January 22, 2007

Marshall Field And Customer Loyalty

Businesses and brands are created and destroyed every day (i.e. Cingular). Marshall Field represents another brand that was wiped out, this time by Federated, owner of Macy's.

When Federated purchased May Company, the decision was made to convert many different brands to the Macy's brand.

In Chicago, customers are frustrated with this decision. Seeing this as an intrusion upon Midwest tradition, customers continue to lobby for the nameplate to return.

Ok, my virtual Chief Executive Officers, here's the question for you. Would you keep the Marshall Field nameplate on stores, along with the traditional merchandise assortment, or would you convert the stores to the Macy's nameplate, and risk customer alienation?

For instance, assume management ran profitability numbers. Assume that a Marshall Field store would generate $60,000,000 net sales, and $4,800,000 profit a year.

Assume that converting the nameplate to Macy's results in a ten percent reduction in sales, down to $54,000,000. Normally, this would result in profit decreasing down to $2,700,000 --- but various efficiencies created by a mega-brand increase profit to $4,000,000 a year.

Back to the question. Do you take this potential hit in sales and profit, in order to build a nationwide department store brand that may have better long-term upside than a regional merchandiser like Marshall Field?