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Virgin Mobile Pricing and Launch in Usa

Virgin Mobile Pricing and Launch in Usa

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Published by Hiamanshu Singh

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Published by: Hiamanshu Singh on Nov 14, 2010
Copyright:Attribution Non-commercial


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Pricing for the very first time
³We 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'sexperience through innovation.´ 
irgin Group Website
Virgin a pound 7.8 billion worth UK based company lead by Sir Richard Branson. Itis one of the top three most recognised brands in Britain. The virgin group has gone on togrow very successful business in sectors ranging from airlines and trains to beverages andcosmetics. The company¶s portfolio consists of more than 200 different corporate entitiesworldwide.In the year 2001 Sir Richard Branson appointed Dan Schulman as CEO, for VirginMobile USA, to develop the new Virgin Branded Mobile Service, with the launch date of July 2002. The goal of Virgin Mobile was to have 1 million total subscribers by the end of the year 2002 and 3 million by the year 2006.
Challenges for Virgin Mobile in the launch of its Mobile Service in USA.
The mobile virtual network operator (MVNO) model that company decided to utilisein USA had already seen a setback in Singapore. The mobile communication industry isconsidered to be over crowded in US, with six national carriers and number of regionalservice providers.Mobile industry penetration at present was 50% with 130 million subscribers. Themarket was considered to have reached maturity. The only segment which at a scope of growth was consumers aged 15 to 29. But these young consumers had poor credit quality.Also this segment had inconsistent usage and do not have a fixed income.The company wanted to generate revenues with competitive prices without triggeringa price war.
Targeting and Positioning Strategy.
Team lead by Dan Schulman, CEO, Virgin Mobiles was fully aware that the market inwhich they are going to enter is already overcrowded and the existing market players in thefield of mobile telephony have been in the market for over a decade. However, the marketresearch which was carried out brought out two important facts which attracted the attentionof Virgin Mobiles team, these factors were
Mobile penetration by age group
The realization that existing players are making money from customer confusion and the intended target customers are fully aware of this and theyresent such policies.
Based on the outcome of the research the company decided to targetconsumers aged between 15 to 29, since this was the only section of customers where theindustry penetration was close to 20% compared to 50% in other customer groups and the projected growth rate amongst this segment of customers in years to come was expected to berobust.The targeting strategy adopted by Schluman and his team was the best to be adopted by a new entrant into the market, where in the market penetration is already 50% and themarket is heading towards maturity. Under these circumstances a new player should and mustfocus towards open fences, i.e. segments of consumers which have still not participated inmarket penetration and do further research as to find out why the segment of customers didnot participate in the industry penetration. After conclusive outcome of such researches, thenew entrant should carry out a SWAT analysis and evaluate if targeting this group of consumers is beneficial, i.e. whether the company can address to their needs andrequirements and if the answer is ³yes´ the company must go ahead with the plan of targetingthe said customer group, and that is what Schluman and his team finally did
The positioning of the Virgin Mobile Services in the US market is to attractthe customers of aged between 15 ± 29 yrs. Knowing that this segment of consumers is moreopen to new things such as mobile, text and entertainment services and considered mobile phone as a fashion accessory, the Virgin Mobiles concentrated on VirginXtras i.e. MobileEntertainment Services and promoted sleek trendy handsets at no additional costs in their advertisements, so that the target customer can associate with the Virgin Brand and develop a bond once they start using the services.Advertisement in youth media networks. MTV, WB and Comedy Central and YouthMagazines (The Complex, Vibe and XXL). The name of the initial products,³Party Animal´ & ³Super Model´
Launch Price and Communication to achieve the Target Segment
For every customer the cost per customer to be borne by the customer comprises of the following
Handset Subsidy
Companies are providing handset having price range $150 ± 300 with asubsidy of $100 ± 200. Typically end users are charged between 60 - 90 dollars per handset.Virgin has entered into a contract with handset manufacturer Kyocera where in handsets will be available in the price range of $ 60 ± 100, thus Virgin has effectively brought down thehandset subsidy to around $10 per handset. The distribution agreement with Target and BestBuy has reduced the distribution cost to $30 per phone against the industry average of $100.
The firm has a Advertisement budget of $ 60 million for the first year,thus the per capita acquisition cost(AC) works aout to be $60 (assuming Advertisementresults in acquitting 1 million customers). Thus per capitaAC = $10 (handset subsidy) +$30 (distributor) + $ 60 (Advertisement)

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