1. Given Virgin Mobile’s target market (14 to 24-year-olds), how should it structure its pricing? The case lays out three pricing options. Which option would you choose and why? In designing your pricing plan, 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.).
I believe Virgin Mobile has two options. The first option is the obvious for their target market and any new product entering a saturated market, the pricing should be low if not the cheapest product out in the market. This age group (14-24 year olds) does not have a lot of spending money, if it is their own, or the parents’ do not want to pay a huge phone bill. The second pricing structure that would appeal to Virgin Mobile is pricing their product in the middle or average of the industry standard. For example, if the industry low is $50 to a high of $250 then Virgin Mobile should price itself around $150. Option three is titled “A Whole New Plan.” The idea behind it is starting afresh and coming up a different pricing structure that is different from everything out on the market now. Some specifics Dan Schulman discussed that would be incorporated into this option would be: no contracts, prepaid compared to post-paid, no hidden fees, and off-peak hours. Prepaid vs. post-paid minutes is another important variable when considering option three. The consumers might be occasional users and this quality would be ideal for them. Virgin Mobile’s solution to hidden fees is simple, eliminate all hidden fees. This will create the image of “what you see is what you get,” which will help attain more of the youth market and even some unhappy customers of their competitors.
2. How confident are you that the plan you have designed will be profitable? Provide evidence of the financial viability of your pricing strategy.
I am very confident the plan I have designed will be profitable....
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