THE PERILS OF RE-INVENTING YOUR BRAND
When former Sears and Walgreens finance executive Atul Kavthekar reported he was joining LivingSocial as CFO to help execute the e-commerce company’s ongoing re-invention strategy, I began to think of how many other brands also need re-invention.
While LivingSocial has sought to pivot away from its origins as a daily deals site and become more of an e-commerce platform positioned as, “the local marketplace to buy and share the best things to do in your city and beyond,” the appointment of Kavthekar suggests health care related products could also play a greater role in LivingSocial’s value proposition going forward given his background at Sears and Walgreens.
Certainly brands like Radio Shack, TGI Fridays, Best Buy, Farmer’s Insurance, Netflix, Cadillac, McDonald’s and others have engaged in a re-invention strategy by pivoting in varying degrees over the past 5 years. Coke and Pepsi (see below) have also joined the ranks of re-invention given the American consumers’ thumbs down to sugary soft drinks and soda in general.
The shift in consumer mind-sets, especially among younger consumers, is causing much of the re-invention today.
Millennials — the 20- and 30-something consumers whom marketers covet —are demonstrating through their wallets that they would rather spend their hard-won cash on out-of-town vacations, fitness club and gym memberships, meals with friends, and of course, their smart phones.
Analysts say there is a wider shift afoot in the mind of the American consumer, spurred by the popularity of a growing body of scientific studies that appear to show that experiences, not objects, bring the most happiness. The internet is bursting with the “Buy Experiences, Not Things” type of stories that are causing sleepless nights for many retail executives in particular.
The age-old ‘pile it high and watch it fly’ mentality at department stores no longer works. The shift in consumer mind-sets, especially among younger consumers, is causing a re-invention in stores like Macy’s and Kohl’s. And as both chains continue to report flat or declining sales amid missed profit forecasts, they continue to look for ways to pivot.
Fact is, re-invention strategies are being discussed in boardrooms and by CMOs throughout corporate America today to boost market share, sales and profits. And in some cases, merely to survive.
Change is not an option as new CEO’s are brought on to re-invent and re-energize.
Since Target brought on Brian Cornell a year ago, the company’s first outsider CEO, he has restructured and refocused on digital and earnings growth, closed its money-losing Canadian operation of approximately 133 stores, layed off about a fifth of its Twin Cities headquarters staff, and ditched the company’s previous goal to reach $100 billion in sales in 2017.
Cornell is hoping to build momentum by focusing on increasing online sales, building smaller stores, revamping Target’s grocery department, and integrating operations to help fuel Target’s transformation. Re-invention indeed.
PepsiCo’s CEO Indra Nooyi is working to recalibrate, if not re-invent, the company’s approach to innovation and strategy – from using design to rethinking the customer experience and taking real risks, quickly. According to reports, she is unafraid to confront executives who resist change, telling everyone that if they don’t change, she’ll be happy to attend their retirement parties.
Tough-talking Nooyi thinks re-invention requires not only a change in culture, but in design. As such, she visits a market every week to see what Pepsi looks like on the shelves. In doing so, she realized that the shelves just seemed more and more cluttered, so she has led a movement within Pepsi to rethink its innovation process and design experiences for consumers—from conception to what’s on the shelf. Now her teams are pushing design through the entire system, from product creation, to packaging and labeling, to how a product looks on the shelf, to how consumers interact with it. And if the rising stock price is any indication, it appears that her re-invention strategy is working.
Some companies have even put fancy names on their re-invention strategies. Kohl’s, for instance, calls theirs the “Greatness Agenda,” a turnaround effort unveiled last year that focuses on developing a loyalty program and expanding the merchandise mix with more national brands. Unfortunately this re-invention strategy has been slow to show results.
The perils of re-inventing a brand are many, but first and foremost, a company must re-invent its product.
Many years ago, my marketing firm became the first agency of record for Levitz Furniture. At one time, Levitz Furniture was a successful nationwide chain that helped create the “furniture warehouse” genre decades before Costco created the grocery warehouse concept. At its inception, customers would walk through the warehouse first to create a “wow” factor before arriving at the showroom. And because the item was already in stock, customers could strap a sofa to their flatbed and drive home with it that day. Or get delivery the next day. Yet after being in business for nearly 100 years, Levitz ended up liquidating in bankruptcy in early 2008. But wait, I’m getting ahead of myself.
In 2000, our agency was charged with re-inventing the brand’s marketing and advertising. The re-invention, if you can call it that, was to refresh an old brand with old stores, and an old warehouse model that had become obsolete. And yet, still bootstrapped with a large percentage of these “dinosaur” stores, the client’s initiatives were relegated to introducing Natuzzi leather furniture, a popular new furniture brand at the time; next-day delivery on in-stock merchandise; and a choice of over 100 fabrics on sofas, etc. Our task was to put a new coat of paint on their advertising, beginning with a refreshed logo, updated jingle and slogan, new in-store signage and a new broadcast advertising campaign. The client handled the print advertising in-house.
After our new campaign launched, we were pleased to hear that for the first time, Levitz reported a reversal of their negative double-digit same-store sales. We achieved the first quarter of nearly positive comps in many years. A swing of +5% to +18%, depending on store market.
For newer stores (where smaller footprint locations had no adjoining warehouse like the older stores) in growing markets like Las Vegas, the results of this new advertising were even more positive and sustainable. But that was a small part of the company’s overall sales.
Often, re-invention needs a total mix of fixes.
For a chain that was handcuffed with outdated “warehouse-style” stores that had lost any meaning to consumers, especially since other furniture retailers like Rooms To Go were promising entire “room packages” with “next day delivery,” Levitz needed to do more to truly re-invent themselves. Moreover, Levitz’s under performing legacy real estate in low economic areas was financially draining, and an anemic merchandise mix with little styling and stiff competition didn’t help matters. It appeared that the small inroads our new advertising was making would not be enough to pull Levitz out of deep hole they had dug for themselves over the past two decades.
As a “hail mary”, Levitz (a public company) did what a lot of companies like Radio Shack and others do when they find themselves on the edge of extinction. They brought in a high-salaried, stock-optioned executive from a big chain (Sears) to serve as their new President. He brought with him (as is usually the case) a new Merchandising VP and VP-Marketing Director with equally robust salaries and stock options.
Funny how history often repeats itself. In 2012, JCPenney hired new CEO Ron Johnson, a former chief at Apple, to re-invent the company. Johnson undertook a risky transformation with regard to its “shops” concept and promotional strategy that almost finished JCPenney. It all began when an activist shareholder group allowed then-CEO Ron Johnson and his management team to enact a “bet the farm” strategy, undertaking a complete makeover of JCPenney without trying it out on a limited basis first. He eliminated couponing, sales, and disregarded the wants and desires of JCP’s core customers by moving to an everyday low price strategy. Fortunately, the company saw the error in its ways and brought back JCPenney’s prior CEO Mike Ullman III who acknowledged that Johnson’s strategy was poorly executed and that significant changes needed to be made quickly to stem the operational declines and cash burn.
But I digress.
Just prior to the arrival of Levitz’s new management team, we were tasked with developing an entirely new advertising campaign that could reposition Levitz in a new light. But new management wasn’t sure if our newest campaign, yet to launch, was the right approach. So they agreed to do some focus group research with both existing customers and prospects to see if our new marketing campaign achieved the “re-invention” in the minds of consumers that they were hoping.
The new Marketing VP’s notion for re-invention was to add the name “Homestore” to Levitz, since in Chicago the few Levitz “Homestore” locations there were doing good business compared to the rest of the country. He wanted to test that name in the focus groups. We felt that if the goal was to re-invent the brand, it needed more than an additional name. It needed a top-to-bottom re-invention of the merchandise, the stores, the displays, the sales staff, the advertising…everything. Our campaign, we argued, was only one small component of the re-invention mix. However, since he was dead set on using the new name to re-invent the brand, we suggested testing it with 4 other names in the focus groups. He agreed.
Fortunately for the agency, the focus groups loved the new advertising campaign we presented and it appeared to achieve the “re-invention” promise the client had hoped to achieve. However, the focus groups ranked “Homestore” last on the list of names. The researcher thought we had gotten some very good feedback from the focus groups and gave us kudos for a well-received ad campaign.
Next day, we got a call from the VP-Marketing who disagreed with the research, thought it was flawed, and instructed us to insert “Homestore” into all the print ads and broadcast going forward. We argued our case by pointing to the research and lost our plea to reconsider his decision.
Within 90 days, the account was moved to another ad agency, and within
5 years, Levitz liquidated in bankruptcy.
Too little, too late.
Was it just the “Homestore” decision that put the final nail in Levitz’s
coffin? Not by a long shot. The perils of re-inventing a brand are many, but first and foremost, a company must re-invent its product.
Levitz had only scratched the surface of re-invention by bringing on new management, a few new product lines, adding walls to the showroom furniture displays, and asking us for a new advertising campaign. What they truly needed to do was bite the bullet and close its underperforming “warehouse style” stores located in mostly low-income neighborhoods where demographics had changed; test in a few markets a merchandise revamp comprising 75% of its inventory with more contemporary and exciting styles; test new marketing initiatives in 2-3 markets to determine which one performed the best; revamp its sales team and sales practices in those markets; create a new and unique in-store customer experience; and bring in new management with turnaround experience and the vision to re-invent the brand, not merely collect six-figure salaries and stock options for the duration of the chain’s existence.
Then maybe Levitz had a chance of not just surviving, but thriving. Then again, maybe not.
STUART DORNFIELD is an award-winning freelance Creative Director/Copywriter with more than 40 years experience in marketing, strategy, advertising and production. As the former Sr. VP-Creative Director of Zimmerman Advertising (Omnicom), the 13TH largest agency in the U.S., and the former co-founder of Gold Coast Advertising, 3rd largest agency in South Florida, today Stuart offers his creative services and marketing insights as a freelancer with offices in New York and Miami.