Consumer to Consumer by hcj

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									XM Satellite Radio Brand Analysis

BA590 Fall 2005 Prof. McAlexander

By: Brian Smith Gideon Darko Oppong Gene Wooden Sirikanya Buranabunpot Joe Dollowitch

Table of Contents
Table of Contents ................................................................................................................ 2 Introduction ......................................................................................................................... 3 Customer to Product Relationship ...................................................................................... 6 Customer to Brand Relationship ....................................................................................... 13 Customer to Marketer (Company) Relationship ............................................................... 14 Consumer to Consumer Relationship ............................................................................... 17 XM Satellite Radio: What‟s in store for the future? ......................................................... 21 Appendices:....................................................................................................................... 24 References: ........................................................................................................................ 25

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Introduction
XM Radio is the leading satellite radio provider in the United States, with approximately 70% market share (www.xmradio.com, 2005). XM Satellite Radio

Holdings, Inc. became a publicly traded corporation in 1999 and officially launched satellite radio service to consumers in September 2001, the first to do so. XM is one of only two companies, along with Sirius Satellite Radio, to be licensed to broadcast via satellite. Headquartered in Washington, D.C., XM broadcasts its entire programming lineup out of facilities in Washington, New York, and Nashville. Much of XM‟s market share dominance can be attributed to several factors; being the first provider to launch satellite radio service, as well as its diverse array of programming content. With such a large share of the market, XM should be able to leverage its existing success in order to promote its service to potential customers in the coming years. XM currently holds a sizeable lead over Sirius in terms of subscribers and technology. But XM has not always been out in front of its competition. Sirius Satellite Radio was formed two years ahead of XM and was the first company to be granted a satellite radio license by the Federal Communications Commission. Sirius also had all three of its satellites in orbit by 2000, while XM had yet to launch any of its satellites. The big turnaround for XM came in 2001, when both companies had plans to officially launch the service to consumers near the end of the year. Sirius had some glitches in its technology that forced it to postpone its launch for another eight months. This delay allowed XM to capitalize on being the first to the market by building up its subscription base before consumers even had a choice of another provider, and by promoting itself as the technology leader given Sirius‟s difficulties with its technology. XM took advantage of its position and has continued to do so now four years later.

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While XM has yet to turn a profit in any period since its inception in 1999 (www.xmradio.com, 2005), the outlook for the firm looks promising. High initial infrastructure investments have led to poor cash flow. But given that much of this infrastructure is now in place, much of the revenue growth expected over the next five years should produce increasing margins and translate directly into higher profits for the firm. One of the biggest market drivers in the satellite radio industry is programming content. XM‟s service features over 150 channels covering a myriad of formats such as music, news, talk, and sports. Broadcasting 67 music channels commercial-free allows XM to offer consumers virtually any music genre they desire without the advertising interruptions they disdain. Regarding its news lineup, XM has partnered with established media outlets like ABC, CNN, and Fox News to broadcast 24 hour-a-day news content. These media companies have brought instant credibility and recognition to XM, something the young company needs. XM‟s broad use of entertainment figures like Paul McCartney and Snoop Dogg to produce individual pieces of music programming has also lent star power to the XM brand. While Sirius has attempted to succeed using a business model of signing well-known celebrities to expensive, multi-year contracts, XM has shied away from this strategy. Hugh Panero, XM‟s CEO, believes that because consumers cycle through celebrities so often, the company does not want to risk signing a big pop culture icon to a long-term contract if they aren‟t going to be popular one or two years from now. Instead, XM regularly brings in music stars and other celebrities on an ongoing basis to produce shows or record programming in the XM studios. This allows

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XM to focus on bringing in the most popular stars at any given time. It remains to be seen as to which company‟s strategy will best be received by customers. As touched upon earlier, XM is recognized as the technology leader among satellite radio providers. XM has been acknowledged by numerous rating services as having better hardware technology and sound quality associated with its service than Sirius. This area has been a focus point for XM in its battle with Sirius for new subscribers. XM‟s belief is that product reliability and quality are just as important to subscribers as is content. Based on the background and experience of the management team of XM, it appears as though the company has leaders in place that will be able to guide the venture through the explosive growth that is expected. The Chief Executive Officer, Hugh Panero, has been in that position since 1998 and has spent his entire career in the communications or entertainment industry, as have other top executives such as the Vice President of Marketing, Chief Financial Officer, Vice President of Programming, and Chairman of the Board. Their experience in related industries will be important to a company that is in such an early-stage of its and its industries life cycle. Despite XM‟s short existence, there are a variety of ways in which the brand community model and the dimensions within it relate to this company. This paper will analyze the aspects of the customer-product, customer-brand, customer-company, and customer-customer relationships surrounding XM and its subscribers.

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Customer to Product Relationship
Product adoption and customer profile Satellite radio is classified as an “Early Lifecycle Portable Electronic Product”, or ELPEP, by Mintel (Mintel Reports, 2004). Since it is a product from a recently emerged technology (launched in 2001), satellite radio service is in the very early stages of its product life cycle. Because the innovative diffusion into the social culture is still in the early adopters and early majority stages, market penetration is still low. Based on demographic information, higher income customers have been the first to adopt satellite radio technology (see Table 1 in Appendix). Moreover, the complexity of the technology is one of the factors that hinder the higher rate of technology adoption. Regardless, consumers‟ biggest concern of purchasing satellite radio is whether they determine it to be a worthwhile investment in entertainment. Additionally, XM‟s revenue model is based on customer acquisitions and sales subscriptions; therefore customer satisfaction with the product is critical. The product‟s complexity and reliance on satellite reception can cause dissatisfaction over time in the post purchase period. In a new product line and product extension, XM focuses on simplicity and compatibility with customer‟s existing systems so that they will attach to the product easily in an attempt to increase customer satisfaction. Moreover, XM seeks to improve its product features to have higher sound quality comparable to an MP3 player. In order to understand the key issues underlying the relationship between the customer and XM products, this section will cover the current XM product lines and accessories, customers‟ relationship, and discussion concerning present market conditions.

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XM Radio current hardware products Currently, XM Radio carries three product categories; portable, plug-and-play, and home receivers. In the portable category, XM receivers have a wireless connection that can connect to car or home receivers. Regarding memory storage, these portable devices can record up to five hours of broadcast programs and play back when satellite signal reception is impossible (e.g. subway tunnel). Plug-and-play products are receivers that are compatible with in-car or home stereo systems. As for home receivers, products in this category have the most powerful, technological, expensive, and luxurious design. Most of the designs create and add significant value to the customer experience in terms of more convenience and higher productivity. The design and model name try to reflect how the brand will be compatible with a customers lifestyle. Delphi XM Roady2™, for instance, is the receiver explicitly named to show that its targeted market is users who spend a large share of their time on the road. From subscribers‟ data collected by XM radio, there is a relationship between income and number of subscribers. Similar to adoption behavior, higher household income consumers have a tendency to subscribe to satellite radio more than lower income consumers. Therefore, XM radio hardware products are designed to have luxuriouslooking interfaces and easy-to-use panels, which are visually appealing to this segment of customers. In addition to providing products through retail channels, XM Radio is installed in many high-end cars. However, XM generally targets market penetration via lower-end mass market car brands, such as Honda and Nissan. It announced that in 2006 Honda will have XM factory-install XM-compatible radios in over 550,000 vehicles, including the

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Honda Civic and the Honda Pilot. Furthermore, in June of 2003, XM began rental car activities and has over 19,000 satellite radio units installed in rental cars. XM Radio accessories and merchandise In addition to XM Radio‟s main product line, XM radio also provides various selections of accessories from a tool kit to high-end audio systems. There is also XM Radio merchandise such as coffee mugs, sportswear, apparel, and travel gear. The content As previously mentioned, satellite radio is perceived as an ongoing investment for customers. The interest that consumers have in satellite radio is mainly the broad, attractive content. XM‟s over 150 programmed channels, in music and non-music formats, are aimed at attracting and maintaining subscribers and supporting future growth. XM Radio aims to have approximately 25 million subscribers by 2008. With this many subscribers, consumers‟ preferences and taste for content will vary. Therefore, XM must develop broad selections of the right content that is relevant, diverse, and timely. However, the narrow, niche-oriented formats for stations are important so that specific music genres are available to customers. This niche programming tremendously differentiates XM satellite radio from traditional radio. Through programs like Artist Confidential, XM Radio is creating a premium by providing intimate experiences with many famous music legends and live performances. Not only do customers have a richer experience with music channels that is rare in traditional radio, but also it builds bonding with XM Radio. Therefore, it strengthens the tendency for subscribers‟ renewal.

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Current issues concerning XM radio product Delphi‟s bankruptcy The main weakness of XM satellite radios is its dependency on technology and third party vendors to provide hardware and innovation. Delphi, the manufacturer of some XM parts and equipment, sought Chapter 11 bankruptcy protection on October 8, 2005. Many analysts believe that the Delphi bankruptcy could have impacts on XM‟s technology advantage in the future (Spring and Wren, 2005). Delphi has been the most innovative satellite radio provider, introducing many breakthroughs such as the first plugand-play unit (the SkyFi) and the wearable product (the MyFi). However, XM radio has diversified its use of external suppliers to Pioneer and Audiovox and even developed its own in-house chipset production. Partnership with top leaders XM radio‟s main strategy is to be a leader in technology. To implement this strategy, XM has partnered with leaders in the technology industry, such as Samsung, to deliver higher quality satellite reception capabilities in a smaller unit. By partnering with Dell, XM has been able to launch its latest hardware called “Dell DJ Satellite”, the XM/MP3 player with 30GB storage. This XM unit was launched not long after Sirius launched the “S50”, an iPod-sized portable satellite radio receiver which can also play digital media files. Not only do the features and specifications of the XM product far exceed its competitor, but the price of the device is cheaper as well. In addition to hardware partnerships, XM radio has also announced a massive partnership with Napster, the leader in online music service. When the XM/MP3 player is connected to a PC, the “XM+Napster” service will match the marked XM song titles with

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Napster‟s gigantic music catalog; available songs can be purchased individually for ondemand listening and transferred to the player for a completely portable experience. The “XM+Napster” service will also enable XM subscribers to manage their entire digital music collection under a single interface from a variety of sources (www.orbitcast.com, 2005). The features that enable customers to invest their identity in the product will build the attachment customers have toward that product (Belk, 1998). XM portable receiver‟s performance Although XM has the advantage of being the first to introduce a groundbreaking satellite radio portable receiver, the Delphi XM MyFi‟s performance does not seem to create impressive satisfaction to customers. From CNET customer review

(reviews.cnet.com, 2005), this product only rated 7.1 out of 10. Many are disappointed with the poor reception when the device is operated without an external antenna. Some complain that the external portable antenna is inconvenient and even ugly. Moreover, numbers of customers found that the product is overpriced compared to its sound quality and functionality. Switching costs Switching costs are created when customers invest in XM-compatible hardware and would have to purchase a new unit should they decide to switch satellite radio providers. These costs also extend to listening habits as XM listeners become familiar with the hardware interface and rituals. Nevertheless, the FCC has mandated that XM and Sirius design a radio compatible with both signals; a team from both companies is currently developing one. Eventually, the switching costs in hardware will disappear but

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the attachment and routine associated with using XM is what the company hopes will maintain its customers. Additionally, hardware compatible with multiple satellite radio signals could bring new customers into the market who had been deterred from purchasing the hardware that could only be used with one satellite radio provider. The relationship After it was launched in 2001, XM radio received incredibly positive customer feedback. Customers who already own XM radio tend to have more than one product. For example, they tend to have XM receivers in every car they own and also inside their houses. Based on many consumer reviews, satisfaction from XM products derives from the ease to use and the functional features that serve customer needs. The customer feels that with XM radio symbolizes their personality by the channels they listen to (Ahrens, 2005). Satisfaction VS Loyalty XM radio won a Brandweek Customer Loyalty Award in November 2005. Brandweek conducted research for products in the satellite radio category by interviewing 12,000 adult Americans. They said, "XM best met or exceeded customer expectations" in the satellite radio brand category. "This translates directly to the most powerful brand equity and the highest degree of customer loyalty." According to Brandweek, customer expectations have increased in all 35 categories of brands with the speed of two-and-a-half times faster than these brands can provide. Therefore, by winning the award, XM satellite radio has proved its ability to keep up with this high-velocity expectation.

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XM radio received reviews from three national magazines for its line of portable receivers. XM2go Radio received the “Best of What‟s New in 2005” award from Popular Science magazine. Additionally, it was selected as the “Editor Pick” in WIRED magazine and was among the Top 10 "coolest tech products" for the holidays from USA Today‟s consumer Tech Guide (www.orbitcast.com, 2005). These awards reinforce the perceived image and confidence of both existing and prospective customers. Another recently received award is the 2006 International CES Innovations Design and Engineering Award (www.xmradio.com, 2005). This award further proves that XM is the leader in satellite radio technology with the most advanced and diverse hardware options available. Along with its manufacturing partners, XM continues to successfully make XM product a mainstay in the car, in the home, and on the go. Although there is no official survey to confirm and generalize the relationship toward product, these awards affect the positive ties between customer and product. As a result, it may be possible to conclude that customers have affection toward XM Radio and consider their XM product as one of their favorite possessions (McAlexander, Schouten, and Koenig, 2002). The relationship to product in the community XM Satellite Radio has teamed up with its exclusive partner, GM, to host events at numerous auto shows. In these events, customers can experience the pure, digitalquality sound of XM Satellite Radio, such as live music and other activities. The social gathering of GM and XM consumers allows them to interact with each other and with the company in situations where they can share experiences, opinions, and ideas. Another sign of this relationship is the movement of some customers to prevent certain legislation that will limit some of the product features available on XM hardware.

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The Recording Industry Association of America (RIAA) is proposing a law to prevent recording capabilities on the new generation of XM2go due to the content protection of record companies (www.xmfan.com, 2005). This recording feature will enable users to record songs or broadcast programs.

Customer to Brand Relationship
XM has done an excellent job building brand customer relationships with its exclusive satellite radio frequencies only available via subscription. XM exceeds

customer satisfaction and exceeding that satisfaction helps the company gain customer loyalty (Yahoo Finance, 2005). Providing top of the line programming with many

choices in the radio line up helps build the customer brand relationship. Commercial-free service, sports channels and headline radio hosts all help build a strong brand. Providing high quality equipment through partnerships with top of the line stereo companies ensures that customers will be less likely to choose other services. The brand success can be considered good when the satisfaction that the service brings to consumers has met and exceeded their expectations. A survey conducted by BrandWeek showed that XM commanded a lead in customer satisfaction by significantly meeting and exceeding those expectations (Yahoo Finance, 2005). With the high

customer satisfaction brings an increased amount of users that enjoy telling everyone else about the great product they are using. talking about their XM Radio service. The company brags that most users can‟t stop In individual discussions, many XM users

mentioned how they would recommend the XM service to family or friends. XM recognizes the brand loyalty and strives to continue exceeding customer expectations so that the customers will continue promoting the XM brand. Customer loyalty builds brand

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loyalty and a unique relationship between XM and its customers. Brandweek stated, “An increase in customer loyalty of only 5% can lift the lifetime profitability of a customer by as much as 95%” (Maranjian, 2005). With XM focusing on retaining current customers, the success of XM will only increase as profit from current customers continues to keep XM growing substantially. Many people spend much of their time in their vehicle traveling for work and dislike changing channels to find programming that interests them or losing reception in remote locations. With XM Radio, the concept of being able to listen to their favorite programming while traveling appeals to many consumers. Whether it is a baseball game, a favorite college football team, or commercial-free music, these have all helped to strengthen the brand image of XM tremendously. Many users have mentioned the difficulty of leaving their vehicle because they are so involved with the XM experience. This has helped build a strong brand image that should only get stronger as the customer base grows. With the introduction of the new portable players many users never have to stop listening to their favorite station. They can go from the house to the car to work without ever missing a play, a song, or a joke. This commitment to continually adding to the customer‟s value and exceeding their expectations adds to the brand image as well as the loyalty of the customers.

Customer to Marketer (Company) Relationship
XM Radio is working towards building good relationships with its customers. The company is aware that, although they are already ahead of their main competitor, Sirius,

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they cannot maintain this edge without building and fostering close relationships with its customers. According to the Mintel report of July 2004, many of the current satellite radio subscribers are early adopters who tend to have a better than average attitude toward the emerging technology products they have recently purchased. Many of these are people who spread the message of a new technology to their family, friends, and colleagues. The Mintel survey indicates that the satisfaction rate for satellite radio service on a 1-5 scale was 3.7 or 74 %. This indicates that, while not low, the satellite radio industry has much room for improvement. It is no wonder then that XM Radio is now using the audio coding technology CT-aacPlus from Coding Technology to deliver an audio quality remarkably close to that of compact disks. Neural Audio, a Seattle-based research lab, has also created a customized version of their proprietary pre-processing software exclusively for XM Radio. This software implements algorithms that are based on model‟s of the brain‟s perception of sound. All of this is being done to create a positive relationship between them and their customers. It is also to identify them as a distinct company in the satellite radio industry. The company is also working on the creation of a positive corporate image. According to Bhattacharya and Sen. (Consumer- Company Identification…Journal of Marketing, April 2003), strong consumer-company relationships often result from consumers‟ identification with those companies, which helps them satisfy one or more important self-definitional needs. This partly depends on consumers‟ knowledge structures about a company as corporate image, corporate reputation and, or, more broadly, corporate associations. XM Radio has carved for itself a reputation for doing

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honest business. Due to complains from some artists about piracy of their music, XM Radio has contracted with Certicom Professional Services to design and build Digital Rights Management (DRM) to mitigate the principle security risk of cloning receivers, eavesdropping, hacking, and key theft. This not only protects XM from loss of revenue but may also put the company in the minds of concerned citizens as a caring corporate institution. The perception of a company as an approachable entity also creates goodwill. XM is working hard to make itself approachable. XM Radio is the leader in satellite-delivered entertainment and data services for the automobile market through its partnerships with General Motors, Honda, Toyota, Nissan and Volkswagen/Audi. It is available in more than 120 different vehicle models for 2005. It is also available in Avis, National, and Alamo rental cars and will soon be available on JetBlue and Air Tran Airways. Consumers can also experience XM over the internet through Radio Online at http://listen.xmradio.com. All these channels help existing consumers see the company as a corporate institution that can be reached in a host of ways. In their „Experience Economy‟ book, Pine and Gilmore (1999) referred to experiences as a fourth economic offering. They explained that companies stage an experience whenever they engage customers, connecting with them in a personal, memorable way. The writers further emphasized the fact that, while the experience itself lacks tangibility, people greatly value the offering because its value lies with them, where it remains long afterward. XM has recognized the role played by this experience in building customer loyalty, recruiting new customers and making them resilient even to negative propaganda. As mentioned earlier, the company is using technology to influence

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the perception of sound they hear on XM radios. They also invite artiste to perform live on some of their channels. The company also has an XM fan club and website http://www.xmfan.com/. Members hold discussion on various issues such as XM‟s emerging technologies, hardware and accessories and installation as well as pictures. They can also share items through this fan club. It is apparent that XM Radio recognizes the role played by the senses in enhancing the customer experience and creating a stronger bond of union between them and their customers. Customers like to associate with companies they perceive as prestigious institutions. XM Radio as the leader in the industry has already carved that image for itself. XM is investing in new technologies to ensure that it maintains its lead in the industry. This is the reason why their customers are proud to associate with them. One concern being voiced by some consumers is that XM is becoming big and the radio programming is changing negatively. Some listeners are concerned that XM

programming is beginning to sound too similar to traditional radio. One of the joys that many consumers get out of XM is that they don‟t hear songs repeated on a regular basis. These customers are concerned that XM is beginning to move to a music format where popular songs get played in the rotation too often. (www.xmfan.com, 2005).

Consumer to Consumer Relationship
The consumer to consumer interaction between XM customers is quietly becoming very popular. This feature is now being showcased on two different websites that offer two completely different ideas. Also, since the product is so early in its lifecycle people are beginning to see what a great investment it is. XM Radio is a very popular satellite radio service and has the latest technologies, which separate it from its

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competitor. Now that people have found ways to enhance their XM listening capabilities they are enjoying their satellite listening experience ten-fold. The first place that XM is reaching out to its customers is on a website titled www.xm411.com. This website has at least 320 active members who frequently

contribute personal comments on their XM radio product experiences. These members show a high sense of community and tend to have negative feelings about Sirius and its services. The website provides all the latest news to XM subscribers and owners, which greatly enhances their knowledge of their equipment. Additionally, stock quotes are posted on this site so investors know how the company is performing relative to its competitor. On top of this, XM Radio customers can chat about their radio and things it helps them do on a day-to-day basis. For example, if someone needs help about how to best utilize their new satellite radio that person can find it from other users on this site. There are also a number of reviews given by consumers so that people buying XM radios know what type of quality to expect. There are also a number of frequently asked questions answered on the website that will help the consumer build its knowledge of the radio they own or how to operate the equipment. This consumer to consumer interaction will only enhance the products they are trying to sell as long as the quality stays high and the technology continues to improve. Consumers will continue to give rave reviews on their products and the services it provides. On www.xmfan.com, not only do the members of the community extensively discuss details of hardware installation and modification of their product, but there are also manuals and help provided for new users, helping to facilitate the transformation from beginner to veteran XM satellite user. Members post photo of their own satellite

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radios, showing off how they install the XM product in their cars and homes. The site provides the consumer with reviews about music that is being played, where they can find certain types of music, and allows users to chat with other people that listen to similar music. This website also allows the consumer to actually talk to other consumers and the individual channel programmers so that people can hear what they want when they want. This site also allows for the consumer to discuss with other consumers anything dealing with satellite radio on any topic so the company knows what types of things they should be adding to the channels. All of these things provide a better experience for the consumer and let them know that their opinions matter when it comes to their radio service. A unique service that this website offers to its customers is a member list so that people can contact other XM listeners to help them with individual problems dealing with their receivers. This process is very helpful to all satellite radio listeners because it helps put the consumer more in control of their own problems. Based on the brand community model (McAlexander and Schouten 2002), the ties between customers are very strong. Evidence of this is in the online communities that are exclusively devoted to XM radio users. Grouped together by various salient interests, there is a hardware and accessories main topic for discussion in these website communities. This illustrates the relationship customers have toward other XM radio customers and the different ways they can contribute to the overall community. There are a number of loyal customers who feel brand community is very important to enhancing their product. The subscribers to XM Radio feel strongly about the subculture of their brand community. This becomes obvious on the websites because the members provide a number of helpful hints to the new consumer about installation, and the best ways to use

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their new product. The veteran users of XM really do a good job of displaying all the great things that come from their product and help convey quality messages to everyone in the discussion boards and they are also on top of all the new technology that XM produces. These consumers also share values like how their XM stock is doing and the different things that are being done to help improve the company as a whole. These values are shared on the websites and in everyday conversation between its consumers. These conversations are important because they strengthen the brand community through knowledge gained about their product and it informs them of the latest technologies. However, there is some negative buzz that consumers are conveying to other consumers, such as with the MyFi portable radio and some of the music that is played on the radio. This portable radio has been identified as having a problem picking up a satellite signal when it is on a person and in an area that is not densely populated. A helpful hint that came from one of the discussion boards on XMFan is for users to put the MyFi antenna on the highest point of their body. Aside from that, consumers love the MyFi because they can record up to five hours of music on the device and play it until the battery runs out. Another thing consumers are saying about this portable radio is they love it because it can go anywhere they want, whether it be in the house, in the car, or even on a morning jog. Another concern that was discussed earlier is the feeling by some consumers that XM is becoming too large and the radio programming is changing negatively, particularly in the area of the overplay of certain songs. The reason this happens more frequently now is because people request their favorite songs on the internet causing overlap. These are problems that XM is dealing with now and must continue to look for ways to keep improving their consumer‟s listening experience. The

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consumer to consumer interaction, although negative in these aspects, is still very important to XM‟s corporate leaders because that is the only way the company can continue to gain on its customer base (Amazon.com Inc, 2004). Consumers are beginning to see that XM Radio is a great buy because of the convenience it provides the consumer while in the car or in the house. This radio can be heard at any time and people can listen to an enormous variety of programming. The consumer to consumer identification with XM is very important to the company because it tells the company what it needs to improve on in order to continue its dominance in the market.

XM Satellite Radio: What’s in store for the future?
Along with providing some background on XM Radio itself and analyzing ways in which the notion of brand community relates to XM and its customers, it is also important to describe the actions that XM will take in the coming years. Based on previous tactics and a forecast on what will be needed to maintain its position as the leader in the satellite radio industry, it is expected that XM will do the following:      Continue to develop better technology and sound quality Expand its partnerships with auto manufacturers Make a commitment to quality programming content Partner with Sirius to develop compatible listening devices Increase its marketing efforts to boost customer awareness As previously discussed, XM is acknowledged as the technology leader in the industry. Given XM‟s decision to make this a focus of its competitive advantage over

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Sirius, it is expected that the company will continue to align with firms in the consumerelectronics and sound industries to help develop the newest technological innovation. One of the primary means of gaining subscribers for both XM and Sirius thus far has been by means of having their radios placed in new vehicles by auto manufacturers. XM currently has partnerships with General Motors, Honda, Toyota, Nissan, and others in the industry to have XM radios installed in certain models produced by these car makers. XM will attempt to get its hardware placed in an increasing number of cars in the coming years in two ways; by negotiating with its current partners to increase the number of models and cars installed with the XM service, and by partnering with additional auto manufacturers to gain access to even more potential customers. Typically for buyers of vehicles with satellite radio installed, limited-time free subscriptions are granted upon purchase of the vehicle. After the trial period ends, customers are given the choice of canceling the subscription or begin paying for the service. A main task of XM will be in capturing enough customers during the trial period that they will want to continue with the service once the free offer ends. Most would agree that what will ultimately win customers in the battle for satellite radio supremacy will be the programming content available from each of the services. To that end, XM will look to gain an edge over its rival in this area. While XM currently offers a wider range of programming, it trails Sirius in terms of sports programming and star power. XM will look to recruit more celebrities and music icons to add to its programming, as well as sign additional contracts with sports leagues and sports channels to exclusively broadcast their content.

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XM is currently cooperating with Sirius to develop radios that are compatible with both companies‟ satellite signals. This technology has the potential of increasing customer subscriptions for both companies. At present, some potential customers may be hesitant to spend the money to purchase a satellite radio if they are not sure they will be satisfied with the actual satellite radio service. If customers will have the ability to switch satellite radio providers without having to purchase a new radio, they may be more willing to give satellite radio a try. Getting this technology to market will be a focus for XM in order to broaden the potential consumer base available to them. Lastly, XM will engage in marketing efforts centered on increasing customer recognition of satellite radio and the XM brand in particular. At this early stage in the industry‟s life cycle, awareness of this service has not entered the conscious of many potential consumers. An increase in advertising spending on radio and television will enable XM to reach more people in hopes of maintaining its current market share dominance as well as increasing the overall size of the satellite radio market.

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Appendices:
Table 1: Subscriber data collected by XM: self-reported income of XM subscribers, 2003

Household income Under $25K $25K to less than $50K $50K to less than $75K $75K to less than $100K $100K or more Refused to answer

% 3 14 20 15 35 13

(Source: XM Satellite Radio)

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References:
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