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Virgin Lifestyle:

The Future Of Super Brands In The Network Economy.

Rachel McLean and Nigel Blackie

Centre For Networking and Telecommunications Research, The University of Salford

R.McLean@pgr.salford.ac.uk n.m.blackie@salford.ac.uk

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This paper explores the tensions and synergies developing in the new network economy. Through analysis of markets,
forecasts and primary research with major commercial collaborators, it generates the hypothesis that greater consumer
empowerment and freedom of choice promised by the global network will gradually be replaced by restricting zones of
activity or self contained ‘virtual corner shops’. In this scenario one single multiproduct enterprise or ‘lifestyle
fulfilment company’, will fulfil all of a customer’s requirements. In this world opportunities for ‘disruption’ of the
relationship through marketing and advertising by others will be minimal. Focuses on three key areas: the underlying
trends in marketing and advertising in the virtual and real economies, the pragmatic response of businesses to market
fragmentation and the future impact of brand ubiquity and market fragmentation on the individual. It concludes that
greater consumer empowerment and freedom of choice promised by the global network will be replaced by self
contained ‘virtual corner shops’ and suggests issues for future research.

Introduction and Background

In the first wave of e-commerce, new start-up ‘pure play’ or single channel Internet companies were
seen as pioneering new markets and business models. The most successful initial public offerings
(IPO) market in history was the Internet sector. In 1998 the top three IPOs generated an average
price increase of 990%1. Both Internet start-ups and established bricks-and-mortar companies
surged to establish themselves in the virtual economy. It was widely believed that pure Internet
enterprises with low overheads and keen investors would supplant traditional companies. However,
as the initial wave of optimism and investment has subsided, companies have been left to ponder
the battle for market share and ultimately for survival.

In the same period, consumer experience came back to the fore and suggested that a more pragmatic
approach was required. In spite of being offered financial advantages to perform commercial
transactions on the Internet, a recent study by NFO Interactive2 found that nearly half of online
consumers are more likely to transact with a firm if it also has a physical presence. Of those
respondents, 42% stated that they ‘trust’ a brand with physicality. In response, companies began to
scramble back to ‘reality’, investing in a ‘presence’ and combining ‘bricks-and-clicks’. Many
takeovers, partnerships and alliances have been formed to give ‘physicality’ and ‘tradition’ to
Internet companies in order to strengthen brand position.

Whilst the current developments in online commerce can be characterised as a retreat from
virtuality, the future of commerce is electronic. The current phase of e-commerce development is
reminiscent of the introduction of television. Early television programmes were essentially televised
radio broadcasts relying on tried and tested cultural signals but failing to leverage the full potential
of the new channel. Endeavours to ‘internet’3 existing processes using relatively immature
technology fail to capture, and lay bare the potential of virtual channels. The market penetration of
e-commerce in the UK currently stands at 18.2%, and is expected to rise to 38.7% by 2003. When
compared with 97% penetration of fixed line telephone and 99 % penetration of television, it is
clear that e-commerce is not yet a mature cultural form4. Attempts to assimilate highly social
learned behaviours such as shopping and banking with the solitary new environment of the PC
Internet have merely culminated in the use of crude semiotic devices aligned to prior learning and
cultural forms such as virtual shopping carts and virtual checkouts.
A resurgence in the virtual is inevitable. What will emerge will be new and wholly unprecedented
cultural, technological and commercial constructs. The image of the solitary ‘time poor’ individual
shut away with the PC doing the weekly shop, or paying the bills will be superseded by the advent
of new integrated and mobile technologies, literally woven in to the fabric of our lives and clothes5.
As technology advances bringing more diverse channels for commerce, so the customer base and
behaviour will fragment. The potential offered by developments in digital television is immense.
Interactive advertisements could not only facilitate the impulse buying of a pair of jeans, but of
shares in the jeans company itself. Companies will not only face the problem of striking the right
balance of ‘bricks-and-clicks’, but will need to develop new paradigms for marketing their products
and services to a fragmented market already saturated by mass marketing initiatives.

The underlying trends in marketing and advertising in the virtual and real economies.

It is estimated that the average consumer sees approximately three thousand marketing messages in
the course of an average day’s activity. These include broad media advertisements, supermarket
promotions, junk mail, and the labels and logos that are ever more pervasive in today’s consumer
culture. Evidence suggests that consumers, suffering from information overload, no longer respond
to traditional one-to-many mass marketing messages that address them as a passive, homogenous
audience. Online consumers are already becoming immune to banner advertisements. Click-through
rates have fallen from an average of 2% in 1997 to less than 1% in 1999.6 Clearly the adoption of
traditional marketing techniques for new media channels is not effective. The more interruptions a
consumer perceives, the more immune they become to interruption.

As traditional marketing channels become more fragmented, the ability of businesses to reach the
customer base through traditional methods will further diminish. Market fragmentation means that a
company will not reach a significant percentage of consumers through one medium. Consumers
will select their own combination of channels of communication to suit their lifestyles, and will
become less susceptible to ‘disruption’ from advertising. Companies must deconstruct current
marketing practices to leverage the full potential of the new media. They must restructure or
fragment their brands to reach their target customer whatever channel; real, virtual, fixed or mobile
they may choose. Research suggests that increasing the quantity of information does not assist
consumer brand decision. Through one-to-one and permission marketing techniques companies can
increase the quality of information they deliver to consumers. One-to-one marketing7 focuses on
getting to know existing customers and extracting maximum value from them. Permission
marketing takes a step back, focusing on turning prospects into customers before gaining their
permission to attempt to extract maximum value on an ongoing basis. In either case, marketing
messages can be ‘anticipated, personal and relevant’8. The synergy of new marketing techniques,
which cut through the daily clutter of mass marketing messages, and new technological
developments is infinite.

As marketing techniques evolve consumers will continue to be targeted by a range of companies


through a number of channels. To cope with the vast range of choice and fragmentation consumers
will turn to the familiar, brand names. Brands are used by consumers to simplify shopping
decisions. Recognised brands signify ‘trustworthiness’ and permit the customer to pre-filter
information leading to their purchase choices. As the ‘new economy’ develops customers will
establish deeper relationships9 with fewer brands. The increased range of facilities and companies
online will strengthen relationships between customers and familiar trusted brands. The increase in
choice will drive consumers to become ever more reliant on brands they have experienced. Over
time this will lead to the domination of market share by successful, relevant mega-brands that will
grow through the acquisition of smaller companies, or by squeezing them out by starving them of
customers. Large companies will pool their resources and brands through alliances and partnerships
and thus dominate the resurgence of the ‘new economy’ (Fig 1). To be successful in this, brand will
become ubiquitous.

Partnerships, Alliances and Takeovers

Royal Bank of Scotland

National Westminster plc

Virgin Group Tesco

Virgin Personal Tesco Personal


Direct Line
Finance Finance

Dixons Motors jamjar.com Green Flag Direct Line Rescue

Brand and product heritage is no longer transparent. Complexities of composite capital create the appearance of
diversification and choice. Fig. 1

The pragmatic response of businesses to market fragmentation.

A dichotomy is emerging between the synergies of ubiquitous brand and broad media marketing,
and the tensions inherent in the growing need to fragment the market based on the consumer’s
preferred blend of communication channels. In this economic climate, businesses will need to
reconsider the pragmatic single view of customers as an undifferentiated mass10 and develop a new
approach to designing marketing and advertising for a range of customers in a variety of channels.
The current preoccupation with acquiring customers and building brand awareness through broad
media advertising will evolve into customer loyalty programmes and tailored marketing initiatives
designed to reinforce brand names. Companies will begin to focus on attracting repeat business and
providing new services to established customers in a bid to ‘lock them in’ and ‘initiate a spiral of
economic advantages.’11 (Fig. 2) Brands will need to ‘Be known. Be recognised. Be Anywhere.’12 in
order to establish a trusted and loyal partnership with consumers.

Market analysis reveals a trend in brand diversification. Companies are creating new brands for new
channels in a bid to maintain a facade of consumer choice. However, research suggests that for the
consumer in the new network economy, choice will become almost irrelevant. Instead, consumers
will seek to simplify or consolidate choice around one lifestyle fulfiller. Initial diversification will
lead to a greater need for simplification, and brand will emerge as the dominant factor in the way
consumers consolidate their needs. The analysis predicts that businesses will need to find routes to a
mass customer base before consumers lock into brand consolidators and lifestyle providers, and
stop listening to marketing messages from other companies. This trend is emergent in the market
approach of many companies.

Health & Leisure Clubs,


Books, Videos, Box Office Service,
Music, Soft Drinks, PC Production Company.
Wine, Cosmetics,
Bridal Wear, Cars.
Mobile Devices

Intelligent appliances

Bricks-and-Mortar

Telephone
Utilities, i TV
Travel, Information Services,
Financial Services, Student Online
Package Holidays. Community.

Fig. 2
Which Lifestyle?
Companies will begin to consolidate aspects of lifestyle fulfilment in a bid to ‘lock consumers in’ and
‘initiate a spiral of economic advantages’.

The future impact of brand ubiquity and market fragmentation on the individual.

But what of the consumers? How will they respond to market fragmentation? With choice and
diversification eroded, their lifestyles will no longer be made up of a jigsaw of brands, but will be
dominated by large lifestyle fulfilment companies. Such companies will handle utilities, insurance,
banking, entertainment, holidays, deliver shopping, and even arrange social lives. A company that
has the exclusive permission to constantly bombard consumers with brand loyalty messages,
marketing initiatives and advertisements. This relationship will be characterised by ‘intravenous
marketing’.13 Brand loyalty will no longer simply apply to the washing powder consumers choose,
but the lifestyle they choose.

Research carried out by the Department of Trade and Industry into consumer attitudes towards
switching service providers showed that only 6% of consumers have moved their bank current
account, 12% have switched mortgage provider and 11% their fixed line telephone provider. The
research showed that even when new entrants to a market offer competitive deals, consumers prefer
trusted brands. It further suggests that ‘inertia among consumers’ works to the advantage of ‘first
movers’ who sign up the largest customer base.14 The search for information on alternative
providers, actually switching, and becoming familiar with a new system, all represent a ‘cost’ to the
consumer in terms of time, money and emotional involvement. A cost which most consumers have
neither the time, nor the motivation to meet. How much simpler would their lives become if one
company fulfilled all their needs, remunerating themselves by taking one payment through an
internal electronic transfer? People work for single enterprises bound by such a construct, how
inconceivable is it to extend this unitary relationship to the remainder of the day, and partner private
lives with a single enterprise?

The changing world of commerce will have a great impact on daily life. The ways in which
consumers find and process information about the companies they choose to interact with, and the
systems which consumers and companies operate in will be revolutionised. In his work on social
interaction, Erving Goffman states that:

‘… the individuals I know don’t invent the world of chess when they sit down to
play, or the stock market when they buy some shares, or the pedestrian traffic
system when they manoeuvre through the streets. Whatever the idiosyncrasies of
their own motives and interpretations, they must gear their participation into what
is available by way of standard doings and standard reasons for doing these
doings’15

Society is constrained by a system of interlinked and often contradictory shared beliefs. Marketing,
the values associated with brand names, and consumer behaviour are a part of this system. The
‘Bisto family’, the mother and daughter in the ‘Fairy’ advertisement, and even the ‘Gold Blend’
couple are all branded mass media constructs that reinforce a standard of beliefs and a code of
acceptable behaviours. Similarly, through vicarious learning – observing the behaviour of others –
members of society know how they are expected to behave in libraries, or how they should interact
in banks. For participants in the virtual economy there is no easy facilitator to this shared way of
doing. In the future as our core existence and actual activities virtualise, codes of behaviour and
shared doing will slip below societies visible surface and be consumed only by those participating
in the interaction. Lifestyle brand relationship will become more analogous with a secret society
than an extension of the relationship we perceive today. As ingrained patterns of behaviour learned
at an early age are stripped away many groups in society will be left vulnerable and excluded from
the new network economy.

Conclusion

The current trend in mergers, alliances and partnerships will strengthen the position of companies
offering diverse services and loyalty programmes to deepen relationships with existing customers.
New technological developments are facilitating targeted marketing initiatives and brand ubiquity.
In the developing new economy with its increased range of choice and fragmentation consumers
will seek to simplify choices and ultimately lifestyles. The evidence put forward in this paper
suggests that greater consumer empowerment and freedom of choice promised by the global
network will be replaced by self contained ‘virtual corner shops’. The future of the ‘Super Brand’
will not only affect the remaining ‘real’ entities, but will impact on consumers whether it is as
citizens of a global network economy, or as customers locked in to a virtual corner shop. This raises
a number of issues for future consideration including:

• Branding strategy. To be successful, brand will need to be ubiquitous (available anytime,


anywhere, on any device) and interactive. Companies will need to be innovative to
anticipate consumers’ needs and be the first to deliver. Ultimately, they will need control
over their customer base in order to ‘lock them in’ and create a value added relationship with
a view to becoming a ‘lifestyle fulfilment company’. Such strategies will raise many
consumer rights issues.

• Globalisation. Super brands or ‘lifestyle providers’ need not operate solely within their own
national and cultural boundaries. Will globalisation lead to cultural homogenisation or will it
create new or harden existing divisions of society such as age, sex, race and class?

• Social inclusion. Market fragmentation through technological developments will not only
impact on personal privacy, but will enable segmented narrow-casting. As companies begin
to focus on the ‘lifestyle value’ of a customer targeting only those who promise most
economic advantage, those who are not targeted will become ‘locked out’, excluded from
economic benefits and ultimately alienated from the new network economy.

• Social order. What will be the impact of the virtualisation of the economy on social order
and the ‘shared way of doing things’? Social cohesion depends upon a set of learned and
observed behaviours. How will social order be maintained or threatened by the erosion of
feedback and opportunities to emulate accepted behaviours?
1
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2
Online Shopping, NFO Interactive, 1997.
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4
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5
Fox, Barry, Computer Clobber, New Scientist, Vol. 160, No. 2154, 3rd October 1998.
6
Kienan, Brenda, Small Business Solutions E-Commerce. Washington: Microsoft, 2000.
7
Peppers, D. and Rogers, M, The one-to-one future. London: Piatkus, 1996.
8
Godin, Seth, Permission Marketing; turning strangers into friends and friends into customers. London: Simon &
Schuster, 1999.
9
The New Brand Experience. London: Forrester Research, 1998.
10
Sealey, Peter, How e-commerce will trump brand management, Harvard Business Review,
July-August 1999, pp 3-7. (Reprint 99409)
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Reichheld, Frederick F. and Schefter, Phil, E-Loyalty: your secret weapon on the web, Harvard Business Review July-
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12
Levinson, Cathy, Building a blue chip brand for the twenty first century: speed, control, E*novation. Executive Briefings:
Strategies for The Competitive Edge. Stanford. Kantola Productions, 2000.
13
Godin, Seth, ibid.
14
Switching Suppliers: a research study commissioned by the Consumer Affairs Directorate. London, DTI, 2000.
15
Goffman, E. The interaction order, American Sociological Review 48, 1983, pp 1-17.

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