MANAGEMENT DECISION CASE

Virgin Group Brand Extensions: Lots of Hits and a Few Misses

One of the most valuable aspects of a strong brand is its ability to be extended to new products in the category and even into completely new categories. This capability allows companies to take advantage of the strong brand equity that has been built through good customer experiences with the brand’s products and the many marketing activities that have helped build the brand’s image. Most companies tread carefully into new product or category territory, but the Virgin Group is a corporation known for its bold moves in extending its brand with new companies and products marketed around the world. Its successes and failures provide insights for marketers using a brand extension strategy to increase brand equity and company revenues.

Virgin’s flamboyant founder, Sir Richard Branson, has become well known as an adventurer, playboy, and the brand’s chief cheerleader. He named his new enterprise “Virgin” to represent his lack of business experience in his early days. His first major venture was his independent record label, Virgin Records, in 1972. Signing music superstars Phil Collins, Janet Jackson, and the Rolling Stones propelled the company’s growth and eventually led to the opening of the Virgin Records Megastore in London in 1976, and later in major cities around the world.

During the high-flying years of the record business, Virgin decided to fly high in a more literal way. Virgin Atlantic focused on more comfortable air travel for transatlantic passengers; it was the first airline to offer individual TV screens with a choice of channels—even in economy class. This superior service caught the attention of customers, but also of its major competitor, British Airways, whose employees used underhanded techniques to poach Virgin Atlantic customers. The Virgin airline business soon expanded to other parts of the world with Virgin Australia and Virgin America.

Branson next observed that many young people found expensive monthly cell phone charges too high for their budgets. Virgin Mobile was born, offering a pay-as-you-go approach so teenagers wouldn’t have to be locked into yearlong contracts. The youth-oriented marketing offered features designed to make cell phones more playful and fun, such as Rescue Rings (a feature allowing you to save yourself from a bad blind date), wake-up calls, and ringtones using the latest hit songs.

There have been a few other businesses, too: Virgin Media, Virgin Active (health clubs), Virgin Books, Virgin Cosmetics, Virgin Games, Virgin Radio, Virgin Wines, Virgin Vodka, Virgin Hotels, Virgin Vacation, Virgin Trains—these plus more, for a total of about 400 companies in all. If it seems that the sky is the limit for Virgin’s ambitions, think again. Virgin Galactic is currently testing spacecraft that will take passengers on a joyride into space. So far, 700 people have either paid their full fare of $250,000 or a deposit of $20,000 to hold their spot, including renowned physicist Stephen Hawking.

But with such a large number of brand extensions, not all could be hits. Virgin Cola fizzled because it was not different enough from Coca-Cola. The company’s website for buying and selling cars (Virgin Cars, of course) failed, Branson said, due to a “wrong angle” and because the business was not focused on sustainability. VirginStudent.com tried to beat MySpace and Facebook to the social media game but didn’t gain traction. Virgin Pulse followed the Apple iPod’s lead but did it with a much larger portable music player that never took off. Despite (or perhaps because of) a launch that included founder Branson dressed in a wedding gown, Virgin Bride was also a bust. However, even these failures served to build the Virgin brand. Each time Virgin took on a major brand (like Coca-Cola) a tremendous amount of media coverage was generated and Branson’s image as a risk-taker was reinforced.

Although the list of Virgin businesses represents a diverse group of industries, they share two common attributes: an unconventional approach to marketing and flying in the face of ordinary customer service.48 Perhaps the most important common denominator is Sir Richard Branson himself. Although many modern executives have been visible parts of their company’s marketing messaging, few can match the promotional energy of Branson. In addition to a Virgin bride, he also dressed as a female flight attendant and a Zulu warrior (to promote a new South African flight route). To take a shot at Coca-Cola, he drove a tank down New York City’s Fifth Avenue and “fired a missile” at the famous Coca-Cola sign on Times Square. Bolstering his image as an adventurous risk-taker, he attempted to circumnavigate the globe in a hot air balloon.49 Having a mere mortal personifying the brand comes with risks. “Every day that Richard gets older the issue of the Virgin brand becomes a bigger one because so much of it is tied to him,” according to an executive at brand consultancy Interbrand.

For now, the Virgin Group brand is strong, with brand recognition of 99 percent in the UK, 96 percent in the United States, and 97 percent in Australia and South Africa, and with annual sales of $24 billion. After 50 years and 400 businesses opened (and many closed), the “virgin” name may no longer fit its founder. Whether this breathtaking pace of brand extension can continue will be closely watched by brand strategists and by fans of the Virgin Group and its flashy founder.

Questions for Consideration:

1. When founder Richard Branson is no longer at the helm (and in the news), do you believe Virgin will be able to continue its forays into radically different brand extensions? What strategies can the Virgin Group employ to ensure continued brand success after Branson is out of the picture? Should those strategies be implemented now or after the founder’s departure?

2. In this chapter, you learned about Aaker’s five dimensions of brand equity. Assess the Virgin brand on the basis of these dimensions. With these dimensions in mind, what steps could the Virgin Group take to increase brand equity even further?

3. Is the Virgin experience with brand extensions an anomaly, or are there lessons that could be applied to any brand wanting to expand this way？