Do You Dream in Chocolate? A Case Study on Lindt's Branding Strategies Before and After 2008 Helen Wong A Capstone Project Presented to the Faculty of the School of Communication in Partial Fulfillment of the Requirements for the Degree of Masters of Arts in Public Communication Supervisor: Professor Pallavi Kumar April 26, 2012 2 Copyright Helen Wong 2012 3 Acknowledgement This capstone project would not have been possible without the help of Professor Pallavi Kumar. Her invaluable guidance, encouragement, and willingness to help have been very important to this capstone project. Also, I would also like to thank Professor Maria Ivancin for giving me research guidance and being encouraging. Finally, I appreciate the all the help from my fellow classmates by providing useful feedbacks on my drafts and being supportive throughout the semester. 4 Abstract This study seeks to understand how Lindt rebranded itself for the mass market after the economic downturn in 2008. By studying Lindt's rebranding effort before and after 2008, the capstone project will also address the benefits and barriers of a more luxuriant brand rebranding itself to more mainstream, as well as develop guidelines for brands that want to take this leap in the future. A case analysis was conducted by comparing how Lindt performs before and after 2008 in each branding pillar (storytelling, positioning, customer relations, design, distribution, and pricing) based on the items used by the brand. The research findings indicate that Lindt's rebranding strategies have been successful based on its steady sales growth since 2008 because the brand keeps some of its luxury appeal. 5 Table of Contents I. Introduction .............................................................................................................................. 6 II. Literature Review a. Overview of Branding ...................................................................................................... 9 b. Positioning ....................................................................................................................... 10 c. Storytelling ...................................................................................................................... 12 d. Design .............................................................................................................................. 13 e. Pricing............................................................................................................................... 17 f. Customer Relations ........................................................................................................ 19 g. Distribution ..................................................................................................................... 29 h. Luxury Appeal ............................................................................................................... 23 III. Case Study of Lindt's Rebranding Strategies Methodology....................................................................................................................... 25 Lindt's Branding Effort Before and After 2008 .............................................................. 29 Discussion ............................................................................................................................ 34 VI. Conclusion ........................................................................................................................... 43 VII. References .......................................................................................................................... 44 VIII. Appendices ....................................................................................................................... 50 6 I. Introduction Swiss chocolate brand Lindt & Spruengli, more commonly known as Lindt, was established in 1845 by David Spruengli-Schwarz and his son Rudolf SpruengliAmmann. The brand started from a small confectionery shop in Zurich called Spruengli & Son. The Spruenglis later renamed the company after buying the business of Rodolphe Lindt, a chocolatier who invented the first truly melting chocolate. After 167 years Lindt becomes one of the most famous chocolate brands in the world, and its products are distributed to more than 80 countries (Lindt, 2011). The brand entered the U.S. market around 80 years ago, but it maintained a low profile till 1989. Lindt also owns another famous U.S. chocolate brand Ghirardelli, which does not have a prestigious image as Lindt. (Bernard, 2009). The brand's flagship products include Lindor Truffles, Lindt Excellence, and Gold Bunny Chocolate Bars. Although Lindt positions itself as premium chocolate brand and is always considered as a major competitor of the Belgian chocolate brand Godiva, Lindt has become more mainstream since the global economic downturn in 2008. The brand closed around 50 to 80 stores to save money and decided to bring its products to discount stores and drug stores such as CVS and Walgreens (Wiggins, 2009) besides selling them in its remaining retail stores ("Lindt & Sprungli," 2009). Apart from Lindt, other luxuriant brands have also rebranded themselves for the mass market. One of the most famous examples is Revlon, a cosmetic brand that was established by Charles Lachman, Charles Revson, and his brother Joseph Revson in 1932. Its image was glamorous, sexy, and confident. The use of supermodels in 1980s as 7 brand ambassadors further strengthened the brand's image as more upscale (Revlon.com, 2011). Due to heavy debts in 1990s, Revlon decided to revitalize its business by positioning itself as a more affordable luxury (Costello, 2001). Revlon becomes more mainstream by lowering its price and tremendously increasing its distribution channels. All of its products only cost from $5 to $15, which are comparable to another mainstream brand P&G in the market (Barnes, 2012). Also, coupons and free samples of Revlon have become more available in magazines (Sloan, 1994). Moreover, the brand changed its distribution channels from being in upscale shopping malls to department stores, and eventually to mostly mass retail channels such as CVS and Walmart (Barnes, 2012). However, Revlon is still perceived as competitive as other luxuriant cosmetics brands such as L'Oreal and Estée Lauder (Benady, 1999) because it still uses celebrities such as Julianne Moore and Halle Berry as the brand ambassadors. Also, the brand emphasizes its signature red in its advertising campaign to maintain some of its glamour and luxury appeals. Based on the examples of Lindt and Revlon, companies may consider rebranding at some point to boost their sales especially during times of economic uncertainty. Since little research has been done to examine Lindt's branding strategies before and after 2008, this capstone project will conduct a case study based on the items used by Lindt in these time frames to compare how Lindt has rebranded itself for the U.S. market. This capstone project will first provide an overview on branding, and then the literature review will elaborate the concept of branding by explaining the six pillars of 8 branding: storytelling, positioning, design, pricing, customer relations (Healey, 2008, p.6), and distribution (Perreault,, Cannon, and McCarthy, 2008), as well as the concept of the luxury appeal in branding. The research phase of this project will be a case study on Lindt's branding strategies before and after 2008. Parameters of how luxury and mainstream brands brand themselves will be drafted respectively based on the literature review. Then, Lindt's prices, campaigns, posters, sales locations, and customer relations programs before and after 2008 will be used for evaluation. Finally, based on Lindt's sales figures, the project will discuss the benefits and barriers of rebranding from a more luxuriant brand to more mainstream. The capstone will conclude by providing guidelines for other luxuriant brands that want to enter the mass market in the future. 9 II. Literature Review a) Overview of Branding According to What is Branding by Matthew Healey, a brand can be anything from products, services, organizations to even people. It is a "promise of satisfaction" and "an unwritten contract between a manufacturer, a consumer, a seller, and a buyer" (2008, p.6). Additionally, the American Marketing Association defines a brand as a "customer experience represented by a collection of images and ideas" through symbols such as a name, design scheme, and logo. Therefore, branding is an ongoing process to define the promise and fulfill the customers' satisfaction by using suitable images and symbols. Today, branding is generally defined according to these six pillars: storytelling, design, positioning, pricing, and customer relations (Healey, 2008, p.8), and distribution (Perreault, et al., 2008). If brand recognition can be built, eventually customers' buying behavior can be changed. Cacioppo, Petty, and Schumann (1983) use the Elaboration Likelihood Model (ELM) to explain effectiveness of advertising. According to Fisher (n.d., para 1), ELM states that human beings process information through two routes: the central route and the peripheral route. When a product has strong personal relevance to customers, or they have high involvement to the product, they will put more cognitive effort to product evaluation. This cognitive engagement is also known as the central route of processing in the ELM. On the other hand, if customers have weak personal relevancy, or low involvement to the product, they will put less cognitive effort to evaluate the product. 10 This is called the peripheral processing. Apart from personal relevancy, customers' ability to process the information is essential to determine the purchase decision. Visual elements are not necessarily peripheral cues and verbal elements may not be a central cue as most scholars suggested. Depending on the target audience's ability, either visual or verbal messages can relate to customers and appeal their emotion. Eventually, their buying behavior will be changed (Cacioppo et al., 1983). Therefore, if a brand can understand more about its target customers such as the media they prefer for information, its promotional materials such as logos, advertisements, and packages will be more appealing. Once stronger brand recognition is established, its target customers will be more likely to pick up its products and learn more about them. b) Positioning Jack Trout and Al Ries first proposed the concept of brand positioning in 1980 (Healy, 2008, p.8). To position a brand is to "manipulate what is already up there and retie the connections that already exist in [customers'] mind" (Trout et al., 1980). Because the brand needs to first understand what its target audiences think before well positioning its product, positioning makes branding a two-way dialogue (Healey, 2008, p.8). Positioning is important today; especially since consumers have too much information to process every day. Once customers make up their mind, it is difficult to change perceptions. Therefore, positioning strategies need to match customers' schema (i.e. prior knowledge or experience) (Trout, et al. 1980) to increase the personal 11 relevance of the brand to its customers. Many brands rejected by customers are due to the lack of schema. Since customers do not have prior knowledge to work with the messages that the brand tries to communicate, millions of dollars spent on ads and campaigns become a waste. Trout, et al. (1980) also emphasize the importance of being first in the market or in customers' mind because being the first is always remembered but not the second or the third brand entering in the same market. If unluckily the brand cannot be the first one in the market, it should try to be first in another category (p. 51-53). Once the brand becomes the first in the customers' mind, it should try hard to make the brand stay the first by being consistent and active with its strategies years after years (Aaker, 2008, p.178). A brand should know its strengths and weaknesses and its competitors because it will help carve out "a specific niche in the market" and the niche should resonate with its target customers (Aaker, 2008, p.178). Based on Trout and Rie's concept, Aaker (2008) suggest three possible "niches" for brands to bring potential customers from considering products of the competitors: creating stronger emotional benefits than the competitors, emphasizing different functional benefits, and setting lower costs for equal or greater functional benefits (p.179). c) Storytelling Based on its position, a brand can form good storytelling tactics to help its target customers gain unique experiences by differentiating itself from the others in the market (Fog et al., 2010, p.16). People create stories to organize their experiences, 12 explain unique events, and gain perspective so that they can understand the world around them as well as their role and identity in society (Escalas 2004). Stories are also helpful to reinforcing the existing memory, updating the missing aspects of their memory, and further proving that the story understood previously. In branding, good storytelling should be able to build an emotional bond between the brand and its customers. When a story has strong personal relevance to customers, it will start to have a proper proportion in customers' lives (Bruce, 2001). The best scenario is that the customers believe that purchasing products from the brand is telling their own stories simultaneously. Escalas (2004) further elaborates the good standards of storytelling skills. A good story should consist of goal-directed action-outcome sequences (i.e. episode schema), which means physical and/or psychological responses are created by initial events. With these responses customers will develop goals that lead to actions that cause certain outcomes. Therefore, if a story fulfills customers' psychological state (feel the need to purchase), formation of goals (decide to purchase), action (purchase), and outcome (product purchased), it will be a successful story. Additionally, a great brand story should communicate the brand's value (what the brand stands for) and identity (who the brand is) by embracing its heritage. By emphasizing and reassuring the important role of customers in building the brand's heritage, the bond between customers and the brand can be strengthened (Bruce 2001, Healey 2008, p. 28) and loyalty will be built gradually. However, the brand also needs to ensure customers to have the ability to understand the story. Sense of humor is 13 encouraged, but all the marketing jargons should be eliminated because it will separate the brand from the customers (Bruce, 2001). Fog, Budtz, and Yakaboylu (2002) suggest the four essential storytelling elements to communicate the brand's core value: plot, message, conflict, and characters. The plot provides a structure to propel the story forward to keep audience interested. Message will be needed in the plot and usually there is only one central message such as the moral behind. Conflicts can be emotional needs and they will mark the turning point of the story. By addressing the needs characters are motivated to find solutions to solve the conflicts (p.33). In brand stories customers and employees are the characters with their roles. If brand stories can remind the internal listeners (employees) of how they can also contribute to building the brand story, they can make the stories be touching to customers easily with their pride (Bruce, 2001). d) Design Visual elements of a brand are usually the first thing to catch customers' attention and evoke emotions to make purchase decision (Simmons, 2007). Apart from having aesthetic qualities, visual element should also match the brand's position and story. Simple and clean designs are always preferred (Christian, n.d., para 4). In Emotional Branding (2001) Gobe suggests color, typography, images, and shapes are the major design elements that a company should concern in branding (p. 68). Color is one of the three visual pathways in human brains and using color appropriately can increase the brand recognition by 80 percent. By triggering very specific responses in the central nervous system and the cerebral cortex in our brain, 14 colors can activate our thoughts, specific form of perception, and memories (Gobe 2001, p.77). Therefore, a brand needs to "own" its color in mind of customers (Daye, 2011). On the color spectrum (i.e. all the colors of the rainbow) red, orange, and yellow are referred as warm colors; green is the neutral color; blue, indigo, and violet are cool colors. Warm colors come forward in space as well as bring excitement and stimulation to our heart and nervous system. Apart from showing cheerfulness, creativity, and warmth, warm colors are considered to increase appetite. Red is especially preferred for fine dining because it is always associated with festivity, celebration, and completeness (Cooper, 2008, p. 25-30). Black, white, gray, and brown are neither warm nor cool colors. They can be used frequently and in large area without being overwhelming, so the best effect will be using these colors with little warm colors. Using solely black and white can be perceived as cheap and inexpensive as generic brands. However, brown is always used to show the wholesomeness and naturalness of food (Cooper, 2008, p. 34-36). Typography is another important element in branding. Healey defines typography as "the art of selecting and using an appropriate style of font, in a way that reinforces the message of the words" (2008, p.96). Different fonts carry different connotations and can relate to brand perception and consumer memory (Childers and Jass, 2002). Several scholars have suggested good uses of typography in branding. First, because typefaces have particular semantic qualities, if a specific typeface has the similar characters to the product on the advertisements or packages; the benefits of the 15 product and the brand would be the most memorable to customers under both high and low involvement (Walker, Smith, and Livingstone, 1986; Childers and Jass, 2002). Second, typographic consistency can reinforce brand recognition and communicate the never-changing brand standards (Healey, 2008, p. 96). Finally, customers' memory for brand benefits will peak if the semantic association of the typeface can be activated by the "abstract connotative dimension," such as the elaborate style of writing and creating the abstract association with the concept "elegance" (Childers and Jass 2002). Unique and memorable shapes of packages can also trigger the "cognitive process of evaluation" and brand preference under both high and low involvement (Daye 2011). Three aspects of packaging can affect buying behaviors: functionality (if the packages can fit customers' needs), environmental concern (disposal after use or simplicity), and communication (if the design and product information fulfill human curiosity and interest) (Clement 2007). Among all visual elements, image is the most effective because it can give us "a sense that we know the places, times, and people we have never experienced." Customers' perception to the world will then be influenced (Schroeder 2008) and human curiosity may be fulfilled. Snapshot photographs are the most common images used in branding today instead of illustrations because snapshots appear to be more contemporary, authentic, casual, and fit average customers' regular lifestyle (Schroeder, 2008). Customers' emotion and buying behaviors will be changed when different juxtapositions, lightings, 16 colorations, point of view, and cultural perspective recall their memory (Healey, 2008, p. 114). e) Pricing Price point is also an important brand positioning cue besides design elements. The brand's pricing strategies can either enhance or lower the brand's perceived value and thus contribute to maximizing or minimizing revenue and profit for a company (Dale 2011; Aaker, 2002, p.281). Although the concept of pricing was first proposed by economist Alfred Marshall in 1890, research on this topic has not gone very far since then. One of the major reasons is that companies believe pricing is more of a marketing strategy instead of including it with other pillars of branding (Smith, 2011). Brands tend to include deep discounts and desperately believe that this is the only way to boost sales during economic recession. In fact, discounts can either help or hurt a brand. Price reduction may be effective to boost the sales. However, to customers and retailers, a sharp price reduction may indicate the brand to be the same as other lower-priced brands and thus have average qualities. Also, if the brand is still strong after the price reduction, customers and retailers may come up with their own explanation such as the brand being overpriced in the past (Aaker, 2002, p.281). Premium brands that want to move down need to be even more careful. They should try to retain some quality differentiation; otherwise they will have to struggle not to reposition the brand as a lower-quality price brand. In fact, according to Marketing and the Psychology of Savings by Dale (2011), only a little creativity can generate different options of pricing strategies rather than only provide discounts. 17 First, value perception of a brand or a product will be enhanced by higher price. When two brands are in the market, if their prices are the same, their target customers will not have any significant preference. If the price of one brand is higher, customers tend to choose that brand because the higher price indicates higher quality and value. However, if the price difference is too high, customers will return to a cheaper choice (Dale, 2011), especially if they believe the price of the brand is too high compared to its benefits (Aaker 2002, p.102). Therefore, the brand needs to find that balance. Second, if a brand owns many products, it can "offer a less attractive alternative with similar price" (Dale, 2011). Therefore, after comparison customers will be more likely to purchase the "more attractive" products, which is also what the brand wants to sell. Another way will be putting absurdly expensive items together to force people to buy the cheaper items that the brand wants to sell. Third, the brand can also create expectation of higher future prices, so customers will want to stock your products because of the common philosophy of "buy now and save" (Dale, 2011). This strategy is also adopted by some luxury brands to create luxury appeals (Heine 2011). Aaker also suggested that another good pricing strategy is based on strong relations with your customers. If customers become loyal to your brand, they will be more willing to pay more money for equal or similar benefits (2008, p.320). f) Customer Relations Customer relations focus on the human interaction between a company and its customers. Scholar McCarthy's 4P model (price, promotion, product, and place) in 1964 18 suggested customer relations were built by solely promotion, which was also the same as persuasion (Duncan and Moriarty, 1998). However, McCarthy's suggestion was soon rejected by other scholars. Although communication with customers is always intended to be persuasive, the term "persuasive" has a manipulative connotation and means only one-way communication (Duncan et al., 1998). In fact, building strong customer relations involves many one-way (through advertisement and media coverage) and two-way communications (through customer support during sale and post-sale period) rather than only one-way (Davis, 2005, p.198). The ultimate goals of these communications are to make every customer feel important and good about purchasing the brand (Healey, 2008, p.126). Three major strategies to achieve these goals are setting customer touchpoints (Davis, 2005, p.198) and adopting customer loyalty program (Hlavainka et al., 2007, p.48). These strategies are common for luxury brands to communicate with their customers to make them feel prestigious (Heine, 2011). Customer touchpoints build a bridge between customers and the company (Davis, 2005, p.198). Traditionally, the touchpoints are retail stores of the company with knowledgeable and helpful staff as well as products readily available near the cash registers. However, post-sale touchpoints such as technical support, return policies, and follow-up surveys should not be ignored (Davis, 2005, p. 200). As technology is more advanced, touchpoints can be extended to the Internet, movie product replacement, radio, TV, and even lunchrooms for advertisements, brand publicity, product information, and even Q&A sections (Davis, 2005, p. 200). Since customers may prefer 19 different ways to be reached, it is important for the company to identify who its target customers are and their needs (Davis, 2005, p. 199). Also, when the brand gets "no permission" to talk to its customers, it will be more likely to appeal the customers and start the conversation by teaching customers information about its products to match customers' needs (Hlavinka et al., 2007). Rewarding customers by discounts and free products based on their loyalty is another way to build good customer relations. This serves as an emotional appeal to make customers feel good about using the brand (Hausman, 2011). Although this program was traditionally considered as a short-term promotion instead of a way to build customer relationship (Hlavinka, 2007), more companies put effort into the program to establish long-term relationship with their customers (Healey, 2008, p. 126). To launch a successful customer loyalty program, a company should treat its customers as friends by empathizing, listening, and responding to their needs quickly. Today, database technologies make it easier to stay in touch with the customers because the company can track their shopping behaviors before providing suitable follow-up services or rewards around customer's interest area for the loyalty program (Hausman, 2011). However, the entry point of the loyalty programs should be lower for those lowcost target customers, and the rewards should be attainable for most of the target customers rather than the one percent heaviest users. Thus, the company can sustain "the dialogue" with its customers and prevent them from going to other competitors. 20 g) Distribution Distribution of products is another essential element in branding because different ways of distribution affect customers' perception to the brand. Distribution is also known as the "place" element of the marketing mix model proposed by economist E. Jerome McCarthy (Perreault et al., 2008). According to Needham, distribution means selling the product at the right place, time, and quantities based on the brand's knowledge of its target customers (2010). For instance, the sales location or product placement should help the target customers know the existence of the brand, so that they can purchase the products easily (Needham, Rawlinson, Coles, Harris, and Dransfield, 1999). However, the location and (D., Rawlinson, Coles, Harris, & Dransfield, 1999)placement of products need to differentiate from other competitors (Kotler and Armstrong, 2010). Also, a brand wants its product to be visible at the precise moment such as during holiday seasons, so that target customers will be encouraged to purchase based on their actual need or impulse (Four Ps Of marketing product, price, promotion, placement, n.d., para 1). Channels of distribution are usually categorized as direct and indirect channels. Direct channel means manufacturers selling products directly to customers, so manufacturers will have total control on their product. On the other hand, indirect channel go from manufacturer, wholesaler, retailer, and finally customers (Marketing mix: place, n.d., para 2). Three common distribution strategies are practiced in these two channels of distribution. The first one is intensive distribution strategy, which means "a company 21 sells a product in as many places as possible, so consumers see the product wherever they go" (Cambridge Dictionaries Online, 2012). This is the most common for products targeting the mass market such as cigarettes, soft drinks, and eggs that are available in drug stores and grocery stores because the purchase decision of these products is made quickly and based on convenience. Also, these products are usually consumed rapidly and the frequency of purchase tends to be high (Miracle, 1965). The second one is exclusive distribution strategy, which limits products to be distributed to a single outlet, or only one retail or agent in each region (Marketing Mix: Place, n.d., para 1). This strategy is usually practiced by products with higher "technical complexity, unit value, and the need of customer service as well as lower 'frequency of purchase' and speed of consumption (Miracle, 1965) such as luxury. The third strategy is selective distribution, which means products are "available only in a limited number of stores or a particular type of store" (Cambridge Online Dictionaries, 2012). This strategy is the most common for manufacturers with large geographic spread and target customers who are willing to shop around. Criteria for retail stores being chosen includes whether the retail outlets match the brand's policies of selling product such as providing proper training and support for their staff to handle the products (Miracle, 1965). h) Luxury Appeal Although luxury brands adopt some of the tactics in branding as mentioned above, luxury appeal is created to differentiate brands from others in mass market. The word "luxury" comes from a Latin phrase "luxus," which means "indulgence of the sense" and "regardless of cost." (Nueno and Quelch, 1998) Luxury items are "out of the 22 ordinary in terms of daily living needs." (Renand and Vickers, 2003) Since luxury items are bought for "what they mean beyond what they are" (Dubois and Paternault, 2003), buying luxury products is also suggested as an extreme way to demonstrate one's value (Renand and Vickers, 2003). According to Catry, premium qualities, uniqueness, as well as the illusion of scarcity and exclusiveness are vital to create luxury appeal. When people own luxury, they should feel differentiated from the mass due to the "emotional value of acquiring rare and well-crafted objects." (2003) Historically, using products that are made of materials such as gold and silver that are naturally scarce was "a luxury." Today, luxury appeal can be created in the following ways based on the rule of scarcity and exclusiveness: being the first in the market, having limited edition, and adopting individual approach such as more customized interaction between the brand and customers (Catry, 2003). Dubois and Paternault (2003) also mention that creating "dream value" is also an important requirement to create luxury appeal. Dream value means the eagerness of customers owning the luxury item. This eagerness can be increased if products are made less attainable as well as "provide extra pleasure and flatter all senses at once." (Wiedmann, Hennigs, and Siebels, 2007). Other factors that create luxury appeal and affect customer's decision-making process are focusing on the perceived extended self and perceived hedonism to the luxury brand. In general good storytelling tactics in branding, luxury brands can create perceived extended self by integrating "the symbolic meaning into customers' identity or image" (Vigneron and Johnson, 2004). Apart from resonating customers' identity, 23 luxury brands should increase its perceived hedonism by creating "intrinsic enjoyment" and emotional value such as excitement and gratification, so that customers will feel fulfilled and rewarded during the purchase (Weidmann et al., 2007). For instance, people feel more prestigious and special than their friends if they are using luxuriant brands while all their friends are using other mainstream brands. If the luxuriant brands are popular among Hollywood celebrities or use these celebrities as brand ambassadors, people will feel as glamorous as these celebrities. Although a more expensive product will be less attainable and have stronger luxury appeal, luxury brands should also embrace their own historical antecedents by emphasizing the brand's heritage and craftsmanship (Nueno and Quelun, 2008). Heine further elaborates this idea by suggesting that the story and the position of luxury brands should associate with the country of its origin that has "an especially strong reputation as a source of excellence in the relevant product category" (2011). Conclusion of the Literature Review A brand should understand its strengths and weaknesses in order to increase its personal relevancy to its customers. By finding a right position, the brand can come up with a suitable story, design, pricing point, distribution channel, and customer relations strategies to strengthen customers' emotion bond to the brand and make them feel good about their purchase. These tactics are also applicable for luxury brands, but luxury appeal needs to be created. By emphasizing the brand's premium qualities, uniqueness, the illusion of 24 scarcity (Renand and Vickers, 2003), and dream value (Dubois and Paternault, 2003), luxury brands can differentiate themselves from other mainstream brands in the same market. The following section of the capstone will analyze how Lindt's image leaped from more prestigious to more mainstream based on the six pillars of branding and luxury appeal creation presented in the literature review. Also, the capstone will look at whether this shift was the correct decision for Lindt by reviewing sales. 25 III. Case Study: Lindt's Branding Effort Before and After 2008 Methodology As mentioned in introduction, Lindt has become more mainstream after the economic downturn in 2008. This study seeks to determine, through the framework presented, how a brand such as Lindt that was once perceived as "prestigious" rebrands itself for the mass market. The first step was to draft parameters of how luxury and mainstream brands use the branding strategies respectively based on the findings of the literature review, and the appropriate data was sought for discussion in each of the branding pillars. The next step was choosing items used by Lindt before and after 2008 to compare the use of each branding pillar. Due to time constraints and limited manpower, this case study will be limited to analyze one item for each pillar of branding. Items were chosen because of their accessibility and visibility on the internet. The ultimate goal is that the items reviewed should reveal some changes in the branding efforts of Lindt. The parameters, branding pillars, and the items used are shown in the table below. 26 Pillars of Branding Items Chose for Comparison Qualities to Create Luxury Appeal How Mainstream Brand Use the Strategy Storytelling Television Commercials in 2005 and 2011 Positioning Ad campaigns before and after 2008 Price Price of Lindor Truffle balls before and after 2008 _____________________________ 2. Heine, 2011 3. Greenhill, 2011 4. Fog, et al., 2002 5. Quillin, 2012 6. Atwal and Williams, 2009 7. Edberg, 2011 9. Trout, et al., 1980 Resonate the "dream value" 1 Embrace brand heritage and craftsmanship 2 Purchasing the product will help audience be unique among other people 3 Invite audience to join "the journey" as the characters in the story 3 Has only one central message such as the moral behind. 4 Prestigious 6 Well-crafted6 Exclusive 6 Distinctive from competitors 7 More individualistic 8 Rarely provide discounts to keep the brand less accessible and evoke association of rarity 2 Raise price continuously year by year to increase demand and to motivate customers to buy sooner than later 2 Simply have celebrity, model, or interesting objects surrounding the products 5 Lack central message 5 Affordable for everybody 2 Still somewhat distinctive from competitors but may not be as much 9 Offer discounts all the time to make products very accessible 2 27 Pillars of Branding Items Chose for Comparison Qualities to Create Luxury Appeal How Mainstream Brand Use the Strategy Customer Relations Customer loyalty program before and after 2008 Mainly use television commercials and bulkmail to reach the mass 2 Very accessible and easy to be found such as being in grocery stores 2 Boutiques of the brand are in every corner 2 Distribution Sales locations before and after 2008 _______________________ 2. Heine 2011 Focus the communication precisely to their target group by keeping their brand "a secret" such as having exclusive events 2 Personalized pre- and after sales experience such as product customization and providing advice to customers 2 Adopt exclusive or highly selective distribution policies to maintain product rarity2 Audience may need to initially find out the existence of the brand and its products 2 Boutique should only be in prestigious shopping areas with other luxury brands as neighbors 2 Waitlist and limited edition for some products to "fuel customers' desire and thrill of anticipation" 2 Flagship store to show specific personality of the brand 2 28 Pillars of Branding Items Chose for Comparison Qualities to Create Luxury Appeal How Mainstream Brand Use the Strategy Design Posters of Lindt Excellence in 2006 and since 2011 2 _____________________________ 2. Heine 2011 7. Edberg 2011 10. Christian n.d., para 3 Link to country of origin The brand owns its colors and shapes as signature elements 7 Convey the brand identity and position 7 Project timelessness such as having clean, simple logos, monograms and classic fonts 10 Do not usually associate with brand history 2 Lack of consistency in images and design 10 With too much details and information on the design 10 29 Lindt's Branding Effort Before and After 2008 This chart compares and summarizes how Lindt rebrands itself based on the six branding pillars mentioned in the literature review. Items listed in the chart below were chosen based on their accessibility and availability on the internet. Storytelling Past Name of the commercial: Do you Dream in Chocolate? Company: Lindt (USA) Air date: 2005 (See Appendix 1 for the screenshots) Present Name of the commercial: Roger Federer "Airport" Company: Lindt (USA) Air date: 2011 (See Appendix 2 for the screenshots) This commercial does not have a clear plot, characters, and conflict as the typical requirements for good storytelling (Fog et al., 2002). Instead, the commercial used the question "Do you dream in chocolate?" and the line "150 years of our passion for one moment of yours" as the theme throughout the whole commercial. The main visuals used are the chocolatiers making chocolate, swirling milk chocolate being poured into a Lindor Truffle, and the question in cursive font. This television commercial uses Roger Federer, a Swiss tennis player, to represent the brand's Swiss heritage. The commercial uses the storytelling tactics mentioned by Fog et al. (2002) including a plot, characters, conflict, and a central message. First, the commercial starts clearly by showing Federer going through the security check at the airport, and then how and why he is stopped by the guards, and finally what the guards want to do with his chocolate. The structure is easy to follow and keeps the commercial interesting. Second, conflict is introduced when the guards have to find a reason to "steal" the chocolates based on their emotional needs and they are not supposed to do this. The question "Do you dream in chocolate" in cursive font and the chocolatiers are making chocolates are not used in this commercial. Only the swirling milk chocolate being poured into the Lindor Truffle appears quickly. 30 Positioning Past Lindt's positioned itself as similar to its major competitor Godiva as luxury chocolate brand ("Lindt & Sprungli," 1999) and targeted 35 to 54 years old females with a household income of more than $50,000 ("A Lindt Opts for Print," 2001). The brand used "Do you dream in chocolate?" ad campaign to maintain its prestigious image. 1. Prints ads were in lifestyle magazines such as Vanity Fair, Better Homes, and Martha Stewart Living ("A Lindt Opts for Print," 2001) 2. Created more classy and sensual mood on print ads and television commercials by using visuals such as rich chocolate being poured into a Lindor Truffle, headline "Do you dream in chocolate" in cursive font, and a faint illustration of two old chocolatiers ("A Lindt Opts for Print," 2001) Present Lindt's repositions itself by using Roger Federer's likability to "talk to existing Lindt customers in a more casual way" (Mahmud, 2010) The brand launched the "Federer Campaign" to show its more down-to-earth position. 1. Choose famous Swiss tennis player Roger Federer as the brand ambassador. 2. Sense of humor is used in both television commercial and print ad a) In the television commercial, the security guards try all the ways to own the Lindor Truffles (Mahmud, 2010) b) In the print ad, truffle balls are flying above the tennis racket held by Federer (Mahmud, 2010) 3. The "Federer Campaign" also launched a sweepstake called "The Perfect Match" in 2010. The sweepstake opened to everybody and the winner could go to Federer's tennis games (Mahmud, 2010). 31 Price Past Lindor Truffle was 50 cents in the retail store (Exotikittenx, 2008). Also, a box of 60 Lindor Truffle balls cost $23.99 on OfficeMax.com (Chocolate Candy, 2004). That means each Lindor Truffle ball cost about 40 cents. According to Lindt's annual report in 2002, the brand avoided working with hard discounter in order to keep its premium and prestigious image (p.32). Present A pack of 5.1 ounce Lindor Truffle with 12 truffle balls costs about $4 regularly, which means each Lindor Truffle ball is about 33 cents. Sometimes the same-sized pack only costs $3.50 in grocery stores such as Giant and Walmart. That means each truffle ball is about 30 cents. Customer Relations Past Although Lindt had over 100 stores as its touchpoints before 2008, it also had a customer loyalty program called "Lindt Lovers' Reward Program" (Lindt Lovers' Reward, 2012). The program opened to everyone as long as they filled out the application at the stores or on the company's website. Members got one point for every dollar they spent in Lindt retail stores or its online store. Once they had 100 points, they would receive a $5 gift card as a reward. Also, they received newsletters regularly and member-only offers as other benefits. Present Lindt launched another customer loyalty program in May 2011 called “Lindt Excellence Influencer Club” besides the "Lindt Lovers' Reward Program." This new program is exclusively open to 150 customers who are willing to use Facebook as their primary communication channel and match the criteria set by Lindt such as being passionate to the brand and the products of the Excellence line. These 150 members were selected from 9,000 applicants and can regularly receive samples, coupons, and recipes, which allow them to provide feedbacks to Lindt and share with their friends (Excellence Team 2011). Since only limited amount of customers are chosen and the new club makes them more special than other customers, this new club increases the brand's luxury appeal. 32 Distribution Past According to the Lindt's CEO Thomas Linemayr, Lindt was a "hitor-miss" item and only for specialty markets when it first entered the U.S. market (Pacyniak, 2001). Customers had to purchase Lindt's products in special confectionary stores. Afterward, the brand had its own retail stores as a way to showcase the brand personality (Lindt, 2002). Lindt gradually allowed some duty-free stores to carry its product; however, product placement in the duty-free stores was under strict rules. For instance, the products had to be in a fixed position in every store as "Lindt Block," so they will be clearly recognizable to customers (Lindt, 2002, p. 32). Lindt also had "Shop-in-Shop" program, which was a six-tier self-contained wooden shelf displaying its products, in only 160 exclusive retail agents in the East Coast (Pacyniak, 2001). Present Although Lindt used to have more than 100 retail stores, only 21 retail stores are left today. The majority of them are located in the outlet malls or normal shopping areas in the East Coast. Only several stores are located in prestigious shopping areas such as The Rolex Building on the Fifth Avenue in New York City (Lindt Store Locator, 2012). The brand heavily relied on local wholesale and grocery stores as its major distributors. However, not all the grocery stores can carry Lindt's products. For instance, most Walgreens, CVS, and Target can carry Lindt's products but only selected Walmart stores are allowed to (Lindt store locator, 2012). These stores need to follow specific requirements such as placing the seasonal products at eye-catchy position in addition to normal shelf spaces (Lindt 2011). Apart from retail stores, Lindt products can be purchased through its own online store and other online confectionary stores. 33 Design Poster for Lindt Excellence in 2006 The poster layout is simple and clear. A piece of Lindt Excellence chocolate is tilted in the center and captures audience's attention. The setting looks like being inside a pot of chocolate and the light is shining from the right to light up the pot inside, just as discovering some secret. The chocolate piece rising from the creamy chocolate ripple creates some dynamic. Poster for Lindt Excellence from 2011 Although the elements used in this poster are the similar to the poster in the past such as the color combination and the chocolate ripple image, this poster shows the whole chocolate bar with the light coming from the top right corner to the center instead of showing a piece of Lindt Excellence. This poster looks cramped and busy because the main visual is blown to more than half page of the poster. Also, the chocolate bars just immerse in the chocolate rather than coming out from the ripple as the old poster. 34 Discussion This comparison of past branding strategies to present has proven that Lindt has become more mainstream today, especially from the brand's prices and distribution channels. However, the brand still keeps some of its luxury appeal in its positioning, storytelling tactics, design, and establishing a more exclusive customer loyalty program called the Excellence Influencer Club. How Lindt Rebrands Itself for Mass Market Price The first feature of Lindt losing its luxury appeal is to adopt deep discounts. Although Lindt claimed that it would adhere to strict pricing policies and only give limited discounts to maintain its prestigious positioning (Lindt, 2011), each piece of Lindor Truffle dropped from 50 cents to 30 cents, which is 25 percent lower. Also, after 2008 discounted Lindor Truffles can be seen more often in large grocery stores such as Target and Giant with each piece of Lindor Truffle being 30 cents. According to Dale (2011) and Aaker (2002), deep discounts can hurt the brand's perceived value and luxury appeal. Although deep discounts can increase demand in short-run, they can decrease the sales in long-run because deep discounts indicate that the brand has the same qualities as other less expensive brands in the market. Also, customers may think that the brand was overpriced in the past. This impression will be hard to change; unless the brand can maintain some quality differentiation from other lower-priced brands. 35 Distribution Lindt's distribution strategy is another obvious feature to show the brand becoming more mainstream. In the past, the brand enforced an exclusive distribution strategy to maintain its luxury appeal. The brand strictly controlled its products to be sold only in its retail stores and selected duty free stores. According to Miracle (1965), this strategy is usually practiced by products with higher technical complexity, unit value, and low speed of consumption such as luxury. Today, although Lindt's products cannot be found in every grocery store and the stores have specific rules to carry Lindt's products based on its selective distribution strategy (Bryne 2010), the products are more accessible and visible in many mass retail stores. Since distribution can affect customers' perception of the brand (Perreault et al., 2008), by being too attainable, Lindt violates "the rule of scarcity and exclusiveness" for creating luxury appeals (Catry, 2003). Positioning Lindt tries to repositions itself from being more luxuriant to more down-to-earth by using Roger Federer as the spokesperson and launching the new "Federer Campaign" with sweepstakes and advertisements. Since tennis is a sport for a wider range of audience and Federer is a famous tennis player, this approach can resonate his fans or tennis lovers to pay attention to and purchase Lindt because it "carves out the special niche" by bringing a "stronger emotional benefits than its competitors" (Aaker, 2008, p.179) and increasing personal relevancy to the brand (Trout et al., 1980). 36 This approach is similar to the chocolate dream ad campaign in the past. By asking the question "Do you dream in chocolate?" and using more relaxing background music, more sensual and classy feelings (emotional benefits) are created for Lindt's target audience (35 to 54 years old female with high income). Also, when they see the possibility of having their own chocolate dream or are reminded of the chocolate dream they had before, it increases their personal relevancy to the brand. However, compared to the visuals of chocolatiers and swirling milk chocolate used in the ad campaign before 2008, the new position focuses less on Lindt's luxury features such as its craftsmanship and exclusiveness (Atwal and Williams, 2008), which also decrease the brand's functional benefit (Trout et al., 1980) because Lindt was famous of its smooth Swiss chocolate and it is what the brand is always proud of. Storytelling The new commercial has effective storytelling tactics because it includes the four major elements suggested by Fog et al.: plot, conflict, central message, and characters (2002), and these elements make the commercial more structured and interesting. However, the commercial has has less luxury appeal as the commercial in 2005. First, compared to the line "150 years of our passion for one moment of yours" as well as the visuals of the chocolatiers and the swirling milk chocolate in the television commercial in 2008, the new commercial does not have as much luxury appeal. Instead, the new commercial just subtly communicates the brand's heritage (Heine, 2011) by having the Swiss tennis player Federer as well as its and well-craftiness (Heine, 2011) by showing the excitement of the security guards and the visual of swirling milk chocolate. 37 Second, the new commercial does not invite the audiences to join the journey as Federer (Greenhill, 2011) but simply shows his experience with the security guards. In contrast, in the old commercial the question "Do you dream in chocolate?" leads the audiences who had not had a "chocolate dream" before to pursue their unique versions of chocolate dream by purchasing Lindor Truffle. Once the audiences know that such a "sweet dream" is attainable, the brand starts relating to them more. Also, they will feel the need to purchase Lindor Truffle and eventually may purchase the product. Thus, a "goal-oriented action-outcome" sequence will be created and this is one of the keys for successful storytelling (Escalas, 2004) On the other hand, the new commercial still keeps some luxury appeal by including dream value despite being more subtle. By humorously showing the excitement of the security guards as they are eating Lindor Truffle, "extra pleasure" provided by Lindor Truffle is resonated because the chocolate "flatters all senses at once" (Weidmann et al., 2007). Therefore, the audiences will still be eager to have this experience (Dubois et al., 2003) just as the chocolate dream, which demonstrates some luxury appeals. Design Visual elements are the first things to catch customers' attention and evoke their emotions to make purchase decision. The elements should match the brand's position and story (Simmons, 2007). Both posters have good color combination with the large 38 area of black and little warm color, which makes the posters pleasant to look at (Cooper, 2008, p.34-36). The brand wants to position itself as more down-to-earth yet luxuriant because the new poster uses a more contemporary font but still has similar elements as the old poster such as the chocolate ripple symbolizing Lindt's craftsmanship. According to Childers and Jass, fonts can carry different connotations to trigger and relate to the brand's perception, and the san-serif font used in the new posters can convey a more contemporary and down-to-earth quality of the brand. On the other hand, the cursive and elaborate font used in the old poster is usually perceived as more elegant (2002). Luxury appeal in the new poster is not presented as obvious as the old poster. Although the new poster still wants to communicate the luxury appeal by using the creamy chocolate ripple to show its craftsmanship (Heine, 2011), it is harder for audience to associate that the chocolate bars are coming from the ripple because they seem to just immerse into the ripple. The new poster could have added more luxury appeal to avoid being completely mainstream. First, the product should have a more unique placement as the old poster because unique shape and signature design will make the brand more memorable (Heine, 2011; Daye, 2012) as well as more comparable to luxury brands. Second, the image of the new poster should have been smaller because the poster look busy and out of proportion. Simple and clean design is always helpful to differentiate the brand from other mainstream brands in the market (Christian, n.d., para 3). 39 Customer Relations Apart from positioning, storytelling, and design, Lindt retain its luxury appeal through its customer relations strategies during its rebranding. Instead of reaching its target audiences by bulk mail as mainstream brands (Heine, 2011), the brand establishes a more exclusive customer loyalty program called the "Excellence Influencer Club" besides having the Lindt Lovers' Reward Program. By exclusively selecting 150 customers, solely using Facebook for communication and collecting feedbacks, as well as keeping the club events private, Lindt becomes more comparable to other luxury brands because this new club focuses its communication precisely on its target audiences and is secretive to other non-members (Heine, 2011). The use of social media also takes the "Excellence Influencer Club" to a different level from the Lindt Lovers' Reward Program. Also, as the brand's "VIPs," these customers feel more special about purchasing Lindt products. This positive emotional appeal will eventually strengthen their loyalty about the brand (Catry, 2003; Hausman, 2011). Conclusion of How Lindt Rebrands Itself for Mass Market Based on the analysis, although Lindt has reduced its prices and increased its distribution as comparable to more mainstream brands, from its storytelling tactics, design, customer relations, and positioning strategies, the brand still tries to resonate to its customers its luxury appeal by emphasizing its well-craftiness and keeping some exclusiveness. These qualities form a special niche for Lindt and distinguish it from other mainstream brands, which are also its competitors. 40 Is Lindt's Rebranding Successful? Lindt can still maintain growth in its sales after rebranding for the mass market. The annual report from 2002 to 2007 mention that Lindt's sales had more than 10 percent growth every year before 2008. After the economic downturn in 2008, its sales still have had an eight percent increase every year according to Lindt's annual report from 2008 to 2011. Based on the steady sales growth, Lindt's rebrand can be considered as successful and this shows the possibility for more luxuriant brands becoming more mainstream. Part of Lindt's rebranding success can attribute to the brand keeping some of its luxury appeals even when it decided to enter the mass market. Therefore, although Lindt's products are more accessible and less expensive as other mainstream chocolate brands such as M&M Mars and Hershey's, most people will still differentiate the brands from the competitors. Kapfere and Bastien (2009b, p.318) as well as Dubois et al. (1995) mentioned that completely removing the luxury appeals affects customers' perceptions to the brand. If the brand becomes over-diffused or suddenly too mainstream, it will damage the brand's image even though it is the best seller. The reason for luxury brands being "luxury" is based on the rule of scarcity and exclusiveness. Once this rule is broken, the dream value will also decrease because owning the brands is not as exciting and special. Customers can access the brands easily as other mainstream brands instead of having to dream about owning the brands. In Lindt's case, by establishing a more exclusive loyalty program as well as emphasizing the brand's heritage and its expertise of making 41 chocolate, the brand is still somewhat special to the customers despite a lower price and being more visible. Guidelines for Luxuriant Brands to be More Mainstream Based on Lindt's case study, the guidelines are drawn for other luxuriant brands that want to rebrand for the mass market. More Affordable Pricing: Discounts should not be offered very often because customers who first knew the brand as more prestigious will change their perception to the brand. When the brand lowers the prices of its products, it should keep some qualities of differentiation such as adding more luxury appeal in other branding pillars. Therefore, the brand can separate itself from other mainstream or lower-priced brands in the market (Dale, 2011). Selective Distribution: Selective distribution strategy is recommended and it should be followed strictly. Instead of relying heavily on mass retail stores, a brand may consider of using department stores as another distribution channel for its products. Because department stores are not as accessible as grocery stores, the products can be somewhat exclusive and will not perceived as accessible as other mainstream brands. Positioning with Stronger Personal Relevancy: Famous and likable spokesperson can be used to position the brand as more down-to-earth. Yet, he or she should be able to increase audiences' personal 42 relevancy to the brand and convey the brand's well-craftiness, exclusiveness, or heritage to maintain the some of the luxury appeal. Storytelling Skills: The sense of humor and the four storytelling skills (plot, characters, central message, and conflict) should be used to keep the brand story more interesting (Fog et al., 2002, p.56). Also, it should communicate an attainable dream, and the dream should resonate the audiences' past experience to increase the brand relevancy to them. More Contemporary Design: Good color combinations (Cooper, 2008, p. 34-36), clean and simple layout (Christian, n.d., para 3), as well as unique packages (Clement, 2007) are always important to capture audiences' attention. Also, the design should have a good balance of luxury appeal and contemporary style. For instance, when the image shows a unique shape and color of the product as the luxury appeal, san-serif fonts or snapshot photos (Schroeder, 2008) can be used as the contemporary elements. Customer relations to Build Stronger Loyalty: Loyalty or reward program is recommended. There should be one program just for more important customers as the Lindt Excellence Influencers Club and another one for lower-cost customers as an encouragement for their loyalty (Hausmann, 2011). Therefore, the brand can be more open to the mass market yet still maintain some exclusiveness to be luxuriant. 43 Conclusion This study looks at how Lindt rebrands itself from a more prestigious brand to more mainstream after the economic downturn in 2008 based on the six pillars of branding and the concept of luxury appeal. The research revealed that Lindt's rebranding has been successful based on its steady sales growth since 2008. Lindt's pricing strategies and distribution channels make the brand more accessible as other mainstream chocolate brands; especially after the brand decided to expand its U.S. headquarters in Stratham, New Hampshire in 2006 for a larger scale production and distribution (Lindt 2006). However, Lindt is able to maintain some of its luxury appeals in its positioning skills, storytelling tactics, design, and customer relations program and this might be a reason for its continued success. Since only one item was analyzed for each pillar in this study, it is recommended that two or more items should be compared to get a more thorough analysis of Lindt's rebranding strategies. For instance, future research can look at the role of using social media to strengthen customer relations and the designs of promotional materials of different products owned by the brand. 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VO: Lindt 53 Appendix 2-- Television Commercial of Lindt in the Present (2011) (Background noise: people walking by) (Sound: "ding ding…") Federer: Hello Security: Come check this out 54 (Background music: ding ding…) (Background sound: unzipping bag) VO: Lindor Truffles. (Background sound: unwrapping Lindor Truffles) 55 VO: When the smooth center starts to melt Security: We are going to confiscate these. Federer: Why is that? Security: It's a new policy. I think we should do a strip search too. Federer: Excuse me, are you kidding me? 56 (Background music: ding ding…)