19th Feb 2010
Virgin Galactic president Will Whitehorn discusses the company's remarkable journey - and the part that the likes of customer insight and internet marketing have played.
Virgin Galactic stands on the threshold of being the first business to make regular commercial flights into space. If all goes according to plan, the company’s first space tourists could be blasting off in the next 18 months. It represents an incredibly audacious quest, and the organisation as a whole is an amazingly bold business venture.
At the helm of Virgin Galactic is president Will Whitehorn. Whitehorn is often portrayed as Richard Branson’s righthand man at Virgin Group, and before his present position at Galactic, he was Group public relations manager and head of the Group’s public affairs department.
MyCustomer.com sat down with Whitehorn at Alterian’s recent Engaging Times Summit in London to discuss the evolution of Virgin Galactic – and the role that customer insight, digital marketing and social tools played in its journey.
The brand image and the brand challenge
Virgin has one of the most recognisable brands on the planet, imbued with that priceless quality: trust. Few organisations have it in such abundance as Virgin Group. "Virgin is not a single company – we are a venture capital organisation," Whitehorn emphasises. "We’re a central holding company that invests in businesses – sometimes with partners, sometimes with institutes of finance. But they are separate companies with their own destinies.
"But we have a brand. The Virgin brand. This is what I used to be involved with but since I went to run Virgin Galactic back in 2004, it has now diversified and now there is a whole team across the Group who help us manage the brand and the way the brand is used by the companies. They don’t dictate how these companies market – they just basically list the extremes of how they might market. There is a lot of freedom in the Virgin companies."
Not all organisations are as fortunate as Virgin, however. Some brands have become tarnished – think of Toyota’s present struggles and the damage that has been inflicted. And Whitehorn is only too aware of the difficulties that any company faces, Virgin included, once this occurs – particularly in light of the super connected world we now live in.
"Let’s say that you have a good product but it is badly perceived, how do you change the perception of it?" he says. "In the present world, you can’t just solve the problem by whacking a lot of advertising dollars at it. You can’t just do it with a direct mail shot to everyone you have identified. You have actually got to engage with huge numbers of other audiences. You have got to try and convince the analysts and the opinion formers that your product is as good as the rival products and they’ve got to try and convince lots of disparate groups around the place. And those are the challenges for marketers now."
Be bold - have a higher purpose
Leading thinkers are convinced that mankind will be forced to increasingly exploit space this century if it is to handle the increasing environmental pressures being placed on humanity. Space already plays a vital role in feeding the world’s population, with weather monitoring satellites and GPS having enabled food production to increase 12% over the last 10 years. Without such technology, billions could be starving within decades. But space has future implications too for climate change. Information technology has now overtaken aviation as the source of carbon in the atmosphere and that is going to exponentially grow unless more efficient server farms are developed. The place that those are probably going to be developed is in space – provided there is a cheap enough way to get there.
Speaking at the London Business Forum earlier in the month, customer experience expert Shaun Smith used Virgin Galactic as a case study example of a bold and brave brand, and one that strives for a higher purpose. "The big idea that Branson has is to be able to develop a payload vehicle that can actually put commercial stuff like [servers] into space and take some of the heat out of the world," he said. "So it is bold. But it is also driving towards something else."
The seeds of Virgin Galactic were sewn during a conversation between Branson and Buzz Aldrin, with the Virgin CEO curious why space shuttles didn’t launch from planes already in the air, instead of launching from the ground, an enormously inefficient approach that uses the equivalent of a one kiloton nuclear explosion. As it transpires, there had been work done on just such an approach, though this was shelved when it hit problems relating to re-entry. With NASA spending some 10% of US GDP on the race to get man to the moon, they opted to simply build the biggest rocket they could to get their people up there. It wasn’t efficient, but it did the trick. The problem is that nearly 50 years later, NASA continues to use this strategy.
With the advancement in material technology and what Virgin itself had been doing in aviation with the likes of the Virgin Atlantic Global Flyer, which travelled around the globe on one tank of fuel, the team became enthralled with the idea. The result was a high-tech carbon composite vehicle that released a shuttle midair, and used a fraction of the energy that NASA would use – the journey is estimated to use the equivalent energy as a business class flight from London to New York. In 2004, Virgin Galactic put manned shuttles into space twice within two weeks, a feat never achieved by NASA.
"You probably wouldn’t be doing that project without having some greater goal," concedes Whitehorn. "The risk of getting where we are has been humungous. We had our Apollo fire moment, we had incidents with the technology, one of the biggest test flying programmes in history... It was an extremely bold move to invest in that business and it wasn’t done for marketing and brand purposes because you don’t spend hundreds of millions of dollars just doing that.
"The higher purpose in business should always be there. But the highest purpose in business should be to try and be a profitable company. If you start from that premise, everything else fits into place. If you have an aim of creating a profitable business with a good return on capital, you are going to have to be much more environmentally friendly to make it work in this modern low-cost-energy deprived environment – especially with a physical business like ours."
The original design for Virgin Galactic's space shuttle.
The power of the 'word of web': traditional advertising is dead
By 2004, Virgin had the technology – but had no idea whether it had a market. "We thought, if we are going to do this, we need to do it with a first market," says Whitehorn. "And with all the buzz going on around the world about space tourism, it had to be our first market. We know tourism really well, we know information really well, let’s go after space tourism and find out how we’re going to market."
Unsurprisingly, Virgin’s investment board was also adamant that they prove there was a market there. As investor, Virgin Group insisted it wouldn’t invest unless Galactic raised $10m in deposits in nine months. Having just about raised the funds to buy the technology and IP rights, and therefore having no money to spend on advertising or marketing, Whitehorn decided to tap into the surging influence of the internet, utilising "word of web".
In Autumn 2004, the company built a website that could take bookings, started asking people for deposits, held a press conference at the Royal Aeronautical Society and invited the world’s media. 24 hours later the web page had received 2.5m hits – and they had their first cheque. Within six months, 60,000 people had registered an interest in flying in the future, and they had the first 40 customers signed up, with their deposits taking them past the magic $10m figure.
The success of Virgin Galactic’s "word of web" approach would have been unthinkable only a few years earlier. Now, of course, such a strategy is commonplace. "Almost all direct mail now is a web call to action, there is very little even call centre call to action," says Whitehorn.
With digital’s influence continuing to increase, he also sees huge implications for advertising. "People won’t stop spending money on what we call ‘advertising’, but they will change how they spend it," he continues. "The place between television and broadband provision of audio visual messages has shifted and tends to intercross. Television is going through a very big revolution in digitised countries like the UK, where you have got both good access to broadband and also very sophisticated satellite broadcasters. People’s interactivity with the television is going through a revolution which is mirroring the revolution that is happening with social media. The idea of the advert is not over. But it is how you then manage the call to action from that that is changing dramatically, and how that might appear and how it might interact with social media. Advertising is definitely not dead – but traditional advertising is."
Customer insight and social media
With the Virgin Galactic having secured the necessary investment, and with the first customers signed up, the business was ready to move into the next phase. Customer insight is something that Whitehorn emphasises has always been part of the Virgin ethos. But how do you get customer insight into a product that you are pioneering?
There was, of course, no market research on space tourism to speak of, although Virgin did uncover a study by NASA dating from 2002, which investigated the space market and concluded that there were as many as 150,000 people worldwide who could pay up to $200,000 to go into space. Other than that, Virgin had to create its own market research.
Fortunately, thanks to the website, the company already had a database of 60,000 people who were interested in flying into space that they could regularly communicate with via the web – along with the 40 customers that had already paid. And the findings from their research proved invaluable, with three specific points having major ramifications for the Virgin Galactic experience.
Firstly, no-one was going to pay $200,000 for a ticket if they couldn’t get out of their seats and experience weightlessness. Secondly, they wanted to see the full panoramic view of the earth. And finally, they wanted to be able to share this experience with a craft full of other passengers. All three of these posed a problem with the existing shuttle design. And so it was back to the drawing board for designer Burt Rutan, so that the shuttle incorporated bigger windows, more passengers, and room to move around the cabin.
As it happened, this opened up new opportunities. With the ship much bigger than the original design, there was now space to dedicate part of it to scientific tests, and part of it as a ship replica for training. "We have basically got ourselves a very versatile vehicle as a result of talking to those customers on the web, discussing things with them that were happening, marketing to them a concept, them telling us what they wanted, and then building something that fit with what they wanted and that had a lot of other applications in the future," says Whitehorn.
It’s not just the Virgin Group acknowledging the value of customer insight these days of course, and Alterian CEO David Eldridge speaks of organisations shifting their thinking from "just outbound marketing" to "thinking about customers and individuals." "Social media has given them the opportunity to interact and understand as opposed to just trying to improve their targeting based on some segments," he adds.
Whitehorn sees other areas impacted by the technological evolution taking place. "Mail shots are dying," he says. "They are not helping you to get information about your customers and what they are saying and doing in the way that they might have done 15 years ago. Companies have make the choice that they are going to find out what the customers are doing using the fact that all customers now communicate in the electronic medium we call social media. That is going to provide them with all the data they need and the direct mail shot of the past is done."
Never a better time to start a business
To date, some 500 people have been into space since Yuri Gagarin in 1961. In the first year of Virgin Galactic’s operation it will send around 600 customers into space. By year 10, that number is expected to have reached 50,000. It is a hugely ambitious undertaking. And the internet, social media and analytics, as well as Virgin’s sheer brand power, have all played critical parts in this remarkable journey.
Whitehorn believes that these new tools available to marketers and businesses will continue to have huge implications not just for his organisation, but for many many others – including those that have yet to begin their own journey.
"I was reading the paper this morning about one of our sister companies Virgin Money, which has just got a banking licence, and is going into proper banking as a business, and it is a fantastic place to be right now because it was developed out of a call centre business in the mid-90s and it has never had a physical office. Here it is now with a whole world of banking ahead of it and nothing as a legacy behind it," he concludes. "Even its legacy, is a legacy of this new world. And for Virgin Money, the ability to be able to understand what customers want and do, and have the data really from the world go to be able to do it…. it is going to be fantastic. So there couldn’t be a better time to be starting a business."