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How Did Coach Grow from a $700 million Company to a $2 billion Brand in just Four Years?
Consumer insights provide Coach with a huge return on investment
Stevens, PA January 10, 2007 - This year marks Coach's 65th anniversary. Founded in 1941, for years they were known as a staid but reliable producer of quality handbags with a reputation for classic designs and fine leather workmanship. That all changed just before 2000 when CEO Lew Frankfort brought in designer Reed Krakoff to breathe new life into Coach's product line.
The results speak volumes about their success. Revenues nearly tripled in four years to $2.1 billion in fiscal 2006. Net profits multiplied 6.5 times in the same period.
So how did Coach transform its 'old luxury' brand into today's hottest name in luxury fashion accessories for women young and old?
Two Essential Keys to Coach's Success
Pam Danziger, president of Unity Marketing and author of Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience, says, "Coach got the fundamentals right. The new executive team built on the foundation of the brand's heritage. They created compelling new experiences for shoppers in the branded stores. They expanded distribution overseas and introduced new designs every month, while moving out last month's models." Yet the two fundamental success strategies are simple:
- Willing to Risk Change - Coach could have settled for modest year-upon-year growth. Instead the company's leaders knew that dramatic growth was possible and it required dramatic change in every area of business.
- Relentless Focus on the Customer - Frankfort and Krakoff knew they didn't have all the answers for such sweeping change. But they knew who did - The Coach Customers!
So they revved up the company's market research and fed the results into decision making throughout the company. Every year the company interviews at least 15,000 consumers, by phone, in-store or via the internet. The results of all that research guide the company in what products to design and how many to produce. Forbes estimates Coach invests some $4-$5 million per year on market research, but the payback on that research investment are huge.
To learn more about Coach's transformation, send an email with "Coach Corporate Profile" in the subject line to pam@unitymarketingonline.com
Coach Targets the Luxury Market 'Sweet Spot'
Coach also hits the luxury market's sweet spot, what the company calls "accessible luxury lifestyle accessories." Danziger explains, "There are some 32.5 million affluent households in the U.S. today and the vast majority of them (75 percent) fall into the lower-income ranges: the 'trading up' segment (household income of $75k-$99.9k) and the comfortably affluent (household incomes from $100k-$149.9k). These consumers are the most responsive to Coach's powerful price/value proposition where bags average less than $300."
Don't Envy Coach's Success - Learn from It
What kind of strategies would you need to implement in your company to copy Coach's success? What would you do to take your $500 million company to $1.5 billion in sales in only four years? Or your $30 million brand to $90 million? Or your $1 million company to $3 million?
"One thing is for sure, you'd have to put your company's marketing and product development programs on steroids," Danziger says. "And you couldn't afford any mistakes - no more throwing new product blindly 'against the wall' to see what sticks. You'd need a strategy based upon what the customers really want and are willing to pay for."
Luxury marketers who hunger for revenue and profit growth like Coach's have two choices:
- They can envy Coach's success and then keep on doing the same things they always have done - which is the definition Albert Einstein gives to "Insanity: Doing the same thing over and over again and expecting different results," or
- They can learn from Coach's example and get really smart about the luxury consumers.
"For the first choice, you are on your own. But if you want to vastly improve your company's marketing and new product development success, then Unity Marketing can help by getting you 'up close and personal' with your target consumers," says Danziger. Unity provides a range of consumer insight services that will give you a deep understanding of the luxury consumer. Your company can put these new insights to work like Coach in strategy, marketing and new product development. Unity Marketing offers:
- Luxury Consumer Tracking Study - Unity's flagship service for luxury marketers, it keeps you on the cutting edge of new trends in the luxury market. You get updates every three months about what more than 1,000 luxury consumers are buying, how much they spend, where they are shopping and what brands they prefer. The cost is only $3 for each of the 4,000 luxury consumers surveyed each year. And Coach is consistently ranked the #1 brand in luxury fashion accessories. To learn more visit http://www.unitymarketingonline.com/reports2/luxury/luxury3.html
- Luxury Market Report 2006 - This annual report compiles results from the previous year's quarterly tracking studies for companies that want a historical perspective. To find out more, visit http://www.unitymarketingonline.com/reports2/luxury/luxury1.html
- Customize Research and Consultation - Pam Danziger can design a cutting-edge consumer insight program for your company. She can make sense of much of the 'gobbledygook' that comes out of market research and tell you what it really means for your company. For more information, go to http://www.unitymarketingonline.com/cms_pages/about_us.php
- Executive Presentations, Meeting Facilitator, Keynote Speeches - Danziger is a popular speaker at corporate presentations, meetings and conventions. She also facilitates ideation and marketing strategy sessions. Her most popular presentation is "The Ten Things Every Luxury Marketer Needs to Know about the New Luxury Market." For more info, click through to http://www.whypeoplebuy.com/ or call Pam at 717-336-1600 or email pam@unitymarketingonline.com
For media: Charts, tables and graphs are available on request.
To learn more about Coach's transformation, send an email with "Coach Corporate Profile" in the subject line to pam@unitymarketingonline.com
About Pam Danziger and Unity Marketing
Pamela N. Danziger is a nationally recognized expert specializing in consumer insights, especially for marketers and retailers that sell luxury goods and experiences to the masses or the 'classes.' She is president of Unity Marketing, a marketing consulting firm she founded in 1992.
Advising such clients as Cartier, PPR, Rémy Amerique, Stearns & Foster, Waterford/Wedgwood, Prudential Fine Homes, Baccarat, The World Gold Council, The Conference Board and American Express, Danziger taps consumer psychology to help clients navigate and master the changing luxury consumer marketplace.
Her latest book is Shopping: Why We Love It and How Retailers Can Create the Ultimate Customer Experience, published by Kaplan Publishing in October 2006. Her other books include Let Them Eat Cake: Marketing Luxury to the Masses-as well as the Classes, (Dearborn Trade Publishing, $27, hardcover) and Why People Buy Things They Don't Need: Understanding and Predicting Consumer Behavior (Chicago: Dearborn Trade Publishing, 2004). |
