Reference no: EM131418237

Case Study

Questions:

1. Repositioning is a challenging strategy. Based on the case study, what are some of these challenges, and how did Burberry manage to deal with them?

2. Compare Burberry’s turnaround under Bravo/ Bailey with Gucci’s under Ford/de Sole.

Case Study : The Rebranding of Burberry

Burberry was founded in 1856 by Thomas Burberry as a draper’s shop in Basingstoke, England. Burberry is credited for inventing gabardine, a waterproof and breathable fabric, and during World War I the British army chose Burberry’s trench coat as the official army coat (see Figure 3.18). The now-famous Burberry check pattern that eventually became its trademark was introduced in the twenties as a lining. The trench coat gained popularity over the years and was worn by King Edward VIII, Humphrey Bogart and Ingrid Bergman in Casablanca, Audrey Hepburn in Breakfast at Tiffany’s, and even by Peter Sellers in the Pink Panther movies. In 1955, the business was bought by Great Universal stores, a British home shopping network, and in the 1970s, the brand was licensed to the Japanese Mitsui and Sanyo corporations. Through such licensing agreements, Burberrys expanded its categories from apparel to chocolate and a wide range of products that came in a wide range of quality and price as well. With limited control over licensed products, the brand suffered from discrepancies in quality and price as well as from parallel trading, espe- cially in Asia, which by the nineties became the major market for the brand with over 75 percent of its sales. At the time, the brand was mainly popular among older males and Asian tourists and noted mainly for its outerwear products and accessories (such as umbrellas and coats). Indeed, by the mid-nineties the brand’s earnings were low, and its image was conservative, noncohesive, and anything but luxury.

The Repositioning Decision: In 1997, Rose Marie Bravo, former president of Saks Fifth Avenue and a respected industry vet- eran, was appointed as the new CEO. Bravo’s main goal was to transform and reposition the brand from the old, unexciting brand it had become into a luxury lifestyle brand that is stylish and innovative. She immediately took a number of measures that included hiring a new team of highly qualified man- agers experienced in interpreting and analyzing consumer market trends. She also understood the importance of the aesthetic values of the brand’s visual identity and therefore decided to change the brand’s name from Burberry’s to Burberry while introducing a more modern logo and packaging designs. Although the name change might seem purely cosmetic, it was meant to reflect a new and modern attitude, especially as the target of the repositioning strategy was to reintroduce Burberry as a luxury brand and attract younger customers without alienating its core customer base. Bravo and her new team started by analyzing the luxury market to determine existing gaps where Burberry could step in and establish its niche without compromising its core brand values. Based on their research, they noticed great positioning potential between brands such as Armani and Ralph Lauren in apparel, where they would be neither too classic nor too fashion forward or cutting-edge trendy, and between Gucci and Coach in accessories. Pat Doherty, Senior Vice President of marketing, described the goal of the brand as being an accessible luxury brand that is aspirational but also functional. Having decided on the repositioning goal and strategy, Bravo and the team began taking certain measures, such as:

• Cutting down the number of existing products from 100,000 SKU to 24,000.

• Ensuring an updated and consistent look across products.

• Redesigning Burberry’s traditional products and introducing new products that complement the range. They classified their products as either continuity (classics such as the trench coat) or fashion-oriented (responding to new fashion trends and introduced on a collection-by- collection basis).

• Exercising tighter control over its licensing agreements where the royalties ranged from 3 to 12 percent of recommended retail value and accounted for 10 percent of Burberry’s revenue. Many of the licensing agreements were either cancelled or reexamined to ensure consistency in quality, design, and pricing.

• Reevaluating its distribution network, reviewing its partners, and opening new flagship stores in major cities, such as London, Barcelona, and New York.

• Raising prices to reflect the new positioning proposal, increasing the gross margin from 47 percent to 56 percent.

Burberry initially produced three collections:

1. Women’s wear, which included outerwear, knitwear, swimwear, tailored garments, and underwear

2. Menswear, which included tailored coats, pants, and shorts

3. Accessories, which included soft items such as scarves and ties, as well as hard items such as handbags and leather goods handbags Later Burberry introduced children’s wear as well.

The Labels: One of the significant decisions was hiring Christopher Bailey as the creative director in 2000. As Bravo put it well, “Our biggest design challenge is to create a consistent brand image. The lifestyle of a teenager is very different from the lifestyle of someone who lives in the English countryside, just as the lifestyle of a banker is very different from the lifestyle of a fashionista. So unless we have a strong vision and speak with a consistent voice, we run the risk of losing our brand credibility.” While Burberry London remained the core brand, Burberry introduced a number of brands within the Burberry portfolio, such as Thomas Burberry, which is a low-priced line available in Spain and Portugal, and Burberry Blue and Black, available in Japan, targeting young men and women. At the higher end, Burberry introduced its Prorsum line to emphasize its new status as a luxury brand. With its hand-tailored designs and innovative fabrics, Prorsum is its high-profile, haute-couture-inspired brand that is meant to be seen on runways and communicate the new status symbol of the brand.

Communication: To promote and emphasize the new positioning proposal of Burberry, Bravo and the team needed a new communication strategy and promotional campaign. They hired a world-renowned team of professional photographers including Mario Testino, famous for his work with Vogue and Vanity Fair. With a budget of more than $14 million, they were given the task to produce a campaign with supermodel Kate Moss that would end the old, tired reputation of the brand and replace it with one that is new and modern without betraying the brand’s British heritage (see Figures 3.19a–b).

Success and Challenges: The campaign succeeded and Bravo and her team managed to turn the brand around and successfully reposition it. Photos of celebrities such as Madonna were seen wearing Burberry, and Christopher Bailey was hailed as one of the hottest designers in the industry. The company even received a number of awards, including one from the British fashion council. Bravo attributes part of the success to the brand’s British heritage. She believes it is one of the few luxury brands that can be considered classic as well as contemporary. It is clear that Bravo and the team understood the brand very well and what chal- lenges it faced to reach their ultimate goal. Among these challenges was how to treat their infamous checks design, which had been so overused during the early years of uncontrolled licensing. Today the check is approached in a more controlled manner so as not to kill it. It is used more subtly and in less obvious places, such as under a collar or as a lining. The strategy also aims to prove that the brand can offer more than coats and checks.

Angela Ahrendts and Burberry: In 2006, Angela Ahrendts became the new Burberry CEO. With a successful tenure at Liz Claiborne, Donna Karan, Henri Bendel, as well as Burberry, Ahrendts had the experience and vision to direct the brand toward future growth. One of her first goals was to continue attracting a new generation of cus- tomers and emphasize the modern look of the brand through a series of initiatives including a stronger presence online. In 2009, Burberry launched Artofthetrench.com, a Web site whereby customers can buy and learn more about the iconic trench coat. But most important, they can participate and share photos of their trenches through Facebook. It is an attempt to keep the brand relevant and the iconic item “cool and hot” at the same time, as she described it. Burberry is also present on other pop- ular social networks such as YouTube and Twitter. The newly formed team of Ahrendts and Bailey (see Figure 3.20) managed to keep Burberry growing by introducing more items, taking greater control on pricing, and with two-thirds of revenue derived from clothing, Burberry has focused less on department stores and opened new stores. Ahrendts also emphasized the importance to keep each of Burberry’s lines clearly identified.

The Future: After succeeding in repositioning the brand, Burberry faces the challenges of maintaining and defending its position and managing its own growth. Julia Werdigier from the New York Times described how Burberry’s children’s line was so suc- cessful that the company ran into production and shipping problems trying to fulfill the high demand. With plans to license beauty and cosmetics lines as well as more men’s accessories, challenges of man- aging growth as well as facing tougher competition, ranging from high-end boutiques to discount stores where the same customer can be seen shopping, become more apparent. Burberry also remains a popular brand among international tourists, which makes it sensitive to exchange rate and interna- tional travel fluctuations. Yet Burberry seems to be heading full force toward solidifying its new posi- tion as a luxury lifestyle brand.

Case Study

Questions

1. Repositioning is a challenging strategy. Based on the case study, what are some of these challenges, and how did Burberry manage to deal with them?

2. Compare Burberry’s turnaround under Bravo/ Bailey with Gucci’s under Ford/de Sole.