Virgin Media

Virgin Media was formed as a result of the merger between Virgin Mobile and NTL:Telewest in 2006. The service was launch on 8th February 2007, referred to as Ð''V Day' by Virgin. It offered the UK's first Ð''Quadplay' service, combining television (including video on demand), broadband and mobile phone and fixed line services. Although Virgin implemented a major advertising campaign, it has had a rough few months with many problems, including a failed bid for ITV, removal of Sky channels from its platform and the subsequent loss of a significant number of customers. In addition, it now faces tough competition from other companies launching their own freeview services. Despite these difficulties, it has emerged as a leader in Broadband services, having been voted Ð''best consumer ISP' and is currently the UK's second largest pay TV service.

Q1

Virgin media was set up as an alternative to what it perceived as monopolistic domination by Sky over entertainment media in the UK. It sought to differentiate itself from existing competitors by offering the first Ð''quadplay' package available. As well as bringing together entertainment and communication, Virgin media aimed to "shake up multichannel and free-to-air TV" as well as liberate viewers from a "linear schedule". This is through its Virgin on Demand service, which allows customers to choose what they wish to watch from a large variety from Virgin's media library.

All these offers, range extensively beyond individual services offered by other companies. The four services are combined into various packages which are customised to serve and match each customer's individual needs; hence prices also differ depending on what each package offers. Using this model has resulted in economies of scope: the more services included in the package, the cheaper the unit costs. By switching from single-service contracts to combined packages, customers will no longer have to handle different contracts, which is much more convenient.

Although Sky has similar services on offer, mobile phone contracts are not available. In addition, it currently doesn't offer an on demand service to equal the immense catalogue of media offered by Virgin.

Q2

The marketing mix is made up of four variables: Price, Place (channel), Product and Promotion. The launch strategy was predominantly focused on promotion and product, with lesser emphasis on price and channel.

The aim of the launch was to create awareness of a new broadcaster with unique selling points. This was achieved by a grand entrance, supported by a phenomenal promotional campaign budget of Ð'Ј20 million used to infiltrate newspapers, magazines, billboards, radio and television.

Teaser campaigns were also used to capture imaginations, as well as build anticipation. Virgin directed messages to internet users who sought faster broadband speeds to keep up with the growing popularity of downloading media and social networking. The main PR event for the marketing of the bundle services was the Ð''Launch Lounge' in Covent Garden, where Sir Richard Branson was enclosed for a day with the quadplay bundle as his sole means of communication. This acted as a means of engaging the public, indicating customer control as the very essence of the Virgin Media philosophy.

The use of celebrity status was also relied upon in the promotion of this product. Today, more than ever before, people are highly interested in the lives of the rich and famous, hence, celebrity endorsements provide remarkable publicity. Celebrities also act as role models and as a result, such endorsements influence consumer decision making, as a large proportion of decisions are based on reference groups.

Virgin Media pioneered the concept of bundling four services, bringing together communication and entertainment and this was the main point of differentiation in their product. This was backed up by the best set top box (at the time) as well as their VoD service, which even now leads the pack in terms of popularity and ease of use.

The price was set at Ð'Ј40 for all four services (as well as many other bundle prices for different products/services) which was highly competitive compared to the alternatives offered by competitors such as Sky. Clearly, Virgin Media felt that bundle pricing was the way to go due to convenience for customers, as well as more efficient operations for the company.

Many channels were used to get the product to the consumer. One was a direct channel between the company and the consumer, through the internet (specifically the Virgin Media website). This short channel gave the company a significant element of control. In contrast, a much longer channel used was from company to wholesaler to a recognised electronics retailer and eventually to the customer; this provided little control for Virgin Media, however allowed them to gain access to a much larger customer base.

There are plans to set up 26 Virgin Media retailers which would lead to a medium chain length. This may give a best of both worlds scenario for the company as they would have greater access to consumers, as well as a high degree of control.

Q3

Although the launch of Virgin Media was initiated by nationwide press coverage and an aggressive multimillion pound marketing campaign, the results were not quite as successful as anticipated. This was due to various factors such as competitor rivalry and inadequate customer service.

A fundamental flaw of the high profile launch was the availability of the services to potential consumers. At the time of launch, Virgin Media's cable service was available to just 55% of UK households, compared to 97% coverage for BSkyB. Thus, regardless of the effectiveness of the marketing strategy, nearly half of UK's population were unable to sign onto Virgin Media's services even if they wished to.

This problem can be solved by ensuring Virgin Media persist in plans to extend coverage to 97% by the end of 2007.

With BSkyB dominating thus far in the pay TV market, the initial campaigns of battling against Sky gave detrimental results and even led to loss of existing customers. Consequently, a different strategy could have been adopted by concentrating on different sectors and markets. In hindsight, Virgin Media could have benefited from diverting its attention away from engaging in price wars or wars of attrition against Sky. Instead they could have implemented a better strategy of concentrating on the exclusivity of their own non-commoditized products on offer,