Levi Strauss Company
Levi’s inclined path is an archetypal case of a dominant brand that lost its way. Levi’s took birth in the California gold rush. This American idol assisted baby boomers describe themselves in the 1960s as hip and distinguished from Establishment culture. In spite of such a reputation, currently the Levi’s name has developed into staggering old age in a harshly competitive fabric market. Sales have declined from ?7.1 billion in 1996 to around ?4 billion in the year 2003. The company’s guarantees of development have faded away, and losses, hit ?16 million in the first three quarters of the year. (Zellner, 2003)
New technology and more demanding consumers have forced companies to provide products that are more tailored to the individual requirements of consumers. “Treat different consumers differently. It’s a simple idea, but difficult to implement,” says Don Peppers, founder and partner of Stamford, Connecticut-based Peppers and Rogers Group, a consumer relationship management consulting firm. “But companies that do incorporate the strategy of mass Customisation can overcome the double-barrelled problems of declining consumer loyalty and shrinking profit margins.” (Zellner, 2003)
Building relationships is sensible for consumers who are top on lifetime value ranking in the company. Hence, building relationships should have the focus on consumers who are presently the most beneficial, expected to be the most profitable in the coming times, or expected to remain with the company for the predictable future and have adequate levels of productivity.
The objective of relationship management is to boost consumer satisfaction and to reduce any inconveniences. By employing in “smarter” relationships, an organization can discover consumers’ priorities and develop faith. Every communication point with the consumer can be seen as a possibility to record information and learn priorities. Objections and mistakes have to be recorded, not just fixed and forgotten. Contact with consumers in every channel; over the internet, through a call centre, or through personal contact, is traced and centralised.
Many companies are starting to attain this objective by using consumer relationship management (CRM) software. Information, once collected and centralised, can be used to customise service. Additionally, the database can be analyzed to identify models that can suggest better ways to serve consumers in common. A key feature is to learn and trace priorities. Consumers’ priorities can be determined: transparently and jointly.
Finding priorities transparently denotes that the marketer learns the consumers’ requirements without really involving them. For instance, the Ritz Carlton hotel brings up a point of monitoring the preferences that guests make and recording them. If a guest asks for an extra blanket, then an extra blanket will be provided on every visit to that person.
With improved use of the internet, companies have more prospects to learn consumers’ main concerns and behaviour visibly. Data that can be easily gathered includes:
· Key words used to find your site in search engines. These can help recognize how to rank your services.
· Source of visit (search engine, other sites, directory sites, portals, banner advertising and so on)
· Individual consumer measures such as number of monthly or weekly visits; time spent per visit and search patterns; orders from site; communication (from visitor to purchaser); spending per order; spending per visit.
When marketers learn consumers’ priorities jointly, they appoint in discourse to help consumers clear their requirements and recognize how to meet those requirements. Eventually, this process should give an ideal product, but it can take time. The objective of the marketer in learning priorities jointly is to determine a way to exploit learning without annoying consumers. Again, the internet can be helpful with online survey forms. (Kahn, 2000)
Permission marketing can be used also. This engages requesting consumers for permission to gather personalized data or to contact them in the future. Lastly, collective filtering is efficient for learning consumers’ priorities and assisting them choose items they may enjoy. The company can trace consumers’ priorities and purchase models, matches them with those of alike consumers, and recommend other products based on purchases by similar consumers.
When consumers work with marketers, the consumers are also learning their own priorities. Consumers can thus have more command and ensure they get what they want. A product planned with the consumer is by definition not wrong, so having a consumer work together on finding out his or her own requirements supports the consumer to execute. Lastly, just being part of the business process is likely to enhance satisfaction. This was the case when is came to customised jeans from Levi’s. Consumers were more likely to be contented with the final product if they practically tried on a pair of jeans.
Learning Assists Cross-selling
One benefit of learning a consumer’s priorities is that the company then has a track that can be used to cross-sell other products or services. This information would be useful to the consumer for financial planning and would offer a rich data bank for the marketer.
In addition to assisting the consumer to manage his or her expenses, the marketer could learn about the consumer’s current transactions. For instance, if a consumer started buying children’s apparel, the marketer could propose related goods; or if plane tickets were bought, hotels could be proposed.
Other consumer records can also assist the marketer. For instance, health organisations could keep a track of incidents and patient lifestyles that might propose diagnostic testing and cure. Insurance companies, such as USAA, which has conventionally focused on army officers and their families, already do this. USAA tracks marriages, births and other life-changing patterns so it can recommend clients on changing requirements. By responding to these patterns, USAA enhances revenues by selling more insurance and financial services. Additionally, it enhances consumer satisfaction and loyalty by observing and adapting to their requirements. (Buss, Crawford, Gordon, and St-Maurice, 2001a)
Marketers need to be cautious with this data and construct a relationship based on loyalty. A few of the businesses have natural benefits: People are more likely to trust a teacher or a healthcare professional than a supermarket. Nevertheless, if relationships can be constructed and if the marketer offers worthy suggestions, the consumer is likely to be loyal. It is easier for a consumer to stay with a loyal company rather switching to another. (Kahn, 2000)
A Virtuous Circle
By learning consumer priorities and focussing on long-term relationships, managers can present products and services that fit consumers’ requirements. They can also perform this in a manner that guarantees loyalty. If a company wins a consumer’s trust and if, as a result of that trust, consumers share tactical information about their priorities and requirements, it will be hard for competitors to replicate the relationship.
As relationships develop, consumers will tend to purchase more from the company. Also, the more a consumer buys, the more likely he or she will be to buy from that company again. This honourable circle is unbreakable because the more a consumer buys from the trusted company; the less likely the consumer is to turn to another supplier. Lastly, the returning consumer is more expected to switch to a premium product or service.
The eventual incentive in managing Customised relationships will appear if a company can transform consumers into supporters. A fresh example has been observed among Palm Pilot owners. The Palm Pilot can be modified and so has obsessive supporters. Owners are eager to submit their names and priorities, to be on mailing lists, and are recurrent visitors to the company’s web pages. Furthermore, these loyal consumers praise the qualities of the product to likely buyers. (Buss, Crawford, Gordon, and St-Maurice, 2001b)
Although price strategies may be efficient in the short-term, they rarely come out best in the long run. A better approach to alter consumers into advocates is to attempt to meet the requirements of each consumer more accurately. Learning consumers’ priorities can not only assist meet their requirements better than the competition, but can also assist marketers counterfeit a stable relationship. (http://knowledge.wharton.upenn.edu/article.cfm?articleid=269)
As many companies have discovered, interactions between designers and consumers during the development of new products can provide managers with information that can help make the products more acceptable in the marketplace. (Buss et al, 2001a)
Certainly, Levi’s is one of the best-known brands the world-over. But the company’s advertising of its “authentic” jeans does not reverberate with younger shoppers. While some boomers still believe them hip, that’s exactly why their kids don’t.
Eleven years ago, Levi Strauss introduced a programme to customise its jeans for women. As the programme became more popular, retail outlets began getting requests for the Customised jeans from men. Last fall, the clothing manufacturer enlarged its custom fit programme to all accommodate both sexes, as consumer demand for the personalized product transcended traditional gender marketing lines. “What started out as a fit solution for women became a style solution for everyone,” says Jeff Beckman, senior manager of communication at the San Francisco-based company. (Mazur, 2002)
At ?55 per pair, the “Original Spin” programme uses an in-store computerised kiosk to let the consumer select between specific models, fabric, leg openings, buttons and colours. A sales associate then measures length and waist size. “After all the measurements are calculated, the computer will suggest a ‘test drive jean’ for the consumer to try on,” says Beckman. “242 test drive jeans are on hand at the store so there is approximately always going to be match. It also gives the consumer a chance to tweak the fit of the jeans by saying something like ‘I like it baggier in the thigh,'” (Mazur, 2002)
The programme is available at 13 select Original Levi’s stores and department stores nationwide. “When Levis Strauss offered “Personal Pair,” they experienced a 38 percent repurchase rate, compared to the normal repurchase rate of their products of just 12 percent,” says Peppers. With “Original Spin,” they have expanded their made-to-order jeans from 10,000 different sizes for women, to 1.5 million Customised styles for both sexes.” (Zeiger, 1999)
There are three at the loyal end. Emotive loyalists are the company’s champions, who feel strongly that the brand is best for them. Next come the inertial loyalists, who rarely switch because they don’t feel it’s worth it or can’t be bothered.
Then there is an intriguing group called deliberative loyalists, who frequently reassess purchase decisions and will continue to choose the brand mainly for rational reasons. And it’s these that should be of greatest interest to a company like Levi’s. Why? Because while this group makes up to 40% of all consumers across industries, when it comes to apparel they account for a staggering 69%, more than in any other industry. They are also the toughest to win over. Deliberators make cool, well-thought out decisions based on things such as price, performance and how easy it is to do business with the company. (Buss et al, 2001a)
They are thus less likely to be won over by emotional appeals. This is specifically the case in a segment such as jeans where brands are comparatively functional, comparisons are made easily, and competitors discriminate mainly on functional features like price.
So doing some much deeper digging into its consumers’ profiles and figuring out what marketing techniques to use with the deliberators could begin to pay off for Levi’s. It couldn’t be timelier; in February 2002, the British Standards Institution announced the first stage in the development of a new standard for improving loyalty. (Mazur, 2002)
IT can assist companies with time to acceptance and more. To establish consumer loyalty – to establish brand – companies are required to keep their consumers engaged in a continuous discourse. The communication between consumers and the organization should not be restricted to the development cycle. How the product or service works, the consumer’s experiences with the product, and how the company maintains the product or service after the sale also contribute to consumer loyalty. (Buss et al, 2001b)
Companies must keep the discourse flowing and also maintain communications with distributors, suppliers, and others in the marketplace. To do this efficiently, the technology linking these individuals to the company must be incorporated with internal systems controlling production and design plans, field sales data, and even reasonable intelligence. Jointly, these systems allow companies to interact with their consumers and the marketplace in real time and to integrate into their products the service experiences that will keep consumers loyal. Discourse will become the way companies build brand. (McKenna, 1995, pg 88)
Companies like Apple can do more than use information systems to sense the requirements of their consumers. They can also use technology to respond to consumers by creating service experiences for them. By closing the interactive loop, marketers can establish and maintain a dynamic brand in a noisy marketplace.
Levi Strauss has begun marketing a made-to-order service for tailoring women’s jeans in selected U.S. regions. Salesmen take customer’s measurement and feed the data into a computer-aided-design information system. They let a consumer try on sample jeans in the store and they feed the additional information into the system. The information is processed to a computerised fabric-cutting machine at the factory, and the jeans are made to order. The custom jeans cost only ?10 more than Levi Strauss’s mass-produced products.
In this real-time system, the business (selling the jeans) is also a service experience for the consumer. Technology allows firms to pack services into every product and turn every sale into a communication. The interface allows the consumer and the producer to learn from each other and to respond to each other.
Undoubtedly, it is still the patch on the back of the jeans. Nevertheless the electronic communication that surrounds it has developed in significance. The shopper will still be expecting high quality jeans at a realistic price, but she will also help Levi Strauss design her product, and she’ll define exact essentials of the product-measurements, colour, and texture-that suit her. The brand, in this case, is no longer the inert image it was during the age of mass marketing. Alternatively it has become an ongoing discussion, the interactive experience of buying and using the product. (Mazur, 2002)
In the coming eras, Levi Strauss can use this method to expand its discourse with the consumer. Consumers could order new products over the phone; Levi Strauss could make them using the consumer’s measurements, stored in a database, and ship them out quickly. The company could also send data on new products to returning consumers. And, as the company’s database grows, it will have useful data about the sizes and styles of jeans that its consumers are ordering. (McKenna, 1995)
Mass customising its products meant more business for the jeans-maker Levi Strauss.
Levi Strauss has long recognised the significance of integrating consumers into their business processes. They treat consumers like “prosumers,” a futuristic term Alvin Toffler used in his renowned Future Shock to describe consumers who also play the role of the producer
Barbara Kahn, 2000, That Elusive Consumer Loyalty: How to Build It, Learn From It and Profit From It, Financial Times, retrieved on Sunday, 07 January 2007, from http://knowled7ge.wharton.upenn.edu/article.cfm?articleid=269
Buss N, Crawford B, Gordon J, and St-Maurice, I (2001a) “Unlock your brand”, McKinsey Marketing Solutions, January
Buss N, Crawford B, Gordon J, and St-Maurice, I (2001b) “The power of brand building”, McKinsey Marketing Solutions, January
Mazur, Laura, 2002, Why Levi’s must get grips with loyalty to brand, Marketing (00253650), 00253650
McKenna, Regis, 1995, Real-Time Marketing, Harvard Business Review, 00178012, Vol. 73, Issue 4, pg 88
Zeiger, Ari, 1999, Customisation nation, Incentive, 10425195, Vol. 173, Issue 5
Zellner, Wendy, 2003, Lessons From a Faded Levi Strauss. Business Week, 00077135, Issue 3862