“ The Coach brand represents a unique synthesis of magic and logic that stands for quality, authenticity, value and a truly aspirational,

distinctive American style”

Reed Krakoff, president and creative director of Coach Inc., in May 2004

Background

Coach was established in 1941 in NY by Miles Cahn; it’s one of the oldest US brands in its sector

New way of leather processing was introduced It become well known for the sturdy and high-quality leather handbags and

accessories in classic style The company was sold to Sara Lee Corp. Ltd in 1985 when it was already a

premium brand in US Under Sara Lee Ltd the company started expanding the portfolio and entered

new markets like England, Italy, Germany and Japan In late 1980s the company was unable to meet the huge demand and some

stores closed By the early 1990s, Coach had lost some of its cachet, as other premium brands

offered products, which were more trendy while Coach was more classic and staid designed

… background

In the late 1990 the company’s CEO and the creative director revived the brand message and the market

Coach was listed in October 2000 In 2005 the company was in a very strong financial position with 3 times the

revenues of year 2000 New York-based designer and marketer of superior quality, “modern American classic”

accessories In 2006 is recognized as one of the 21 top luxury brands in US together with popular

fashion houses like the Gucci Group, the Hermès Group, Giorgio Armani S.p.A. LVMH, Chanel, and Prada S.p.A.

Unique positioning due to the significantly lower prices As of early 2006, Coach sold a range of accessories like bags, watches, footwear,

sunglasses, and outwear for both men and women in 19 countries worldwide. For fiscal 2006 Coach total

revenues stood at $2,111.50 million11.

Image / personality of Coach’s products

Durable and functional handbags in superior quality leather; the average life of a handbag is 15 years, but if maintained well the can last up to 40 years

A lifetime service to the clients was offered in repairing and replacement of pieces for freeA “country-club” image was acquired

which strengthened the high-end positioning of Coach

in the leather goods market

The issue - durability and functionality prevail trendiness

Despite the good reputation, Coach lagged “trendiness”; their products were classic and attracted old women not interested in fashion

Stylish European brands performed better Coach’s strategy – timeless, classic pieces, not subject to the fashion; used always the same

design style

Classic and elegant design fashionable

The competitive environment in the mid -1990sLV, Gucci, Prada,Ralph Lauren

→ The “business casual” style came over the classical one→ Women become more trend-conscious

→ Non traditional materials were used do make bags (nylon, fabrics etc.)→ Changes in customer preferences

→ Declining sales for Coach in the mid 1990s

1996, Enter Krakoff: “… I had to update the image”

“ I felt he’d be able to balance magic with logic, keeping the best of Coach and infusing the edge it needed” said Frankford

What they did?

Maintain the “classic image” to retain the loyal customers Modify design and style to appeal also to the younger audience Represent modern classic or classic American designs and style with a modern twist

“ We seek to be leading brand of quality lifestyle accessories offering classic modern American styling”

New collections came

Use a variety of new materials such as fabrics, nylon and variations of light-weight leathers to appeal to the younger consumers

Variety of new shapes and colors

The Ergo bag

Hamptons bags

The Neo bag

Expansion of the product portfolio to increase sales

The best seller – new Signature collection

Impact of the campaign on Coach’s buyers behavior

A Shift in the nature of involvement : Right balance of «logic with magic»

Generate incremental business through impulse purchases

Cognitive

Low

High

Affective

Note: 1 - Coach website

Rational purchase•Durability•Functionality•Superior quality leather

Station bag, “one of the originalCoach designs” ¹

•Emotional purchase•Fashionable•Innovative•Luxury

Madison bag, “radiates luxury from every angle” ¹

Increasing motivation through a better understanding of consumers’ needs

Understanding consumers’ needs

Customer-centric design process • Bottom-up approach• Customers surveys, focus groups

and market researches– Testing of new products– Measuring brand awareness – Tracking tastes

Motivation of the new customers

Full-price stores• Female aged 35, educated,

working• More label-conscious• Fashionable• Self-esteem

Factory outlets• Mother, aged 45, educated,

married• More quality-conscious• Looking for bargains• Professional shoppers• Utilitarian

Reducing perceived risks for purchasersFinancial risk: accessible price

Financial risk: accessible price

Psychological risk:

luxury aspect of the

product

Performance of the

product: quality and

functionality

• Prices starting from $200 vs. European luxury brands (c.

$1000)• Factory outlets selling older collections, irregular products,

etc.

• Selection of the highest quality of leather

• Nothing is added for cosmetic purpose

• Authenticity certified by numerous criteria

• No price cutting• Unique tagged number

synonymous with exclusivity and style-

statement

Maximizing exposure of the brand through an integrated marketing campaign

• Extension of the brand to new products to increase brand visibility• Eyewear, business cases, travel accessories, watches, scarves• Launch of a men’s line in 2002• Launch of new collection every month• Co-branding with Apple (iPod cases)

• New channels of distribution• A « Multi-channel international distribution model »• Coach stores, Coach catalog, Coach factory stores, duty-free

locations, department stores, website

• Advertisement campaign• « Living legends » ad campaign evolution : from legendary

personalities to contemprorary models• Young and popular celebrity endorsers (Kate Bosworth, Mandy

Moore…)• Featuring in VogueAll this leads to consistency with a youthful and luxury image

Enhancing perception through both products and channels of distribution

Stimulating vision and touch through new collections

• From muted colors to seasonal palettes• Introduction of many colors to

revitilize the brand• Customers are tactile shoppers and like

to feel the material• Introduction of new materials such

as exotic skins, plastic, nylon

Creating a new retail atmosphere• Store redesign took place at the end of

the 1990s to reflect the new brand image

• White theme, spacious stores, lighting effect in order to create a pleasing ambiance

Success of the strategy

• Success of the new positioning– Ranked among the 21 top luxury fashion

brands in the US among Gucci, Hermès, Giorgio Armani, LVMH, Chanel, Prada, etc.

– « The strongest fashion brand among the more mass-oriented luxury brands purchased by wealthy consumers » ¹

– An internal poll realized on a market of Coach in 2001 revealed that 30% of buyers were under 26 meaning that the brand had managed to become appealing to young customers

• Revenues have tripled over 2000-2005

Reasons behind the success of this « masstige » strategy

•The image campaign did not start from scratch• Coach benefitted from strong original attributes (i.e.:

quality, know-how) and a strong reputation

A brand revival strategy

• Coach kept on with the core essence of the brand• Authenticity, functionality and quality remained

important features of Coach’s bags

Retaining core customers

while targeting new ones

• The lack of scarcity of the products and their affordability have not impair the exclusivity image of the brand because Coach managed to create a new segment, stimulating incremental

business• The masstige segment enables to attract both consumers who

are status-oriented and more quality and price-conscious

Creating a new market

segment

Is this strategy sustainable?

A combination of several factors could entail a dilution of the brand’s accessible luxury image

Low prices and high exposure could lead to confused positioning

The positioning is heavily dependant on sales volume to maintain margins, raising the problem of premium-brand over-expansion

Outsourcing of production to low-wages countries could negatively impact quality or consumer’s inference about it through the

mention of the country of origin

Background

Coach was established in 1941 in NY by Miles Cahn; it’s one of the oldest US brands in its sector

New way of leather processing was introduced It become well known for the sturdy and high-quality leather handbags and

accessories in classic style The company was sold to Sara Lee Corp. Ltd in 1985 when it was already a premium

brand in US Under Sara Lee Ltd the company started expanding the portfolio and entered new

markets like England, Italy, Germany and Japan In late 1980s the company was unable to meet the huge demand and some stores

closed By the early 1990s, Coach had lost some of its cachet, as other premium brands

offered products, which were more trendy while Coach was more classic and staid designed