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What could Tiffany’s Do?

Mukesh Gupta | Jul 19, 2017 187 views 5 Comments

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Premise:

Last week the Wall St. Journal featured a story on Tiffany & Co’“midlife crisis.” The piece highlighted the jewellery brand’s struggle to regain its “cool” and improve recently tepid sales and profits. A few days later they announced the hiring of a new CEO.

Tiffany is hardly the only brand that is going through such a crisis. There is a lesson that all of us can learn from the experience of Tiffany and to a certain extent, even JC Penny. Steve Dennis on his blog talks about the customer trapeze. The customer trapeze is the idea of a brand hoping to reach a new, highly desirable set of customers while at the same time letting go of those with less favourable characteristics. Most often we see it at play when brands see that their most profitable demographic is ageing and at some point in the near future will start reducing their spends.

Knowing this, brands want to re-invent themselves to become more relevant to the new generation by becoming more hip or trendy.

The Challenge:

The challenge comes when they want to entice the new younger generation to engage with the brand, while at the same time do not want to alienate their existing client base, which is still generating most of their profits for them. This is a true catch-22 situation for brands. But is it?

Tiffnay has tried almost every trick that brands have in their sleeves – becoming more fashion forward, introduce less expensive items in their portfolio or attaching themselves to celebrities that appeal to the new demographic that they want to attract. What they are trying to do is to find the perfect moment when they can let go of their existing customers and take on the new ones. In Tiffany’s case, over the years they have introduced less expensive items and expanded their assortments in an attempt to widen their appeal to the new generation of shoppers. They have even taken on Lady Gaga and Elle Fanning as spokespeople and launched a new, more youthful ad campaign.

What could Tiffany’s Do?

I believe that this is a false dichotomy. I also believe that there is a simpler and a more easier way for brands to transition from one set of customers to another.

Option 1:

Create a new brand for the new customer segment. Let the old brand age with the ageing population cohort.

History reveals that very few established brands are able to successfully execute a dramatic re-configuration of their customer base–at least quickly. There is a significant risk in pursuing this strategy because, irrespective of what the brand does to do this switch, they will not be able to become attractive to both the ageing and the young cohort. In the process of trying this, they only alienate both the customer base, which ends up not so well with the brand and the brand dies a very slow and a painful death.

What is needed here is a mindset shift. What happens if companies create new brands for a new cohort of potential customers and continue to use the existing brand for their existing cohorts of customers. The existing brand can continue to remain relevant to their existing customers and even look at other things that the brand can do for the customers, keeping their brand values intact. In this case, in addition to creating beautiful jewellery, Tiffany’s could also look to create other items that an aging population needs – embellished walking sticks, reading glasses for the old. You get the flow.

What this approach does is allows a brand to live and stay relevant to a specific cohort of customers with their sensibilities. It is ok to allow a brand to age with their customers who grew old loving the brand.

Option 2:

The second answer is a bit more difficult.

Instead of trying to win the younger generation by themselves, allow their existing customers to do that for them.

What I mean here is the following: Instead of the brand trying to woo the next generation of customers and win them over, allow their existing customers (ageing population) do that for them. Then the question becomes what can the brand do for their existing customers so they can win their daughters and grand-daughters to their brand. This allows for two things to happen at the same time:

  • Strengthen their relationship with their existing cohort of ageing customers
  • Build a bridge for the new young customers to start engaging with the brand

This also means that the entire brand needs to go for a make-over and if done well, this can give the brand a new lease of life. The risk here is that if done badly, this could also very much fast track the death of the brand.

Conclusion:

In conclusion, I will only say the following: how Tiffany’s and other brands in the similar situation handle it can have a profound impact on the brand – one way or other.

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5 Responses to What could Tiffany’s Do?

  1. Chip R. Bell July 20, 2017 at 5:24 am (186 comments) #

    A thoughtful piece. Smart organizations have found ways to use their brand subtly to expand their offerings to a different target market (whether price point, age or tastes). Courtyard by Marriott and Boston by Steinway are two examples of this Option 1 approach. Courtyard is less expensive than a full service Marriott but retains a tie to the core brand. Boston is a less expensive piano than Steinway but holds on to the distinction of the core brand. However, your Option 2 is an intriguing approach. Boy Scouts/Girl Scouts use the parent as scout leader to inculcate the next generation into the value of the organization. Any examples of how a business can use “generational” marketing to keep their brand evergreen?

  2. Raghunathan Kuppuswamy July 20, 2017 at 5:33 am (2 comments) #

    Option 2 might be a v slow process. And option 1 is more like going for broke. Don’t know if this has been tried: Why not extend incrementally rather than jumping over a chasm? Example: extend the appeal from 60-year old’s to 45 year-old’s.

  3. Lisa Yetman July 20, 2017 at 6:18 am (15 comments) #

    Hi Mukesh! Liked the article! You touch on a very tenuous point that many companies today are facing, and many of these brands have taken steps to keep themselves young – yet appeal to their veteran customers as well. As an example, I point out all the wonderful new dreams and creations that The Walt Disney Company has come up with to pull out of their sorcerer’s hat – Star Wars -themed attractions – including a hotel! -, Toy Story Land , the newly opened Avatar Land, three new Disney Cruise ships for future cruisers, – the list goes on and on. What drives these imaginative geniuses is the fact that they have their finger on the pulse of new and different, appealing and satisfying, etc. and these flights of fantasy come from ideas generated by their Guests! Disney is a brand which has withstood the ups and downs of time and still stands strong as Hercules because all of the Cast Members – from Bob Iger and John Lasseter on down – know what ‘s what and how to wow their Guests. After all, creating magic is what Disney does best!

  4. Michael Lowenstein July 20, 2017 at 12:42 pm (1310 comments) #

    I’m not particularly comfortable that either of the options offered will be effective. Tiffany’s, or any retailer for that matter, would do well to fully dissect the customer experience, in as granular a manner as possible, That way, they would be able to identify what is working and what isn’t; and they would also be able to launch pilot CX initiatives designed to build more customer advocacy behavior.

  5. Andrew Rudin July 21, 2017 at 2:16 pm (231 comments) #

    Hi Mukesh: Thanks for bringing this up. You could be making some tenuous assumptions: “Most often we see it at play when brands see that their most profitable demographic is ageing and at some point in the near future will start reducing their spends.” Does this consistently happen? Is it inevitable? Seniors – especially affluent seniors – could be a fantastic demographic, one worth concentrating more resources on. Seniors often have more discretionary income because their kids are out of college, they have “downsized” their living arrangements, and in general, have lower monthly costs than when they had dependents living at home.

    I also believe that we can’t assume that younger people today would dedicate their disposable income toward buying jewelry, and other traditional Tiffany’s staples. Could wealthy millennials be more inclined to indulge other purchases like luxury vacations, health clubs, personal trainers, fine dining, adventure travel, high-end apartments in the city? Maybe Tiffany’s could consider a brand extension into these areas.

    When I taught undergraduate courses in IT strategy, a large part of the early-stage of my curriculum was centered on defining business problems. This is a great challenge in practice, and defining the wrong problem – as often happens in IT – sends people scurrying down pathways that have high likelihood of not correcting or improving the central issue. I think that is the case here. (“The goal is how to get a suite of office software on every desktop!” as one student said to our class. That underscored my point, since the overarching challenge in the case I was using was how to improve financial performance, and improving labor productivity was a subsidiary challenge. But it wasn’t ‘getting software onto every desktop in the company.’)

    The problem for Tiffany’s is not how to better sell to younger buyers (though that could be part of the solution.) The problem is “what is the best way to grow revenue.” For many companies, that involves acquiring new customers, but not always. Sometimes it involves changing a distribution model, raising prices, expanding a product offering, etc.

    As I have shared with both my students and clients, every new strategy involves new risks and new trade-offs. They must be identified. A “more youthful” ad campaign (however that might be defined), or going down market to attract less-affluent customers carries immense risks in alienating Tiffanys’ core consumers. Any company that attempts to undergo a change in brand image better have the capacity to absorb the risk. In other words, they must be able to weather the storm, because it’s coming.

    Here, it’s far from certain that younger buyers would be able to overcome the taint that comes from buying from the same company their grandmother does (or did). from the information given here, I don’t know whether moving away from their traditional base is strategically sound. Financial spreadsheets for Tiffany’s and their closest competitors, a past revenue analysis, and a look at future demographic trends would be a minimum that I’d like for a more in-depth analysis.

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