Virgin's challenger image shines in failed Northern Rock bid

LONDON - The company's unsuccessful bid for Northern Rock has left it cast in a favourable light with consumers.

Far from doing any damage to Virgin, Richard Branson's failed takeover bid for Northern Rock may have enhanced his brand's reputation as the customer's champion. However, it is the future of Virgin's unique challenger positioning that could be in doubt.

Some experts suggest that Virgin did not actually want or expect to acquire the beleaguered bank, and that the bid was merely a cynical attempt to boost its brand status without having to prove itself by actually running it. The theory is that if Northern Rock's management now fails to deliver, consumers will be left believing that Virgin would have done it better.

Melanie Skotadis, brand director at Added Value, claims this is classic 'hero brand' territory. 'The language Richard Branson used when the deal fell through was consistent with that positioning,' she says. 'He said: "We have tried our best to save Northern Rock and the jobs of its staff." The fact that Virgin tried valiantly, and failed, will not do its reputation any harm. Indeed, it has created an added association with financial services.'

Whether Virgin could really have turned Northern Rock around is another matter. Branson undoubtedly knows a lot about branding, and repositioning will be critical to Northern Rock's future success. However, he knows rather less about banking.

'Northern Rock is going to be a difficult business to turn around, and Virgin does not have a particularly glorious history in either financial services or turnarounds,' says Luke Mansfield, inventor at innovation company ?What If!

Indeed, although Virgin makes regular high-profile forays into new markets, its record of success is mixed. The days when Branson would slap the Virgin logo on whatever caught his eye, such as cola, condoms and computers, have gone. However, the brand's portfolio still covers a plethora of products and services, from travel and shopping, to media, telecoms, money and health.

As a private company, it is difficult to obtain financial information about Virgin, but some experts have claimed that its only profitable part is Virgin Atlantic, and that, despite its high-profile branding, even the returns on that are quite small. Problems in its train and telecoms businesses are also well-documented.

Nonetheless, the power of the Virgin brand, which is closely tied to Branson's own carefully crafted image as the honest, bearded adventurer, instils a sense of forgiveness, argues Graham Hales, chief marketing officer at Interbrand. 'The public has given Branson time to get the train service right, but they would have shown far less patience with other brands,' he says.

Unimpressive financial returns do not seem to matter either, according to Rob Oubridge, managing director of brand agency Aqueduct. 'The public sees financial failure as part of Virgin's continuing commitment to doing things better for the consumer regardless of profits,' he says. 'In some ways failure actually enhances the brand.

People forgive Branson because they believe in his "avenging angel" approach to business.'

Branson, arguably the world's best-known and best-loved businessman, is unique in his field; it seems that nothing can topple him from his pedestal. However, brand commentators believe the Virgin brand has two main vulnerabilities, despite its apparent Teflon coating.

One is that very brand-persona link from which it draws its strength. Hugh Davidson, visiting professor at Cranfield School of Management and author of The Committed Enterprise, says that if anything should happen to Branson, it would be 'devastating' for the brand.

Chris Wood, chairman of Corporate Edge, argues this danger will diminish, as the Virgin management team has strengthened in recent years, but others feel that the best thing Branson could do for the brand in the long term is to distance himself from the company.

The second potential Achilles' heel for Virgin is its tendency to criticise the competition. Its reputation as a challenger brand is largely founded on the way that Virgin Atlantic snaps at the heels of rival British Airways, but some feel that blowing the whistle on it for its role in fixing ticket prices - a practice in which Virgin colluded - was underhand. After all, incriminating BA gave Virgin immunity from the swingeing fines subsequently faced by the former.

Many brand experts also question the comparative advertising strategy that Virgin employed when launching its broadband offering. Its ads encouraged consumers to challenge their existing suppliers about the download speeds they claimed to provide. 'There is a feeling that Virgin should put its own house in order before criticising others,' says one.

Branson is an opportunist with a keen awareness of the power of PR. His greatest talent is his ability to cloak a fierce commercial desire to deploy Virgin's considerable brand assets to ever-greater advantage in apparent sentiment and idealism. But while Virgin exemplifies the power of branding, Branson must take care that it does not come to be seen as a triumph of style over substance.


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