Xm Satellite Radio Case Study

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Satellite radio is a technology that provides a radically new way to listen to radio. XM’s service makes use of advanced satellite capabilities and elaborates terrestrial receiver architecture to deliver a wide array of high quality radio programming nationwide. In early 1998, Robert Acker, director of strategic planning at XM, needs to develop a marketing strategy for this new radio service. There are several decisions that need to be made by the company in order to finalize the business plan. At fist XM needs to decide which of two business models to pursue, whether emphasis should be placed on charging customers a monthly subscription fee, or whether to rely more on earning revenue through advertising. In addressing this problem,…show more content…
Option two would allow XM to sell advertising time for all stations and programming. This option could provide a large amount of advertising revenue, but at the same would make differentiating the product from traditional radio much more difficult and will not justify paying a subscription fee for the potential customers. Option three would involve a combination of stations carrying commercial-free programming and programming included with a small amount of advertising time. This option could allow for certain types of programming, such as talk and sports radio, to run advertising while still providing meaningful product differentiation through an offering of commercial-free stations. This option would allow XM to raise some advertising revenue in addition to subscription fees. Even though this model may potentially turn prospective customers away if the concept of offering only certain commercial-free stations cannot be communicated effectively, this option seem to make most sense out of all described above. Many sports events already include breaks for advertising so consumers are used to and expect commercials for this type of programming. Revenues from radio advertising have increased almost fifty percent since 1992i which demonstrates the value advertising can provide to the company. It is also important to keep in mind that XM is still in the position to have to sell the
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