Levi’s must give choice back to its consumers

Consider the following quotation: “[This year] the company reorganised its operation in Europe. Suffering from a serious downturn in its market, under pressure from a host of small fashion-oriented brands, and feeling the effects of a deterioration in image… morale was at a lower ebb. For a company that was unused to anything except success, with an unparalleled record in employee relations, the prospect of layoffs was a bitter pill.”

This – from a 1988 IPA Advertising Effectiveness Award paper on jeans maker Levi-Strauss, sounds recent. But it refers to 1984. Fourteen years later, there is a serious downturn in the market again – a 22 per cent fall in the UK, according to Levi-Strauss UK general manager Jack Cosgrove. Competition from fashion brands is hitting the company again. And once again, Levi’s is trying to revitalise its image through controversial new advertising and a pan-European restructuring plan. The market is facing “permanent, structural change”, says Levi-Strauss. The question is how well the brand will respond to that change.

Since 1984 important factors have emerged to effect such change. One is the way in which the globalisation of trade and communications is exposing the schizophrenic nature of the Levi’s brand. In Europe, it is positioned as a premium fashion item relying on selective distribution. But in the US, it is an everyday commodity with universal distribution. By 1991, the company had used its premium branding strategy to make 501s five times more expensive in Europe than in the US, according to a 1992 IPA Advertising Effectiveness Awards paper. But as awareness of the disparity grows, so do grey imports – hence Levi’s current writs.

Another factor is the rise of own label. In 1984, The Gap, which made most of its money selling Levi’s jeans, developed its own brand version. By 1991 it had stopped selling Levi’s altogether. As we all know, by offering similar quality at much lower prices, own label questions brands’ justification for premium prices.

A third factor is the drive by retailers such as Tesco to stock branded clothing, which conflicts with Levi’s selective distribution strategy. Tesco isn’t trying to sell own-label jeans. It wants to sell Levi’s. Levi’s says it would supply Tesco if it met its (unpublished) distribution criteria. But these criteria – location, affinity to target consumer (defined by Cosgrove as “young consumers that are interested and involved in clothing”), other brands stocked, presentation and staff training – aim to ensure, as Cosgrove puts it, “that Levi’s outlets are committed to and treat casual apparel as an important part of their business”. That means specialist outlets, not supermarkets.

According to Cosgrove, Levi’s is being “used and abused” by Tesco for its own PR purposes. He says that, in the light of the recent Office of Fair Trading report on supermarkets using (as Levi’s put it) “their huge buying power to squeeze discounts from suppliers which they fail to pass on to consumers”, Tesco’s actions are “a smokescreen”.

But Levi’s success lies in its ability to sustain its premium branding strategy (MW July 17). Real premium brands have a justification for their strategy which is based on limited edition production, the use of expensive raw materials, unique design talent, skilled labour or technological achievement. Yet Levi’s (like many other would-be premium brands) is a mass-produced item. It says one of its reasons for taking legal action against retailers stocking grey imports is to protect consumers from counterfeits. But it is becoming its own form of counterfeit: a mass-produced item which – through selective distribution, heavy image advertising and premium prices – has the appearance of a premium brand.

As the writs fly between Levi’s and Tesco, an even deeper issue is coming to the fore. According to a MORI poll for the Parallel Traders Association, 79 per cent of UK consumers think supermarkets should be free to sell brands like Levi’s. Surely, if consumers want to buy their brand from an outlet like Tesco, they should be given a free choice? No, says Cosgrove. Choice is for the brand, not the consumer.

“What we are saying is that we have a minimum criterion that we believe meets our brand values and qualities. And that is our choice as a brand. Now, the consumers may have a different point of view. There is a wide range of consumer choices out there, and there are a wide range of criteria that consumers will apply to their decision making. Can we satisfy all those consumers? No. Because they have different criteria. But what we can do is satisfy ourselves that we are clear about what experiences as a minimum we want our consumers to be able to have with our brand. Whether or not they value that is a different story.”

This take-it-or-leave-it attitude, not PR stunts by Tesco, is Levi’s real problem. Brand owners tend to think that because they own the brand, the brand is theirs to do what they want with it. Increasingly, however, consumers are coming to think that in a sense they own the brand. Brands should not only appeal to them in relevant ways, their brand strategies should also reflect their wishes and not just those of the owners. The owners of the Levi’s brand may not want to manage their brand in Europe as they do in the US, but what happens if its consumers do? This is an issue which is affecting all brands, not just Levi’s. Successful brand managers will only remain successful if they manage the brands in ways that their increasingly sophisticated consumers want them to. And brands that stand on their brand dignity are vulnerable.

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