Virgin Mobile aims to address high customer dissatisfaction in the US cellular market through a radically different pricing approach. It plans to eliminate contracts, reduce hidden fees, simplify pricing without buckets or peak/off-peak differentials, and increase handset subsidies to attract customers. This strategy aims to make pricing transparent and flexible to meet customer needs. However, it may face challenges in achieving profitability due to higher expected churn without contracts and lower monthly margins from simplified pricing. Virgin Mobile must carefully set prices to break even on its reduced acquisition costs and maximize customer lifetime value.
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.
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?
ATLANTIC COMPUTER: A BUNDLE OF PRICING OPTIONS Akshay Jain
There are four main types of pricing strategies from which Atlantic Computers canchoose. First, Atlantic Computers could stay with the status quo and offer software tools for free. Second, it could choose competitive based pricing. Third it could choose from Cost-plus pricing. Finally, it could choose value-in use pricing.In addition to determining which pricing strategy to use, Atlantic
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.
Clique Pens - Case Study Solution by Kamal Allazov (Essay type)Kamal Allazov (MSc.)
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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
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.
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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.
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.
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?
ATLANTIC COMPUTER: A BUNDLE OF PRICING OPTIONS Akshay Jain
There are four main types of pricing strategies from which Atlantic Computers canchoose. First, Atlantic Computers could stay with the status quo and offer software tools for free. Second, it could choose competitive based pricing. Third it could choose from Cost-plus pricing. Finally, it could choose value-in use pricing.In addition to determining which pricing strategy to use, Atlantic
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.
Clique Pens - Case Study Solution by Kamal Allazov (Essay type)Kamal Allazov (MSc.)
Clique Pens Case Study by Harward Mba Center. This paper introduces possible solutions and recommendations by MSc. Marketing student - Allazov Kamal. (https://allazov.org/)
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
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.
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.
programmatic Buying in Mobile Advertising Sumit Roy
74% of marketers are now using programmatic media buying on mobile for retargeting users, 62% use it for performance marketing and 61% for branding. • This represents a huge opportunity for the industry to build targeting and measurement solutions that deliver greater effectiveness and efficiency for upper-funnel campaigns. Of those not using programmatic, the biggest barriers for adoption are complexity of the ecosystem (58%), skills shortage (42%) and lack of education (33%).
mobile PHONE INDUSTRY COMPANY’S MARKETING STRATEGYMr Nyak
N CELLULAR PHONE INDUSTRY
COMPANY’S MARKETING STRATEGY Keywords - Competition, Porter. M analysis of 5 forces, Marketing strategy, market leader,
market challenger, market follower
I. INTRODUCTION
However it’s been only over 10 years since cellular phone industry has developed in
Mongolia, marketing activities have already been formed and considered as a very
special market. Customer satisfaction level, firm’s effectiveness and to be considered as
a market leader are all dependable on marketing management activities. The bitter the
rivalry is the more demanding the consumers are and their expectations’ level will be
higher. According to that, firms’ customer retaining policy and finding new consumers’
have intensified. Thus, studying about competitor’s activity and strategy theoretically
and using the information about competitors in own company’s activities have become
very important issue to marketers.
Transformational Marketing: Rethink, Reinvent, Reskill Your Marketing Organiz...Marketo
Marketing executives today face the critical question of how to engage customers in this always-on, noisy, digital world. Check out this presentation created by Marketo's General Manager of Consumer Marketing, Robin Bordoli, to understand how marketing leaders are embracing the seven principles of engagement to build long-term, personalized relationships with their customers.
You will discover how to rethink and reinvent your marketing team to make your company a winner!
Capturing the Youth in the Mobile SpaceDevansh Doshi
This is report prepared by the Marketing Research Cell of IIFT from primary research. It covers contemporary topics in mobile marketing such as Whatsapp marketing, missed call marketing, mobile advertising, and so on. It also talks about the service tax impact on this sector.
We all know that mobile is central to people’s lives and that the changing mobile landscape means that people are increasingly connected through a raft of mobile devices and solutions. A strategic medium for brands but ultra personal for users, mobile is reshaping customer relationships and leading marketers to focus on customers first, fulfilling their requirements and delivering what they want.
Mobile is with the customer at all stages of the purchasing path. So whatever your objective, (customer recruitment, customer satisfaction or customer engagement), you must deliver the best mobile consumer journey possible.
With straightforward tips and best practices to sharpen your marketing strategy, this webinar will introduce you to the golden rules of customer engagement and show you how to forge longlasting and meaningful mobile experiences to drive sales.
You’ll learn easy ways to embrace mobile:
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Re-envision the consumer path to purchase, to deliver an effortless journey that ends in a happy transaction
Register now for this webinar – a must for any successful mobile marketing strategy!
Moderator:
Leo Scullin, Global Industry Initiatives, Mobile Marketing Association
Presenters: Stéphanie Viriot, Strategic Marketing Analyst, Gemalto
Live Webinar Date: January 16, 2014
When you begin your campaign, you create a text-only ad that includes a link to your Web site. Then you select the keywords that will determine which searchers see your ad. You can — and should — specify how much you want to spend, what language(s) your ad will appear in and even the geographical reach of your ad.
Zero to Full-Blown mCommerce by Rob Roy, Head of Digital for Time Warner CableRob Roy
Rob Roy GVP of timewarnercable.com shows how Time Warner Cable went from Zero to Full-Blown mCommerce and mobile became a big part of their sales channel mix. Rob also outlines TWC's future in mobile with Responsive Design and Google Enhanced Campaigns. Rob presented mediapost.
Similar to Virgin mobiles pricing for the very first time (20)
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Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
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What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
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Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
As a business owner in Delaware, staying on top of your tax obligations is paramount, especially with the annual deadline for Delaware Franchise Tax looming on March 1. One such obligation is the annual Delaware Franchise Tax, which serves as a crucial requirement for maintaining your company’s legal standing within the state. While the prospect of handling tax matters may seem daunting, rest assured that the process can be straightforward with the right guidance. In this comprehensive guide, we’ll walk you through the steps of filing your Delaware Franchise Tax and provide insights to help you navigate the process effectively.
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
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𝐓𝐉 𝐂𝐨𝐦𝐬 provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
➢ 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
➢ SUPER JUNIOR-L.S.S. THE SHOW : Th3ee Guys in HO CHI MINH
➢FreenBecky 1st Fan Meeting in Vietnam
➢CHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
➢ WOW K-Music Festival 2023
➢ Winner [CROSS] Tour in HCM
➢ Super Show 9 in HCM with Super Junior
➢ HCMC - Gyeongsangbuk-do Culture and Tourism Festival
➢ Korean Vietnam Partnership - Fair with LG
➢ Korean President visits Samsung Electronics R&D Center
➢ Vietnam Food Expo with Lotte Wellfood
"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
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What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
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In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
1. P R I C I N G F O R T H E V E R Y F I R S T T I M E
2 Apr 2014Marketing Case Study -Virgin Mobile
Virgin Mobiles USA
Prepared by-
Chanpreet Singh
Sachin Sharma
Surabhi Kala
Swapnil Soni
DoMS, IISc
Course-
Marketing Management
Instructor-
Prof. R. Srinivasan
2. 2
Index
Introduction-Virgin Group
Introduction-Virgin Mobile
Virgin Mobile – Ventures
Virgin Mobile USA
Case Questions
Pricing strategy
Addressing the Customers’ dissatisfaction
Telecom Market Comparison – India Vs USA
2 Apr 2014Marketing Case Study -Virgin Mobile
3. 3
Introduction-Virgin Group
2 Apr 2014Marketing Case Study -Virgin Mobile
Type Private limited company
Industry Conglomerate
Founded 1970
Founder Richard Branson
Headquarters London, United Kingdom
Area served Global
Revenue £15 billion (2012)
Employees Approximately 50,000
Year Milestones
1960 A seventeen-year-old Richard Branson launches his first two businesses
1970 Virgin opens Britain’s first residential recording studio
1980 Virgin Games is launched
1990 First national radio station hits the airwaves
2000
•Virgin Media becomes the UK's first quadplay company
•Virgin Mobile goes Global
Britain's Flag Carrier
Virgin Group
4. 4 2 Apr 2014Marketing Case Study -Virgin Mobile
Introduction-Virgin Group
Virgin Group Products
Banking
Beverages
Travel
Video games
Consumer
electronics
Financial
Services
Films
Internet
Music
Radio
Books
Cosmetics
Jewellery
Houseware Retail Mobile Phones
Commercial
spaceflight
5. 5
Virgin Mobile
2 Apr 2014Marketing Case Study -Virgin Mobile
Ansoff Growth Matrix
Market
Product
Foray into new Market with new Product-
“Diversification”
6. 6 2 Apr 2014Marketing Case Study -Virgin Mobile
Year Countries Partners
In operation
1999 UK NTL Telewest
2000 Australia Optus network
2002 USA Sprint
2005 Canada Bell Canada
2006 France Carphone Warehouse
2006 South Africa Cell C
2011 India Tata Teleservices
2012 Poland PLAY
Virgin Mobile Launch
Defunct
2001 Singapore Singtel
2010 Qatar Qatar Telecom
Virgin Mobile
7. 7
Virgin Mobile - Ventures
2 Apr 2014Marketing Case Study -Virgin Mobile
Success
Cellular Operation in UK
2.5 Million customers in 3 years
Country’s 1st MNVO (Mobile Network
Virtual Operator)
United Kingdom Singapore
Failure
Cellular Operation in Singapore
Joint venture with Singapore Telecom
Fewer than 30,000 customers in 5 years
Strategy
Company leased Network space from
Deutsche Telekom
Cause
Saturation of market
Virgin’s hip & trendy positioning
8. 8
Virgin Mobile USA
2 Apr 2014Marketing Case Study -Virgin Mobile
Facts:
• Mobile market seems to have 50% penetration with 130
million mobile subscribers
• Age group 15-29 yrs came out to be less penetrated in
terms of Mobile usage
• This young demography was projected to have good
growth in next 5 years
Issue:
• Big players didn’t target this potential customer segment
• This segment had been underserved; their specific needs
had not been met
USA, Year 2011
Not just a call…
9. 9
Search for Leadership
Virgin Mobile USA
2 Apr 2014Marketing Case Study -Virgin Mobile
• US Telecommunications holding company
• Providing wireless services
• Major global Internet carrier
• 3rd largest U.S. wireless network operator
Search for Service provider
50-50
Richard Branson & Daniel Schulman
Daniel Schulman, CEO, Virgin Mobile USA
“..We would be entering with a brand that had little US name recognition
except for Airline.. It’s these kind of opportunities where a team can define
itself and if this could be pulled off it would be unbelievable..”
10. 10
Virgin Mobile- Promotion
VirginXtras
Text Messaging
Online Real Time Billing
Rescue Calling
Wake Up call
Ring Tones
Fun Clips
The Hit List
Music Messenger
Movies
Daniel Schulman
“Our market research
indicates that VirginXtras will
attract and retain the youth
segment”
2 Apr 2014Marketing Case Study -Virgin Mobile
11. G I V E N V I R G I N M O B I L E ’ S T A R G E T M A R K E T , H O W S H O U L D I T
S T R U C T U R E I T S P R I C I N G ? W H I C H O F T H E O P T I O N S G I V E N I N
T H E C A S E W O U L D Y O U C H O O S E A N D W H Y ? D I S C U S S T H E
P R O F I T A B I L I T Y I M P L I C A T I O N S O F T H E P L A N C H O S E N B Y Y O U
U N D E R S U I T A B L E A S S U M P T I O N S .
2 Apr 2014Marketing Case Study -Virgin Mobile
Question-1
12. 12
Pricing strategy
2 Apr 2014Marketing Case Study -Virgin Mobile
Overall Goal in choosing pricing structure
Need A Breakthrough
Must reach target market : YOUTH!
Create a positive lifetime value
(LTV) for every customer.
- Must be able to make money
Three main options
1. Clone the industry prices.
2. Price below competition.
3. A whole new plan.
Audience don’t trust industry pricing plan.
Opportunity
13. 13 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Option 1 : Clone the industry prices
1. Simple message
Pricing competitively.
MTV applications.
Superior customer service.
2. Better Off-peak hours.
3. Fewer hidden fees.
14. 14 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Minutes
Option 1 : Pricing Structure
15. 15 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Option 1 : Benefits and Shortcomings
Pros
And
cons
Easy to Promote.
Consumers are used to “BUCKETS” and
peak/off-peak distinctions.
Savings on advertising budget costs.
Simple packaging
Hard for a new entrant.
No flexibility in calling habits.
No price distinction hence consumers are not
willing to switch
16. 16 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Option 2 : Price below competition
1. Similar structure
Pricing slightly below the
competition.
2. Maintain “buckets” of minutes.
Price per minute set below
industry average in certain key
buckets.
Target young market that uses
100 to 300 minutes.
17. 17 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Option 2 : Pricing Structure
18. 18 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Option 2 : Benefits and Shortcomings
Pros
And
cons
Maintain BUCKETS and volume
discounts with price per minute set below
industry average.
Offer best off-peak hours and less hide
charges so consumer will know virgin
mobile is cheaper and simple.
Expand size of market that results in
greater sales and profit
Earnings from each consumer will be less
Sales growth doesn’t mean big profit
May trigger competitive reaction
19. 19 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Option 3 : Radically new plan
1. Shorten or eliminate
contracts.
2. Prepaid service.
3. Handset subsidies.
4. Eliminate all hidden fees
and off peak hours.
5. Concept of LTV
20. 20 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Contracts: Does it make sense to shorten subscription terms or eliminate them?
1) Contract provides a hedge against churn.
2) Estimated churn rises from 2 to 6%.
Advantage: It allows 18 years and younger to purchase the product.
Prepaid
Vs
Postpaid
Fact: 92% of subscribers have postpaid plan.
Concerns:
Prepaid arrangements have prohibitive pricing.
(35-50 cents per minute to as high as 75 cents)
Phone use was infrequent.
Higher churn rate.
No loyalty to provider.
Recoup acquisition cost.
Morgan stanley research suggest that acquisition cost must be
at or below $100 for prepaid to be viable.
Need a method to add minutes.
21. 21 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Handset subsidies
Fact
Currently carriers purchase
handsets from major
manufacturers at a cost of $150 to
$300.
Carriers then subsidize user $100-
$200 ---becomes part of
acquisition cost.
Approach
Increasing subsidies so that phones
are cheaper than competition.
Getting consumers to feel more
invested and loyal.
22. 22 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Hidden Fees Off-peak hours
Goal: Make pricing very
simple.
“What you see is what
you get”
1)Rolling inner prices of
taxes and fees into final
prices.
2)Make money.
Target market
Young people!
Price insensitive.
Demand is inelastic.
Rarely worry about
charges. Call in office
hours.
Make calls whenever
necessary and can avoid.
Care about price
Price sensitive.
Elastic demand
Business person
Student
23. 23 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
What is LTV?
ARPU CCPU M AC LTV
Average
Revenue per
user
Cash cost per
user
(45% of
ARPU)
Monthly
Margin
(ARPU-
CCPU)
Acquisition
cost
Lifeti
me
Value
R: Retention rate= 1- churn rate
i= interest rate = 5%
-Sales commission
-Advertising per
gross add
-subsidy cost
Value of customer in terms of
how much service or product
he will purchase in his lifetime.
Value of keeping customers
loyal
24. 24 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Acquisition Cost
Advertising per gross add-
$75-$100
Sales commission-$100
Handset subsidy-$100-$200
Total- $275-$400
Acquisition cost roughly-
$370
Breakeven Analysis
Monthly ARPU- $52
Monthly cost to serve- $30
Monthly margin=($52-
$30)=$22
Time to breakeven on acquisition cost
= $370/$22= 17 months
26. 26 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Option 3a
With
contract
$29 -- $35 due to hidden cost
(21% decrease)
1) r(annual retention rate):
1-(0.02*12) = 0.76
2)M (yearly margin):
22/1.21=$218.16
3)i(interest rate) : 5%
4)AC(acquisition cost): $370
LTV=[218.16/(1-0.76+0.05)]-
370
=$382
Option 3b
Without
contract 1)r(annual retention rate):
1-(0.06*12) = 0.28
2)M (yearly margin): $218.16
3)i(interest rate) : 5%
4)AC(acquisition cost): $370
LTV=[218.16/(1-0.28+0.05)]-
370
= -$86.68
27. 27 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Lifetime value Analysis Results
Option 1 2 3a 3b
LTV +$540 -$27.14 +$382 -$86.68
+value
Acceptable
A different approach
1)Lowering customer Acquisition cost
• Sales commission: $30
• Advertising per gross add: $60
• Handset subsidy: $30
Total customer Acquisition cost= $120
2)Embracing additional pricing elements
3)Developing competitive positioning through pricing.
28. 28 2 Apr 2014Marketing Case Study -Virgin Mobile
Pricing strategy
Achieving profitability
1. Breakeven Analysis
Given the acquisition Virgin’s $120 acquisition cost, what would
the company have to charge on a per-minute basis (P) to equal
the industry’s break-even time of 17 months, assuming that
Virgin’s customers use 200 minutes per month (a midpoint of
estimate p. 7)?
Monthly ARPU: 200(P)
Monthly cost-to-serve (45% - Ex. 11): (0.45)*[200(P)]
Monthly margin: [200(P)] - [90(P)] = 110(P)
Virgin Acquisition Cost: $120
Price to Break-Even: 120 / 110(P) = 17
P = 6.4 cents
r (annual retention rate): 1 - (0.06 * 12) = 0.28
LTV (6.4): [(0.064 * 110 * 12) / (1 – 0.28 + 0.05)] – 120= - $10.29
LTV (10): [(0.10 * 110 * 12) / (1 – 0.28 + 0.05)] – 120 = $51
LTV (25): [(0.25 * 110 * 12) / (1 – 0.28 + 0.05)] – 120 = $ 309
LTV Analysis: Eliminating contracts
29. T H E C E L L U L A R I N D U S T R Y I N T H E U S H A S A V E R Y H I G H R A T E
O F D I S S A T I S F A C T I O N R E S U L T I N G I N C U S T O M E R C H U R N . H OW
H A V E T H E V A R I O U S P R I C I N G E L E M E N T S A F F E C T E D T H E
D I S S A T I S F A C T I O N A N D W H A T H A V E T H E B I G P L A Y E R S D O N E
T O R E D U C E T H E C H U R N ?
2 Apr 2014Marketing Case Study -Virgin Mobile
Question-2
30. 30 2 Apr 2014Marketing Case Study -Virgin Mobile
Addressing the Customers’ dissatisfaction
Sources of
customer
dissatisfaction
contracts
Peak time
differentials
Complex
sales process
privacy
concerns
Credit
checks
Poor
customer
service
Hidden fees
Bucket
pricing
31. 31
Reasons for dissatisfaction
Customer under contract leads to lower churn rate
Hidden charges allows the company to promote at lower per minute
pricing levels.
A complex sales process, which in turn drives costly sales commissions.
Bucket pricing system often lead to confusion with customers and so they
are penalized.
Off-Peak/On-Peak differentials add to customer confusion and off-peak
period has shrunk over time
2 Apr 2014Marketing Case Study -Virgin Mobile
Addressing the Customers’ dissatisfaction
32. 32
Virgin Mobile – A Different Approach
1. From a customer perspective, an "ideal" plan would probably
include a number of elements which would have a potentially
negative impact of the company’s financial…
2. … but Virgin can use a number of different managerial tools to
counter these negatives, for example:
• Lowering Customer Acquisition Costs
• Embracing Additional Pricing Elements
• Developing a Highly-Differentiated Competitive
Positioning through a new services package and a new pricing
proposition
2 Apr 2014Marketing Case Study -Virgin Mobile
Addressing the Customers’ dissatisfaction
33. 33 2 Apr 2014Marketing Case Study -Virgin Mobile
No contracts
A Consumer Friendly Plan: Potential Problems
Increased Churn
Consumers want….. But the problem is …..
No Pricing Buckets
No Hidden Fees
Lower
Operating
Margins
No Peak/Off Peak
Hrs
No Credit Checks More Uncollectibles
Simple Sales Process
Sales commission
reduction
Great Service Increased Costs
Addressing the Customers’ dissatisfaction
34. 34 2 Apr 2014Marketing Case Study -Virgin Mobile
Lowering Customer Acquisition Costs
1. On sales commissions
• Because of a different channel and merchandising strategy where "consumers can pick up the
phone without a salesperson helping them" , Virgin expect its sales commissions to be $30 per
phone, as opposed to $100 for the industry average.
2. On advertising costs
• Virgin plans to spend much less than its competitors (approx. $60 million for the year. Given
the company’s target to acquire 1 million customers during this period, the advertising cost will
be $60 per gross ad, compared to the industry average of $75 to $100 .
3. On handset subsidies
• Virgin handsets cost the firm between $60 to $100 compared to an industry average of $150 to
$300 because the company plans to stay away from selling high-end phones to young
customers.
• If Virgin is decided to offer subsides at half the rate of the industry average (current industry
handset cost / subsidy = 67%), then this subsidy would be roughly ($80 * 35%) = $30
4. Virgin total acquisition costs: $120
• Sales commission: $30
• Advertising per gross ad: $60
• Handset subsidy: $30
Addressing the Customers’ dissatisfaction
35. 35
Embracing Additional Pricing Elements
1. Pre-paid requirement – no contract
• Eliminate the problem of uncollectible
• Eliminate the need for credit check
• Simplify the selling process
• Encourage trial (and therefore potentially lower customer acquisition
costs)
• Lower costs-to-serve (simplified billing, reduced number of service
calls related to pricing disputes)
2. A completely transparent, simple (one-size fits-all) per-minute
price – no form of pricing discrimination being practiced by the
competition (pricing buckets, on/off-peak policies, hidden fees,
etc.)
2 Apr 2014Marketing Case Study -Virgin Mobile
Addressing the Customers’ dissatisfaction
36. 36
Developing a Highly-Differentiated Positioning
1. A highly-differentiated service proposition
• Rescue Rings
• Wake-Up Calls
• VirginXtras…
2. A highly-differentiated pricing proposition
3. An opportunity to tap into the consumer resentment with a non-
cynical, non-manipulative and radically different pricing approach, one
that promises full transparency, no traps and no (bad) surprises, all at
a fair price (customer rage management)
2 Apr 2014Marketing Case Study -Virgin Mobile
Addressing the Customers’ dissatisfaction
37. 37
A Consumer Friendly Plan: Potential Solutions
2 Apr 2014Marketing Case Study -Virgin Mobile
No contracts Increased Churn
Consumers want… But the problem is …..
No Pricing Buckets
No Hidden Fees
Lower
Operating
Margins
No Peak/Off Peak
Hrs
No Credit Checks More Uncollectibles
Simple Sales Process
Consumer
Confusion
Great Service Increased Costs
Lower
Acquisition
Costs
Simplified Pre-
paid Plan
eliminates
confusion, no
uncollectibles,
fewer service calls
Lower Subsidies
A possible solution is …..
Addressing the Customers’ dissatisfaction
38. H O W W O U L D Y O U C O M P A R E T H E U S M A R K E T A N D T H E
I N D I A N MA R K E T F O R T H E S A M E C U S T O M E R S E G M E N T IN
T E R M S O F P R I C I N G A N D C U S T O M E R C H U R N ? W H A T S H O U L D
B E T H E S T R A T E G Y F O R P R I C E A N D C H U R N I N I N D I A ?
2 Apr 2014Marketing Case Study -Virgin Mobile
Question-3
39. 39
Telecom Market Comparison
2 Apr 2014Marketing Case Study -Virgin Mobile
Characteristic India United States
Urban Population 30.30% 82.20%
Mobile Phone Penetration 96.57% 76.67%
3G/4G Penetration by 2016 16.2% 68.3%
Prepaid Mobile Share of Phones 96.2% 21.3%
Churn Rate/Year (not compounded) 73% 21%
Number of SIM Cards/Phone One to Four One
Minutes of Use/Subscriber/Month 320 650
Average Revenue/User/Month $3.10 $50
Cost to subscriber for calls Per Second Per Minute
Charging Model Outgoing Only Incoming and Outgoing
40. 40 2 Apr 2014Marketing Case Study -Virgin Mobile
Inference
• India has great potential in terms of Telecom market i.e. appox 900 mn subscribers
• Although market show increasing trend yet according to the forecast the market is posed
to be saturated in near future
• Urban is the major contributor in Telecom consumer market
Telecom Market Comparison
Source: Telecom Regulatory Authority of India, Press Release No. 72/2012, April 7, 2012, p. 1
Indian scenario
41. 41 2 Apr 2014Marketing Case Study -Virgin Mobile
Inference
• In India more customers are “Pre-Paid” (non-contract) subscribers as compared to those in USA
• Pricing policy highly differs in Indian context keeping above in mind
Telecom Market Comparison
Source: Business Monitor International, India Telecommunications Report, 2Q 2012
Indian Vs US
42. 42 2 Apr 2014Marketing Case Study -Virgin Mobile
Concentric Diversification
Opportunity for growth,
targeting the same youth
consumer base with lucrative
services
Telecom Market Comparison
Inference
•Comparatively there is a huge gap exists
between US & India in terms of 3G service
penetration
•This helps Virgin to offer diversified
product to the market
43. 43 2 Apr 2014Marketing Case Study -Virgin Mobile
Churn Rate Comparison
• At any period Churn rate of mobile
subscribers is higher in India than that in US
• Churn rate in India is increasing in contrast
to that in US
• Churn rate directly reflects in LTV (Life
Time Value) and thereby pricing decision
Telecom Market Comparison
Source: Business Monitor International, India Telecommunications Report, Q2 2012,
Reason for High Churn Rate in India
Competition MNP
44. 44 2 Apr 2014Marketing Case Study -Virgin Mobile
Source: Business Monitor International, India Telecommunications Report, Q2, 2012,
Telecom Market Comparison
Indian Vs US- Average Revenue Per User (ARPU)
Inference
• ARPU for India is very less as compared to that of US
• In general it follows a decreasing trend due to market competition
45. 45 2 Apr 2014Marketing Case Study -Virgin Mobile
Websites
http://www.virginmobile.in/
http://www.virginmobileusa.com/
http://en.wikipedia.org/wiki/Virgin_Mobile
Tools used
Microsoft Encarta (Encyclopedia for offline references)
Microsoft Excel (for data analysis & graphs)
References