Virgin Mobile Usa: Pricing for the Very First Time

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Virgin Mobile USA is a cellular phone company about to launch their product. A team assembled and began to address challenges faced as a new cellular provider in the American market. For instance, the market was over saturated, seemingly mature and highly competitive with six national carriers, and an industry penetration of almost 50% with 130 million subscribers (McGovern, 2007). However, market penetration was considerably lower for consumers aged 15-29 because competitors had failed to reach this segment (McGovern, 2007). There are some problems associated with low market penetration for younger market segments that Virgin Mobile USA is to consider. • Existing cell phone providers do not advertise aiming at younger aged market segments. • The competition’s distribution channels do not match buying trends of the younger market segment. • Pricing option1: duplicate the industry prices, offering off- peak hours and similar rates. • Pricing option 2: undercut the competition and price below. • Pricing option 3: develop an entire new plan, profoundly different from competition. The competitions advertising attempts were aimed at undifferentiated market groups, such as business professionals that were thought to use their phones the greatest (McGovern, 2007). This is a problem because a large market segment is under recognized when competitors figure that gaining young subscribers, who typically do not talk on phones often, would be a waste. The competition often sold merchandise at mall kiosks, propriety retail outlets and high end electronic stores because that is where the competitions target market tended to shop and not usually where the youth segment shopped (McGovern, 2007). Also, competitors had high rates, hidden fees, long-term contracts, and pre credit approvals that deter the younger aged segment from purchasing phones which Virgin had 3

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