Welcome to ZenUnwired; a blog dedicated to tracking developments in technology and strategy, and to deciphering the impact of these developments on wired and wireless ISP's, device manufacturers, OS and application developers, and most importantly - you.

Monday, March 8, 2010

Tata’s Multi-brand Strategy in India

What is multi-branding?
In a market that is fragmented amongst a number of brands, a supplier can choose deliberately to launch totally new brands in apparent competition with its own existing strong brand (and often with identical product characteristics); simply to soak up some of the share of the market which will in any case go to minor brands. The rationale is that having 3 out of 12 brands in such a market will give a greater overall share than having 1 out of 10 (even if much of the share of these new brands is taken from the existing one). In its most extreme manifestation, a supplier pioneering a new market which it believes will be particularly attractive may choose immediately to launch a second brand in competition with its first, in order to pre-empt others entering the market.

Multi-branding in the wireless industry
Multi-branding is a viable strategy in the wireless industry but hasn’t been used very often. Since wireless has been a growth industry thus far, and because pursuing a multi-branding approach requires the use of common ‘shared services’ (billing, support, channels, etc.), wireless carriers have instead opted to use the MVNO (Mobile Virtual Network Operator) strategy. The most well known example of the MVNO approach in the US is that of Sprint. Until the end of 2009, Sprint operated its flagship Sprint and Nextel brands, while selling ‘wholesale’ network access to its MVNO’s like Virgin Mobile, Boost Mobile, Helio, etc. These MVNO’s resold their network access in the form of voice/data buckets to end-customers and managed the rest of the customer interactions independently.

However, as wireless growth is slowing down, carriers are forced to look at cost efficiencies and the lure of savings from ‘shared services’ is indeed becoming increasingly alluring. Therefore multi-branding is back in vogue. The best example of multi-branding in the wireless industry is a European carrier called E-Plus. E-Plus operates a bunch of sub-brands targeting niche customer segments based on key characteristics like price, lifestyle, etc. while managing a lean and consolidated back-office.

Multi-branding in the Indian Wireless Market
Since MVNO’s are barred from operating in India, it seems like the multi-branding strategy is the de-facto choice. And there is evidence that Tata Telservices is already heading down this path. Tata Teleservices is a telecommunication services provider in India that offers CDMA and GSM mobile, public booth telephony, and wireline services; and wireless desktop phones and data cards. Among its wireless offerings, Tata’s current sub-brands include Tata Indicom, Tata Photon (data cards), Virgin Mobile (youth oriented tie-up with Virgin), and Tata DoCoMo (tie-up with NTT DoCoMo). In addition, Tata recently announced a partnership with Indian retail giant Future Group to offer mobile services on its GSM platform under a new brand name called ‘T24’ (stands for Talk24).

While it is clear that Tata Teleservices is following the multi-brand approach, it is not clear what its strategy is. To work successfully, a multi-brand strategy requires clear market segmentation on the front end (for tailoring offers/sub-brands) and cost efficiencies on the back end (to boost profitability). A brief look at Tata’s brands and operating model does not offer any evidence of either of these conditions being satisfied. Agreed, India’s wireless market is still growing in leaps and bounds and therefore Tata has some time to figure out their strategy. For now however, it seems Tata’s multi-brand strategy seems to be focused on just one thing – gross adds.