Virgin Mobile

os
t
9-504-028

rP

REV: FEBRUARY 17, 2005

GAIL MCGOVERN

Virgin Mobile USA: Pricing for the Very First Time

yo

When Richard Branson 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
industry known for its customer service and we’d be entering with a brand that had little U.S. name
recognition except for possibly as an airline. But then I thought, “It’s these kinds of opportunities where a team
can define itself, and if this could be pulled off, it would be unbelievable.”
— Dan Schulman, CEO, Virgin Mobile USA

opSchulman 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&T and had most recently been CEO of Priceline.com. He
would need to draw on his experiences from both firms to create an appealing offer that would take
off in a saturatedmarket. His goal was to achieve a run rate in which Virgin Mobil would have 1
million total subscribers by the end of the first year, and 3 million by year four.1

No
tC

One of the key decisions for Virgin Mobile USA was the selection of a pricing strategy that would
attract and retain subscribers.

Company Background

Virgin, a U.K.-based company led by Sir Richard Branson, was one of thetop three most
recognized brands in Britain. The company had a history of brand extensions—more than any other
major firm in the past 20 years—resulting in a vast portfolio consisting of more than 200 different
corporate entities involved in everything from planes and trains to beverages and cosmetics. What
tied all of these businesses together were the values of the Virgin brand:

Do

Webelieve in making a difference. In our customers’ eyes, Virgin stands for value for
money, quality, innovation, fun and a sense of competitive challenge. . . . We look for
opportunities where we can offer something better, fresher and more valuable, and we seize
them. We often move into areas where the customer has traditionally received a poor deal,

1 Numbers in this case are disguised forcompetitive reasons and utilize primary data from industry analysts.

________________________________________________________________________________________________________________

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 ofprimary data, or illustrations of effective or ineffective management.

Copyright © 2003 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
reproduced, stored in a retrieval system, used in aspreadsheet, or transmitted in any form or by any means—electronic, mechanical,
photocopying, recording, or otherwise—without the permission of Harvard Business School.

Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617-783-7860.

Virgin Mobile USA: Pricing for the Very First Time

os
t

504-028

and where the competition is complacent. . . . Weare pro-active and quick to act, often leaving
bigger and more cumbersome organizations in our wake.2

rP

Many of the company’s ventures, such as Virgin Music Group, had proven to be phenomenally
successful; others, such as Virgin Cola, had resulted in failure. Virgin’s cellular operations in the U.K.
had been among the company’s success stories—Virgin had signed up approximately 2.5...