Virgin takes on telcos

Since it hit Canada last March, Virgin Mobile is giving Canadian telcos a real run for their money.

U.K.-based Virgin may not qualify for our best-brand survey, but perhaps it should in the wake of its big Canadian landing (literally) in March. To mark the launch of new cellphone carrier Virgin Mobile Canada, Richard Branson, legendary founder of parent Virgin Group, dressed up as a superhero and appeared atop a building on the edge of Toronto's Dundas Square. From there, he descended by a cable and harness into the welcoming arms of three comely models dressed as nurses.

The costumes, of course, related to Virgin's new ad campaign, which must be one of the first anywhere to rely heavily on the general theme of sexually transmitted disease. The campaign plays off the complaints some Canadians have about their cellphone carriers and offers up Virgin's pre-paid plan as the cure for “the Catch.” In a series of clever ads, the firm highlights a list of “medical” symptoms–including unsightly hidden fees, monthly billing discomfort and paralyzing contractual obligations–not found in Virgin's easy-to-use, pre-paid, no-contract cellphone plan. “We're a niche player; we don't attract customers over the age of 30,” says Nathan Rosenberg, who is head of marketing for Virgin Canada. “People over a certain age may be turned off by it, but that's not our market.”

Is the mainstream telco market anyone's market? It's no big secret that Canadians don't exactly love their cell carriers, a fact confirmed once again in this year's best-managed brands survey, which found that the two biggest names in Canada, Bell and Rogers Wireless, both rank low. Almost 14% of Canadians surveyed ranked Bell among the worst-managed brands, while 13% chose Rogers. Telus dramatically improved this year (with 10% calling it one of the best brands), but that's after being ranked one of the worst brands in Canada by 16% of respondents last year. That's some disconnect.

No wonder there's a sense of optimism in the air at Virgin's trendy new Canadian headquarters in Toronto. Rosenberg, a 33-year-old transplanted Aussie, landed here with the Virgin brand tool kit tucked under his arm, a large nylon folder that contains the Big Red Book (playing on Mao's little red one) as well as various writings and implements (including a wine opener) to help local managers understand the exact shape and essence of this global brand. Which is important. After all, Virgin is the one company that has evolved furthest from any primary production, morphing itself into an organization that is purely and simply just brand.

In the U.K., Virgin has its name on everything from trains and cola to makeup and wedding gowns. But it doesn't actually produce any of that stuff. Virgin usually partners with a local service provider in whatever business it is looking at, and then applies its own marketing and branding to develop market share. In Canada, Virgin hosted a series of “V dinners” at which execs grilled ordinary folk about cellular service. That identified the malady: cellphone contractitis. The remedy: Virgin decided not to build a new cell network; rather, it has partnered with Bell Mobility and will operate as a virtual network operator, tasked only with marketing its cellphones and manning the call centre. The advantage in being “virtual” is that Virgin can quickly scale up or down as needed. That will be important if its plan to commodify the mobile-phone industry works. Virgin is selling its hand sets in places like 7-Eleven and Wal-Mart, which it expects will increase the rate of cell penetration in Canada (at 45% one of the lowest in the developed world).

Should the incumbents be worried? Perhaps. Consider that Virgin's partner Bell has begun advertising “no hidden fees” in its own retail mobile service, a development Rosenberg takes credit for. “We've only been in operation for two months and we've already had an effect,” says Rosenberg. “That says something.”