Virgin Mobile

Virgin Mobile USA

Executive Summary

Virgin Mobile USA, a UK based company led by Sir Richard Branson, having a vast portfolio of brands ranging from planes and trains to beverages and cosmetics, is looking to enter the almost saturated US mobile telecommunications market by devising a competitive pricing strategy that will “make the difference”. The overall industry is populated with multiple players and supposed to be already mature. But Virgin Mobile has identified a niche of a customer segment for ages 15-29, which is projected to grow in the next five years. As a new entrant to the mobile telecommunications market, Virgin has identified a niche of a customer segment for ages 15-29, which is projected to grow in the next 5 years, entry strategy of partnering with Sprint and positioning of the brand with VirginXtras that would appeal to the customers. Their concern at this moment is to come up with a pricing strategy that will give them competitive edge while maintaining a steady growth and profitability.

We have been hired by Virgin Mobile to provide an accurate pricing strategy to attract customers as well as remain profitable without compromising the company mission statement and values. We considered the target market, positioning and costs associated to calculate projected net incomes over the next year. We recommend that Virgin Mobile should proceed with ‘pricing option 3’ and prepaid connections only, which will include facilities of:

a) No Contract, b) No Handset charge for basic models, c) 23 cents per min for the 150 minutes d) No extra charge for using ‘VirginXtras’ and enhanced messaging services like MMS, e) No hidden fees.

The total price paid by customers per month would be $40 (at $34, breakeven lifetime value (i.e. LTV=0) will be reached and above this price Virgin will be profitable) (See Exhibit 1 for detailed calculations). Market study shows that only 15% of the market is penetrated in US in the age group 14-19 and 45% in the 20-29...