Levi Strauss

Levi - Strauss case studie

Question 1) What environmen tal variables contributed to the 1998 position of Levi ?

Levi Strauss is the world's best-known jeans brand, but it's hard to see much chance of the company regaining its former glory without a substantial overhaul. Iconic or not, what kind of future lies in store for a company which derives around 85% of its annual revenues from selling pants? And only really two sorts of pants at that, which are also sold by just about every other clothing manufacturer on the planet. Either Levi Strauss needs to diversify substantially, and bolt on other brands or - more likely - needs to sacrifice its long cherished but out-of-date independence and become part of someone else's larger multi-brand portfolio. These years of struggle against a vast array of competitors have merely added to the gradual erosion of the brand. The development of value line Signature has helped, but despite doubling in size during 2004, its contribution has steadily decreased ever since.

In the late 1990s, Levi's became a victim of their own success. Too involved in corporate restructuring, the company effectively ignore a seismic shift in the youth market. In the 1980s and early 1990s, Levi's 501 jeans had managed to dominate the market for everyday clothing as a result of high quality manufacturing and smart marketing. There were many kinds of jeans, went the general perception, but Levi's was the brand to which all others aspired. A brilliant marketing campaign, especially in Europe, reinforced the brand's hip status. But in the late 1990s, Levi's jeans suddenly became a victim of its own success. They were seen by the new generation of teenagers as "the jeans my Dad wears", and that put them completely out of fashion. Fashions in cut came and went but Levi's failed to respond, leaving the market wide open for competitors

The company's biggest mistake, arguably, was to ignore the baggy cut, which rode in on the back of the mid-1990s grunge movement, and remained the leading fashion style for the rest of that decade. While Levi's stuck rigidly with the 16-inch straight-leg cut that appealed to the now ageing market who had rediscovered the brand in the 1980s, even the least hip of US retailers began selling extreme-cut. Millers Outpost, Tommy Jeans, JNCO and even JC Penney and Sears were selling jeans with legs as wide as 23 or 40-inches. The fashion-conscious teenage market began buying their jeans from other manufacturers, while a new breed of retailers, led by The Gap, captured the middle ground. Protecting their premium status, Levi's refused to chase the market and strictly adhered to their long-established policy of only selling through specialist outlets and avoiding discount stores including Wal-Mart. Although this held the brand's perceived value it also restricted sales to only around half of the US retail market. Worse still, later that decade the market as a whole began moving away from denim altogether as combat and cargo pants became the new fashion

Question 2) How could a sensitive and informative Marketing Information System (MIS) have helped Levis to identify these environmental variable and form future strategies ?

THE NEED FOR MARKETING SUPPORT

In 1986, Levi's relaunched the 501 with the 'Launderette' and 'Bath' commercials. The tremendous success of these executions and the campaign that developed from them has been well documented. All of the commercials featured the 501 jean and most stated 501 specifically in the end frame.

The advertising success was not restricted to the 501 alone. There was a halo effect on the whole Levi's range. But naturally the 501 took on a dominant share of Levi's business.

This dominance was intended. The 501 was positioned as definitive. It is an anti-fit jean which is right for most people, and, in a sense, 501 for most people took fit out of the purchasing equation.

Despite this, there were (and still are) a significant number of people who, for reasons of personal physique or style, did not consider the 501 as the right fit for them.

For this significant minority Levi's developed a range of other Red Tab fits. The range includes: Historically the strategy had been to sell these non-501 Red Tab fits in-store, via POS and retailer advice. Levi's own retailer and consumer research indicated, however, that the non-501 Red Tab fits had been underperforming in the market. There were a number of reasons.

l Many consumers were under the impression that Levi's was really just about 501. They were unaware of the availability of other

Red Tab fits. So if they tried on 501 and were not completely happy, they would try on another brand, rather than another Levi's fit.

Or if they knew from the start that they wanted a fit other than 501, they would go directly to another brand.

517: Regular Fit

518: Loose Fit

511: Zip Fly

536: Girl's Fit

l Many retailers were not directing 'failed 501' traffic onto other Red Tab fits.

l Some retailers, in the absence of specific consumer demand for non-501 Red Tab fits, were deciding not to stock these fits at all. The above factors created a problem that reproduced itself

Levi's was losing out to competitive brands in this significant minority of the premium jeans market. And there was a risk that if no action was taken, the scale of the problem would spiral.

Clearly the Red Tab range required marketing support, and advertising was deemed necessary.

THE BRIEF

We determined that there was a very specific role for advertising: to raise awareness of the multiplicity of Levi's Red Tab fits.

Advertising should make people understand that if they want something other than 501, it will be there in the store for them. They can discover exactly the right fit in-store.

And we drafted a very simple proposition to address this task:

Levi's Red Tab jeans come in as many different styles as the people that wear them.

THE ADVERTISING MINEFIELD

This seems relatively straightforward.

But in fact, in identifying these as the role for advertising and proposition, we had also identified what advertising could not do or say.

Examination of previous competitive advertising relating to product ranges and fits indicated to us a series of problems and misconceptions both strategically and creatively.

It was important that we map out for the creative team where these perils and pitfalls lay, in order that they could steer a clear path through the minefield.

The 501 issue

We were concerned that above-the-line support for fit numbers other than 501 would confuse people and dilute the definitive status of 501.

We realised that we could not expect people to memorise a series of fit numbers and their definitions. It had taken a great deal of time and money to establish one fit number in public consciousness.

Indeed, we did not want non-501 fit numbers to develop their own identify to the extent that they became sub-brands. The non-501 Red

Tab fits could not approach the wealth of heritage and associated imagery commanded by 501. They could not really aspire to being brands in the same sense.

More importantly we did not want to compromise in any way the definitive status of 501.

Thus we specified in the brief that executions should avoid discussion of or comparison with 501s.

Moreover, we determined that we could keep the Red Tab communication separate from 501 communication by adopting an entirely new medium for Levi's: posters. More specifically, Adshels offered a street level impact, in keeping with our youthful target and within sight of most retailers.

Since advertising's role was not to raise awareness of individual fit numbers, we decided its effectiveness should not be judged by people's ability to recollect specific numbers, but by their awareness that Levi's have a range of Red Tab fits.

Range advertising

Advertising a range of products is often strategically unsound and creatively uninspiring.

People generally do not buy ranges; they buy individual products. A range campaign tends to proclaim the benefits of the range as a whole, or to highlight the differences within the range. But if people are interested in individual products, all they really want to know is what is good about that product.

Moreover, a brief for range advertising can often lead to creative cul-de-sacs: a row of products and an invitation to the consumer to make his or her own choice etc.

Consequently, although the objective of the advertising was not to establish individual fit identities, we did specify that each execution should feature one fit only and would talk about the benefits of that fit. Across a range of executions we aimed to establish a sense of the multiplicity of the fits, thereby addressing the key objective.

Fit adverting

Fit messages also pose a strategic and creative challenge.

People choose different jeans fits for reasons both of personal physique and current fashion. If advertising addresses one motivation, it struggles to communicate the other. And the more obvious creative solutions tend not to be challenging or motivating.

For example, a tight fit can be communicated by showing a thin person and a loose fit by showing a fatter person. But the latter expression clearly does little for loose fit. And what of the people who wear loose fit for style rather than physical reasons? Alternatively, a fit message can be conveyed by showing the overall style or fashion of the wearers of different fits. For example, a punk in tight jeans and a hip-hop fan in loose jeans. But youth fashion cannot easily be compartmentalised into discrete tribes with conveniently different jeans fits. Moreover, young people quite naturally recoil from any cynical attempt by advertisers to mirror their own street-level cultures. And, as with the above, what of the people who do not choose fits for fashion reasons? We concluded that these more literal expressions of fit were not worth exploring and we directed the team to seek out more lateral solutions.

THE CREATIVE SOLUTION

The creative team, conscious of the objectives of the advertising and the strategic and executional minefields to be avoided, came up with an innovative solution to the brief.

They developed a range of executions each employing a black and white still from the respected photographer Bill Brandt to deal with one Red Tab fit message.

They did not talk about fit in a literal way. Rather they implied the various fit messages.

Moreover the images employed were not completely unrelated to fit. (They were not vegetables or fruit!) Rather all the executions focused on the human form, which is after all the basis of any fit choice.

ADVERTISING EFFECT

The poster campaign ran nationally for four weeks only in April 1993.

Millward Brown tracking showed very high advertising recognition: over 40% of a sample of 17 to 29-year-olds recognised the posters.

More importantly, spontaneous and prompted awareness of Red Tab rose from 35% to 45% and from 57% to 75% respectively. The percentage of respondents able to quote any non-501 fit number rose from 50% to 60%.

We are unable to divulge actual sales data.

SUMMARY

The planner's role does not only entail pointing the creative team in one particular direction; it can also involve illustrating to them the strategically unsound and creatively fruitless routes.

In advertising non-501 Red Tab fits for the first time, Levi Strauss were entering a minefield. By identifying the best role for advertising and mapping out the geography of that minefield, the planner was able to play a part in the development of advertising which maintained

Levi's best standards of creativity and effectiveness.

CREATIVE BRIEF

Why are we advertising?

To raise awareness of the range of Levi's Red Tab jeans by demonstrating that Levi's produce different fits to compliment different body shapes and personal styles.

Who are we talking to?

Question 3) Analyse the importance of the various marketing mix elements in the success :failure of Levi, how important is design?

Levi's share of the denim market plummeted. In 1990, according to Tactical Retail Monitor, more than 48% of men chose Levi's as their preferred choice of jeans. By 1998, this had tumbled to 25%, while Lee and Wrangler had risen from 22% to 32%, and private label brands including Gap from 3% to more than 20%. In sales terms the brand slipped from a 30% US market share to 14%. (Upmarket designer labels such as Tommy Hilfiger and Calvin Klein got a great deal of publicity but never achieved more than around 7% of the market). The percentage of teenage boys who thought Levi's was a "really cool" brand had dropped from 21% in 1994 to just 7% by 1998. Levi's position has, for the most part stabilised since then, but competition remains intense

The Levi's brand now houses several sub-brands. Chief amongst these is Levi's Red Tab, which includes the legendary 501 button-fly design. (The number 501 was originally the product's stock number, first adopted in 1890; the red fabric tab was first used in the back pocket from 1936). Levi's Vintage features a broader range of "classic" retro designs. In pursuit of the youth market, the company has tried to turn back the tide with more extreme cuts, such as Levi's Engineered Jeans, introduced in 2000 and supposedly designed ergonomically to fit the body's contours. Some cuts are even pre-stained with oil. Another stylised new design launched in early 2003 as Levi's Type One. These offered exaggerated versions of traditional features such as rivets, stitching and the tab, blown up in size. However sales were slow to take off, especially in the US, despite high profile marketing, including a Super Bowl ad (which the company later claimed admitted was unsatisfactory). They, along with another stylised line known as Silvertab, were replaced by the Levi's Capital E line. Levi's ICD, a partnership with Philips to market workwear with "integrated" electronic devices such as mobile phones, MP3 players etc, was withdrawn in 2002. The group also licenses out the Levi's brand to other manufacturers for branded T-shirts and accessories. Combined sales of the core brand improved in 2007, reaching almost $3.2bn. Levi's is primarily a menswear brand, with just under three quarters of all pairs sold bought by men.

After its many attempts to introduce more stylized or fashion-oriented designs had failed, the company agreed to abandon its premium positioning and chase the mass-market as well. A new design, Levi Strauss Signature, launched in July 2003, initially available exclusively through Wal-Mart. By the end of the year it had become apparent that the new line was the much-needed hit for which the company had been searching. The group rebranded the range as Signature by Levi Strauss, extended distribution to Target Stores and Kmart in 2004, and also introduced the range into selected mass-marketers in Australia (including Coles Myer's Target and Kmart), Japan and other Asian markets. It was also launched in the UK (through Asda), France (through Carrefour), Germany (through Wal-Mart) and Switzerland (through Migros), but performed poorly and was withdrawn in 2007. Yet after a strong start, sales of the Signature line have fallen steadily since 2005, declining from a peak of around $410m that year to $260m in 2007.

Dockers, first launched in the US in 1986, is the company's khaki-based casualwear line. It was launched as something of a reaction to inroads into the market by Gap and others, serving as a halfway point between jeans and smarter dress pants. Dockers Slates, a sub-brand of dressier and more expensive trousers, was discontinued in 2004. Although it has been generally successful, Dockers remains very much the second string in the group's portfolio behind its jeans line. In 2004, Levi Strauss put the Dockers brand up for sale in order to concentrate on its still struggling core business, but failed to attract a suitable buyer. Sales of the brand were reported at $1bn for 2003, but had fallen to around $775m by 2005, with sales concentrated in the US. Since then it has repositioned itself as a wider casualwear brand, diversifying into shirts, sweaters and blazers, as well as a line of women's clothing. The unit was rewarded with an increase in revenues for 2006, its first for several years. For 2007, it generated sales were around $915m. The group also generates significant income from royalties on Dockers belts, footwear and other accessories manufactured by other companies under license.

Levi Strauss has production facilities and customer service centres throughout the world. Until comparatively recently the company maintained a policy of manufacturing its goods in the regions in which they are sold, but rising labour costs and declining sales made this increasingly unfeasible. Production in the US and Europe began to be farmed out to cheaper regions in the late 1990s. Having already closed six of its US factories by 2003, the group announced that the remaining four in North America would also be shuttered by early 2004. The group supplies its products to around 60,000 retail outlets worldwide. It owns and operates around 200 of its own Levi's or Dockers branded stores, and franchises around another 1,300. More than half of these stores are located in the Asia Pacific region. Otherwise sales are through department stores and national chains.

There are three regional business units: Levi Strauss North America operates local subsidiaries in the US, Canada and Mexico, and accounts for almost 60% of revenues, or $2.5bn in 2007 (compared to a peak of $4.8bn in 1996). Levi Strauss EMEA is the second biggest market, but performance there took longer to recover than in other markets. Sales rose in 2007 for the first time in several years, finally returning above the $1.0bn barrier. Asia Pacific remains the smallest market for now, but has been the company's strongest performing region for several years. Sales rose by a further 6% in 2007 to $805m, with Japan contributing a little under half of all sales.

Question 4) As a strategic marketing consultant, advise Levi about what now it should now do ?

It is every business's objective to maximize their profits and lessen their expenses. Levi's has invested on one of the most important resource that a company could have - its employees. Their corporate strategy has now been aligned with their human resource management which is valuing their employees due to high costs of recruiting and training new staff. It must be noted that losing an employee can be very expensive and high staff turnover can eventually ruin a business. The last thing that businesses need is for its competitors to benefit from the training, knowledge and experience that it has built within its workforce.

It is suggested that employers give their people the opportunity to make their own benefits decisions. This way, employees will take a keener interest in their benefits. The traditional company benefits package often has a rigid “one size fits all” approach; it fails to consider the varying needs of individual employees. In addition, the traditional company benefits package may sometimes be complicated and difficult to manage. Thus, it is greatly recommended that companies like Levi Strauss and Co. implement a flexible benefits package to help reduce costs and provide a greater choice for their workforce. Furthermore, flexible benefits provide additional lifestyle choices along with traditional company benefits such as private healthcare and the company pension scheme which will allow employees to choose the benefits that they want which in turn will motivate them and make them more productive.

It is also important that companies like Levi Strauss and Co. consider some of the following pointers: (1)

* the main goals of the company's employee benefits programme,

* the last time that the company last reviewed their benefits scheme,

* steps or initiatives undertaken to ensure that the company's benefits programme underpins their business strategy,

* knowledge of employees regarding the benefits that the company offers and how they benefits from it,

* issues like sickness and absence, healthcare and dental care, and (6) the extent of the relevance and significance of the recruitment and key staff in employer's business and their industry.

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