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Case Study
Virgin Mobile
Team: Amit Choudhary, Anand
Narayanan,
Anshul Saxena, Apurva
Sandilya, Archith Goverdhan
Objectives
Facts of Virgin mobile, USA
Niche marketing
Pricing Strategy
Prepaid vs Postpaid
Risk considerations-Recovering customer
Pricing Calculations
Industry average customers acquisition cost:
$370
Industry average monthly cell phone bill: $52
Industry average monthly hidden fees (plan
price markup): 21%
Industry average monthly cost: $30
Retention rate at 2% churn: 1- (0.02 * 12) =
0.76
Average minutes used by the 15-29 age
group: 100-300 minutes
Interest rate: 5%
Pricing Calculations
Break-even Analysis for Contract Plan
Average monthly bill average monthly cost =
months
Virgin Mobiles CCPU would be constant at 45% of
Pricing Calculations
Break-even Analysis(Continued)
Revenue CCPU=Margin
=>Revenue -0.45Revenue=18.18
=>0.55Revenue=18.18
Revenue=18.18/0.55=$33.05 per month
Assuming target segment average usage =
200 minutes
Pricing per minute=$33.05*100/200
=16.52 cents per minute
Pricing Calculations
Customer Lifetime Value
Regular plan at 2% churn
CLV = (Ma) ra-1 / (1+ i)a - A.C
Learnings
1)Market Penetration by catering to the needs and
demands of a specific niche segment(value
proposition).
2)Effective Pricing strategy offering the best to the
target segment as well as recovering costs while
minimizing consumer churn.
3)Effective promotional strategies via tie-ups and
attractive packaging styling.
4)Effective Blue Ocean Strategy targeting
neglected segments and providing augmented
offerings.
THANK YOU