...History of Virgin Mobile USA Virgin, led by Sir Richard Branson, is one of the top three most recognized brands in Britain. The company values money, quality, innovation fun and a sense of competitive challenge. In the past twenty years, Virgin has established more than 200 different corporate entities ranging from airlines, beverages, trains and cosmetics. Also, they usually target the untapped market because they believe that there are great opportunities where the needs and wants of people have not been satisfied yet. One of the successful ventures of Virgin is its cellular operations in the U.K. where they had signed up approximately 2.5 million customers in a span of just three years. Virgin Mobile launched its first mobile virtual network operator (MVNO) in November 1999. The company leased network space from Deutsche Telekom instead of investing in and running a network in-house. However, the company did not succeed in Singapore. Virgin Mobile and Singapore Telecommunications entered into a joint venture but it only reached less than 30,000 subscribers after its launch in October 2001. One of the reasons for its failure is that the market had been too saturated to sustain a new entrant. Another reason is that the company’s positioning as the hip and trendy brand did not appeal to the Singapore market. In 2002, it launched a wireless phone service in the U.S. It was one of the first companies in the country to offer prepaid cellular service. Virgin Mobile was the...
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...Issues Virgin, a U.K.-based company is one of the top three most recognized brands in Britain. Virgin’s cellular operations in the U.K. had signed up approximately 2.5 million customers in just three years. The company had a history of brand extensions and one of these extensions is the launch of their wireless phone services in the USA called "Virgin Mobile". The key issue for Virgin Mobile is to select a pricing strategy that will both attract and retain subscribers. There are three options for pricing that are under consideration. Dan Schulman, CEO of the Virgin Mobile USA is trying to determine which pricing strategy would be most efficient in attracting and sustaining youth market in the USA. Other factors such as unique features that Virgin Mobile can offer in order to differentiate from the competitors, their marketing strategy and Life Time value (LTV) of the customers and customer retention also need to be part of the decision making criteria. SWOT Analysis Virgin Mobile draws its strengths from the vast experience that the parent company has in the UK market. With a 50-50 joint venture with Sprint, Virgin Mobile has setup MVNO model which has low fixed costs as well as low operation and maintenance requirements. Virgin Xtras is a value added proposition that would appeal to the young customers. The strategic agreement with MTV to deliver entertainment functions as well as the cooperation with Target, Sam Goody music stores and Best Buy, will help Virgin Mobile in marketing...
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...Value for money, quality, innovation and sense of competitive challenge is what Virgin stands for and its aim is to look for opportunities, which provides a better offer for its customers. That’s what drives Virgin Mobile USA to focus on youth market targeting customers between the ages of 15 and 29, which is a group that hasn’t been targeted as much by major cell phone providers. Virgin Mobile has proposed a 50-50 joint venture with Sprint, in which Virgin Mobile would buy minutes from Sprint as needed. Overall, this goal would classify as a SMART goal. It is specific in the age group it targets (15-29 year olds), measurable in the fact that they want one million subscribers by year 1 and three million subscribers by year 4, attainable in the fact that the U.S. penetration rate for this group is low and does not have much competition, and realistic/time based in the fact that there is a stated time length to complete the project. However, the main problem that Virgin Mobile faces is the pricing strategy that will be implemented for this project. The three viable pricing options for Virgin Mobile are to set the same price as other carriers, price below the market, or to create a whole new plan. If Virgin mobile were to price the same as other carriers, they would benefit in the fact that it would be easy to promote and it would be a plan that customers are already use to. However, the cons outweigh the pros in this scenario because there is no price distinction, and customers...
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...Study:-Virgin Mobile USA: Pricing for the very first time Introduction: Virgin Mobile Company led by Branson, is a British-base company. Dan Schulman was chosen as CEO in 2001. He was trying to find a niche market in US for virgin mobile. US market was under-served and dissatisfy with existing Carriers. Youth were ignored and no carrier had capitalized on this segment. The company entered in a 50-50 joint venture with US-based Sprint in which Virgin will use Sprint network for US services. The goal of the US Virgin mobile was to have one million subscribers by 2002 and 3 million by year four. Virgin mobile was planning to adopt pre-paid system instead of contract. It was intended to serve those that are unable to have credit cards yet. Virgin mobile had to fight many shortcomings that were endemic in the industry. They preferred to introduce new features that will attract youth to use their services. Therefore, they were worried about pricing their services that should be attractive for the consumers, profitable for the company itself, and not rise the reaction of the rivals. 1. Do you agree with Virgin Mobiles target market selection? What are the risks associated with targeting this segment? Indeed yes, the saturated nature of the wireless communication industry in U.S. made it very difficult for the new brands to enter the market. However the (15-29) market segment is yet remained untouched by the big players. If the youth segment remains the main focus for Virgin, the15-29...
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...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 share...
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...Situation Analysis Virgin, a U.K.-based company, has been one of the top recognized brands in the U.K. with a brand identity that encompasses value, innovation and fun. This allows for the firm to play in numerous industries, everything from aviation to mobile phones. When assessing new market entry, Virgin typically moves into industries where the customer is less than satisfied and the incumbents are complacent. In the U.K., Virgin has been incredibly successful in the firm’s venture into the mobile phone provider industry and is looking to continue the success abroad in the established U.S. mobile phone provider market. The mobile phone provider market in the U.S. is currently a very saturated market with six strong national incumbents and a series of regional providers. That said, it is also a market that is currently neglecting the consumers aged 15 – 29 due to the high cost to attract the consumer, the proportion of individuals in this segment that cannot pass credit checks needed for the traditional voice plans, and the hesitation of pre-pay plan options. Virgin plans on entering the U.S. market through targeting these consumers (age 15-29). The firm has a solid marketing plan which is tailored specifically to appeal to these consumers, including VirginXtras (a focus on exclusive content through the non-traditional phone services such as text messaging, ring tones, music, etc), special packaging and point of purchase, advertising spends targeted specifically at the...
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...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 salespersons...
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...Virgin Mobile 1. 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.) 2. How confident are you that the plan you have designed will be profitable? Provide evidence of the financial viability of your pricing strategy. 3. the cellular industry is notorious for high customer dissatisfaction. Despite the existence of service contracts, the big carriers churn roughly 24% of their customers each year. Clearly, there is very little loyalty in this market. What is the source of all of this dissatisfaction? How have the various pricing variables (contracts, pricing buckets, hidden fees, off-peak hours, etc.) affected the consumer experience? Why haven’t the big carriers responded more aggressively to customer satisfaction? 4. How do the major carriers make money in this industry? Is there a financial logic underlying their pricing approach? 5. What do you think of virgin Mobile’s value proposition (the VirginXtras, etc.)? What do you think of its channel and merchandising strategy? 6. Do you agree with virgin Mobile’s target market selection? What are the risks associated with targeting this segment? Why have the major carriers been slow...
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...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...
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...Virgin Mobile USA is a brand extension of Virgin, a U.K.-based company founded by Sir Richard Branson. The company led by CEO Dan Schulman was founded under Virgin's mission statement which stated "we believe in making a difference. In our customer's eyes, Virgin stands for value, for money, quality, innovation, fun and a sense of competitive challenge... we look for opportunities where we can offer something better, fresher, and more valuable, and we seize them. We often move into areas where the competition is complacent... We are pro-active and quick to act, often leaving bigger and more cumbersome organizations in our wake." (1) Virgin Mobile USA had a number of things going for them despite a crowded cellular marketplace. For starters, they had a CEO who had experience in telecom as he was formerly an executive with AT&T. Schulman also had experience with successful pricing strategies and technology as former CEO of Priceline.com. The biggest plus for the startup was the support and backing by its management and stakeholders who genuinely wanted to garner success against the perception of another market saturated run poorly with complacency and poor customer service. The bar was set high for success, as Schulman's goal was to have acquired 3 million customers by their fourth year of operation. I believe that Virgin Mobile USA took a big gamble in targeting a niche that was essentially written off by the other players in the industry as being largely unprofitable. Perhaps...
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...1. We decided that that pricing strategy three “a whole new plan” would be the most effective at positioning Virgin mobile as the brand for adolescents and young adults in the United States. This pricing strategy is easy for young consumers to understand and afford. The phones are at the most expensive $100, which a high school student can afford with half of their part-time job paycheck or a teenager who has an allowance can save up for a month and buy. It is also at a reasonable price for parents to spend on a phone if they were to purchase a handset as a gift or for their child’s safety as a way of instant communication between parent and child. This plan is also an excellent strategy because it throws out the idea of contracts, which 14-17 old teens cannot obtain without a parent to co-sign. This allows a teenager whose parent may not want them to have a cellular phone to get a cell phone or parents whom are not willing to jeopardize their credit or risk a high cell phone bill to fulfill their teenagers wants. This strategy will also be a great tool at building brand loyalty at a young age. If a teenager is given the freedom to have a cell phone at an early age by Virgin mobile and feels comfortable and trusting of the provider they will come back to the brand when their are of legal age to a contractual cell phone plan and opt out of it by choosing Virgin Mobile. Cell phones are a form of constantly innovated technology and young consumers are the opinion leader on these...
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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...
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...Problem Statement Virgin Mobile is launching its services in USA in the summer of 2002. It has to decide on its pricing strategy that would attract and retain subscribers. Situation Analysis Customer: The target consumer group is youth aged between 15 and 29 years. Penetration in this segment is significantly lower and the growth rate is projected to be robust in the coming years. Most of them have a history of poor credit quality, no credit cards and no facility to pass credit checks. The revenue generated is lower than the average acquisition and the cost of serving of the industry. Hence this group is largely under served. This consumer segment has their specific needs that are not being met by the mobile service providers. Virgin Mobile is addressing these specific needs. Virgin Mobile is targeting value added services like Text Messaging, downloading information, ringtones, graphics, etc. These are more popular and considered trendier by these young adults. Virgin Mobile also plans to introduce more new value added services via ‘VirginXtras’. Virgin also will have more ‘easy to buy’ mechanism and communicate it to the target segment through more youth focused media channels such as MTV, WB and advertorials in The Complex, Vibe & XXL. Company: Virgin Mobile, a venture of Virgin Group, was the 1st company to introduce a mobile service using Mobile Virtual Network Operator (MVNO) model. Virgin Image emphasizes on value for money, quality, innovation, fun & sense of...
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...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. Virgin Mobile USA: ...
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...Problem Statement Virgin Mobil is venturing into the US market and their launch date is July 2002. The company’s goal is to have one million total subscribers by the end of the first year and three million by year four. In order to achieve their goals, the company has to come up with a competitive pricing strategy to attract and retain customers in an already mature market. Recommended course of action Despite a mature US market, the cellular service industry has a market penetration of only about 15% in the segment comprising of users aged between 15 and 19 years. This segment is characterized by inconsistent cell phone usage, low credit ratings and usage pattern different from the typical businessperson. Hence, Virgin Mobile USA is looking to penetrate this segment and create brand loyalty through attractive pricing and additional feature in mobile entertainment. Based on our analysis, we recommend the following: 1. Aim for the non-contractual prepaid segment with a new pricing structure: Virgin Mobile USA should look to price at 20-30 cents per minute. 2. Increase the off peak hours: The company could extend the off-peak hours by 2 hours, starting at 7pm instead of 9pm. 3. Lowering of Acquisition Cost (AC): Virgin Mobile USA should keep its AC around $130 by passing on a part of the handset cost to the customers. Rationale for Recommendation We can see from Exhibits 1 & 2 that if Virgin Mobile opted for a contractual service plan with rates at par with industry...
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