Submitted by: Submitted by charityejr
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Words: 493
Pages: 2
Category: Business and Industry
Date Submitted: 11/05/2014 06:46 PM
Virgin Mobile USA
Pricing for the Very First Time
Virgin Mobile looks at U.S. Mobile Market, 2001:
• Crowded market, maturing
• Capital-intensive
• Highly competitive
• Poor customer satisfaction
• 14-to-24 year-olds = Under-served segment • Ideal entry point to U.S. cellphone market • Must differentiate from rest of the industry
TEAM II 2
How Did Incumbents Make Money?
• • • • • • •
TEAM II
Long-term contracts Confusing “Buckets” of talk time Controlling Credit Risk Early Termination Penalties Overage minute charges Texting, Data &Directory Assistance Charges Peak/Off-Peak Differential Pricing
3
Causes of High Dissatisfaction
• 24% Annual ‘churn’ acceptable • Confusing, misleading pricing; onerous contracts, early termination penalties • “Bucket” pricing promotes uncertainty & confusion • Dwindling “Off-Peak” periods • Poor call quality, dropped calls, spotty coverage • Choices limited by region • Carriers held number until late 2003 • Brusque, indifferent, hostile customer service
TEAM II 4
Targeting 14-to-24 year-olds: Plusses & Minuses
Plusses:
Significantly under-served, ignored by Telcos Opportunity for growth in mobile entertainment Identifies with Virgin Mobile branding Risks managed via MVNO strategy Grow demographic into long-term customers. Minuses: × Potentially volatile, ‘fickle’ market segment × Industry near saturation; room for another? × Reliance on MVNO partner for infrastructure × No monopoly on innovation × Reliance on partners for content & marketing × Financial risk associated with demographic
TEAM II 5
What’s Virgin Mobile see that everyone else missed?
Why have incumbents overlooked this demographic?
• Don’t understand the demographic • Familiar with older, business-linked demographic • Generally risk-averse • Very conservative, protective of shareholders
• Mistrustful of: • Unquantified credit risk • Unpredictable usage patterns • Acquisition & retention costs
TEAM II 6...