Virgin Mobile Pricing Strategy

Essay by justinh8University, Master'sA, November 2008

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Virgin Mobile USA Pricing Strategy1.) Given Virgin Mobile's target market (14 - 24-year-olds), how should it structure its pricing? The case lays out three pricing options. Which options would you choose and why? Be as specific as possible with respect to the various elements under considerations (e.g., contracts, the size of the subsidies, hidden fees, average per-minute charges, etc.)Given Virgin Mobile's (VM) target market (14 - 24-year olds), I would recommend the company to structure its pricing based on the model presented in Option 3. This option, although appearing to be quite radical and extreme, would allow VM to create its own pricing structure while fixing some of the problems that are so common in the cell phone industry. The goal of VM's pricing strategy was to make sure that they were able to offer competitive prices, while at the same time remain profitable and one step ahead of the competition.

By going with Option 3, VM would be able to reach out to a broader range of customers and meet their specific cell phone usage needs. By eliminating the long-term contracts altogether, it would be a big advantage for VM from a customer acquisition standpoint. For example, for those people under the age of 18, they would now be able to purchase their own cell phone through VM without having to ask their parents or guardian to sign a contract on their behalf. This would open up the doors to a huge potential customer base and generate more profits for the company. As seen in Exhibit 2, there was a huge market penetration gap between the U.S. and other countries especially in the "Ages 15 to 19" group. The term "no contracts" does have mass appeal, especially in the cell phone industry. Although contracts do offer a safety net...