Growing is no child's play

Dave Rogers, of UXcentric, brought to my attention an article titled “A Woman Spurned” which was recently published in the Los Angeles Times. The writer, Valli Herman, discusses the sharp turn St. John—a luxury knitwear maker—took this year from its primary customer segment—older, conservative, wealthy women who have turned St. John into a $400-Million-strong company—to a brand new segment of younger women.

St. John may have sound reasons to reconsider its business (and segmentation) strategy. Perhaps its revenue stream slowed down. Perhaps its growth can’t meet its forecasted revenue targets. Maybe lower-cost production and supply chain opportunities opened up overseas that put new volume demands on the company. Or perhaps it simply wants to capitalize on a segment that tends to spend more on clothing.

Companies evolve and grow. And after years of stable and, some might say- overly conservative growth strategy--it’s possible that it’s time for St. John’s to do the same. But judging by customers' reaction, the executive churn in the company, and the absence of official comment, St. John, it seems, is focusing more on where it wants to be and less—and much too little—on how to get there. Moreover, St. John is neglecting to take into consideration key factors which can make or break the company’s prospects for long-term success:

First- customer retention is much easier than new customer acquisition.
A marketing 101 fundamental: it’s significantly easier and much more cost-effective to retain existing customers than to acquire new customers. As a large company, it might indeed be the right time for St. John to branch out. But it may have been wise to also continue and provide to its existing customers as it expands its offering to other segments.

Knitwear? I don’t think so.
Bright color and sequenced Knitwear isn’t a typical young woman’s key wardrobe item. St. John knows this and in its new collection, has dialed its look to the complete opposite--patching together silk, leather, and its trademark knits. But a brand new offering to a brand new customer segment may not mean such drastic shifts. To truly understand what is required for success, St. John needs to invest in research into competitors’ fabrics, designs, colors, and textures. It needs to conduct competitive reviews and redesign its marketing campaigns—an effort it already initiated by launching a new brand campaign featuring the young and hip Gisele Bundchen and the ever allusive Angelina Jolie.

To some degree, St. John, in its focus on where it wants to be, started from the end with the launch of its marketing and advertising campaigns before it had a strong grasp on the offering itself—both internally in the company and in its communication to its customers.

"Why should I be interested in this formerly knitwear-focused company?" A customer might ask. “What is better about St. John than any other high-end young woman’s line where I’ve been finding new outfits so far?” another might wonder. All these and more need to be understood and communicated first inside the company, and then to customers in every action and every decision the company makes—and in every interaction it has with its customers.

Third- understand, plan for, and manage Risk in change.
St. John’s change-strategy is a risky one. The company could reap big rewards or fall faster than a meteor entering the earth’s atmosphere. There are no parachutes in its strategy; no safety nets—and hence, the level of change-readiness and impact-absorption capability are critical to the success of St. John’s transformation.

Having been deeply entrenched in narrow segment and design approach, St. John has become an expert at understanding and designing for its specific customer segment. For this very same reason, St. John’s ability to quickly understand new markets and, at the same time, create a compelling offering to this new target market under the current St. John label warrants the current scrutiny.

A lower-risk approach St. John could have applied, as it builds the mechanism for increasing revenue, is to stagger its transformation process. This would have allowed it to test its strategy in the marketplace, with its customers, and make necessary adjustments. Once St. John had a good handle on delivering to its new market segment needs, expectations, and perceptions, as well as an internal infrastructure to support it—the company could get much more aggressive at a lower risk.

Fourth- it’s not just about a new design for a new customer.
When a company the size of St. John decides to drastically change its strategy and its offering to its customers, the ripple effect is much wider than it may seem.

• St. John will need to decide how much knowledge of its previous strategy and execution it needs to keep. Designers, market researchers, distribution channels, production vendors, sales models all possess invaluable information. It will also need to decide what new resources and knowledge it will need to successfully sell to the new market segment.

• With its focus on a new image for a new market segment, St. John will need to redefine its language. It will need to determine how best to communicates its image to its employees and customers, train anyone in the company who comes in contact with customers—directly or indirectly—including its sales people, customer service representatives, and of course, St. John’s executives.
• As St. John takes this seemingly-aggressive path to growth, it will attract more attention from media and analysts alike. It will need to leverage the attention to prepare the ground for a results-driven transformation, create excitement, and use these to turn its existing customers’ distain to enthusiastic support while tapping into new customers’ curiosity…and purses.

With a new campaign already in place and a formal declaration of change, the coming year is going to be very interesting for St. John. Will putting all its hangers on one rack prove genius or detrimental?  Will it continue on the current aggressive path or correct course and build in room for adjustment?  Will existing customers warm up to the new St. John or walk away to never look back?  And new customers--will they buy into the conservative label’s re-imaging or stick with brands they know or discover?

In the end, it'll be St. John's customers who will provide the real answers. But it is yet to be seen whether St. John knows which questions to ask.