ZIPPO’s Global Dilemma

Zippo-Lead-photo

Zippo CEO Greg Booth is solving a problem most executives would eagerly share. The company’s flagship product, the iconic windproof lighter, is too well known. Don’t laugh. How can Booth successfully launch new products when Americans aren’t used to accepting Zippo the lighter as Zippo the brand?

Yet the company identified a need for diversifying its product line. Lighters are generally used in connection with tobacco products, and Zippo executives haven’t missed what Booth calls the “significant decrease in smoking” that began in the 1980s and ’90s.

“Of course, we immediately realized it was a trend that we needed to face, and face immediately to ensure the company would remain strong,” he says. Zippo reacted by committing significant resources to “determining how we could evolve beyond just being known for our windproof pocket lighters, and laying out a strategy for product line expansion that would be accepted by our consumers as ‘Zippo.’”

That strategy of recreating Zippo’s domestic image starts overseas, test marketing new products before bringing successful trials back home.

A full 60 percent of Zippo sales are overseas in more than 160 countries. These markets often resemble the end goal for the American Zippo experience: Up to 90 percent brand recognition bolstered by an openness to products that, believe it or not, don’t generate a flame.

Zippo CEO Greg Booth

Zippo CEO Greg Booth

“We’ve found that consumers in markets such as China, which is actually our number one market outside the U.S. representing 10 percent of our business, are very receptive when it comes to other products we’ve introduced,” Booth says. “Here in the U.S., the domestic consumer is very much focused on Zippo the lighter company—so we have a lot of work to do.”

Zippo has flirted with other product lines for a while. “The company has always taken strides to expand beyond [being solely known as a lighter company], introducing such products as tape measures, a pocket flashlight called the ZipLite, pill boxes and even golf balls, but these tangents never took off,” says Booth. “They weren’t true to the core values of our brand or what Zippo stood for.”

Those core values—quality, durability, ruggedness—are what Zippo has zeroed in on with its latest product expansions. And while the renewed and concerted effort to diversify may have been sparked by fears over trends showing decreased smoking, that trend never really amounted to falling sales. In fact, sales never faltered much at all, excepting the time surrounding 2007, when sales of everything were down, outside of perhaps alcohol and rope.

“The motivation is not to offset a decline in the lighter business,” says David Warfel, Zippo’s global marketing director. “The diversification strategy began 10 or 12 years ago with just some concepting about, hey, in addition to great brand recognition, we have a sales channel that’s in place. We certainly have manufacturing capabilities.”

Zippo's Global marketing director, David Warfel

Zippo’s Global marketing director, David Warfel

Warfel points to a strong collectors market, foreign sales, custom design and positioning the product as an accessory—rather than just a cigarette lighter—as top contributors to not only sustained, but rising bottom lines. “Our lighter sales for the past three years have grown approximately 20 percent each year,” he says. “Our lighter business has never been bigger, better or stronger—and I know that sounds crazy but it’s the truth.”

That’s saying a lot for a company that famously manufactured its 500 millionth lighter in July of this year, after more than 80 years in business. That bears repeating: 500 million lighters. Is it any wonder that the little metal rectangles are the first thing called to mind whenever the word “Zippo” is uttered? Or is it a surprise that such an iconic company would want to trade on its flagship product’s key traits—quality, durability, ruggedness—to start entering new verticals? Certainly not.

The surprising part is the products—and places—Zippo decided to venture.

Buon Giorno, Italia!

The lessons of how to leverage the international marketplace as a launching pad for new products begins with an important understanding: “Middle-aged white men in Bradford, Pennsylvania, cannot be making consumer opinions for Delhi or Beijing,” says Warfel, a middle-aged white man in Bradford, Pennsylvania. “It’s very easy to have opinions. You have to put those aside.”

Warfel’s approach is much smarter and solves two problems at once. To collect market data, advice, trends and the like from countries around the world on the local level, he relies on a PR firm, namely, SLAM. His reasoning is important: Yes, you need localized information worldwide, but you also can’t spend all your time communicating with dozens of PR firms—you need a single firm with tremendous reach, one that can consolidate information and transmit it in a fraction of the time, freeing Warfel up to strategize on that question we keep coming back to: How can Zippo diversify its product line?

In Italy, he was told, Zippo’s answer is fragrance. Zippo fragrance? Yes. Zippo fragrance—and no, it doesn’t smell like butane.

“The fragrance is an excellent example. The brand perception of Zippo in Italy is somewhat— ” Warfel stops short, tussles with some descriptions and final settles on this: “There’s a cool factor to it.

Zippo's newest smash hit, fragrance, launched in Italy, with the help of a leading local perfumery.

Zippo’s newest smash hit, fragrance, launched in Italy, with the help of a leading local perfumery.

“[Italy] was the ideal place to begin extending out into this ambiguous ‘lifestyle’ category,” he continues. “And there’s nothing that speaks of lifestyle more dramatically or as quickly as fragrance. That’s what lifestyle is.” Warfel says fragrance sales began in Italy because, when an Italian fragrance company came knocking with enticing news about a new opportunity, Zippo knew there would be a predisposition to accept its brand beyond just windproof lighters—thanks, of course, to its friends at SLAM.

“We partnered with a leading Italian perfumery to design the scents and packaging and it’s absolutely resonating with our consumers in Europe,” Booth says. “With success such as this, the fragrance line is without question ready for prime time here in the U.S.”

Zippo can now turn to its domestic distributors with the idea of adding a fragrance line not sounding so far-fetched. “We will be using data and consumer acceptance overseas to demonstrate viability to key U.S. accounts,” Booth says. The company has already gone this route with Zippo-branded watches, also launched in Italy and currently on sale at select men’s stores that carry the company’s wares.

Watches were a logical extension of the Zippo brand in its existing distribution channel. For one, they didn’t take up very much room in the transportation process, and resellers already carrying windproof lighters wouldn’t mind picking up a dozen Zippo-branded watches. “If someone was predisposed to buy a Zippo lighter, they’re in the store, they look over and they can also get a Zippo watch,” Warfel says. “Maybe that’s a nice add-on purchase.”

Ni Hao, China!

China has been kind to Zippo, accounting for 10 percent of total company sales. The company couldn’t be blamed for rushing to offer more of its products to such a successful market, though it suffered a tough lesson in the perils of hastiness.

“We are just like lots of people venturing into new markets for the first time,” Warfel says. “We’re beginners, too, in certain categories.” One such category was sunglasses, which had become quite a successful accessory back in Italy, where Zippo seems to launch many of its introductory products. When a Chinese distributor asked for rights to sell the eyewear in its market, Zippo saw a great opportunity and had “a bunch of glasses” shipped right over from Italy. The only problem? They didn’t fit. It turns out that the head size of the average Chinese consumer is roughly 20 percent smaller than an Italian’s. “Talk about missing the obvious,” Warfel laughs. “But something as simple as that, making sure the sizing is correct….” The company abandoned the idea of marketing sunglasses in China, deeming the small scope of projected sales less enticing when accounting for doubled manufacturing costs.

Items from Zippo’s luxury clothing line, launched in China.

Items from Zippo’s luxury clothing line, launched in China.

It was an error Zippo would not repeat while using China as the testing ground for the launch of its luxury clothing line. The addition, which the company has been working on for more than two years, culminated with the recent launch of a Zippo-branded store in Qingdao. The idea had surfaced nearly four years ago when Warfel conducted a survey and found that Zippo already carried 50 percent aided and unaided brand recognition—what he calls “a good head start.”

“Before we began we already had resellers lined up to carry the brand line,” he says. The company was meticulous in its research. “We said, ‘Where’s the space that Zippo should play outside of the lighter market?’ Clothing came up. And as we examined the market, we found that it was the white space. We’re not competing with everyone else, we like to think that we found the white space where Zippo can fit where nobody else is playing.”

He likens Zippo’s clothing brand quality to that of a Nautica or Timberland—“maybe not a Ralph Lauren,” but rugged and aimed at outdoor types. As part of that aiming, Warfel has helped to develop a marketing strategy that strikes at the heart of his desired current and future audience, with the main goal of edging Zippo back to relevancy. Partnering with entertainment company Live Nation to sponsor a series of concerts, Zippo drew on local talent to create a run of battle of the bands-type shows, as many as six per year until it grew into a larger event. “It was sort of the monkey move-up. Based on online endorsement, [bands] would advance to the next round,” says Warfel.

“We had product, signage, lots of promotion surrounding it,” he explains. “It’s been very successful.” Part of his surprise stems from an observation that, in China, big crowds are typically not well-received, so a stadium full of rock music enthusiasts could have been a tough sell. “We would have anywhere from 700 to 2,000. But because it was unique for the market, it gained an awful lot of attention. In fact, we did that type of promotion for two years and we became a feature on MTV [in China].”

The success of the Zippo Encore Program, as the company calls it, depends on “ground activation” and co-promotion with local media, such as, “Call in the next hour and get two tickets plus a Zippo something for the upcoming concert.”

“Any event has a beginning, the event, and a follow up,” Warfel explains. “We look at an event not as a singular activity, but as a campaign, and that’s sort of the crown jewel.” Zippo’s participation in these events gives it more to talk about than just product. The company becomes an interesting story, engaging and—here’s that word again—relevant. “But we’re not talking about product,” he reiterates. “We’re not saying ‘go out and buy a lighter. Go out and buy a pair of jeans.’ People talk about it because it’s cool, it’s fun.”

Fun. It’s a word that hasn’t been bandied about much here in the States when Zippo is the topic of conversation. Or is it even the topic of conversation? Perhaps, and perhaps not. But there’s little question of whether their cornerstone product is cool. As Warfel points out, have you ever seen a Bruce Willis flick in which he didn’t light up with a Zippo? And aren’t they used in every episode of Mad Men ever made?

Zippo’s manufacturing plant in Bradford, Pennsylvania.

Zippo’s manufacturing plant in Bradford, Pennsylvania.

“We have a very rich history and it’s romantic and it’s World War II and it’s Vietnam and it’s movies,” says Warfel. “I finally said, ‘No more.’ I don’t want to talk about the past. I only want to talk about the future.” Can you blame a guy for such sentiments when he’s tasked with breathing new life into an iconic brand via new—and often unlikely—products?

“We had the potential of becoming Pepsodent, Texaco. One of those famous names from out of the past. I’m not going to let that happen. And the first thing we had to do is, we had to become relevant.” Again: Relevant. And it’s as simple as reconnecting the youth of today with the classic cool Zippo came to signify yesteryear. Which is why the Mad Men placement is so brilliant—it’s retro, but retro is young now. “So often people talk a lot about Zippo in World War II. The fact of the matter is, when soldiers embraced Zippo in WWII, they weren’t 60-years-old. They weren’t your fathers and grandfathers. They were 18-, 19-year-old kids. Those are the people we have to engage now.”

They’re already being engaged in China and Italy—just two of Zippo’s 160-plus foreign residencies. The final phase of the company’s master plan is only just now beginning to play out. “Market conditions will always change and force you to adapt,” says Booth, “but remaining true to the principles that your company was founded on and the core values of your brand will always inform the best direction.”

With fragrance, watches, clothing and more inching into local chains as the culmination of a successful expansion strategy that began overseas, the Zippo brand is truly headed in the best direction: Up.

The post is reprinted from the Global Trade Magazine

 

 

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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