Case Study | Levi’s – Aiming at the Echo Boomers

In 1986, Levi Strauss & Company found that the best way to stay true blue to its customers was to change its colors. Riding high on the results of a recent “back to basis” campaign with its flagship 501 brand, Levi’s was enjoying reinvigorated jeans sales. But the good news was followed by bad. Research showed that baby boomers, the core of the company’s customer franchise, were buying only one or two pairs of jeans annually, compared to the four to five 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 their break with the tastes and traditions of their parents. They had, in the words of Steve Goldstein, vice president of marketing and research for Levi’s, helped turn the company into an “international global colossus” in the apparel industry. Now, however, the baby boomers were looking for something different. They still wanted clothing that was comfortable and made from natural fabrics, but fashion had become more important. Many worked in environments with relaxed dress codes, so they sought clothing that combined style and versatility-something appropriate for both professional and leisure activities.

Introduction of Dockers

“We set ourselves out to answer the big question,” Goldstein says. “How could we keep the baby boomer generation in Levi’s brands when they weren’t wearing so many pairs of Levi’s jeans? And the answer was Dockers, something between the jean that they loved and the dress pants 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 (in brown, green, black, and navy, but mostly traditional tan) was in. Positioned as more formal than jeans yet more casual than dress slacks, Docker’s satisfied an unfulfilled need.

They were the right pants for a variety of occasions, an unpretentious alternative to dressy, tailored slacks. The challenge in marketing Dockers was to leverage the Levi’s name and heritage while establishing the independence of the new brand, and to do so without detracting from Levi’s core jeans focus. According to Goldstein, the company briefly considered not using the Levi’s name at all, but realized that this would be “sort of like trying to put a space shuttle up without any launch rockets.” So the original theme for Dockers was “Levi’s 100 percent cotton Dockers. If you’re not wearing Dockers, you’re just wearing pants.”

Response from retailers and from the target market of 25 to 49-year-old was everything Levi’s hoped for. All the top men’s wear accounts across the country placed the new product in their stores, and in only five years, Dockers became a $1 billion brand. Brand awareness among men 25 and older was 98 percent, and 70 percent of target consumers had at least one pair of Dockers in their closets.

With the new brand sailing along smoothly, Levi Strauss & Company began to dissociate Dockers from the company brand name. In 1993, the Levi’s name and the words “since 1850” were removed from the Dockers logo. Robert Hanson, vice president of marketing and research for Dockers, claims the change was needed to “allow the Levi’s brand to be focused on the core teen target because…it’s the quintessential icon of youth culture.”

Slates Enter The Market

Still following the baby boomer market, Levi’s in 1996 brought out Slates, an extensive line of wool, polyester microfiber, and fine-gauge cotton dress pants. “We thought there was room in a man’s closet for a third brand,” says Jann Westfall, president of the Slates division. “That’s 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 Levi’s in the ’70s and Dockers in the ’80s would be ready for Slates in the ’90s. Slates would be the high end of casual, neatly filling the “lunch with client/salary review with boss” role in the Docker man’s wardrobe.

Consumer research told Levi’s that consumers found shopping for dress pants a chore: slacks departments were dreary; finding the right size was difficult; and getting alterations was frustrating. Consumers wanted cash and carry, off-the-rack dress pants. So Levi’s devised a carefully crafted strategy to overcome the typical male distaste for dress pants shopping. Slates were sold in scientifically tested selling areas consisting of mahogany-toned circular store displays that allowed easy access to the various styles and sizes. Levi’s 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 hemmed and cuffed and have double pleats in the front. For
customers with larger waist sizes, the pleats are more kindly placed.

Levi’s backed Slates with $20 million in advertising, beginning with television ads at the opening of the National Football League season. To charm potential customers, Levi’s agency designed ads such as one showing a guy springing up from lunch with his partner to tango with his waitress. “The ads are stylish but they are not over [the market’s] heads,” said Nancy Friedman, vice president of research and development. “The trick is to rein it
back in so it isn’t so chi-chi that people can’t relate to it.” A year later, everyone agreed that Slates was a dynamite brand. 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 the envelope. This has created a tremendous consumer awareness for slacks in general.” Some retailers 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, the good news about Slates has been accompanied by bad news-plummeting market share in the core jeans market. Although Levi Strauss had 30.9 percent of the U.S. blue jeans business in 1990, it had only 18.7 percent seven years later. Worse yet, Levi’s sales to teens, the core blue jeans buyers, had dropped from 33 percent in 1993 to 26 percent in 1997. Once the
darling of the 15 to 24-year-old buyer, Levi’s now faces indifference in this segment and an attitude that Levi’s are “your dad’s pants.” The bottom-line message: Levi’s are uncool.

Male teenagers increasingly prefer brands like Tommy Hilfiger and Old Navy. Even the young women who have been more inclined buy Levi’s are moving toward brands such as Calvin Klein, Gap, and Guess. Levi’s is being squeezed by upscale brands like Tommy Hilfiger and Ralph Lauren on one end and private label or store brands on the other. It’s a classic marketing goof: Levi’s lost sight of the market that launched it to success. By concentrating on Dockers, and more recently on Slates, executives were distracted from the threat to the core jeans business. “They missed all the kids and those are your future buyers,” says Bob Levi, owner of Dave’s Army & Navy Store in New York. “It’s very important that you attract this age group,” says Gordon Hart, vice-president of the Lee brand at VF Corp. “By the time they’re 24, they’ve 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 been costly: falling sales and market share forced Levi’s to lay off 1,000 salaried workers in February 1997, and to shutter 11 plants and lay off onethird of its North American workforce in November of that year.

Also Read: Old Spice – The Advertisement That Took The Brand By Storm

What is Levi’s 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 fit and uses non-denim fabrics. The median age of a Silver Tab buyer is 18, compared to 25 for Levi’s other products. Levi’s 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 fivefold for events such as concerts in New York and San Francisco, for up-and-coming bands playing music known as Electronica, and for outfitting characters on hot television shows such as Friends and Beverly Hills 90210.

Levi’s is also taking action on the retail front. In 1998, Levi’s will introduce jazzier, more colorful packaging aimed at giving its products a more exciting, youthful look. It has dropped plans to open 100 new stores in malls across the country in favor of Nike Town-type stores, which will serve as the company’s flagship outlets in large cities. Holding nothing sacred in its quest to reposition itself in younger segments, Levi’s is also searching for a new ad agency to replace Foote, Cone and Belding, which has been the Levi’s agency for more than sixty years. And the company is recruiting more outside managers. “[Levi Strauss & Company] has always been insular, paternalistic, and, quite frankly, a little smug” says Isaac 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 and market clout to pull it off. But didn’t we just read that some of those trendy new styles for Silver Tab include khakis? Doesn’t that sound like Dockers? And speaking of Dockers,
Levi’s may have a problem making that brand relevant to the next generation of young men. Baby boomers who 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 their core jeans-wearing years may now be thought of as “my dad’s brand” by the next generation of young men moving into this segment. Thus, the “dad’s brand” problem that hit Levi’s in the blue jeans segment now threatens the Dockers market. Even as Levi’s is working to get its core jeans business back on track, it will have to contend with a similar problem with Dockers.

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