Virgin

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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.…show more content…
Alternatives Some Alternatives for Virgin Mobile are i. Clone the industry prices: This would copy the same pricing structure as of the competitors. The competitive difference would be its application like VirginXtras, better customer service, no hidden cost & relaxed off-peak hours. This would be easy to promote and given the smaller advertising budget would be more cost beneficial. But people may not like the idea as its nothing different from the more established players in the market. ii. Price below competition: This would use the similar pricing structure as the rest of industry with price below the competition. (say, ¢14.99 /minute incl. all taxes) This would be easier to communicate to customer, as they are already familiar with the bucket system & volume discount. Again Virgin Mobile will be only differentiated by its cheaper price, VirginXtras, no hidden cost & better off-peak hours. But in this case also, Virgin Mobile is no different from the industry and hence has no big competitive advantage. Recommendation Virgin Mobile is entering a competitive market, and need to attract new segment of customer. Hence apart from the basic Cost Based Pricing, Virgin will have to adopt Competition Based Pricing & Value Based Pricing models. The pricing & features of the Virgin Mobile should be as follows i. Pricing: Virgin Mobile can charge ¢24.99 /minute inclusive of all taxes. We can understand from the

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