Tiffany and Co.'s recovery and branding challenges in luxury jewelry

Tiffany: Case Study

The jewelry and luxury goods company Tiffany and Co. is one of the world's most famous companies, immortalized in the film Breakfast at Tiffany's. It has shown robust growth in recent months, rebounding nicely after the recent credit crisis. Tiffany's and the luxury, high-end market also recovered quickly after the recession of 2001. Luxury consumers tend to be less impacted by economic downturns than middle and lower-class consumers (Blackburn 2004). More of high-end consumers' income is derived from diversified investments and they are less dependent upon a weekly paycheck. While high-end consumers may curtail their spending if their investment income has decreased, few are so negatively impacted by the economy that they feel forced to cut out all luxuries from their budget. Furthermore, jewelry is viewed as an investment, rather than as a frivolity. And, in Tiffany's favor, the upper echelon of the market has grown wealthier and more concentrated, and increased purchasing power of wealthy consumers means increased sales for Tiffany's. "The jewelry sector is the largest in the luxury goods industry with global retail sales amounting to $150 billion" (Blackburn 2004)

In 2010, Tiffany's sales in the Americas increased 15%; U.S. store sales increased 12% and in New York alone Tiffany's sales boasted a 20% increase. Internet and catalog sales in the U.S. increased 17%. Sales in the Asia-Pacific region increased 11%. Sales in Europe increased 30% (Tiffany's holiday season sales increase, 2011. Investors: Tiffany Website). Tiffany rebounded more quickly from 2008 than its primary competitors Bulgari and Cartier, given that it tends to attract older consumers, while younger, 'new money' consumers' equity was more hard-hit by the contraction in the real estate market.

Statement of strategic and tactical problems

Tiffany must continue to bolster its sales in the U.S. market and abroad. It must try to expand its market share amongst the younger luxury demographic to ensure continued sales into the 21st century without diluting its brand image in the eyes of older, loyal consumers. It must also answer industry criticism regarding allegations of 'blood diamonds' or diamonds obtained illegally (often through slave labor) whose funds are used to support the activities of renegade militant groups.

Issue and problems identification and analysis

Branding is Tiffany's current struggle: it must brand itself as a company that is ethical and is responsive to a larger, younger international market's style and concerns without losing its core consumers.

Recommendations

This personalization and targeted demographic is essential for Tiffany to succeed in the upcoming era. "The fine jewelry sector currently faces the increasing trend of consumers requesting first-class goods at middle-class prices. Tiffany & Co. has taken advantage of this trend by offering lower-priced items along with its brand name in an attempt to lure consumers to its blue box. However, Tiffany must approach this strategy with a special balance, as some worry the company may dilute its elite image among affluent buyers while trying to expand its consumer base" (Blackburn 2004). Market segmentation seems to be the clearest way for Tiffany to thrive. For its younger consumers, it can use social media such as mobile phone-based advertising to direct its message in a highly personalized manner. Tiffany's classic luxurious yet fashion-forward image, the company's sense of ethics, and even its affordability can all be communicated, based upon targeted advertiser profiling.

For older consumers, Tiffany can use more traditional forms of marketing, such as promoting its product through high-end magazines, catalogues, and through its in-store sales. A multifaceted approach is essential, given the greater diversification of Tiffany's customer base.

Implementation + plan of action

1. Increase mobile and social media advertising to younger consumers.

2. Do not promote lower-end jewelry nation or worldwide in a mass advertising campaign; rather direct such advertising to consumers within the specific demographic, while emphasizing Tiffany's luxury image in traditional media to more traditionally high-income, high-status consumers.

Conclusion

Tiffany must make ample use of market segmentation if it is to retain its brand's reputation yet still attract a younger 'consumer for life' who may feel that the company's classic image is not trendy enough for her. Using social media such as mobile advertising and Facebook to communicate Tiffany's environmentally-friendly fashion-forward image while still using older sources to keep in touch with the brand's loyal, older demographic is essential if Tiffany is to continue to thrive and build upon its current sales increases.