Target
To create an appealing offer that would take off in a saturated market. 1 million total subscribers by end of year 1 3 million subscribers by year four.
Company
Was one of the top three most recognized brands in Britain Most brand extensions in past 20 yrs Values :
± Believe In making a difference ± Move in areas where the customer has traditionally received a poor deal
In US it launched the mobile operations utilizing the MVNO (mobile virtual network operator) 50-50 JV with Sprint, where Virgin Mobile USA s services hosted on Sprint s PCS network
The U.S. Cellular Market
At end of 2001 U.S. had 6 national carriers and a number of regional and affiliate providers Industry penetration was close to 50% About 130 million subscribers Market was considered to have matured Consumer segment aged 15-29 penetration was significantly low Big players didn t target this segment
± Young Consumers often had poor credit quality
The U.S. Cellular Market (cont.)
Average cost to acquire a customer was roughly $370 Avg. monthly cell phone bill for national carriers was $52 (417 minutes of use) Cost to serve a customer was roughly $30 a month Carriers tended to be wary of acquiring low value subscribers
Virgin s Target
Consumers aged 15-29 Underserved by existing carriers They have specific needs which were not met More open to new things like text messaging, downloading information using their phones More likely to use ringtones, faceplates, graphics etc Phones are more than a tool
± A fashion Accessory ± A personal statement
VirginXtras
Delivery of content, features and entertainment Company signed an exclusive, multiyear content and marketing agreement with MTV Subscribers access to MTV branded accessories and phones as well as branded content like graphics, ringtones, text alerts and voicemail Company received promotional airtime on MTV s channel and website Subscribers could use their phones to vote for shows on MTV
Cont.
Text Messaging Online Real Time Billing Rescue Ring Wake-Up Call Ring Tones Fun Clips The Hit List Music Messenger Movies
Channel Strategy of Virgin
Distribute in channels where youth shop Kids are used to buying consumer electronic products Clamshell, clear see-through package Bundled with decorated interchangeable faceplates Starter packs easily visible on large point of sale displays Company entered into distribution agreements with Target and Best Buy (commission $30 per phone) Company expected its phones to be available at more than 3000 retail U.S. outlets by their service launch in July 2002
Advertising
Advertising budget approx. $ 60 million Campaign to be quirky, offbeat and different from competitive ads To feature teens Would make use of strange, indecipherable metaphors Advertorials for Youth Magazine High-Profile street marketing events
Pricing Decision
Market research among target segment revealed:
± Audience did not trust the industry pricing plans ± Young people know there are lot of hidden charges
Pricing as an opportunity to differentiate from competition 90% subscribers in U.S. had contractual agreements with cellular providers Industry making money from customer confusion On-Peak and Off-Peak minutes have to be in the right mix Customers never selected the right plans according to their usage
Objectives
Make sure
± prices are competitive ± Company can make money ± It should not trigger off competitive reaction
Option 1- Clone Industry Pricing
Pricing message have to be relatively simple Better off-peak hours Fewer hidden fees