Term Paper: Xm Radio

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XM Radio

XM and Sirius are the sole operators granted a license to radio broadcast through satellite and the latter possessed better technologies and more financial resources (Godes and Ofek, 2004). Due to their transactions on the stock market, Sirius had attracted numerous investors which contributed to the completion of their operations and offered them increased chances of launching their products prior to XM. Were this to actually happen, XM would be seriously affected from numerous stand points.

A first effect of Sirius' launch before XM's would be materialised in the loss of numerous potential customers. In other words, there is a great demand out there for satellite broadcasting radio channels, and if Sirius manages to launch their services first, they will be able to attract the most customers. It is also possible for the audience to wait for XM's launch in order to compare offers and choose the one that best meets their demands, but the first alternative is more likely to occur.

A second problem posed by the prior launch of Sirius' in given by the reduced interest from investors. In this order of ideas, the sponsors and other corporations holding significant financial resources to invest in satellite radio broadcasting would be more interested to invest in the first launch, rather than the second. As such, Sirius would possess even more financial resources and would be significantly more competitive than XM.

Another negative aspect is the increased pressure placed on XM. They will have to measure up to the services offered by Sirius, they will have to meet higher quality standards and in all, they will have to be more competitive. They will have to come up with marketing solutions through which to convince the audience to switch providers. But these are just a few possible threats; the actual list is far more comprehensive.

The decision for choosing the revenue model to be implemented in the case of XM Radio satellite broadcasting depends on the characteristics of the two available options: subscription-based and advertising supported (Godes and Ofek, 2004). The main advantage of a subscription-based broadcasting is given by the fact that the radio programs will not be interrupted by commercials. The disadvantage is given by the fact that customers will have to pay a fee for the right to listen to the radio. The required payment could pose a threat even more when most of the radio channels are free of charge.

On the other hand, an advertising-supported radio channel has the advantage of no fee to be paid by the listener. And it has the disadvantage of the radio programs being interrupted by commercials. But the advertisements are not necessarily a bad thing and some listeners even like to hear them. They inform them of numerous products and services. Take for instance the case of a construction business which transports materials. While listening to the radio, they could hear information on new stores specialized in construction materials and consultancy. Take the case of an individual interested in purchasing a house. He might hear on the radio announcements of a new real estate project being built in the suburbs. The list of examples could go on.

In choosing the revenue system, XM must also take into consideration their personal capabilities as well as the strategies implemented by the competition, namely Sirius. In this order of ideas, Sirius implemented a subscription-based model and if XM were to do the same, they would have to offer their services at lower prices. And due to limited financial resources, they cannot do that. In all, XM should implement the advertising-supported model. For the future, and considering there is demand, the company could combine the two models and also offer commercial free subscription-based services.

Once the model is chosen, the marketing team at XM Radio has to develop a strategic implementation of their ideas in order to ensure the successful launch of their services. The strategies must be developed in regard to product / service, price, place (distribution) and promotions, otherwise called the marketing mix, or the 4 P's of marketing (Net MBA, 2008).

Service Strategies

The satellite radio is aimed to satisfy the informational and/or recreational needs of the population. As such, they will be comprised of numerous radio channels airing news, music, contests and other types of radio programs, all within one channel, or on different specialized channels. The system at the basis of XM's radio channel will be formed from "a distribution network consisting of an uplink facility, two satellites, and, where necessary in urban areas, terrestrial repeaters to provide digital audio services to both fixed and mobile radio receivers throughout the continental U.S." (Godes and Ofek, 2004)

The main characteristic of the satellite radio broadcast is the fact that it will have continuous signals and entering new territories within the U.S. will do not affect the quality of the transmission. "XM hypothesized that the use of two high-power satellites, spatial diversity coupled with error concealment in the signals from the satellites, and terrestrial repeater networks would provide national, near-ubiquitous radio coverage such that a listener could drive across several states without ever losing the signal" (Godes and Ofek, 2004).

Price Strategies

Assuming that XM Radio does indeed choose to implement the advertising-supported model, they will have no retail price to the listener. However, budgetary decisions must be made in regard to the price requested from companies having their advertisements aired on XM. These prices would be higher than those implemented by Am and FM radio stations as they would offer more benefits.

An important feature which must be kept in mind when setting the prices is the fact that excessive commercials might negatively impact the radio as its audience will loose interest. In this order of ideas, XM should air limited numbers of commercials and establish sufficiently high prices to ensure profits from this operation.

XM is currently able to implement this strategy since they encounter limited competition on this particular segment. To better explain, their number one competitor is Sirius, which announced its intentions to air on subscriptions; therefore they will air no commercials. And XM is the sole satellite radio who will advertise companies, hence, their possibility to demand high prices.

Place Strategies

Since XM will offer no material product, it is only natural for them not to have an actual sales point. They will however receive suggestions and complaints from customers in person, at the company's headquarters, through telephone and through the internet. There is no need for a logistics system.

Promotional Strategies

Once again considering that XM Radio chooses the advertisements-based model, the listeners will have little impact on the corporate outcomes; but they will have to listen to the radio so to ensure XM there is sufficient audience to listen to the commercials paid by their investors. Advertisements will be aired onto numerous media channels to inform the audience of the launching of the satellite radio channels. The emphasis will be placed on the free of charge airing and the limited commercials.

Promotional strategies will be implemented in regard to the companies requesting advertising services from XM Radio and will materialize in lower fees during promotional periods or more commercials aired for the same fees.

The strategies to launching the radio satellite must however be developed and implemented based on the particular features of the company and the environment in which it activates. These are organized into the SWOT analysis.

Internal Strengths

The company's strengths derive from the high quality of the offered services and the dedication of the staff, which is committed to successfully launching the satellite radio channels.

Internal Weaknesses

The company's internal weaknesses can be established by comparison to the main competitor, Sirius. As such, XM possesses fewer financial resources, fewer investors and lower quality technologies.

External Opportunities

However the competition from Sirius poses a serious threat, the strategies implemented by the competition offer an opportunity for XM Radio. In this order of ideas, since Sirius implemented pay-based model, XM has the possibility to implement a free of charge model and attract customers based on the advertising model. Another important opportunity comes from the continuous technological advancements which could be integrated into the XM system and further increase the quality of the provided services.

External Threats

The basic threat comes from the fierce competition posed by Sirius. And this basically derives from the possibility that the competitor possessing better technologies and more financial resources might be able to launch their services sooner than XM Radio.

But regardless of the competition and its internal weaknesses, XM Radio stands increased chances of success. Considering that they launch their services based on the advertising-supported model, the future could easily bring them to also implement the subscription-based model. These two could function simultaneously or the latter could entirely replace the initial model.

This situation could occur given that there is a demand for commercial free radio channels. And this would be concluded after numerous market researches and after conducting several analyses to identify the… [END OF PREVIEW]

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