Case: Virgin Atlantic Airlines

B37000 Marketing Strategy

Purpose of the report “Overview” From 1984-1994 Virgin Atlantic Airlines (henceforth “Virgin”) emerged as a successful competitor in the airline industry by providing high quality service at reasonable prices. In addition, Virgin has led the airline industry by setting the new standard of airline amenities (e.g. state of the art entertainment systems, high end lounges, to name a few). Furthermore, Virgin is the only international carrier to feature a charismatic and widely admired CEO, Richard Branson. To remain profitable and competitive in the future, Virgin will have to leverage these strengths. A greater focus should be placed on high end travelers who desire and appreciate the amenities and service that Virgin provides. Thus, for travelers seeking a luxurious, indulgent getaway, Virgin is the luxury carrier of choice because it has high end and boutique amenities. The goal of this report is to consider the implications of this position for Virgin, and assert the reason why this position provides Virgin with a competitive advantage in the future.

Recommendations
Virgin should shift its focus away from budget travelers, and instead focus on travelers seeking luxurious, indulgent getaways. This segment includes affluent consumers, as well as high-profile individuals. To differentiate itself, Virgin should offer premium amenities that create a unique flight experience, and expand coverage to include the most popular destinations (i.e. major business centers, leisure centers, etc.). It should also partner with complementary luxury providers also servicing these locations, i.e. hotels, cruises, etc. Virgin should signal its positioning concept by promoting itself via channels that target this premium consumer segment. For instance, advertisements featuring the celebrity founder Richard Branson, as well as other celebrities, should be placed in high-end media, i.e., Vogue, Vanity Fair, etc. Furthermore, Virgin should also sponsor exclusive events to promote an escapist image.

Analysis “Comparative Advantages” Virgin’s key strength and source in differentiation has been “[maintaining] the coexistence between [different] passenger groups better” than its competitors; as the case authors note,
While it described itself as a 'niche airline for those seeking value-for-money travel', its standards and reputation could appeal to a broad spectrum of customers. It managed to serve both sophisticated, demanding executives and easy-going, price-sensitive leisure travellers in the same aircraft. (p. 55)

Given an increasingly competitive and uncertain airline market, Virgin needs to identify the key sustainable competitive advantage they can offer to customers. They can appeal to consumers’ desires for high-class features in a way that a commodity airline cannot. People will buy Virgin flights to get an experience that no one else can deliver. One nice thing is that these high-class customers have higher profit margins, so even a small advantage among these kinds of consumers can make a big difference on the bottom line. Furthermore, from a larger perspective of accounting for greater demographic shifts, the “senior” generation of retirees is a growing consumer base that will soon outdwarf younger generations (this claim has basis; it underlies Social Security’s future bankruptcy and Europe/Asia’s concern with declining fertility). Their spending power is greater and their propensity to luxury travel (since they have more leisure) is higher; millenials hurt by the recession have less promise as immediate consumers, even if their potential as a core members of their consumer base is high in the future. We emphasize that shifting focus on the experience-seeking vacationer with money to spend does not imply abandoning the original customer base, namely price-sensitive travelers seeking cheap fares, and is consistent with