Posted on Tue, Mar 30, 2010 @ 03:01 PM
Recently our good pals at Hubspot posted a blog applauding the marketing tactics of Virgin America. The author, Mike Volpe, offers a lot of great insight into the role that non-traditional thinking has played in the airline's success, and it made me think of some other unique aspects of Virgin's business model that are just as important. I began to craft a blog comment in which I pointed out a few of these elements, and realized that the response was getting so long that I had to create a post of my own.
I love Virgin's image and style- though I'm not wild about the mood lighting (it's a plane, not Studio 54), and if their seats were a bit wider they'd probably be my favorite airline. But the genius of the company lies more in their business strategy than their marketing tactics.
One of the smartest things that Virgin did was they decided not to compete against most other airlines since they have a virtually non-existent corporate travel program (a $200 billion industry) due to the lack of markets they serve. Currently Virgin services only eleven destinations, and most destinations are connected exclusively through cross-country routes (no Ft. Lauderdale to Boston route yet). Virgin is not a major airline, and to compare it with the "big boys" would be unfair to both parties. It is more accurate to say that Virgin is the first airline that is capturing a long-tail segment of the travel industry I would call, "the Continental Destination Traveler." This by the way, is the market Disney should be rushing to fill. Virgin focuses (as Mike correctly points out) on the experience of these targeted destination consumers rather than on offering the convenience of multiple destinations. I would argue that this tactic, and not their inbound marketing strategy, is what has given them such great success and created the social media buzz. After all, content is king.
The next revolutionary tactic Virgin has pioneered is it's definition of marketing. Mike's blog mentions that Virgin has a, "much smaller marketing budget than it's competitors". I won't argue that the raw dollar amount that Virgin invested in marketing is smaller than what a major carrier does, but let's think about what we mean by marketing. The essential service of Virgin's business is to transport people from one select place to another select place through the air. Yet Virgin has invested heavily in non-essential, on-flight amenities such as touch screens, personal cable TV, and that damn mood lighting. Why? Because these "amenities" are actually marketing investments that promote and separate Virgin from other brands (a beautiful form of interactive, guerrilla marketing). Most tech-savvy travelers (Virgin's target market) already have access to many of these amenities in the form of smart phones or laptops, yet they enjoy the fact that these features are a part of the plane. When they get off their flight, they spread the good word about how different Virgin is from other airlines, even though the essential service is exactly the same. Considering this, we can group this investement in "amenities" into the marketing budget and suddenly the gap is not quite as large.
It is a virtual law of business that if your competitor has a distinguishing feature that elevates it's brand against yours, you will do everything you can to level the playing field. It stands to reason that American, Delta and United would be looking to negate this advantage, yet three years since the launch of Virgin and still no significant upgrades on any of these major carriers. (I flew to Chicago from Boston on American recently and had nothing but the half-filled crossword puzzle to entertain me). Why?
The reason for the delay is twofold: Virgin still does not own a big enough market share to threaten the major carriers, and such "non-essential" improvements are financially impractical for these companies. Virgin maintains a fleet of 28 Airbuses, compared to the over 600 Boeing planes American Airlines operates. Adding touch screen TVs to every seat is a much easier task for Virgin than American. Thus Virgin was able to bring a high standard of quality across the board that the larger airlines could not keep up with.
The major airline carriers' biggest concern right now (after security) is price. Southwest's bare-boned style of travel has grown it into the 2nd largest carrier in the nation. But price is not the most important factor in the minds of the consumers. One way or the other travel is expensive, and whether it's a $400 flight or a $250 flight really doesn't matter when you are spending another $1,000 on hotel rooms and meals. Virgin is focusing on what the next generation of Americans care about when they travel. Crappy chicken dinners are out; private TVs are in. 1st Class is out; 6 more inches of leg room in coach is in.
I wouldn't say Virgin America has invested less in their marketing than other airlines (maintence and upgrades of these amenities may actually end up costing them more). I would say they have invested smarter. As we crawl out of this recession, look for Virgin to significantly grow their market share by meeting Gen Y's voracious appetite for a luxurious technological experience rather than cheap tickets or frozen dinners. You'll know the game is over once you see Virgin flying to San Antonio.
Posted by SJ Petteruti.
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