Most brands conjure up an image of a product or service: shoes for Nike, yoghurt for Danone, ballpoint pens for Bic, a holiday village for Club Med, and so on. This is not surprising: before they became brands, they started out as a simple product or service, driven by marketing and sales.
Virgin is an exception: who associates that brand with only one product or service? Indeed, Virgin now comprises 200 companies and 25,000 people working for the brand worldwide. It has a turnover in excess of s7 billion, and has become one of the world’s top 50 brands. Even in countries in which it does not operate, it is still a famous brand.
It all started in 1969, when Richard Branson decided to launch a direct record-selling operation, enabling many groups without distribution by the ‘majors’ to gain access to the general public. The brand’s DNA is already apparent in this founding act: Branson seeks out opportunities in markets choked by ‘false’ competition.
He asks himself how he can operate differently from the leaders – who have usually frozen the market to their advantage. The Virgin name was chosen because it was friendly and modern, and could be applied to sectors other than just music. This last consideration alone presaged the business model that would follow.
Virgin’s originality lies in the fact that it is held together by one entirely intangible ‘glue’, its brand. This is why the brand architecture is umbrella branding. Every year, Virgin launches itself into new businesses and pulls out of others. In under 20 years, Richard Branson has extended the brand to the following sectors (and subsequently pulled out of some of them):
In a sense, Virgin is like the Japanese keiretsus, horizontally structured conglomerates consisting of independent companies that share one name and one set of values. How can a brand spread itself in so many directions without specific competencies and with minimal investment? Of course, the more widely the brand spreads itself into apparently dissimilar extensions, the greater the need for an intangible link (see Figure below) – and this link consists of the Virgin brand’s values. Its extensions actually form a family of independent companies that share the values of the Virgin brand.
The Virgin extension model
To finance his expansion, Branson usually seeks support from appropriate partners in order to minimise his own investment, even if this means not being the majority shareholder. The partner thus provides the sector know-how, the money, and its own energy as an entrepreneur. For example, Virgin Megastores in the UK are 75 per cent owned by the W H Smith group. Similarly, Virgin Vodka was manufactured and distributed by William Grant in a 50/50 partnership with Branson.
Virgin allows start-ups to begin with a world brand as their ‘birth gift’, significantly reducing their necessary advertising expenditure
– particularly as Branson is well aware of the financial benefits of repeated public relations exercises such as his balloon trip around the world, or riding down Fifth Avenue in a Patton tank to celebrate the launch of Virgin Cola.
Branson also resells his businesses, but only after having added what makes them valuable in the eyes of the public – his brand. For example, the French Megastores were sold to Lagardère, and Virgin Atlantic Airways went to Singapore Airlines. Of course, the Virgin brand remains the property of Virgin Enterprises, a company of which he is the sole owner.
Virgin’s extensions are remarkable in that they are truly based on a strategic analysis of the sector. But in addition, like any healthy extension, they deliver far more than just a name to customers: they represent true innovation which remains consistent with the brand’s values.
As its name so prophetically suggests, Virgin aims to take a brand new, ‘virgin’ approach to markets and operate in a different way from the ‘majors’. Virgin has a rebellious, extraverted personality. Its ambition is to ‘unblock’ markets and liberate consumers from meaningless choices between dominant market leaders. Its commercial proposition is innovation, quality and fun.
The result is a product range totally different from those of its competitors, targeting a younger audience and better value for money, all under the aegis of an aspirational brand.
After all, in order to succeed, innovation is required at every stage, even if it means being copied: Virgin Atlantic Airways was the first company to offer a Volvo-chauffeured collection service for its business class clients from their offices, and a bathroom at the arrival airport. On board, Virgin innovated with the first personal video screens, followed by relaxing massages and the like.
Another example is Virgin Cola, which innovated by offering an excellent taste, produced by the Canadian firm Cotts (bought out by Virgin in 1998), at a price nominally 10–15 per cent lower than that of Coke, with widespread distribution.
However, the system has its limits: extensions do not always work (a fact that applies to Virgin just as it does to any other firm, of course). The further you get from the British zone of influence, the weaker and less emotive the Virgin brand becomes. This makes the high visibility associated with the Megastores’ music and entertainment brand a prime tool for generating recognition and empathy among young people from all countries.
Paradoxically, Virgin’s failures do not seem to have damaged its business model. In situations where many brands would have packed up and gone home, Virgin simply continues to expand elsewhere. After all, should we criticize David if he loses to the Goliaths every now and then? At least he tried. But can this brand and business model last forever? Not if the extensions fail too frequently. An analysis of the failures readily shows when an extension has been inappropriate:
Without Richard Branson himself, could the Virgin group succeed? Given its founder’s aura, and his ability to attract the attention of the media and to concentrate energy and investors around him, it must be concluded that Virgin is Branson himself. This is the brand’s strength, but also its weakness. As with luxury brands, we should remember that a brand only truly begins with the loss of its founder.
Strategic Brand Management Related Tutorials
|Strategic Management Tutorial||Strategic Planning for Project Management Tutorial|
Strategic Brand Management Related Interview Questions
|Strategic Management Interview Questions||Strategic Planning for Project Management Interview Questions|
Strategic Brand Management Related Practice Tests
|Strategic Management Practice Tests|