Question

MINI CASE STUDY: VIRGIN CREDIT CARD

When consumers think of global brands, Virgin is a brand that comes to mind. The Virgin brand has been described as both easily recognizable and innovative. This is partly due to the ever-increasing number of businesses that come under the Virgin umbrella. Virgin founder Sir Richard Branson is widely regarded as epitomizing the Virgin values- being consumer focused, offering value for money, quality innovation, fun and a sense of competitive challenge.

The Virgin Money Group Australia launched the Virgin credit card in 2013. Virgin positioned the credit card as offering innovative and better value. The creative idea behind the launch campaign

for Virgin’s credit card was: ‘Give you plastic the surgery it deserves’ and ‘Shaping up you credit cards’. Virgin credit cards are differentiated visually by a rounded corner reflecting the ‘shaping up’ of the industry. Individual expression and equality are catered for through a choice of card color. The card

was marketed as a low cost product to challenge Australia’s major banks and to compete with similar credit options offered by credit unions. Feature included:

- No annual fees – ever

- No application or joining fees

- Low ongoing interest rates

- Mates’ rates rewards - Customer service available 24/7

Virgin emphasizes its consumer friendly reward scheme. Reward partners include a cross section of industries including accommodation, car hire and entertainment services. Partners include Virgin Blue, Eurocar and Dendy cinema.

The initial positioning of Virgin’s credit card was an affordable second credit card. The launch of the credit card was reminiscent of earlier product launches by Branson. He donned a surgical gown and conducted a mock surgical operation to remove a competing credit card from a consumer, pronouncing that Virgin intended to give you plastic the surgery it deserves.

However, not all Virgin businesses have been a success. Do you remember Virgin Clothing, Virgin Vodka or Virgin Cola? Some experts in marketing and branding are surprised that Virgin has not suffered more failures and view the Virgin approach to brand extension as ‘completely unfocused’. Many suggest that Virgin should get out of businesses that do not fit the company or Branson’s personality, especially businesses such as beverages, cosmetics and financial services – or, as one commentator recommended, the company should come up with a different name for them.

QUESTION 1

Did Virgin make the right decision in using the Virgin brand in the credit card market or should the company have developed a new brand? In your answer discuss in detail the benefits and risks in using an existing brand in a new product category

QUESTION 2

Use the concepts of points of difference and points of parity to explain how Virgin has positioned itself in the credit card market.

Answer 1

Virgin is a global brand, and it is easily recognizable and innovative brand. Virgin has various brands in different sectors and emphasizes the Virgin values such as being consumer-focused, offering value for money, and so on.

Virgin is a well-recognized brand, which will help to promote its new credit card and attract consumer towards its credit cards. The new brand will increase the product line of Virgin and increase its market competitiveness. Therefore, Virgin makes the right decision for its newly launched credit card.

Benefits of using an existing brand for the new product category would be:

· It will provide a well-established consumer base for the new product.

· It will provide goodwill of existing products to the new product that will advertise the product without paying for marketing.

· It helps to enhance product competitiveness in the existing market.

· It reduces the cost of establishing a new brand for the new product.

Risk of using an existing brand for the new product category would be:

· It increases the risk of maintaining the goodwill or market position with the new product as it can be successful or unsuccessful in the new market.

· It may reduce the reliability of the brand if it is used in another market rather than the core brand market.

The point of parity refers to the standards that define the minimum eligibility/criteria of the product to enter the competition in the market. Here, the point of parity for Virgin’s credit card in the credit card market is to provide all the facilities to the consumers that other existing firms offer such as increase purchasing power, borrow money, overdraft facility, and so on.

And, the point of difference refers to the features of a product that makes it differentiated from other existing products and that attracts the consumers towards the product in the competitive market. Here, the point of difference for Virgin’s credit card in the credit card market is its unique features such as low-cost product, shaping-up (rounded corner), no annual fees, No application or joining fees, and so on.

Hence, Virgin has positioned as a competitive firm in the credit market as it provides similar credit options as well as differentiated features to the customer.