Small Business

Lessons from Virgin's U.S. Brand Builder


For Frances Farrow, the central trick is to see the business from the customer's perspective and respond to the customer's needs

The Executive: Frances Farrow, 44

Background: Farrow, an executive member of the board of Virgin Atlantic Airways since 1993, arrived in New York eight years ago to help build Virgin USA, the headquarters of the Virgin Group in North America, where she is currently chief executive. Virgin is already a household name in Europe, with more than 200 companies run by charismatic entrepreneur Sir Richard Branson. Farrow's job is to expand the Virgin brand in North America.

The Company: Virgin USA was established in 2001 and currently consists of about 15 different brands (BusinessWeek.com, 7/8/08). This year, the company launched Virgin America, a domestic airline service based in San Francisco.

Revenues: $23 billion (Virgin Group global revenue)

Her Story: Everyone's got something to say about Virgin. With an unusual brand name and a mold-breaking leader in Richard Branson, that's hardly surprising. From praise of his business acumen and curiosity about his home on Necker Island in the British Virgin Islands to head-shaking at our outrageous company stunts, I have heard them all. But the ones I appreciate most are comments about the brand's elasticity and its unique ability to succeed in diverse markets: "I fly your airlines, my kid uses your cell phones, we rock out at the music festival, and we're excited for Richard to invent alternative energy options."

It is a reminder of Virgin's infinite opportunities, but also of the risks of letting the brand stray off course.

My job is to help start new Virgin companies in North America while making sure the global brand remains strong. The mission is pretty clear: Our brand values have been the same since 30 years ago, when Richard went from running a student magazine to running a record company and then an airline. And even as we are expanding the global brand, including here in the States, with much higher stakes, the approach is still the same.

Virgin Innovations

First of all, the customer viewpoint remains the heart of our companies' origins: We spot gaps in the market where consumers have needs, and we try to fill them. Richard himself was a frustrated consumer who found a better way. Stranded at an airport, he chartered a plane and got himself and his fellow passengers home. That experience inspired him to start an airline that he himself would want to fly. Virgin Atlantic introduced the seatback entertainment system and an onboard bar, and it taught cabin crews to make friendliness a priority, to name a few innovative firsts.

How does our startup process work? Even as a global enterprise, Virgin Group starts companies with the same alacrity and speed as when Richard first began to build the brand. Consistent with Virgin's entrepreneurial genesis, the process is not complicated, and we keep pace with market changes. Our corporate development team has experience with private equity, investment banking, and entrepreneurial activities. Together with the brand team, it looks for sectors currently experiencing consumer "headaches," which to us are opportunities. The teams work together to make sure these opportunities fit our brand values and offer something better and fresher in their sectors. Partners and other investors come to us with all sorts of ideas, to which my teams ask and answer the following questions: Are we meeting a gap where there is a need? Does it offer consumers a better deal? Is it the right fit for our brand? Can we offer both substance and a unique Virgin flair across many consumer touchpoints?

The better consumers know us, the more they love us. That's what our brand studies have found, and I think it's in no small part due to how we go about deciding what companies to start. We don't ask ourselves, "What do we want to bring to market?" but rather: "What do consumers want?" We look at the world from the point of view of the consumer. The result of that kind of criteria is loyalty.

Maintaining Freshness

In spite of our track record in Britain, U.S. consumers were not so familiar with the Virgin brand when we started out here. This gave us the opportunity to enter U.S. markets with the same entrepreneurial passion that breathed life into Virgin's first British companies. But the brand is fresh and innovative, not only because of what we do but how we do it. Let me give you a few examples.

In the early 2000s, we recognized that both the young and the budget-conscious had limited cell-phone options. So we partnered with Sprint (S) and started Virgin Mobile USA (VM) as the first mobile virtual network operator in the U.S. to offer affordable but quality handsets and wireless service with excellent customer care and mobile data services. Six years later, its customer base exceeds 5 million consumers. It's a crowded marketplace—to cut through, one of the things Virgin is known for is its irreverent attitude when it comes to advertising. We started Virgin Mobile with holiday advertising, such as Chrismahanukwanzah and SugarMama, a revenue-generating program where users were rewarded with free minutes for watching online content.

It's not just about marketing. One of the ways we've continually stood out is by finding a niche, differentiating our product among existing ones, and improving customer service. For instance, when we launched Virgin America, as an affordable option to a sector in need of a makeover, we offered such features as seatbacks with a functioning PC run off Linux that houses on-demand movies, video games, and a first-of-its-kind seatback food ordering system. We're tickled that people are blogging about other extras, such as seat-to-seat texting, the mood lighting, and even the safety video.

Humane Lending

The financial-services industry is another pain point in the U.S. We recently watched a small company called CircleLending build a steady customer base and expertise in family-and-friends lending programs. Because we liked what they did and felt it could go even bigger and bolder with the Virgin brand, we invested in it and rebranded it Virgin Money. We saw the power of the brand immediately: Six months after rebranding, revenues jumped more than 50%. The brand has given the business permission to communicate in a fun and more human way. We now have advertising about friends, family, and loans with characters asking with a wink, "Anyone up for a threesome?"

We've also taken some knocks, however. One unique hazard in building on a known global brand is making the assumption that a product or service that works in one market will work here. In the late 1990s, we launched Virgin Cola in the U.S. with hype and fanfare. Richard drove a tank into Times Square and knocked down cola cans. Despite success in Britain and other countries, U.S. consumers didn't want another cola, and we retreated. It offered us a valuable lesson: One size doesn't fit all.

Virgin got its start as a true upstart. Richard launched a student magazine that led the way to a record company, and so forth. We are fortunate that instead of constantly reinventing ourselves 30 years later, we can stay true to our authentic roots, our rock-and-roll spirit, and the challenge laid down every day by our founder, who seems always to be one step ahead of everyone else in gauging the next big thing. But the entrepreneurial Web 2.0 world we live in means there are fewer Goliaths to slay and plenty of upstart Davids. We certainly don't rest on our laurels, because there is always room for better options of style and substance. That's what gets the folks at Virgin USA out of bed every day (and Richard out of his island hammock).

—As told to Stacy Perman

For more on Virgin's U.S. brands, see BusinessWeek.com's slide show.

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