Value Proposition

Value Proposition amongst consumer segment is varied. XM planned to offer 15-20 channels specifically designed to young adult market; 5-10 channels to a broader market base that included 35 – 54 year olds and tech friendly and also a cluster of up to 3 channels segmented on African Americans, Hispanics, business people and interstate truckers. In order to identify the primary target market, XM should rely on its research in Exhibits 9 & 10 which state that urban males (aged 18-45) are tech seekers and they constitute a large chunk of the market. The age 25 – 54 urban male population is willing to pay substantially more than the female population – who are tech-friendly and will be early adopters. It would take enormous coaxing of multiple radio manufactures to partner with XM. This would drive up costs – accordingly their radio receiver and monthly subscription fee would be higher. An optimal price for monthly fee could be $10. For a shorter lifetime, it would be priced higher and you would reward loyalty and price lower for a longer duration customer as acquisition costs would be low. If XM were to source funds from Wall Street, it would require a robust plan to repay debt at the earliest. Accordingly, the pricing would need to be higher initially – this would help in a) Recover significant portion of costs early and b) Attract the tech savvy and early adopters and subsequently, through good word-of-mouth publicity/exemplary service – try to attract a wider base of the population by lowering the price of the radio and monthly subscription fee. While radio advertising is increasing to about $12 billion a year, XM wants to differentiate itself from FM and a no-commercial service is essential to counter SIRUS. Pricing should be unambiguous and priced around $250 for the radio and $10 for the monthly fee. Subsequently, based on demand and preference, there could be tiered models and a range of radio sets. Communication strategy should consist of strategic