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A Tale of Two Brands

lego-lether

They were the best of brands…ok, we’ve probably taken that literary reference as far as it should go. At Optima Group, we often look beyond financial services brands to gain insights into what makes a brand successful, where brands can falter and even how they can “rehabilitate” themselves. Two examples of classic brands that took a turn for the worse and what they did to address this illustrate some of the tried and true wisdom regarding brand equity that can be all too easily forgotten.

Lego, a privately held family-owned company, is perhaps the epitome of a toy designed to challenge a child’s imagination. From the original plastic building materials introduced in 1949, little has changed in the design of the basic iconic Lego brick, which generations of children have enjoyed. Faced with competition and the desire to increase its audience through product diversification, Lego began expanding into clothing, theme parks and accessories such as watches, pens and clocks, as well as board and video games. It also tried to increase its appeal to girls, at the expense of its core boy consumer. As a result, it almost went bankrupt in 2004. Recognizing this, the company embarked on an ambitious plan to restore the company to profitability, discontinuing or divesting itself of products that were not core to the business, such as the theme parks and video game development group. It also determined that a relatively untapped audience was the older consumer who still loved Legos, but was looking for more challenging building sets, paving the way for sales of higher-end, bigger ticket items. That, combined with the buildup of lucrative product licensing, returned the company to a profitable, market leading position.

In the American high-end retail leather goods world, Coach at one time was a brand without equal. It was the classic American look, and no upscale wardrobe was complete without a coach “dinky” or saddle bag. However, this brand also began to stray from its core mission, trying to appeal to a very diverse group of consumers. In addition, its brand was diluted through the production of less expensive lines (think of the “C” logo bags so visible so many places) plus aggressive outlet distribution of cheaper, less well-made (or perceived to be less well-made) lines of goods. Those factors, combined with increased competition in the mid-price upscale space, from newcomers such as Kate Spade and Tory Burch, have all conspired to seriously diminish the brand equity of Coach. Coach has made moves to regain its footing, hiring Stuart Vevers, a creative director known for his ability to reinvigorate and transform brands. It is also developing campaigns and reengineering its product lines to hark back to its roots as an American original. Whether these efforts will be successful remains to be seen. But both of these examples serve as cautionary tales of what can happen when one strays too far from one’s brand equity roots.