Xm Satellite Radio Case Study

Satellite radio is a technology that provides a radically new way to listen to radio. XM’s service makes use of advanced satellite capabilities and elaborates terrestrial receiver architecture to deliver a wide array of high quality radio programming nationwide. In early 1998, Robert Acker, director of strategic planning at XM, needs to develop a marketing strategy for this new radio service. There are several decisions that need to be made by the company in order to finalize the business plan. At fist XM needs to decide which of two business models to pursue, whether emphasis should be placed on charging customers a monthly subscription fee, or whether to rely more on earning revenue through advertising. In addressing this problem, management must consider the value that XM radio could propose for different consumer segments as compared with existing modes of radio (AM, FM) and in relation to its sole competitor in satellite radio – SIRIUS. Besides choosing a business model there is also a need to explore how best to approach and leverage manufacturer and channel partners, considering high unknown and high-risk technology. The purpose of this report is to analyze possibilities and outline possible recommendation on strategies for XM Radio. The following areas will be examined:
• Market and Competition
• Business Model
• Pricing
• 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
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