Commentary by Jonah Bloom

Lacoste Owes Its Growing Success to Robert Siegel and Smart Pricing

A Lesson in Building a High-Margin Luxury Brand

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Robert Siegel seems to operate on instincts. Good ones. He made his name, in '86, as the man who launched Dockers -- a fashion crime and a runaway business success story -- but was frustrated by Levi's slow-moving, group-think culture. In a 1999 Fortune story
Jonah Bloom, executive editor of Advertising Age.
on the sad state of Bob Haas' Levi's he commented: "If you asked [Levi's executives] for the time, they would build you a clock and still not be able to tell you."

He's now 67, with a stint at the top of Stride Rite behind him, and appears too patient and gentlemanly for that cutting criticism -- less thrusting CEO and more stately chairman. But in the last three years at the helm of Lacoste -- he in fact holds both titles -- he has orchestrated a sales explosion. (U.S. sales for the $1 billion global brand rose 125% last year and are expected to rise 60% in 2005.)

Saying 'No'
How? He made the product hipper and younger with a tighter fit for the company's trademark polo shirts. He had the sense to realize women want a different fit than men -- a duh! moment maybe, but one that had eluded previous Lacoste U.S. regimes. He took the product out of stores he didn't feel were right for the brand. "Saying 'no' is the best thing you can do for a brand. If the best stores aren't in the markets, don't go there."

He hired a marketing director, Tamara Rosenthal, and a PR manager, Sarah Penchansky: smart, young women and natural brand ambassadors with a good sense of the type of promotion that would erode the brand's authenticity as it grows. (They seeded the brand with suitable celebs, scoring appearances for the Lacoste croc on the chests

Lacoste's strategy keeps prices and quality high.
of Natalie Portman and Katie Couric among others.)

But Siegel's masterstroke may be his pricing strategy.

Paired with Izod
In the 1980s when the Lacoste license was owned by General Mills -- it paired the crocodile logo with the Izod name -- the shirts retailed for as little as $35. Not only did the low price inherently cheapen the brand, but it forced General Mills to cut costs to maintain margins, using cheaper fabric and manufacturing processes. That made it even harder to sustain demand at the price. General Mills had created a vicious cycle of diminishing returns and almost destroyed the Lacoste brand. Lacoste bought it back and temporarily exited the marketplace.

By the time Siegel took the helm in 2001, Lacoste had returned but was making a loss selling only to country-club gents. To achieve sales growth, Siegel was encouraged by colleagues and retailers to slash prices. He did nothing of the sort, rolling out the new-look shirts at $69 for men, $72 for women. "Part of the brand is the pricing," he says. "Our quality is very high." He says a cheaper price tag would neither reflect that nor allow continued investment in product.

Luxury market as mass market
What he also understood was that the luxury market is now a mass market, and quality products with matching high prices no longer limit a marketer to a niche.

Historically the marketers we think of as U.S. leaders have relied on low pricing to grow volumes and taking a leadership position in their sectors. Think fast-feeders, big brewers, automakers, food giants, clothing manufacturers and national retailers. In doing so they have cheapened many good brands, and some now seem to be running out of ideas to grow in their saturated marketplaces. Perhaps marketers like Siegel, who put margins first, are pointing the way forward.

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