2011

Virgin Case
Assignment
Consumer Behaviour

Ahmed Nasir, Ali Naqi, Major Zeeshan, Warda Zahid,

NUST BUSINESS SCHOOL

Submiited To : Abid Khawaja
10/1/2011
 Question No: 01

Option 1 “Clone the industry prices”

Option 1 which aims at cloning the industry prices is not very feasible for the market that is
being targeted. Since not price differentiation is being offered this would not attract the customer
who will be very price sensitive in this case. The consumers might not be just willing to pay
more for the extra features that are being offered. The hidden charges in this case would be a put-
off for the young target market as they feel cheated due to the hidden costs.

Option 2 “Price below the competition”

The second option which is to price below the competition is also not very appropriate for the
intended target market as it lowers the average revenue per unit. It is not a very profitable option
and it could lead to price wars.

Option 3: “ A whole new plan”

According to our understanding we have decided that that pricing strategy three “a whole new
plan” should be opted as it would be the most effective one. It also compliments the positioning
Virgin mobile wants to achieve as a brand for youth in the United States. This option is suitable
for the target market as if offers the convenience of no contracts which is preferred by the youth.
It offers low acquisition cost as compared to industry standards because of no subsidies, no credit
checks involved, low advertisement and commission. Also by availing the third option, Virgin
would be able to enjoy high customer acquisition by serving a larger customer base of the target
market   (below 18 year age customers) as there are no contracts involved. It saves billing costs,
late fee problems and no credit hassles which is very much desired by the target market Virgin
has defined for itself. Since there isn’t any monthly line rent, no penalties for over use, no
hidden charges, the consumers would get attracted to this offer as this industry is notorious for
hidden charges and because of this the consumer feels cheated. There would be no monthly bills
and this methodology is relatively simple and the youth values convenience. It also caters to the
variable consumption pattern exhibited by the target market. Moreover the cost of acquiring a
new customer would be met at the first time when a customer buys the mobile. This pricing
strategy will be easy for young consumers to not only understand but also to afford. Since this
strategy eliminates the idea of contracts so now teenagers would not require the consent or
permission from their parents to acquire a phone. This strategy will also be helpful to create a
brand loyalty at a young age with these youngsters, this way they will definitely come to Virgin
mobile once when they are of legal age to a contractual cell phone plan. Also young consumers
are the opinion leader on these products and services of mobile companies as compare to older
consumers. But when deciding how minute pricing should be done, Virgin should stay with the
industry average of about ¢20 per minute because they should not position themselves as more
cost efficient in talk time prices, but rather focus on their Virgin extras. Text messaging has
become such an accepted and widely used form of communication. In 2001 when Virgin was
launching their mobile brand the U.S sent over 253 million text messages, and that number
increased to 4.3 billion in 2006. Test messaging is much more convenient way of communication
if a person doesn’t have enough time for a full conversation. This is where Virgin should
differentiate itself when it comes to pricing strategies. So for consumers to choose Virgin Mobile
they have to price their text messages below the regular rate of other carriers this is where their
pricing would become a deciding factor in. The case mentioned that youngsters are not making
business calls and consuming large amounts of minutes, but students are using text messaging as
form of communicating when they are not allowed to talk, like in class so this would be our USP.

Question No: 05

The Virgin Mobile value proposition is very effective considering its target market. Virgin
Mobile’s main positioning is that they offering a hassle free mobile connection at an affordable
price with added features that are very much in congruence with what the target market values.
They are not just providing reliable cellular service but also promising their customers extra
features, “VirginXtras”. Virgin Mobile customers would be able to access MTV, VH1 and
Nickelodeon music, game and other features. The selection of all these avenues is exactly what
the target market is all about and is a significant part of their lifestyles. Hence the youngsters
would be attracted to Virgin mobile. The company has a confidential agreement with MTV
which allows its subscribers a wide variety of benefits. This is an outstanding strategy as the
majority of their customers are loyal MTV fans. This joint venture with MTV builds Virgin
Mobile’s Brand equity as well. Customers would be given the opportunity to vote for their
favorite artists on the popular MTV show “Total Request Live”. They can also personalize their
phones by adding MTV brand graphics, ring tones, text alerts and voice mail. They also offer
their customers text messaging, online real-time billing, rescue ring, wake up call, fun clips, the
hit list, music messenger, and movies. Text messaging is a key selling point to youth. These
customers spend a lot of their time at school/college secretly communicating with friend through
text messaging. Text messaging also provides privacy from parents. Also the real time billing is
an effective way for them to keep track of their bill. The Rescue ring is also a feature that would
be much appreciated by the target market. Also placing the product in youth oriented retailers
such as Target, Best Buy and Sam Goody is a good strategy.

Generally, Virgin’s value proposition has been tailored to suit the preferences of the young target
market and is not only innovative rather very much in line with what the target market values
and desires.