Virgin Group Limited is a British conglomerate that encompasses numerous companies that provide products and services in various economic sectors that include travel, money, lifestyle, music, health care, people and planet, and alcohol. Virgin is an example of the application of the brand extension concept. A brand extension can be described as the act of introducing new products and services into different market categories using a company’s name as leverage.
Branson introduced Virgin Vodka, Virgin Cola, Virgin Money, Virgin Books, Virgin Galactic, Virgin Unite, Virgin Radio International and Virgin Wines following the success of Virgin Atlantic Airways and Virgin Records. Virgin Group’s extension strategy has evolved over the years, and it involves introducing products and services in categories where consumers’ needs are not fully satisfied.
Brand Development
The introduction of new products is one of the most important aspects of the brand development process (Strategic Brand Management). The success of the majority of Virgin’s products can be attributed to the initial success of the company after its incorporation in the 1970s. The success of Virgin Records and Virgin Atlantic Airways solidified the position of the company in the market. Brand extension results from factors such as the need for growth, financial constraints, and stiff competition.
A brand name is a valuable asset to a company (Strategic Brand Management). Therefore, introducing new products under an established name is an effective way of mitigating the aforementioned challenges. Richard Branson has introduced several products under the famous Virgin brand in order to take advantage of the brand’s success so as to explore new economic areas.
Advantages
Brand extensions have several advantages. They facilitate new product acceptance and provide feedback benefits to parent company by clarifying brand meaning, increasing market coverage, and revitalizing the brand (Strategic Brand Management). The failure rate of a new business is higher than that of an extension. The launch of products such as Virgin Mobile in 1999 and Virgin.com was successful because Branson introduced them by leveraging the value of the Virgin trademark.
The majority of the company extensions have been successful because the acceptance of the various products has been based on the reverence accorded to the Virgin name. Successful ventures have enhanced the company’s name because customers perceive new products in the same light as existing ones. Moreover, the parent brand communicates longevity, quality, and sustainability. Extensions enhance the efficiency of promotional expenditures as fewer expenses are incurred in promoting new products (Strategic Brand Management).
The Virgin Group has successfully introduced innovative businesses in various economic sectors because of the possession of a strong trademark. The quality of its products and services is perceived to be contained in its subsequent business ventures. Moreover, the conglomerate reduces the cost of product development and marketing because it does not create new brands but it invests in extensions. Products such as Virgin Money, Virgin Unite, Virgin Hotels, and Virgin Wines enhance the value of the Virgin Group as a whole.
Disadvantages
Brand extensions have disadvantages too. They can frustrate consumers, hurt parent brand name, and encounter retailer resistance (Strategic Brand Management). For example, the failure of Virgin Cola, Virgin Jeans, Virgin Vodka, Virgin Brides, and Virgin PCs had a negative effect on the Virgin brand. Customers’ negative experiences can affect the company’s overall brand equity. The aforementioned extensions frustrated customers because they offered products that were of lower quality than those that were in the market. The leverage of the Virgin brand did not guarantee the products’ success.
These failures can be used to explain why the Virgin Group has changed its trademark extension strategy to include businesses that have the potential to generate $150 million in sales within the first three years of incorporation.
Virgin’s Success
The Virgin extensions have been successful because customers perceived a fit between the new products and the parent brand. Associations about the parent entity that consumers develop could play an important role in enhancing the success of extensions. These associations aid companies in promoting new products. Quality is also another important factor that determines the success of extensions.
High-quality brands experience higher rates of success that average-quality brands. The failure of extensions such as Virgin Vodka and Virgin Jeans can be attributed to the ease of product manufacture. Brand extension is difficult when it involves products that consumers perceive as easy to produce. This can be illustrated from the failure of virgin Group’s extension into jeans, vodka, cola, and clothing. Virgin Galactic and Virgin Oceanic were successfully launched because they offer services that are perceived as unique and not easily duplicated.
Conclusion
The Virgin brand has existed for many decades and it represents the Virgin Group’s commitment to offer high quality products and services to consumers. This commitment to quality has allowed the company to pursue its brand extension strategy by launching products in numerous economic sectors. The strategy has been highly successful despite a number of failures. Certain extensions failed and served as an indication that even though Virgin had a strong presence in the market, launching products in certain sectors was detrimental to the company’s overall value.
Work Cited
Strategic Brand Management: Brand Extensions. Lecture 7. PowerPoint presentation.