The Innovation Station
Cost & Profit:
The cost of making the Galactic is already £155 million (un-finished), in addition to the $37 million runway cost, and these costs are yet to increase. The $200 million project could only ever be completed by a company on the scale of Virgin, with Branson behind it, who will most certainly reap the rewards once the first flight launches. The profit lies within the $250,000 cost per astronaut, per flight. Each flight holds six passengers, so it will take 134 flights in order to break even (800 passengers at an overall cost of $200 million), with 640 passengers having already signed up to take the flight in to space, it is highly likely that Virgin will be making huge profits from this venture.
Value Proposition:
The price that Virgin are valuing the experience at is $250,000, a price that Virgin feels is worthy of a trip in to space and the experience of weightlessness. Very few consumers will be able to afford the cost of visiting space, and this just makes the experience even more unique and value for money, as it is not available to everybody. Within the package, not only do the consumers enjoy the experience of a life time, they also receive a three-day stay in a hotel, training for the flight and transportation to and from the airfield. An expense by any means, but the value proposition is that this is a unique, and more often than not, once in a lifetime opportunity.
Virgin Galactic's Business Model
Value Chain:
The main way in which Virgin adds value is by offering a new experience to the consumer. The number of customers that have already signed up to take a trip in to space without the Galactic having even been finished proves that the experience is what the consumers are paying for. However, the $250,000 two hour flight also includes a three night stay in a luxurious hotel, transport to the airfield and meals which also adds value, as the customer receives the entire package.
Value Network:
Virgin has a great value network as it is such a huge company with a vast range of products and services under the one brand. As Virgin is renowned for offering great customer service and excellent quality, it is already well known and therefore has already built a relationship with consumers who know that they are able to trust the brand. Virgin prides itself on providing a cut above the rest in service, and everybody that signs up to travel on the Virgin Galactic will not be expecting anything less than the best from Virgin. This great brand image will particularly assist Virgin with the launch of the Galactic, which we are already seeing from the number of celebrities and other consumers that have already paid their deposit to secure a seat on the Galactic.
Competetive Strategy:
Virgin Galactic are using an existing product and marketing it to a new market. The spaceship is not a new concept to us, but the idea of ‘normal’ human beings paying to travel to space has never been on offer previously. Using Ansoff’s Matrix, Virgin Galactic is focussing on ‘market development;’ offering an existing product to a new market. Virgin’s strategy is to gain the first-mover advantage and become renowned for being the first company to launch customers in to space for a ‘holiday.’
Market:
The key segment that Virgin are targeting the Galactic at are the rich and famous. Numerous celebrities, including Justin Bieber, Katy Perry and Ashton Kutcher, have already signed up to take a trip to outer space, and Virgin will not be short of customers desperate to experience the unknown. Yet, the segment which Virgin are targeting is a niche market, only a small number of people will be able to afford the steep $250,000 for a two and a half hour ‘holiday,’ meaning that the market segment is extremely small.
The below analysing of Virgin Galactics business model comes from "Business Modelling" by H. Chesbrough, R.S. Rosenbloom (2002)