Authour: R Samuel, Economcis SME @ www.classof1.com  

One of the most interesting ads on TV now is the Vodafone ad featuring ZooZoos. There is no doubt that this advertisement is a big hit, and has become very popular with everyone, from kids to adults. One often wonders what it is about this ad that makes it “click”. Is it merely because the Zoozoos look cute, or is the humor in the advertisement’s theme? Whatever it may be, the ad has given Vodafone, the world's leading mobile telecommunications company with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States, a new look and appeal that will go a long way in further improving its brand image.

Zoozoos are the characters from Vodafone ads that have been aired during season 2 of the Indian Premier League (IPL). These ads have, undoubtedly, raised the revenue and sales of Vodafone for the second quarter of 2009. In 2008, Vodafone had unveiled the ‘Happy to Help’ series during the first season of the IPL. With the launch of the second season of the IPL, Vodafone has invented the Zoozoo: a special character created specifically to convey a value added service (VAS) offering in each of the newly released commercials. What’s really interesting is that there are some 25 such commercials planned under this campaign, 10 of which are already on air. It’s not an easy task to unleash so many commercials at a go, with the risk of consumers not grasping them as fast as the brand churns them out. With this ad, Vodafone has got an edge over its competitors who include Orange, T-Mobile International, Telefónica O2 Europe, At&T Wireless, T-Mobile etc.

This ad has several implications from the economic perspective.  Vodafone operates in what is known as an “oligopoly”. An oligopoly is a market structure that has unique features because it is characterized by a few sellers and mutual  interdependence. In this market structure, the strategy (and hence the price, quantity and revenue) of each player will be affected by strategies of other players and in turn affects the price, quantity and revenue of other players also. It is a market where the each seller tries to outdo the other through what is known as “price wars” (cutting down prices) and “non-price” wars.  Advertising is part of “non-price war” where a firm tries to outdo its competitors through marketing and/or advertising strategies to generate mass appeal. Zoozoos are part of a unique and innovative advertisement strategy that has far outdone the strategies of Vodafone’s competitors.

Vodafone has a number of different competitors in each market, and there are very few companies that could be considered as “rivals" for Vodafone beyond one or two particular markets. Vodafone's large scale in Europe gives it an advantage over competitors, allowing it to source handsets and equipment at lower prices. The firm can also develop a product in one country and roll it out to many others at minimal additional expense.  Vodafone generally has done a great job of using these advantages to enter new markets, especially emerging markets such as India. Though emerging markets currently account for only one fourth of sales, they are expected to become the main driver of future growth. Ultimately, Vodafone aims at stimulating revenues with innovative developments in their 3G technology offerings and improve operational efficiency through cost reduction efforts. The wireless market is changing fast, presenting a number of important challenges to Vodafone. Historically, Vodafone has seen its growth chiefly coming from developed markets, particularly in Europe. With average penetration now around 100%, these markets are mature and have limited future growth potential. In addition, competitive pressures in these developed markets are increasing following recent new market entrants and greater competition from incumbents. These competitive pressures are decreasing Vodafone’s pricing flexibility and spurring “price wars”, which are expected to continue into the future. Lastly, the regulatory environment remains challenging with continued regulator-imposed interconnect rate reductions on incoming calls across many markets. So at this point, Zoozoos are just what is required to help Vodafone improve its appeal and brand image across markets. In fact, it can be said that the latest commercials by Vodafone featuring Zoozoos have hit the Indian market like a storm. They have caught attention, became popular and will now probably go into history as one of the most brilliant advertising idea for the industry.

Harit Nagpal, chief marketing officer for Vodafone India, said that Vodafone has been acquiring customers at a very fast pace, but a large number of them had been unaware of the range of services it offered. Since media spends and visibility for brands peaked during the IPL, Vodafone wanted to take advantage of it. The brand was in need of an idea that would work doubly hard, as it was planning to spend some four months’ worth of marketing monies in one month. Vodafone had briefed its agency, Ogilvy India, to create uncommon characters – a common thread to link the ads in the campaign together. And thus, the Zoozoo was born. 

So how did this ad contribute to revenue?

 Revenue in the three months ended June 30, 2009 rose to 10.7 billion pounds ($17.7 billion), in line with analyst estimates, clearly proving that the ad has contributed to this. Vodafone chief executive Vittorio Colao said that its total communications strategy was delivering well, with group data revenue up 19 per cent and fixed line revenue 7 per cent higher than last year's comparative period. The Vodafone CEO further stated that free cash flow generation was strong at £1.9 billion, up 21 per cent. But while Vodafone has shown signs of combating the recession; some areas of weakness remained. Not considering the positive effects from foreign exchange fluctuations and acquisitions, Vodafone’s results also highlight several areas in its core businesses that require close attention.

Vodafone also noted in its financial statement that its future revenues will be impacted by reduced mobile termination rates in the UK and by lower roaming prices and reduced travel across Europe. While Vodafone was doing well in attracting customers to its fixed services in Europe, growth in this area is not compensating for the drop in mobile voice revenues. According to a report in the Telegraph on 24 July 2009, Vodafone, the world's largest mobile phone firm by revenues, reported sales in line with market expectations for the quarter to end-June as strength in India and Africa compensated for weakness in Europe. Vodafone has continued to see good growth in India and South Africa, according to its Chief Executive Vittorio Colao. Vodafone added 8 million customers in this quarter, taking its proportionate customer base to 315 million. Verizon Wireless, its U.S. joint venture with Verizon Communications, had 1.1 million net customer additions. Vodafone's data revenue grew 19 percent organically to 888 million pounds. Free cashflow rose 21 percent to 1.896 billion pounds, while the company's net debt at June 30 stood at 31.2 billion pounds. Growth in India and South Africa helped the mobile phone giant report a 9.3 per cent rise in revenue in the three months to the end of June to £10.7billion.

It is clear that the Vodafone ad featuring Zoozoos has gone a long way in promoting the brand image of Vodafone, while also contributing to its sales and revenue. Thus it can be seen that the features of the oligopolistic market structure of this industry has played a significant role in the generation of revenue for Vodafone, especially through this unique advertising strategy.

www.classof1.com

References:

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http://www.bloomberg.com/apps/news?pid=20601087&sid=aQJTAbG7H9.M

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http://www.neeshu.com/Articles/zoo-zoo-videos-vodafone-zoo-zoo-pictrues.html