Brand Management: The Hilfiger Lessons

It has been quite a decade for Tommy Hilfiger. During the 90s, it seemed his brand could do no wrong. The business experienced meteoric growth and, by 2000, was generating $2bn in worldwide sales.

But then came the new century, and Hilfiger struggled to maintain the momentum. Tommy would learn some of the key lessons of brand management the hard way.

First, growth and success are the two biggest enemies of all strong brands.

Hilfiger's global sales grew tenfold during the 90s. On a Powerpoint slide to investors, this looks fantastic. But, internally, this kind of growth is a major challenge. It is a classic conundrum for most niche brands that experience market success. Their scale increases, they lose focus and, eventually, all the elements that made the brand successful are lost.

Second, watch out for retail 'partners'.

Hilfiger, like most fashion brands, relies both on its own outlets and selling through major department stores. The latter are not necessarily motivated to protect and care for brand equity over the long haul. Hilfiger experienced first-hand the classic one-two-three of retail sales. 'The problem was the department stores in the US,' he said. 'First of all they copy you, then they under-price you and then they discount the brand. They don't take care of your shop areas in stores.'

Third, the financial markets are run by brand morons with unreasonably short-term profit goals. Tommy went public relatively early in its history in 1992. When a brand is in the ascendancy, being a publicly listed company confers only advantages. But with this status come analysts, expectations and impossible quarterly sales growth.

Hilfiger himself accepts the pressure of the market made his life very difficult and had a negative impact on the brand: 'I was under the public auspice for around 10 years. It's a whole different ball game. Everything you do is looked at under a microscope, so you make decisions based on Wall Street agendas, and maybe those aren't always the right decisions to make.'

Fourth, pressure from Wall Street often leads to a focus on short-term sales at the expense of long-term marketing focus. There is a big difference between marketing and sales. When you are sales-oriented, all customers are equally valuable additions to your quarterly sales figures. Marketers, however, know that all customers are not created equally.

To succeed over the long term, a fashion brand must aim high and deliberately avoid appealing to customers lower down the fashion hierarchy. According to the company's chief executive Fred Gehring, this is something that he is addressing. 'Over the past couple of years, everything was top-line-focused,' he said. 'In a (non-publicly listed) situation, we don't have to have an obsession with the top line
anymore and can focus on quality, not quantity.'

Fifth, beware sales promotions. The single fastest way to kill any brand is to over-produce and then discount heavily through sales promotions.

Price-based promotions kill brand equity and, when the former is more prominent than the latter, disaster is rarely far away.

In recent years, it has been hard to find Hilfiger clothing that was not on sale. There is no sadder sight in branding than a sign saying 'non-sale items over here'. For Gehring, his number-one priority is to raise price points gradually and restore brand equity: 'One overriding principle will be to try and trade up, not overnight, an become a materially higher brand,' he said. 'It will happen in due course, (a little bit) every season.'

30 SECONDS ON ... TOMMY HILFIGER

- The Tommy Hilfiger Corporation was founded in 1984 by fashion designer
Tommy Hilfiger.

- The company designs, sources and markets men's and women's sportswear,
jeanswear and childrenswear, as well as footwear and fragrances.

- Its brands include Tommy Hilfiger and Karl Lagerfeld.

- In 2004, the company had 5400 employees and revenues of more than $1.8bn (£955m).

- In 2002, Hilfiger went public and in 2006 completed its merger with Apax Partners, which purchased the company in a $1.6bn all-cash deal.

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