Virgin soars on circulars, store refits

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A shift in merchandise mix and an aggressive marketing program brought Virgin Megastores its best holiday season in five years.

The Los Angeles-based multichannel music and entertainment retailer dedicated 30 percent of its annual ad budget to the holiday period, which it said was a drastic increase from previous years. It also used circulars as a marketing strategy for the first time.

"We decided to run circulars, as we had never done it before and thought it would be an effective method to showcase our expanded product selection, competitive pricing and Virgin exclusives all in one place to brand-new customers," said Dee McLaughlin, senior marketing director for Virgin Entertainment Group, North America. "Another reason we decided to use circulars was to become more competitive with larger retailers who rely on them at Christmas."

The circulars ran Thanksgiving week, the week of Dec. 12 and the week of Dec. 26 in daily and weekly local newspapers in several markets. Virgin also used street teams and cross-retail partnerships to distribute the circulars in other markets. Other Virgin holiday efforts included national cable TV ads.

The expanded product selection Ms. McLaughlin referred to is something Virgin Megastores has been working on for a few years, when it decided to become more of an entertainment lifestyle retailer. As part of this strategy, the company has spent $1 million on store refurbishments, creating store-within-a-store concepts for key categories and offering larger DVD, electronics, games and apparel departments.

These in-store and marketing strategies helped Virgin generate a 12 percent gain in retail sales during the holidays versus the prior-year period. This included a 28 percent gain in electronics and a 26 percent increase in apparel and merchandise.

Virgin hopes to build on this momentum with a recently launched VIP customer loyalty program. According to Ms. McLaughlin, it is the first of its kind in North America, using a patented thermo-graphic rewritable card. The card instantly updates loyalty points and marketing messages with each use and can be rewritten 500 times.

Customers in the program earn points for every dollar spent and get chances to win instant giveaways from Virgin Megastores and VIP program partners. They also earn privileges such as meeting celebrities at a Virgin Megastore and backstage passes. In addition, they will receive e-mail and direct mail communications regularly.

The program replaces an existing frequency-card program available in select stores. It has already been available in Europe, Asia and Australia, where there are almost 30 million active users.

VIP partners will be able to advertise on the card on a monthly basis. The program also includes reporting tools with the ability to segment and offer targeted marketing and e-mail communications.

Virgin expects the program will "help build our customer loyalty and word of mouth to drive business," Ms. McLaughlin said.

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