Overall Case Summary

Ted Katagi was recently put in charge of turning around the struggling Kansai Digital Phone Company. They are trying to compete in the Kansai market against three main competitors (DoCoMo, Cellular, Tu-Ka) and three PHS startups. Katagi and his team have developed several initiatives to try and turn themselves into a customer-centric organization. These incentives include: * Zutto - Operating without contracts. The customer pays up front and receives some benefit at the end of the commitment period in an attempt to elicit behavior (such as paying for another period) * Welcome Calls – Personal contact with each new customer in an attempt to keep customers from switching carriers. * Brand Strategy – Sign …show more content…

In order to do this, we would propose the following structure for the Zutto Plan. * No initial fee at start of service, month 1 * At six months, a signed 12 month contract guarantees free premium services (Being conservative we calculate Y500/month x 12 months =Y6,000) * At customers 18th month of service if they re-enroll in a 12 month contract they will receive three free months of standard line rental fee (3 months Y12,000) and ongoing free premium services * At the 30th month, the customer can re-enroll in the plan, meaning they have the opportunity to receive three free months of standard line rental fee every 12 months and ongoing free premium services if they are under contract to remain with the company.

To calculate:
Customer acquisition cost =Y50,000 every 15.5 months
+ Fee to retailer for each new customer service plan (Y10,000) = Total Y60,000

Cost of loyalty contract program for first 18 months =Total Y18,000
12 months of premium services = Y500 x 12 months = Y6,000
3 free months of standard line rental charge = Y12,000
For 30 months, add an additional 12 month premium services and 3 months free line charge = Y36,000
To conclude, for 30 months, we are currently spending Y100,000 (Y60,000 for every 15.5 months). With this plan, we will spend Y36,000 in 30 months while retaining customers, saving Y44,000 as acquisition cost . Additionally, we would recommend