Virgin Mobile

Target
• To create an appealing offer that would take
off in a saturated market.
• 1 million total subscribers by end of year 1
• 3 million subscribers by year four.
 Company
• Was one of the top three most recognized brands in
Britain
• Most brand extensions in past 20 yrs
• Values :
– Believe In making a difference
– Move in areas where the customer has traditionally
received a poor deal
• In US it launched the mobile operations utilizing the
MVNO (mobile virtual network operator)
• 50-50 JV with Sprint, where Virgin Mobile USA’s
services hosted on Sprint’s PCS network
 The U.S. Cellular Market
• At end of 2001 U.S. had 6 national carriers and
a number of regional and affiliate providers
• Industry penetration was close to 50%
• About 130 million subscribers
• Market was considered to have matured
• Consumer segment aged 15-29 penetration
was significantly low
• Big players didn’t target this segment
– Young Consumers often had poor credit quality
 The U.S. Cellular Market (cont.)
• Average cost to acquire a customer was
roughly $370
• Avg. monthly cell phone bill for national
carriers was $52 (417 minutes of use)
• Cost to serve a customer was roughly $30 a
month
• Carriers tended to be wary of acquiring low
value subscribers
 Virgin’s Target
• Consumers aged 15-29
• Underserved by existing carriers
• They have specific needs which were not met
• More open to new things like text messaging,
downloading information using their phones
• More likely to use ringtones, faceplates, graphics
etc
• Phones are more than a tool
– A fashion Accessory
– A personal statement
 VirginXtras
• Delivery of content, features and entertainment
• Company signed an exclusive, multiyear content
and marketing agreement with MTV
• Subscribers access to MTV branded accessories
and phones as well as branded content like
graphics, ringtones, text alerts and voicemail
• Company received promotional airtime on
MTV’s channel and website
• Subscribers could use their phones to vote for
shows on MTV
 Cont.
• Text Messaging
• Online Real Time Billing
• Rescue Ring
• Wake-Up Call
• Ring Tones
• Fun Clips
• The Hit List
• Music Messenger
• Movies
 Channel Strategy of Virgin
• Distribute in channels where youth shop
• Kids are used to buying consumer electronic products
• Clamshell, clear see-through package
• Bundled with decorated interchangeable faceplates
• Starter packs easily visible on large point of sale displays
• Company entered into distribution agreements with
Target and Best Buy (commission $30 per phone)
• Company expected its phones to be available at more
than 3000 retail U.S. outlets by their service launch in
July 2002
 Advertising
• Advertising budget approx. $ 60 million
• Campaign to be quirky, offbeat and different
from competitive ads
• To feature teens
• Would make use of strange, indecipherable
metaphors
• “Advertorials” for Youth Magazine
• High-Profile street marketing events
 Pricing Decision
• Market research among target segment revealed:
– Audience did not trust the industry pricing plans
– Young people know there are lot of hidden charges
• Pricing as an opportunity to differentiate from
competition
• 90% subscribers in U.S. had contractual agreements with
cellular providers
• Industry making money from customer confusion
• On-Peak and Off-Peak minutes have to be in the right mix
• Customers never selected the right plans according to
their usage
 Objectives
• Make sure
– prices are competitive
– Company can make money
– It should not trigger off competitive reaction
 Option 1- Clone Industry Pricing
• Pricing message have to be relatively simple
• Better off-peak hours
• Fewer hidden fees