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Virgin Mobile Pricing Strategy

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Submitted By fasajjad
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Q.1 Given Virgin Mobile's target market 914 to 24-year-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 subsidies, hidden fees, average per-minute charges, etc.).
I will recommend third pricing strategy, which is to come up with a completely new plan, since we are trying to target a new market segment. The following will be the structure of the new price plan, which employs a revolutionary and aggressive approach.
Subscription Type All of the plans will be prepaid thereby completely eliminating the need for indulging into contracts. The subscription will come into packages that resemble consumer electronic packaging and would be plug_and_play when you buy them. Contracts: Since the plans will be all prepaid, the services will be offered without indulging into a contract. This will allow e.g. the teenagers 14-17 to be able to get the subscription because otherwise they are not eligible to sign the contracts. This is clearly an untouched segment and will bring lot of new customers. However the risk of churn will be increased to 6% per month, but that will be catered into pricing calculations given in the end.
Handset Subsidies: All customers will be offered handset subsidies at 50% of the handset costs. This will reduce the subscription price and hence enabling the young customers to afford the plan.
Hidden fees and Off-peak hours: All plans will have no hidden fees or charges. The price plans will includes all cost calculations and will be based on the idea as ‘what you see is what you get’. The peak and off-peak distinguishing will be completely eliminated and the buckets of minutes will have ‘any-time’ minutes, providing the...

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