Moving into New Markets by Will Whitehorn
Extract from Lessons Learned – Straight talk from the world’s top business
leaders - Sparking Innovation
50 Lessons (Harvard Business Press) £6.49
www.FiftyLessons.com
Looking at new markets in a different way is one of the real lessons of doing
business. People tend to think in very sheltered and shuttered ways about
what they do.
If you invent the Mars Bar and it’s the 1930s, it takes you until the 1980s to
think of using the Mars Bar as an ice-cream bar, for example. Now, that may
be very rational because Mars becomes so associated with one thing that the
Mars family, which invented the name, can’t really do much with it. You
can’t create Mars dog food, for example, because chocolate is bad for
dogs.You can’t extend that brand much, but you can take it into some new
markets. Almost any product name or brand can be taken to new markets.
The unique and interesting thing about the Virgin brand was that very early on
in Virgin’s history we learned how to look at new markets in a very
different way. Richard Branson came up with the brand name in the late
1960s, with the idea of Virgin being a name that could be transferred to
other areas, and he had this idea in his mind. I remember finding an
interview that he’d done in 1968 for Vogue magazine, a piece titled “People
of Tomorrow,” where at the age of eighteen he talked about how we had called
this company Virgin because we’re not experienced in business, but we think
there are lots of different things we could do for young people in different
areas.
That idea, by an eighteen-year-old, is one of the marketing foundations of
Virgin - the concept of looking at new markets and looking at them
differently. The brand has based its reputation in this area on one big
market move that it made to look at a niche market where it felt people were
being very badly served, which was the airline industry. Sir Freddie Laker
had run an airline in the 1970s that had introduced low-cost, long-haul
travel for the first time to the British public. It was about low-cost
travel for all and it was cheaper to fly to New York on Laker in 1981 than
it was to fly on BA [British Airways] to Paris.
In 1982 that company was bankrupted by a combination of airlines coming
together, operating a cartel, and undercutting [Laker] on price. Because the
quality of [Laker’s] service wasn’t very good, Sir Freddie’s airline went
down. Richard Branson bought that license from the government in late 1983
to launch another airline, and he was always very mindful of what Freddie
Laker had experienced.
Branson realized that we had to look at the market to see how the consumer was
being badly served and could be better served in the future. He based his
idea for that new airline, called Virgin Atlantic, on these simple precepts
that Freddie Laker had come out with, that if you’re going to enter a new
market, you must have a strong brand name, because the public has to
recognize the brand. [The public needs to] recognize you as an individual
because this is a government-dominated area of business where the government
can make rules and changes, and you have to lobby on your behalf and on the
consumers’ behalf.
He also said that you need to have lots of different price points. You must
not just try to be a low-cost airline like Laker, because the business
market is very important on long-haul routes. Also, people on long-haul
routes tend to fly much more seasonally, so you need to have the different
types of marketplace.
You must have a business class, which [Laker] didn’t have on his airline, and
you have to be prepared to face a price war from a cartel of airlines and
have a better quality of service. If you’re going to enter a new market, you
have to have a good quality of service. And if you can find a way to do
these things, then the sky is the limit.
It doesn’t matter if your brand’s come out of the music business and is going
into the airline business. As long as you have the approach to the
marketplace right, the brand can transfer into anything. As long as we were
giving the consumer those perceptions of value, quality, and innovation, we
could then transfer the brand from place to place. You have to think about
what you’re going for the consumer. You have to think about the market niche
you’re moving across to.
For instance, if we take the idea of Virgin Mobile—it was an idea that came to
Richard Branson himself. He was one of the progenitors of this idea in the
late 1990s because his kids had prepaid mobiles and they were very expensive
to use. His contract mobile, which I think was from Cellnet, as it was
called then, was cheaper for him to use. He thought this was very strange
because the kids were making quite a lot of calls and there didn’t seem to
be any mechanism like a normal product, in that the more you used it, the
cheaper it got.
We could see at the time of the late 1990s that the market was quite saturated
in areas. The business user of the phone, for example, had a complex series
of contracts, but this prepaid market was completely undeveloped. Young
people who couldn’t get credit ratings and didn’t have rich parents to get
them phones on their contracts were really suffering quite badly. So we
decided to find a partner and do a deal whereby we could launch a mobile
phone company based upon the simple precept: the more you used the phone
every day, the cheaper it got.
Everything was priced incredibly cheaply and simply; and by word of mouth, the
concept took off. In four years we got four million customers, and it’s just
because it’s simple, cheap, and easy. It fulfils these ideas of a brand of
quality, value for money, and a bit of innovation in the product, and it is
simple to use and understandable. If you can keep to those precepts, you can
actually move a brand from market to market.
Takeaways
People too often think in sheltered ways about what they do. But almost any
product name or brand can be taken to new markets.
To move a brand to a new market, start with a strong brand and provide a
level of service that the competition can’t match.
In addition, keep the product or service simple and understandable, and
provide strong value for the money.
