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Consumers may develop attachment to product objects based on things such as attributes, experiences, or values they share. The emotional attachment comes about due to a personal meaning the product has for the consumer that is unique and special in some way. The concept of product attachment is well known in marketing and consumer behaviour, but it has been a difficult challenge to plan for attachment and to implement during the product design process. The researchers Orth, Thurgood, and van den Hoven (2018) explored the prospects of creating products that are designed to connect with consumers based on their self-identities and life stories [1].

In thinking about self-identity, we can apply different means by which we perceive and define ourselves as persons (“who I am”). The process of construing one’s identity may start with his or her personality traits (i.e., self-image), but it can be expanded by adding beliefs, goals and values in life, an overall view of life and a look for the future (identity may also be expressed through salient group affiliations: social, professional etc.). When a good match of a product with any of those aspects is found, it may become the foundation for a consumer’s attachment with the product. However, there is another avenue for forming product attachment by means of connecting through episodes and elements in one’s life story or narrative — experiences and special moments (memories), people, places, and other objects (e.g., ties to existing possessions).  Orth, Thurgood and van den Hoven follow this avenue to look for opportunities to create product objects that designated individuals would meaningfully connect with. They state their objective as “purposefully create meaning by evoking meaningful associations” from one’s life narrative or sense of self.

In a marketing context, brands rather than products per se would be the appropriate targets for attachment. Brands identify products. Yet furthermore, a brand, as an intangible entity, may hold associations beyond attributes linked directly to the physical product that the brand name is assigned to; the associations can extend to brand personality traits, values, heritage, and more. The quality of an attachment may be assessed by (a) the brand-self connection that is built (i.e., how well the brand’s associations agree with and corroborate an individual’s self-identity to the extent that the brand becomes part of one’s definition of his or her identity); and (b) the prominence of brand associations in memory (e.g., how significant they are, that is, they come instantly and automatically to mind) [2]. Orth and his colleagues, who focus on product design, do not step-up from the product- to the brand-level, although they do refer to aspects underlying attachment that extend beyond the materiality of the product.

The researchers applied a three-stage methodology: 

Inspiration is derived from the life stories of consumers through in-depth semi-structured interviews (with three participants) —  participants told the researchers about their life stories, including people and places that were involved, memorable experiences they have had, possessions they cherish, as well as their views on physical product properties such as colour, texture and materials.

Creation of artefacts (products), designed to capture associations linked to valued and meaningful experiences, people, places, etc. in the memories (life narrative) and sense of self of the consumers-participants. Two artefacts were especially designed and made for each participant. The objects stayed with participants for two weeks.

Evaluation of the meaning, value and emotional tie each consumer-respondent ascribes to those two artefacts, designed-to-fit associations from each one’s life experiences and self-identity (note that the participants were not told that the objects were ‘designed-to-fit’ personally for them). As a reference, each respondent was also asked about his or her perceptions of and emotional ties to an artefact designed for another participant and to possessions they own which they regard as significant to them.

The results obtained by Orth, Thurgood, and van den Hoven were mixed. With at least one product-artefact they successfully captured the expected match in associations for forming an attachment; for other artefacts they partially captured the associations that would predicate an attachment (e.g., an attachment was formed but based on associations different from those expected); and in the case of at least one artefact, the design was evidently inadequate in forming an attachment (i.e., practically being a miss). The results testify to the difficulty of identifying and anticipating associations that will serve as the meaningful bridge for forming an attachment, even when quite detailed  information about the consumers to draw from is available.

Louise was offered a transparent candle cover (‘Diramu’) with silhouette of native Australian trees; the candle had a scent of smoky campfire.  It was intended to be reminiscent of her childhood in an area surrounded by bushland in Australia, where she had played frequently, but there was concern it would bring up less pleasant, disturbing memories of the struggle to keep bushfires away from her family’s home. Nevertheless, the designed Diramu managed to capture a ‘soft spot’ in the memories of Louise for bushfires (i.e., the bushfire was pleasant, not scary, and the candle’s scent had a feeling of home).

A partial success was obtained in cases as these: (a) Alex liked a porcelain decanter (‘Kiruna’) designed for him due to its fine aesthetics (attractive, elegant) and delicacy that he appreciates and favours.  But the decanter reminded him of the colours of Greece (white and blue) rather than his winter activities and skiing vacations with his children as intended. (b) Karen received a pendant necklace (‘Crater’) with a shiny anthracite coal that would resemble a gemstone. She found it ‘quite nice’ and she ‘quite liked it’. However, she grew no attachment to the object in spite of her affectionate memories of her father as a coal miner in England. The cue of coal failed to transfer the emotional significance regarding her father to the Crater artefact. The researchers admitted that they missed the completely functional attitude and emotional indifference of Karen towards objects, as they discovered it only in the evaluation stage.

The special world clock device (‘Globe’) prepared for Alex in conjunction with his many travels did not meet the expectations. Alex started developing a passion for travels during childhood in Australia and extended it to travels overseas in adulthood through his work; he likes connecting with people in different countries and collecting souvenirs (e.g.,  refined art objects, books and paintings). The Globe was made to show the names of places around the world (e.g., cities) at the time each location, according to its time zone, enjoys a Happy Hour for evening drinks. However, the name title of places turned out to be too weak as a cue to link to specific experiences. Alex commented that while many of the cities mentioned reminded him of some wonderful memories from his being there, “that thing doesn’t reflect those”. The clock design apparently also did not appeal to Alex (e.g., too simplistic, not to his aesthetic standards, and even stopped functioning after a while), leaving a negative impression on him.

The names as cues were probably too general and vague to trigger meaningful associations from the respective places; perhaps photographic images would have helped, but they too should prove personally relevant to Alex. Neither the informational cues (names) nor the design of the Globe artefact corresponded meaningfully with memories and associations of Alex from his travels, and thus according to Orth et al., it can be argued that the artefact was lacking authenticity for Alex.

  • Fournier (1998) studied the life narratives of consumers through in-depth interviews, though in her research the aim was to trace anchors for developing relationships between consumers and brands. That is, she learned from the products-in-use in the lives of three research participants about the roles that the brands of those products played in their lives and how bonds could be created with the brands based on the rich meanings they received [3]. The contribution of Orth and his colleagues is special in their attempt to leverage the information obtained about the life narratives of consumers into actual product objects designed specifically for those same consumers.

Realistically, companies cannot gather so detailed and personal information from too many consumers to enable them to design a product that will fit particular aspects from the life narrative or self-identity of each consumer. Orth, Thurgood and van den Hoven spoke to just three consumers and they had varied levels of success in anticipating the associations upon which attachment would be formed.

One direction they suggest, borrowing from previous research, is to create a set of optional product designs (versions) that would confer meaningfully to different target groups of consumers. In other words, each design could contain cues that any particular consumer may connect through to his or her idiosyncratic associations so as to develop an emotional attachment to the product object. This may suggest the importance that prevails in studying the lifestyles, values and psychographics of consumers (using surveys) in order to create the knowledge base necessary for designing personally meaningful product models. Nevertheless, this kind of information may never be as intricate and deep as the life stories studied by Orth and his colleagues. Finding personal meaning in products (and brands) could remain in the domain of the consumers based on what they know about themselves and their past experiences in life.

Another direction is to give consumers an active role in self-designing a product customised for each individual consumer who takes part in such a scheme. The consumer first has to choose what type of product is wanted; then he or she can choose features or properties (e.g., aesthetic-visual, functional) that may be perceived by each one as effective cues to trigger meaningful associations. The aim of self-designing a product in this context is self-expression and connecting to one’s experiences and self-identity, not strictly satisfying one’s utilitarian preferences. In typical schemes of mass customization consumers are constrained by the capabilities and willingness of companies to make the products of their designs. But in the age of 3D printing, consumers may gain greater authority, freedom and flexibility to design and create products to fit more closely the way they perceive and feel about themselves. Orth et al. put it this way: “Advancements in custom manufacturing technologies such as 3D printing provide growing opportunities for bespoke design practices such as those presented in this paper as an alternative to traditional mass production processes” (p. 101).

Orth, Thurgood and van den Hoven set two conditions for designing objects (products) with meaningful associations: (1) Cueing Meaning —  the product object has to cue an aspect of identity of the consumer that is personally significant or meaningful (e.g., the Kiruna made of porcelain related to an aspect of identity, ‘ceramics man’, not significant enough to Alex whereas the Diramu representing bushfires connected to an aspect of experience of ‘a pleasant bushfire’ uniquely meaningful to Louise); (2) Authentic Embodiment —  the consumer has to perceive the way a product object cues an association as authentic for it to elicit its personal meaningfulness (i.e., the consumers “must perceive the object to successfully embody the associated source”, hence establishing an authentic linkage between the object and source) (e.g., the Globe failed in relating authentically to the travels of Alex).

Product designers, with the help of design researchers, can go quite a long distance towards consumers in designing products that will be more meaningful to them, but they have to know and respect their limits in approaching consumers close enough. The difficulty is mainly in anticipating the associations that will be perceived by an individual consumer as relevant and significant to be the basis for forming an attachment, and then capture it in an authentic way. As Orth, Thurgood and van den Hoven phrase it, designers should acknowledge that they are “limited to creating possibilities instead of certainties in any attempt to design for product attachment” (p. 100). The task of finding a meaning in a product neither has to be relegated fully to the consumer. It should be a shared endeavour in which the designers recommend products and provide sufficient informed cues to meaningful associations, whereon consumers can detect and choose which ones in a product design truly matter to their self-identity and life experiences; and if technology allows, the consumers may be given even a more active role in creating such design cues meaningful to them.

Ron Ventura, Ph.D. (Marketing)

Notes:

[1] “Designing Objects with Meaningful Associations“; Daniel Orth, Clementine Thurgood, & Elise van den Hoven (2018); International Journal of Design, 12 (2), pp. 91-104. (Images of the artefacts can be seen in the article here).

[2] “Brand Attachment and Brand Attitude Strength: Conceptual and Empirical Differentiation of Two Critical Brand Equity Drivers”; C. Whan Park, Deborah J. MacInnis, Joseph Priester, Andreas B. Eisingerich, & Dawn Iacobucci (2010); Journal of Marketing, 74 (November), pp. 1-17

[3] “Consumers and Their Brands: Developing Relationship Theory in Consumer Research”; Susan Fournier (1998); Journal of Consumer Research, 24 (4), pp. 343-373

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Everything happens faster in the fashion world. Fashion houses and retailers have to deal with an increasingly turbulent market wherein trends and tastes fluctuate all the time and design styles replace each other in ever shorter cycles. This instability means greater uncertainty for firms, which makes it harder for them to plan and operate through the year. Attempting to curb the motion and introduce more stability can be a serious challenge for the fashion designers, marketers and retailers; the stream is strong, and more often it seems that everyone has to continue flowing to the next fashion style. Retailers with physical stores face an additional challenge from strengthening e-commerce — consumers prefer to buy more clothing items online, especially from whatever source and channel they can find them at lower prices.

Castro is a leading fashion house and retailer in Israel with over 130 stores carrying its name (i.e., Castro, Castro Men, and Castro Kids) across the country. The Castro company  was established by Aharon Castro in 1950. Its retail start was modest, and the business continued to be primarily a fashion house, designing and making garments (for women only), until the late 1980s. In 1985 the founder opened a flagship store on the modern Dizengof shopping street of Tel-Aviv; that may be considered a first brave move to lift-up the image of the Castro fashion brand and earn it more publicity.

In the early 1990s Aharon Castro passed the realm of the company to his son-in-law Gabriel (Gaby) Rotter, joined later by his daughter Esther (Etty) Rotter, and they have been serving as co-CEOs since then. The second period of Castro is marked by the great expansion of the retail arm of the business. More and more stores were opened in the 1990s and 2000s (Castro also made a venture abroad, mainly in Germany, but it was unsuccessful and largely cut-off). In this period the prevailing brand image of Castro was also invented, which gave it fame and appreciation. The last decade has seen more acquisitions of fashion enterprises (clothing and accessories) made by the company, but these do not carry the Castro name and therefore have less bearing on the Castro brand. In summer 2018 Castro merged with the fashion group Hoodies, and the repercussion of this move is yet to be seen, whether the brands mix or remain separated.

Listed below are selected actions that contributed more significantly to establish the prime attributes associated with Castro, exciting and daring, since the 1990s:

Castro aired a famed TV commercial in 1993 that was daring, playful and igniting the imagination — it is best simply to watch it.  Two more facts make this commercial special: (a) It was aired in the beginning of commercial TV in Israel, when the audience was highly curious and interested in advertising in this medium, which helped the commercial to become a “hit”; (b) The song featuring in the commercial was Creep by Radiohead, during the early stage of its musical career, so the commercial gave a unique exposure to Radiohead in Israel. Definitely in those days this Castro commercial was unusual and exciting (until today it is the most loved commercial in the country); it drove great attention and interest in the coats and other clothing products of Castro, and put it on a trail of growth.

In the early 1990s Castro moved into the pivotal shopping centre of Tel-Aviv (Dizengof Centre). Moreover, Castro situated its store near the entrance to the major department store of that time (HaMashbir), a sound call of challenge. A decade later, in 2003, Castro relocated within the shopping centre and opened its flagship store Castro Tel-Aviv, occupying three floors, with an external façade that turns to a strategic corner of streets with high exposure — a strong declaration of their presence. At least for several years it was an important anchor in the shopping centre.

Castro gradually started to enter clothes for men into its stores. Over time the fashion house expanded the scope of its target segments to become a marketer and retailer of clothing for men and women, youth and kids. On the retail side, Castro made two key moves: in 2000 it launched its sub-chain of Castro Men stores, and in 2013 the Castro Kids sub-chain of stores came to life. Perhaps already less exciting to consumers, but they are still daring moves (a demonstration of force).

However, the expansion of Castro’s activities, particularly adding stores to its retail chain, seems to have taken a toll from the company. It is hard to put a finger on a single factor as the cause of recent troubles at Castro. It appears, yet, that the toll has hit primarily Castro as a fashion house. From some point in the passing decade, consumers have been losing interest in the garments of Castro. In earlier decades, Castro led by its founder gained a reputation for creativity, for bringing new designs and quality fabrics (important especially in the 1960s and 1970s, credit going also to Aharon’s mother Nina). Consumers may have stopped believing that Castro’s clothing expresses creativity, novelty and ingenuity. Nonetheless, the needs and tastes of Israeli consumers apparently have changed, and they are looking for something different in fashion and clothing, which also happens to be less original and less expensive clothing.

Firstly, consumers buy more frequently from a variety of online retailers (‘e-tailers’), on top of them is Amazon.com, while getting easy access to broad selections of clothing from abroad at affordable prices. Consumers also are willing to pay less for garments, shoes and accessories of lower quality even if they would have to replace them more frequently. They further tend to inspect garments in physical stores and then buy the same or similar items from online stores. Yet another threatening competition to Castro comes from quick-movers, discount retailers like Zara and H&M that produce and sell garments of similar designs as those of known fashion houses (though they may have some original clothes). A more discomforting revelation of recent years is that a low cost retailer (Fox) is gaining in popularity while Castro is sliding down. The stores of Castro see less traffic of visitors (footfall), thus stores are too quiet for extended periods, and the sellers have too much ‘free time’ to arrange merchandise; a special report on public TV (Kan News, 4 May 2019, Hebrew) indicates that a growing pressure is put on sellers and other staff (e.g., visual merchandisers) to contribute to better results . Could it be that Israeli consumers find the design of stores less attractive; is the visual merchandising in-store less appealing to them; or is it the merchandise itself losing its appeal? We should not overlook the influence of background factors such as changes in the code of dressing (more casual, ‘dressing-down’, sportive) and economic constraints on consumers’ shopping behaviour in clothing and fashion.

  • In 2018 Castro saw overall a loss of 59 million shekels (~$16m), after a net gain of 48m shekels in 2017 and in 2016, and operating profit on clothing has dropped 66%. Additionally, sales of clothing in same stores of Castro+Hoodies fell 7.7% in 2018, above average rate in this sector (Globes, 5 May 2019, Hebrew — this article follows the report on Kan News).

A few ideas may be learned from the American department store chain Kohl’s that is taking dramatic measures in its effort for resurgence, led by CEO Michelle Gass [A]. Some of these measures may be relevant also to Castro, and could suggest directions for the transformation it may also be required of:

Kohl’s is reducing the amount of merchandise displayed in its stores, and is also decreasing the selling space of stores. On the other hand, the retailer installed an advanced inventory technology that allows it to track its merchandise on display at any time (by using RFID tags on product items), and follow purchase data (including online) and analyse it. Hence staff at Kohl’s can predict what products are in greater demand and what merchandise is in need of replenishing in real time, enabling to display less merchandise with no disadvantage.

Furthermore, Kohl’s  developed a capability to trace changes in market trends faster and cut the time needed to deliver new designs to stores (i.e., shorter time-to-market).

Kohl’s introduces new technologies in its stores to improve the service to shoppers and their in-store experience overall, including handheld checkout devices to cut waiting lines at cashiers, and digital price screens that can be updated with less hassle for staff; in addition, the RFID tags aforementioned enable staff to help customers quickly find products they seek (mirrors with holograms or augmented reality may come later).

  • Kohl’s has taken another intriguing step: orders from Amazon can be returned at desks in a hundred of its stores (out of 1,100+ stores). Critics and skeptics regarded this co-operation akin to “sleeping with the enemy” or “bringing a fox into the henhouse”. However, Gass sees in providing this service at Kohl’s stores an opportunity whereby Amazon’s customers already in a store may choose to buy some products they see around, similar to the case when Kohl’s customers who use its “click & collect” scheme at Kohls.com online store later come to pick-up the order at a physical store.

Castro announced recently that it plans to enlarge and redesign some of its stores. Castro Store TelAviv in GanHaIrPerhaps its management should re-consider enlarging stores. Does Castro really need to have stores as large as those of Zara and H&M (1000sqm+)? This may not be effective in terms of (lower) revenue per squared metre [B]. The stores can also be arranged to be more spacious between display exhibits and hold less merchandise, provided that information technology can be used to monitor it cleverly. Redesigning stores may indeed be welcome — current stores could feel too dark-toned with selective spot lights, which may be perceived more elegant but less convenient. Existing large stores may be reduced somewhat, or perhaps may better allocate space to other purposes like special projects (e.g., gallery of new art designs in fashion), a coffee bar or hosting events that may be more interesting than a space loaded with more products [cf. A].  Greater attention should be drawn to the experience that can be generated for visitors in-store.

Another issue concerns the image and experience delivered by the website and online store of Castro. Is the online store not advanced and rich enough? Will more exclusive online offers make the difference? [cf. B] What kind of experience should the website and online store present to visitors? Entering the e-commerce website overly feels like entering a catalogue. The e-store has some nice features like a model’s image changing position when hovering above with the mouse to show the garment from another angle, or being able to see the same garment in different colours. Yet the website appears nothing more than an e-commerce website; it misses something more important — it obscures Castro as a fashion house. The story of Castro and its creations is practically hidden, hard to find. When entering the website, it should communicate the image of the brand Castro — show original designs of the fashion house before start selling. The website should clearly show the “door” to the online store but right next to it should appear the “door” to Castro the fashion house and its story.

Eventually, the garments designed and created by Castro are the main issue to address. This should be an important point of differentiation for Castro from other retailers on which it should make its voice loud and clear. For example, prior to her role as CEO of Kohl’s, Gass identified the rise of the trend of activewear (sportive-energy) style in clothing; she gave it more emphasis in stores with the help of national brands like Nike and Adidas. Castro has a category (online) of Activewear. On the one hand, it can make its voice by introducing its own designs in this category. On the other hand, it should not go only after what seems popular at a time but suggest other modes or styles to the market.

Castro seems to lack sub-brands or endorsed brands up front that consumers can easily identify and associate certain styles or attributes with them (e.g., more daring or novel vs. more conservative, more artful vs. more functional). Castro is said to hire top-of-class young designers. Yet it does not elevate anyone as house designers by name, perhaps to encourage more collegiality and teamwork. An alternative approach would be to build a brand around a team of designers (like a “centre of excellence”) who share a certain vision and approach in fashion styles. Actually Castro already has three sub-brands: “Red” for casual dressing; “Blue” for more elegant, quasi-formal dressing; and “Black” for jeans wear. Castro can develop and enrich any of these sub-brands; create another brand with a specific style or tone of design as a secondary “specialisation” under any of those above; or build a new brand endorsed directly by the Castro name that will express new forms of art, novelty or elegance, etc. Whatever course taken, the leading idea is to give consumers a ‘name & face’ they can cling to, to follow how it evolves, and to identify with.

There are multiple avenues for Castro to reinvent and revive its brand and business as a whole. The expansion of its retailing activities may have led to the weakening of its fashion house and dilution of its brand. Some of the enterprises Castro acquired or merged with could hurt the brand to the extent that they are stopping Castro from developing answers in-house to gaps in the market. Therefore, it is perhaps the time now to return to increase the focus on Castro the fashion house as in earlier times, and let the retail arm serve it, not the other way round. Castro should be ready to enter its third period; the challenge will likely be assigned to the new Deputy CEO lately nominated, Ron Rotter (son of Etty and Gaby Rotter and former CFO), to reinvent Castro and put the brand on a new course.

Ron Ventura, Ph.D. (Marketing)

Additional Sources:

[A] “Michelle Gass Is Cracking the Code at Kohl’s”, Phil Wahba, Fortune (Europe Edition), December 2018, pp. 104-112.

[B] “Castro Once Was the Most Sexy Brand in Israel, But These Days Are Gone” (origin in Hebrew), TheMarker, 12 April 2019 (MarkerWeek edition), pp. 14-16

 

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Many companies are well-known to consumers by their corporate names, including manufacturers, chain retailers and service providers. The corporate name may serve as the leading brand identifier (like an ‘umbrella’ name) for the company’s products or services. But furthermore the corporate-level brand name is the gate to access the organisation’s image as held in the public opinion of consumers. In the last decade companies are increasingly judged by their values, culture, and market and public conduct. Consumers are more strongly influenced in their choice of products or services of a company by what they think of and how they feel towards its corporate brand.

A Tel-Aviv-based strategic management consulting firm, TACK, constructed a two-dimension metric for assessing the image strength (or sturdiness) of companies in Israel. The metric comprises a rational-oriented ‘pillar’ named Logic and an affective-driven ‘pillar’ called Magic. Each dimension of the image strength metric is measured by two (rating-scale) items.

Logic represents how much a company is appreciated by consumers, and to what extent the company makes it worthwhile for consumers to be its customers.

Magic expresses how much a company is loved by consumers, and to what extent consumers believe that the company cares about its customers.

Magic pertains to the emotional ties between the company and its customers and is therefore particularly important to the relationships built by a company with the customers. We cannot underestimate the importance of the logical or cognitive-based evaluation of the company, by weighing its advantages and disadvantages, as the basis for the interest and preference consumers show in using the company’s products and services. However, reasoned appreciation of the company and its offerings will likely not hold-up a relationship without developing an attachment to the corporate-name brand.

TACK applied its Logic & Magic metric for the third continuous year in 2019 to 71 Israeli companies (e.g., food producers, retail chains, telecom service providers, banks). Measures were collected in a survey of 503 adult Israeli consumers (Hebrew-speaking). The companies are not necessarily managed purely as a ‘branded house’; however, this study is not concerned with additional brands owned by the company (e.g., brands that may be endorsed by the corporate brand name or products positioned as sub-brands). The demonstrated mappings of corporate brands (in Hebrew), along the dimensions of Logic and Magic, bring forward some sobering realizations shared below:

Firstly, it is noticeable that, from a consumer perspective, companies that are doing better on the logical-functional front are also more successful on the emotional front, and thus are doing better overall in connecting with consumers. We cannot conclude from this a cause-and-effect relation. But the findings do suggest that a wise strategy that is sensitive to consumers (i.e., it sees things through the eyes of consumers) can win on both fronts. In other words, a company as such that succeeds, through its strategy, in gaining the appreciation of consumers for its performance and advantages of its products and services, is also likely to win the affection, trust and approach of the consumers.

There are hardly any corporate brands that seem to get a high score on Logic but relatively lack in their score on Magic, and vice versa. This implies that a company cannot sustain a ‘cold-minded’ appraisal of its performance and offerings while failing to win the hearts of its customers; and just as well, a company cannot sustain an affectionate connection with its customers without establishing the foundation of approval of its functional benefits to customers (e.g., being relevant and attractive). Nevertheless. it should be noted that the spread among corporate brands with relatively higher Logic and Magic scores is greater than among brands with relatively lower scores on both dimensions (there are more of them and they are more condensed). There is still much variability among the best performing companies — they are not consistently doing better in the same way.

Secondly, the quality of products and services is just one of the factors consumers likely consider in their logical-functional evaluations, and is possibly not the more prominent one. There seem to be large differences in perceived quality of the products of at least some of the companies or in the weight assigned to quality. Moreover, companies whose products appeal in their high quality or expertise to only a relatively small segment of consumers (a niche) seem to fall behind and do not come out favourably in this type of all-market brand rankings. It is not so surprising to realise that the stronger and leading corporate brands are those of companies that aim to fulfill the needs and preferences of the wider common base of the mass market.

Let us look at a few examples:

  1. In the category of retail food chains, a heavy discount retailer, Rami Levy, is positioned close to the top-right corner of the map (both in its category and overall) with high Logic and Magic scores, while a delicacy retailer Tiv Ta’am is at the bottom-left corner of the map. The two major food retail chains are in-between, one in the top-right quadrant (Shufersal) and the other in the bottom-left quadrant (Bittan [Mega]). Tiv Ta’am may bring better-quality products (e.g., fresh produce, imports of delicacies) than other food retailers, but its stores are considered too expensive, lucrative, and they are not liked. Rami Levy and Shufersal are listed among the Superbrands of Israel for 2018 in the retail category.
  2. In the category of coffee houses, we find in relatively high positions the low-cost, basic-service chain of Cofix, and the espresso-bar, self-service chain Aroma. In the worst position we find Arcaffe, an Italian-style chain of coffee bars serving fine coffee, sandwiches and other products, but it fails to receive the appreciation of the greater public for their offerings and service. Aroma is much more popular although their products and its serving standard are moderate. Yet Arcaffe is considered more ‘top-notch’, made for European-connoisseurs, and is relatively more expensive. Eventually, Aroma and Coffix are also much more emotionally appealing to Israeli consumers than Arcaffe. Roladin, a bakery and coffee-house chain, can be argued to be much closer in quality and service standard to Arcaffe than to Aroma; yet, Roladin is appreciated and considered worthwhile (Logic) similar to Aroma and is even a little more loved and cherished (Magic) than Aroma —  the advantage of Roladin over Arcaffe seems to be that they understand better what the greater part of Israelis like to eat and expect to find in a coffee-house for a light meal. Aroma and Roladin are listed among Israel’s Superbrands of 2018 (dining out) whereas Arcaffe is absent.
  3. In the media category, among the news press publishers, HaAretz holds a much lower position on both Logic and Magic than Israel HaYom; Yediot Aharonot is located closer to HaAretz. Two marked differences between them: (a) HaAretz is left-leaning (affiliated with the Guardian and New-York Times) and Yediot is oriented to the centre-left, whereas Israel HaYom is right-wing; (b) HaAretz is superior, especially in some areas, in quality of commentary and analysis to the two other newspapers (tabloid-fashioned). But the political left, and the HaAretz newspaper associated with it, are out of favour in recent years, and perhaps as a result the tolerance to its reporting by large circles of society is low, no matter its apparent news quality. [It is noted that all three also have a news website, though in the case of Yediot the online channel is branded separately as ‘ynet’ — it is positioned close and just a bit better than the press edition]. Yediot (+ynet) and Israel HaYom are listed in the media category of Israel’s Superbrands for 2018 but HaAretz is absent (its economics and business branch TheMarker is included).
  4. Interestingly, the researchers of TACK report that preference for Arcaffe and for Tiv Ta’am, each in its category, is stronger among consumers who describe themselves as leaning to the political left. The relevance of political attitudes to dining-out and food shopping is a little obscure, but it gives an indication of the portrayal of their more likely customers. More importantly, this research evidence amplifies the argument that corporate brands more entrenched in niches — like HaAretz, Arcaffe and Tiv Ta’am — are much less likely to be considered strong leading brands.

Thirdly, response to price and value perceptions are not free of an emotional loading. An economic approach views the calculation of value as a rational procedure of weighing the benefits and cost of a product or service offer. However, when an offer is judged as unfair to the disadvantage of the buyer, this may stir anger and resentment of the consumer in response to the price offer. The resentment is more often directed to the retailer, but it may be pointed towards the manufacturer of a national brand as well, depending on whom the consumer believes to be more responsible for a price differential or increase.

The judgement of unfair price differentials is contingent on the reference price used (e.g., a price paid by a friend for the same product at another store this week). In the case of a price increase, the reaction is subject to whether consumers can see justification to a price increase by attributing the increase in retail price to a rise in cost that retailers or manufacturers could not control (e.g., price of raw materials). In the past decade much resentment developed because consumers failed to find such justifications. Instead, the perception more accepted was that retailers and manufacturers were rolling their cost rises mostly to consumers, and they raised prices merely to improve their profits. In Israel this problem was evident especially in the food category where consumers were witnesses to continued feuds between the food chain retailers and manufacturers. More broadly, many Israeli consumers appear to these days to have little tolerance to retailers, service providers or manufacturers that seem to raise prices unfairly or try to position themselves to be more up-scale and luxurious — disappointment and anger at them motivates consumers to punish them in some way. This kind of resentment and urge to act in revenge is apparent also in the results of the study by TACK.

Price is given priority by more Israeli consumers, and it seems to overweight possible advantages in quality of products, services or the environment of shopping. In some cases consumers may fail to appreciate any such advantages while in others they simply consider the price premium as unjustified or unaffordable (which may add frustration to their evoked emotions). This can be another aspect that explains the differences between companies described above: (a) for instance, the gaps on Logic and Magic between coffee-house chains like Cofix and Aroma compared with Arcaffe,  and vis-à-vis Roladin, or (b) Rami Levi which is probably perceived as making greater effort to charge affordable prices (although it declined a little from last year), far better than a delicacy chain such as Tiv Ta’am. In other categories, it is more difficult to make clear inferences. In telecom services (mobile, TV, Internet), for example, all major companies receive relatively low appreciation and are less loved. A specialised dairy producer (Tara) is positioned less favourably than the two major and larger dairies (Tnuva and Strauss) which happened to be more shaken by consumer protests of several years ago (Tara is more preferred though among ages 55+ according to TACK). Among fashion retailers, a low-cost retailer of casual wear (Fox) is positioned just slightly higher on Logic but lower on Magic than some major main-stream retailers (H&M, Castro, Zara); yet another retailer (Renuar) that is probably somewhat more exclusive appears to be considered less worthwhile and having moderately less of magic (as reference, Polgat [for men], which has visibly better quality clothing, is not included).

The study of image strength by TACK sheds light on the relative positions in which consumers hold corporate brands both in their minds (Logic) and in their hearts (Magic).  It is somewhat surprising to find such a strong association between the logical-functional dimension and the affective dimension — it suggests that a company cannot sustain a positive stance on one dimension without the other for a long time. There is some discomfort also in realising that price could be more dominant than quality, but it is important to acknowledge how perceptions of value, and especially unfairness, can influence the emotional reaction of consumers to the corporate-level brands. Effectively, being attentive and sensitive to what the wider circles of consumers in the country need and expect to have is a key to be regarded overall as a favourable, strong leading brand.

Ron Ventura, Ph.D. (Marketing)


Comment on Methodology:

The brand scores are given in percentages. More detailed values reported for 2017 help to understand the metric’s structure. The score on each dimension (Logic or Magic) seems to be calculated as the sum of the ‘top-box’ proportions for the two items it is composed of (e.g., % who give a rating of 6 or 7 on a 7-point Likert-type scale in agreement with each statement of Logic, where 25% on ‘appreciate’ + 20% on ‘worthwhile’ = 45% on Logic). However, summing up those percentages is not a proper procedure — this sum does not have a meaningful interpretation because the proportions cannot be accumulated. It would be correct to take their mean rather than the sum. Another valid option is to add-up the rating values of the pair of items for each respondent and then calculate the percentage who have given a total score on that dimension of above a threshold (e.g., a score on the index of Logic of above 12) in order to produce a score that may be more easily related to.

Reference on price fairness:

The Price is Unfair! A Conceptual Framework of Price Fairness Perceptions; Lan Xia, Kent B. Monroe, & Jennifer L. Cox (2004); Journal of Marketing, 68 (October), pp. 1-15.

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One does not have to be a faithful Christian to enjoy a good Christmas market, and the Swiss markets in Zürich during the Advent period (22 November – 23 December) are very good indeed. Truly, those markets are useful and delightful for non-Christians just as well. As a market, it is a commercial event at its core. But much beyond its commercial function, the Christmas market has the flare of a festive fair, and this is well felt in Zürich.

Remarkably, the Christmas markets of Zurich do not have the appearance and feel of an over-commercialised event. A careful observer may find signs of event marketing and brand marketing, but they are woven cleverly and tastefully into the market happening so it should not disturb the visitors. Big brand names are not omnipresent or dominating the markets. Instead, stalls seem to be inhabited mostly by small and independent local traders, and much of the merchandise is made by handicraft. The magic of this organisation is in giving the sense of older-times retailing. These characteristics may signify, more broadly, a distinction between European and American approaches to commerce and marketing. Nevertheless, the Zurich Christmas markets seem to exhibit elements of a well-thought marketing design, yet without making them imposing or too apparent to celebrating visitors-shoppers.

Just to remove any doubt before continuing: These markets involve not only merchandise — food and drinks play a major role in them. More will be said about eating and drinking at a Christmas market later in the post.

Several Christmas markets operated this year (2018) in Zurich, the three major ones were in the main railway station (Hauptbahnhof); in front of the Opera House near the lake; and in the Niederdorf Quarter in the Old Town of Zurich (on the north bank of the Limmat river).

The Christkindlimarkt in the large hall of the Hauptbahnhof (i.e., it is located indoors) is the most immediately accessible to anyone arriving to Zurich by train. But furthermore the station is a major hub of travel and shopping for anyone passing through (note: the station lays over a large underground shopping centre). It is the central market of the city with 150 stalls. The Christmas market in the station is therefore said to be the most busy one in the city, and it can feel over-crowded at times.

The market is arranged in a squared block with two longitudinal ‘avenues’ running Swarovski Christmas Treethrough it with stalls on both sides, and some passes connecting between them. In the middle of the market features the main attraction: a 15-metre-high sparkling Christmas tree with glass decorations, courtesy of Swarovski. The tree is surrounded at its base by displays of glassware jewelleries, figurines and other decorations by the Swarovski retail brand, with a little hut-shop next to the tree (a Swarovski store is situated across the street from the railway station). The tree makes a very impressive attraction, nevertheless, and lures many visitors circling around it. Overall, the market looks and sounds cheerful and busy, and while the Swarovski-branded tree acts as a market’s anchor, it does not seem to distract visitors-shoppers from attending the many stalls in the Christkindlimarkt with their various gift-opportunity offerings and food delights.

A greater festivity takes place, nonetheless, at the Christmas village (‘Wienachstdorf’) in the large square in front of the Opera House (Sechselautenplatz) just next to the Zurich Lake promenade. This Christmas market-village entails around 100 stalls, arranged in free-form, curve-shaped areas. Not least, it seems to offer the best opportunities for eating and drinking in between looking for merchandise. A large place is dedicated in the centre of the village for sitting at long tables to eat some of the delicacies like Swiss raclette or a French crêpe. Since this market is open-air, and it can be freezing cold, a most popular hot drink at this time of year is Glühwein (mulled wine) — many people can Christmas Market Village, near Opera House, Zurichbe seen walking and warming up with cups of Glühwein. There are, however, some more protected areas to stay, eat or drink, particularly two indoors halls that resemble pubs in atmosphere. The market is plentiful with merchandise at the stalls, so much it is impossible to cover here its variety.  Most products can fit appropriately as gifts for family and friends, but they also suit shoppers wishing to spoil themselves for Christmas. One may find there winter accessories, decorations and toys of all sorts, woodcraft, and much more.

Two main attractions are especially noteworthy; each is of a different type, and either is hosted by an Alpine mountain resort site. The major leisure attraction is an ice skating rink, hosted by Arosa mountain resort (neighbouring Lenzerheide in the Graubünden Canton). Little children are welcome to join skating with the aid of ‘penguins’. Traditional Christmas songs (as back in time as from the 1940s) play in the background to complete the nice entertaining experience. A culinary attraction on site of the Christmas village is the Fondue Chalet hosted by Klosters, the Klosters Stübli (Klosters is a resort village neighbouring the more famed town of Davos). Inside the chalet, diners are seated at long wooden tables on benches with woolen covers, giving the place the atmosphere of a public dining house. Having a fine cheese fondue with a glass of cider makes a wonderful meal. True, the two resort sites make a promotion for themselves ahead of the winter vacation & skiing season, but in view of the pleasant benefits they provide to the visitors of the Zurich Christmas market, such a branded initiative appears legitimate and welcome. They fit well as event marketing attractions in the Wienachstdorf that add to the whole festive atmosphere, like one big street party.

The third key Christmas market is in the Niederdorf Quarter of the Old Town. It is centred at Niederdorfstrasse, but it has ‘satellite’ extensions along the streets, starting from the large cathedral of Gross Münster. The headline advantage of this market is the relaxing atmosphere that the Old Town architecture provides. It is relatively smaller as well as calmer than the two previous markets described.

Smaller concentrations of Christmas market stalls can be found in another part of the city centre, along and around the Bahnhofstrasse. One concentration, for instance, can be found in a pedestrian street running between the Jelmoli aChristmas Market near Globusnd Globus department stores, and continuing in front of the latter. It adds light and buzz to that area that is not available in other times of the year. Another Christmas market happening takes place not far from there, at Werdmühleplatz, next to the main shopping and business Bahnhofstrasse. There beside the stalls stands a large Singing Christmas Tree; in the evenings different choirs from the Zurich district stand on elevations around the tree and sing Christmas songs in various languages to the pleasure of a pedestrian audience. This gives a special celebrating atmosphere to the small market.

To complete the picture, add to the Christmas markets the sights of Christmas lights in different decorative forms and colours, hanging above streets and on the facades of buildings, especially those housing large stores, banks, and other prominent businesses. The Christmas lights will follow shoppers most of the way moving from one market to the other. A special tram for children runs between sites in the city in a round tour starting nearby the Wienachstdorf; the children are hosted by Christmas angles (Christkindli) on their trip, sponsored by Jelmoli department store.

A Stall in Christmas Market near Globus

It must be emphasised that stalls selling food and drinks are available for visitors-shoppers in each of the Christmas markets, including serving the Glühwein, a necessity when temperatures drop to zero degrees Celsius. Similar food delicacies may be found in most of the markets (e.g., raclette, sausages, crêpes, Berliner, mini mousses), yet the market in front of the Opera seems to be the culinary centre with a greater variety of foods (e.g., including also Asian cuisine). Lines may be found in front of every food stall at the Wienachstdorf, and the tables in the village centre are almost always fully occupied.


Notwithstanding the markets in Zurich, an experience of an even greater Christmas market is awaiting those willing to go farther along the Lake of Zurich (less than an hour journey by train) to Rapperswil-Jona, its lakeshore promenade and the Old Town. The Christkindlimärt spreads over the large place of the promenade and extends into theChristmas Market in Rapperswil-Jona streets of the Old Town going up to the castle. The market inhabits over 200 stalls of nearly anything one can ask for in gift merchandise for the holidays, foods and drinks. Notably, more handcrafted artifacts appear to be available in this market than in the city. Overall, there seems to be much greater variety of products in this market, if you include stalls on the promenade and within the town. Additionally, one may find there food produce to buy for home (e.g., varieties of cheese, salami). Musical performances are playing from a stage in the promenade to make the celebration merrier. As a note aside, no conspicuous brand marketing could be readily traced in this event, except perhaps for the event marketing of the whole market. In summary, the Christkindlimärt of Rapperswil-Jona offers a special and rich experience that feels more free, like a holiday in the countryside, to anyone willing to make the modest distance.


 

The Christmas markets of Zurich, as described above, are well organised and designed to create festive events — the markets are both commercial events and celebrating events for the seasonal holidays. There is a flourishing shopping activity that visitors are engaged in, but it is enveloped with leisure, culinary and entertainment activities and experiences. Visitors walking through the markets can mix between all these possibilities to create each his or her favourable experience. The style of these markets, not unexpectedly, is orientated more towards the traditional marketing and retailing rather than modern design. But it has to be well planned in our days to sustain those earlier characteristics. In that sense, the markets appear to manifest good practices of event marketing. The city of Zurich can be complimented for creating attractive festive markets for residents as well as tourists.

Ron Ventura, Ph.D. (Marketing)

 

 

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When the fashion house Maskit originally flourished in the 1950s and 1960s, no one probably thought about it as a brand; actually, not many back then thought about ‘brands’ in general, at least not in Israel of those years. Yet if we look at Maskit retrospectively according to the standards of brands known today, it would be acknowledged as a name brand in fashion. The contemporary fashion house of Maskit, revived after a long recess of two decades, has adopted not only the name but also the genuine styling ideation and design creativity of the former fashion house, thus deserving the ‘license’ to exist again. Maskit of our days has already been planned to be a luxury brand based on current knowledge in marketing and management.

Maskit was unlikely to be regarded as a brand in the 1950s-1960s for two conspicuous reasons: First, brands and their functions in modern marketing came to recognition some thirty years later; Second, Israel had a heavy-laden socialist economy with little competitiveness and a just nascent consumer culture (evolving through the 1960s). Furthermore, Maskit was not run in its prime years as a business enterprise: it started in 1954 as a government agency, turned a decade later (1964) into a governmental company. Only in the 1970s has the government loosened its hold on the company and gradually handed it over to private hands. However, that move has more than anything led to the decline and demise of the former Maskit in 1994.

Maskit is very much the story of the people who built it, then and now. The fashion house was founded in 1954 by Ruth Dayan almost incidentally, but with a great spirit for initiative. She was actually asked by government officials to help in identifying and creating employment opportunities in agriculture for new Jewish immigrants from the Middle East and North Africa. However, Dayan noticed that women from North African countries had a special talent and skills in weaving, sewing and embroidery; she also identified that men from Yemen excelled in jewellery. From there the idea of a fashion house employing immigrants started to take form. Since Dayan was not a fashion designer herself, she teamed-up with Fini Leitersdorf, nominated as the house chief designer. Together they developed a unique and genuine concept for fashion design that is at the same time multi-cultural and Israeli-native. Albeit the unusual circumstances of her enterprise, Ruth Dayan was by our current understanding an early woman entrepreneur in Israel of that period. The privatised company did not manage to continue in the footsteps of Dayan and Leitersdorf following their retirement from the fashion house in the late 1970s. Dayan who just celebrated in mid-March this year (2018) her 101st birthday also belongs nonetheless to the present of Maskit as she has helped in creating the newly born fashion house.

  • ‘Maskit’ can have multiple meanings, such as ‘image’ and ‘figure’, but the most appropriate meaning of this old Hebrew word in relation to what the fashion house does would be ‘ornament’.

Sharon Tal, a fashion designer, re-founded Maskit together with her husband Nir Tal in 2014, following more than two years of preparation, research and planning. Sharon Tal is the fashion house chief designer whereas Nir Tal (CEO) is in charge of the business side, specialising in entrepreneurship. Sharon Tal is a graduate in fashion design from Shenkar College of Engineering, Design & Art in Israel. She has subsequently worked in internship for Lanvin in Paris and for Alexander McQueen in London, where she acquired experience in international fashion design. At McQueen in particular she has learned and later advanced to specialise in embroidery, which would prove especially relevant and important for her professional and business venture of re-launching Maskit. On her return to Israel in 2010 she developed interest in starting a fashion house, and with the help of her husband Nir they discovered that the ideals or goals she has been aspiring for in a fashion house had existed in Maskit of Dayan and Leitersdorf.

Sharon Tal met with Ruth Dayan to talk about her interest in reviving Maskit, and it seems that they connected quite quickly — their first meeting extended into several hours, and they continued to work closely together on the initiative thereafter. It appears that shared thinking, the commitment of Sharon Tal to respect and maintain the original vision of Maskit, and the relevance of Tal’s specialisation as well as international exposure for continuing the heritage of Maskit have helped to convince Dayan that Tal was the right person to revive the fashion house. Ruth Dayan has given her blessing to the Tal couple, and has joined them in guidance during the research and planning process. Indeed the success of Maksit to re-establish itself depends greatly on reviving the heritage of Maskit, which Sharon Tal seems to fully recognise and appreciate, as she also respects the personal legacy of Ruth Dayan.

Maskit has made different types of garments in the days of Leitersdorf and Dayan. The concept that was special in many of them was mounting quality fabrics with motives of different ethnic cultures in embroidery.  They combined modern styles of the times with design traditions of embroidery embellishments “made by immigrants, as well as by Druze, Bedouin, Palestinian, Lebanese and Syrian women” [E1; also see Maskit.com: About]. They used for decoration articles like buttons (e.g., made from river stones and shells), some were initially brought by immigrants from their countries of birth. Maskit also produced jewellery, pillow covers, and other home artifacts. Silver and gold for jewellery were also used in decorating garments. The Hungarian-born Leitefsdorf created the integration of Western (European) practices, materials, and design styles known to her with ethnic styles of different communities she came familiar with in Israel. It was a unique way of adopting cross-cultural ethnic fashion styles and designs, fabrics and colours, and fitting them to the Israeli habitat (nature, climate, and contemporary culture), hence making their clothing and other products ‘Israeli native’.

  • Ruth Dayan provided employment to the immigrants and hence has given them an opportunity to assimilate in the country, as well as helping them to preserve their traditions. It should be noted, however, that immigrants fleeing from Arab countries were at great disadvantage with limited choices compared with more veteran immigrants, mostly from European countries, who formed the dominant classes in the young state. Dayan benefitted from belonging to the latter (‘elite’) classes and was close also to ruling political circles (married at the time to General and later Defence Minister Moshe Dayan), which further helped in obtaining funding.

Sharon Tal has the will and intention to proceed along the same guiding lines of design and craftsmanship set by Dayan and Leitersdorf. But the aim of the renewed Maskit is not to relive the past; instead, the Tals strive to fit the concepts and practices of former Maskit to contemporary styles and tastes of our days. Their priority is to keep the fashion house being Israeli-native, representing its culture and nature, but that also means expressing the multiple original ethnic cultures that make up the Israeli society. Their emphasis also appears to be on handwork production and authenticity in everything they do. These implied ‘values’ could be key to achieving high quality, uniqueness and luxury positioning. Authenticity is seen as a basis for differentiation of the fashion brand; it is also approached as a way of establishing luxury in the sense that authenticity has become hard to find in many areas, and in fashionable clothing in particular. Maskit may be authentic in the fabrics and other materials they use, the methods they apply, and the personal and attentive treatment and service they would provide to their customers (including personally customised designs).

Here are some aspects in which Sharon Tal works to continue the heritage of Maskit. The fashion house uses, for instance, soft fabrics as in the past (including silk, linen as well as leather). Weaving in-house is no longer feasible as in the past so quality fabrics are imported (e.g., from the same suppliers as those Lanvin and McQueen work with). Yet Tal still sees hope that it will be possible to acquire quality fabrics made locally, and perhaps produce at Maskit, in the future [H1]. Among the creations of Leitersdorf, one that has given Maskit greater fame is the desert coat (or cloak) — Sharon Tal designed a new ‘desert collection‘ that is “re-interpreted for today’s woman and her lifestyle”. One of the differences in the desert coat of today from the previous is in its being made in linen rather than wool [E1]. Embroidery designed and prepared in-house remains an identifying signature of Maskit. However, the renewed Maskit is ready to give more credit to artisans working with the fashion house, unlike in the past.

Sharon and Nir Tal are clear about their high ambitions. They want Maskit to be an international leading luxury fashion brand. It is meant to compete on a world stage against international fashion super-brands and challenge renowned fashion retail chains. They do not see their competition against fashion designers in Israel since they look forward to see more Israeli designers succeed and the whole fashion industry in the country developing (H2). That may sound a little co-descending but it can also be interpreted as saying that they hope Maskit will be able to pull the fashion industry in Israel up with them, as Maskit has done before in its earlier life. Accordingly, while they aspire to reach overseas, they intend to extend their efforts to global markets only after establishing Maskit in Israel [E1], and wish to be able to return Maskit into being an international fashion house operating from Tel-Aviv [E2], apparently keeping this home base as their anchor.

Maskit led by Dayan has already reached overseas, mainly to the United States. Since 1956 the fashion house presented in fashion exhibitions in New-York and other American cities. Their designs sold at department stores of Neiman Marcus, Bergdorf Goodman, and Saks Fifth Avenue, and they featured in leading magazines like Vogue. Sharon and Nir Tal expect to take the renewed Maskit in the same direction, and their emphasis at least at start also is on the US. Targets are shifting with time, however: many female customers turn to fashion chains to buy their casual and less costly clothing, then invest in more special dressing, higher quality and enduring, from name designers or specialty boutiques — the latter is where Sharon Tal seems to be aiming. As a luxury brand, Maskit would also target women who buy primarily from famed designers [H2]. In addition, Maskit of the past attracted in Israel tourists visiting the country and their relatives (i.e., mostly Jewish, American, and more wealthy). Yet, Israeli customers also used to buy gifts from Maskit, mostly when they wanted to bring or send them to their relatives abroad to leave a good impression on them. This should stay valid today as then. Maskit may also be able to tap a growing desire in Israel to return to its roots (‘authentic Israeli’) or to connect generations of customers wearing Maskit then and now.

The prices of Maskit to end customers are in the mid- to high-range, not for every occasion.  Their blouse shirts or dresses can be even expensive relatively for their categories. Evening dresses or gowns may cost, for instance, from just below 2,000 shekels ($570, €465) up to a few tens of thousands shekels (e.g., a dress with handmade embroidery in a unique technique was sold for 25,000 shekels or more than $7,000)[H2]. The price of a bridal dress may cost (selling only) in the range of 7,500 to 25,000 shekels (~$2,000-7,000)[H3]. Bridal dresses and customised dresses are the more expensive on offer. A blouse could cost, for example, 900 shekels (leather-trimmed tunic blouse — ~$260, €185)[E1]. The items of Maskit, according to Nir Tal, are made to appeal to women who are “pretty sophisticated, and appreciate the art of this clothing” [E1]. The prices are clearly set to support perceived high quality of garments, and in particular the investments in craftsmanship and dedicated handwork.

  • The flagship shop and studio of Maskit are located in the American-German Colony in the old city of Yaffo adjacent to Tel-Aviv. The place is designed to resemble an atelier of many years in business, and includes museum-like displays next to selling areas (also see photos in H3].

From the business perspective, the Tals approached the launching of Maskit as when creating a start-up, guided primarily by Nir Tal. They wanted the revival of Maskit to be special and different, following the model of revival of brands like Burberry and Lanvin [E1]; it had to reflect the significant achievements of Maskit as a leading fashion house in the country in past years [H2]. It meant that greater effort and resources would have to be invested in the initiative, as in a start-up. The Tal couple gained major funding from key Israeli industrialist Stef Wertheimer, together with his invaluable business wisdom. Launching Maskit as a start-up sounds reasonable in order to recruit the energy needed and concentrate financial and organisational resources in launching the business. However, soon enough comes the time that the fashion house is established and has to realign itself to run for the long-term. There are good indications Maskit could be near that time, if they have not passed it already, and it does not require that they should be established off-shore first. For the long-running fashion house, sustained creativity and innovation are important as much as persistence and discipline. Maskit would be wise not to push itself too far too fast, so as not to burn itself like a start-up.

  • Note: Start-ups in hi-tech, particularly in Israel, do not have too good a reputation in holding for long, hence it would not be wise to use them as a model if the fashion house desires to exist in the long haul and does not plan an ‘exit’.

The brand of Maskit in fashion was not properly valued nor appreciated by the establishment in Israel more than forty years ago (Ruth Dayan noted jokingly in interviews that she lives on a monthly pension of 5,000 shekels as a former worker of the Labour Ministry). But Dayan together with Leitersdorf have demonstrated that a successful brand can be created even without having their minds set to it. Sharon and Nir Tal now have the opportunity to show how high Maskit can reach, and to develop and strengthen its brand, with the much greater marketing and management knowledge and best practices they can now employ. Reborn Maskit is positioned as a luxury brand for women with fine taste in fashion and appeal to nostalgia. The brand’s distinction remains dependent on their commitment to an Israeli-native identity with original creative design in high quality, and keeping their base in Israel even as an international brand.

Ron Ventura, Ph.D. (Marketing)

References in Hebrew:

[H1] Interview with Ruth Dayan & Sharon Tal at Maskit Studio, Xnet, 18 October 2015 (Xnet is an online ‘magazine’ section of Ynet news website, fashion section)

[H2] The New Life of Maskit, Calcalist (economics and business newspaper), 13 December 2017

[H3] New home for Maskit fashion house, Xnet, 28 June 2016

References in English:

[E1] “A Ready-to-Wear Fashion House in Israel’s Ethnic Past“, Jessica Steinberg, Times of Israel, 26 May 2014

[E2] “How the Israeli Fashion Brand Maskit Delivers Authentic Luxury“, Joseph DeAcetis, Forbes’ Opinions, 16 May 2017

 

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Ordinarily, Great Britain is not the first country to come to mind when thinking of chocolate. The names of Switzerland and Belgium are more likely to come up first, and then perhaps some other European countries (e.g., France, Italy, Germany, Austria). However, the British upmarket chocolatier Hotel Chocolat may deeply change our perception of Britain in association with chocolate; that is, following of course consumers’ pleasurable associations with the brand Hotel Chocolat. The brand name identifies both the company and its products (i.e., it is a ‘branded house’ of chocolate). Moreover, the company is a manufacturer as well as a retailer, offline and online, of chocolate products of multiple sorts, all under an encompassing brand, Hotel Chocolat.

Britain has been known for chocolate from companies like Cadbury and Thornton. But their products did not really succeed in raising an equivalent alternative that challenges the quality of chocolate from the better known ‘chocolate nations’. Cadbury in particular is most probably the main source for perceptions of British chocolate generated by consumers; in some of its products Cadbury blurs the distinction between true chocolate and chocolate snacks or confectionary. In 2010 the American company Kraft Foods took over Cadbury in an unfriendly maneuver; yet Kraft had a problem in swallowing the business of the acquired British company and just a year later split all of its confectionary arm including Cadbury to a new spin-off company called Mondelez International. Thornton’s already set a standard of higher quality chocolate delicacies in forms like bars and pralines. It also developed a chain of chocolate delicacy and gift shops. However, the enterprise expansion eventually ran into trouble and in 2015 the brand was acquired by the Italian giant Ferrero (well-known for ‘Ferrero Rocher’, also owner of Nutella).

Hotel Chocolat seems to be different, not merely for its positioning as an upmarket brand but in virtue of the fine feel and taste of its chocolate products — one immediately knows it is different when tasting one of the brand’s chocolate products. Drinking their hot chocolate with cocoa-flavoured cream makes a fitting complement to the pleasure of eating the solid chocolate delicacies. The experience of visiting a boutique shop of Hotel Chocolat (e.g., in Covent Garden in London, in the basement) also is an important contributor to conquering committed chocolate lovers.

Appetising Selection of Chocolates at Hotel Chocolat

Tempting chocolates displayed in cave basement of Hotel Chocolat’s Covent Garden shop

 

Hotel Chocolat was co-founded by Angus Thirlwell, CEO of the company, and Peter Harris (Development Director). In an earlier stage of their chocolate business, the co-founders established a company named ‘Express Choc’ as an online retailer of chocolates in 1993 (no doubt an early venture in e-commerce). They opened their first physical shop in the north of London in 2004 after changing the business name — this event practically marks the initiation of the brand Hotel Chocolat.

Over the years the brand has evolved and broadened its concept and it actually extends beyond products, shops and online store (retailing) — it also includes a Tasting Club (pre-launched 1998), chocolate workshops  (School of Chocolate), café-bars, a restaurant in London, and a hotel with restaurant in the Caribbean Islands. The company is proud of being a grower of cocoa for its products, a unique status for either a chocolate manufacturer or a retailer. The co-founders acquired a cocoa plantation in the Caribbean island Saint Lucia (2006), an initiative that brought Thirlwell back to his childhood in that part of the world, an origin of cocoa. In the estate of the plantation they opened their hotel (‘Boucan’) and a restaurant (2011). Their restaurant in London, established a couple of years later (2013) to bring West Indian tastes to the UK combined with modern British cuisine (e.g., ‘Slow Cooked Cacao Glazed Lamb Shank’), bears the name of the plantation and the year it was created (‘Rabot 1745’).

In an interview to BBC News, Thirlwell explained the reasoning behind the name — at start there seemed to be no logical relation to hotels. As for the choice of ‘Hotel’, Thirlwell replied: “It was aspirational. I was trying to come up with something that expressed the power that chocolate has to lift you out of your current mood and take you to a better place“, like going on vacation where one would stay at a hotel. As said above, seven years later and Thirlwell materialised the symbolic idea of Hotel into physical reality. Regarding the French wording ‘Chocolat’, he said that “everybody agreed ‘chocolat’ sounded better than chocolate”, which is hard to argue with, and added that the sound of the word almost suggests the sound of how chocolate melts in the mouth (he used the Latin term ‘onomatopoeia’) (BBC News: Business, 27 October 2014).

As reflected from his interview to the BBC, Thirlwell is a devout chocolatier, completely enthusiastic about chocolate. This impression is also supported in a personal page about Angus Thirlwell on the website of Hotel Chocolat. He continues to taste products every day and approves every recipe the company produces. A guiding principle that appears highly important to him is using more cocoa in chocolate products and less sugar. It is said that people started to crave cocoa long before anyone added a grain of sugar. This principle was practised, for example, in a product called ‘Supermilk’ that contains 65% cocoa, emphasises the ‘smooth creaminess of milk’, and includes less sugar than a dark chocolate — a feel of milk chocolate that is nearly a dark chocolate. In ‘Our Story’ webpage, Hotel Chocolat laments the overemphasis on sweetness in British chocolate: “Today, sugar is 20 times cheaper than cocoa, and a typical bar of milk chocolate contains more than twice as much sugar as cocoa”. Conversely, the mantra of Hotel Chocolat is explicitly: ‘More Cocoa, Less Sugar’.

A notion of this motto is felt very present indeed in a number of chocolate products of Delicious Orange Tangs by Hotel ChocolatHotel Chocolat, and it is probably at the root of the magic of their chocolate, and their business success. Just for instance, take their chocolate shells filled with Salted Caramel Cream, or Orange Tangs (orange-filled chocolate sticks) that are truly special and delicious (based on the author’s experience). It is all about the pleasure of eating genuine and fine-flavoured chocolate.

Formally, according to the website of Hotel Chocolat, the company operates 93 shops as well as cafés and restaurants. The Telegraph (24 January 2018) tells us that in the weeks running to Christmas 2017 and New Year of 2018 Hotel Chocolat opened ten new shops, bringing their total number to 100 across the UK. The store locator on the website (provided with an interactive map) suggests, however, that the company may have an even larger number of establishments in the UK — 153 locations are designated as ’boutique’ (shops). There are specifically 26 locations of café-bars, and the restaurant in London. It should be noted that café-bars are mostly (or always) integrated with shops, and Rabot 1745 is a complex including the restaurant, shop and café-bar. The brand is also represented in concessions (51 in total). The conflicting numbers are confusing and make it hard to determine the true current number of outlets of the company (could be a result of duplication in the counts of location types in ‘Our Locations’, apparently mainly due to concessions counted as boutique shops). Hotel Chocolat also has two stores in Copenhagen, Denmark, and several outlets in Ireland (seem to function mostly as concessions).


  • The revenue of Hotel Chocolat Group in the financial year 07/2016-06/2017 amounted to £105.24 million, an increase of 15.5% year-on-year; the net income in that period was £8.76m, an impressive rise of 114.6% year-on-year.
  • Hotel Chocolat Group was incorporated in 2013 and is listed on the London Stock Exchange since 2014 (the founders exchanged a third of their holdings for cash, receiving each about £20m, while in total raising £55m).
  • In the past six months the share price shifted between 240p and 380p, standing in late January ’18 at 333p; market capitalization: £375.5m.
Source:  FT.com, (Market Data)
Sales received a lift of 15% during the 13 weeks to 31 December 2017, attributed mostly to a special package in advance of Christmas (a gin ‘advent calendar’ package), a 100% cocoa collection, and the introduction of no-sugar milky chocolate range. Hotel Chocolat makes 40% of its annual sales in the run-up to Christmas and New Year (The Telegraph, 24 Jan. ’18).

A clear, well-stated and meaningful vision must have helped Hotel Chocolat considerably in its evolution and expansion. It stands on three values people in the company believe in: (1) Originality — not playing by the rules, rather doing things differently, and being creative and innovative. (2) Authenticity — growing cocoa, making and retailing chocolate, being true to cocoa and using natural ingredients (not letting sugar dull the flavour of cocoa itself and not mask the nuances from other ingredients, in line with the mantra cited above), and developing their own recipes in-house at the factory in Cambridgeshire (award-winning). (3) Ethics — committing to a deep sense of fairness that extends to farmers, customers and future generations (i.e., not spoiling the environment with waste in all stages of production).

The description of these three values or principles seems elaborate and specific enough to offer very clear guidelines for all managers and employees in the company to go by. They are accompanied by two business or marketing goals set by Thirlwell: excite the senses with chocolate and making it widely available. The two goals help to add focus to the mission of the brand: the first seems to pertain primarily to the products, the second underlies the network of retailing through physical shops and an online store. Other activities of Hotel Chocolat (e.g., hotel,  restaurants and café-bars, Tasting Club, School of Chocolate) contribute in enhancing the brand: deliver its message across and strengthen closer relationships with customers.

The business revolves around the brand ‘Hotel Chocolat’ and its development as it is their face and voice to the world. That is how customers and other stakeholders recognize everything they do. The more prestigious image of the brand is expressed through their products and packaging, primarily with their premium collections (‘tables’ — e.g., 86 pieces £65, 179 pieces £100). Pricing is also part of supporting the image, though Hotel Chocolat tries not to be excessive (e.g., one can find small-medium packages and boxes for prices in a range of £5-25). The concept of Café bars is gaining weight in aim to come closer to consumers — creating a venue where they can relax and enjoy a good chocolate drink with something light to eat (e.g., brownies) from Hotel Chocolat. The company may tap on a desire of Britons for high-quality chocolate, having a better own experience with chocolates from countries like Switzerland and Belgium. The founders protect the brand from dilution by avoiding, for example, displaying their products on shelves in supermarkets for sale (but their products are sold through concession in departments stores of John Lewis which fits better their brand image). The brand is taken care of meticulously by the founders to maintain an image they worked hard to instill: “a necessity of life, albeit a luxurious one” (Kate Burgess, opinion column, FT.com, 13 March 2016).

The brand of Hotel Chocolat has built its strength in quality of products and the expanse of its brick-and-mortar shops in addition to online retailing, supported by further activities or services. But attention must be paid to challenges ahead. First, how to balance resources correctly between keeping the quality of products and the expansion of the retail network — not falling to the trap of sacrificing the pleasure from the chocolates to their increased availability in the retail chain. Second, how to manage wisely and responsibly reaching out to other countries. In the interview to the BBC News (2014), Thirlwell concluded: “If you are specialist you have got to be absolutely specialist. There is a lot of competition and we want to be in the driving seat.” Consumers who appreciate and love genuine chocolate would surely hope that Hotel Chocolat succeeds in its mission so they can continue to enjoy their delicacies, and be excited.

Ron Ventura, Ph.D. (Marketing)

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In 2016 General Electric (GE) sold its domestic appliances division to Haier from China. The American company reached a dismal situation wherein it needs to repay a large debt and streamline its businesses. Selling the consumer-oriented business may have seemed to the management, led at the time by previous CEO Jeff Immelt, as a means to relieve the company from a business that is out-of-line with its other mostly industry-oriented business areas. However, that division was an asset whose value could not be measured just in financial terms — it was more than a capital asset. It provided a valuable support to the brand of General Electric, together with the lighting business. The incoming CEO John Flannery is planning even more drastic changes to the company’s composition, but removing the appliances division might turn out as an obstacle to his mission. The industry brand of GE could benefit from its long appraised consumer brand.

General Electric is engaged in a range of business areas. In some of them the company has obtained or enhanced its capabilities through acquisitions during the tenures of CEOs Jack Welch (1981-2001) and Jeff Immelt (2001-2017). The businesses of GE feature: (1)  Additive –advanced manufacturing technologies (e.g., 3D printing); (2) Aviation — engines, components and electric systems for jets, and avionics (e.g., innovative digital pilot dash-boards); (3) Power, including gas, steam and nuclear power; (4) Industrial Connections, including electrification, grid and control; (5) Healthcare — medical technologies such as ultrasound, MRI  & CT, digital integrated care (i.e., data sharing and management), patient monitoring, surgical imaging and more; (6) Renewable Energy, including wind, solar and hydro, and innovative hybrid solutions; (7) Transportation — digital automation and industrial Internet-of-Things (IoT) solutions for  locomotives, marine (drilling) and mining.  The businesses of GE today are directed largely to industrial, commercial, and public clients. The last business that targets consumers at least in part is Lighting, offering advanced LED bulbs (e.g., smart IoT-controlled, HD-quality), linear fluorescents, and other products.

Noteworthy, digital transformation is omnipresent through most of the businesses of the company, entailing advanced computer-based digital systems, interfaces, and mobile applications (e.g., IoT apps developed in co-operation with leading hi-tech companies). Much of the digital activity seems to be originated, planned and developed at the Digital division or unit of the company (e.g., industrial apps serving IoT products, Predix — the online platform applying IoT data and predictive analytics, manufacturing software, as well as cybersecurity). Internet-of-Things functionality applies also to lighting products for consumers; it was supposed to be implemented as well in their domestic appliances. In practice, the appliances may still be reliant on GE for IoT technology even after the transition.

For many years the Appliances of GE were commonly associated by consumers with quality and durability — having a refrigerator carrying the art-graphic logo sign of GE in the kitchen was taken as a symbol of social status. In 2015 the appliances division generated revenues of $6.34bn, 7.1% of GE’s total revenues. The combined revenues of GE from appliances and lighting, as reported by the company, stood at $8.8bn (an increase of 4.8% from the previous year). Combined profits were $700m, a margin of 7.7% as percentage of revenues (GE 2015 report on financial results, Segment Operations: Appliances and Lighting). GE overall reported a loss in 2015 (see Chart 2). The company first tried to sell its appliances to Electrolux but the deal was objected by the American Department of Justice. A new process for selling the division started with Qingdao Haier, and after six months of negotiations a deal was closed in June 2016 at a price of $5.6bn. The range of appliances in their new ‘home’ includes refrigeration, cleaning (dishwashers), cooking, laundry (washing machines), accessories such as water filters, and air-conditioning.

The division of appliances is now identified as ‘GE Appliances: A Haier Company’. This company is in an interim period of transition, alas outwards its status creates a bit of confusion about who is really in charge. The company’s website is resident at a domain titled ‘geappliances.com’ and the company retains the brand identity of GE. The association with Haier does not seem too committing. For example, whom consumers should expect to be responsible for their appliances? Or, how to distinguish between appliances that originate from GE or from Haier? The headquarters of GE Appliances remains for the time being in US territory in Louisville, Kentucky, under American executive leadership. Recently, the new company announced the creation of appliance connectivity — operation command by voice and through mobile apps (IoT). Yet the technology is reasonably a direct extension of GE’s development of capabilities of Artificial Intelligence and IoT in their businesses for industry.

Haier has thereof received a strategic foothold on US soil, in hope to strengthen its position in the country and establish a long sought market share in the American market; American consumers have refrained from buying appliances of Haier. The Chinese manufacturer rose from a failing refrigerator factory in Qingdao of thirty years ago by instilling over time quality standards that were much higher than those accustomed in China. Zhang Ruimin, leading the transformation, succeeded remarkably in turning the company into a major national appliances manufacturer in China with global extensions. However, the quality standards at Haier remain behind those of developed countries and therefore the company’s efforts to sell in the ‘West’ have been lingering (1). Haier still has a challenge of closing a gap in quality and credibility, which the acquisition from GE is expected to help overcome.  Many consumers in the US as well as in other Western countries will probably remain concerned by ambiguity about the source of their appliances, being of GE (United States) or Haier (China). Haier also gained important American technological know-how (e.g., in AI) from the American company. General Electric apparently gained a financial relief, but one that may be only for a short-term, and the company may have to pay for it in the future.

The new CEO of GE, John Flannery, revealed in an annual ‘Investor Day’ meeting last month (Nov. ’17) the company’s plan to focus on three business areas: power, aviation, and healthcare. It will exit completely some of its existing business operations (e.g., transportation, lighting, industrial solutions, electrification) while reducing its effort and involvement in others. For example, the company will retain its digital unit or division to develop and sell apps to customers for operating and monitoring equipment reliant on Predix platform, yet with a smaller budget. Flannery was less clear on the future of some areas such as renewable energy where the company is not completely willing to leave and some other arrangement may have to be found. Strategically, the plan is to reduce the span of businesses the company engages. In addition, the CEO informed analysts that the company will have to cut in half its dividends.

The share of GE climbed from a level of $25 to $30+ in late 2015 and held its price as high through 2016 with small fluctuations. Then, the price started to slip down continually through 2017. So much for the effect of selling GE Appliances on equity. By August 2017 the share price already came back to $25. Since Flannery entered the CEO office, and subsequently following the announcement of his plan and the harsh cut in dividends, the share price steeply fell to about $18, as low as the band of $15-20 in which the share fluctuated in 2009-2011.

Chart 1 GE Share Price

Analysts were left unsatisfied and critical about the turnaround plan at GE. They complain for instance that the company is too expansive, and that it must increase efficiency and reduce duplicate costs across the organization (Reuters, 13 Nov. ’17). Others express concern in particular about the debt at GE, and that the plan includes insufficient measures to fix problems with the company’s businesses (CNBC.com, 14 Nov. 2017 — also noted, GE share underperformed S&P 500). Part of the cure will have to include exit from some businesses (e.g., where GE entered by acquiring another company or where it did not build a substantial advantage). Nevertheless, increasing efficiency and reducing duplicate costs can be achieved also by merging some associated areas and consolidating them into a new division, though perhaps narrowing the scope of operation in each field. One example for doing so may be in the area of energy: sources, production or distribution (i.e., power, renewable energy, connections). Another area to consider is ‘digital’ — balancing between development of original technologies and solutions in a central unit, and their implementation for specific systems and equipment in the various business divisions. Letting go of the appliances business could be seen as a logical way to free resources for advancing industry-related areas of expertise that remain. But solving problems of over-expansion and inefficiency in the industry-oriented businesses did not have to come at the expense of the consumer-oriented business in which the company developed product and brand advantages over decades.

The company has to come to terms now with damages from excessive expansion-by-acquisition, a strategy led by Welch and followed by Immelt. The ‘elephant in the room’ for the company is GE Capital, the investment bank of General Electric, whose troubles particularly since 2009 inflict on the whole company. Now the company under Flannery plans to heal by letting go of some more of its genuine businesses such as transportation and lighting (Matt Egan, CNNMoney.com, 20 Nov. ’17), that is, in addition to the appliances already shed by Immelt. The company has built an expertise in transportation, especially locomotives, during the past hundred years. Lighting can be regarded as a founder’s asset of the company (i.e., attributed to Thomas Edison); as described by Egan, lighting “symbolizes the company’s history of innovation”. General Electric could find it very difficult to continue after removing parts of its heart and soul.

The intensive occupation of the company with allocation of capital was initiated and developed by Welch but it spiralled out of control under the leadership of Immelt. The latter quadrupled the amount of capital invested in the company (from $42bn in 2001 to $163bn in 2009) which involved a significant increase in borrowing. By 2011 it was recognised as a major problem with the management of Immelt. Geoff Colvin of Fortune described how Immelt as CEO remade the portfolio of GE, for instance by entering new “future industries”  (e.g., healthcare, green energy). However, his aggressive expansion came at a high cost. While the CEO already tried to unburden the company from some businesses (e.g., NBC and Universal Studios), it was seen by analysts as insufficient. The real issue at GE, as Colvin noted, was capital allocation, and it became more so critical at GE Capital (2). The decision to quit the involvement of GE in TV broadcasting and online media (NBC) as well as cinema productions (Universal) sounds very reasonable. Conversely, the claim supported also by Colvin that Immelt was waiting too long to unload appliances (executed only in 2016) and lighting (never completed to-date) from GE should be much less applauded because these business areas made-up a distinct branch at GE with deep roots, and were also carriers of its consumer brand, a valued non-tangible asset.

In a highly critical opinion column in the Financial Times, John Gapper argues that focusing management on capital allocation could kill GE as an industrial company. It would make GE operate more like an equity fund. The company needs to shift because it may no longer be sustainable to run a manufacturing conglomerate as in the 1980s. However, it does not require to treat the business units as equity holdings for capital optimization: “Once efficient allocation becomes the priority, it is hard avoid this cycle.” It cannot be surprising for Flannery to continue this path, following the leadership of Welch and Immelt, considering his long career at GE Capital, up to the latest post he held as head of that division. Culture and a style of management have kept the units of GE stick together like a glue for many years. Without them, Gapper wonders how longer GE can hold together (FT.com 15 Nov. ’17).

The financial figures of GE in 2015 and 2016, as published in the Fortune 500 ranking, show little so far in favour of the impact of exiting from some business activities such as Appliances, measures taken by Immelt to heal the company in his last years in office: The revenues have fallen, but moreover the return on revenues has also decreased from a level of 8%-10% in 2011-2014 to 7% in 2016, after recovering from a loss in 2015 (Chart 2 below). It should be noted nonetheless that the value of assets has already shrunk by 50% between 2011 ($717bn) and 2016 ($365bn).

Chart 2 GE Revenues and Profits

  • General Electric descended from former 6th-9th positions in the ranking of Fortune 500 (US) to 11th place in 2015 and 13th in 2016.

The products of GE for consumers, both appliances and lighting devices, were the ‘face’ of the company to the wide public and a closer form of connection with consumers. Their contribution is in providing stability and longevity to the GE brand, identified by name, logo, and other associated elements. Above all, the brand was represented in products, equipment and devices, in millions of homes, to be useful in the everyday lives of the consumers and make their lives more comfortable. The domestic products also were a channel to implement some of the technological progress and innovation of the company and demonstrate them to a wider public audience. Consequently, exposing consumers (who also happen to be small investors) to GE could help to increase public confidence in the company, especially in turbulent times.

General Electric did not depend on the appliances and may do well without that business. The same may be true for the lighting business. But removing them will not bring the cure either– the selling of GE Appliances apparently has gone wasted so far. Instead, keeping the consumer products would have enhanced the corporate brand. The management could perhaps have gained some peace of mind while reforming their industry-related businesses. In the medium term, making reforms could be a little harder for Flannery and his top-management team to push through. In the longer term, leaving consumer products out of the company — as already happened with the appliances and is expected to repeat with lighting — may remain as a wound, something amiss, in the reputation and brand image of General Electric.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) “Zhang Ruimin’s Haier Power”, Michael Schuman, Time (Europe), 14 April 2014 (183 (14)).

(2) “Grading Jeff Immelt”, Geoff Colvin, Fortune (Europe), 28 February 2011 (163 (3)).

 

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