Virgin Mobile USA Pricing for the Very First Time Case Solution

Case ID: 504028
Solution ID: 16535

Words: 1556

Price: $45

Case Solution

To enhance the efficacy and efficiency, color cases should be produced in color. Dan Schulman, the CEO of Virgin Mobile USA, is under pressure to chalk out a pricing design for a novice wireless phone service, which targets tends and tweenies as core consumers – many of whom are perceived to have unstable credit rating and rough usage trends. In contrast to the traditional industry belief, Schulman is assured that he can formulate a lucrative business grounded on this below the belt target audience. the most significant factor is pricing. Schulman is presently considering three pricing strategies:

Implementing a pricing program similar to those of the primary carriers

Implementing a similar pricing program with actual prices less than those of the primary carriers

Chalking out a completely different pricing design. For the third option, Schulman is contemplating a number of different options, which include dependence on prepaid (in contrast to post-paid) plans and the complete doing away of contracts. The case includes colored exhibits. 

Excel Calculations

Questions Covered

Given Virgin Mobile's target market (14-24 year olds), how should it structure its pricing?. the case lays out three pricing options, evaluate those options. which option you choose and why? in designing your pricing plan, be as  specific as possible with respect to various elements under considerations( e.g., contracts, the size of the subsidies, hiddenfees, average per minute charges, etc)

How confident are you that plan you have designed will be profitable? Provide evidence of the financial viability of your pricing strategy.

The cellular industry is notorious for high customer dissatisfaction. Despite the existence of service contracts, the big carriers churn roughly 24% of their customers each year. Clearly there is very little loyalty in this market. What is the source of this dissatisfaction? how have the various pricing variables ( contracts, pricing buckets, hidden fees, off- peak hours, etc effect the customer experience? why haven't the big carriers responded more aggressively to customer dissatisfaction.

How do the major carriers make money in this industry? Is there a financial logic underlying their pricing logic?

What do you think of Virgin Mobile's value proposition ( the virgin Xtras etc)? What do you think of its channel and merchandising strategy?

Do you agree with Virgin Mobile's target market selection? What are the risks associated with targeting this segment? why have the major carriers been slow to target this segment?

Provide evidence of the financial viability of your pricing strategy. You should be able to provide information on acquisition costs and breakeven*(either as a monthly charge or per minute charge)

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