Business Strategy For Effective Diversity Marketing

Adrian Parkerwww.theparkmark.com

Who is ? A division of Liz Claiborne, Inc. (NYSE: LIZ), MEXX is optimistic, nonconformist,

inspiring and fun. The dual gender fashion line markets an extensive range of fashion

apparel and accessories for women, men and children through a multi-channel

business: wholesale, retail and home shopping.

Founded in 1980 and acquired by LIZ in 2001, the brand is available in Europe,

Canada, the Middle East, the Asia Pacific region and more than 65 countries

worldwide.

The contemporary and affordable products were brought to the United States in 2004

with the opening of 11 east coast locations. In 2006 however, the chain’s plans to

bring “The GAP of Europe” into the U.S. hit several hurdles, including severe

distribution channel issues, lack of consumer clarity, decreased corporate

expenditures and aggressive competition. The U.S. store base, which was slated to

evolve into a 100+ door chain, was reduced to just 4 stores, 2 in NYC and 2 in

Washington D.C.

OVERVIEW

FASHION SNAPSHOT

OVERVIEW

CrispClean linesClassicBasic elegance

Bold colorsSleek blacksFlexible & activeEffortless

FlirtyEdgyConfidentTapered fits

FINANCIAL TOPLINE 2006

WHERE THEY WERE

OVERVIEW

WHERE THEY WANTED TO BE

2006

Sales $20M

% of LCI retail 2.8%

4-wall DOP 6.9%

Sales/sq. ft. $502

Gross Margin 63.20%

Doors 4

% of LCI retail 0.8%

2007 2009

$22M $50M

2.8% 4.0%

8.3% 16.0%

$524 $540

64% 64%

8+ 25+

1.5% 3.3%

STRATEGIC BUSINESS SURVIVAL

REQUIRED GROWTH

OVERVIEW

In order to remain profitable to LIZ and meaningful

to the consumer, USA must evolve into 100+ door

domestic chain, grow viable e-comm presence and

unite with international business partners.

Competitive Landscape:Where They Were vs. Where They Needed To Be

OVERVIEW

Coldwater Creek GAP Limited

OVERVIEW

Demographics• Dual-gender• Ages 20 – 34• NYC and DC

Psychographics• Creative with fashion• Fashion aware & involved• Diverse, unique style• Social• Influencer• Up to date• Against American casual uniformity

Competitive Set• Zara• Club Monaco• H&M• Esprit• Express• Benetton• A/X

Who is the consumer?

The GoalOverall, their goal was to give shoppers an inspired, Euro-City

experience of buying fashion products at attractive costs from

intelligent, caring and friendly people.

Then they had to bring the shoppers back. And find others just

like them.

THE REAL DEAL

StrategyTargeted, non-traditional diversity marketing was truly the only

approach for increasing store traffic, transactions and overall

awareness in such a formidable environment.

Why?At its best, diversity marketing empowers the consumers you

care about to more easily access your products/services.

It removes barriers to engagement. They used it as a

Mechanism to transform challenges into opportunities for

results.

THE REAL DEAL

Marketing budgetAllocations were anemic. Down 71% to ’04, 59% to ’05 and 8% to LY despite higher sales plan per store..

CHALLENGE #1

Opportunity

“Because we didn’t have the luxury of a

reasonable marketing budget, we were forced

to spend every $1 where it would yield not only

positive ROI, but also the best ROI.”

Brand awareness among mainstream USBeyond fashion-aware shoppers, brand recognition is negligible

CHALLENGE #2

Opportunity

“Within the U.S., our brand had no equity or

position among the general market. Instead of

shouting at the crowd and hoping they would

listen, we chose to talk directly to our evangelists

who would spread the gospel for us.”

Brand value Attrition of more than 50% of consumer-base and closing of 64% of stores has degraded perception.

CHALLENGE #3

Opportunity

“Simply put, the formidable task of reviving the

ailing brand created a “do or die” energy that

afforded us a “by any means necessary”

approach to gaining traction. Our micro-brand

created the perfect opportunity to isolate and test

diversity initiatives.”

Bigger, more aggressive competitors Direct domestic & global competition (Zara, H&M, A/X, Club Monaco, etc.) have larger resources & share-of-voice.

CHALLENGE #4

Opportunity

“Unorthodox guerilla and grassroots methods

allowed our branding to be more nimble and

concentrated to our locations.”

TARGET SEGMENT OVERVIEW

SEX IN THE CITY

• Professional minority woman • 30 years old +• Average income $100,000+• Single and married working mothers• Likely to have curvier, more robust figures• College graduates and advanced degrees

(J.D., MBA, M.D., PH.D.)• She enjoys traveling, reading, fine dining,

shopping, spa treatments, theatre, concerts and is active in her church and community

• Resides in New York and Washington DC Metro Areas, Atlanta, Los Angeles, Chicago, Baltimore, Detroit, Miami, Dallas, Houston, Richmond, Seattle and Philadelphia

• Shrewd, Confident, Views MEXX as conservative

TARGET SEGMENT OVERVIEW

OUT & PROUD

• Gay men• 20 - 30 years old• Highly style conscious• “Discovers” fashion (Trendsetting & fashion forward)• Often have increased discretionary income due to double incomes in HH and no

kids.• Very socially active and likely to use word of mouth referallas• Wields purchasing power to support brands that support them• Will check out any store at least once and is fond of European fashions

TARGET SEGMENT OVERVIEW

SASSY SERIOUS STUDENTS

• Ages 18 - 25• Wide spectrum, mostly females• Love to shop• Somewhat more conservative• Needs clothes for work• Upwardly mobile• Somewhat insecure• Open to new fashion brands that connect

and offer a chance to be “set apart.”

STRATEGY OVERVIEW

LEARNEducate new & existing shoppers

to remain relevant in their life.

LOOKExpose 3 new shopper

segments to locations &

product

LISTENEngage new audiences by

Showcasing what the brand

stands for

• Advertising• Window Visuals• Guerilla

• PR• Experiential

Events• Celebrity Seeding

• Loyalty/CRM• Online• Gift/Credit Card

What they didSpent $80K on media

Delivered 8M+ impressions during Holiday

Finished October ↑11% plan and ↑17% comp

Media until year’s end with pulsing at peak weeks

TACTICS

Advertising

In-store

Guerilla

PR

Events

CRM

Online

Advertised in print pubs targeted to professional commuters and in minority-rich areas. Partnership with Heart & Soul mag.

Created print partnership with OUT and INSTINCT magazines, leading gay men’s pub.

Advertised in college weeklies around D.C. locations: The Hoya, City Paper

Advertising

In-store

Guerilla

PR

Events

CRM

Online

What they didEnhanced store experience with multi-lingual copy

Reconfigured floor fixtures for increased SKUs on selling floor and made associates more recognizable

Small store count allows for personalized designs

TACTICS

Tailored stores according to key targets most likely to shop at locations. Instead of store associates wearing store apparel during peak time, they wore special branded shirts. These “uniforms” made them easier to recognize for patrons and increased service effectiveness.

Offered incentives for shoppers to return with bounce-back discounts. These maximized the “new” traffic each store was obtaining.

In-Store

• MEXX Cheque bolstered post-Black Friday ADT decline.

• Recommitment to merchandising and selling Gift Cards.

TACTICS

Guerilla

In-store

Advertising

PR

Events

CRM

Online

What they didDistribution of MEXX coupons at premier NYC festivals, parades & cultural events.

Garnered low cost exposure at key GLBT events with street teams distributing branded coupons and offers at Gay Pride festivities.

Guerilla

• Distributed 5,000 bouncebacks to target segment.

• Some parades routes passed directly in front of 5th Avenue store location

TACTICS

In-store

Guerilla

Events

CRM

Online

PR

Advertising What they didSecured excellent placements of product on TV, print and websites (Earned Media)

Produced 4 “Look Books” (style guides) that gained attention of fashion editors and stylists.

Shopping event featured in target publication, Heart & Soul. Sent fashion samples to celebs for seeding.

Gay men’s event featured online and in-print with additional e-mail blasts. Key placement on Queer Eye.

Outreach to local college pubs

PR

• US Weekly 11M imp• Queer Eye 1.5M imp• NBC’s Today Show 6.2M imp

TACTICS

In-store

Guerilla

PR

CRM

Online

Events

Advertising What they did clusive event platform brought diverse groups together for one purpose: fashion

Also activated off-site nightlife events to position MEXX as cool & trendy and introduce brand to new audiences.

“Fabulous on 5th” event made concerted, deliberate effort to attract diverse audience. Hosted by Latino , AfAm & Gay peers.

Hosted Gay men’s fashion show to highlight the season’s latest looks directly to captive audience in heart of NYC

“Sexxy, Sassy, Saturday” event invited all local college students out to shop using special discount and offered free drinks.

EVENTS

• 1st Event grossed $20K in 3 hours• DJ “Scratch” event lead to 66% comp• Radio promo touched 7M New Yorkers

EVENTS Highlight Reel Click ‘play’ icon in center. Must have internet connection to view.

TACTICS

In-store

Guerilla

PR

Events

Online

CRM

Advertising What they didLargest portion of ’06 budget (26%)

Targeted existing 30K shoppers (lifetime spend of $3.9M)

ADT of top-half of database = $89

ADT of top-quarter = $104 (avg = $73)

Photography featured looks and key items in fashion environment as opposed to being worn by “European” models. Sent direct mail pieces to database of target partners (OUT, INSTINCT, etc.) and also supplied to stores for distro at key locations, especially college hot spots.

CRM

• Holiday mailer in-home 11/17• Promo = $15 MEXX Cheque Card

• Distro = 30K CRM, 10K Prosp, 3K Magazine

TACTICS

In-store

Guerilla

PR

Events

CRM

Online

Advertising What they didLaunched MEXXSTYLE.com site to feature new looks, event footage and store details

Monthly “New Arrivals” e-mail to members

Launched branded MySpace page

MEXXSTYLE micro-site and MySpace became a digital destination for our shoppers to participate in the brand. They gave feedback on styles, events, upcoming activities, etc.

ONLINE

• MEXX Style became digital destination supported by social networking

• E-mail blast & outreach to target segments

2006 MARKETING SPEND

Postcards & BBs

PR & Look Book

Europe Usage

Events

Advertising

Professional Fees

Seeding

Credit/Gift Card

Digital

$491K (2.5% of sales plan)

Advertising 80Events 55Europe Usage 75PR/Look Book 88Postcard & BBs 125Digital 14Credit/Gift Card 12Product Seeding 15Professional Fees 27

491

PR

EVENTSCRM

WWW

ADS

INSTORE

APPROACH REVIEW

• Stay true to the core values & attributes of the brand.

• Break the rules. Burn them. Bury them.

• ROI! Ensure every $ spent brings back more in return.

• Think Globally. Act Locally.

• Show the product. Show the product. Show the product.

• Use every touchpoint as an opportunity to make them LOOK, LISTEN & LEARN.

RESULTS

THE GOOD• Finished 2006 4%+ to financial plan, the brand’s first + comp year ever• 4 doors pushed $19M in sales, highest sales/store ever• Delivered more than 8M impressions and $3.4M in sales during holiday

Impressions TransactionsEst. Incremental Sales

4,954,000 39,632 2,972,400

Digital Media 650,000 5,200 390,000

CRM 190,100 1,521 114,060

5,794,100 46,353 $3,476,460

Local Advertising

Promoted Sales

THE BAD• Factoring in 2006 store closings, overall US division was -7% to plan

THE UGLY• The entire US division was shuttered in summer 2007. There are presently

no stores domestically.

DISCUSS

1. This is one David vs. Goliath story that lacked the celebratory ending. Was it worth it?

2. What is the common thread among the 3 target segments – professional minority women, gay men and college students ?

3. The team was tasked with 2 key challenges to solve simultaneously: proving MEXX as a viable U.S. retailer and proving diversity marketing as the correct business driver. Is it possible for one to succeed without the other?

4. Although LIZ is a Fortune 500 retailer, this 2006 case provided a micro “Petri dish” view into practical, real-world execution on an entrepreneurial level. Given the challenging state of retail in 2009, are there key learnings for other retailers?

5. MEXX remains one of the largest global fashion brands without a U.S. presence. If the brand is re-launched domestically, should it activate a more general market approach and cast a wider net?