Are You Surrounding Your Market?
Last October, my wife, Peggy, and I invited our good friends Paul Goldberg and Joseph Dipper to lunch in Chicago, where we were all attending the DMA Conference. The hotel concierge recommended NoMI on the seventh floor of the Chicago Park Hyatt. Our table by the big window overlooked the iconic Chicago Water Tower, constructed in 1869 of Joliet (Illinois) limestone blocks and one of the few survivors of the 1871 Great Fire.
Everything about the restaurant was world-class—the décor, service, food, wine and vodka (Grey Goose). Dining doesn’t get any better than that, and I would recommend it to anybody who has plenty of money or a fat expense account.
The next table was set for three. Lunching there were a most stylish young suburban matron, her equally stylish daughter—age about 9—and the daughter’s doll, which was continually being fussed over by both. The three of them were having a grand time together.
As they were leaving, I asked the lady if the doll was from American Girl.
“Oh, yes,” was the reply. “We have a 2 o’clock appointment at American Girl Place to do some shopping for clothes and accessories.”
The idea that Mattel signed the prestigious Creative Artists Agency to extend its toy brands—presumably to create games, DVDs, films, Internet action and TV specials for Barbie and the Fisher-Price line—is fascinating. Most intriguing is what they might do for American Girl.
My bet is nothing.
American Girl has already done it.
Sometime in the late 1970s, I submitted a fanciful article to Folio: The Magazine of Magazine Management on the subject of direct mail. To my surprise, it was accepted, and the editor, Chuck Tannen, invited me to lunch at a restaurant near his offices in New Canaan, Conn., just up the pike from my house in Stamford.
Tannen was a lovely, civilized guy; short with a mop of curly hair and owlish glasses. In the 1990s, Tannen invested in Jay Walker’s Priceline.com and walked away with a tidy $23 million, which delighted me.
As we settled down for lunch, I asked Chuck if Folio was profitable. He wagged his flat right hand and indicated the answer was comme ci comme ça, or so-so. He then went on to explain:
Folio is the flagship. It spawns books, special reports, the Folio conference, consulting assignments, list rentals and card decks. When someone in the magazine business buys something from us or attends the Folio Show, it is our license to go after him and sell him anything and everything we have. It is our intention to surround the industry.
Tannen’s line about surrounding the industry remains etched in my memory. At the time I thought it a brilliant concept. I still do.
American Girl: the Beginnings
In the 1980s, Peggy and I were running WHO’S MAILING WHAT! out of our house in Stamford, Conn. It was a newsletter based on the giant archive of direct mail and catalogs we were acquiring from correspondents around the country.
I was vaguely aware of the sumptuous, oversized Pleasant Company catalog offering up-market dolls to little girls. It was a niche thing, and we included it in our listings, but having neither daughters nor granddaughters, we never paid much attention.
The company was founded in 1986 by Pleasant T. Rowland, a former elementary school teacher and TV news reporter who dreamed up the American Girls Collection which is described on the Web site:
The American Girls Collection and its contemporary counterpart, American Girl Today, were created especially for girls ages 7 to 12—girls who are old enough to read and still love to play with dolls. For younger girls we offer Bitty Baby, a line of soft, huggable baby dolls, board books, and accessories that encourage creative play and nurturing behavior.
At Pleasant Company, we are committed—as you are—to providing your American girl with rich, age-appropriate play experiences. By choosing the right books and toys for your daughter at the right age and stage of her growth, you protect her development, nourish her spirit, and give her imagination wing.
With revenues of $300 million, American Girl was bought by Mattel in 1998 for $700 million. American Girl did $431.3 million in 2007, down 2 percent from the prior year, prompting Mattel to call revenues “flat” in its most recent annual report.
Flat or not, American Girl is a business model of pure genius that every marketer can learn from.
Quite simply, like Folio back in the 1970s, it surrounds the market.
The Great American Girl Smorgasbord
When Peggy’s niece was between 7 and 12, the American Girl catalog used to come to the house and long phone conversations ensued between sisters as to what Aunt Peggy’s gift(s) should be for birthday, Christmas and other occasions.
Go to the American Girl Web site: www.americangirl.com
You will find an eye-popping (and pocketbook-popping) array of goods and services:
* Dolls and doll outfits for any and all activities and occasions
* American Girl accessories—Animals and umbrellas, slippers and schoolbags. For yesteryear and today, for girls and their dolls. With American Girl accessories, girls will find that something extra to bring a story to life, or a special item for school, home, and just for her.
* American Girl furniture—American Girl furniture inspires girls to re-create the stories they love-from historical times to present day. Designed with the finest craftsmanship, each piece is a keepsake to treasure, just like the stories and characters they bring to life.
* Books, magazine, DVDs
* Clothing for girls and their dolls—Dress Like Your Doll clothing lets girls match their dolls with authentic styles from the past and fun looks for the present. Girls can also express themselves with clothing just for them or just for their dolls. Outfits are age-appropriate, and there’s one for every occasion—schooltime, bedtime, playtime, and more.
* Doll Care—Bubble Tub, Styling Center, Salon Chair and Accessories.
* Bath and Body Care—As girls grow up, caring for their bodies helps their confidence grow. With personal care products from American Girl and Bath & Body Works, girls can look, feel, and be their best. Inspired by American Girl’s bestselling advice books, these items are for ages 8 and up. To see the entire selection, please visit your nearest Bath & Body Works store.
* What happens on a visit to the Doll Hospital? When dolls arrive at the hospital, they get the best of care:
— Dolls are welcomed to the hospital and carefully handled to protect from further injury.
— A team of doctors examines the dolls from head to toe and decides how best to proceed.
— THE DOCTORS may consult with you on the best treatment, and they do it all—from hair brushing to surgery.
— DOLLS GO HOME with smiles on their faces and special items to remember her stay.
WITHIN 2 WEEKS you can welcome her home:
—18” American Girls return with a hospital gown, an ID bracelet, a Certificate of Good Health, a “get well” balloon, and a band-aid sticker
—Bitty Baby and Bitty Twins return with a hospital gown and hat, a Certificate of Good Health, and a band-aid sticker.
In short, the American Girl Web site is a marvel of endless opportunities to part with endless quantities of cash. For mother and daughter the site is easy to navigate, easy to order from, and even offers a bill-me-later option—so rare on the Internet!
Wait! There’s More—The Stores!
For the retail experience, American Girl has stores in Chicago, New York, Los Angeles, Dallas and Atlanta.
“American Girl Place is a jaw-dropping collection of attractions: three floors and a mezzanine offering boutiques, a doll hair salon, doll hospital, theater, bookstore and clothing for both doll and child,” wrote Alex Kuczynski in The New York Times. “There is also a bustling cafe, which offers brunch, lunch, dinner and high tea, and is often booked months in advance.” One of the more amusing accounts of the American Girl retail experience is by a doting father:
Once a year, as the holidays approach, I engage in a ritual well known to men of a certain demographic ilk. Armed by my wife with a shopping list detailed enough to thwart paternal cluelessness, I enter American Girl Place off Fifth Avenue in Manhattan. And there, amid the madding throngs of little girls and their mothers, I rush to score the season’s must-have accessories for Felicity and Samantha. Those would be my daughters’ beloved dolls.
It is not my favorite shopping experience. But then, American Girl wasn’t created for fathers. And if you are a little girl or her mother (or grandmother, or aunt), American Girl is, at most times, a quite breathtakingly attractive amalgam of education and entertainment, all of it rooted in storytelling.
After a $22 lunch, a $32 revue, a $15 hair styling, and a $24.95 photo session, plus a few new outfits and a book or two, of course, you’re talking about a doll-stravaganza tab running to several hundred dollars. Not for the faint of heart. Nor, as I’ve noted, for dads. And that’s before the package deal with any number of hotels, which (again, brilliantly) offer turndown service for dolls in their own beds; Wyndham Hotels throws in a logoed doll bathrobe.
—Keith H. Hammonds, Fast Company, September 2006
The Chicago store gets approximately 1.5 million shoppers annually.
Surrounding Companies That Surround a Market
In a 1998 interview, Priceline.com founder Jay Walker described to me the concept of creating a business that lays on top of another business that you have no relationship with. Examples: Priceline, Orbitz, Expedia, Travelocity, Hotels.com and Hotwire. These businesses are built on top of the travel industry, which has many billions of dollars invested in jet planes, hotels and fleets of rental cars. Yet the only investments of these online services are computers and exotic software. As I wrote in “PRICELINE.COM: A Layman’s Guide to Manipulating the Media”:
The IPO price [of priceline.com] was $16 a share, and the stock hit a high of $165. For one brief moment in time (April 30, 1999), the investment community was persuaded that Jay Walker’s 35,000 square feet of sublet office space in Stamford, Connecticut, with its little assemblage of computers, exotic software, and 177 employees were worth (on paper) $23.1 billion—more than United, Northwest, and Continental airlines combined. That’s roughly the GDP of Somalia.
Google “American Girl,” and amidst the 8.7 million entries you will start running into entrepreneurs and companies that have built businesses on top of American Girl:
Doll dresses, shoes and accessories; sewing patterns for American Girl dolls; matching mother, daughter and doll outfits; American Girl themed hotel packages that cater to visitors to the retail stores.
Beware of Trying to Compete with the Outsiders
It is tempting to try and lasso the money these interlopers are making off your brand. However, getting into areas that are outside your core competency can be dangerous—opening you up to a loss of control that ultimately causes a diminution of the brand. For example:
* Sewing patterns for American Girl doll clothes may be fine for expert sewers. However, beginners on a sewing machine could create ill-fitting, poorly finished outfits. American Girl would lose control of its perceived excellence and that would reflect badly on the brand. Picture the not-so-occasional person walking down Philadelphia’s South Street in a stained and filthy sweatshirt that has OLD NAVY or DKNY emblazoned across the chest. Yuck. Is that the image you want associated with your brand?
* Should American Girl get into adult clothes to match their daughter and doll outfits? Probably not. Fitting little girls age 7 to 12 is fairly straightforward. But adult female figures can get complicated with hips, bosoms, derrieres, shoulders and sizes that range from petite to full-figured. The seemingly good idea could quickly turn into a nightmare of SKUs and inventory write-downs.
In short, extend your brand, but not to the point where you are outside your core competency and not in complete control.
Joint ventures may be better than trying to do it yourself.