One Million Virgins Can’t Be Wrong

When Virgin Mobile USA launched services in mid-2002, it was the subject of much skepticism. Not only did the fledgling wireless carrier plan to specifically target the often-elusive teen market, but it did so by offering pay-as-you-go services, with no contracts for users to sign. Moreover, instead of building its own network, Virgin Mobile rolled out its services over partner Sprint PCS’s system, while still handling all marketing, billing, customer care and data content requirements in-house. Sixteen months later, Virgin Mobile’s subscriber base has topped 1 million--a record-setting pace on par with Sprint PCS’s own growth--and in the process, the company has proven the viability of both youth-centric prepaid services (70% of subscribers are under the age of 30) and the mobile virtual network operator (MVNO) model in general. On the occasion of Virgin Mobile USA topping the 1 million mark, CEO Dan Schulman spoke with Jason Ankeny about what the carrier did right, and what it must do next.

On proving the viability of the MVNO model: We did one thing very right: We stayed very, very focused on our target segment and developed our entire proposition and business model around supporting that target. It’s easy to lose sight of your focus--there are always a thousand different opportunities that throw themselves at you. But we were determined we would understand the youth segment better than any other wireless carrier out there, and in doing so develop a proposition and an IT infrastructure and a distribution network and a value proposition that supported that target. Frankly, that also meant making choices not to serve other targets, and if we didn’t do all those things--both from a business model perspective and from a marketing perspective--we wouldn’t be here today.

On market segmentation: Having run AT&T’s entire consumer business a number of years back, I know that it’s very difficult when you’re trying to be all things to all people and all sub-segments. You have a brand that stands for certain things to certain segments, and if you push it too hard and heavy in one segment, you may start to alienate another part of your customer base. Bringing the brand to edgy and risky areas is difficult. It’s why when we were looking for our chief marketing officer we chose [Howard Handler], who used to be the chief marketing officer for MTV. We realized we weren’t so much trying to be a telecommunications player as were trying to be a youth consumer products player.

On advertising to the youth market: We try very hard to be multicultural in our approach. We now have a very multicultural customer base skewed very much to the youth demographic, which is exactly what we set out to do. The thing you can spot is when there are advertisements that try to hard to reach out to a certain demographic or ethnicity. The youth market is extremely savvy--they’ve been marketed to since the day they were born, and they can see through things that don’t ring true. We’re very pinpointed and focused in our advertising. We do quite a bit on MTV, we do things on BET, on Comedy Central and on very late-night TV. One of the things we found in our research is that there are TV shows you watch when your parents are in the room and TV shows that you wouldn’t want to watch with your parents. We go for those unsupervised moments. We’ve been fairly successful at brand awareness among our demographic--when we first launched, brand awareness hovered around 25 or 30 percent, and we’re now very close to a lot of the traditional carriers. We also have very strong word of mouth. Over 90 percent of our customers are likely to recommend Virgin Mobile to a friend.

On multimedia content: The youth market does not want to be force-fed anything. However, if you look at the things that drive them--this whole need to be in tune with pop culture and where it’s going--as we looked across the field of people who we might partner with for content, MTV came to the top of the list. We also came to the top of MTV’s list, because unlike other carriers, our brands meshed extremely well--this was the only segment we were going to focus on. We came into a good marriage where we decided to work exclusively with each other. We’ve had some big successes and we’ve had some not-so-big successes. One of the things that we do is introduce a lot of different content out there--stuff that works, we constantly update and keep fresh, and stuff that doesn’t work, we tear it down. We’re not interested in having the most content, but the best content. Forty percent of our base uses our non-voice services on a regular basis, and for that you need the right experiences and the right content--you can’t be all things to all people.

On staying ahead of the competition: The first thing we’ve got to do is not take our eye off the ball--I’m sure there will be people who come into the market and I’m sure they’ll find it a much more difficult row to hoe than they anticipate. Our goal is to stay focused on our segment and keep refining our value proposition. Through all of the ups and downs that a national launch will bring you, we have stayed very true to those two things--if we can continue, the numbers will hopefully fall out in a good way for us.