THE TELKOM SPEEDY: IMPLEMENTING MARKET

SEGMENTATION, MARKET TARGETING AND BRAND POSITIONING

Rachmi Rida Utami - 46.A - 29.111.305 MBA.ITB - BANDUNG

ABSTRACT Telkom is one of the worlds oldest telecommunication company. PT. TELKOM is one of state owned enterprise in Indonesia whose shares are currently owned by Indonesians government (51.19%) and public (48.81%). Telkom provides fixed wired telephone services (fixed wireline), wireless fixed telephone service (fixed wireless), mobile telephone services (mobile service), data/internet and other multimedia services. Telkom speedy is a broadband service that uses ADSL (Asymetric Digital Subscriber Line) which can deliver data and voice simultaneously through a telephone line which are pledged with service package, launched from the modem to the BRAS (Broadband remote Access Server). Speedy covers national region. The service quality are both national and international. Its gateway is 40 Gbps (the largest in the world). The contents are including free email, edutainments, games and musics. Based on Indonesian market, the demand of Indonesian people in using

internet are rising. The Speedy package targeting all segments of society, ranging from lower to middle class.

INTRODUCTION Market-ing means dealing with ever changing market. Marketing definition according to Philip Kotler is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products and value with others. And marketing definition according to Hermawan Kertajaya is a strategic business discipline that directs the process of creating, offering and exchanging value rom one initiator to its stakeholder. Marketing is very important to help company to deal with dynamic market. When the company wants to market their product, they need to design and concept the marketing plan so it will meet the market. First thing, the company should do is the strategic plan, which are segmenting, targeting and positioning the product.

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SEGMENTATION, THEORY Segmentation is the process of dividing the market that is heterogeneous from one product to the market segments that are homogeneous (Kotler,2001). Segmentation also means the process of dividing the market into segments that are smaller, based on similar characteristics of customers behavior and then determined which segment we want to serve (Hermawan Kertajaya) Figure.1. In other words, segmentations is the process of dividing market into groups of buyers that are distinguished by needs, characteristics, or difference behavior that may require separate marketing mix. The importance of segmentation can be looked in Figure.2. That, can be described as followed. By dividing the market into segments, it will be easier for the company to determine which segment is best served and in which segment has the greatest competitive advantage, thereby company could easily in desigining products that meet the markets needs. The company did this because they have limited resources that can be offered to the market. Segmentation along with the target markets selection will provide basis and references for determining the positioning of products. By determining the positioning, the company have a basis for differentiating, marketing mix and selling strategy. After being determined, the company will have a complete referene to create value through services and processes. Companies must be able to make the segmentations by regarding the market with a unique perspective that differ from the competitors. In other words, company must evaluate their position and market competition. There are four stages of market segmentations as in Table.1. Mass marketing means the company produce, distribute and promote the same product massively with the same way to all customers. Marketing segment means separate the segments that make up the market and adapt its offer to suit the needs of one or more segments. Marketing niches focused on subsegment or niche market that has innate characteristics that might be seeking for the combination of spesific number of benefit. Micro marketing, product designs practices and marketing program suited to invidual taste and spesific location including local marketing and individual marketing. There are some main variables that often used to determine market segmentation, which are static attribute, dynamic atribute and individual atribute. Static atribute can be divided into geographic (Table.2) and demographic (Table.3). Dynamic attribute divided into psycographic (Table.4) and behavior (Table.5). Indivual variables means we need to identify the market by collecting database. The customers database is classified by value, cost, products purchased, etc. Interactions with the customers using information technology.
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In this process, the company still consider differentiation so that value added remains strong. Offers customization on each customers.

TARGETING, THEORY Targeting is the process of evaluating each market segments attractiveness and selecting one or more segments to enter (Philip Kotler,1999) Figure.3. Targeting also means the process of putting the company into the right target market segments that have been pre-selected (Hermawan Kartajaya). To determine the target market the company must first conduct market segmentation. Targeting is important since the company can not serve all customers or buyers in the market. There are too many buyers with different needs, so that company must identify where it will serve as target market. Marketing activities will be more succesful if it was directed only to certain customers as a target market. Since the limited amount or companys resources, with it company needs to determine the target market through classifying the customers based on characteristics or nature associated with their needs and desires. The target market should be established, because it gives company benefits in developing product positioning and marketing mix strategies, aiming for a broader market opportunity, utilizing the companys limited resources as efficiently and effectively as possible, anticipate the competition by identifying the market, the company will be in a better position to serve particular customers from that market. The process to determine the market target are through two steps, evaluate the segment attractive power and followed by choosing the target market. In evaluating segment attractive power we need to find out about market size, market growth, competitive advantage and competitive situation (Figure.4). Evaluating market size means ensuring the target chosen is quite large and quite profitable for the company. The company could choose a segment which is currently small but profitable and attractive in the future. By identifying the market size, we need also identifying the market growth, since it will affect the size and growth of the companys target market. Competitive advantage is a way to measure wheter the company has the sufficient strength and expertise to dominate the selected market segments. Not only to have an adequate resources, company also need a capability, competency and competitive advantage to implement the differentiation which is aimed to win the competition. Competitive situation means that the company must consider the competiition situation which directly or indirectly affect the attractive power of target market. Factors to be considered are intensity of segment competition, potential entry of
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new players, industry entry barriers, the existence os subtitute products, the presence of products complementary also the bargaining powers growth of buyers and suppliers. After we analyze the segment attractive power we can choose the target market. The way to choose target market can be classified into three ways: undifferentiated marketing, differentiated marketing (single segment) and concentrated marketing (multi segments)Figure.5. Undifferentiated marketing offering one marketing mix strategy for all market segments, mass marketing oriented, suitable for homogeneous market and focus on common needs rather than what is difference. Differentiated marketings target consist of different multiple market segments. Differentiated marketing means designing unique marketing mix for each segment market.. The goal is to achieve higher sales and stronger position. Concentrated marketing (multiple segments) choosing only one segment by developing one marketing mix. The companys targets is a small market share of major market. This approach is due to limitations of company resource.

POSITIONING, THEORY Positiong is the act of designing the companys offering and image so that they occupy a meaningful and distinct competitive position in the target customers mindFigure.6 (Kotler, 1999). Postioning also means the process to put a company in cutomers mind (Hermawan Kartajaya). The importance of positioning the product in customers mind are to build customers trust and to create companys credibility in customers mind. Positioning is a strategy to communicate products attributes or companys services to the market. To be successful in the competition, company must position itself as unique and valuable as they can. So that, the company have a place in customers mind. Three ways to positioned company in customers mind are positioning development, positioning benefit factor and positioning statement. Positioning development consists of four elements: competitor, company, customer and change. In competitors view, positioning should be unique so can easily be differentiated from competitors. From companys poin of view, positioning reflects their strength and superiority. For customer, positioning should have positive impression, so customers have the reason to buy the products and considere it as value. Positioning benefit factor is a method to positioned products or services based on level of markets benefit in using a product or service (performance, convenience, price and psychology factors)-Table.6. Elements of positioning elements can be looked in Figure-6.

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TELKOM SPEEDY Technology developments are currently experiencing a very rapid progress. Internet is a common used technology and becoming a necessity in our daily life. It can be seen from the widespread use of internet by people in society. Internet usage in society today is a common thing, since it is easy to understand. Various internets facilities offered by the marketer to catch customers attention. Home phone usage are decreasing overtime, since the emerging of mobile phone that gives us some advantages than home phone. This condition pushed PT. TELKOM to think how to reembarked home phone usage. With an existing network home phone, PT. TELKOM tried to introduce a new facility to their customers related to internet services. Thereby, in 2006 PT. TELKOM launched a new innovation called Telkom Speedy using ADSL technology. The aim was to increase the value of the old home phone that already existed. Having the preceding home phone network and with lower investment costs, Telkom Speedy was expected to increase the number of a landline network that has been declined.

PRODUCTS AND SERVICES PT. TELKOM provides fixed wired telephone services (fixed wireline), wireless fixed telephone service (fixed wireless), mobile telephone services (mobile service), data/internet and other multimedia services. The products can be looked in Exhibit.1.

THE TELKOM SPEEDY, TECHNOLOGY Telkom speedy is a broadband service that uses ADSL (Asymetric Digital Subscriber Line) which can deliver data and voice simultaneously through a telephone line which are pledged with service package, launched from the modem to the BRAS (Broadband Remote Access Server)-Exhibit.2. From BRAS, the users will be linked to: Domestic content, via peering with open IXP, content provider or other ISP. International Gateway, which has large capacity to host the worldwide internet. Broadband content, consists of variety of web content, games, multimedia, TV and a variety of tools through a special connection that can only be accessed by the users. Speedys customers can both connect to the internet and also use the phone to receive calls. This technology offered much higher speed than a regular modem. Telkom Speedy does not need a new phone cable, since ADSL allows to use the existing phone cord.

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UNIQUENESS OF TELKOM SPEEDY Some reasons for customers to use Speedy because Speedy is a very high speed provider, very affordable price, not many requirements for installation and customers can still receive incoming calls via phone without disruption. Speedy primarily intended for both those who have been acsessing internet through TELKOMNet Instant and other providers competitors (Smart, XL, Telkomsel Flash, etc.). Optional packages are available to increase customers pleasure in acsessing internet with the competitive rates than dialing up internet accesss rates. Internet access using dial up TelkomNet Instant have some weaknesses, which are slower internet access (speeds only 56Kbps), higher rates and disruption of telephone connection when using internet. In other words, customers could not use telephone when accessing internet. These become on of the reasons why PT TELKOM lauched Telkom Speedy as one of lead products.

TELKOM SPEEDY IN INDONESIA The first ranked on internet usage by world region in 2007, was Asia with 437 million of internet users (Exhibit.3). The data showed that for Asia region, Singapore and Malaysia state top ranks with 66,3% and 47,8% respectively. While Indonesia still left behind with 8.9% of penetration. It means that only 8.9% of Indonesian people use internet. From that number, we can estimate the number of internet users in Indonesia. Of the approximately 200 million people in Indonesia, there are about 17 million of internet users. It showed, that the opportunity to develop Telkom Speedy was still wide open. In fact, in 2007 the home phone users had reached 10 million users.

THE PACKAGES Exhibit.4 shows Speedy packages rates. There are some options of packages, depend on customers needs. Either for home or for office business, for based or unlimited time, with variety of speeds. Mail Package (15 hours limited-1Mbps). With a speed of downstream and 256 Kbps and low rates, this package is intended to introduce the internet to whom are rarely use the internet but want a fast connection. Chat package (50 hours limited-1Mbps). With a speed of 1 Mbps downstream and 256 Kbps upstream and with affordable rate, customers could perform high speed internets connection with longer time. Family package (semi unlimited 384 Kbps). With a speed of 384 Kbps downstream and 96 Kbps upstream, costumers can accessing internet (browsing, chatting, etc.) as much as they want, as long as it is still in the quota limit of 3 GB per month. When the quota limit
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reached 3 GB, the speed would be reduced to an effective 12 Kbps until the end of the month and would revert to its original speed at the beginning of next month. Load package (semi unlimited 512 Kbps). With a speed of 512 Kbps downstream and 128 Kbps upstream, unlimited, customers can browsing, downloading and chatting as much as they want, as long as it is still the quota limit of 3 GB per month. When the quota limit reached 3 GB, the speed would be reduced to an effective 12 Kbps until the end of the month and would revert to its original speed at the beginning of next month. Game package (unlimited 1Mbps). With a speed of 1Mbps downstream and 256 Kbps upstream and the capacitys allocation to a bigger international gateway suitable for the proffesionals or shared internet users for about 10 users. Executive package (unlimited 2 Mbps). With a speed of 2 Mbps downstream and 512 Kbps upstream and capacity allocation to a bigger gateway, suitable for both business and offices needs with shared internet users up to 20 users. BIZ package (unlimited 3 Mbps). With a speed of 3 Mbps downstream and 512 Kbps upstream and capacity allocation to a bigger gateway, suitable for both businesses and offices with shared internet users up to 30 users. From the packages above we could see that the price or rates of Speedy are varies depend on its speed.

THE COMPETITORS The rapid growth of internet services made telecommunication service provider included internet services in their services. The competitors are such as XL, Telkom Flash, SmartFren, Indosat, Axis etc. In 384-512 Kbps class, XL offered 256 Kbps and 512 Kbps speed with lower price than Speedy. Axis offered 384 Kbps speed with much lower price, as well as SmartFren. Telkomsel Flash offered 384 and 512 Kbps speed with also lower price. In 786 Kbps-2Mbps, SmartFren offered 768 Kbps speed with lower price, Telkomsel Flash offered 1 Mbps and 2 Mbps speed with also lower price (Exhibit.4)

THE PRICE Exhibit.4 shows us mapping price of Speedy among other competitors. In 384 Kbps class, Speedy stated higher price than Flash and Axis, but still in the medium price range. Speedy still left behind from Smart, related to its speed. In 512 Kbps class, XL stated lower price than Speedy, so did Telkomsel Flash. Telkomsel Flash have a better speed than Telkom Speedy. From mapping price 786 Kbps-20 M, showed that for speed class under 1 Mbps, Speedys price still inexpensive. And for class above 1 Mbps, Speedys price still too expensive. That become challenges for Telkom to improve the market.
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Speedys customers in 2010 reach nearly 1.7 million. Nationally, Telkom is still dominant in marketing fast internet access product by controlling about 80% market share compared to other competitors. Speedy always innovating and doing some products developments, such as improving the networks quality, infrastructure and increasing its content to meet different user segments.

TELKOM SPEEDY MARKET SEGMENTATION From geographic segmentation, Speedy covered all regions in Indonesia both rural and city, since Telkom exists in every subdistrict capital city. Users demographic segmentations are ranging from younger to older people, both women and men, from any educational background, in every family life cycle and with medium expenditure budget. Psycographic segmentations of this product is low to middle class.

TELKOM SPEEDY MARKET TARGETING As described above, Speedy targeted the market with its variety of products. Speedy targeting the market from the network society users, because as we know, today in Indonesia, user network society (Facebook and Twitter) ranked the first place. The users are ranged from the beginner users to student and college student who usually use their products, such as Flexi and Speedy. From 2007 data, showed that there have been 10 million home phone lines in Indonesia. From this data, Telkom targeted to get at least 50% of 10 million phone lines. Thus, will generate revenue for Telkom.

TELKOM SPEEDY BRAND POSITIONING Telkom launched speedy in 2006, with emphasizing its unique side. Not only emphasizing in its unique side, Speedy also equipped with a unique tag line. Thereby a customer can stamped Speedy in their mind. Speedy with its tag line Speed that you can trust emphasizing that by using Speedy, users would be provided with a very high speed internet access and easier telecommunication network. Speedy famous with its high speed internet access, they maintaining the speed using fixed wire line. Telkom still believe internte connections using fixed wire line will continue to demand the customers, because it has advantages over other communication services, for example using fixed wire line is not constrained by weather problems, so the speed can be maintained. By using the tag line, Speedy as if hypnotized people and make people convince to use the product. Since the product is the best among good. After some period of time, Speedy not only provides a
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proven internet connection, but also provide a selling transaction program content and applications online trough stores. Trough this services, users can enjoy the content of antivirus, program application, and other services as needed and in flexible hours. Thereby, later Speedy change its tag line into Speedy Lead Your Life. By constantly changing its tag line, the customers will continue to recall the product in their minds. Because the tag line has already attached to the product.

SUGGESTIONS From the explanation above, Telkom already done some great efforts in marketing the product, Speedy. In the future, Speedy needs improvement with concerning at some points. The technology of Speedy was already good and reliable. Yet, Speedy should be more concerned with its speed. The speed problem should be maintained, so that the customers would be pleasant in using its services. From the point of services, Telkom should keep reaching its services up to distric areas, so the distribution of the products could work well. In terms of price, the price of over 1 Mbps speed was already competitive and low enough. Yet, from speed above 512 Kbps, Speedy need to innovate the price to be more competitive compared with other competitors. Today, Speedy ranged its price from 195.000-295.000 rupiahs, while other competitors are lower. Telkom must improved its quality of services, during both installation and after sales activity. The customers loyalty would be good if its compared with good quality of both presales and aftersales. Since Speedy is one of the lead product from Telkom, creating a strong brand will also strengthen the company position in the market. So that, by improving the image of Speedy product, it would also directly improve Telkoms image as the provider.

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