The Gonzo Way of Branding

There's not much fun and lots to fear in the airline business these days, though. Carriers are struggling with everything from soaring fuel costs to plunging brand loyalty. This time, Branson really is going out into a hurricane, his critics say. "Virgin is too late," says the marketing guru Al Ries, coauthor of The 22 Immutable Laws of Branding. "It's 33 years since Southwest launched a low-cost airline, and now there's JetBlue, Song, Ted, and all the others. At this late stage, it's hard to imagine any angle they can come up with." The other startup airlines succeeded by serving markets that Southwest had ignored, Ries says: JetBlue flies out of New York and AirTran serves the Southeast. "Where's the hole for Virgin? They have the advantage of a brand name, but I think Virgin America is going to be just as successful as Virgin Cola and Virgin Vodka," which were Branson's most conspicuous failures. Adds Henry Hardevelt, a travel industry analyst at Forrester Research: "Please tell me why anyone would invest in an airline. The U.S. airline industry makes NHL hockey matches look like fifth-grade recess. It's brutal and bloody. The sad truth is an investor could get a better return starting a Subway sandwich shop than an airline."

But what really gives the skeptics conniptions isn't so much any specific business Branson launches, but the sheer number of ventures he dives into. Isn't Branson spreading his brand too thin by slapping it on anything that will hold still? "A brand can't stand for music stores, airlines, mobile phones, colas, financial services, and on and on," says Peter Sealey, the former head of marketing at Coca-Cola, who now teaches at UC Berkeley and Stanford. "There's no brand on earth that can do that. That's ego."

If they're right, the thrill-seeking Branson may finally be diving into one adventure too many. He has led a charmed life so far -- a man with a Midas touch who seems to be able to turn every whim, hobby, and surmise into gold. But beneath the showmanship, the seeming effortlessness, and the Boy Billionaire lifestyle, Branson is a tenacious, focused, and creative entrepreneur who has defied the naysayers time and again. The experts thought he was insane 20 years ago, for example, when he started out with only one airplane to launch Virgin Atlantic. "He's charming and disarming," says one of his executives, "but he has a razor-sharp mind behind that."

Branson infuriates the experts precisely because his success has come from breaking nearly all of their most sacrosanct rules. "You're not supposed to 'stretch' a brand so much," says Alycia de Mesa, a marketing consultant and author of Before the Brand. "But Richard Branson is a billionaire because he hasn't accepted limitations." She contends that even a failure like Virgin Cola actually benefited the brand because it generated so much media coverage and reinforced Branson's image as a risk taker challenging the establishment. "I would look at it as a promotional effort, not a product," she says. "It's a great promotional tactic."

Branson's willingness to pull publicity stunts has been invaluable, from plastering the Virgin name on his giant balloons to posing in full drag in a frilly wedding dress for the opening of his Virgin Bride shop. But wackiness aside, there's a clear method to Branson's madness. He may claim to plunge into ventures just because they seem as if they might be fun, but there's usually much more calculation to it than that. "The time to go into a business is when it's abysmally run by other people," he says, and when he feels Virgin can provide a significantly better customer experience. Airlines, for example. Cell phones, too. Five years ago, Branson realized that many young people couldn't afford the expensive monthly charges the big players required. Instead, he envisioned a pay-as-you-go approach, so teenagers wouldn't need to lock themselves into yearlong contracts or pay for airtime they didn't use.

Virgin Mobile USA is a classic illustration of how Branson builds a business. It started, of course, with an outrageous stunt. His people wanted to dramatize the motto "nothing to hide" since their service has no hidden costs. So Sir Richard rose above New York's Times Square on a crane, then stripped down to a "nude" bodysuit, his loins covered with a Virgin cell phone. He was surrounded by the cast of Broadway's The Full Monty in the same pose.

Pay-as-you-go was a new idea for cellular service in America, and the Virgin brand wasn't widely recognized here, so Virgin Mobile USA got off to a slow start. The operation quickly ran out of cash. Its top executive, Dan Schulman, said he needed more money to order phone handsets to sell during the holiday season. Branson called him and said, "I'm selling one of my favorite hotels in the world to fund you." Recalls Schulman: "He won me over right there. Now there's little that I or my organization wouldn't do for him. He puts his money and actions behind his words."