mobile
Stephanie Amate
Janet Baselice
Misty De Lira
Lee Hamilton
Alnita Turner
Company Background
Summer 2001 Dan Schulman became new CEO of
Virgin Mobile USA
Virgin was one of the top 3 recognized brands in
Britain
More than 200 different corporate entities involved;
tied together thru Virgin brand’s values
Virgin Mobile cellular operations in the UK were among
the success stories of the company with 2.5million
customers in 3yrs. setting the ground work for the first
MVNO
Joint venture in Singapore setting up a MVNO had
difficulties and failed due to only attracting 30,000
subscribers after launch in Oct. 2001 and was forced
to close their doors recently
Using the MVNO model Virgin set up a joint venture
with Sprint PCS in the U.S.
Identifying a Niche;
Targeting the Youth Market
Penetration was significantly lower and growth rate was
projected to be robust for the next five years for
consumers aged 15-29
Big players hadn’t targeted this market because of the
assumption that it wouldn’t be profitable
Phones are more than a tool for this market; they are a
fashion accessory and a personal statement
Mobile entertainment projected to increase in the next
few years
Despite its challenges, VM decided this segment
represented the best opportunity
Key Attributes
Value – VirginXtras
MTV-, VH1-, and Nickelodeon-based content
Text Messaging, Ring Tones, Fun Clips, etc.
Purchase – Different channel strategy
Sold where the youth shop; Target, BestBuy, Sam Goody
See –through packaging; convenient location on kiosk
Handset starter packs on p.o.s. displays
Advertising- Making the most with a limited budget
Break through the clutter and focus on a narrower target market
Usage of ads that are quirky, entertaining, and unique
Place ads in youth magazines
Utilize high-profile street marketing events
Pricing- A way to differentiate themselves from competition
Opportunity to stand out from competitors with pricing strategies
Goals
Provide a pricing strategy that would attract and retain
subscribers
Prove that you can target young people and still make
money
Provide fun, honesty, and great value for the money to
meet the youth segment’s wants and needs
Ensuring every customer has a positive lifetime value
from VM
Creating a pricing strategy that is competitive and
profitable, and doesn’t trigger off competitive reactions
Option 1
“Clone the Industry Prices”
Will differentiate from the competition by
offering better off-peak hours and fewer
hidden fees, differentiated applications, and
superior customer service
Easy to promote – customers are used to
buckets and peak/off-peak distinctions
Message will be simple – can put on the
packaging without the help of a salesperson
Option 2
“Price Below the Competition”
Price per minute would be set below the
industry average for certain key buckets
(100-300 minutes per month)
Will alert consumers that “we’re cheaper,
plain and simple”
Could also offer better off-peak hours and
fewer hidden fees
Option 3
“A Whole New Plan”
Consumers under 18 cannot enter into a contract
without their parents to do it for them. Eliminating
contracts would be a big advantage from a customer-
acquisition standpoint
With a prepaid plan, consumers could purchase a
number of minutes in advance
By increasing the subsidy for handsets, phones can be
cheaper than the competition or by lowering the
subsidy, consumers will feel more invested and loyal
towards VM service
Eliminating all hidden fees would create a “what you
see is what you get” philosophy
Option 3
Disadvantages
If VM were to shorten or eliminate such
contracts, the risk would be that its churn
rate would skyrocket and in terms of
retention, they would eliminate their safety
net
Prepay consumers tend to have high churn
rates; the company would risk never being
able to recoup its customer acquisition
costs
Harder to promote, especially given the
limited advertising budget
Recommendation
Option 1 – “Clone the Industry Prices”
The simplest and cheaper option
Easy to promote – can even put on the packaging without
the help of salesmen, consumers would get the message
Key advantages such as MTV-branded content,
VirginXtras, better off-peak hours and fewer hidden costs
for same price as competitors
*Plan to roll out the new plan after they are in a better
position and have reached their goal of 1 million
customers by the end of the first year.