The Gonzo Way of Branding

Getting It Right

Branson has lured Fred Reid, former president of Delta, to run the new carrier. But Branson says that he's going to "get out there and help him shout about it." And he's planning to use all the publicity around the new airline to bolster his other American ventures. "An airline is a very high-profile way of getting a brand established in a marketplace," he says. Virgin America will spend around $70 million a year on television advertising in the United States, while Virgin Mobile will lay out another $70 million and Virgin Atlantic will ante upward of $25 million. But the reality-TV show will probably do more for Virgin's brand awareness than all of those well-funded marketing campaigns combined. "In one fell swoop we should get Virgin completely well-known in the States," Branson says.

Still, Branson knows from experience just how unforgiving the airline business can be. Four years ago, Virgin Atlantic introduced new first-class sleeper seats, but customer feedback revealed that "we didn't get it quite right," Branson says, because the seats didn't fully recline. "Rather than living with it for 10 or 15 years, we just decided to start again," discarding an investment of $68 million. "It's important to acknowledge that you haven't gotten it right and then not keep your head in the sand but get on with it." The cost this time around was another $127 million.

Isn't that throwing good money after bad? Isn't that kind of business decision a lot like playing blackjack in Las Vegas: You lose big and then you raise your bet, but each new hand is still another big gamble, right? "There's always a risk," he says. "But the much bigger risk is to let your reputation erode away by not getting it right. There's no room for second best. In the airline business that's particularly the case."

Virgin Everything

Virgin is an unusual conglomerate. While most of its revenue comes from a handful of businesses -- airlines, megastores, mobile phones, the V2 music label, and European trains -- the final 20% or so comes from hundreds of small and scattered ventures, so many that it's hard to believe that even Branson can remember what they all are. There's Virgin Cosmetics, Virgin Radio, Virgin Wines, Virgin . . . just about everything. In London he even owns a modeling agency and two nightclubs (one straight, one gay).

Why does he keeps launching so many small operations? "If we were purely a money-making machine, with our one reason for being to get a 35% to 40% return annually, I suspect that we wouldn't do as many new ventures and we would be marginally more focused than we are," he says. "Having said that, our returns are still pretty astounding -- maybe triple what they would be if you invested in the stock market or with other venture capitalists." Of course, that's impossible to confirm since most of Virgin's ventures are privately held and chartered offshore.

So again, why start all those companies? "I love learning about things I know little about," Branson says. "I love people, and I don't like to say no all the time. We've got people all over the world who are coming up with great new ideas, and it doesn't actually cost us a lot relative to the overall size of the group. Four months ago, I went into a juice bar in Sydney called Pulp. Fantastic. Healthy. Delightful staff. I knew the guy who set it up. So let's give it a go outside Australia."

Branson especially hates to say no when he likes the people who propose ideas. Virgin Bride was the brainchild of one of his flight attendants, who wound up running the London wedding superstore. When Branson's wife Joan's manicurist suggested offering massages and nail treatments to Virgin's first-class passengers, he created Virgin Touch and put the manicurist in charge of it. Even the Virgin Web site solicits proposals for new business ideas.

The person Branson admires most in the world is his friend Nelson Mandela, who has been an accidental scout for new ventures. Mandela told him that a big chain of health clubs had gone bankrupt in South Africa and 5,000 people were about to be put out of work. He asked if Branson could come down the next day and save their jobs. Branson got on a plane, looked over the books, and decided it was a very good business. Now Virgin owns around 85% of the health clubs in South Africa.