2.  What is the Interplay between Pricing, STP &
Value proposition ?
 Are there Multiple pricing options ?
 Should one follow Long term Strategic than short
term tactical perspective
 What should be the Pricing level i.e. how much the
consumer pays ?
 What should be the Pricing structure - how it is
presented to the customer ?
 Can we draw some Industry parallels in the
Indian context ?

3.  Segment : Basis of age group Below 30yrs
 Target : Youth,14-24 yrs, college/school going
 Value Proposition : Delivery of Content,
Features, Entertainment.
 Positioning : Symbol of Fun, Honesty, Great
Value for Money.
 Pricing –Differentiated, Transparent, Industry
pricing plans are not trusted by users.

4.  Yes.
2. Clone Industry prices:
Differentiated applications,
Superior Service
3. Price Below competition
4. New Plan
End contracts
Prepaid Vs. Postpaid
Handset Subsidies
Remove Hidden fees and peak hours

5. Long term :
 Robust growth for next five years
 Untapped Market – 16-18% in US
 More time to recover entry subsidies.

6.  Company should select option three titled “A Whole New Plan.”
 This is the most radical and risky of the three options, but if executed
correctly can proved to be profitable and the right choice.
 No contracts, prepaid compared to post-paid, no hidden fees, and off-
peak hours.
 Considering Virgin Mobile’s target market ranges from 14 to 24, it would
guarantee the younger teens would be able to purchase their products.
 Ideal for occasional users and it also goes along with the group of
consumers who do not have good credit.
 Create the image of “what you see is what you get,” by eliminating
hidden fees which will help attain more of the youth market and even
some unhappy customers of their competitors.
 Option three provides Virgin Mobile with the ability to stick with the
company’s value proposition of always being innovative and supplying
the best products and services to consumers.

7.  Per Minute Rate : $0.15
 VirginXtras rate : $24/month
 No hidden Fees
 No peak hour rates

8.  ARPU= (200 minutes x 0.15 dollars/minute +
VirginXtras - hidden fee – off peak hour) =
$30+ $23.74 - $6 - $3 = $44.74 dollars
 Thus Customer pays $44.74 per unit per month

10. • 1 million customers at the end of year one(first
page of the case)
• 200 minute per month average use (exhibit 9a)
• 15 cent per minute average rate (exhibit 9a)
• Hidden fee $6 dollars (page 7)
• Off peak hour cost $3 dollars (exhibit 10b) $30-
(200 x 0.135)
• Market share : 1 million out of 130 million =
0.77%

11.  Option#1 (2% churn)
Price = Industry pricing + VirginXtras – hidden fee
– off peak hour
 Option#2 (2% churn)
Price = Industry pricing + VirginXtras – hidden fee
– off peak hour- 5 cents per minute
 Option#3 (6% churn)
Price = average minutes of use x earnings per
minute + VirginXtras – hidden fee – off peak hour

12.  From exhibit 3: Revenue for mobile
entertainment services average between 2002
and 2003 approx 37 billion
 VirginXtras revenue = $37 billion x 0.0077
market share = 284.9 million dollars
 VirginXtras revenue per customer = 284.9
million / 1 million customers / 12 months =
$23.74 dollars per month

13.  ARPU= (200 minutes x 0.15 dollars/ minute +
VirginXtras - hidden fee – off peak hour) =
$30+ $23.74 - $6 - $3 = $44.74 dollars
 LTV = (M/ 1-r+i) – AC
 If LTV = 0 because of a prepaid scheme, then
AC = (M/ 1-r+i)
 M= ARPU – CCPU = ARPU – 45% ARPU=
0.55% ARPU= $24.607 USD
 r= retention rate = 1- churn = 1-0.06 = 0.94 ,
i=interest rate= 5%

14.  AC=acquisition cost = sales costs+ marketing
costs + handset cost = $223.70
 Industry AC = $100 Dollars (page 9)
 Conclusion: Virgin could spend up to $123.70
MORE dollars on marketing or quality of
service and still LTV would be positive.