Answer questions based on the ‘ XM Satellite Radio’ case study
Questions:
1. As a new product, XM has the potential to offer a variety of value propositions to different
segments.
a) what are all the value propositions that XM has the potential to offer, relative to existing
alternatives?
b) What are all the relevant consumer segments for XM?
c) Describe each of these different consumer segments and the value proposition of XM to these
segments?
d) Who do you think should be the primary target market for XM?
2. Now let’s think of pricing.
a) What are the key aspects that XM needs to consider in creating its pricing scheme?
b) Suggest an appropriate price for monthly subscriiptions? (Note: this is about the subscriiption
price alone)
c) How should the hardware be priced? If it helps, assume a five-year lifetime for a customer?
d) How should the price of the service and hardware change over time? High-tech new products
(e.g., Flat-panel TVs) often follow the “price-skimming” approach (i.e., starting off with high
prices and then lowering them over time). Would you, or would you not, recommend a “priceskimming” approach for XM’s service and hardware prices? Give reasons either way.
3. This part is about how XM can earn revenue.
a) What aspects need to be considered in allowing advertising to run on XM’s service? (Note: simply list all the broad factors, briefly) How does the fact that the firm could also earn money
on advertising affect the optimal subscriiption price?
b) What revenue model should Robert Acker recommend that XM pursue to capture value from
satellite radio (e.g., how should they be thinking of advertising revenue versus subscriiption revenue)?
