TRENDSETTER BOSS TAKES ON THE WORLD:HUGO BOSS LINE IMPLEMENTS DIVIDE-CONQUER MARKETING TACTIC

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[metzingen, germany] Peter Littmann was an unlikely candidate to transform German men's apparel marketer Hugo Boss into a global brand when he joined as chairman three years ago from a job as CEO of a carpet business.

But Mr. Littmann arrived with a marketing strategy: Segment the staid Hugo Boss fashions into three distinctive sub-brands with their own target audiences. Then spread the word through the company's first global advertising and quickly open Hugo Boss stores around the world. At the same time, Mr. Littmann is cautiously seeking new Hugo Boss products-from shoes to watches-that will bring in licensing revenue without damaging the brand image he is constructing.

FOLLOWING LEVI'S LEAD

"What Levi's did for jeans, I want to do for the Boss labels and turn them into global brands," he said.

Under the overall Hugo Boss brand name, Mr. Littmann created the Hugo label for young and fashion-conscious customers. Clothes aimed at the businessmen who form the bulk of his market are now simply called Boss. And a third, premium-price label is named Baldessarini, after Hugo Boss' chief creative designer, Werner Baldessarini. Boss and Hugo are similarly priced at $360 to $650 for jackets and $580 to $850 for a suit; Baldessarini prices are much higher, though still below those of Giorgio Armani.

"I came to Boss with the idea of segmenting the Boss brand," Mr. Littmann said. "The '80s were the time of yuppies. In the '90s, there is a trend toward more individualism in fashion, and men want excellent clothes for both business and leisure."

Mr. Littmann, 48, who moved to Germany from Czechoslovakia at age 20, was hired by Marzotto, an Italian textile group that bought a majority stake in Hugo Boss in 1991 and also owns designers Gianfranco Ferre and Missoni. Marzotto saw international potential in the German company with a small export business run from an out-of-the-way village.

Germany is still Hugo Boss' biggest market, accounting for 38% of the $644 million in 1995 sales, but the company's growth potential is outside its home market. Sales in the rest of Europe rose 8% to $211 million last year, compared with an increase of 3% to $244 million in Germany.

Mr. Littmann, who spends only about 25% of his time at his German headquarters, said he is targeting North America, Eastern Europe and Southeast Asia, including China, where Hugo Boss will open its fourth store this year, as opportunities for growth.

The main vehicle for spreading the Boss brand around the world is the rapid opening of franchised, identical Hugo Boss stores. The lone Hugo Boss outlet that opened in Germany in 1993 will be a chain of 188 by December. With most of this year's new stores located in Asia or Eastern Europe, Asia will overtake Europe with 82 Hugo Boss stores, compared with 62 in Europe and 44 in the U.S. and Canada.

NEW PRODUCTS

In another growth area, Mr. Littmann is adding new products in addition to the five fragrances already sold using the Boss name under a licensing agreement with Eurocos, a fragrance company owned by Procter & Gamble Co.

Last year, the Boss collection was expanded to include pajamas, bathrobes and towels, bringing total income from license fees including fragrances to $24 million.

This fall, Italian-made Boss shoes will debut, initially in Germany, Austria and Switzerland.

Part of the challenge-and risk-of expanding a designer brand is to avoid the overlicensing that cheapens its image.

"Hugo Boss will not grant licenses endlessly; the products must fit our Boss brands," Mr. Littmann said. "The original brand can easily suffer if too many licenses are granted. I realize that license business brings profits, but Hugo Boss in not out for short-term profit."

Still, Mr. Littmann has his eye on a Boss watch for the future.

"To become a global player, we no longer manufacture local collections, just an international one with small differences for various markets," he said. "And we decided to only run a global [ad] campaign."

Mr. Littmann hired Bartle Bogle Hegarty, a London agency renowned for highly creative advertising that works internationally, to develop an umbrella concept for promoting the Hugo Boss brand around the world.

In that short-lived relationship, Bartle came up with stunning b&w print ads using the theme "Men at work" that captured real men in different occupations during their workdays. In a typical Bartle ad, radio DJ Bert Bevan, dreadlocks tied back, wears an expensive Hugo Boss sweater as he spins a turntable.

Bartle also put Hugo Boss on TV, a rare choice for clothing designers, who often promote their fragrances in commercials but limit clothes to glossy magazines.

In the vivid TV and cinema spot, a European soccer team manager passionately follows his team's action-packed game, finally giving the mud-spattered player who scores the winning goal a euphoric hug. The action freezes when mud adheres to the manager's precious Boss suit. Finally, he shrugs and smiles.

ADS NOW DONE IN-HOUSE

Bartle's tenure only lasted a year; in 1995, Hugo Boss took the account back in-house. Industry executives say Hugo Boss franchisees preferred more conventional ads using professional models.

Hugo Boss now works with New York design studio Baron & Baron to create print ads for Hugo, Boss and Baldessarini, using male models shot by top U.S. fashion photographers like Herb Ritts and Richard Avedon.

Some ads are innovative, such as one for Baldessarini that emphasizes the fabric's quality and texture by zeroing in on a small section of a suit jacket.

"We tried to break out of the conventions that characterize so much of men's fashion advertising," said Nigel Bogle, Bartle joint chief executive. "They decided to go back in-house and do it themselves."

About $10 million of Hugo Boss' $50 million marketing budget goes to media advertising. The company's sponsorship activities range from tennis, golf and motor racing to New York's Guggenheim Museum, which will award a Hugo Boss prize this fall to young artists.

"Since Peter Littmann was named chairman of Hugo Boss in 1993, the company is definitely doing better-and performing much better than [the rest of] the fashion market," said Ingbert Faust, a Frankfurt-based analyst at Union Bank of Switzerland. "The strategies initiated by Littmann, like creating sub-brands under the Boss label, were good moves and had a very positive effect on the image of the original Boss brand."

Shareholders also have a tangible measure of Hugo Boss' performance. Since 1995, the company's share price has almost doubled, from $658 to $1,142.

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HUGO BOSS DATA

Headquarters: Metzingen, Germany (near Stuttgart)

Ownership: Majority owned by Italian textile group Marzotto

1995 sales: $644 million, up 5.1%

1995 profit: $41.42 million, up 10.7%

Leadership: Peter Littmann, chairman and member of the management board; Werner Baldessarini, vice chairman, responsible for design, board member

Ad agency: Ads created in-house, with assistance from design studio

Baron & Baron, New York; media handled by Mediaplan Stuttgart.

Budget: $50 million for worldwide marketing account, media,

sponsorships, below-the-line activities.

Recent successes: Dividing Hugo Boss into three separate brands: Hugo, Boss and Baldessarini.

Challenge: To turn a German company with export business into a global marketer.

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