Richard Branson loves new ventures, not least because of the PR
stunts and gimmicks they allow.
Donning nightcap and gown, he climbed into bed with Danni Behr for
Virgin Atlantic’s recent business class launch while Virgin Brides saw
him bedecked in crushed silk. His other companies, spanning music to
financial services, have launched with a similar bang.
Although his latest launch, Virgin Mobile, may not afford such
tomfoolery, it is perhaps Branson’s most significant. It gives the
entrepreneur a way to connect his companies for a simultaneous Virgin
A system under development will allow users to, at the touch of a button
on their Virgin phones, view their Virgin bank balance, check the
performance of their Virgin PEP, and order Virgin plane or train
tickets, Virgin cosmetics or Virgin jeans.
Details of the deal, which has still to be finalised pending Cable &
Wireless and MediaOne’s sale of One 2 One, remain scant. However, it is
understood that Virgin will source handsets from a supplier and brand
them with the Virgin logo. It will then buy airtime from One 2 One to
create a fifth mobile digital brand.
Many of Branson’s previous start-ups have met with criticism, with
observers questioning whether the brand is being stretched too far. In
some cases the doubts have been justified. Virgin Vodka has effectively
been withdrawn from public sale, Virgin Trains is proving a PR nightmare
while Victory Corporation, which runs the clothing and cosmetics
operation, issued official profit warnings last year.
The move into the mobile industry, however, appears a smart one, not
only because it is relatively new, at just over ten years old, but also
because it is booming. As Steven Day, former Sunday Express joint deputy
editor and now Virgin Mobile PR chief, states: ’More than one in four
people now own a mobile phone, with predictions that this will double by
2001. It’s a very exciting industry to be in.’
Secondly, Virgin’s positioning as the consumer’s champion is well suited
to the mobile phone industry. In the early days, the mobile market
gained a bad reputation and was frequently accused of ripping off the
It has yet to fully shrug off this image, not helped by the confusing
array of tariffs and small-print-stuffed ads.
This is where Virgin hopes to make a difference. ’Simplicity and
competitiveness are our key propositions. Like Virgin Direct’s
simplified financial services, so Virgin Mobile will make pricing much
easier to understand. The industry is very confusing as it stands,’ says
Virgin Group director of communications Will Whitehorn.
Research from JWT Insight conducted last month suggests a significant
number of people think the Virgin brand would extend successfully into
phones. From a sample of over 1000, 27% said they would buy a Virgin
phone if available.
E-commerce is the key area of development for Virgin. It believes that,
by 2003, the mobile will become the main way to access the internet.
Next generation soon
Vodafone and BT Cellnet are both planning to launch an internet phone by
the end of the year and, like Virgin, will bid for a UMTS licence, the
next technological generation, to allow further applications, including
video and games, through phones. Virgin will also give away free
Branson advised staff to use headsets following the death of a friend -
a heavy mobile user - from a brain tumour, although the link between
phones and cancer is unproven. Hands-free sets are also needed to let
users look at the phone’s screen and to press buttons.
Observers expect Virgin to target a currently underserved market of
young people and those outside established markets.
’Virgin’s brand image is suited to young and alternative customers. Like
banking, the idea is to lock consumers in early so they stick with the
same brand forever,’ says Jim Ross, telecoms analysts at ABN Amro.
Although Vodafone and BT Cellnet, traditionally business-focused, now
target youth with no-contract pre-pay phones, there is significant room
’We will be targeting a broad audience,’ says Whitehorn. ’However, there
is lower penetration in the UK among young people and the elderly than
in other European countries. In Scandinavia around 95% of under-25s have
a mobile phone.’
Virgin has briefed Rainey Kelly Campbell Roalfe, Manning Gottlieb Media
and HPT Brand Response for the project.
Virgin is also trying to shake up the market by selling direct, allowing
it to undercut the commission charged by high-street retailers. This
concept has helped Virgin Cosmetics back to its feet, with direct sell
now outperforming its retail arm. In mobiles, BT Cellnet is also
expanding its telesales division and claims it now accounts for a
’significant chunk’ of business.
How One 2 One will fair through the deal is less clear. Some argue the
tie-up is a coup for One 2 One, helping it to increase market share on
the back of Virgin’s marketing muscle. It is currently the smallest
operator, despite a raft of price cuts.
Using a bigger brand to increase share is a strategy recently used by
Cellnet, which rebranded as BT Cellnet. However, the company believes
the One 2 One brand may eventually be replaced by Virgin Mobile.
Says BT Cellnet communications manager William Ostrom: ’Virgin is a
powerful brand which will exert a vampire effect on the One 2 One brand.
As the industry goes forward it’s no longer about price, it’s a brand
game, inevitably with winners and losers.’ L
MOBILE OPERATORS’ SHARE (Q1, 1999)
Brand New connections Customer base Pre-pay
Vodafone 700,000 5.57 million 1.8 million
Cellnet 479,000 4.52 million 910,000
Orange 370,000 4.52 million 734,280
One 2 One 329,000 2.25 million 1 million
Source: Operators’ own figures