Explaining And Defending The Assigned Option - Assignment Example

Virgin Mobile Pricing Options Explaining and defending the assigned Option The value for quality, money, sense of competitive advantage and innovation is what Virgin Mobiles is looking for and aims at offering to its customers the best services (McGovrn, 2015). Virgin Mobile USA focuses on the youth market, targeting consumers who are between the ages of 14-24. Therefore, it is very crucial for Virgin Mobile to have the best pricing option for their offering. All the three pricing options are very significant for Virgin Mobile to establish the American market (McGovrn, 2015).

Considering Virgin Mobile’s goals, background and strategy option one, clone the industry prices, will be the best pricing option. There is variety of reasons why I choose this option as the best among the three. First, Virgin Mobiles will be able to enter the market on the same level as their competitors. With this first option, Virgin Mobile will tell their target customers that their products are priced competitively with other companies. Additionally, the competitive pricing has a greater emphasis on key advantages such as superior customer service and MTV (differentiated applications).

Regarding their target market of persons of 14-24 years old, the company has some agreement with MTV that enables Virgin subscribers to have a wide variety of benefits provided by the network (McGovrn, 2015). Secondly, the differentiated products offer better off-peak hours as well as fewer hidden costs. Virgin Mobile understands that customers dislike hidden cost, and they hate off-peak transactions that begin at 9.00pm. By introducing better off-peak hours and having less hidden fees, they will be solving a real sore spot for the youth.

Moreover, cloning the industry prices stands to be the best option as it is easy to promote the strategy of “buckets” is already used in the industry. With this option, Virgin can also put their packaging so that consumer can get the message without the help of salesperson (McGovrn, 2015). Reason I am confident that the option is profitable I believe the pricing option that I have chosen will be profitable for Virgin Mobile. Virgin Mobile Company will enter the market matching with prices offered by their competitors.

I also believe that their modern channel strategy and VirginXtras they will differentiate their products that will offer them a competitive gain in their target market. Given that the market is flooded, it is appropriate to let these features retain their product distinct and not saturate the population with totally new prices that may be difficult to understand. Moreover, by matching competition and maintain their phones as post-paid, they can keep a low roil rate of 2 percent (McGovrn, 2015).

The rate will give Virgin Mobile the greatest chance of becoming even more profitable. If they opt for below competition option, they will create an entirely new price that might turn out to be risky. They may risk complicating a saturated market and raising churn rates. “Clone the industry Prices” options will be more profitable as it requires a small advertising budget. They can put their packaging so that they can pass their message to their customers without using salespersons. By using this option, their profits can be increased since there are reduced expenses for hiring salespeople.

Virgin Mobiles anticipates using approximately 60 million dollars less on advertisement compared to their competitors. With this pricing option, the compare expects to acquire 1 million consumers and the advertisement cost is expected to be $60 per gross ad, as compared to the industry average of 75-100 dollars. Additionally, using option will result to an annual retention rate of 0.76, an yearly margin of $264, interest rate of 5 percent and an acquisition cost of $370. Therefore, I am confident that the pricing option 1 will turn out to be profitable for Virgin Mobile.

Reference McGovrn, G. (2015). Virgin Mobile USA: Pricing for the very first time. California: Yi Zhang.