Price Wars
Price Wars in the Wireless Market
1. Who are the key players in this industry?
The key players in the wireless industry are Verizon Wireless, AT&T, Sprint, and T-Mobile. With these four companies controlling 90% of the market, there are no other ‘key players’ in the industry. U.S. Cellular is not quite a ‘key player’, however they do hold approximately 2.4% of the customer nationwide and must be in the overall picture. In addition, the data suggests that the pool of potential people that would get a cell phone is almost entirely saturated so it does not look as if there is any room for additional competition.
If a price war will reduce margins, as the case suggests, why would any company embrace this strategy?
Price is the most attractive marketing gimmick to attract competitors’ customers. As the case told, the cell phone subscribers have nearly topped 260 million in the US and the country’s population is 305 million. The remaining 45 million maybe too young for a cell phone or they have already decided they do not want to have a cell phone. This condition created no more new customer so wireless companies will compete each other to attract its competitors’ customers. Certainly, the existing customers will be reluctant to move to another wireless company without an interesting offering. The existing customers have to change their cell phone number that is not comfortable so the company should attract the competitors’ customer by offering low price.
In the middle of rigor competition, the company should put attention to the competitor-based method to set its price. Furthermore, the case told that low price would have a risk of causing harm to their economic bottom line. Thus, the wireless company should formulate the marketing gimmick to compensate its low price. For example, Verizon lowers its voice plans price but in the flip side Verizon eliminates the data plan bonus. In addition, JP Morgan estimates that only
1. Who are the key players in this industry?
The key players in the wireless industry are Verizon Wireless, AT&T, Sprint, and T-Mobile. With these four companies controlling 90% of the market, there are no other ‘key players’ in the industry. U.S. Cellular is not quite a ‘key player’, however they do hold approximately 2.4% of the customer nationwide and must be in the overall picture. In addition, the data suggests that the pool of potential people that would get a cell phone is almost entirely saturated so it does not look as if there is any room for additional competition.
If a price war will reduce margins, as the case suggests, why would any company embrace this strategy?
Price is the most attractive marketing gimmick to attract competitors’ customers. As the case told, the cell phone subscribers have nearly topped 260 million in the US and the country’s population is 305 million. The remaining 45 million maybe too young for a cell phone or they have already decided they do not want to have a cell phone. This condition created no more new customer so wireless companies will compete each other to attract its competitors’ customers. Certainly, the existing customers will be reluctant to move to another wireless company without an interesting offering. The existing customers have to change their cell phone number that is not comfortable so the company should attract the competitors’ customer by offering low price.
In the middle of rigor competition, the company should put attention to the competitor-based method to set its price. Furthermore, the case told that low price would have a risk of causing harm to their economic bottom line. Thus, the wireless company should formulate the marketing gimmick to compensate its low price. For example, Verizon lowers its voice plans price but in the flip side Verizon eliminates the data plan bonus. In addition, JP Morgan estimates that only