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Posts Tagged ‘Perceived Quality’

It is hard to ignore the increased frequency at which men can be seen with a beard of some form or style on their faces in recent years. Beards have become popular especially among young men towards or in their early twenties. The renewed fashion of growing beards is making troubles for 115+ years old Gillette, once an independent company and since 2005 a division and brand of consumer packaged goods giant Procter & Gamble (P&G). The difficulties for the famed brand of razors and blades caused by changes in shaving habits of male consumers have been further exacerbated by increased competition and the growing shift to e-commerce. Yet above and beyond, Gillette faces a key challenge to defend and sustain its brand equity, arising from its reputation and position of leadership for many years.

Indeed ‘beards’ are far from being uniform. Beards, and facial hair in general, can be thick or thin, with or without a moustache, covering the cheeks or leaving them clear (see for example the  top 15 beard styles described by Gillette). Often enough the beard is not much more than stubble kept growing for a few days. But beards should be more than a matter of avoiding a shave everyday. As said above, there are different shapes and styles of them, and to keep the beard in form and in good appearance, one has to cultivate and nurture his beard on a regular basis.

  • From the late 19th century and through the first half of the 20th century the moustache was the epicentre of facial hair for men. It was a fashionable sign of manhood, and there were some creative and artistic designs of them.

According to figures from 2013, it was estimated that 17% of American men grew a beard of some form in that year, up from 14% in 2009. Beards are particularly frequent among young US men age 18-24: 35% in 2013 compared with 31% in 2009 (Experian Marketing Services, 14 March 2014; the estimate of ‘bearded men’ is based on a definition of men not using any shaving products or men who use electric shavers or shaving cream (foam) fewer than two times per week [to be distinguished from watching men and counting those bearded]).

The problem of Gillette seems to be aggravated, however, by a reduced frequency at which men shave per week. It is increasingly popular to grow a 2-day, 3-day or 5-day beard. If to judge by the frequency of using shaving cream, US men used it 4.5 times per week in 2009 versus 4.3 times in 2013 (mean 3.5-3.6 among 18-24 years old). Therefore, this is not simply a question of whether an individual uses shaving products, particularly disposable razors and blades, but how much one uses them (and thereof pays to buy them). It should be noted that just 15% of young men age 18-24 in the US have had a thick beard (using no shaving products) in 2013 (2009 13%);  among those in the next age group of 25-34 years old this proportion was a minor 5%.

  • In other data (by Mintel) for 2015, 41% of men using shaving products in the US do not shave daily (50% of  18-24 years old, 51% among 45-54 years old). Nonetheless, among those who do not shave daily not all is lost, probably far from it.

Hence, there is a different way, more optimistic, to look at the situation. Many of the men who grow some form of a beard do have to continue to shave regularly enough. First, it can be noticed that many of the young men grow a rather thin and light beard. Second, many grow a beard on part of their faces (e.g., around the mouth) and hence have to keep shaving the remaining areas where facial hair grows. Therefore, instead of looking at how men do not shave or shave less frequently, one should look at the frequency they do shave, when and how. Additionally, men who grow thin and partial beards can be encouraged and advised on nurturing their beards, keeping them in line and aesthetically appearing. In fact, Gillette demonstrates in videos on its country-websites how to do so with their manual shaving products, a step in the right direction (note: similar instructive videos are available from other sources as well). Nevertheless, more emphasis may have to be given to trimmers for cutting off more dense facial hair to offer customers a more complete solution.

Shaving manually with razor blades is a ritual that demands time, patience and care. It involves three main stages and requires the use of supplementary products (e.g., pre-shave lotion, shaving cream or foam). Part of the market of manual razors and blades has been captured years ago, especially in developed countries, by electric shavers for the greater simplicity of shaving with them and also for being safer. In the US, the ratio between shaving methods stands (2013) at about 3:2 — 6 users of disposable razors and blades to 4 users of electric shavers (Experian). Younger men (18-24) tend somewhat more to prefer manual shaving over electric shavers. If it gives any consolation, only 27% of American users of electric shavers apply the machine daily (i.e., 7+ times per week). In addition, users of electric shavers seem to have lowered their frequency of shaving (mean uses per week): 4 in 2009 versus 3.7 in 2013 (18-24 years old use them less frequently to start with, 2.5-2.6). A possible lesson from those revealed figures might be that men in developed countries should not be expected nowadays to shave daily, perhaps only half as frequently, using either manual or electric devices.

In some ways, as suggested below, the management of Gillette can draw back users of electric shavers to using the brand’s razors and blades. First, users of electric shavers may be convinced of a greater accuracy in which Gillette razor blades can be used to keep, for instance, a beard within its intended  border lines. Second, while men may not find the time and patience to shave manually during the week, they may see the benefits of doing so, instead of using the electric shaver, on weekends and holidays when they have more time to groom themselves. It may be possible to widen an already small overlap that appears to exist between the use of electric shavers and the use of disposable razors and blades.

  • P&G also markets the Braun brand of electric shavers (foil covering a straight-line blade). Philips, a leader in electric shavers (round rotary heads), is offering models with or without a pop-up trimmer on back of the handset shavers; a trimmer is also available as a separate device, as may fit the need to separately treat more dense hair. (Royal Philips has been re-aligning its business in the past few years, but it seems to have found a place for its shaving products in the personal care category for men as an extension to health-care technologies).

Gillette looks as an autonomous division of P&G, almost independent from it. It may get even more freedom than other brands in the house of brands of P&G. Indeed, Gillette has been an independent strong brand for many years and is still capable of being a driver of consumer choice without the help of the corporate name of P&G. Moreover, Gillette has been and remains the endorser of product brands such as Sensor (since 1990), Mach 3 (since 1998) and Fusion (since 2006; Fusion has two premium sub-brands ProGlide and ProShield). The three product brands may be strong enough each to share a driving power equally with the endorsing Gillette name. Some consumers may know that Gillette is owned by P&G and they may value the solid backing it can give Gillette, but it seems the P&G name has no more than a role of shadow endorser [1]. The root (US) website of Gillette and its various country-websites make no reference to P&G in their content; the only mention given is a title at the top left corner saying “Part of the P&G family”. This approach thus helps in instilling the notion that Gillette acts as a stand-alone brand (or brand tree).

The cost of replacing the disposable razors (‘handles’) and blades of Gillette has become a key issue for the brand in the last ten years. The ‘heads’ that contain the blades (e.g., Sensor with 2 blades, Mach has 3 blades and Fusion has 5) seem to cause the greater burden for users, especially as they have to be replaced more frequently than the razor on which the ‘head’ is mounted. Gillette has embarked on a major effort in the US to lower their cost and bring back customers — the US website includes a ‘Pricing’ page introducing a special Lower Prices offer on razors and blades (these are recommended retail prices that Gillette is careful to stress it cannot guarantee for every retailer). A similar ‘Pricing’ page appears on the Canadian website but without details of prices, while no such page appears on websites of other countries (e.g., Australia, UK, Germany, Argentina, South Africa). Additionally, Gillette publishes on its American website a ‘Letter to Consumers’ from its employees as part of its effort: showing how they listen to consumers, and expressing gratitude to those who have already returned after trying razors and blades of competitors (attributed to Gillette’s quality advantage and their lower price offering). It begs one to wonder why this effort is limited to North America.

A threat to Gillette has come primarily from online retailers such as Dollar Shave Club (now owned by Unilever) and uprising Harry’s. At first, men reacted to increasing costs of blades by growing beards and shaving less frequently, but then also by turning to online suppliers. Dollar Shave Club was estimated to have an online market share in 2016 of 52.4% on razors and blades, and Harry’s obtaining 9.4%. However, Gillette has also entered into selling its razors and blades online and launched a customer Club in 2014; in 2016 its share online was estimated at 21.2% (CNBC, 7 August 2016, estimate figures provided by Slice [Ratuken] Intelligence). An increasing interest in subscription plans was further noted by Mintel (5 Nov. 2015) — such plans offer razors and blades at lower prices with the advantage of providing also supplementary shaving products; all can be ordered together in convenient packages. Gillette had to adapt to the new conditions, including the shift in consumer behaviour and new market rules (i.e., e-tailing). The subscription scheme of Gillette Club is available mostly in Western countries of North America and Western Europe (notes: in some countries it is labeled ‘On Demand’, and in the scheme described online, orders are set to be fulfilled via retail stores).

  • Gillette was acquired by P&G in 2005 for $57Bn. In May 2018 the Gillette brand was ranked #32 on the List of Most Valued Brands of Forbes, valued at $17.1Bn. Market share of razors in the US has been sliding down during six consecutive years, from 70% in 2010 to 54% in 2016. Since 2012 the sales of Gillette have declined from a peak of $8.3bn to $6.8bn in 2016, and dropped another 3% in 2017 to $6.6Bn. There is an anticipation now that the Club would help to halt the decline in 2018.

The slogan of Gillette, sustained for several decades already, is “The Best a Man Can Get”. Gillette has been thriving for excellence in the area of shaving as a cornerstone of its brand equity. It has won its recognition as a leader based on high perceived quality of its shaving products, especially its razors and blades (as a ‘power brand’, it achieved a central category benefit [‘the closest shave’], and has been continually improving [2a]). An association that resonates with consumers is significant for brand-building; it has to be meaningful and relevant to them. David Aaker and Erich Joachimsthaler noted in their book ‘Brand Leadership’ that Gillette was among the brands “that have high customer resonance because their customer value proposition is highly relevant” [2b]. This could be the prime challenge of Gillette as a brand for the coming years: The high quality of its products is undeniable, but can it uphold its relevance to consumers?

 


In its struggle to bring customers back, a national advertising campaign to persuade men to shave again has missed its target. An Israeli advertising agency (ACW) created a campaign titled ‘The Dad Test’ featuring a ruler for measuring how much a beard or stubble hurts babies by scratching the baby’s face (2017). The campaign stirred protest and anger for being insensitive and aiming low (Mako-Keshet TV, 7 June 2017 [Hebrew]). First, the ‘problem’ the ad caught onto is hardly new. Second, the campaign took an offensive stand by raising a conflict, alienating customers, and thus was shooting in the wrong direction. (ACW is affiliated with international advertising agency Grey; this campaign does not seem to have appeared outside Israel).

The US-based advertising agency Grey New-York launched in the past three years ad campaigns, for American Father’s Day, that seem to adopt a more positive and constructive approach to father and son relations: (1) In 2016, ‘Go Ask Dad’ instead of turning to the Internet (The Drum, 19 June 2016); (2) In 2017, ‘Handle with Care’ featuring a son helping his elderly father shave (AdWeek, 22 June 2017); (3) In 2018, ‘Your Best Never Comes Easy’, meant to redefine or re-establish the brand’s slogan (AdAge, 11 September 2018). A leading theme in these ad campaigns is connecting fathers and sons with a razor product of Gillette as the pivotal mediator. They may also be noted for enhancing a functional benefit of Gillette with an emotional benefit.


 

An approach that may help Gillette paving its way forward is looking through the lens of The Theory of Jobs to Be Done developed by Clayton Christensen [3]. In order to attract customers and keep them, a company has to understand the goal or task the consumers wish to accomplish and focus on how its designated product will help them in making progress towards achieving their goal (i.e., ‘getting the job done’). Furthermore, jobs are context-dependent, that is, in different circumstances or conditions the consumer may need the same product to do differing jobs. In the case of shaving razors and blades, we may posit ‘jobs’ such as: (1) What type of look men wish to display with their beards — does the consumer want to foster a ‘neat and elegant’ look or is he interested in appearing ‘rough and tough’? — from here a company may derive the extent to which razors have to provide a close shave and accuracy; (2) The main concern of male users may be that shaving will be easy and convenient, and without taking too much time (say 10 minutes). An additional goal for shaving may require that it is more economically affordable. Taking these options into consideration, it may prompt Gillette to examine whether consumers can easily distinguish between the different razors it offers and trace which model of razor and blades is most appropriate for the job one wants to accomplish.

The challenges Gillette has to resolve may be divided into two levels. In the short to medium term the brand may be more engaged in tackling the contemporary fashionable trends in growing beards and thereby the shifts in shaving behaviour of male consumers. There is little point in speculating how long this period may last — the brand just has go through it and adjust its product offerings and marketing. In the longer term, more crucially, Gillette will have to be concerned with sustaining the relevance of the brand (e.g., fit for a job) to men, younger and older, and ensuring that associations they hold of the brand remain valid and meaningful. On that depends the future of Gillette.

Ron Ventura, Ph.D. (Marketing)

Notes:

[1] Based on the model of brand architecture in: Brand Leadership; David A. Aaker and Erich Joachimsthaler, 2009/2000; London, UK: Pocket Books (paperback edition, originally published in 2000 by Simon & Schuster UK)

[2] Ibid. 1: [a] (p. 67) and [b]  (p. 89)

[3] Competing Against Luck; Clayton M. Christensen with Taddy Hall, Karen Dillon, & David A. Duncan, 2016; Harper Business (HarperCollins Publishers)

 

 

 

 

 

 

 

 

 

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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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A consumer who eats a chocolate product would want to know that it contains the ingredients it is supposed to — mainly cocoa. That sounds so reasonable and understandable. If you are a true chocolate lover, it is not enough that the food product tastes like chocolate; you want it to be really a chocolate. This is expected not only from chocolate bars and confiserie (pralinés, truffles) where it is obvious. It should also hold for snacks like chocolate-coveted waffles, cookies and biscuits with chocolate, and milk delicatessen with chocolate. But “chocolate products” are not always what consumers would expect or believe them to be. One example as such is a milk deli called “Milky” from Strauss dairy company (Israel).

Some companies may think that resembling chocolate in flavour and appearance is enough. It does not have to be a complete fake (i.e., no cocoa, just flavour and colour substitutes). The more clever companies include in the product some cocoa substances, only to give it a feeling of chocolate. However, formal food standards are quite strict and require that a product contains a minimum (proportional) amount of cocoa substances to be designated as “chocolate” or a “chocolate product”. An honest company that sells a product which does not stand by the standard can state that its product is “chocolate flavoured”, though it leaves the consumer to figure out what that means. Yet sometimes companies tempt to hide the reality about the chocolate content of their presuming product.

Milky is a special dairy deli product. It comes in two layers: a chocolate cream at the base (about 2/3 of the cup) and whipped cream on top. This combination has bought Milky many fans — some prefer to keep the layers in place and dig in with a spoon to pick some chocolate cream from below and then take whipped cream from above, whilst others simply mix the creams well together and indulge on the composition. Milky was created and first launched in 1979 when Strauss, now the second-sized dairy in Israel, was a marginal local dairy. But the deli has made its leap to fame and popularity only in the early 1990s following its wonderful, humourous commercial “The Chase for Milky” (two housewives chase each other in a supermarket to collect the last Milky on the shelf). It was one of the best executions of a TV commercial in the early days of advertising on TV in Israel (Channel 2) , and it quickly caught the attention and favour of consumers.  Along the years Strauss has added variations of Milky like a supplement 0f tiny candy beans, “extra chocolate”, and “mini” serving.

But is the chocolate cream really made of cocoa, its essential component? Two class action suits against Strauss (for 274m shekels=~€62m), submitted in 2013, have put the composition of the chocolate cream into question. Two claims were made, one against the label title declaring the product as “Milky Chocolate”, and another regarding an image of a chocolate cube on the label. The two lawsuits were settled together this month (February 2015) in court in a compromise agreement between the plaintiffs and Strauss.

Only a symbolic monetary compensation was awarded because no direct damage to the plaintiffs or the consumers they represent could be proven  — though Strauss has agreed to donate dairy products in worth of 300,000 shekels (~€70,000) to a peripheral hospital or a similar association as decided by court. But although the litigation ended in a compromise the bottom line is that Strauss was charged with wrongdoing by misleading consumers and was ordered to change the way it describes its Milky products (“Milky Chocolate”, and its “extra chocolate”, “mini” and “light” versions). The judge ruled that the designation “chocolate”, as if the product contains chocolate, misrepresents its content; the label should instead state that Milky is “in chocolate flavour”. It was also confirmed that the picture image of a chocolate cube may give consumers a false impression about the product’s nature but without concluding that the image should be removed.

The heart of chocolate is its cocoa content: The amount of cocoa mass and cocoa butter (making up cocoa solids) in the final product. The European Union regulation from 2003 requires that for being designated “chocolate” or “chocolate (contained) product” cocoa solids must compose at minimum 25% of the product’s weight. This minimum particularly describes “milk chocolate” as the baseline. The practical norms vary for different types of chocolate. In Belgium, for example, the norm is that milk chocolate contains 30-35% cocoa solids, and dark or bitter chocolate includes 70% cocoa solids (extra bitter chocolate will have even 80-90% cocoa solids). White chocolate has only ~20% cocoa butter and no mass and therefore some connoisseurs question its status as “chocolate”.

  • The rule for (brown) chocolate in the EU is that cocoa mass should weigh at least 2.5% of the product, the rest of the cocoa solids made of cocoa butter. However, a larger amount of cocoa mass will improve the taste of chocolate (e.g., richness). The amount, quality and processing of cocoa beans making the cocoa mass are determinants of the overall quality of the chocolate.

The chocolate portion of a product comprises primarily cocoa solids, milk solids (including milk fat) and sugar. Producers of inferior or imitation chocolate replace cocoa butter (fat) with vegetable fats, yet the EU has entered a stipulation that vegetable fat can account for no more than 5% of the chocolate portion of the product (not of its total weight!). Other ingredients of the product (e.g., nuts, honey filling) contribute to the total product weight in addition to the chocolate portion or mix.

  • The UK has been specially allowed to market milk chocolate with just 20% cocoa solids and 20% milk solids whereas in continental Europe the norm is a mix ratio of 25% cocoa solids to 14% milk solids of total product weight. However, Europeans designate the former mix as “family milk chocolate” to be distinguished from their “milk chocolate”.

The current standard in Israel from 1996 refers to a minimum requirement of 30% cocoa solids in chocolate, but the Standard Institution of Israel notes it is “under revision” (according to a draft proposal from August 2014 the SII may adopt the EU rules). It is not revealed if the Milky product contains an insufficient amount of cocoa solids (even just cocoa butter) or none at all. Yet, whether the court ruling is based on the current standard or considering the prospect standard in line with the EU, the level of cocoa solids in Milky has had to be low enough to fail formal chocolate regulations either way. Since the product is largely made of milk produces, it may give the manufacturer a relatively large space for maneuvering between cocoa solids and milk solids. Ironically, the “extra” version of Milky that contains a greater amount of chocolate cream, and perhaps should have been “darker” chocolate, is not recognized as “chocolate” either.

It is very much possible that Milky did contain a larger proportion of cocoa substances in its chocolate cream in previous years. Manufacturers tend to get into a quality-price cycle in which they try with time to lower their costs by reducing the amount of higher quality ingredients in their products that are more expensive, thus lowering the product’s quality; they may nevertheless continue to raise the price to consumers to improve their profitability. There could be mitigating circumstances in this case, but the question is how companies like Strauss handle them. The rising prices of raw cocoa in the global market, especially so in the past few years, could have pushed manufacturers to gradually use less cocoa in the chocolate portions of their products. The alternative would be to raise the consumer price, but that has a limit in consumer acceptance — particularly in view of the growing social protest since 2010. It is worthy to note that the price of Milky in Israel compared with similar products in Europe played a role in this protest last fall.

Therefore, if Strauss has reduced the amount of cocoa in Milky to control its costs, it was wrong to conceal it from consumers. But pricing Milky as purportedly a chocolate product in disregard that it contains less or none of its more expensive ingredient, cocoa, is seemingly a grave mistake. Consumers are more dispositioned to perceive a company as unfair when it increases rather than only protects its profits. Strauss claimed that it had changed the labeling more than a year ago (as currently appears on their Milky labels) but it did not dissuade the judge from including the requirement in the compromise agreement.

Truly, Strauss and Milky are not alone in this game. Competing milk delis of chocolate cream are apparently also imitations given that they are labeled as “milk deli in chocolate flavour”. Additionally, a similar charge was made against a popular “chocolate” spread (“Hashachar Haole” — Hebrew for The Rising Dawn) that did not make clear on its packages that it actually had no chocolate in it as defined by standard regulations. It is now described as a “select cream for spreading”, specifying at most the cream is “in chocolate flavour”.

  • Cocoa can also have positive health implications. Research in past years has suggested that cocoa beans carry a benefit for cardiovascular performance where content in their nibs supports the growth of blood vessels, and increases blood circulation, helping to lower blood pressure. Moreover, a recent study (at University of L’Aquila in Italy with Mars Inc., cited in Scientific American) suggests that this is good not only for our heart but also for our brain: a better flow of oxygen to the brain improves cognitive functions. This benefit is attributed to compounds in raw cocoa beans known as flavanols. There is, however, a practical caution for consumers: The level of flavanol in chocolate products could be much lower than in raw cocoa due to food processing methods in use (even for dark chocolate), too little to have the expected effect. That may come as quite a disappointment for chocolate consumers. It is apparent that consumers should not hope for health benefits of this kind in products like Milky or Hashachar Haole.

This affair is a cause for embarrassment to Strauss. First, Milky has been a flagship brand and a source of pride for the company. The affair is hurting the brand of Milky by potentially diminishing the perceived quality of its product. Second, Strauss is now united with Elite, a major chocolate producer in Israel that was once an independent company and these days is a prime brand of Strauss, acting as an endorsing or umbrella brand for multiple product ranges (e.g., chocolate, coffee, candies). Therefore, Strauss management should have known better. It suggests that the two merged companies are still not properly integrated and there is not enough learning and collaboration between their managerial and professional staff. The damage to Strauss is accentuated by the fact that it has been publicly forced through a legal litigation to label its Milky products “in chocolate flavour”.

The takeaway to food manufacturers should be clear: Do not try to deceive consumers and let them believe their products have properties or ingredients they do not actually hold. Sadly, it is neither unusual nor new for companies to hide from consumers the true compositions of their products or any changes made in them over time. Milky could garner more consumer respect and support by describing it as “chocolate flavoured” but at the same time informing consumers of an actual, low yet non-zero proportion of cocoa solids in the product. Just do not try to hide it under the carpet because someone will lift the carpet for the company eventually.

Ron Ventura, Ph.D. (Marketing)

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In the past ten years the China-based Lenovo has been moving persistently to hold a leading position in the computer and information technology markets around the world. After making strides in the personal computer global market (desktops and laptops/notebooks), Lenovo is set to take a leading role also in the market of mobile devices, smartphones and tablets, worldwide. Lenovo is ambitious and unrelenting — it does not want to be cornered to its home-base in China; instead, it aspires to be recognized as the brand that comes from China.

Lenovo already has a range of models of smartphones developed “in-house”, from entry-level and low-cost to advanced full-featured 5” screen models, which it markets mostly within China. They are doing well selling in China — Lenovo is in second position (13%) after Samsung Electronics (21%) [1]. And with hardly any reach beyond the country and other emerging markets (e.g., BRICS), it is enough for Lenovo to be ranked fifth globally in 2013 (see chart below). However, that may not be enough for Lenovo to break out of its current markets and expand into markets of developed countries, as it did in the PC business.

As a reminder, in 2005 the company acquired IBM’s PC business, a startling move at the time, in order to make its way into Western markets. The most lucrative asset purchased was the ThinkPad brand of laptops, valued primarily by business users. Apparently in view of the success of that venture, Lenovo concluded in January 2014 its deal to purchase Motorola Mobility (MM) from Google for $3bn. The deal is still pending regulatory approval in China and the US, yet the debate on its ramifications is already widespread. As done before, Lenovo shows that in order to reach Western markets it is ready to stand, at least for a while, on the shoulders of Western well-known brands. The Wall Street Journal noted that considering how the acquisition of the PC business from IBM helped to take Lenovo out of the shadows around the world, and the company’s success in building a leading PC division, the latest deal should be worrying for Samsung Electronics.

Lenovo’s CEO Yang Yuanqing further declared recently that Lenovo is restructuring in order to focus on four main business groups: PCs (desktops & laptops), servers & storage, cloud computing, and mobile devices (smartphones & tablets). Notably, in late January this year Lenovo also bought from IBM its x86 server business ($2.3bn). Thus, Yang presents the company’s latest moves as part of a greater plan to expand its activities and market presence. As if to underline the company’s ambitions, Yang said in an interview to Fortune Magazine, he wished that Lenovo could sell 100 million smartphones in 2015 — that is twice the combined sales volume of Lenovo (45m) and Motorola Mobility (10m) in 2013. Thereby he made it Lenovo’s mission to surpass Apple and Samsung(2).

The motivation for Lenovo to invest in developing its mobile device business further should be clear. The market for PCs is declining: global shipments are dropping for the seventh consecutive quarter and IDC predicts that this trend will continue in coming years. Annual shipments of 2013 (316m) are expected to be 10% lower than in 2012 and 14% lower than 2011. Among the top five brands, only Lenovo may not see a decrease in PC shipments for the year. Lenovo just managed in 2013 to tie-in with HP, at around 16% market share each (3). Business enterprises and other organizations are more likely to continue to buy and use PCs, especially laptops, but consumers are moving more quickly to smartphones and tablets for satisfying their information and entertainment needs.

The global sales of smartphones (based on vendor shipments) meanwhile grew in 2013 by 38% year-over-year, surpassing one billion units, according to estimates of IDC. As seen in the chart below, Lenovo is currently in close contest with LG and Huawei, all three showing remarkable growth rates in 2013. Yet they are still a significant distance from the leading Samsung. The second-runner Apple enjoys a comfortable lead over the next three competitors, but its growth rate in 2013 has been the most modest. Apple might have more to worry about Lenovo’s plans than Samsung, given also Apple’s lingering penetration in China, largely because their handsets are considered desirable but not affordable enough for many young people (4).

Smartphones: Global  Market Shares and Sales Growth 2012-2013

Smartphones: Global Market Shares and Sales Growth 2012-2013

Yang sounds confident that Lenovo can replicate with MM what it achieved with ThinkPad from IBM, based on many similarities he finds between the pairing of Lenovo-IBM PC and that of Lenovo-Motorola Mobility, and the companies being “definitely complementary” (5). However, MM may be in a weaker position than ThinkPad or IBM were at the time of acquisition. MM is already detached for a while from the mother-company Motorola, so it is not clear that it can still enjoy the privileges of that name as before. Motorola is not on Interbrand’s list of Best Global Brands, and neither is Lenovo; Apple is ranked first in 2013 and Samsung is in the 8th spot. Motorola, once a leader in mobile phones, was already seriously behind the competition in developing satisfactory smartphones when it sold its Mobility division in 2012 to Google , inherently a software and Internet company.

Google, on its part, can take the credit for re-invigorating the Motorola Mobility business by producing up-to-date improved models Moto G and Moto X, reliant on advantages of Google’s Android operating system, now passed-on to Lenovo. It also brings to Lenovo a talented, highly capable staff. Nonetheless, the effort to grow MM within Google ended unsuccessfully after less than three years. Google did gain an access to more than 2,000 patents of MM that it has already utilised and will be allowed to continue to use to improve and enhance Andorid.

The keywords for Lenovo are (perceived) quality and credibility. The company remains concerned with raising the perceived quality image of products it develops on its own. Its advanced smartphone models, for instance, are targeted primarily for audiences in Western countries but those smartphones will be difficult to get accepted without the endorsement of a familiar and trusted brand in this product domain. Lenovo could rely on its achievements in the PC-laptop domain, yet its management, justifiably, does not believe this would be sufficient to extend to the fiercely competitive smartphone market. The greater strength of its corporate brand today, and specifically of its laptop brands for business (ThinkPad) and home-leisure (IdeaPad) should in the very least provide a solid support to build upon, although a brand like Motorola is expected to be the door-opener in developed economies.

  • It may be noted that in the US PC market Lenovo was ranked fourth in Q4 of 2013 (holiday season) with a market share of 10%, quite behind HP (26.5%), Dell (23%), yet closer to Apple (14%); in Europe, the Middle East and Africa its status is relatively better, second (15%) to HP (20%)(6).

Forrester Research’s analyst Frank Gillett is in opinion that Lenovo does not quite require MM for technological capabilities as a phone company; it is specifically after the brand name. He explains: “Buying Motorola Mobility is a much quicker way for Lenovo to access the premium smartphone market. Motorola has not been shooting the lights out with designs or sales volumes in smartphones, so the value is simply in brand recognition.” Nicole Peng, analyst with research firm Canalyst, essentially agrees while emphasising that the name “Motorola” is meaningful and should help in entering Lenovo’s smartphones mainly to the US; it would be useless in China where the presence of “Motorola” is currently miniscule (0.2%). She adds: “People don’t associate Lenovo so much with phones. But with Motorola, people automatically think of it as a phone brand.”  That is, Lenovo was seeking “Motorola” as an intangible asset.

Still, one may rightly get the impression, vis-a-vis the chequered record of Motorola Mobility in recent years, that the potential contribution of this brand to Lenovo is overrated. In his interview to Fortune (7), Yang admitted that he was interested in MM even before its acquisition by Google, and he had told Page about it. Eventually Page returned to Yang and offered Lenovo to take MM over, and they did. Yang suggested that lately the time was ripe for Lenovo for making the handover. The question is, whether both sides did not lose precious time, letting the MM division “cook” at Google instead of being repaired by a company that is rooted in the business of hardware equipment and handsets. It could have been a much more swift transition from Motorola with better prospects for capitalizing on its brand equity. Lenovo is contemplating how to balance between the Lenovo brand and Motorola Mobility. Yang suggests that in regions like the US and Western Europe it will focus at least in the first stage on leveraging Motorola while in China it will maintain the Lenovo name for its models. However, at some point it may introduce a combined-endorsed branding like “Motorola by Lenovo” to push forward the brand in China. That may be even a better strategy to implement in the West soon enough, as it did with “ThinkPad by Lenovo” to establish the linkage with the new parent. Nevertheless, it seems that Yang is aware of the state of MM when he says that Lenovo will have to grow the Motorola brand.

Suspicions about quality of products from emerging markets is a disturbing issue that concerns companies such as Lenovo. It may be infiltrating consumer attitudes even in China with regard to domestic products — Lenovo has recruited American celebrities NBA player Kobe Bryant and Hollywood actor Ashton Kutcher for its China advertising in attempt to portray their brand as more American or global (8). Deepak Advani was Chief Marketing Officer of Lenovo in 2005-2008 (brought in from IBM). In an interview to marketing professors Dhar and Sudhir of Yale University School of Management in 2009, after returning to IBM, he suggested that the difficulties of companies from countries like China and India with low perceived or expected quality are similar to those that were facing companies in Japan in the 1970s or in South Korea before the 1990s. Henceforth he proposed: “What Samsung and Sony and Toyota did was shift the focus away from where they came to what they did. And what they did was really exceptional.” Indeed a lesson worth considering: Should Lenovo leverage its country-of-origin currently, or postpone it to a later stage when the excellence of its products is already established?

Anything that goes on in the competition between smartphones cannot be dissociated from the battles of the operating systems (OS). Software companies are fighting for the number of handsets that will run with their respective OS. Google’s Android is practically the undisputed “lord” with 79% market share in 2013 (up from 69% in 2012), followed remotely by Apple’s iOS (15% down from 19%) and Microsoft’s Windows Phone (3.3% rising slightly from 2.4%)[BlackBerry is effectively pushed out with 0.6%; source: IDC]. Apple is in a unique position because it voluntarily restricted its iOS to its own iPhones, and that rather seems to constrain the company more severely as time passes in marketing its iPhones.

Google on the other hand works to get Android installed on as many smartphones as possible from different sources, particularly of the major device manufacturers. And that is almost obviously behind the deal with Lenovo: Google’s objective to expand the operation of more smartphones using its Android OS; Wall Street Journal notes however that Google signed new contracts with both Samsung as well as Lenovo to solidify their reliance on its OS.  Larry Page, CEO of Google, congratulated the deal with Lenovo and complimented their expertise in hardware and global reach and expressed confidence that they will preserve the distinct brand identity of Motorola Mobility; he sees the deal as a stage in a long-term partnership with Lenovo. This approach is welcome, though it may have been possible to launch earlier.

It is appropriate mentioning here the acquisition of Nokia mobile business by Microsoft last September. Nokia, like Motorola, was once a champion of mobile phones that trailed behind in smartphones. Microsoft was already in relations with Nokia for two years to replace the latter’s Symbian OS with Windows Phones on their smartphones. Yet, the deal to hand over Nokia phone division to Microsoft ($7.2bn) has become disputable. The motivation of Microsoft is sensical, to push forward its Windows Phone with the aid of handsets of a company it managed to capture and get under its control as owner. That sounds alarmingly familiar. Following the experience of Google with Motorola Mobility, it is legitimate to question whether Microsoft as a software company (notwithstanding its Surface tables) will be able to do better.

Lenovo is taking upon itself a complex challenge before it dares to challenge the major competitors Samsung and Apple. Because the brand it purchased may have to be salvaged before it really proves productive in expanding Lenovo’s smartphone business, particularly in Western countries. On the one hand, the company has a very good record in building its PC (mainly laptop) business with the aid of ThinkPad from IBM, which works in its favour and increases its chances of success. On the other hand, Motorola as a smartphone brand could be less ready to employ and more difficult to benefit from than expected. It will be interesting, and important, to follow how Lenovo deals with these internal and external challenges, and especially how smartly it succeeds in combining between the brands.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) “King of PCs, Lenovo Seeks to Dominate in Smartphones”, Eric Pfanner, International New-York Times, 28-29 December 2013 (figures for China from Canalyst research firm).

(2) “Lenovo CEO on Apple, Samsung: ‘Our Mission is to Surpass Them'”, Fortune Magazine (Online with CNN), 30 January 2014 (excerpts from an interview Miguel Helft with Yang Yuanqing). http://tech.fortune.cnn.com/2014/01/30/lenovo-ceo-on-apple-samsung-our-mission-is-to-surpass-them/

(3) Press Release: “Garter Says Worldwide PC Shipments Declined 6.9% in Fourth Quarter of 2013”, Gartner Research, 9 January 2014; also Ibid. 1 (global market estimates of IDC). http://www.gartner.com/newsroom/id/2647517?fnl=search

(4) “Can Apple Win Over China?”, Bill Powel, Fortune Magazine (Europe Edition), 29 December 2012, 166 (7), pp. 33-38.

(5) Ibid. 2.

(6) Ibid. 3 — Gartner Research Press Release.

(7) Ibid. 2.

(8) Ibid. 1.

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