speed (Essar), Hutch

(Hutchison), Wings (RPG), Cellsuvidha (Fascel) and Yes (Usha Martin)

CASE STUDY QUESTIONS- Answer all questions

Question 1

Assume that Bharti Cellular Limited (Bharti) is faced with the challenge of a low sales

volume despite engaging endorsers. As a research consultant you have been assigned the

task of establishing the problem that could be the root cause of the low sales volume.

Identify any five (5) key points that you will keep in mind while defining the research

problem facing Bharti Cellular Limited. [10 Marks]

Question 2

Describe two (2) common research fallacies that a researcher should avoid when handling

research work for companies such as Bharti Cellular Limited. [10 Marks]

Question 3

Assume that Bharti Cellular Limited wants to conduct an intensive examination of

customers' response to its products and also examine the effectiveness of its strategies in

attracting customers. What research design would you recommend for Bharti Cellular

Limited? Provide justification for your answer.