Virgin’s countercultural approach powers success

USA Today has a much-cited article on the success of Virgin Mobile. Rather than rehash it from top to bottom, let’s take a look at some of the key elements of where Virgin Mobile did right where most other MVNOs went wrong. Before even delving into the article, though, we know that being an early adopter certainly helped their cause. Back in 2002, when they launched, there weren’t too many MVNOs, though one of their competitors, Boost Mobile, was already targeting the youth market. So how did they differentiate?

For starters:

[Virgin Mobile USA CEO Dan] Schulman says: Providing “good value on basic stuff.”

That’s an aspect I think a lot of the failed MVNOs forgot to take care of. Yes, you want to develop a niche so that you can target a certain demographic of users. However, if you’re not putting most of your time and effort into providing voice and messaging services, you’re not going to get far. Data usage isn’t exploding in the U.S. While some can afford the luxury, the majority of users are fine with voice and text. So keeping the focus on that can be the difference between accruing 5 million subscribers in six years, or folding before you hit your one-year anniversary.

Its “Sugar Mama” service, aimed at fusing ads into the mobile experience, rewards customers — with wireless minutes — for watching ads. So far, about 750,000 customers have signed up, earning 23 million minutes overall. (Customers are limited to 75 free minutes a month.)

On one hand, I’m surprised that more people haven’t signed up for Sugar Mama. On the other hand, I suppose that enough of Virgin’s demographic falls into a high enough income level that the minutes earned on Sugar Mama are not worth the time invested. It does, however, give teenagers incentive to choose Virgin, especially those who have to pay for their own cell bill. If I was 16 years old and wanted a cell phone, and had to pay for it myself, I’d pick Virgin Mobile in a heartbeat — and make sure to get all 75 of those free minutes.

The article also talks about the impact of Helio in a way I haven’t really explored yet. Apparently, this is a way for Virgin to retain customers as they “grow up” and opt for a contract-based phone instead of pay as you go. By offering higher-end handsets and a contract-tier service, Virgin could see a reduction in churn, something every prepaid carrier clamors for. Then again, at that point, Virgin would be a hybrid provider, rather than a straight prepaid provider.

The outlook for Virgin looked bleak when they announced their first quarter results. They’ve done a good job in the second quarter of regaining some consumer confidence. It will be interesting to see their second quarter results.

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