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XM Satellite Radio: Competing in the New Digital World
Teaching Note
Case Overview
This case examines XM Satellite Radio Inc., the leader in the satellite-delivered radio market.
XM’s founding was promoted by the radio industry’s first major technological development since
technologies including MP3 players such as the immensely popular Apple iPod, Internet radio
and developments that are occurring among traditional terrestrial AM and FM radio stations.
The case provides a brief history and overview of XM and its programming content.
There is also a discussion of the integrated marketing communications program used by XM to
create awareness and generate trial when its new service was launched, including media
We recommend using the case with Chapter 11 of the text which deals with Broadcast
Media. IMC Perspective 11-4 introduces students to the digital revolution that is impacting the
radio industry. In teaching the case, the focus should be on the challenges facing XM in terms of
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integrated marketing communications and what the company needs to do to continue to attract
subscribers and compete with Sirius. In addition to media advertising, both companies are using
a variety of sales promotion tools such as rebates, price deals, spiffs and other tactics to attract
Discussion Questions
1. Which competitors should XM target in the future: Sirius, terrestrial radio, MP3
players and podcasts, or Internet radio?
Sirius – Targeting its only direct competitor might be the smallest opportunity strategy as
Sirius currently, and over the short term at least, has the smallest user base of all the
competitive options. Spending too much time focusing on Sirius might divert attention from
the larger, more important job facing XM which is growing satellite radio as a viable product
Terrestrial Radio– XM has the strongest package of benefits versus terrestrial radio and its
efforts might be best applied to pointing out these advantages which include more content
and program options, commercial free music, better sound quality, and the ability to listen to
the same programming anywhere in the country. The greatest potential for new subscribers is
in converting the huge segment of the U.S. population that currently listens to terrestrial radio.
XM’s tagline, used in advertising and on their website, “Beyond AM. Beyond FM. XM.”
positions the brand as the best satellite radio option and as better than traditional radio.
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Internet Radio – The pros and cons of XM versus Internet radio are similar to those of the
MP3 player market. However, Internet radio may be even more threatening as the streaming
format allows for “real time” communication of content, and doesn’t require all the time
spent to download and upload listening material. However, it may be some time before
Internet radio is available in cars which is where much radio listening occurs.
The best way to determine the optimal strategy is to assess:
▪ The size of the market segments represented by the various forms of competition
▪ The advantages XM has versus each competitor and determining whether they are
important to consumers
2. Should XM try to appeal to all demographic groups or target specific segments? If the
latter, which segments should they target and why? What types of advertising and
promotion tactics can be used to market XM to these groups?
The fact that Sirius is becoming inextricably linked with Howard Stern, who appeals most
strongly to young adult males, may create an opportunity for XM as Sirius may be boxing
itself in from an image standpoint. This young, macho male association is further reinforced
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3. What are XM’s options for their advertising creative strategy going forward? Should
they focus on their content and programming, digital sound quality, ease of use versus
the other alternatives, their innovative hardware, a combination of these factors, or
some other attributes?
The key issue for XM is whether to pursue the same advertising creative strategy for every
market segment and demographic group or whether to customize the message based on each
user groups’ “hot buttons” and areas of interest. Decisions also have to be made regarding
points of difference that should be communicated for XM versus the competition.
The major points that can be used as the basis of the creative strategy are that XM has:
a. The best overall content due to its breadth (best for families/something for everyone)
b. The best sound quality as rated by objective sources such as Sound & Vision magazine
The print ads provided with the case shows how XM is positioning itself as the best satellite
radio option based on a combination of attributes such as best hardware (portability, storage
and playback features) and breadth of content (commercial free music, sports, news and talk
radio, comedy, and business programming). The earlier magazine insert that appeared when
XM was first introduced focused on the breadth of programming by showing all of the
channels. Students can be asked what they think of XM’s advertising. They can be asked
(that features songs by Frank Sinatra), and/or “old time radio” with shows such as “The Lone
Ranger” and “Dragnet”, as well as news programming.
Samsung, Delphi and Pioneer products that combine an MP3 player with XM might be
featured in ads directed at the 18-34 year olds, touting the benefits most important to this
target – that XM provides the ultimate in choice. Ad copy might focus on the unique
combination of benefits including the ability to have your own play list, the benefit of XM’s
hip and cool stations that are the first to feature new artists, and the ability to record what is
heard on XM for later listening pleasure.
4. Are there any other sampling or promotional programs that XM should pursue to
attract new subscribers and retain them?
XM is doing a thorough job of sampling the product at retail through in-store demos and in
customers tend to be young, hip, and have slightly higher incomes. The three primary ways
to impact repeat purchase should be identified:
1) Increasing the percent of free trials through new user promotions that result in
conversions or commitments to at least a one-year plan
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5. What type of programs can XM develop with retailers to increase their share of
“aftermarket” installations?
Key to creating impact at point-of-sale is the trial/display of units that allow customers to
sample the XM’s sound quality and programming. Attached to these units are marketing
materials such as brochures and signage that communicate XM’s marquis programming.
commitment to a one-year subscription. This would be a win/win for retailers, as it would
both drive users into the store for the promotion and would encourage them to visit both the
satellite radio departments and CD music departments of the store. They might also consider
using a sweepstakes whereby people who purchase an XM system would automatically be
entered, or prospective customers might be encouraged to visit the company’s web site to
enter. The sweepstakes prizes might include a car with a factory-installed XM satellite radio
system, the opportunity to be a guest on the show of their favorite XM radio channel host, or
other prizes such as a portable XM receiver or combination XM receiver/MP3 player.
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have to reconsider its position on rebates if it continues to lose sales to Sirius because of the
difference in the rebate offer. Consumers may be attracted to Sirius because of the larger
rebate and retailers may find it easier to sell the brand over XM because of the cost savings.
This may result in retailers pushing Sirius over XM and may continue to be a problem unless
6. How can XM best combat the momentum Sirius gained from the advent of Howard
Stern?
To maximize the benefit of signing Howard Stern, Sirius focused much of their advertising
budget in the four months prior to his coming and the two months after his arrival on
promoting his show. A great deal of the advertising for Sirius continues to focus on Stern
7. Is there a cooperative advertising message (such as Intel Inside) that XM can further
promote with its distribution partners to increase the synergy and awareness for the
brand and its unique benefits?
XM may be able to work with automotive companies to deliver a type of
ingredient/component branding message about the benefits of having its satellite radio system
as an accessory in a vehicle. XM benefits greatly when prestigious partner brands such as
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research that demonstrates the value of having XM in a new vehicle and how it increases
purchase intentions. Encouraging XM product mentions in advertising done by its automobile
partner will also help increase awareness and prestige due to favorable associations with these
brands.