Virgin Mobile USA

University Degree Business and Administrative studies

Rutvik Rana

MKT G200

Prof. Barczak

Virgin Mobile USA: Pricing for the Very First Time

What is the first thing that comes to your mind when you either hear Virgin, or see the spiffy logo of Virgin? A plane is what comes to my mind. Virgin Group has successfully managed to expand their image and business from a magazine and mail order record store to cell phones, planes, trains, soft drinks, cars, wines, etc. Today they are virtually in every industry and employ about 25 thousand employees∗. In their efforts to explore the mobile phone market, they decided to expand their business here in USA. In the past they have used mobile virtual network operator (MVNO) to serve the consumers. With this technology they had both good and bad experiences; it was a hit in the UK while it failed miserably in Singapore. In this paper we will explore Virgin Mobiles efforts to enter the USA mobile phone market, their pricing options and marketing strategies.

It would be helpful to see what strategies Virgin used by analyzing the competition, consumers and the company aka the three C’s. Let us first look at the company itself. When a consumers looks at virgin, they are concentrated on the difference the company brings. In customer’s eyes, Virgin stands for value for money, quality, innovation, fun and a sense of competitive challenge. The core principle of Virgin is to look for new opportunities in a business sector where they can offer a product that serves the consumer better at a lower price and yields higher satisfaction. The company has tapped in to different markets, e.g. food, airlines, entertainment, travel, etc. In the cellular market they keep their fixed cost low by entering using the MVNO technology or creating joint ventures with existing players. This way they can focus more on the needs of consumers and service provided to them.

At this juncture let’s find out what the consumer base looks like. Most the national wireless providers target businessmen as their primary consumers as their behavior is the most stable. They are also the consumers which are guaranteed to cover your cost and could benefit the most from. The average cost to acquire consumers is averaged as $370 and average net profit is about $22∗. The customers targeted are required to have a good credit and heavy user of wireless service. Customers are normally bound to the wireless providers by a one or two year contract. The contract guarantees higher customer loyalty in a market with very high churn rate. Customers with low use of wireless service have to pay a higher price or opt to an expensive pre-paid option. One of the largest complaints by customers is: the cell phone plans are very hard to understand and wireless providers are known to charger them for hidden fees (overage charge, taxes, media, etc). Based on this service issues the average industry churn rate is about 2%.

Now let’s take a peek at the competition in the cellular market. In 2001 the cellular market was over crowded with providers at local and national levels. There were six major national carriers viz. Cingular, Verizon, VoiceStream, Alltel, Sprint and U.S.Cellular. AT&T had affiliates providing services nation wide and there were few local providers. Industry penetration was close to 50% with about 130 million subscribers and the market was considered to have reached maturity. Service providers normally provide their subscribers with handsets at a subsidized rate for about $100 to $200, a convenient charge to acquire consumers. The pricing plans ...

Virgin Mobile USA

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