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Virgin Mobile Case Analysis

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Virgin Mobile Case Analysis
1 Introduction
1.1 Purpose
The purpose of this report was to analyze the best possible pricing strategy for the Virgin Mobile venture into the United States.
1.2 Situation
Virgin is a global company that has 200 corporate entities involved in everything from planes and trains to beverages and cosmetics. The newest addition is the Virgin Mobile USA entity, which was created after Virgin was able to successfully penetrate the U.K. cellular market. However, the company was not so successful with the mobile services in other parts of the world. The company has concerns about entering into the over saturated and competitive US cellular market but has decided to pursue entry anyways. In the US, Virgin Mobile has entered into a joint venture with Sprint and has agreed to pay them on an as-used basis. In order to be successful Virgin Mobile has decided to target the younger consumer market from age 15 to 29, which has not been penetrated by any other cellular provider and is expected to have positive growth in the future.
1.3 Problem
Virgin Mobile is facing a problem with the structure they are going to use for pricing, which is the most crucial part in successfully launching their brand within the mobile market. Through consumer research, Virgin has found that their young target audience is extremely price sensitive, bitter toward hidden charges and fees, their usage varies greatly per month and they desire mobile entertainment. The only thing now is that Virgin must differentiate itself by its pricing strategy in order to obtain consumers and loyalty from younger customers. Virgin Mobile is considering three different pricing strategies: cloning the industry prices, pricing below the competition, or creating an entirely new plan.

1.4 Alternative Solutions
We are presented with three possible pricing options. Option one (Exhibit B) consist of completely cloning the mobile industry as it currently exists. With an advertising budget at $60 million, it can be
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