Caldwell_Virgin Mobile Case Discussion

7/31/2019 Caldwell_Virgin Mobile Case Discussion

1/9

Virgin Mobile USA

Amit Naik

DeeJay Nelson

Jong Oh Kim

Randall Piatkowski

Tim Caldwell
http://www.virginmobileusa.com/home.do


2/9

Virgin Mobile U.K. based company- led by Sir Richard Bronson

History of brand extension- 200 differentcorporate entities

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 positioningfailed


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Identifying A Niche Virgin Mobile to target youth between ages 15-19.

They have specific needs that havent been met. VirginXtras

A value proposition that would appeal to the youth Includes text messaging, rescue ring, wake-up call, music messenger,

etc. Handsets offered at retailers (Target and Best Buy).

Kyocera phones include interchangeable faceplates with eye catchingcolor nestled inside bright red clamshell-style Starter Packs.

Starter Packs easily visible on large point-of-sale displays on retailers

sales floor. Advertising

A limited budget Advertising campaign to be quirky, offbeat, and completely different. We need to stand out from the rest of the crowd


4/9

Problem: The Pricing Decision Customers resent cell phone carriers because of hidden

fees

High charges for going over contracted minutes

Customers pick cheaper plan, but forget about goingover on their minutes

Carriers do not info customer of hidden taxes, universalfees, etc.

Virgins target segment is savvy to these types of charges.

Pricing teams came up with three possible pricingstrategies.


5/9

Option 1: Clone the Industry Prices Much of industry pricing went into sales commissions and performing credit checks.

Problems with this option Could not differentiate between competition 30% of targeted segment could not pass credit check

Option 2: Price Below Competition Adopt similar pricing structure as competition but priced slightly below.

Problems with this option: Could not offer off peak hours Could not eliminate hidden fees

Option 3: A Whole New Plan Contracts shortened or eliminated Prepay rather than post-pay Increase or decrease handset subsidies

Eliminate hidden fees and off peak hours Problems with this option:

Prepaying customers have no loyalty Contracts provide annuity stream Make the handset cheaper vs. loyalty Rolling all of hidden costs into pricing structure while maintaining competitive.

Problem: The Pricing Decision


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Possible Courses of Action Option 1 Clone the industry Prices

Advantages Easy to promote Differentiated applications (MTV) Superior customer service

Better off-peak hours and fewer hidden fees Disadvantages

The price is same with major competitors 30% of targeted segment could not pass credit check

Option 2 Price below the Competition Advantages

Actual prices slightly below those of the competition Would maintain the buckets and volume discounts Can tell consumers who use between 100 and 300 minutes per month that Virgin

mobile is cheaper, plain and simple

Disadvantage Kills the margin tremendously as we are leasing a line from other provider.

Still may have problems with youth passing credit checks.
http://www.virginmobileusa.com/home.dohttp://www.virginmobileusa.com/home.do


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Option 3 A Whole New Plan Advantages

Helps to lure target market as no contract so customer under the age of18 can buy.

Gives us chance to get more margin on VirginXtras service. Allows us to serve the most under served consumer base. Can lure temporary visitors to the country and those without valid SSN. Youths can maintain their privacy. Prepaid service gives them chance to adjust their usage as per their

minatory conditions every month.

Leverages positive lifetime value (LTV) Disadvantages

Add a risk of sky rocketing churn rate. Acquisition cost may not be recovered.

Possible Courses of Action (cont)


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Time

Dollars

Cell Phone sfor youth

Introductory

Stage

Growth

Stage

Maturity

Stage

Decline

Stage

Recommendation Option 3 - A Plan Designed for Youth

A radical idea is more likely to appeal to youth.

Long-term benefit of positive lifetime value (LTV)may outweigh short-term cost of increased churnrate.

Product is introduced to new users.


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Value-Based Pricing

Elastic

S

DP

Q

$

Q

Increase Volume

This strategy is designed specifically to penetrate youth market.

Creates value by taking into consideration the needs of this market.

No contracts, prepaid, easy to understand

Profit Maximization Strategy Targeting youth will allow Virgin Mobile to take advantage of positive

lifetime value (LTV) over time and increase volume as a means toincrease profitability.

Caldwell_Virgin Mobile Case Discussion

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