Cath Kidston: Nostalgic Fantasy Value versus Price
In certain respects, cross-comparing personal products such as key
That Creates Value for Consumers rings can be problematic, because there is so much variation in both features and price. But consider some popular Cath Kidston This case study examines the pricing strategy of Cath Kidston, one products. Its scarfs sell for roughly $76, whereas comparable UK-based company that sells furnishings, home and personal products from apparel retailers such as Marks & Spencer or accessories as well as clothes, operating mainly in the UK, Europe Monsoon range from roughly $20 to $55. Cath Kidston’s and Asia regions. plasticcoated fabric bags sell from roughly $47 to $119 whereas How much are you willing to pay for a key ring? The market other apparel retailers only charge similar prices for their leather price charges just a bit more than $1. But would you pay $2 for a bags. comparable product? How about $7? A low-price strategy is often The fantasy of the English country childhood that Cath Kidston used by companies if their products are not well differentiated. creates for customers enables the brand to charge price premiums Although a low-price strategy might seem attractive, especially in as compared to competitors, such as John Lewis, Marks & Spencer, an economic downturn, some companies are focusing on creating and Monsoon. For the fans of Cath Kidston, her products excite value for customers and adopting customer-value added pricing them in a way that IKEA and other competitors cannot hope to strategy. Cath Kidston Ltd is one UK-based company that grasp. understands that sometimes it pays to charge more. Cath Kidston’s In terms of competition, in the product category of home key rings sells for roughly $7 to $9.50, whereas the market price accessories, Cath Kidston competes directly with UK retailers like charges less than a third of that. To understand how Cath Kidston John Lewis and Marks & Spencer. In the clothing category, apparel has succeeded with this pricing strategy, let’s look at what makes retailers such as Monsoon and Marks & Spencer are the key the brand so special. competitors of Cath Kidston, while it competes with retailers like The cheery colors and fun patterns Cath Kidston created allows it IKEA in the furniture category. Compare to the above main not to focus on price-sensitive market segments but instead lure competitors, the weakness of Cath Kidston is its product offerings customers with a value-added pricing strategy. It is important for a are still relatively limited and narrow. However, Cath Kidston’s brand to create something that people respond to with their hearts, unique strength is the product design offers its customers strong which is a sure-fire way to breed success for a brand. Cath Kidston personal statement and identify that other competitors found hard is one of the brands that is confident in its design style and fun in to achieve. The biggest challenge of Cath Kidston brand is to its character. continue its success with the traditional English country style and fun brand character, while satisfying its loyal customers with From Humble Beginnings innovative product design and product line extension. Cath Kidston Ltd was founded in 1993 when designer Cath Kidston opened a tiny shop in London’s Holland Park with a Retro Brands in Hard Times $23,800 investment in her business, selling towels, vintage Given the harsh economic climate, you might expect to see the fabrics and wallpaper, and brightly painted “junk’ furniture she cheerful floral prints that made Cath Kidston a household name remembered fondly from her childhood. Cath Kidston’s cleaver re- withering a little. However, Cath Kidston has survived the working of traditional English country style made her tiny shop recession very well, selling the retro-styling and a rose-tinted soon become a cult success. Today, the brand carries a wide antidote to an uncertain world in the uncertain economic climate. product range, everything from furnishings, crockery, cutlery, The brand is now a seemingly recession-proof “global lifestyle cloths, toys, china, bed linen, and bags, to women’s and children’s brand.” wear and accessories, charging price premiums that fans are gladly In 2009, while other brands were chalking up serious losses due to paying. the economic downturn, Cath Kidston saw profits leap by 60 In 2012, Cath Kidston had 57 shops and concessions in percent, and sales rose from roughly $30 to $49 million. The the UK, 2 in Ireland, 27 in Japan, 7 in South Korea, 3 in Thailand, reason for this phenomenon is that in these uncertain times, and 1 in Taiwan. The business is also driven by successful web, consumers, although cash-conscious, have an appetite for nostalgia. mail-order, and wholesale divisions, with UK, Euro, and US The products of Cath Kidston fulfill consumer needs for value and transactional Web sites. Cath Kidston has become a powerhouse of meaning, because they are inspired by a comforting and familiar British design and retail, up there with the likes of Burberry and 1950s aesthetic. Pringle. For Cath Kidston, its premium pricing strategy coincided with Design is core part of Cath Kidston’s brand. However, it is more a trend of consumer preference toward nostalgia, which seemed to than the vintage-inspired patterns and the stunning shop interiors. provide comfort in the time of recession. Thus, the value derived Walk into any Cath Kidston shop and you are able to “experience” from Cath Kidston products was enough to justify the high prices the brand that other retail shops do not offer. And this “experience” for many of its products. In an economic downturn, consumers permeates Cath Kidston’s Web sites and all of its printed want a bit of security and comfort, and this trend shows in the communications. If you are a fan, you can feel the essence of the recession of the 1990s and today. UK retailers such as Asda brand in every aspect. In color psychology terms, Cath Kidston is reported a surge in sales of nostalgic brands, as people seem to pure spring—fun, creative, warm, inspiring, and young, adding a look back to their childhood in an attempt to cheer themselves up. splash of color and vintage charm to a routine day. Consumers want the comfort and security that retro brands can give Cath Kidston not only offers a wide product range but is actually a them, reminding them of their childhoods and even their parents’ lifestyle store. You can buy almost everything for your home, childhoods. children, or yourself. The broad product range maximizes the In times of economic downturn, people are worried about the brand’s appeal and means that it works for both gift and personal credit crunch and losing jobs, and thus brands that act as an purchases. Cath Kidston allows its brand personality (fun and antidote to anxiety will do well. A lot of people didn’t see the most brightness) to shine through its brand identity (colors and recent economic crisis coming, and that makes them nervous about typography), hence becoming a brand consumers can fall in love looking forward. The reflex is to seek comfort in things that with. 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 granny’s 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 brand’s 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 high-profile 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 product-centric strategy. The control and expansion of the brand to a wider product range is still the focus after the shifting of company ownership. The product-centric 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 Kidston’s pricing strategy truly differentiate it from the competition? 2. Could Cath Kidston have been successful as a design-focused product marketer had it employed a low-price strategy? Explain.
Is Increasing The Entrepreneurial Orientation of A Firm Always A Good Thing. or Are There Circumstances or Environments in Which The Further Pursuit of Opportunities Can Diminish Firm Performance?