Don’t let your enthusiasm get the better of you in achieving your business dreams.
The last time I wrote an article about Mulberry, the UK fashion brand famous for its costly handbags, I used the headline “Mulberry Trebles Profits”. That was in December 2012 when the share price was at £25 and the company didn’t seem to know how to stop growing. Sadly, things are not quite so rosy now: the share price has tumbled to £6.45 and it has just parted company with Bruno Guillon, its CEO. He was recruited from even more pricey Hermes when Mulberry was at the top of its growth curve and it began to dream of moving from being a premium domestic product to a global luxury brand. What went wrong?
Well, in spite of the relatively kind words about the outgoing CEO from Mulberry’s former CEO, who has just been brought back to pick up the pieces, I think Bruno made a couple of pretty basic mistakes. The first was that his attempt to reposition the brand at a higher price-point, to challenge his previous employer, was ill-conceived and poorly executed. Price positioning is a vital consideration when buying any product but with a luxury good, it is a critical indicator of status, exclusivity, and scarcity, which is the primary benefit that is being bought. Customers who buy Mulberry handbags don’t just want a handbag they want the status that goes with it and they know that is “£500 status” not “£1500 status”. Just raising prices for a brand that is positioned at a lower price point will only make people think it is too expensive.
The second mistake that Bruno made was losing Emma Hill, its creative director, who reportedly left as a result of differences over the brand’s “creative and operational strategy”. As Emma has been widely credited with the brand’s success that is the wrong reason for her to leave and it implies that she didn’t agree with what Bruno was doing. You know what? She was right.
The third mistake was that Bruno was in too much of a hurry and he took too big a step into the unknown with his move to raise prices. The fact that the business was under pressure from competition, at the lower end of its price range, wasn’t enough of an excuse. This sort of move required more research, more market testing and some serious thought about extending rather than repositioning the brand. If you want people to think of the brand, or a sub-brand, as being justifiable at a higher price-point then it needs much more work in changing customer perceptions first. Mulberry should perhaps have launched a “Lexus” version of its “Toyota”.
There is much to learn here, for any business faced with evolutionary pressures:
- New leaders will change things, they are natural change agents and they come with a lot of baggage that is hard to leave behind. If you recruit one from outside he/she is going to do things differently. If you have a problem that is probably what you want but when things are going splendidly it is a risk
- Always take small steps with any major business initiative so that if things don’t work out it won’t be terminal.
- Always align everything behind your brand’s positioning and don’t deviate, ever.
- There are no quick fixes, or completely safe options, for diversifying into a new market segment. You have to invest time, effort, and money to create the perception that you have a credible product in this new segment and that isn’t easy to do.
- In some industries, there are employees you really shouldn’t lose because they are the emotional heart of the brand and when they go the business suffers.
Mulberry now needs to rediscover what made it successful in the first place and perhaps get Emma back too.