Levi's Strategic Marketing and Planning

Levi's Strategic Marketing and Planning

Bavarian immigrant to America, Levi­Strauss, carted a load of heavy fabric to California to make tents during the gold rush. He found that the gold seekers needed trousers more than tents, so he used the fabric to make canvas trousers. His blue jeans are now a worldwide institution. Levi­Stranss &Co. still dominates the jeans industry. From the 1950s to the 1970s, as the baby boom caused an explosion in the number of young people, Levi­Strauss

& Co. and other jeans makers experienced heady 10­15 per cent annual sales growth, with little or no strategic or marketing planning effort. Selling

jeans was easy ­ Levi concentrated on simply trying to make enough jeans to satisfy a seemingly insatiable market. However, by the early 1980s, demo­ graphics had caught up with the jeans industry. Its best customers, the

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baby­boomers, were ageing, and their tastes were changing with their waist­ lines­ they bought fewer jeans and wore them longer. Meanwhile, tine IS­to

24­year­old segment, the group traditionally most likely to buy jeans, was shrinking. Thus Levi found itself fighting for share in a lading jeans market.

At first, despite the declining market, Levi­Strauss & do. stuck closely to its basic jeans business. It sought growth through mass­marketing strategies, substantially increasing its advertising and selling through mass retailers

like Sears and J.C. Penney. When these tactics failed and profits continued to plummet, Levi tried diversification into faster­growing fashion and speciality apparel businesses. It hastily added more than 75 new lines, including Ralph Lauren's Polo line (high fashion); the David Hunter line (classic men's sportswear): the Perry Ellis Collection (men's, women's and children's casual sportswear); Tourage SSE (fashionable men's wear); Frank Shorter Sportswear (athletic wear); and many others. By 1984 Levi had diversified into a muddled array of businesses ranging from its true olue

jeans to men's hats, ski­wear and even denim maternity wear. As one analyst

reported at the time in Inc. magazine:

For years, Levi prospered with one strategy: chase the demand for blue jeans. Then came die designer jeans craze ­ and Levi became

unstitched. The company diversified into fashion. It slapped its famous name on everything from running suits to women's polyester pants. The results were disastrous: profits collapsed by 79 per cent

last year, and the company slashed about 5,000 jobs. In 1985, in an effort to turn around an ailing Levi­Strauss it Co., new

management implemented a bold new strategic plan, beginning with a drastic reorganization. It sold most of the ill­fated fashion and speciality apparel businesses and took the company back to what it had always done best ­ making and selling jeans. For starters, Levi rejuvenated its flagship product, the classic button­fly, shrink­to­fit 501 jeans. It invested $38 million in the now­classic 501 blues' advertising campaign, a series of hip, documentary­

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style reality ads. Never before had a company spent so much on a single item of clothing. At the time, many analysts questioned this strategy. As one put it: 'That's just too much to spend on one lousy pair of jeans.' However, the 501 blues campaign spoke for all of the company's products. It reminded consumers of Levi's strong tradition and refocused the company on its basic, blue jeans heritage. During the next six years, the campaign would more than double the sales of 501s.

Building on this solid­blue base, Levi began to add new products. For example, it successfully added prewashed, stonewashed and brightly coloured jeans to its basic line. In late 1986, Levi introduced Dockers, casual and comfortable cotton trousers targeted at the ageing male baby­boomers.

A natural extension of the jeans business, the new line had even broader appeal than anticipated. Not only did adults buy Dockers, so did their chil­ dren. In the few years since its introduction, the Dockers line has become a Si billion­a­year success, Le\i's has continued to develop now products for the ageing boomers. In 1992 it introduced 550 and 560 loose­fitting jeans ­ 'a loose interpretation of the original' ­ for men who have outgrown the company's slimmer­cut 501s.

In addition to introducing new products, Levi­Strauss & Co. also stepped up its efforts to develop new markets. In 1991, for example, it devel­ oped jeans designed especially for women and launched an innovative five­ month, S12 million 'Jeans for Women' advertising campaign, featuring renderings of the female form in blue jeans by four female artists.

But Levi's most dramatic turnaround has been in its international markets. In 1985 Levi almost sold its then stumbling and unprofitable foreign operations. Since then, however, the company has turned what was

a patchwork of foreign licensees into a well­co­ordinated team of worldwide subsidiaries. Levi is now a truly global apparel maker. Its strategy is to 'think globally, act locally'. It operates a closely co­ordinated worldwide marketing, manufacturing rind distribution system. Twice a year, Levi brings together managers from around the world to share product and advertising ideas, and to search for those that have global appeal. For example, the Doekers line

originated in Argentina, but has now become a worldwide best seller. However, within its global strategy, Levi encourages local units to tailor

products and programmes to their home markets. For example, in Brazil, it developed the Feminina line of eurvaceously cut jeans that provide the

ultralight fit that Brazilian women favour. Levi's European Docker division now plans to conquer Europe from its Swedish base. In doing so it has

created the world's biggest advertisement, a 480 square metre banner hung on Stockholm's up­market NK department store,

In most markets abroad, Levi­Strauss & Co. boldly plays up its deep American roots. For example, James Dean is a central figure in almost all Levi advertising in Japan. Indonesian ads show Levi­clad teenagers driving

around Dubuque, Iowa, in 1960s convertibles. And almost all foreign ads feature English­language dialogue. However, whereas Americans usually think of their Lcvis as basic knockaround wear, most European and Asian consumers view them as up­market fashion statements. The prices match the snob appeal ­ a pair of Levi 501 jeans selling for S30 in the United States costs $63 in Tokyo and $88 in Paris, creating lush profit margins.

Levi's aggressive and innovative global marketing efforts have produced stunning results. As the domestic market continues to shrink, foreign sales have accounted for most of Levi's growth. Overseas markets now yield 39 per cent of the company's total revenues and 60 per cent of its profits. Perhaps more impressive, its foreign business is growing at 32 per cent per

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year, five times the growth rate of its domestic business. Levi continues to look for new international market opportunities. For example, the first Romanian shop officially to sell Levi's jeans recently opened to large crowds, and Levi is now racing competitors to reach jeans­starved consumers in eastern Europe and the former Soviet republics. Dramatic strategic and marketing planning actions have transformed Levi­Strauss into a vigorous and profitable company, one better matched to its changing market oppor­ tunities. Since its 1985 turnaround, Levi's sales have grown more than 31 per cent and its profits have increased fivefold. Thus, by building a strong base in its core jeans business, coupled with well­planned product and market development, Levi has found ways to grow profitably despite the decline in the domestic jeans market. As one company observer suggests, Levi has learned that 'with the right mix of persistence and smarts, [plan­ ning new products and] cracking new markets can seem as effortless as breaking in a new pair of Levi's stonewashed jeans', 1