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China 3G Customer Demands 2005
Analysys International, March 2005
Facing varied results of overseas 3G implementations and uncertainty about securing 3G licenses in China, service providers need to carefully measure the opportunities, strive for an advantageous competitive position, plan a profitable investment strategy and grasp a full understanding of the situation before the licenses are handed out in the coming 3G age. Therefore, understanding 3G customer demands has become one of the most pressing needs for service providers in the current stage. Answering these needs will have a strong impact on the service provider's decisions regarding network construction, user development methods and marketing strategies.
Based both on qualitative and quantitative methods this report applies a research method of combining secondary analysis with in dept primary research into the consumption habits of potential 3G users that have the desire and capability to consume mobile communication and 3G services. The report also gives marketing suggestions targeted at specific market segments. Its value mainly lies in:
- The Forecasts of the number of potential 3G users in large and medium Chinese cities.
We have predicted that the number of potential 3G users in big and medium cities in China in the initial implementation phase. This provides a foundation for the service providers to determine the investment strength, progress and coverage of 3G network construction, and made it possible to help them construct a 3G network step by step, provided services by utilizing network capacity economically and effectively and optimize the network return on investment (ROI). This is based on a long-term examination of service provider development, user's consumptions in existing networks, and deep understanding of regional differences between users.
- Analysis of potential 3G users' consumption behaviors and habits
We have analyzed consumption behavior and habits of potential 3G users. This in-depth study establishes important references for service providers to know the users, enhance service quality and levels, make pertinent marketing decisions and develop better services. This is based on a long-term and systematic study of customer habits and thorough grasp of market demands,
- Market Segments of potential 3G users
Based on a structured and systematic method, we have studied the internal factors that make up user consumption behaviors and has set up an effective method of subdividing potential 3G users into four market categories. This establishes a foundation for effectively distinguishing clients, applying successful marketing strategies, satisfying user demands, gaining competitive advantages, and receiving profitable returns on investments.
Our Findings
Number of potential users
- The number of potential users is influenced by the following factors:
- Progress of 3G-network construction
- Technical maturity of 3G mobile phones,
- Costs of mobile services
- Service development and combinations that meet users' demands and policies.
- Based on large sample size research and secondary analysis, and considering the influence of the existing network coverage, we predict that in 2006, 3G users could potentially reach 22.67 million. By 2008, this number is expected to reach 106.08 million due to the completion of 3G network's expansion for national coverage.
Character and Composition of Potential Users
- Young people between 20 and 28 accounts for 55.5%, more than half of the total potential users. Users with college qualifications and below account for 78.4% and university graduates 21.6%. The average academic qualification is far higher than the nationwide average. Students, private owners, and commercial services personnel represent the potential users group.
- The potential users have a large capacity for consumption with a monthly telecommunication budget greater than 100 Yuan.
- Most of the potential users enjoy an affluent lifestyle that emphasizes family and social activities. They actively pursue new experiences and work hard to create the life they want.
Potential users awareness and desired usage of 3G
- Users' awareness of 3G is reasonable and clear. Their expectations for operations, technical features and advantages of fast network speeds are consistent with what 3G can deliver.
- Potential users' predicted average price of 3G mobile phones is only a little higher than current average price of 2G mobile phones. The number of potential users willing to buy mobile phones priced higher than 3,000 Yuan is small.
- 3G Value-Added Services that the potential users are willing to use are mostly for entertainment. The proportion of users willing to buy such value-added services as commercial and information applications is small. After the launch of 3G, the conditions in China will be similar to Japan and Korea—entertainment will account for the main part of the value-added services in the initial phase. Out of all the entertainment services, video content is most preferred.
Users' Awareness and Use Intentions of 3G per Service Provider
- Most of the PHS users are low end users. Only 27.3% have heard about 3G. That can be compared to the 62.5% awareness of China Unicom's CDMA users.
- For 3G mobile phones, post-paid users pay more attention to functions; pre-paid users are more concerned with appearance; and PHS users value a good price.
- 76% of pre-paid users will use mobile phone Internet functionality, while not being interested in other 3G value-added services. Users with post-paid contracts have interests in some of the higher-level 3G services.
Market Segments of Potential Users
- By qualitative study and quantitative analysis, we divided potential 3G users into four markets categories. These are: student, newly thriving white collar, business elite, and steady and practical.
- Modern students are young and have little income, but they are interested in fashion.
- White-collar workers that are new to their respective industries try hard to fit in with the higher echelons of society. They use their academic degrees to secure high paying positions. While seeking out more success, they pursue entertainment and active lifestyles.
- The business elite more senior with successful careers, high incomes and refined lifestyles.
- The steady and practical remainder constitutes manly of older people with steady careers who emphasize family cohesiveness.
Our Suggestions
Suggestions for Service providers
- On 3G network construction
- Construction of 3G networks must begin with an examination of the current and near future user base. This gradual development will allow investors to optimize their return while providing economical services and efficient uses of the network capacity.
- The user's close attention to network deployment urges service providers to solve interoperability issues in order to offer functional roaming strategies as well as to quickly overcome weaknesses in 3G area coverage during. The initial phase should cater to the desires of young clients that demand the newest entertainment and fashion novelties. During the next stage, large-scale marketing promotions should used to cultivate experiences of the initial consumption. This would avoid wasting deployment and bandwidth resources.
- On Strategy of User Development
- During the initial deployment of 3G, efforts should be made to create the right mindset for the launch of the new services. Operators should promote exciting concepts and ideas to invigorate the imagination of the potential user market.
- For those users that are not constrained by the price of solutions and services, especially when they have a potential of using higher 3G functions, awareness of the user demands becomes a key factor for success. Service providers should grasp these opportunities and reinforce competitive advantages. This will help ease the stress of a continually decreasing ARPU value.
- Whenever there are prominent differences between groups of users, the provider should offer both value-added and plain services. For users willing to pay less than 20 Yuan for a value-added service, advertising should focus on free trial periods. While providers should pay attention to the demands of users willing to pay more than 50 Yuan and provide them with relevant services.
- In order to break into the market, providers should concentrate marketing and strategies according to market categories. Our research suggests the following order and emphasis.
1. Appeal to fashion for the student in category II,
2. Novelty and functionality to the newly thriving white-collar workers in category I
3. Elegance for business elite in category IV,
4. Consistency with traditional values for steady and practical people of category III,
- On Marketing Strategy
- Due to low cost and high circulation, newspapers and the Internet are the most important platforms for promoting 3G services and functions. When it comes branding and promoting conceptual ideas, television is better. Although it costs more, it has a wider coverage.
- The new generation operators will face challenges with the psychological impact of the high cost of the new 3G mobile phones compared to the price of 2G technology. In order to cultivate a user demand for the new products, the service providers should consider subsidizing initial expenses. By offsetting these costs, the provider can strive to enlarge the user base of the users.
- 59% of prospective users prefer a certified service provider logo; and 76.7% of users prefer to buy their 3G mobile phones in stores certified or owned by service providers like China Mobile or China Unicom. This indicates that the service providers have gained a certain loyalty. Loyalties of this nature normally grow from consumers trust in the quality associated with the product. Service providers should use this to offer customized phones, especially in cases where customization leads to an increase in loyalty.
- The three most successful promotion methods are decreased hardware costs, free services, and communication expense deduction. The service providers should adopt methods like gifts or service trials. This allows them to cultivate the users' experience and habits.
- In order to increase ARPU operators should establish flexible pricing policies. Mobile Games for example could be charged by monthly fee, by time used (possibly with a prepaid model), per use, each use with a time limit or just once per game, with unlimited using rights. The charging models should be customized for the different demographic segments, and a certain number of them chosen per application in order to prevent confusion over the charging model.
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