‘Cautious’ Virgin brings Branson ethos to the Net

Virgin Group tries softly-softly approach to Internet launch to avoid ‘boom and gloom’ problems of not being able to match demand for its service. New Media is edited by Michael Kavanagh, who can be contacted on 100413.3070@compuserve.com

Better late than never: Richard Branson’s Virgin Group launches on the Internet this week with its Virgin Net service.

For once with a Virgin launch, initial advertising and promotion will be relatively low-key. A far cry from taking on British Airways in the skies, challenging Pepsi and Coca-Cola, and putting the frighteners on the fuddie-duddies of the financial services industry

Martin Keogh, marketing director of Virgin Net, explains: “Our marketing will be targeted and focused. We will be doing direct response advertising, and using existing Virgin channels for promotion where there’s a natural synergy with the product – for example through Virgin Games stores.”

Virgin Net is also working hard trying to tie up bundling deals with PC and modem manufacturers to ensure hardware is shipping with Virgin Net software for Net access.

All basic stuff for a mass-market brand striving to make a mark in an Internet access and online service market. And certainly Virgin has an opportunity to carve out a niche in this highly fragmented and fast-growing sector.

The performance of the UK’s early online front-runner Compu-Serve is beginning to look decidedly creaky. This mirrors the pattern set by market leader AOL in the US, where exponential growth and marketing investment has been undermined as early adopters have switched to a range of no-frills Internet service providers (ISPs).

The same picture is emerging in the UK, as a about 200 ISPs have sprung up with lower margins and created a market with little brand loyalty and high customer churn.

So will the Virgin branding count for much? And why is Keogh’s foot not fully down on the marketing peddle? “There’s a potential problem if the market grows beyond expectations and it’s not matched by service,” says Keogh. A key problem is churn caused by “free trial” hopping by Net surfers.

Virgin believes it is well prepared for respectable levels of early business, using the technical back-up of its partner in Virgin Net, Cabletel.

And Virgin Net’s pricing is competitive, if not the cheapest on the market, claims Keogh. The Virgin package will undercut market leader CompuServe on two tariff packages.

The Virgin brand will not simply draw people to the Net, but will keep customers committed to Virgin Net and avoid the churn other ISP operators have faced, he claims.

Matthew Townend, marketing manager of Pipex Dial, Britain’s second biggest consumer-based ISP, agrees that Virgin has been right to adopt a cautious approach. “It does not matter how good your brand is, unless you can properly service and support your customers,” he says.

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