Virgin Mobile – Case Study Essay Example

Extras,’ further diluting the differentiating factor.

This leads us to a second option where Virgin brings down the price slightly below the industry standards especially in the bucket of 100-300 minutes. However, this still being a contractual service offering, will not allow Virgin to tap the full potential of the 15-19 years segment. Both these options have a very high LTV, but the pricing strategy and the contractual obligations will fail to create sufficient service differentiation. Also, the high LTV suggests that Virgin can adopt a more aggressive marketing strategy.

The above analysis leads us to the conclusion that Virgin should adopt a strategy of introducing a non-contractual, large-scale prepaid service to place itself uniquely in the market. To estimate the price per minute for Virgin, we calculated the break-even Average Revenue per Unit (ARPU) by using LTV as 0. The company has an ARPU of $26 with a 50% subsidy on the handset (we estimated the handset value to be $80). This led to the conclusion that the company’s ARPU has to be greater than $26, i. e. their price should be greater than 13 cents per minute. This does not include revenues of $12 per unit per month that Virgin can expect to earn from mobile entertainment. The company needs to have a healthy LTV as it has high fixed costs associated with the MVNO model it has with Sprint. Hence, the company should charge the customers between 20-30 cents per minute giving it an LTV of over 100, simultaneously allowing it to distinguish itself in an industry, which has an average price between 35-50 cents per minute for prepaid services.

To make its product even

more lucrative to the target segment, Virgin Mobil could extend the off-peak hours by 2 hours thus bringing down the actual price by 3 cents a minute and which the company should look to advertise to attract more customers.