Levi Strauss & Co. Has An Opportunity To Break Its Brand-Business Behaviors

It is always distressing when an iconic, cultural brand-business declines. It is especially distressing when the brand-business is an ingrained part of American history. But, this seems to be the case with Levi’s. 

Levi Strauss & Co.’s latest earnings call is depressing. Yes, the brand is globally recognized as an authority in jeans. But, the brand-business missed its quarterly revenue estimates. And, Levi Strauss & Co. cut its guidance. So, shares traded lower.

However, the saddest part of Levi Strauss & Co.’s earnings call is the reasons given for the decline. Many of these reasons are self-inflicted. Unfortunately, as with many self-inflicted troubles, Levi Strauss & Co. executives blamed the consumer, the economy, the big box stores and the weather.

Levi Strauss & Co. current CEO indicated that the brand is strong. Incoming CEO, Michelle Gass, ex-CEO of Kohl’s, praised the brand as “… transcending cultures and demographics and beloved across markets.”  As for the future, Ms. Gass stated that her key areas of focus would be 1) International, 2) becoming a denim lifestyle brand and 3) transforming the brand-business into a best-in-class direct-to-consumer organization.

Whatever Levi Strauss & Co.’s strategies are, fixing some inherent blocks to success is necessary.

Reuters, the global news service, reported on Levi Strauss & Co.’s results.  Here are four tendencies for trouble appearing in Reuters article. Levi Struss & Co. must address these troubles.

1. Believing your customer is “the value-conscious customer. This is a problem. There is no “value customer” segment. All customers are value conscious. Thinking there is a specific market segment that owns value consciousness is a massive marketing mistake. Every shopper wants a good value. The buyer of 7 for All Mankind Jeans, the buyer of Citizens of Humanity jeans and the buyer of Levi’s jeans all want a good value. The driver who purchased a Mercedes and the driver who purchased a Toyota both believe they bought a good value. Brand-businesses must not focus merely on price when discussing value. To be the best value, brands cannot compete on price alone. Brand-businesses cannot cost manage their way to enduring profitable growth. Brand-business value is more than low price. Value is what you receive for what you pay. Customers assess value by their expectation of a total brand experience (functional, emotional and social benefits) relative to costs (price, time and effort).

2. Losing focus on the customers who love you. All brands need both current and new customers. But, focusing on the customers you have at the expense of those who may or may not just like you, is a formula for failure. Core customers are valuable. There are reams of data to support this statement. Losing even a small percentage of core customers can create a disproportionate amount of lost income for brand. It is common practice when a brand-business is suffering in the US to seek growth internationally. Growing a global customer base is great as long as the core base is not ignored. Adore the core.

3. Deal loyalty is not the same as brand loyalty. According to Reuters, Levi Strauss & Co. used “hefty promotions” that affected its performance. These promotions affected sales at Walmart and Target. Reuters reported that Levi’s prices of its Signature and Denizen brands started at just a bit lower than $30. Analysts are worried that additional promotions and price cuts might “pressure margins.” Recently, Levi’s cut prices of around six or so “price sensitive items” sold by retailers to “jumpstart” sales. Reuters reported that in July, Levi’s cut prices on “select” pairs of jeans by $10. (This left these select jeans still $10 more than the cost pre-COVID.) Levi’s current CEO indicated that Levi’s would not be “aggressive” with promotions but would be “competitive.” When a brand-business resorts to deals, the brand-business generates deal loyal customers. Deal loyal customers go where there are deals. When a competitor has better deals than your brand, you lose. A brand-business must communicate that that it is a great brand at a great price. For example, T. J. Maxx communicates, “ Where you can always afford to be you to the Maxx.”

4. Believing your brand can be a lifestyle brand. Not every brand can be a lifestyle brand. A lifestyle brand is an expression of the values, hopes, interests, attitudes or opinions of a group. A lifestyle brand creates a culture. Lifestyle brands want to create a way of life for a specific group of people. A lifestyle brand describes an emotional bond with its customers. Members of a particular lifestyle believe that the lifestyle reinforces who they are and who they can be.  Soon-to-be CEO Ms. Gass wants Levi’s to be a lifestyle brand. This is what Ms. Gass calls, “head-to-toe denim dressing.” Or, the “true apparel lifestyle brand.” The idea is that Levi’s image as a great denim brand can be expanded and transferred into being a true apparel brand lifestyle. Investors have serious reservations about the expansion strategy into skirts, dresses and other women’s clothing. A lifestyle brand must be more than an array of clothing. For example, clothing brand Free People’s mission is: “Lifestyle merchandising is our business and our passion. The goal for our brands is to build a strong emotional bond with the customer. To do this we must build lifestyle environments that appeal emotionally, and offer fashion correct products on a timely basis. Free People was founded on the values and principles of inclusivity and cultural understanding. Every day we strive to be better, to better serve our customer and, in turn, build a better community.”  What is the Levi’s lifestyle? Is it connected to its Iconic, Americana authenticity? Levi’s has a deep provenance. What is the expression of the values, hopes, interests, attitudes or opinions described by head-to-toe denim?

Even big, iconic brands can fall into trouble. Some people believe that there is a natural brand-business cycle from birth to growth, to maturation, to decline, to death. This is wrong. Brands do not inevitably die. Brand-businesses can live forever. Brands get into trouble due to self-inflicted actions of their owners and leaders. Levi Strauss & Co. has work to do in order to reinvigorate itself for success.