Virgin Mobile Case

Virgin Mobile is a successful company based in the U.K. The company is well known for its brand extension and was the first company to introduce the Mobile Virtual Network Operator (MVNO) in the U.K., where they leased network space form another firm instead of running a network in-house and as a result avoiding infrastructure and large fixed cost. The company entered into a 50-50 joint venture with Sprint in which Virgin Mobile USA‟s services would be hosted on Sprint‟s PCS network. Under the agreement, Virgin Mobile would purchase minutes from Sprint on an as-used basis. The goal of Virgin Mobile USA is: to have 1 million total subscribers by the end of 2002 and 3 million by year 2006. Dan Schulman has been appointed CEO of the Virgin Mobile USA branch and is now trying to determine what pricing strategy would be most efficient in attracting and sustaining customers in the USA.

Virgin Mobile is targeting a particular segment of economical people and the emphasis has been on “Youth” within the age group of 15-29 years who were still not targeted by other market players because of the relatively poor credit quality of the consumers of this age group. The penetration and growth rate of this segment was supposed to be very strong in the coming five years. This segment was characterized by some challenges like high cost of acquisition per customer and considering the low switching cost and the low frequency of their consumption, but despite of these challenges the company went ahead and used an overall integrative strategy to capture this particular segment.

There are 3 alternatives in regards to the key decision:

(1) “Clone Industry Prices:” clone existing price structure