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?

9 comments:

  1. Anonymous6:22 AM

    Point 1. Opposition to name change started before Lundgren proposed changing name. Witness Roger Ebert's articles, and others.
    Lundgren should have handled differently, either as a gradual change(slowly converting stores until only state street left) or a compromise (Macy's @ Marshall Fields).
    Point 2. Most opposition is really centered on State Street. What's interesting is that due to recent publicity, people in other cities are empathizing with those in Chicago---people miss Burdines, Foleys, Strawbridges, etc.
    Point 3. Macy's should have clear strategy of what they sell and make that clear to customers. Ask people and they will give you mixed answers--more upscale than Strawbridges or Kaufmanns, downgrade from Fields or Filenes. Only thing people comment about their home products are that Charter Club is not that good and that Martha Stewart switched from Kmart to Macy's.
    Last point: Name recognition takes quite a time to build and has an impact on whole life of a consumer. You might argue that is why Macy's went for brand recognition by changing all names, and you are right. However, knowing opposition they should have worked with that opposition to overcome it, rather than ignoring it. Now you have at least 60,000 Fields fans not buying from Macy's for at least 5-10 years, discovering taking loyalty to stores like Von Maur, Nordstroms, and Carsons.

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  2. In Seattle, Federated changed the Bon Marche name brand very slowly, over the course of a couple of years.

    While people were a little frustrated, it generally happened in a peaceful and gradual manner. 'The Bon' is now just a memory.

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  3. Anonymous10:30 AM

    Kevin,
    Regarding your prior point costs reduced by mega-brand, you have to realize in some cases that backfires. One of the constant complaints I hear about Macy's is that it IS all one brand--that is, they don't account for regional flavor.
    Notice people don't say this about Penney's, Sears, or Kohl's==that's because Macy's took over the regional store. So people before had choices--the mega stores OR discounters(Walmart, Target, TJMaxx) OR their regional mall(Burdines, Bon Marche, Famous Barr, etc.). Now they don't have regional except for specialty stores.
    To twist your question around, do I think Macy's will fail in long run due to megabranding? Probably not. But the benefits of the cost-savings are a quite a bit off in the future so for longterm effect that you propose they have to do something in short term to get sales. They accumulated $17 billion in debt with merger(on top of 4-5 billion they already had). Closing 100 stores, selling L&T and bridal units and credit card took some of the edge off that, but still that's a lot of debt.
    So from marketing persepective, name change hurts. What will increase sales now? Taking out competition in a mall doesn't automatically make you the guy people buy from--you still have to draw them in.
    Martha Stewart move remains to be seen but initial reaction I've heard from people is "eww--if I didn't buy it at Kmart why would I buy it at the MALL?" In 90's, Kmart was forever linked with cheap low-quality products and MS name smeared with it.
    What else do you recommend Macy's do?

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  4. I'm originally from the Midwest, so to me, the name Marshall Field meant something. Growing up, Macy's was the name of a Thanksgiving Day parade.

    I didn't have access to the financials, obviously --- if brands were unprofitable, it makes sense to me to change the brand name.

    If a brand were profitable, that becomes a thorny topic to me. I tend to fall on the side of brand heritage over the strategy of buying real estate with the purpose of creating a national brand.

    Great thoughts, I appreciate the feedback, and really appreciate the opportunity to have an enjoyable conversation.

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  5. Anonymous, I agree strongly with your comments around the pain from a marketing perspective. As a native of Minnesota, I watched Federated change Dayton's, which was a cherished local brand, to Marshall Fields and while there was some initial concern, the net effect was that people continued to shop the new Marshal Fields stores because they continued to deliver a customer experience consistent with what they expected from Dayton's. More recently, they have changed the name to Macy's and I have not heard as much concern about the name change, but I have heard much more complaining about the customer service policies and the overall change in service. This may not be the reality, but if it is the perception that Macy's does not provide the same service/quality/value relationship that they came to expect with Marshall Fields/Dayton's then the Marketing efforts are doomed to suffer extreme underperformance if not outright failure and the whole question of a name change becomes a secondary issue.

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  6. Everybody seems to feel Macys made an obvious mistake. So why do you think they did it? These are not stupid people.

    My guess: they felt the Macys brand was stronger than Marshall Fields. Yes you lose a few loyalists, but have a net gain from more other customers. And most of the loyalists will eventually come back if they find or hear about a good experience under the new name.

    Also, there's something to be said for brand honesty: if the store really is a Macys, then keeping the Marshall Fields nameplate won't fool anyone.

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  7. I imagine these smart people believe in the power of a national brand, and enjoyed crafting a strategy that minimizes SG&A.

    Great conversation, folks!!

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  8. Anonymous10:38 AM

    Why did they do it? Honestly? They did it because their HQ is in New York, and New Yorkers think that NYC is a shining city on a hill that everyone else wants their town to be like. They knew Chicagoans felt a huge affinity for their hometown store, just like most people did for Strawbridge's, etc., and they figured, "Dumb Midwesterners, they'll get over it once they see how high quality our New York stores are." They thought the New York store's name had better pull long term with people than the local. Their error was to try to push what they thought was great on to others.

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  9. Anonymous9:07 PM

    The facts presented in your premise need to be adjusted to reflect the significantly greater drop in sales realized by Macy's at former Marshall Field's locations.

    Analysts and interviews with in-store vendors reveal that Macy's sales at many former Marshall Field's locations have dropped as much as 30% to 40%. This lost revenue is generally attributed to Macy's failure to listen to Marshall Field's customers and Macy's failure to maintain Marshall Field's high level of customer service, quality and emotional attachment to the store.

    Where Field's on State Street was the city's third largest tourist destination, attracting more than 9 million people in 2004 before the sale FDS, the landmark building is now but one in Macy's national chain of 850 discount stores. Chicago lost an important part of the identity it presents to the world.

    Macy's is a national discount store and as such eliminated most of Field's higher end designer merchandise, replacing it with house brands like Alfani. Field's ustomers want Armain, not Alfani. Macy's offend Chicagoans at every turn and emphasizes the need to "re-educate" Field's customers rather than the need to listen to them.

    Macy's is driving a treasured Chicago asset into the ground and has earned the disdain of generations of Field's shoppers.

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