Tully's Letters

This morning I went through the pile of articles and papers I've been collecting for the past couple of months. Most of them made it to the circular file, but one I kept was a story from the June 26 issue of The Wall Street Journal detailing Zale Corp.'s failed attempt to go upmarket. What makes this story worth reading is that the company's upmarket strategy had them totally abandoning the part of the business that introduces most people to their brand: young men and women shopping for diamond engagement rings.

Instead of moving their diamond business upmarket to differentiate the brand from down market jewelry competitors like Walmart, their strategy was to totally abandon "The Diamond Store" product mix that made the brand famous — and try to build a new business model focusing on higher margin gold and silver jewelry.

Makes you kind of wonder what they were thinking.

Great story in yesterday's Sunday New York Times about Harvard University's new publication, 02138 (no link available at the time of this publication). It seems that the venerable upmarket institution sees value in promoting the fact a small number of its many graduates have gone upmarket themselves.

The first issue includes a list of Harvard's "most important ulumni," which includes Bill Gates (no. 1), Matt Damon and Natalie Portman and a cover featuring Rashida Jones in a suit and tie, but no shirt. Advertisers (yes, you can buy advertising to target the readership) include Polo, Marquee Concierge, and other upmarket brands.

Also in this same article is an interesting piece of info: Harvard spends between a half and a million dollars a year "to keep other institutions from billing themselves as, say, the Harvard of Dog Training Schools or the Harvard of Pilates Teacher Training Programs."

How much does your company spend protecting your brand's value?

If you're paying attention to what we find interesting here at Smith & Jones, you know we spend a lot time following the Cultural Creatives. Here's another group we find fascinating: America's Educated Elite. The October issue of The Atlantic Monthly has a great article that explains where these upmarket consumers are clustering, what's attracting them to these cities and the cultural result.

On another subject entirely, the issue also has excerpted contributions from a wide variety of participants at the 2006 Aspen Ideas Festival (from Bill Clinton, Karl Rove, Bill Joy, Jacqueline Novogratz, and many others). While most of this has very little to do with moving brands upmarket, it's great reading for those of us who had conflicts and couldn't make the event.

There's a great story in the International Business section of this morning's New York Times profiling Club Med's recent decision to move aggressively upmarket. They're investing a lot in this venture and admit that it is necessary to remain in business long-term.

What's really interesting is how quickly the middle of the category became a dangerous place to be. From 2001 to 2004, Club Med lost 23% of its worldwide clientele. Twenty of its villages closed after 9/11. They lost $121 million in 2003. They had properties hit by several cyclones and a tsunami. Ouch.

It's impressive how seriously they are taking this move. The company has committed to investing $128 Million annually on upgrades to its properties through 2008. Their 27,000 employees worldwide are in an intensive training program to learn "lessons in fostering ambiance." And they've replaced the Elvis impersonators with "gowned women in glittering Venetian masks who welcome guests for Italian soirees."

Early indication are that Club Med's upmarket strategy is working. They turned a $4 Million profit last year. And at least the French are returning to the brand, the vast majority of them "high-spending tourists from the top fifth income rank."

Let's hope they succeed. It is sure to be a great story to watch as it unfolds.

PS 

In the Itineraries section of the same issue is a report on how hotels are opening spas to attract overstressed business travelers. I think I should go on a business trip this weekend...

Like a lot of other agency people, I've seen a tremendous shift in how clients think about the big picture marketing model. Whereas, a decade ago, a simple, tight and effective marketing plan could be created using good old print, radio, TV, billboards and direct mail, all with good results, it's clear those days are over for good.

This research brief from mediapost.com does a great job of putting a finer point on exactly how agencies are seeing those basic marketing models change.

If an agency isn't adept at change, or hasn't figured out a way to bring services to the client's table that address this changing marketing model, the future won't be bright. Those that keep their eye on people in the real world (read: consumers) have a much easier time helping their clients develop strategy, execute, and grow revenue.