Which would you choose? A cellphone that costs $30 a month, or one that cost $70 a month. What if your signal was twice as good on the expensive plan? Is it still worth the difference of $40? This is exactly your choice if you were looking for a new cellular provider today. Established companies are marketing their services to consumers as the “trusted” choice. The basic message: pay more for better coverage. Virgin Mobile is trying to break into the US market. Their strategy is to provide a cheap alternative to cellphone plans. Their basic message: why pay more?
In looking at the services and comparing quality, it is easy to see who has the competitive edge. Verizon has the best coverage and speed. They have the most maret share capered to the other big 3 cell phone providers (AT&T, Sprint, and T-Mobile.) They also have some of the most expensive subscription services in the market. The average family plan costs $210 a month. Over the course of a year, individual subscribers pay $1,140.
Strategist may call this business plan a Differentiation approach. Verizon is working to create a network that has the most coverage and the best data speeds. Consumers who want a premium network are going to pay more for this service. Some strategist would also argue that Verizon is employing a Network Effect Strategy as well. They do not charge customers minutes if they are calling another Verizon customer. This encourages people to promote Verizon among friends and family. Consumers who are “in network” are getting twice the monthly call time.
Virgin Mobile USA is a subsidiary of Sprint. They have been selling prepaid voice, messaging, and mobile broadband service since 2001. Virgin Group, Singapore Telecommunications Limited, and Sprint Corporation originally founded it. Their approach was to sell phone services at discount rates. They hoped to undercut the competition and create a new market for contract free services.
Recently they have changed their marketing to target younger consumers. They offer popular smart phones with unlimited talk, text, and data. Their monthly service charge is significantly less expensive the other providers. Strategist would classify their business model as Low-Cost Leadership. Target and Kmart are other companies who have employed this strategy. By undercutting the competition, they are drawing costumers away from the established companies. Subscribers sacrifice some user ability, but pay less for services.
Personally, I am tempted. My current contract with Verizon needs to be renewed. If I switch, I lose the in network benefits that I current enjoy. If I stay, I end up paying $535 more than I would at Virgin Mobile. To put that in perspective, that is more than the average income of a citizen in the Democratic Republic of the Congo.