This document analyzes pricing strategies for Virgin Mobile's entry into the US wireless market. It identifies Virgin's target segment as teens and young adults aged 15-29. Three pricing options are considered: 1) matching competitors' prices, 2) pricing below competitors, and 3) a new prepaid plan without contracts. Option 3 is chosen, with calculations showing Virgin needs to charge 10-25 cents per minute to achieve profitability. Virgin ultimately launched a prepaid plan with no contracts, hidden fees or peak/off-peak pricing, charging 25 cents for the first 10 minutes and 10 cents per minute after, allowing unused minutes to roll over for 3 months.
This Presentation provides a holistic view about the pricing option available to Virgin Mobiles in context to US market. What are the various marketing pillar upon which Virgin mobile focused before considering pricing and how it differs from other market players that time.Segmentation, Targeting and Positioning of marketing has been discussed over here.
This Presentation provides a holistic view about the pricing option available to Virgin Mobiles in context to US market. What are the various marketing pillar upon which Virgin mobile focused before considering pricing and how it differs from other market players that time.Segmentation, Targeting and Positioning of marketing has been discussed over here.
Crafting winning strategies in a mature market - US wine marketSaurabh Arora
The Industry Landscape in 2001
US: 4th largest wine producer in the world
US: 34th in world per capita wine consumption
Top 8 firms produce more than 75% of all the wine volume
Estimated 2500 firms produce the remaining 25%
Dominance of few large players in the low price market
Greater shelf space & high marketing budget
1990s: Consolidation of retailers and distributors across US
No of distributors fell from 5000 to 250 by 2000
Only 50 to 100 left with access to widespread national distribution
Large retail consolidation in US
Top 10 supermarkets control 55% of the US market in 2000
Majority of producers are focused on low volume/high price to gain maximum return/margin
Distributors are focused on high volume/low price to maximize economies of scale
Near impossible for a new company to establish itself
Low barriers invite more players to wine market
Porter’s five forces analysis
Threat of new entrants – HIGH
Low barriers to entry for new players in wine industry
Firms spent 40% of their expenditures on marketing and distribution
Existing rivalries in industry – HIGH
Total no of wineries in US increased by more than 400%
Glut of grape supply due to low growth in demand
This put downward pressure on price and margins
Bargaining power of Buyers – HIGH
More players are entering the market
Production outstripped demand by 20%
Consolidation of retailer and distributor
Bargaining power of Suppliers – LOW
Wine producers with their own vineyards attempts to control the operations starting from production to distribution
Threat of Substitutes – LOW for Budget
Only 10% people drank wine regularly
Of the remaining 90%, 46% preferred beer or spirits
35% drank alcoholic beverages other than wine
A marketing Case Study of Natureview Farm, an organic yogurt manufacturer. This analysis was performed by E. Santhosh Kumar, IIT Madras, during an internship with Prof. Sameer Mathur, IIM Lucknow.
This slideshow was created to showcase the marketing research involved in the strategic decision-making process. This presentation represents a decision for the marketing team at Barco Projection Systems, on how to combat the incoming Sony 1270 projector model. This presentation includes a brief history, situation analysis, options for Barco, and an ultimate decision based on this research. This Powerpoint presentation was completed for a Marketing Management & Strategy course.
Case Analysis |Altius Golf and the Fighter Brand|Anahit Babayan
Questions covered.
1. If Altius implements the Elevate strategy what are the risks to the brand and how can they be managed?
2. What sales result would you expect for each item in the line if Elevate is introduced?
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emerging nokia - should they focus on developed or emerging marketsSaurabh Arora
Should Nokia’s growth strategy be to focus on the developed markets, emerging markets or both?
Case Analysis
Handset manufacturer worldwide market share of 38% in 2009
Market leader in emerging markets like India(60%) and China(40%)
Financial performance pre-2008 was exceptional
Known for innovation
Offers products at all price points
Post-2008 started losing ground in developed markets
European market revenue declined by 15% in 2009
Exited the Japanese market after 20 years of operations
Nokia was fifth most valuable brand globally in 2000
Analysis of Emerging Market
Employed the cost leadership strategy: Purchasing power low in emerging markets hence Nokia provided cost effective products successfully.
First time purchasers: Only 20% of the emerging market were not first time purchasers
Services as the key selling point: People of emerging markets wanted value added services bundled with the phone
Analysis of Developed markets
Consumers not very price sensitive
Delivering innovative products more important
57% of the market goes for a second phone, most of the time for an upgrade
Emergence of i-phone, considered as replacement for normal handsets with users looking for upgradation
Growing competition from companies like Samsung, LG, Motorola and Sony Ericson was also making things worse for Nokia.
New Operating System – e.g. – Emergence of OSs like Google’s Android and Microsoft’s Windows mobile further bothered Nokia.
Inability to understand demand – Nokia failed to understand growing demand for touch phones
Why focus on Emerging Markets?
As Nokia has already gained the following benefits by being the first mover, it should strive hard to maintain it’s market share in developing economies. Advantages it has –
Earlier entry, early start of the learning curve. Its crucial and experience is tough to imitate.
Nokia can develop enhanced reputation by being pioneer and using its already established brand image
Absolute cost advantage can be gained by early commitments to supplies of materials and distribution channels….
Recommendations- Emerging Market
Nokia should concentrate on Improved as well as Basic phones as the market is still evolving
Tie up with Telecom players and bring dual sim phones to increase the switching cost
It should follow innovations in developed countries and adapt them to emerging markets in order to stand against competition.
One general strategy should be to outsource the services part as it is not Nokia’s competency and customers are giving more regard to services (Exhibit 6)
Instead of charging customers for Life tools, revenues should be earned from advertisers.
Crafting winning strategies in a mature market - US wine marketSaurabh Arora
The Industry Landscape in 2001
US: 4th largest wine producer in the world
US: 34th in world per capita wine consumption
Top 8 firms produce more than 75% of all the wine volume
Estimated 2500 firms produce the remaining 25%
Dominance of few large players in the low price market
Greater shelf space & high marketing budget
1990s: Consolidation of retailers and distributors across US
No of distributors fell from 5000 to 250 by 2000
Only 50 to 100 left with access to widespread national distribution
Large retail consolidation in US
Top 10 supermarkets control 55% of the US market in 2000
Majority of producers are focused on low volume/high price to gain maximum return/margin
Distributors are focused on high volume/low price to maximize economies of scale
Near impossible for a new company to establish itself
Low barriers invite more players to wine market
Porter’s five forces analysis
Threat of new entrants – HIGH
Low barriers to entry for new players in wine industry
Firms spent 40% of their expenditures on marketing and distribution
Existing rivalries in industry – HIGH
Total no of wineries in US increased by more than 400%
Glut of grape supply due to low growth in demand
This put downward pressure on price and margins
Bargaining power of Buyers – HIGH
More players are entering the market
Production outstripped demand by 20%
Consolidation of retailer and distributor
Bargaining power of Suppliers – LOW
Wine producers with their own vineyards attempts to control the operations starting from production to distribution
Threat of Substitutes – LOW for Budget
Only 10% people drank wine regularly
Of the remaining 90%, 46% preferred beer or spirits
35% drank alcoholic beverages other than wine
A marketing Case Study of Natureview Farm, an organic yogurt manufacturer. This analysis was performed by E. Santhosh Kumar, IIT Madras, during an internship with Prof. Sameer Mathur, IIM Lucknow.
This slideshow was created to showcase the marketing research involved in the strategic decision-making process. This presentation represents a decision for the marketing team at Barco Projection Systems, on how to combat the incoming Sony 1270 projector model. This presentation includes a brief history, situation analysis, options for Barco, and an ultimate decision based on this research. This Powerpoint presentation was completed for a Marketing Management & Strategy course.
Case Analysis |Altius Golf and the Fighter Brand|Anahit Babayan
Questions covered.
1. If Altius implements the Elevate strategy what are the risks to the brand and how can they be managed?
2. What sales result would you expect for each item in the line if Elevate is introduced?
Aqualisa Quartz - Simply A Better Shower (HBR Case Study)Arjun Parekh
Probable Solution to HBR Case on Aqualisa Quartz. The Presentation consists of info about Channel Distribution, Development of Quartz Shower Valve, UK Shower Market, Initial Sales Results, 4Ps of Marketing for Aqualisa, A shift in Marketing Strategy.
emerging nokia - should they focus on developed or emerging marketsSaurabh Arora
Should Nokia’s growth strategy be to focus on the developed markets, emerging markets or both?
Case Analysis
Handset manufacturer worldwide market share of 38% in 2009
Market leader in emerging markets like India(60%) and China(40%)
Financial performance pre-2008 was exceptional
Known for innovation
Offers products at all price points
Post-2008 started losing ground in developed markets
European market revenue declined by 15% in 2009
Exited the Japanese market after 20 years of operations
Nokia was fifth most valuable brand globally in 2000
Analysis of Emerging Market
Employed the cost leadership strategy: Purchasing power low in emerging markets hence Nokia provided cost effective products successfully.
First time purchasers: Only 20% of the emerging market were not first time purchasers
Services as the key selling point: People of emerging markets wanted value added services bundled with the phone
Analysis of Developed markets
Consumers not very price sensitive
Delivering innovative products more important
57% of the market goes for a second phone, most of the time for an upgrade
Emergence of i-phone, considered as replacement for normal handsets with users looking for upgradation
Growing competition from companies like Samsung, LG, Motorola and Sony Ericson was also making things worse for Nokia.
New Operating System – e.g. – Emergence of OSs like Google’s Android and Microsoft’s Windows mobile further bothered Nokia.
Inability to understand demand – Nokia failed to understand growing demand for touch phones
Why focus on Emerging Markets?
As Nokia has already gained the following benefits by being the first mover, it should strive hard to maintain it’s market share in developing economies. Advantages it has –
Earlier entry, early start of the learning curve. Its crucial and experience is tough to imitate.
Nokia can develop enhanced reputation by being pioneer and using its already established brand image
Absolute cost advantage can be gained by early commitments to supplies of materials and distribution channels….
Recommendations- Emerging Market
Nokia should concentrate on Improved as well as Basic phones as the market is still evolving
Tie up with Telecom players and bring dual sim phones to increase the switching cost
It should follow innovations in developed countries and adapt them to emerging markets in order to stand against competition.
One general strategy should be to outsource the services part as it is not Nokia’s competency and customers are giving more regard to services (Exhibit 6)
Instead of charging customers for Life tools, revenues should be earned from advertisers.
Zafin regional CEO: Using Technology to Drive Earnings GrowthZafin
In his presentation to Sibos 2014 delegates in Boston on September 29, 2014, John Kohari, CEO – Americas at Zafin, discussed how the Product and Pricing Lifecycle Management (PPLM) approach to augmenting existing systems delivers sustainable revenue generation for financial institutions.
Telco Churn Rate Analysis - AEDA Capstone Sook Yen Wong
Working with a team of tech-savvy data scientists, business analysts and IT engineers to develop a Capstone project presentation with Python, SQL, Data Storytelling and Tableau within 2 days! We managed to crack the code with data and provide ideas and solutions to better improve the churn rate for Telco!
The US insurance market is transforming rapidly and this is driven by changing buyer needs, ability to use analytics and technology to provide seamless customer experience and more so, the ability to manage costs across the insurance value chain
Customer Value and What Things are Worth (DIT Product Mgmt)Rich Mironov
From my Feb 2014 class time in Dublin Institute of Technology's product management certificate program: a module on quantifying customer value (esp B2B) and how to price software/technology solutions. In-class exercises removed.
When it comes to online advertising, it isn't about how much you spend, it's about how you spend it.
Should you be spending more on Facebook or Google?
What is the best budget for your industry?
When should you stop putting money behind a poor-performing campaign?
For these answers and more, join our live webinar with our in-house pay-per-click expert.
You'll learn:
- How to use 2018's results to set the best budget for your business in 2019
- What processes you can set up now to keep wasted spend in check all year long
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- What signs you should be looking for when managing your bids
When it comes to online advertising, it isn't about how much you spend, it's about how you spend it.
Should you be spending more on Facebook or Google? What is the best budget for your industry? When should you stop putting money behind a poor-performing campaign?
For these answers and more, join our live webinar with our in-house pay-per-click expert.
You'll learn:
- How to use 2018's results to set the best budget for your business in 2019
- What processes you can set up now to keep wasted spend in check all year long
- How to quickly determine which ad types are actually worth putting your budget behind
- What signs you should be looking for when managing your bids
This is a presentation based on customer relationship management, which is now-a-days a very important issue for every company as well for the customers. For capturing more and more customers satisfyingly, every firm need to get into this CRM.
What does Zero Based Budgeting mean for agencies?Ged Carroll
So your client has introduced Zero Based Budgeting what does that mean for your agency. More thinking on http://renaissancechambara.jp/2016/02/14/what-does-zero-based-budgeting-mean-for-agencies/
InfoCision Chief Marketing Officer Ken Dawson presented at the DMA 2010 Conference & Exhibition. He shared how to effectively measure churn rates in order to retain customers; how to utilize Business Intelligence to identify which channel is most effective for each customer/donor; and how to execute a life time value analysis to better understand which customers/donors are worth keeping vs. those who are not profitable.
TrinityP3 Marketing Management Webinars
http://www.trinityp3.com/product-category/webinars/
Managing marketing and your agency suppliers continues to become increasingly complex and time consuming. TrinityP3 Marketing Management Consultants are thought-leaders in all aspects of marketing management to improve marketing and agency performance and increase implementation efficiency. This series of webinars are your opportunity to hear the latest industry best trends and practices from the consultants working in this category on a daily basis regionally and globally. An interactive approach means you will be able to have your specific questions answered by industry leading practitioners.
Topic: The latest trends in agency remuneration
Date: Wednesday August 26
Time: 13:00-14:00 AEST
Presenter: Darren Woolley
Description: Agency remuneration, or as our friends in the USA say compensation, continues to be a significant issue for advertisers, procurement and agencies. There are an increasing number of approaches and methodologies all with their own strengths and weaknesses. And while there is no one cookie-cutter approach, we will be reviewing each of the remuneration models to help you find the one that is right for you.
Similar to Virgin mobile USA pricing first time case analysis (20)
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Virgin mobile USA pricing first time case analysis
1. VIRGIN MOBILE USA: PRICING
CASE ANALYSIS
Siddharth Dhamija
Section- F
S No. 23
2. OVERVIEW
• Objective – To develop a pricing strategy for a new wireless service
• Target Segment – Teens and Twenties
• Business Model – MVNO – No fixed cost or investment in physical
infrastructure
• Virgin’s Brand Personality – Innovative, fun, pro-active and challenging
• Identify and enter areas, where competitors are complacent or customers
taken for a ride by existing players
3. CORE COMPETENCY
• Making a difference in the eyes of the customer in terms of :
• Value for Money
• Quality
• Innovation
• Fun
• A sense of ‘Coolness’
4. SEGMENTATION
Identified the age segment where the Industry penetration was the
lowest, that is, between 15 years to 29 years of age
Growth rate among this segment is projected to be robust for the next 5
years
Existing players ignored this segment due to poor credit quality, irregular
usage etc
60
40
20
0
Mobile Phone penetration
Age 15-19 Age 20-29 Age 30-59
Mobile Phone penetration
5. Identified the income segment with a low disposable income and high
aspiration for trendiness.
1
15
32
32
USA Demography by Income
Upper Class
Upper Middle Class
Lower Middle Class
Working Class
Lower Class
6. VALUE PROPOSITION
• Basic intent was to appeal to the youth, market, generate additional usage,
and create loyalty
• VirginExtras – Integrate entertainment with basic telephone services
• Text Messaging, Online Real-Time Billing, Rescue Ring, Wake-Up Call, Ring Tones,
Fun Clips, The Hit List, Music Messenger, Movies.
• Packaging – colorful and vibrant, Hassle free sale
• Availability – At places frequented by the youth
7. VALUE POSITIONING
• Holistic marketing approach takes pricing decision based on various factors
– 3Cs and marketing environment.
• Company – Pricing should conform to the company’s marketing strategy and its
target markets and brand positioning.
• Customer – Uniform and hassle free pricing which will enhance Customer’s
satisfaction.
• Competition – A pricing strategy which will provide the company a distinct
competitive advantage
8. BUSINESS MODEL
• MVNO – was successful in UK not in Singapore
• Ad budget – Approx $ 60 million
• Lower commissions - $ 30 per phone as against industry
average of $ 100
• Different channel strategy where youth shop
9. PRICING STRATEGY: POSSIBLE OPTIONS
• Option 1: Clone the industry prices
• Pros
• Ease in implementation
• Service and application differentiation
• Competitive Off peak hour rates and lesser hidden fees
• Cons
• No pricing advantage w.r.t competitors
• Will not work with Low income segment
• Poor credit quality of the targeted segment, will reduce the target
market further
• Difficult to penetrate the market without lower prices.
10. PRICING STRATEGY: POSSIBLE OPTIONS
• Option 2: Price below the competition
• Pros
• Pricing advantage w.r.t competitors
• Fits with the requirement of the target market, i.e lower prices.
• Cheaper and hence accessible to Low income segment
• Will enable better penetration
• Cons
• Low margin and would need deep pocket
• May cause a price war
11. •Option 3: A whole new plan
• Pros
• Do away with the contracts so as to get Low Credit customers
• Prepaid services to help customers decide their own talk plans
• Specifically customized for the target market
• Subsidized handsets to make the deal attractive
• Eliminate all hidden costs
• Cons
• High churn rate of 6%
• Concerns over margins
• Concerns over the recovery of cost of handset
• After evaluating the Pros and Cons of the three plans, I’ve decided to try
Option 3 with Optimal Pricing.
12. PRICING LEVELS
Break even analysis
• Monthly ARPU $ 52
• Monthly cost to serve is $ 30
• Monthly margin is $ 22 ( 52-30)
• Time required to break even on the acquisition cost is
• $ 370/22 = 17 months
13. Annual retention rate in this industry is
Calculated as
1- ( Monthly churn rate * 12 months) = 1 – 0.02 * 12 = 0.76
1- ( Monthly churn rate * 12 months) = 1 – 0.06 * 12 = 0.28
14. LTV OF CUSTOMERS
• As per Exhibit 11 the interest rate is 5 % and an infinite economic life ( N)
• Formula for LTV
• LTV = M / (1- r +i) – AC where
M - Margin customers generates in year a
R - Annual retention rate
i - Interest rate
AC - Acquisition cost
N - Number of years over which the relationship is calculated
15. LTV CALCULATION
• 22 * 12/ 1-.76+.05 minus 370 = $ 540
• If eliminating contracts, the LTV would be negative
• 22 * 12 / 1-.28 + .05 minus 370= $ -27.14
• The industry would lose money on the average customer given current
acquisition costs if it abandon the practice of requiring contracts from their
customers. Hence, it is not feasible for the industry to have a no contract
strategy.
16. HOW TO COUNTER THE NEGATIVES
• Lowering acquisition cost such as sales commission,
advertising costs and handset subsidies
• Current industry hand set cost is 225
Average taken (150+300)/2 = 225
• Current industry subsidy is 150 (100+200)/2
• Subsidy as a % is 67 calculated as { (150 / 225) *100 }
17. VIRGIN’S ACQUISITION COSTS
• Handset cost is 60 to100 ( 80 on an average)
• If virgin were to subsidize handsets by 40% its subsidy would equal to $ 30
• Sales commission is $ 30
• Ad per gross add is $ 60
• Hand set subsidy is $ 30
• Total acquisition cost is $ 120
18. COULD IT ACHIEVE PROFITABILITY
• Acquisition costs of virgin is $ 120 versus the industry average of $ 370
• Given the acquisition costs, what would virgin have to charge consumers on
a per minute basis to equal the industry’s break even time of 17 months
19. FURTHER CALCULATIONS BASED ON SOME
ASSUMPTIONS
• Virgin’s monthly ARPU 200 minutes ( A mid point is taken given Virgin’s
estimate of 100-300 minutes per month)
• Monthly cost to serve is 45% of revenues ( given in exhibit 11)
• Virgin’s Monthly ARPU = 200 minutes
• Monthly cost to serve = .45 * 200 * p where p is price per minute
• Virgin’s monthly margin = 200-90 = 110p
• Virgin’s acquisition costs = 120
• To break even in 17 months = 110/17 = 6.4 is the Price per minute
20. LTV AT VARIOUS PRICE POINTS
• (1-.45) (200*12*.064) / 1-.28 + .05 Minus 120 = $ -10.29
• (1-.45) (200*12*.10) / 1-.28 + .05 Minus 120 = $ 51
• (1-.45) (200*12*.25) / 1-.28 + .05 Minus 120 = $ 309
• Customers would not last the 17 months to cover the acquisition costs. In
order to have a positive LTV, Virgin should charge more than 6.4.
• This can be anywhere between 10 & 25 cents
21. WHAT HAPPENED
• A pre paid plan
• No contracts, hidden charges, peak or off peak hours
• Very low hand set subsidies
• No credit checks
• No monthly bills
• Price 25 cents for the first 10 minutes and 10 cents/minute for the rest of the day
• A 3 month period in which to use pre paid minutes, plus an additional 2 month
grace period
• Handsets with one button access to view current balance/remaining minutes
• Customers could purchase additional minutes via the phone or credit card. Users
can also purchase a top-off card through virgin’s retail channels