Chief Essay

1724 Words Apr 13th, 2011 7 Pages
Issues: Sirius’ head start, raise capital, be early, pressure to mimic Sirius, how to distribute, how to price, how to earn, sub or ad, single or tiered, manufacturers (how to proceed and which ones to contact), how to market –to consumers or to manufacturers and retail chains.
Recommendations: Start off with higher radio and subscription prices because the market will take time to develop and XM should not be the bearing the brunt of the development costs. Later, lower prices on both aggressively in order to attract more subscribers and begin to introduce limited advertising. Work with auto manufacturers, offer subsidized prices, let radio manufacturers and retailers handle the home and aftermarket markets, offer subsidies. Target
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Should you price high initially and then decrease it over time or vice versa?
The price of the service should be reassessed continually. Obviously, if the long term viability is in jeopardy due to a faulty pricing structure, the price will need to change to adapt to reality rather than expectations and estimates. Also, it is not beyond the realm of possibilities than advertising income would completely change the cost structure over time based upon distribution and other factors.
XM should price low initially and then increase it over time. XM is very much a business of scale. It’s long-term viability is tied closely to its ability to increase its subscriber base. The company will have more options in terms of how to generate revenues if its subscriber base is high, whereas if the subscriber base is low due to high subscription prices, each subscriber might help offset losses on an individual basis, but potential revenues through mediums such as advertising will be exponentially lower the fewer eyes that see them. That being said, it is generally more difficult to raise prices than to lower them. It comes down to pricing power which would likely only exist if there is high and limited demand for the products or services they offer, and if the subscriber base is so low that higher prices are the only way to increase income, that would suggest that demand is not sufficient to merit a price increase and XM

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