UK operators look to sub-brands to diversify their offerings to young people with VOXI and SMARTY

James Pearce
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The day of the sub-brand has dawned in the UK. Mobile network operators (MNOs) have turned to alternative brand identities to tackle new markets

In the last few months, both Vodafone and CK Hutchison’s Three UK have unveiled new, wholly-owned brands operating on their networks. Vodafone UK took the wraps off VOXI, aimed at the under-25 market, while Three has launched SMARTY.

Both brands operate on their parent company’s network and are sub-brands, as opposed to wholly owned subsidiaries like O2’s GiffGaff which operates as a separate business unit.

Vodafone says VOXI, named after the Latin for voice (Vox) and the word I, will have its own dedicated staff, but will remain part of the UK operator’s wider business. Three’s SMARTY operates on the same principles, and both offer SIM-only agreements.

Both Three and, especially, Vodafone have strong, established brands in the UK, despite being the fourth and third placed-operator respectively, so the question is: Why have they opted to launch these new units?

Elin McLean, general manager for SMARTY, explains: “There is currently a wide variety of different mobile plans and tariffs out there, and these suit a lot of people. That said, we know that many others are looking for more simplicity and honesty from their network. They may not want to commit to a contract and want the freedom to manage their mobile in line with their lifestyles. That’s where SMARTY comes in.

“SMARTY sets out to change the UK mobile market as we know it – putting the power in the customers’ hands by offering the simplest and most honest mobile network experience ever. The unique perk of being given a discount for any data you don’t use at the end of each month is unlike anything that’s been offered by a UK network before.”

For Vodafone, it is a question of tackling the youth market, one of the fastest growing segments in the UK telecoms market, at least according to Vodafone’s segment marketing manager Dan Lambrou, who has become the head of VOXI by Vodafone.

He exclusively told GTB: “Vodafone in the UK works across a number of segments in our approach to marketing – we identify segments where Vodafone can address unmet needs. 16-24-year-olds have the highest percentage smartphone ownership and also have the highest data usage – around three times more than the average. They also have the highest comparable spend, and rely on our services more. They’ve grown up in a digital world and live through social media.

“We’ve seen a huge opportunity and recognised that this segment use their phones differently, but they also engage with brands in a different way. It is fair to say that Vodafone isn’t on the radar for young people as much – we under index in our share. We have 12% of the youth market, which is lower than our average mobile share. That means there is great opportunity for a sub-brand because Vodafone has credibility and complements VOXI, but it can also bring energy into the Vodafone brand by creating positive association.”

Sub-brand benefits

Each sub-brand is offering different benefits. Take VOXI, for example, which is offering zero-rated access to social media applications like Facebook, Twitter, and WhatsApp. That means its customers can access them without cutting into their data allowances.

Lambrou said Vodafone’s goal with VOXI was twofold, explaining: “We are aiming to be a leading provider within the youth segment within the next few years and there is huge growth opportunities both in terms of increasing our market share and also the growth of smartphone penetration in the youngest parts of the youth segment.”

P11 quoteFor Three’s SMARTY the brand allows them to trial a user-friendly proposition – the concept of refunding the cost of unused data to its customers – without the need for a long Three contract.

According to GfK director of technology Imran Choudhary, the move from both operators is aimed at tackling the challenging and changing nature of the UK market. Choudhary claims UK customers are more likely to keep their existing handsets for longer, owing to a perception that innovation in the handset space has slowed, making SIM only (SIMO) offerings more appealing.

“SIMO propositions are becoming increasingly popular as they not only offer value for money, but a sense of freedom and flexibility that the traditional 24-month contract handset deals don’t. We’re seeing strong evidence to suggest consumers are beginning to de-couple the tariff purchase from the handset purchase, as many of those who move to SIMO, end up staying there – even when they are ready to buy a new device, many will buy that SIM-free. As a result of this changing dynamic, MNOs have to re-evaluate their business model and go-to market strategies, as SIMO gathers momentum.”

Choudhary believes that it’s in this re-evaluation that MNOs like Three and Vodafone have realised that taking a more niche and targeted approach, could yield greater rewards within the SIMO space.“Existing MVNOs largely operating in the SIMO space focus their messaging around freedom and flexibility, and do well within niche groups who value these behaviours. It comes as no surprise that MNOs are now thinking it’s easier to convey these messages and propositions with their own sub-brands which are free to focus on niche groups with the right go to market strategies.”

Sub-brands are ultimately a solution. For Three, it is a way of offering simplicity to the market place but gives users a separate identity from Three’s core brand and business.

SMARTY’s most interesting element is an offer to refund unused data. This is a new concept in the UK, going a step further than the data roll-over deals now available from the likes of Vodafone, Carphone Warehouse MVNO iD and Virgin.

Vodafone has launched VOXI for an entirely different reason – the need to grasp engagement with the younger generation of mobile phone users. In fact the brand is exclusively available to under-25s – a “challenging demographic”, according to CCS Insight analyst Kester Mann.

“On one hand, it seems like Vodafone is restricting the opportunity for VOXI by enforcing an age limit on the tariff. But this initiative isn’t unprecedented, and the operator has experience and success in deploying a youth brand – Yorn – in Portugal. In a similar move, at IFA 2017, T-Mobile announced a combined mobile and fixed-line plan for customers aged under 27,” he says.

Mann adds that even though VOXI is “a well thought-out brand” it offers little that is truly innovative, barring the decision to zero-rate a number of social media and content platforms, including Facebook, WhatsApp and Snapchat. EE, Three and Virgin have all recently launched zero-rated bundles in the UK, however.

So with Three, Vodafone and O2 all offering sub-brands, what about the market leader, BT-owned EE? It seems somewhat unlikely that BT will opt to launch yet another brand when it is already running its BT Mobile MVNO proposition through its own network. It also runs Plusnet, which has a mobile division too, albeit a small one. Operating two brands is the way other operators are going, but rumours will likely always follow BT that it will ultimately close the EE brand. That’s unlikely to happen any time soon, however, given it has recently expanded a number of EE’s propositions and given the reins to its entire consumer portfolio to EE CEO Marc Allera.

Mann adds: “Sub-branding hasn’t been a traditional strategy for network operators in the UK, perhaps because of the vibrant MVNO market that has well served a diverse range of segments and niches. Only O2’s giffgaff has been a successful exception. But the approach is more commonplace in other European countries, notably: France, Germany and the Netherlands. As mobile brands jostle for position in the fast-moving UK market, expect plenty more activity over the coming months and years.”