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1、 9 - 5 04-028 REV: J UNE 11, 2007 _ Professor Gail McGovern prepared this case. HBS cases are developed solely as the basis for class discussion. Certain details have been disguised. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffectiv
2、e management. Copyright 2003, 2007 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545- 7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http:/www.hbsp.harvard.edu. No part of this publication may be reprodu
3、ced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission of Harvard Business School. GAIL MCG O VERN Virgin Mobile USA: Pricing for the Very First Time When Richard Branson
4、called me to discuss the CEO position at Virgin Mobile USA, I quickly considered the opportunity: a chance to be the chief executive of a newly formed start-up in an overcrowded, increasingly mature, capital-intensive, highly competitive industry. Oh yeah, I should also mention that this is not an i
5、ndustry known for its customer service and wed be entering with a brand that had little U.S. name recognition except for possibly as an airline. But then I thought, “Its these kinds of opportunities where a team can define itself, and if this could be pulled off, it would be unbelievable.” Dan Schul
6、man, CEO, Virgin Mobile USA Schulman accepted the challenge in the summer of 2001 and began to assemble a team to develop the new Virgin-branded service with a launch date of July 2002.Schulman had 18 years of telecommunications experience with AT others, such as Virgin Cola, had resulted in failure
7、. Virgins cellular operations in the U.K. had been among the companys success storiesVirgin had signed up approximately 2.5 million customers in just three years. The venture had broken new ground by being the countrys first mobile virtual network operator (MVNO), which meant that rather than invest
8、ing in and running a network in-house, the company leased network space from another firm, Deutsche Telekom. In Singapore, however, the story had been different. There, the companys cellular servicea joint venture with Singapore Telecommunicationshad run into difficulties, attracting fewer than 3 0
9、,000 subscribers after its launch in October 2001. The Singapore MVNO had recently shut its doors, and although both partners had agreed that the market had been too saturated to sustain a new entrant, some analysts had offered another explanation for the failure: Virgins hip and trendy positioning
10、had failed to strike a chord in the Singapore market. Despite this setback, Virgin had forged ahead with its plans to launch a wireless phone service in the U.S. Utilizing the MVNO model once again, the company had entered into a 50-50 joint venture with Sprint in which Virgin Mobile USAs services w
11、ould be hosted on Sprints PCS network. (Sprint was in the process of updating its network and increasing its capacity, so that it had ample capacity to allow for additional users.) Under the agreement, Virgin Mobile would purchase minutes from Sprint on an as-used basis. “The nice thing about this m
12、odel is that we dont have to worry about huge fixed costs or the physical infrastructure,” said Schulman. “We can focus on what we do bestunderstanding and meeting customer needs.” The Crowded Cellular Market: Identifying a Niche The team leading Virgin Mobile USA was acutely aware of the overcrowde
13、d nature of the mobile communications industry in the United States. At the end of 2001, the U.S. had six national carriers and a number of regional and affiliate providers. Industry penetration was close to 50% with about 130 million subscribers, and the market was considered to have reached maturi
14、ty. (Please see Exhibit 1 for subscribers by carrier.) Among consumers aged 15 to 29, however, penetration was significantly lower, and the growth rate among this demographic was projected to be robust for the next five years. 3 (Please see Exhibit 2 for growth rates.) Still, as Schulman observed, “
15、The big players havent targeted this segment.” One reason was that young consumers often had poor credit quality. “These are people who dont necessarily have credit cards and often dont pass the credit checks that the cellular contracts require,” Schulman noted. In addition, in an industry in which
16、the average cost to acquire a customer was roughly $370, many carriers did not believe it was worth acquiring consumers who might not use their cell phones on a frequent basis. “The assumption is that if youre not using the phone for business or if you dont 2 Source: Company Web site. 3 Source: Strategis Group. Virgin Mobile USA: Pricing for the Very First T
