Virgin master-brand presents risks for BOQ

George Lekakis
Bank of Queensland directors and senior management are likely to be taking more than a passing interest in the saga unfolding at the nation's second largest airline, Virgin Australia Holdings.

BOQ has invested heavily over the last two years in widening the distribution network of its Virgin Money Australia business - a strategic centrepiece of chief executive George Frazis' plan to return his banking group to growth.

While BOQ and the Virgin Money subsidiary have no equity ties with the embattled airline, there is potential for collateral brand damage given that the airline and BOQ are both leveraging the "Virgin" moniker in their separately owned and managed businesses.

BOQ's wholly owned Virgin Money arm uses the same reverse typeface and red ink as the airline for marketing the moniker to customers.

The problem confronting Frazis and BOQ shareholders is whether Virgin Money's customers and prospective clients understand that the airline and the bank's financial services subsidiary are separate, unrelated businesses.

There's a fair chance that many thousands don't and might incorrectly extrapolate that Virgin Money and the airline are each members of the same group of companies.

The airline's most recent financial accounts show that it was balance sheet insolvent at the end of December last year, with a net asset deficiency of A$1.6 billion.

Banking - whether you're lending or taking cash as deposits - is a business founded on trust and public perceptions about the health of your brand is a critical factor in preserving trust.

Virgin Money is already a big part of the BOQ business, accounting for about 20 per cent or 210,000 of  a 1 million customer base.

Frazis has poured a lot of capital into the Virgin Money arm in an effort to establish a new digital bank in Australia to compete with the likes of NAB's UBank and ING.

In March Frazis wrote to Virgin Money customers to highlight that the business was part of the BOQ group, which stood ready to support them during the COVID-19 crisis.

While that might enough to ease the concerns of most existing customers, it may not  extinguish perceptions of future clients who might continue to believe that all Virgin businesses are owned - at least in part - by British entrepreneur, Richard Branson.

It highlights an operational risk of a bank adopting a franchised brand: reputation might be contingent on the financial performance of unrelated companies using the same master-brand.

For this reason, the fate of the airline is potentially significant for BOQ and the immediate and long term brand equity held in the Virgin Money Australia arm.

The damage to BOQ's investment in Virgin-based branding might be meaningful if the airline's battle for survival becomes as drawn out as the Ansett saga was two decades ago.

At the moment the bank is playing a straight bat, electing not to address the sticky question of collateral brand damage.

"Bank of Queensland (BOQ) owns and operates a number of individual and distinctive brands, including Virgin Money Australia," a bank spokesperson said last night.
 
"As part of BOQ's multi-brand strategy, and as outlined in the group's recent strategic update, Virgin Money Australia remains key to the group's strategic plans and investment.

"BOQ is well-capitalised and has a strong liquidity position, making Virgin Money well equipped to continue supporting and servicing customers during this time."

Branding and marketing experts are divided on what might be the best strategy for BOQ to shield its Virgin Money brand from the airline's existential problems.

One of Australia's most respected brand consultants, Jane Anderson, believes the bank should go on the front foot with a more vigorous communication program.

"What the Bank of Queensland needs to do is take control of the story to create a positive narrative around the Virgin Money brand," she said.

"One plank of the program is a brand-building exercise just to reassure existing customers and others who might not yet be customers.

"If they leave it too long they might lose control of the public narrative."

Professor Steve Worthington from the Swinburne University Business School believes the bank's decision not to react immediately to the airline's travails has been the correct call.

"They have been struggling to get the Virgin Money brand to the fore so it's probably in their best interest not to draw attention to it, right now," he said.

Canstar executive director Steve Mickenbecker said the Virgin name had strong levels of trust as a non-bank brand, which could be undermined by BOQ advertising that Virgin Money was bank-owned.

"Virgin has been such a good brand, I'm pretty sure the Bank of Queensland would be a tad nervous at the moment," he said.

"But I think they're right to sit on the sidelines to see what happens.

"However, then they will have to make it very clear to the public at large that Virgin Money Australia and the airline are separate entities."