Asda’s virtual network ambitions were first leaked in Mobile 12 months ago, with news that it was partnering with Vodafone in a bid to emulate rival Tesco.
Asda is now in the middle of its first big promotion for Christmas. The supermarket launched the Asda Mobile brand in April, and the mobile solution is now popping up in an increasing number of stores. And with handsets on shelves around the country, Asda has started to run nationwide advertising campaigns that it predicts will rapidly boost its customer numbers.
Asda Mobile is on its way to attracting 100,000 active customers – a respectable achievement from a standing start – although the company is confident of making a significant improvement on this number.
Head of Asda Mobile Ted Cadogan believes that customers aren’t yet familiar enough with the brand. ‘There is a low awareness of Asda Mobile as we have not been able to market it to date [without having national distribution] and we have done no PR. There is an education to be undertaken that customers can buy Asda Mobile.’
Cadogan suggests that when this ‘education’ and the ad campaigns fully kick in, there is no reason why Asda cannot attract the equivalent number of customers as Tesco Mobile, based on the relative sizes of the two businesses. Tesco is twice the size of Asda, and Tesco Mobile has two million customers. Using that basis, Asda is aiming for one million customers as a realistic target. In what is a huge compliment to Tesco Mobile, Asda appears to be basing targets on its bigger rival, as well as propositions, pricing and even how it is sold.
Although the Leeds-based company has significantly less stores than Tesco, Cadogan says it will be helped by the fact that it has half the footfall and its stores are typically larger, which means there is a greater opportunity for space to be given over to the Asda Mobile offer.
As surprising as it sounds, gaining space in stores has been a major challenge for Cadogan, who devised the MVNO strategy after being given responsibility for researching ‘income opportunities’ through the launch of new products and services.
‘You cannot simply take out a bay and put your stock in and shuffle everything else around. You have to agree space in each store – sometimes with the manager, who might have some discretionary space – and ensure that Asda Mobile is placed alongside the existing mobile offer and not among the grocery goods,’ Cadogan explains.
He admits that he has been helped by the company ‘pulling back’ from selling contract phones in its stores (it still sells them online), which has created some space for the MVNO deal. The total mobile presence in stores typically encompasses five bays (each of which are two metres long) with two given to Asda Mobile.
With store space becoming available and the strong early sales of Asda Mobile, the proposition can now be found in almost 260 stores. The objective is to extend this to all 300 branches that currently sell mobile phones.
In each of these stores, the key task is to ensure that the customer understands the simplicity of the Asda tariff compared with other providers. ‘It is hard enough to get cut-through in the mobile category, so a simple tariff is critical,’ he says.
What Cadogan is attempting to overcome is the complexity that is inherent in the mobile sector. ‘Traditionally, the mobile market has been all smoke and mirrors with most customers having absolutely no idea what they are buying. The more opaque they make “value”, the less they have to offer customers. There have been moves in the past 18 months to simplify tariffs and we would love to think this is a reaction to Asda,’ says Cadogan.
Simplicity and value for money fit in well with the core Asda shopper, which is why they make up the majority of Asda Mobile customers. It is not the intention to steal prepay customers from the other supermarkets or from specialists on the high street. Neither is there the expectation that Asda will take customers away from the networks’ prepay deals that the supermarket also sells, although it seems this is inevitable.
‘It is complementary; to provide more choice, not to take business away from the networks in our stores. Some people are brand aware, which is one of the many reasons why having choice is good,’ says Cadogan.
He also acknowledges that there is a serious issue over switching providers and customers ‘porting’ their mobile numbers, which is another of Cadogan’s bugbears. That it can take an average of five working days to switch networks in the UK compared with a matter of minutes in Ireland – and substantially less in many other countries – leads him to suggest that it is ‘anti-competitive’ and that Asda would like to champion this issue.
It is a theme that 3 is currently pushing through the courts. As well as giving consumers a raw deal, Cadogan also recognises the process makes it difficult for new entrants to enter the market.
Despite this, Asda has made its move and is using its MVNO to push its credentials as the value-for-money retailer in the UK. Customers are finding its proposition that offers 16p per minute for the first three minutes and 8p thereafter particularly competitive, especially when combined with its rate of 10p per text for the first three texts and 5p thereafter.
The deal is even more attractive when customers receive 10% free credit for topping up in Asda stores or by phone when using a registered credit or debit card.
Value and customer service
However, Cadogan is quick to point out that Asda Mobile is not just about value, but also customer service, which he says was one of the criterion used to select Vodafone as its partner for the MVNO.
‘We wanted them to deliver service that was in line with the Asda brand.’ One aspect of this arrangement that has proved particularly popular with customers is the UK-based Asda Mobile call centre that operates from a Scottish island.
Cadogan suggests that the competitive deals on texts and minutes and the high level of customer service is a result of the company ‘building the whole proposition for the customer’, unlike others in the mobile sector that he believes have created products not for the consumer but simply because they have the capability to do so.
As part of this thinking, Asda has sought to keep its handset selection to the most popular models and is currently giving away £15 of airtime with a selection of 15 handsets priced above £30. Current deals include a Sony Ericsson W200i that costs £35 when bought with £15 of airtime, and an LG Chocolate that retails at £5