Virgin MobileStatement of the ProblemHow can Virgin figure out a way to create value so that they can successfully enter a very competitive and saturated market, and also create profitability with this target segment.
ObjectivesTo determine what pricing strategy the company will implement to have a successful penetration in a very saturated market.-clone the industry prices-price below competition-a whole new plan.Theoretical BackgroundOption 1. Clone the industry pricesProsEasy to promoteSavings on advertising budget costSimple packaging could save costConsThe target youth market is not stressedHard for new player in the marketWith no price distinction consumers will not switch to virgin just for extra features.Option 2. Price below the competitionConsumers will know that virgin mobile is plain, simple and affordable.It will expand the size of the market thus gaining more sales and profits.Earning from each consumer will be lessSales growth and profits doesn’t mean necessarily big.May be regarded as a low quality product.May trigger price war.
I can say much the same when it comes to the market, however. The current industry prices are extremely low compared to what they are now.This is not an exclusive policy of the company. A company could apply to a competitor a cheaper price, but when they put this into a plan their competitors will not buy that plan when they are sure they are going to get to a lower price.If the company decides they will use some other way to buy their product they will end up with less revenue than a competitor who will buy the same product for less money.As far as we know, companies that take advantage of this is the U.S. Dollar System.The same strategy is adopted by large major companies who try to reduce or eliminate competition from their own products.A comparison of U.S. Dollar price and the current $700-900 dollar system will show that, like the system adopted by the most multinational companies, there is a very high risk in using this strategy against a competitor.An example of the risks here, is the U.S. Dollar System.The U.S. Dollar system was introduced by China in 2003 and quickly became a dominant currency in most of the world as it is now. The fact that you now pay for its use is a significant drawback because any country could put you into a currency and expect you to spend this money in the same way it expects you? It would only be a small fraction of what it would be as the government was forced into changing the value thereof.However, the U.S. Dollar system works quite well against other major major global currencies.A comparison of the current U.S. dollar and the current $700-900 dollar system shows that it is a very dangerous system as it will hurt small companies.It also will create a competitive advantage for smaller companies in the U.S. if they can maintain their prices below what they would see in other countries.The company using this system in the U.S. is called JV Associates. It charges a high-cost high-definition phone company (FDD) for high-resolution phones. So there is probably no profit margin for every penny that was spent on the phone on the U.S. taxpayer’s money.The price of the JV Associates is based on the cost to install and run the JV device on one of its networks. This cost is added annually to the budget that is spent on the actual costs of the JV. The total price paid is a lower-cost estimate of the costs of making that JV.And then there is the marketing cost.This is really the big selling point of JV Associates. Their goal is to make consumers buy more and more devices and thereby increase their purchase rate. It is pretty much for selling the same quality wireless range in the United States or to advertise their phone technology as being “top of the line.”Here is a graph of the advertising volume in 2012:That does not represent the actual price of your JV device. It is only a product that you see and hear every second of every month.The JV Associates prices are based on how many people that device uses daily. If people consume less on their JV device they have to pay a higher price.The JV Associates pricing is based on the price paid by the U.S. government for any smartphone you purchase