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Virgin Mobile USA: Pricing For The Very First Time

Virgin Mobile plans to launch mobile service in the US in July 2002 by targeting youth aged 15-29. They aim to attract customers with extra services beyond basic calls. To succeed, Virgin Mobile must determine the right pricing strategy. Analyzing options like matching competitors' prices, pricing below rivals, or introducing a new plan, the document recommends pricing below competitors to appeal to their cost-conscious target market.

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Vikrant Lad
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235 views10 pages

Virgin Mobile USA: Pricing For The Very First Time

Virgin Mobile plans to launch mobile service in the US in July 2002 by targeting youth aged 15-29. They aim to attract customers with extra services beyond basic calls. To succeed, Virgin Mobile must determine the right pricing strategy. Analyzing options like matching competitors' prices, pricing below rivals, or introducing a new plan, the document recommends pricing below competitors to appeal to their cost-conscious target market.

Uploaded by

Vikrant Lad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Virgin Mobile USA: Pricing for the Very First Time

Summary
Virgin Mobile is planning to launch its service in the US Market by
July 2002.
They have done well in UK (2.5 mil consumers in 3 years).
They had however failed in Singapore Market.
The telecom industry in US was saturated and considered to have
reached maturity.
Virgin Mobiles plan was to capture an unsaturated market segment:
The youth segment between the ages 15-29.
For capturing this segment they plan on offering customer a wide
variety of value added service: Virgin Xtras.
They are to decide on a good pricing strategy.
Facts
Dan Schulman was appointed CEO of Virgin Mobile
USA.
The company entered into a 50-50 joint venture with
Sprint in which Virgin Mobile USAs services would
be hosted on Sprints PCS network.
Under the agreement, Virgin Mobile would purchase
minutes from Sprint on an as-used basis.
The goal of Virgin Mobile USA is: to have 1 million
total subscribers by the end of 2002 and 3 million by
year 2006.











Problem Identification
What pricing strategy should adopt Virgin Mobile,
enter a market and take some of the market share?
Generating Alternatives
Option 1: Follow the Industry Prices
Advantages:
Easy to promote.
Provides value added service in same cost.
Make differentiation through better off peak hours
and fewer hidden cost.
Disadvantages:
Loss of competitive advantage in terms of price.
Because of poor credit quality of target segment, will
reduce the market further.

Conti
Option 2: Price below the competition
Advantages:
It fits with the requirement of the target market, i.e.
lower price.
It helps in better penetration of product into market.
Disadvantages:
This strategy will reduce the profit margin.
It may cause a price war with competitors

Conti
Option 3: Come up with Whole new plan
Advantages:
Come up with totally differentiated plan.
Plan should be specifically customized for the target
market.
It helps building brand loyalty at a young age
Disadvantage:
It require some mechanism- perhaps via the web or
through physical phone cards- whereby consumers
could easily add minutes to their phone.
Best Alternative solution

Company should adopt the price strategy i.e.Price
Below the Competition because this option would
allow to tell consumer that we are cheaper, plain and
simple. And also the target market generally uses
between 100 and 300 minutes per month, where the
consumer would get the best price.
Working Note-
Advertising per gross add: from $75 to $100
Sales commission paid per subscriber: $30
Handset subsidy provided to the subscriber: $100 to $200
Total: from $205 to $330 (lets assume somewhere in the
middle = $270)
Monthly ARPU (average revenue per unit): $48 (Price below
Competition)
Monthly Cost-to-Serve: $30
Monthly Margin: $18
Time required to break even on the acquisition cost
= $270/ $18= 15 months

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