Cath Kidston: Nostalgic

Fantasy
That
Creates
Value for Consumers
This case study examines the pricing strategy of Cath
Kidston,
one
UK-based
company
that
sells
furnishings, home and personal accessories as well
as clothes, operating mainly in the UK, Europe and
Asia regions.
How much are you willing to pay for a key ring? The
market
price charges just a bit more than $1. But would you
pay $2 for a comparable product? How about $7? A
low-price strategy is often used by companies if their
products are not well differentiated.
Although a low-price strategy might seem attractive,
especially in an economic downturn, some companies
are focusing on creating value for customers and
adopting customer-value added pricing strategy. Cath
Kidston Ltd is one UK-based company that
understands that sometimes it pays to charge more.
Cath Kidstons key rings sells for roughly $7 to $9.50,
whereas the market price charges less than a third of
that. To understand how Cath Kidston has succeeded
with this pricing strategy, lets look at what makes
the brand so special.
The cheery colors and fun patterns Cath Kidston
created allows it not to focus on price-sensitive
market segments but instead lure customers with a
value-added pricing strategy. It is important for a
brand to create something that people respond to
with their hearts, which is a sure-fire way to breed
success for a brand. Cath Kidston is one of the brands
that is confident in its design style and fun in its
character.

From Humble Beginnings

Cath Kidston Ltd was founded in 1993 when designer
Cath
Kidston opened a tiny shop in Londons Holland Park
with a
$23,800 investment in her business, selling towels,
vintage
fabrics and wallpaper, and brightly painted junk
furniture she remembered fondly from her childhood.
Cath Kidstons cleaver re-working of traditional
English country style made her tiny shop soon
become a cult success. Today, the brand carries a
wide product range, everything from furnishings,
crockery, cutlery, cloths, toys, china, bed linen, and
bags, to womens and childrens wear and
accessories, charging price premiums that fans are
gladly paying.
In 2012, Cath Kidston had 57 shops and concessions
in
the UK, 2 in Ireland, 27 in Japan, 7 in South Korea, 3
in Thailand, and 1 in Taiwan. The business is also
driven by successful web, mail-order, and wholesale
divisions, with UK, Euro, and US transactional Web
sites. Cath Kidston has become a powerhouse of
British design and retail, up there with the likes of
Burberry and Pringle.

Design is core part of Cath Kidstons brand. However,

it is more than the vintage-inspired patterns and the
stunning shop interiors. Walk into any Cath Kidston
shop and you are able to experience the brand that
other retail shops do not offer. And this experience
permeates Cath Kidstons Web sites and all of its
printed communications. If you are a fan, you can
feel the essence of the brand in every aspect. In color
psychology terms, Cath Kidston is pure springfun,
creative, warm, inspiring, and young, adding a splash
of color and vintage charm to a routine day.
Cath Kidston not only offers a wide product range but
is actually a lifestyle store. You can buy almost
everything for your home, children, or yourself. The
broad product range maximizes the brands appeal
and means that it works for both gift and personal
purchases. Cath Kidston allows its brand personality
(fun and brightness) to shine through its brand
identity (colors and typography), hence becoming a
brand consumers can fall in love with.

Value versus Price

In certain respects, cross-comparing personal
products such as key rings can be problematic,
because there is so much variation in both features
and price. But consider some popular Cath Kidston
products. Its scarfs sell for roughly $76, whereas
comparable products from apparel retailers such as
Marks & Spencer or Monsoon range from roughly $20
to $55. Cath Kidstons plasticcoated fabric bags sell
from roughly $47 to $119 whereas other apparel
retailers only charge similar prices for their leather
bags.
The fantasy of the English country childhood that
Cath Kidston creates for customers enables the brand
to charge price premiums as compared to
competitors, such as John Lewis, Marks & Spencer,
and Monsoon. For the fans of Cath Kidston, her
products excite them in a way that IKEA and other
competitors cannot hope to grasp.
In terms of competition, in the product category of
home accessories, Cath Kidston competes directly
with UK retailers like John Lewis and Marks &
Spencer. In the clothing category, apparel retailers
such as Monsoon and Marks & Spencer are the key
competitors of Cath Kidston, while it competes with
retailers like IKEA in the furniture category. Compare
to the above main competitors, the weakness of Cath
Kidston is its product offerings are still relatively
limited and narrow. However, Cath Kidstons
unique strength is the product design offers its
customers strong personal statement and identify
that other competitors found hard to achieve. The
biggest challenge of Cath Kidston brand is to
continue its success with the traditional English
country style and fun brand character, while
satisfying its loyal customers with innovative product
design and product line extension.

Retro Brands in Hard Times

Given the harsh economic climate, you might expect
to see the cheerful floral prints that made Cath
Kidston a household name withering a little.
However, Cath Kidston has survived the recession
very well, selling the retro-styling and a rose-tinted

antidote to an uncertain world in the uncertain

economic climate. The brand is now a seemingly
recession-proof global lifestyle brand.
In 2009, while other brands were chalking up serious
losses due to the economic downturn, Cath Kidston
saw profits leap by 60 percent, and sales rose from
roughly $30 to $49 million. The reason for this
phenomenon is that in these uncertain times,
consumers, although cash-conscious, have an
appetite for nostalgia.
The products of Cath Kidston fulfill consumer needs
for value and meaning, because they are inspired by
a comforting and familiar 1950s aesthetic.
For Cath Kidston, its premium pricing strategy
coincided with
a trend of consumer preference toward nostalgia,
which seemed to provide comfort in the time of
recession. Thus, the value derived from Cath Kidston
products was enough to justify the high prices for
many of its products. In an economic downturn,
consumers want a bit of security and comfort, and
this trend shows in the recession of the 1990s and
today. UK retailers such as Asda reported a surge in
sales of nostalgic brands, as people seem to look
back to their childhood in an attempt to cheer
themselves up. Consumers want the comfort and
security that retro brands can give them, reminding
them of their childhoods and even their parents
childhoods.
In times of economic downturn, people are worried
about the
credit crunch and losing jobs, and thus brands that
act as an
antidote to anxiety will do well. A lot of people didnt
see the most recent economic crisis coming, and that
makes them nervous about looking forward. The
reflex is to seek comfort in things that reference the
past. Also, as people stay at home more in a
recession time to reduce consumption, stylish home
comforts become more important, which also helps
explain why Cath Kidston has done well in hard
times.
Cath Kidston is conquering the world with her floral
and polka dot designs, and it is not surprising to see
how such a powerful brand can divide people.
Consumers either love it or hate it.
For those who hate it, the products of Cath Kidston
look like the junk from a late grannys attic. However,
as the key target audiences
of Cath Kidston are 30- to 40-year-old middle-class
working

women, their strong purchasing power sustains the

growth
of the brand. Spotting the brands potential to
expand in all directions, Cath Kidston embarked on a
series of collaborations, including a range of mobile
phones for Nokia, eco-bags for the UK supermarket
chain Tesco, a flower-covered Sky TV box, tents for
Millets, and radios for the retro-styled Roberts range.
To the fans of Cath Kidston, the brand offers them a
dream of a simpler and nicer world that make them
think of happy childhoods, homemade
cakes, picnics, and the seaside.
In 2010, Cath Kidston became the subject of a highprofile
buyout, when a $159 million deal saw the sale of
Cath Kidston Ltd to a newly incorporated company
owned by the US private equity firm TA Associates.
Cath Kidston Ltd had an equality sale valuing it at
$119 million, while the funder and designer Cath
Kidston retained her remaining 30 percent share
valued at $39.75 million, and continued her design
role for the brand.

Pressing on with Price Premiums

The core idea of Cath Kidston brand is a productcentric strategy. The control and expansion of the
brand to a wider product range is still the focus after
the shifting of company ownership. The productcentric concept of a brand is a business model that
embodies perhaps the most essential brand
ingredient for business success: simplicity. Cath
Kidston Ltd is far from resting and is looking for
further business expansion, with plans to open 50
shops in Japan and the Far East, including China,
Hong Kong, and South Korea. The brand is pressing
on with its nostalgic designs
that create value for its customers, justifying the
premium
price of its products.

Questions for Discussion

1.

Does Cath Kidstons pricing strategy truly

differentiate it from the competition?
2. Has Cath Kidston executed value-based pricing,
cost-based pricing, or competition-based pricing?
Explain.
3. Could Cath Kidston have been successful as a
design-focused product marketer had it employed a
low-price strategy? Explain.