VIDEO CASE 3 LEVIS: AIMING AT THE ECHO BOOMERS In 1986, Levi Strauss & Company found that the best way to stay true blue to itscustomers was to change its colors. Riding high on the results of a recent “back to basis”campaign with its flagship 501 brand, Levis was enjoying reinvigorated jeans sales. But thegood news was followed by bad. Research showed that baby boomers, the core of the companyscustomer franchise, were buying only one or two pairs of jeans annually, compared to the four tofive pairs purchased each year by 15 to 24-year-olds. Born between 1946 and 1964, the baby boomers had adopted jeans as a symbol of theirbreak with the tastes and traditions of their parents. They had, in the words of Steve Goldstein,vice president of marketing and research for Levis, helped turn the company into an“international global colossus” in the apparel industry. Now, however, the baby boomers werelooking for something different. They still wanted clothing that was comfortable and made fromnatural fabrics, but fashion had become more important. Many worked in environments withrelaxed dress codes, so they sought clothing that combined style and versatility—somethingappropriate for both professional and leisure activities. “We set ourselves out to answer the big question,” Goldstein says. “How could we keepthe baby boomer generation in Levis brands when they werent wearing so many pairs of Levisjeans? And the answer was Dockers, something between the jean that they loved and the dresspants that their parents expected them to wear when they got their first job.” Dockers created a product category—new casuals. Blue denim was out; cotton khaki (inbrown, green, black, and navy, but mostly traditional tan) was in. Positioned as more formalthan jeans yet more casual than dress slacks, Dockers satisfied an unfulfilled need. They werethe right pants for a variety of occasions, an unpretentious alternative to dressy, tailored slacks. The challenge in marketing Dockers was to leverage the Levis name and heritage whileestablishing the independence of the new brand, and to do so without detracting from Levis corejeans focus. According to Goldstein, the company briefly considered not using the Levis name
at all, but realized that this would be “sort of like trying to put a space shuttle up without anylaunch rockets.” So the original theme for Dockers was “Levis 100 percent cotton Dockers. Ifyoure not wearing Dockers, youre just wearing pants.” Response from retailers and from the target market of 25- to 49-year-olds was everythingLevis hoped for. All the top menswear accounts across the country placed the new product intheir stores, and in only five years, Dockers became a $1 billion brand. Brand awareness amongmen 25 and older was 98 percent, and 70 percent of target consumers had at least one pair ofDockers in their closets. With the new brand sailing along smoothly, Levi Strauss & Company began to dissociateDockers from the company brand name. In 1993, the Levis name and the words “since 1850”were removed from the Dockers logo. Robert Hanson, vice president of marketing and researchfor Dockers, claims the change was needed to “allow the Levis brand to be focused on the coreteen target because…its the quintessential icon of youth culture.” Still following the baby boomer market, Levis in 1996 brought out Slates, an extensiveline of wool, polyester microfiber, and fine-gauge cotton dress pants. “We thought there wasroom in a mans closet for a third brand,” says Jann Westfall, president of the Slates division.“Thats why Slates was created to [fill the gap] between khakis and suits.” To Levi Strauss &Company, it seemed a natural evolution—the guy who wore Levis in the 70s and Dockers in the80s would be ready for Slates in the 90s. Slates would be the high end of casual, neatly fillingthe “lunch with client/salary review with boss” role in the Docker mans wardrobe. Consumer research told Levis that consumers found shopping for dress pants a chore:slacks departments were dreary; finding the right size was difficult; and getting alterations wasfrustrating. Consumers wanted cash and carry, off-the-rack dress pants. So Levi’s devised acarefully crafted strategy to overcome the typical male distaste for dress pants shopping. Slateswere sold in scientifically tested selling areas consisting of mahogany-toned circular storedisplays that allowed easy access to the various styles and sizes. Levis also responded with off-the-rack pants that require little altering. Whereas most dress pants come only in even waist
sizes, forcing alterations for off-size men, Slates also come in odd sizes. All Slates are hemmedand cuffed and have double pleats in the front. For customers with larger waist sizes, the pleatsare more kindly placed. Levi’s backed Slates with $20 million in advertising, beginning with television ads at theopening of the National Football League season. To charm potential customers, Levi’s agencydesigned ads such as one showing a guy springing up from lunch with his partner to tango withhis waitress. “The ads are stylish but they are not over [the markets] heads,” said NancyFriedman, vice president of research and development. “The trick is to rein it back in so it isntso chi-chi that people cant relate to it.” A year later, everyone agreed that Slates was a dynamitebrand. Levi’s had turned on the Dockers customer to dress slacks just when “corporate casual”started to “dress up.” Noted one industry insider, “Slates and other labels have pushed theenvelope. This has created a tremendous consumer awareness for slacks in general.” Someretailers found that their tailored pants business was up 15 to 20 percent. However, just like the good news about Levi’s “back to basics” move a decade earlier, thegood news about Slates has been accompanied by bad news—plummeting market share in thecore jeans market. Although Levi Strauss had 30.9 percent of the U.S. blue jeans business in1990, it had only 18.7 percent seven years later. Worse yet, Levis sales to teens, the core bluejeans buyers, had dropped from 33 percent in 1993 to 26 percent in 1997. Once the darling ofthe 15- to 24-year-old buyer, Levi’s now faces indifference in this segment and an attitude thatLevis are “your dads pants.” The bottom-line message: Levis are uncool. Male teenagersincreasingly prefer brands like Tommy Hilfiger and Old Navy. Even the young women whohave been more inclined buy Levis are moving toward brands such as Calvin Klein, Gap, andGuess. Levis is being squeezed by upscale brands like Tommy Hilfiger and Ralph Lauren onone end and private label or store brands on the other. It’s a classic marketing goof: Levis lost sight of the market that launched it to success.By concentrating on Dockers, and more recently on Slates, executives were distracted from thethreat to the core jeans business. “They missed all the kids and those are your future buyers,”
says Bob Levi, owner of Daves Army & Navy Store in New York. “Its very important that youattract this age group,” says Gordon Hart, vice-president of the Lee brand at VF Corp. “By thetime theyre 24, theyve adopted brands that they will use for the rest of their lives.” Moreover,the younger segment sets fashion trends that influence older shoppers. The mistake has beencostly: falling sales and market share forced Levi’s to lay off 1,000 salaried workers in February1997, and to shutter 11 plants and lay off one-third of its North American workforce inNovember of that year. What is Levis doing to fix the problem? It’s pumping up the Silver Tab brand, an eight-year-old jeans line considered more stylish among young consumers. Silver Tab has a baggier fitand uses non-denim fabrics. The median age of a Silver Tab buyer is 18, compared to 25 forLevis other products. Levis plans to expand the line to include more tops, more trendy styles,and new khaki pants. The company also plans to boost Silver Tab promotional spending fivefoldfor events such as concerts in New York and San Francisco, for up-and-coming bands playingmusic known as Electronica, and for outfitting characters on hot television shows such asFriends and Beverly Hills 90210. Levis is also taking action on the retail front. In 1998, Levis will introduce jazzier, morecolorful packaging aimed at giving its products a more exciting, youthful look. It has droppedplans to open 100 new stores in malls across the country in favor of NikeTown-type stores,which will serve as the companys flagship outlets in large cities. Holding nothing sacred in its quest to reposition itself in younger segments, Levis is alsosearching for a new ad agency to replace Foote, Cone and Belding, which has been the Levisagency for more than sixty years. And the company is recruiting more outside managers. “[LeviStrauss & Company] has always been insular, paternalistic, and, quite frankly, a little smug” saysIsaac Lagnado, president of Tactical Retail Solutions. All that appears to be changing. Will the new strategy work? Many industry insiders think that Levi has the money andmarket clout to pull it off. But didnt we just read that some of those trendy new styles for SilverTab include khakis? Doesnt that sound like Dockers? And speaking of Dockers, Levis may
have a problem making that brand relevant to the next generation of young men. Baby boomerswho are aging out of the Dockers target market have refused to leave the brand behind.Consequently, the Dockers brand that has been positioned for consumers just moving out of theircore jeans-wearing years may now be thought of as “my dads brand” by the next generation ofyoung men moving into this segment. Thus, the “dads brand” problem that hit Levi’s in the bluejeans segment now threatens the Dockers market. Even as Levis is working to get its core jeansbusiness back on track, it will have to contend with a similar problem with Dockers.Questions for Discussion1. What actors and forces in Levi Strauss & Companys microenvironment and macroenvironment have affected its marketing position?2. Why was Levis so successful in designing products for the baby boomers?3. How and how well has Levis responded to changes in its marketing environment?4. Evaluate Levis strategy for the Silver Tab brand. Is the strategy likely to succeed? Does it meet the concerns of younger buyers? How does Silver Tab compare with the competition?5. What marketing recommendations would you make to Levi’s management?Sources: Elaine Underwood, “Levis New Dress Code,” Brandweek, August 19, 1996, p. 22;“Denim Dish: Dream Jeans for Teens,” Womens Wear Daily, December 11, 1997, p. 12; BeckyEbenkamp, “Slates Speaks Directly to Men,” Adweek, September 8, 1997, p. 5; Stan Gellers,“Tailored Slacks Follow the Mainfloor Leader: Slates Boom Trickles-Up to Better Makers inCasual Fabrics and Golfwear,” Daily News Record, September 24, 1997, p. 3; and LindaHimelstein, “Levis Is Hiking Up Its Pants,” Business Week, December 1, 1997, pp. 70, 75.