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UNIVERISTY OF DHAKA
Course: Principles of Marketing
Submitted to:
Mr. Khaled Mahmud
Assistant Professor
IBA, University of Dhaka
Submitted By:
1.
2.
3.
4.
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Contents
Introduction:..........................................................................................................................................3
Answer to the question no. 1.................................................................................................................4
Source of Dissatisfaction...................................................................................................................4
Hidden charges..............................................................................................................................4
Fluctuating pricing.........................................................................................................................4
Minimal switching cost..................................................................................................................4
Availability of other communication media...................................................................................4
Vigorous credit check....................................................................................................................5
Decreasing off-peak hour...............................................................................................................5
Answer to the question no. 2.................................................................................................................5
Value Proposition and Channel Distribution Analysis.......................................................................5
Thoughts on Virgin Mobiles value proposition (The Virgin Xtras, etc.).......................................5
Channel and merchandising strategy.............................................................................................6
Answer to the question no. 3.................................................................................................................7
Market Selection & Risk analysis......................................................................................................7
Lower penetration for this Niche:..................................................................................................7
Expected growth rate of the niche..................................................................................................7
Niche being untapped and underserved by other players:..............................................................7
There are more than a mobile:.......................................................................................................7
No fixed income source:................................................................................................................8
Less brand loyalty..........................................................................................................................8
High churn rate due to shortened contract terms and prepaid offers..............................................8
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Introduction
Virgin, a UK based company and one of the top three most recognized brand in Britain, wants to
introduce the Virgin mobile USA at U.S with a different pricing and marketing strategy that will
attract consumers aged 15-29. The market is already saturated with a number of national and regional
carriers. The market prefers contractual customers mainly business use as the acquisition cost of the
customer is pretty high, including the subsidized handset ($370) and the payback period to recoup the
fixed cost is average 17months. However the customer is dissatisfied with a couple of issues i.e.
a)
b)
c)
d)
Hidden charges
Off Peak and On-Peak minutes.
Fixed rent on bucket usage (not able to switch)
Indifferent at the prepaid plan.
Given the market competitive scenario, Virgin mobile USA is targeting the aged group 15-29
(monthly use100-200minutes). Though the segment is showing growth in the next 5 years, big players
are indifferent about this segment because the segment has a poor credit check. Using not run of the
mill adds strategy, alternate distribution channel, eye-catching starter packs, unique publications and
VirginXtras, Virgin mobile is looking to get hold of the market. The company is very cautious about
its pricing model, mitigating all the above mentioned confusion of the market and is thinking about
the pricing strategy that will make it profitable and will increase the LTV of customer. The Pricing
strategies are:
a) Replica the current pricing of the market but provide extra such as VirginXtras and no hidden
charges
b) Below market price with better off-peak plan
c) New dynamic plan
Offsetting the contract as part of the target customer is not able to get into contract.
Encouraging the prepaid plan
Increase subsidies on handset
Rolling of hidden charges in the pricing and better align the off peak hours.
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In order to creat value proprosition, team of Virgin Mobile decides to involve delivery content, feature
and entertainment, which they call Virgin Xtras
I believe Virgin is being creative and innovative with their products. Keeping in mind of its terget
segment, company signed an exclusive marketing agreement with MTV network to deliver musics,
game, and other MTV and Nickelodeon based content to Virgin mobile subscriber. Virgin Xtras also
includes feature like text messaging, online real time billing which would provide privacy from the
parents. Large section of ring tone, music messenger, fun clip will appeal to the youth market,
generate additional usage and creat loyalty. Not only will these feature be appealing, but the company
believe they will be addictive and will bond their customer to their cell phones.
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Virgin Xtras planned to eliminate all type of contract, price bucket and other hidden charge. One of its
goal is to offer a service that is priced so simply that consumers dont need a math degree to figure it
out.
By making their features more on the entertainment end to attract their target market of 14 to 24 year
olds,it would also give Virgin Mobile an advantage over their competitors. If they are able to create
consumer loyalty with the youth market, which is a market none of their competitors are going after
for the fear of low-value subscribers, bad credit, and infrequent usage, it would speak volumes and
establish Virgin Mobile USA as a mainstream provider.
Channel and merchandising strategy
Unlike other cellular company, Virgin Mobile created a different channel strategy for attracting their
target market. They needed to create one that would help get their products to their target. This
included the placement of the products at stores were their target segment shops. These retailers
include Target, Best Buy, Sam Goody, etc.
Virgin Mobile USA also thought about how their target market shops. They want to examine the
products and touch them, not talk to a sales person and the products not being kept locked behind the
counters. Knowing this information, Virgin created a clear see through packaging that allowed
consumers to look and touch the product like other consumer electronics product. Also, this new sales
tactic allowed the youth market to examine the products without the stores salespeople harassing
them. The Virgin Mobile USA team also created large point-of-sales displays to showcase and feature
the new packaging. The displays were made available to the retailers so that they would feature them.
The company has entered into distribution agreement with Target and Best Buy that would charge
lower commission than traditional industry channels.
Virgin Mobile USA not only changed the way they were going to package the product, but they made
strides to reach the desired market to make them aware. Virgin Mobile had a different way to
approach marketing. They needed to be innovative since they only had $60 million dollars for
advertisement compared to Verizon Wireless which had $650 million dollar budget. Dan Schulman,
Virgins CEO, said it best, Unless youre between 14 and 24, youre probably never going to see our
ads. They created ads that featured teens and made them stand out to the rest of the industry. They
need to be more entertaining and more unique in their creative execution. Virgin made sure to place
the ads in magazines such as The Complex, Vibe and XXL representing the targeted age group. It also
sponsor and plan street marketing events to create the hpye for the product.
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This age group has very little or no income source. So generating profits from this group is quite
difficult. They hardly have any credit checks.
Less brand loyalty
This age group tends to taste the new things. So they might switch to a competitors offer even if the
offer is similar or slightly better.
High churn rate due to shortened contract terms and prepaid offers
It was estimated that the churn rate would rise up to 6% due to the nature of shortened contract that
would be offered to this market segments. Also the other players of the market are less interested in
offering prepaid due to the high churn rate.
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