Airtel Kenya missed the point with price wars

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  • 6 years ago
  • Posted: September 17, 2013 at 4:03 pm

On 31st August 2013 Airtel made a very silent announcement that they are to increase their products prices by 11%. The increase will see Airtel become the most expensive service provider overtaking Safaricom by about 0.02 cents on majority of products offerings.

We have not seen any press releases by Airtel confirming the announcement other than the article appearing at the East African that discusses on whether the Airtel Kenya’s move to raise call rates will end price wars among telcos. In the article it is mentioned that the intention by Airtel to raise prices is an acknowledgement by Airtel that their market penetration model labeled minute factory model  that targets to generate subscriber and product usage volume per every base station resulting from low cost structure had failed in Kenya. I would add, miserably failed.

The price wars did not just bring negative impact to the telecos. Two players have immensely benefited; and that is the public and Safaricom. The public benefited from these price wars by being enabled to buy the telecos’ services at their willingness to pay point above which they would feel reaped off, below which, as most likely happened with Yu services, they would feel the service bought is of inferior quality. Safaricom on the other hand benefited by being able to set their product pricing at their willingness to accept payment point below which they would incur unnecessary losses or fail to provide critical services to the consumer. Airtel and Yu and and to a large extent Orange could not benefit as they lowered their prices way below the reasonable willingness to accept payment point so they had to sacrifice on critical service areas which are the fabric of success and sustainability for any profit oriented company in a competitive market.

If Airtel, Yu and Orange did their homework well before lowering their prices, they could have known the price point at which they could easily draw subscribers to their services and at the same time be able to sustain provision of reliable quality services, effectively diverse product offerings and maintain infrastructural development needed for increased volume without having to sacrifice on customer care and public relations investments.

When lowering of prices failed to woo customers to their networks, the telecos thought that people were not moving to their networks because they did not want to lose their phone numbers, so they liaised with CCK to introduce number portability.   We all know how this ended. The few who migrated from Safaricom to the other networks especially to Airtel stayed with the new network for a few days then moved back to Safaricom. This should have led the telecos to ask themselves two questions, 1. what does Safaricom have that make people not to migrate and 2. what is it with us that make the few who migrated to us go back to Safaricom almost immediately? Instead of asking the two questions it seems they only asked the first question and to this they provided a wrong answer. Their answer was that Safaricom’s MPESA is the glue that sticks subscribers to Safaricom. Their suggested solution to Safaricom’s MPESA product was that MPESA should be freed so that they can also provide money transfer services through the same platform. I don’t know whether their call for freeing MPESA is still on but I don’t think Safaricom will ever agree to this request.

As said, their answer to what Safaricom is doing right is wrong. I have discussed this with some of my friends who also think that Safaricom’s MPESA is what makes a number of Safaricom subscribers stick with Safaricom. I always give a few examples of people, myself included, with multiple SIM cards and close to all of them have multiple Safaricom lines. I have four personal SIM cards three of which are Safaricom lines and the remaining one, that I hardly use, is Airtel. If it was MPESA that prevented me from using the other networks, then one SIM card with Safaricom running MPESA would suffice. So what makes people like me stick with Safaricom? According to our assessment at Kachwanya.com, we have concluded that the things Safaricom is doing right are what all the other telecos are doing wrong. The critical areas that all telecos should invest in to gain significant market share are customer care, marketing strategy, service quality, product diversification, branding, public relations, and customer loyalty.

Customer care

There was an era when Safaricom’s customer care was the worst. Calling 100 would mean you could wait for one hour or more to get through. That wait would be after trying a thousand and one times to get beyond “number busy” notification. Safaricom did not care and did nothing about tonnes of complains against their customer services until the price wars came. At the onset of price wars, people were insulting Safaricom day and night and threatening to “vuka”. The price wars made Safaricom to think thrice and deep. They revamped not only their 100 customer care line but also invested in social media customer services. They also introduced the online customer care chat feature at Self Care services where customers can not only follow up on their products’ usage history but also promptly resolve any issues they have with their lines on chat. Twitter and Facebook complains are resolved almost at an instant. Safaricom has also invested in queue management system whereby customers do not have to wait forever at their customer care centers across the country.

As Safaricom was busy investing in customer care, the other telecos were busy waging wars on prices, number portability and now MPESA. Calling Airtel customer care number still take ages. If and when you manage to get through, the service provided by the customer care is several points below quality. The worst a subscribe can do is to visit their customer care centers. Despite not having long queues as Safaricom, queuing in any Airtel center still remains a nightmare. Worse than Airtel’s is Orange’s customer care centers. The last time I visited an Orange office in Mombasa the setup was like an informal gathering where customer care representatives shout at each other across the hall and with sales representatives using the same hall as their meeting point, the entire experience was a keen to a class in whispers after being punished for noise making.

Marketing Strategies

Second to customer care is the marketing strategies used by Safaricom versus the rest. Here I just want to mention the irritating promotional text messages from Orange and Airtel. Safaricom knows how to sparingly send promotional text messages. But overdoing it the Airtel way would piss customers off. Whenever I ask anyone what they don’t like about Airtel the answer has always been their endless text messages inviting you to participate in a competition or try a new service. Airtel’s tendency to alert users of credit balance after every call is another irritant. What has annoyed me the most is their tendency to generate calls that when picked, you hear adverts instead of a nice hello from the other end. Wait until they call you at 3pm when you were waiting for that one important call or when you have put all your energy in completing that demanding task with a 5pm deadline. And Airtel doesn’t really care. Their subscribers have complained, requested to be deregistered from receiving the text messages, but the complains have gone unheeded.

Whereas Safaricom has invested in marketing strategies that strengthen their PR by running marketing campaigns like Safaricom Live and customer loyalty promotional competitions like “Bonga Ushinde” and “Bonyeza Ushinde”, Airtel is busy running attack based advertisements like “Je, unagongwa?” that resulted to a friend updating her Facebook, “who told you I don’t like kugongwa?” It’s a fact that Safaricom subscribers have become so loyal that kugongwa hapa na pale is forgivable. Safaricom’s marketing strategies coupled with professional public relations has made them acquire the priceless customer loyalty and more importantly brand recognition. Their MPESA brand has become so important to the extent that MPESA as a noun has been converted to a verb. Money transfer in Kenya has changed from “I’ll transfer the balance tomorrow” to “I’ll mpesa the balance tomorrow”. The phrase “I’ll mpesa you” is also applied to Airtel Money and Orange Money services. With its MPESA product, Safaricom is keen in taking over all the payment services in the country. To help them in this quest we have suggested that they should go smart (read: M-Pesa should stop being dumb and go smart).

Quality of services

CCK ranked Safaricom the worst when it comes to service quality but customers know better. It is true that Safaricom’s services are not the best but we have to give it to them; they are the most spread across the country. Safaricom is also the only network with a well balanced quality distribution for both call and data services. Yu could be the strongest in voice but their data is wanting. Neither can yu (this style of you suddenly died?) expect Yu to be effective when you have to travel to your rural home. Safaricom on the other hand has ensured that a slight detection of its network by your phone will give you some reliable connection to both its voice and data services, a feature absent in all these other networks.

Before these other networks could initiate the price wars, they should have ensured that they have stable and reliable services for all products. Truth is, if Airtel had a half of Safaricom’s subscribers, their services would collapse instantaneously. Just the other day they could not sustain increased call rates when they ran the promotion of “bonga na bob”.

Products and services diversity 

There is nothing much to say here except that while Safaricom pride themselves for innovation and diversifying MPESA by introducing sub-products like MSWARI and MKESHO, the other Telecos are playing catch-up; and instead of them investing in R&D, they have become copycats and cry babies.

Back to Airtel’s announcement of raising rates, the sad fact is that Airtel Kenya missed the point when they instigated the price wars and they have realized this a bit too late. For all these telecos to remain in business, they must make a difficult decision of pricing their products and services at reasonable profitability margin, invest in R&D for product diversification, invest in service quality, revamp their marketing strategies and more importantly elevate their customer care. Increasing the rates alone is a big gamble as the few customers Airtel has might migrate to Safaricom. The telecos should also know that customers do not always want to be associated with cheapness.

What is your opinion on the topic?
Odipo Riaga
Managing Editor at KachTech Analytics Ltd
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Odipo Riaga is a Technology Blogger interested in emerging tech such as VR and AR, AI, Life Extension, Exponential Biotech, Immortality, Cyborgs and many others.
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