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Virgin Mobile Usa

Case Analysis: Virgin Mobile USA

What we are analyzing here is pricing of a service in a market which is saturated, as it has reached maturity, is highly capital intensive and in which a large amount of competition prevails. Virgin however is a known brand name with an extremely diversified portfolio. It has experimented successfully with the telecom business in the UK but failed in Singapore. It now targets the USA market; the problems before it are to: come up with an appealing offer and ensure a run rate of 1million subscribers in the first year and three million by the fourth year.
Keeping with the brand strategy and philosophy of making a difference, it enters areas which are unserved or poorly served which in this case is the age group of 15-29 due to their low frequency of usage and poor credit rating. While targeting this segment lifestyle and psychographic factors are important as usage is inconsistent and based on school and vacation periods.
Virgin tie ups consist of collaborations with MTV an iconic youth brand which would feature in and provide some of the Virgin Xtras, Its services would be hosted on Sprint's network, Kyocera for handsets, Target and best buy as retailers and youth magazine editors for promotions. The channel they are targeting would be point of sale displays at retailers, targeting 3000 outlets, with commissions lower than industry average.
Advertising budget was far less than competitors and consisted of TV and print ads and a huge launch event.
Pricing in the industry involved contractual agreements and ‘buckets' of minutes. Under and over utilization would lead to penalization in terms of high price/minute. Complicating the pricing issue were peak and off peak charges and hidden costs.

Problem for virgin was to come up with a pricing structure which was competitive, profitable and did not trigger off competitive reactions, keeping with the run rate they had set for themselves.

The issues involved in pricing are:...