The case study "Omnitel Pronto Italia" describes the company's situation soon after the launch of its mobile telecommunication offerings in Italy in 1995. Omnitel had decided to focus on improvements on the quality dimension in competing against the Italian monopoly (TIM). However, the results were not very positive. Therefore, Omnitel conducted various marketing research activities in order to create a new business strategy. Various needs of the individual customer segments were identified. Omnitel now had to decide whether the new service plan, "LIBERO", was the right move to attack a new segment and improve on prior performance.
Rajiv Lal; Carin-Isabel Knoop; Suma Raju
Harvard Business Review (501002-PDF-ENG)
August 28, 2000
Case questions answered:
We have uploaded two case solutions, which both answer the following questions:
- What was Omnitel Pronto Italia’s competitive advantage when the service was launched in December 1995?
- Why did the launch not perform to expectations?
- What are the economics of LIBERO?
- Why is the churn rate so high for many European countries?
- Do you expect the churn rate to increase or decrease with the launch or LIBERO?
- What do you learn from consumer research? What do you learn from the results of the conjoint analysis in Exhibits 5 to 8?
- Will LIBERO lead to a price war? If yes, what could Omnitel do to avoid one?
- If you were Fabrizio Bona, what changes would you make to LIBERO and why?
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Case answers for Omnitel Pronto Italia
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Memo – Omnitel Pronto Italia Recommendation Plan
To: Mr. Fabrizio Bona
From: Sama Srinivas, Rania Sakhi
Section: Brand Strategy & Planning 001
Date: September 30, 2020
Re: Omnitel Pronto Italia Recommendation Plan
1. What was Omnitel’s competitive advantage when the service was launched in December 1995?
When the service was initially launched, the competitive advantage of Omnitel Pronto Italia was its superior customer care. Omnitel displayed three main focal points to achieve its high-quality service.
First, a polite operator with a personal greeting approach.
Second, a minimal waiting time where 85% of Omnitel’s customer service calls were answered in less than 20 seconds.
Third, one-stop calling without the need for transfers.
All of their operators would be trained holistically to answer any of the customers’ questions. Aside from this competitive advantage, Omnitel benefited from only having one major existing competitor in the market, TIM.
2. Why did the launch not perform expectations?
Six months after Omnitel Pronto Italia’s service launch, the company had only gained a market share of 4% of the total Italian telecom market with around 180,000 subscribers. Thanks to the company’s high-quality customer care, the customers were very satisfied with the service. However, the launch did not meet Omnitel’s expected market share for various reasons.
Omnitel offered plans very similar to TIM and couldn’t differentiate itself on this point. Existing TIM customers were not dissatisfied with their current offerings, and would not be motivated to switch to Omnitel.
Omnitel also had higher call rates during peak hours which was less attractive compared to TIM’s fixed call rate. During market research, Omnitel found that customers were very resistant to the monthly fee.
Omnitel Pronto Italia was also competing against TIM’s very large distribution channel of 1500 exclusive dealers, 20 TIM- owned shops, and 150 Telecom Italia stores. These channels also became more aggressive after the entrance of Omnitel in the market.
Because TIM dominated this industry, its marketing strategy that portrayed the cellphone as a luxury item made Italians feel as if the product was not a necessity. This also affected Omnitel’s penetration rate in the consumer space because the buying rate was lower.
3. What is the economics of LIBERO?
In the LIBERO plan, Omnitel Pronto Italia would not charge a monthly fee but would…