The focus of the sales promotion campaign

Virgin credit cards have enjoyed a successful launch and now the next phase of the product’s development is to increase market penetration to the level where Virgin can compete with the banks. The industry is changing, as the advent of debit cards threatens to remove the convenience user from the market, leaving only the revolving credit user. Therefore, Virgin must focus on that segment of the market. The future marketing strategy should be based on the vectors that appeal to that segment of the market.

Sales promotions should focus on two vectors — the Virgin brand and the service/image dimension. The Virgin credit card is competitive on the basis of price, but is not superior to the competition. Indeed, if the company offered lower rates than the competition it is likely that a price war would break out, damaging the profitability of Virgin’s business. Thus, the brand and service should be the focus of the sales promotion campaign.

The first recommendation therefore is to tie the Virgin brand to the service/image dimension. This strategy has been utilized to some extent already, with Virgin promoting the image component heavily. The company should shift its message at this point to the service dimension. Where prices are relatively equal, there is benefit to being perceived as offering better service, as that become the main dimension against which the company is measured by consumers. Evidence has shown that the consumers are fickle, and apt to switch on the basis of price. The best defense against that is to be perceived as the best service provider. Dealing with financial institutions is a stressful endeavor for most people. The Virgin brand already has a positive perception with regards to service, but they should increase this emphasis in their marketing message.

The second recommendation is to shift the emphasis of their discounts. Their sales promotions right now are tied to a broad-based loyalty program. However, offering consumers a token discount on compact discs is not a sufficient enticement. The emphasis of the promotion should therefore be shifted to areas that will result in the perception of real value, such as Virgin Blue. Customers notice discounts on airplane tickets much more than on music or other low-end products. The structure change of this loyalty promotion should be designed to break even for Virgin, but enhance the perceived value to the customer.

The third recommendation is to place increased emphasis on the innovation and fun aspects of the brand. This is important because it will help to differentiate Virgin credit cards from the bank cards. At this point in the product’s life cycle, it is moving out of the launch phase and into a phase of prolonged growth that will ultimately bring it into direct competition with the banks for a major share of the market. Indeed, building market share at this point involves stealing it away from the banks. The sales promotions at this point should emphasize differentiation on the basis of low-cost aspects, such as card design, website, splashy but moderate-cost promotions (tickets to shows by Virgin performing artists, for example) and other promotions that emphasize the brand’s core values. It is important to remember that the credit card’s promotional strategies must work within the context of the overall brand strategy for Virgin.

Overall, the strategy thus far has been highly successful. The company’s strategy going forward should build on the work that has already been done, but recognize the shift in dynamic both in the industry and in terms of Virgin’s own position within the industry. These three recommendations facilitate that, while enhancing the perception of value that the customers have with respect to Virgin.

Q2. Loyalty schemes in general are fading from prominence in the industry, and few of them offer much value to the customer. At present, it is difficult to determine the effectiveness of the loyalty scheme at Virgin Money simply because the credit cards have barely left the launch phase. Certainly people are attracted to the cards, but the next couple of years will see if they remain with Virgin or switch to a competing card. On the surface, however, Virgin’s loyalty plan looks weak

The primary value driver for a credit card is the interest rate. Loyalty programs offer 0.69%, which on the average balance of $2,820 amounts to $17.76 per year back to the customer. Not only is this an insignificant amount but it pales in comparison to the difference that a 2-3% change in interest rates offer, which would be $56.40 at 2%. Switching cards yields six months interest free, which on a 12% card would be worth $169.20. The loyalty program as presently constituted has little hope of convincing customers to remain with Virgin, unless the perceived value of the program can be increased to a level where it makes the customer think twice about switching.

For Virgin, the cost of revamping the loyalty scheme to increase its effectiveness would be lower than the cost of offering lower rates. Therefore the company should focus the loyalty program on highly visible discounts that have genuine perceived value to the customer. A 1% discount on a compact disc is worth $0.15-$0.20. A 1.2% discount on airplane tickets is worth for example $12 on a $1,000 flight. The difference in value to the customer is easier to perceive, yet structured properly the cost to Virgin would change little.

With loyalty schemes fading from relevance due to their lack of perceived value, the best move for Virgin is to enhance the perceived value, if only to avoid having to compete on interest rates, which will be more expensive.

Works Cited:

No author. (2004). Loyalty Schemes for Card Issuers: Do They Justify their Costs? Business Wire. Retrieved May 7, 2009 from

No author. (2009). Australia Credit Cards. Economy Watch. Retrieved May 7, 2009 from

No author. (2008). Westpac Banking — Virgin Money Credit Card Deal. Reuters. Retrieved May 7, 2009 from

No author. (2008). Virgin Dumps Stakes in Credit Card Market. Business Spectator. Retrieved May 7, 2009 from

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