Virgin Mobile Case Analysis

In: Business and Management

Submitted By chimmiri
Words 924
Pages 4
Virgin Mobile USA: Pricing for the Very First Time - CASE STUDY Kiran Chimmiri
Virgin is a U.K-based company led by Sir Richard Branson and is one of the three most recognized brands in Britain. Dan Schulman has been appointed CEO of the Virgin Mobile USA and is now trying to determine what pricing strategy would be most efficient in attracting and sustaining customers in the USA. There are several other decisions which also need to be made, such as unique features Virgin mobile can offer to differentiate from their competition, channels to use in order to sell their product and advertising strategy to market the product most efficiently. The company had couple of failures in the past in MVNO and so is more keen in building a robust strategy to venture into the US market. The key issue for Virgin Mobile USA is to select a pricing strategy for market penetration. There are 3 alternatives provided in regards to the key decision: Clone Industry Prices, Price below the Competition & A Whole New Plan.

Analysis and Evaluation:
The Company decided to target the market which is underserved i.e., in the 15 to 29 age group. For this the company analyzed the strategic issues such as a)Develop value proposition that will appeal the youth market b)Maintain customer loyalty & Life time Value c)Address the unmet needs of the target market d)Make the venture a profitable one e)Don’t want to trigger off competitive reaction

The Mobile communication industry in 2001 was highly competitive, saturated and overcrowded. The US industry when compared to Finland, UK, and Japan could be considered an industry that had room for growth. Finland had almost a 90% penetration rate especially in the ages 20 to 29 age group and Japan had almost an 80% penetration rate. In the USA however, penetration was about 50% in the 30-59 age group and as low as 15% in the 15 to 19 age…...

Similar Documents

Virgin Mobile Case Analysis

...Virgin Mobile USA: Pricing for the Very First Time - CASE STUDY Kiran Chimmiri Virgin is a U.K-based company led by Sir Richard Branson and is one of the three most recognized brands in Britain. Dan Schulman has been appointed CEO of the Virgin Mobile USA and is now trying to determine what pricing strategy would be most efficient in attracting and sustaining customers in the USA. There are several other decisions which also need to be made, such as unique features Virgin mobile can offer to differentiate from their competition, channels to use in order to sell their product and advertising strategy to market the product most efficiently. The company had couple of failures in the past in MVNO and so is more keen in building a robust strategy to venture into the US market. The key issue for Virgin Mobile USA is to select a pricing strategy for market penetration. There are 3 alternatives provided in regards to the key decision: Clone Industry Prices, Price below the Competition & A Whole New Plan. Analysis and Evaluation: The Company decided to target the market which is underserved i.e., in the 15 to 29 age group. For this the company analyzed the strategic issues such as a)Develop value proposition that will appeal the youth market b)Maintain customer loyalty & Life time Value c)Address the unmet needs of the target market d)Make the venture a profitable one e)Don’t want to trigger off competitive reaction The Mobile communication industry in 2001 was...

Words: 924 - Pages: 4

Virgin Mobile

...Problem Definition: Develop a price strategy that would allow Virgin mobile to compete in the USA Mobile industry, which highly saturated. However, Virgin targets a market segment which is unsaturated- youth between 15-29 years of age. Also, they are looking for optimum pricing strategy to reach the goal of 1 million customers in 1 year and 3 million in 4 years. This is the issue or concern faced by Virgin, which will be discussed further in the paper. Analysis: Virgin which has huge capability of brand extension looks to enter the market with a non-traditional strategy (MVNO) which comes with an advantage of minimizing the huge amount of fixed costs. Though this particular model failed earlier in Singapore, Virgin still looks to ahead since there is a great opportunity to serve a market segment (youth between 19 and 25 years of age), which is underserved, has lower market penetration rate and high growth. (See page 5 and refer page 84 of text). Primarily they have considered various factors to implement this plan- different advertisement campaign, selling channels and value added services like VirginXtras (see page 3-6). Secondarily they have options of three pricing decision, each options have their own pros and cons. (see page 6-8). 1. Clone the industry prices Pros Cons Give customers more features for the same price Lower margins due to the expenses of value added services (page 19) Easy promotion using the current theme of existing carriers Advantage of low...

Words: 652 - Pages: 3

Virgin Mobile Usa

...Given Virgin Mobile’s target market (14 to 24-yeard-olds) How should it structure its pricing? The case lays out three pricing options. Which option would you choose and why? In designing your pricing plan, be as specific as possible with respect to the various elements under considerations (e.g. contracts, the size of the subsidies, hidden fees, average per-minute charges, etc.) There are two different pricing structures for Virgin Mobile. The first pricing structure is for their target market, 14 to 24-year-olds, and any new product entering a saturated market, the pricing should be low in the market. The second pricing structure is that Virgin Mobile is pricing their product in the middle or average of the industry standard. For Virgin Mobile, I believed that the first structure is easier to attract their target market, 14-24 year olds young demographic. The reason is that this age demographic group does not have too much money to use or to pay for their mobile phone bill. This pricing structure would appeal to the target market and help Virgin Mobile to create brand image which is young, interesting, and fun. While this pricing structure strategy would help gain consumers that value pricing when choosing their products, it could also work against Virgin Mobile. This pricing can create the image that the phones do not have as high of a quality if they are priced below the industry low. This structure would achieve the goal of attaining a sizable amount of the market...

Words: 2358 - Pages: 10

Virgin Mobile Pricing Strategy

... - 169 1 - .28 + .05 Price Plans Now consider the following 3 price plans 1. Easy price plan 300 minutes per month + free SMS and internet 15 cents per minute @ $45 per month LTV per sub = $88 (after putting values in above formula) Based on study of graph, I assume 50% plus subscribers will belong to this group and hence a significant business case looking at the LTV for .5 million ‘easy’ subs = $44 000 000 2. Simple Price Plan 450 minutes + free SMS and internet 12.5 cents per minute @ $56 per month LTV per sub = $36 I assume remaining 30% of subs will belong to this group so LTV for .3 million ‘Simple’ subs = $10 800 000 3. Free Price Plan Unlimited Minutes (fair usage policy of 800 minutes per month), SMS and internet usage 10 cents per minutes @ $80 per month LTV per sub = $2.42 I assume remaining 20% of the subs will belong to this group and hence LTV for .2 million ‘Free’ subs in this case = $484 000 Total LTV for first year for 1 Million subscribers based on further segmentation in Easy , Simple `and free price plans = $44 000 000 + $10 800 000 + $484 000 = $55 284 000 This proves significant business case to opt for these 3 price plans for Virgin Mobile. 2. What do you think of Virgin Mobile's value proposition (the ValueXtras, etc.)? What do you think of its channel and merchandising strategy? Virgin is very creative and innovative with their products. These Xtras help not only Virgin but the......

Words: 1292 - Pages: 6

Virgin Mobile

... corresponding entertainers. Groups like The Police, Aerosmith, Styx, and Pink Floyd, continue to be resilient in their return to stage over the last several years. Why not Virgin Mobile USA? This alignment should further booster customer loyalty and lifetime value. Lastly, I might also look to expand by serving the other end of the age spectrum. Customers aged 65 to 80 years old have great potential. This segment is one of the fastest growing segments due to the retirement of the baby boomers. I think that this is a very viable marketplace that hasn't been targeted well. Virgin Mobile could just extend its festivals and continue to bring the groups from the 70's and 80's back for many subsequent events along with designing products with correlating features and benefits. Sources (1) Virgin Mobile USA Website http://www.virginmobileusa.marketwire.com (2) Virgin Mobile USA Website http://www.virginfestival.com (3) Virgin Mobile USA Website http://www.virgin.com/news/articles/virginmobileusa/2007/26032007 (4) Zeithaml Valerie A. , Bitner Mary Jo , Gremier Dwayne D , "Services Marketing" Pg. 678 Exhibit 11 Case Study 7 Virgin Mobile USA...

Words: 1408 - Pages: 6

Virgin Mobile Case Analysis

...Case Analysis “Virgin Mobile USA: Pricing for the Very First Time” Marketing II – BUSI2202U Group 40, Tuesday Session Word Count: Paper 2,912, Appendix 345 Problem Definition The unimpressive performance numbers in the market belonging to Virgin Mobile are mainly due to the lack of an attractive pricing strategy that would appeal to the target market group. The target market group (consumers aged 19 to 25) have different characteristics than other market groups and Virgin Mobile’s current pricing strategy is clearly not complementing those characteristics. As a result, a re-evaluation of the target market group is required in order to choose a better and more correct pricing strategy to appeal to the majority. The re-evaluation should result in a more successful pricing strategy as well as a solid entrance strategy to get the largest amount of exposure. Situation Analysis External Variables The American cellular market was not an easy market to penetrate as it was already overcrowded. Adding another service provider would not be an easy feat for Virgin Mobile. By 2001, there were already six national carriers and many regional players as well. Based on market share there were only four main industry players; Verizon, Cingular, AT&T, and Sprint. These companies controlled over 60% of the market along with VoiceStream, Alltel, US Cellular, Leap and number of smaller carriers. On top of there being many competitors, it was also believed that the cellular...

Words: 3467 - Pages: 14

Case Analysis of Virgin Mobile

...Virgin Mobile Pricing Strategy Situational Analysis Virgin Mobile, a MVNO is planning to launch its services in USA. It’s target is underserved Demographics of 15-29 years as this age group is underserved by the regular telecom operators due to their low credit score ( Under 18 demographic cannot go for contract). They are planning to launch their product with service offerings that focuses on value added services. Problem Statement * The industry structure is such that supports post-paid user base and is completely different from UK industry structure. * Virgin will have to attract the new user base with lower budgets and this segment does not have a credit score * The industry has matured and the big players already have their decided segment. * Any pricing strategy should be such that it does not start a price war. * Virgin wants to break even as soon as possible SWOT Analysis of Virgin Mobile Group Strength * The company does not have a fixed cost in infrastructure. This gives them freedom to lower their customer acquisition cost * The VAS are created with a focus on target market with JV with MTV. * Brand Image represents fun, honesty, a sense of competition and value for money, which other Telecom operators don’t represent. This brand image resonates with the target group * Low cost of handsets at subsidised prices. Weakness * The company has low budget allocations for the advertising and customer education. Opportunity...

Words: 823 - Pages: 4

Virgin Mobile Case Analysis

...Aleksandr Kazakov MKTG 489 02/05/14 Virgin Mobile Case The Virgin Mobile USA case exemplifies a challenging dilemma faced by CEO Dan Schulman when faced with the task of introducing Virgin Group’s mobile service to the American public. The Virgin Group led by Richard Branson, is a British based company with Virgin branded products extending into industries from apparel to airplanes. In 2001, the Branson led Virgin Group made the decision to extend their mobile service into North America: a market dominated by companies such as Verizon, At&t, and Sprint. In order to better distinguish themselves as a brand and to appeal to an emerging youth market, Virgin Mobile needed a pricing strategy that served the needs of their target market while being profitable. In In 2001, the mobile phone market in the U.S. was entering the maturity stage with a 50% industry penetration rate. However, the penetration rate for consumers age 15-19 was much lower. The main factor preventing this age group from being active mobile phone users was poor credit. Most mobile carriers overlooked this market due to high customer acquisition costs of about $370 per customer. However, Virgin Mobile USA CEO Dan Schulman was determine to reach the fast growing youth market stating that “By focusing exclusively on the youth market from the ground up, we’re putting ourselves in a position to serve these customers in a way that they’ve never been served before”. Schulman positioned the Virgin Mobile...

Words: 877 - Pages: 4

Virgin Mobile

...5. What do you think of Virgin Mobile’s value proposition (the VirginXtras, etc.)? What do you think of its channel and merchandising strategy? We think that Virgin Mobile’s value proposition is very effective to its target market (14 to 24-year-olds). Virgin Mobile positions its brand is what the target market wants and is all about fun, honesty and great value for money. They do not only provide basic cellular service, but also push cell phone content to a new level that involves the delivery of content, features, and entertainment, which they call “VirginXtras.” Virgin Mobile customers have exclusive access to MTV, VH1 and Nickelodeon based content. This strategy appeals to the youth since most of their customers are MTV followers. Besides that, MTV networks is home to some of the most recognized youth brands in the country which is a perfect match to Virgin Mobile’s target market. Customers are given easy ways to vote for their favorite videos on shows such as MTV’s “Total Request Live” through their phones. They can also personalize phones by adding new characters like graphics, ring tones, text alerts and voice mail. In addition to the MTV-branded content, Virgin Mobile provides text messaging, online real-time billing, rescue ring, wake-up call, fun clips, the hit list, music messenger and movies. Text messaging is an important selling point to youth. Kids prefer to text rather than make phone calls. Even when they are in class, texting with friends is common. It...

Words: 651 - Pages: 3

Virgin Mobile Case Study Summary

...VIRGIN MOBILE CASE INTRODUCTION: Virgin is a leading branded venture capital organization. It is conceived in 1970 by Sir Richard Branson, the Virgin Group has gone on to grow very successful business in sectors ranging from mobile telephony, to transportation, travel, financial services, leisure, music, holidays, publishing and retailing. Virgin has created more than 200 branded companies worldwide, employing approximately 50,000 people, in 29 countries. TARGET MARKET: The core-competency of Virgin mobile is making a difference in the eyes of the customer in terms of value for money, Quality, Innovation, Fun, A sense of Cool-ness. It identified the age segment where the Industry penetration was the lowest, that is, between 15 years to 29 years of age. Also, by demography, it targeted income segment with a low disposable income and high aspiration for trendiness. Since the target market for Virgin mobile is youth segment, it makes sense to develop a value proposition like VirginXtras. The revenue for mobile entertainment is projected to increase in the next few years (Exhibit 3). So, by offering value added services like delivering music, video and game content of MTV, VH1, and Nickelodeon etc. Virgin can increase its sales. PRICING STRATEGIES FOR THIS SEGMENT: Option 1 – Clone the industry prices Pros: Easy to promote, No need to spend more money on salespeople, Customers are used to ‘buckets’ and peak / off – peak distinctions Cons: Highly competitive market...

Words: 564 - Pages: 3

Virgin Mobile Usa

... prices, you would be starting price wars with providers that have much more resources than Virgin. As a new entrant, price wars with established competition very rarely works as it does not create sustainable competitive advantage. Creating a plan with no contract that is priced on a per-minute basis is the best option to target a younger population while ensuring they have a competitive advantage. The value proposition to this group would be a pay based on use model with no credit checks or contracts. According to our analysis, the no contract option does not work for the average industry competitor. Due to the big players’ high acquisition cost, $370 per add, compared to Virgin’s, $100 per add, this strategy is not financially feasible for industry competitors. Virgin Mobile can move into this space and avoid competitors who will not have interest in this niche market. In terms of pricing per minute, we recommend selling at any price of 6 cents or more. According to analysis with the given case information, the breakeven price-per-minute is slightly under 6 cents. By entering the market at the lower end, Virgin can ensure maximum market penetration while also creating a barrier to entry with its low cost structure. With the current acquisition costs of the bigger players at around $370 per add, pricing for them would have to be around 22 cents-per-minute to break even. It would be very difficult for a competitor to come into the space and try to sell a plan......

Words: 1297 - Pages: 6

Virgin Mobile

...Case Study - Virgin Mobile USA PGXPM 10 – ARJUNAS – GROUP VI SERVICE MARKETING Assigned by Prof. D. Sriram MEMBERS: NIRANJAN DAUTKHANI Virgin Group Profile: * Virgin, a leading branded venture capital organization, is one of the world's most recognized and respected brands. * Conceived in 1970 by Sir Richard Branson, the Virgin Group has gone on to grow very successful businesses in sectors ranging from mobile telephony, to transportation, travel, financial services, leisure, music, holidays, publishing and retailing. * Virgin has created more than 200 branded companies worldwide, employing approximately 50,000 people, in 29 countries. [ “ We believe in making a difference. In our customers' eyes, Virgin stands for value for money, quality, innovation, fun and a sense of competitive challenge. We deliver a quality service by empowering our employees and we facilitate and monitor customer feedback to continually improve the customer's experience through innovation.” ------- Virgin Group Website Virgin Values: * Virgin stands for value for money, quality, innovation, fun, and a sense of competitive challenge. * Successful cellular operations in U.K.- 2.5 million customers in 3 years. * Unsuccessful operations in Singapore (2001) - Virgin hip and trendy positioning failed...

Words: 853 - Pages: 4

Virgin Mobile Case Study

...Attn: Virgin Mobile The Virgin Conglomerate is known globally for disrupting industries with innovative practices. It is a highly diversified company with many different business entities operating in various, unrelated industries. Today, Virgin Mobile is on the brink of green-flagging a new cable business designed to solve some of the problems that have long afflicted cellular companies. In essence, Virgin Mobile strives to transform an industry by targeting a younger demographic. Their target market consist of 15-29 year olds since they are believed to be a growing market. However, large companies tend to shy away from this segment since they often have poor credit quality. Considering all the factors involved with entering a new market, a SWOT analysis and Porter’s 5 forces model will analyze the industry’s attractiveness. Porter’s 5 force model effectively assess all factors which include: threat of new entrants, threat of substitutes, bargaining power of customers, bargaining power of suppliers, and rivalry among existing competitors. The threat of new entrants will be rather low since other organizations in the industry have already established their claims on most of the market share. Therefore, Virgin Mobile must assess the barriers to entry to ensure a competitive advantage can be maintained over other rivals. Moreover, mobile phones have become a necessity for everyday life, so these devices cannot be easily replaced, which lessens the threat of substitutes...

Words: 564 - Pages: 3

Virgin Mobile

...Virgin Mobile USA : Pricing for the Very First Time 1) Virgin Mobile targets the 14 to 24-year olds market. The case lays out three pricing options. Which option woul you choose and why ? All three options are very interesting for Virgin Mobile to introduce the American market. Considering Virgin Mobile’s background, goals and strategy, I would have choose the option 3 « A Whole New Plan » There are few reasons that explain this choice : Firstly, Virgin Mobile’s cultural values are to be innovative, fun. It also wants to make things different from its competitors and continuously improve customers’ experience through innovation. Indeed the options 3 offer something very different than competitors. Secondly, regarding the segment target, 14–24 years old, it is known that those categories can not pass the credit check with the current carriers due to their lack of revenue. The result is that this target market has been forgotten. Moreover, it is an age where teenagers are looking for “independence” and like to do things without parents. It is why the option 3 fit well. Thirdly, I believe that the option 3 is the one that fit the best selling model that has been chose by Virgin. In fact, it does not require any...

Words: 1730 - Pages: 7

Case Analysi

...  division  needed  to  be  carefully  coordinated  with  those  in  other  divisions  if  the  company  was  to  successfully  leverage  its doll character brands across all divisions.   The Capital Budgeting Process at New Heritage  The annual investment process at New Heritage began with personnel in each division proposing  projects for investment that were aligned with the company’s multi‐year strategy plans.  As the company grew, deliberate steps were taken to decentralize some of the project approval process and increase spending authority at the division level. However, large and/or strategic spending proposals were reviewed at the corporate level by a capital budgeting committee consisting of the CEO, CFO, COO, the controller, and the division presidents.   Each project proposal presented to the committee included the following information:  brief  description of the project and the strategic rationale; overview base case financials (five‐year  operating and cash flow forecasts); spending requirements by asset category, personnel requirements,   key project financial performance measures (NPV, IRR, payback period, profitability index); and  project risks and milestones.  Proposed projects ran the gamut from relatively minor, tactical projects  (the replacement of obsolete assembly equipment) to major strategic projects that would significantly  alter the company’s market position (an acquisition, for example).   Some projects were  HARVARD BUSINESS...

Words: 2246 - Pages: 9