•Manufacturing and distribution channels
Market and Competition
The primary target market for satellite radio should consist of adults ages 25-50. These are customers that make most money and will be willing to pay extra for the quality entertainment service. This target market can also be divided into the smaller segments. The key segments are: •Truck drivers and RV owners (approximately 6 million i)
•Commuters driving more than 90 minutes per day
•Business travelers who spend much of their time in the car (like real estate sales agents) •Workplace listeners, including retail outlets with a need for continuous, non-stop music •Residents of underserved rural areas.
•Sports fans (for example NASCAR)
These target groups spend an extraordinary amount of time listening to radio, especially in the car, and should be extremely receptive to the XM product due to their constant need for radio entertainment and willingness to pay for it.
As a result of the FCC auction, the only XM’s competitor in satellite radio arena is SIRIUS. But at the same time there other entertainment sources that could be perceived as prospective competitors for XM. •Traditional (AM/FM) Radio - it is currently free, but only offers a homogenous shallow play lists with medium audio quality. •Satellite TV and Cable TV - provides a wide choice of programming, with very high audio quality but only fixed receivers, used mostly at home. •Internet Radio – potentially provides a wide choice of play lists but at low quality and requires access to internet. When examining product positioning map on Exhibit 1, one can see that even though audio and video entertainment sources mentioned above do play a role for the potential target market, satellite radio itself has a very good combination of price and quality in addition to the continuous nationwide service to differentiate itself from potential competition.
XM’s only competitor in the satellite radio industry, SIRIUS, has chosen a commercial-free format across all programming, announcing the source of their revenue to be solely from subscription fees. However, XM has two possible options to choose from, in addition to SIRIUS’ format: •advertising on all programming
•combination of commercial-free programming and programming carrying advertising Option one, chosen by SIRIUS, commercial-free programming on all stations, would allow for significant product differentiation in the radio industry. Traditional radio today typically carries advertising for twenty minutes in every hour , causing listeners to constantly scan stations. A commercial-free...