When examining this case study on Virgin Mobile USA and evaluating the different pricing options, we believe Virgin Mobile has two options moving forward. The first option is the obvious choice for their target market, and for any new product entering a saturated market; the pricing should be quite low if not the cheapest product out in the market. The second pricing structure that would appeal to Virgin Mobile is pricing their product in the middle or average of the industry standard. Moving forward and examining the first pricing structure strategy, it of course has both positive and negative aspects to it. On the positive side of the spectrum, it takes a great portion of the market share for those customers who value pricing in choosing their products. This pricing would also be ideal for Virgin’s target market, 14-24 year olds. This age group does not have a lot of spending money, if any of their own, and if not, the parents do not want to pay a huge phone bill. Thus the low pricing would appeal to their target market and help draw in this crowd, creating and younger and hipper image for the company. While this pricing structure strategy would help gain consumers that value pricing when choosing their products, it can also work against Virgin Mobile. This pricing can create the image that the phones are not as high quality if they are priced below the industry low. People may see this pricing difference compared to the other company’s and think low cost equals low quality. Therefore, while this structure would accomplish the goal of attaining a sizable amount of the market share, it would not be as profitable as the second pricing structure strategy. The second pricing strategy looks to gain market share while also earning a bigger profit. This pricing structure strategy would be to conduct further research to find out what the industry is pricing on average. For example, if the industry low is $49 to a high of $299 then Virgin Mobile should price itself around $179. This pricing structure strategy would gain a great part of the market share for a couple of reasons. First, it would send the message that their product maintains higher quality than the lower priced products in the industry, and it would also be priced so that it is not the most expensive, allowing more consumers the ability to afford it. It still brings in the younger crowd as it’s not on the end of the price spectrum, but also is pricey enough to suggest the quality value, still bringing that new and hip vibe, which is a quality Virgin Mobile’s target market cares about. This generation wants the latest products that will make them look cool or trendy. This strategy will play right into that ideal. The negative drawback with this type of pricing, however, is that although it would garner more profit, it won’t gain as big of a portion of the market share as the first pricing strategy. It could also pose the threat of being too expensive, if the industry range is higher. The case lays out three pricing options. Which option would you choose and why? In designing your pricing plan, be as specific as possible with respect to the various elements under considerations (e.g., contracts, the size of subsidies, hidden fees, average per-minute charges, etc.). Each one of the three different alternatives provides a unique way Virgin Mobile USA can enter the market and gain a following. However, one option stands apart from the others and fits with what Virgin Mobile is trying to convey. That would be option number three. Option three is entitled “A Whole New Plan.” The idea behind it is starting afresh and coming up with a different pricing structure that is disparate from everything out on the market now. It is the most radical and risky of the three options, but if executed correctly, can be proved to be profitable and the right choice for the company. Some specifics Dan Schulman discussed that shall be incorporated into this course of action would be no
