Executive Summary
Since the first cellular mobile telephone networks opened for business in the early 1980’s, growth in numbers of subscribers has consistently exceeded even the most optimistic forecasts. Even in the most advanced markets, this growth shows little sign of slowing, and meanwhile, new markets are accelerating rapidly. Cellular telephony was developed by AT;T (American Telephone and Telegraph), in it’s Bell laboratories. It operates by allocating a spectrum of radio channel frequencies to telecommunications systems. The radio channel frequencies are subdivided and assigned to a network of radio base stations each responsible for the coverage of a particular geographical area known as a cell, hence the name cellular telephony.
Our product will take all the benefits of modern pc and cellular technology and will make it even more portable than existing cell phones. We will enable the consumer to have an even smaller, more efficient communication device that will help them make their lives easier and communication more pleasurable. The price will not be low, but will be affordable when compared with the benefits.
This product will be a hot item for individuals from all walks of life. Business people will love it, parents will storm the stores for it, and college students will be begging their parents for one for Christmas or graduation. The features provided by the product will far outweigh the high end cost. With teenagers having cell phones and an interest in the Internet and e-mail, it is expected that we may introduce more fashionable and slightly less expensive model for them as well. They have a high disposable income, and are a very lucrative target market.
Selling of this product will take place through cellular phone providers. As the product requires PCS service, it will need a provider. Their stores make the most sense in which to market the product as the consumer is there to purchase service, and will obviously need the equipment to use the service.
Pricing of the product should be steady, with moderate increases and decreases as the selling seasons permit. Initial price reduction promotions will be warranted as is the case with most new products. After there is a product recognition and appreciation in the market prices can be returned to normal, and perhaps even increased slightly when we supply additional technology and/or features.
Background
The first mobile cellular network operators began using analogue technology for their first networks because it was the only available and prevailing technology of that time. Analog technology is based upon the transmission of sound by way of radio waves through an Analog Mobile Phone System (AMPS).
Unfortunately, the analog networks are limited, in that they suffer from severe capacity limitations. There are reception and interference problems, they are also less secure to prying ears and most importantly from a user point of view, coverage is restricted. Along with the expansion of customers there was also a concern about the availability of bandwidth as the radio frequency became overcrowded. Such problems obviously led to the demand for a new and improved alternative, so along came digital technology (Encarta 1996).
The new digital networks use their allotted radio frequency’s more efficiently than analogue and sound is transmitted by computer code rather than by waves. This enables the network to carry a higher capacity of calls of a higher reception quality and enables the user access to a wider number of advanced features, such as Personal Digital Assistants, (PDA’s), mobile faxing and wireless e-mail.
The second alternative to cellular is PCS or PCN. This stands for Personal Communication Service/Network. It is not too different from digital cellular, except it uses many more transceivers and base stations (five times as many). An advantage of PCN is that the bandwidth is slightly larger, so more information can be passed and the handsets are more attractive to the customer. However a big problem with PCN is that it is very costly to construct a network. Despite the cost, PCN has taken off well, particularly in the USA.
In 1993 the US government set aside a proportion of the airwaves for PCN. It defined 992 regions, within which it hoped companies would want to operate. The federal government then sold licenses to PCN operators, which were by no means cheap. The government made a lot of money from these sales. In 1995 companies paid the federal government 18 billion dollars for these licenses. It was then that it would take the same amount of money again to construct the network. However, this in no way put off the companies involved.
The worlds mobile telephone networks are continuing to enjoy spectacular growth, even in relatively mature markets, annual growth greater than 60% is quite common. The high growth rates in mobile telephony are almost universal, with no sign of a ‘saturation point’ being reached. The Nordic countries, (Sweden, Finland, Norway and Denmark), have consistently led the world in mobile phone penetration. In fact, by mid 1996, more than 25% of all Swedes had a mobile phone.
Meanwhile, new mobile networks are being opened all the time, both in the most developed countries and in the developing world. In the most developed markets, new operators are competing aggressively to capture the consumer market for mobile telephones, positioning the mobile telephone as a genuine, and much more convenient alternative to owning a normal wired telephone.
Product
The dramatic growth of mobile telephony has demonstrated how important convenience and freedom are to users. The Internet, with its ease of use and universal availability, offers the potential for equally dramatic growth in mobile data. Business professionals today need to have the power and information of the Internet at their fingertips at all times.
This necessity for portable communication equipment is what inspired the creation of our new and innovative product. We will shortly introduce, to the mobile communication market, a watch that combines the technology and uses of a Digital PCS cellular phone and wireless PC appliances. Through this product users will be able to use a small watch with a small screen to talk on the phone, check e-mail, and obtain stock quote information.
This product will have a backlighted screen that can be switched on and off, and will have an ear-piece that can be plugged into the side for cases where a conversation needs to be kept quiet and/or private. The number pad will be on a “pop out” slide piece that can be pressed in and out as necessary. A small stylus, or pointed wand will also be spring loaded into the side so as to allow easy pushing of the small number buttons. It will be approximately 1 ? inches long so as to ensure that it can be held onto.
We will offer two models. One will be the model described above, and we will sell it for a price of $250. The second model will be slightly thicker and will include a small keypad with letters to enable user to send e-mails, as well as receive them. This model will be slightly more expensive at a retail ticket price of $350. There are cell phones that offer this type of technology, but they are larger, and less convenient. Both watch models will be small enough to fit on the wrist, and will vibrate as opposed to ringing when a call comes in as well as when there is a new e-mail, or a rise or fall in the price of a particular stock. Both models will also include a paging function where when the phone is off, it will give the caller the option to place a page.
We will package it in an organizer case with an included Franklin planner style organizer in case the customer chooses to write down various information that they need from their e-mails, caller id screen, or their stock prices. Many individuals enjoy the usage of technology to simplify their life and keep them “in touch”, but they often still want that “paper trail” of notes, reminders and numbers. The organizer packaging will make our product that much more attractive.
We will utilize the Digital PCS technology because it prevents lost or dropped calls, which is highly frustrating for the cellular user. It will also ensure connection for the Internet features. Primarily it is cutting edge technology which is interesting for any potential consumer who is interested in having the newest and best technology products on the market. This technology will help support the asking price for the product as well.
The timing for a product such as this is perfect. With interest growing in internet appliances, and portability of mobile communication, we are sure that this product will be welcomed by the business people as well as the busy parents and students. There is no doubt that our lives are more hectic, and constant communication is necessary. This watch provides a more portable, secured to your wrist, way of doing this. It is also safer to use in the car with the ear piece feature. There is no need to hold the cell phone, and two hands are free to drive.
Promotion
We intend to promote our product, at least initially, through an evenly divided program of advertising, sales promotion, and personal selling. Public relations should not figure so largely into marketing this particular product, as it will hopefully sell itself with the many features and advantages it will provide. Advertising will be important in order to make the population aware of this new product. Sales promotion will be accomplished by taking the product out into the market, i.e. businesses, malls, universities, and through technology tradeshows.
A product such as the one we are producing, will require a high advertising budget. We will allow, initially, for a budget of $100,000 per quarter. We will split this budget into a slight television campaign, but a large Internet presence. Individuals with computers are the ones that will be most interested in this type of product. Therefore saturating the Internet with banner ads, a catchy webpage would produce the results that we are looking for. The focus of the ads will be on the portability of the product as well as on the power of the information and connectivity that It provides.
We intend to focus our television advertising on key times during the year. Christmas is always a huge selling time for technology products. This product would be a wonderful present for those who “have everything”. Another time of year that is good, especially for students and new professionals, is income tax return time. This is the time when many have a surplus of cash on hand to spend on extravagant items. Graduation times, i.e. late spring, early summer, are excellent times to advertise for this product as parents or loved ones are looking for useful presents for the newly graduated college student. Television promotion is important during these times because you are advertising to the buyer, who might not necessarily be the user, and might be less likely to go searching for this type of product on the Internet.
Selling to intermediaries such as cell phone service providers is the less expensive way to distribute this product, at least initially. It is an individual product, but requires the service of a PCS provider to be utilized. Therefore, selling it as to companies such as AT&T or Sprint with the option to place their logo on the phone as well ensures that the product can be considered by and demonstrated to individuals considering a digital piece of cellular communication equipment. Cooperation with these providers is essential if this product is to succeed.
Pricing
The pricing for the initial two models will be $250 for the number keypad model that can receive e-mail, receive and make phone calls, and check stock prices, and $350 for the model that has a letter keypad as well. As a promotional feature to kick start sales we plan to offer a $50 price reduction for the $250 model, and a $75 price reduction for the $350 model when they sign up for 2-year minimum contract with the PCS provider. We hope to negotiate a split in the price reduction with the provider. We would both gain from this reduction due to their retention of a 2 year contract, and our sale of the new product.
We will emphasize the features that are gained by this product, and downplay the cost. It is essentially a watch, pager, phone, and internet appliance. That is a 4-in-1 marketing point that we will most definitely stress to the consumer. Many individuals will welcome the chance to wear one item on their wrist in place of carrying a phone, wearing a watch, wearing a pager, and keeping track of all of them. The price does not seem so great when thought of in terms of the fact that it is replacing at least three items.
Eventually there will be other models produced by competitors that will rival the features that we offer on our watch appliance. We have already begun planning to include a calendar option and small television screen that can be played when the phone is off. When the competitor’s product catches up to our own, we will be in a research and development position to advance our existing product further, and thus ensure our position of being an innovator. It will further enable us to maintain our upper-end pricing and profits.
Price advertising is important when the consumer can actually see and handle the product. Advertising of prices via television and the Internet can often deter consumers who feel that the 2-dimensional image is not worth the cost. This is why trade-shows, and personal selling is so important. It brings the consumer in personal contact with the product.
Price changes, increases or decreases, will most likely take place during the key selling periods of the year. These periods, as mentioned before, include Christmas, graduations, income tax time, or perhaps even fathers or mothers day. The increases should not be dramatic, nor should the decreases. Increased sales are tempting, but losses are not worth the slashing of prices in the long term.
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