Thursday, 9 March 2017
The art of building a brand in financial services
Few people know more about the art of building brands than Sir Richard. Despite coming late to the financial services sector, Virgin Money has in a relatively short space of time, run rings round its competitors. In the area of investments, Branson saw the gap in the market for a simple investment for the novice investor by launching its tracker fund (managed by computers rather than costly fund managers) as a retail investment as early as 1995 - well before anyone else. Not only was he able to grasp the power of its simplicity and appeal to the masses, but also succeeded in implementing a management charge of 1% - a fee 12 times that of Legal & General's identical product. Despite this remarkable discrepancy, the fund has been so well pitched in marketing terms and supported by the company's legendary customer services that it has been hugely successful at tapping into the massive market of investment newbies. In one fell swoop Branson had managed to do what conventional investment houses had grappled unsuccessfully with for decades. Indeed, in the wake of Virgin's success, even the mighty Hargreaves Lansdown has in recent years included tracker funds on its roster, having pooh poohed them for years. Though ironically, Virgin's fund isn't among them as its management fee is far too high.
Then in 1997, Virgin saw the potential of shaking up the mortgage market by creating with RBS its One Account in which customers were given the freedom to consolidate the balances of their mortgages, current accounts, savings accounts and loans into one account. By offsetting the net total of all these accounts against the capital sum borrowed for the mortgage, customers were able to reduce the interest payments on their mortgages. It was a brilliantly simple idea. But nobody else had thought of it until then. Needless to say, the product was an instant success and helped this relatively new kid on the block further bolster its position in this otherwise conservative and staid market.
It has to be said that Sir Richard isn't just good at spotting opportunities to win over clients. He's also brilliant at retaining them through customer services, and understands its inseparable link with brand building, better than most. In fact, customer services has been something of an obsession throughout his career. There is, of course, the famous story about him disguising his own voice and calling one of his companies as a disgruntled customer, and demanding to be put in touch with Richard Branson. No one tells the story better than the man himself: "I am so pathetically bad at imitating someone else's voice that Penni, my trusted assistant for many years, sat there and let me make a complete fool of myself with some trumped-up complaint before saying, 'Well, thank you so much for sharing all that with me, sir. Let me see if Mr. Branson is available to take your call.' She then kept me hanging on for what seemed like an eternity - it was probably a couple of minutes - before coming back on the line to say, 'Sorry, Richard, but you appear to be out of the office at the moment, can someone else help you?' before dissolving into howls of laughter."
It's a funny story, but it makes an important point that most entrepreneurs fail to grasp. Namely that you should never get so caught up in management and strategy that you forget that you're providing a product or service for the benefit of customers.
Virgin Money has from the outset tried harder than most of its competitors to score brownie points in this department, and has by and large succeeded pretty well. In 2011, it took the decision once again to do something no other financial services provider had so much as contemplated. It launched its Virgin Money Lounges - essentially VIP lounges on the high street for its customers. Besides free refreshments and newspapers, Virgin Money lounges also provide iPads and in some cases, a bookable room for meetings. According to the young lad who greeted us at the Haymarket lounge, they get around 200 customers using it every day. The one in Glasgow gets as many as 1,000 through its doors on some days. That's an awful lot of customers in a year. Yes, they may be paying too high a price for their tracker funds. But they are happy customers, and they wouldn't dream of going anywhere else. That's the genius and staying power of the Branson brand.
Alex Pearl is the owner of Alex Pearl Ltd and author of Sleeping with the Blackbirds