The Victory Wireless store in Denver is currently offering a fabulous marketing strategy for potential new iPhone customers. Victory Wireless offers customers who purchase an iPhone with a 2-year subscription, a free Otter phone case, car charger, earphones, and speakers. In terms of Porter's Five Forces what is Victory Wireless attempting to achieve with this marketing strategy?

Question

BlackTom AI · Accepted Answer

The scenario presents a marketing strategy by Victory Wireless aimed at new iPhone customers, where purchasing an iPhone with a 2-year subscription comes with a bundled set of free accessories (Otter phone case, car charger, earphones, and speakers). Now, let's evaluate each Porter's Five Forces option in light of this strategy.

Option 1: Decrease supplier power
- This would imply the firm’s actions are designed to reduce the leverage or bargaining power of suppliers. The bundled freebies are tied to attracting buyers, not to altering suppliers’ ability to raise prices or constrain supply. Since the strategy centers on customers’ experience and value, not on changing the dynamics with suppliers, this option does not align well with the described tactic. Therefore, this choice is unlikely to be the intended interpretation.

Option 2: Decrease buyer power
- Reducing buyer power means making customers more dependent on the firm, thereby limiting their ability to negotiate prices or switch to competitors. Bundling accessories with an iPhone raises the overall perceived value and creates switching costs, since customers who are locked into a two-year subscription may be less inclined to switch to another carrier or retailer just for a lower upfront price. This approach is a classic method of increasing customer loyalty and reducing the bargaining leverage of buyers, which fits the tactic described.

Option 3: Increase substitute products
- Increasing substitute products would typically involve expanding options that could satisfy the same need (e.g., more alternative devices, platforms, or services). The described strategy doesn’t introduce substitutes; instead, it strengthens the existing offer by adding value to the current product. Thus, this option does not accurately describe the strategic effect of the promotion.

Option 4: Increase user power
- The term "user power" is not a standard formulation in Porter’s Five Forces framework. The conventional forces are supplier power, buyer power, competitive rivalry, threat of new entrants, and threat of substitutes. Since the prompt asks to categorize the effect within Porter's model, this option either misuses terminology or misrepresents the framework, making it an unlikely fit for the described strategy.

In summary, among the given choices, the strategy most plausibly aligns with reducing the bargaining power of buyers by increasing switching costs and perceived value through bundled incentives. The other options either misapply Porter’s framework or describe effects that are not supported by the bundled-offer approach.

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