Virgin case
... spirit, fun, and value for money was well aligned with the target market.. Competitors: • Six national carriers and several regional and affiliate providers. • 90% had contractual agreements with subscribers- these contracts included the unfavourable pricing structure outlined above. • These carriers had not previously targeted the 15 to 29 year-old segment that Virgin had targeted. • Distributed their services through their own retail outlets and high-end electronic stores. Needed high-touch sales people. Context: Industry penetration was close to 50% while the market was considered to have reached maturity. Virgin mobile faces intense time-to market-pressure, with the cellular industry becoming more cluttered every day. Young people market has a lower rate of penetration and demographic statistics figures show a significant growth in this market size. The Virgin’s strategy of focusing exclusively on the youth market by providing an augmented product has an advantage over the current products offered by competitors. The superior customer services and differentiated applications (MTV) provided the customer with a new experience which will lead to customer satisfaction. The brand association with MTV, joint venture with Sprint, and the agreement with Kyocera are hard to replicate. The following table highlights the advantages and disadvantages associated with the different pricing options. # Option Advantages Disadvantages Option 1 Better off peak hours and fewer hidden fees: using the money saved by promoting the simpler pricing plans on the packaging, rather than using a sales force. Prices are not competitive: we are cloning the existing pricing structure; Targeting: we aren’t addressing all of our customers needs (for instance, our customers are price-sensitive, credit check still in place – parent involvement needed). Option 2 Competitive Prices: prices below competition; Faster penetration: obtained by the lower prices; Easy to promote: we are cheaper, plain and simple. Competition: we may trigger competitive reaction; Targeting: we aren’t addressing all of our customers needs (for instance, credit check still in place – parent involvement needed). Option 3 Flexibility: Reduce the term of the subscription contracts or even eliminating them. Better economical deals: Pre-paid plans can help people to control about the amount of money to spend. Better subsidies: due to our better agreement with manufacturers. Include all the fees in the price with no hidden information. High risk for pre-paid pricing structure: increased risk, due to the reduction of fixed revenues from contracts, high churn rates and customer’s aversion to pay in advance; New mechanism: to support the pre-paid system; Chosen pricing structure: Although pre-paid churn rates are higher, we believe the services we provide will increase brand ...