You’ve Got to Wonder About Tiffany & Co.

Tiffany & Co.

“Good advertising does not just circulate information. It penetrates the public mind with desires and belief.” – Leo Burnett

In December, my wife gave all her employees presents from Tiffany & Co. Everybody was very happy, to say the least.

After my last book was published, I sent the dozen people I thanked in my acknowledgments silver pens from Tiffany. They were very appreciative.

When a friend gets married or has a special event and I’m not sure what to send, I always fall back on “something from Tiffany & Co.”

I don’t wear any Tiffany jewelry or use any Tiffany accessories, but as a gift giver, I’m a big Tiffany fan.

But there is something that puzzles me about this company…

In the past five years, I have bought products from them at least two dozen times … and yet they’ve never prompted me to buy more. They’ve added me to their catalog mailing list, but that’s it.

It makes no sense. Why would they leave me alone? Why wouldn’t they do everything they could to get more business from me?

Making a purchase at Tiffany is a brand-centric buy. By that I mean Tiffany customers happily pay a premium for their products because those signature blue boxes convey a psycho-emotional benefit that can’t be gotten elsewhere.

Tiffany customers happily pay a premium for their products because those signature blue boxes convey a psycho-emotional benefit that can’t be gotten elsewhere.

It’s all about the blue box. It says something specific and desirable about the purchaser: that he or she has sophisticated, understated good taste.

When you walk into a Tiffany store, you know you are going to be treated well.

When you buy something from Tiffany, you know it will be unique, beautiful, and well made. At least that’s the way Tiffany was in the beginning and – thanks to a recent management decision – is once again.

For a while, the company made the mistake that Mercedes made a few years ago: downgrading its product line to attract a wider audience. In the late 1990s, the honchos at Tiffany headquarters decided to sell inexpensive silver jewelry to take advantage of the booming market for “affordable luxury” – i.e. brand names that middle-class people could afford to buy. “The 1997 introduction of the silver ‘return to Tiffany’ collection, which offered jewelry inscribed with the Tiffany name for just over $100, was a huge hit,” The Wall Street Journal reported.

Sales exploded, earnings more than doubled, and the stock price shot up too. But in the years that followed, the Tiffany brand lost its exclusiveness as their stores became crowded with younger and less affluent people. “I felt like I was in Macy’s,” one longtime Tiffany customer told the WSJ.

Although there was plenty of profit in low-end jewelry, in 2002 Tiffany leadership decided to reassert their claim on the luxury corner of their market. They began raising prices on the less expensive items and, after a lag, sales of those products slowed and the stores became less crowded.

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But buying of higher-priced items grew. A good sign. But because Tiffany was giving up the high-margin, middle-market jewelry sales, and earnings were down 16 percent last year. The stock market didn’t like that. Share prices sank by 40 percent.

“I hope we didn’t go too far,” the CEO told the WSJ.

I don’t think they did. Getting out of the middle market was the right move, even if it did cost them earnings in the short run. They could easily make up for those lost earnings and then get back to building their very good business if they would just pay more attention to what I think are their best customers: high-end and gift buyers.

You want to go after your high-end buyers because, next to low-end buying, high-end purchases typically have the greatest margin. And you want to stimulate gift purchasing because there are so many opportunities to do it.

Tiffany has always had a brilliant selling strategy that appealed perfectly to the sophisticated, high-end buyer:

  1. Beautiful, quiet stores
  2. Famously attentive clerks
  3. A dual product line that appealed to the same wealthy buyer

Their two primary product lines were expensive jewelry and attractive silver accessories. If you came in to buy jewelry for yourself, you might buy some additional gift items for friends or relatives. If you came in to buy gift items, you might be inclined to buy yourself or a loved one an expensive piece of jewelry.

Which gets back to my original question: Why haven’t I been getting phone calls, e-mails, and letters from Tiffany?

There is only one possible answer: Although Tiffany’s leadership has the right idea about positioning their unique and valuable brand, their marketing executives don’t know enough about making back-end sales.

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A Rundown of Back-End Marketing

Back-end marketing means getting current customers to buy more from you. It works partly because of something I’ve labeled the “buying frenzy” in past ETR articles: When people buy something, the buying itself does not satisfy the urge. It excites it.

In most businesses, there is a good chance that fewer than 20 percent of your customers are giving you more than 80 percent of your profits. This is so because repeat and upgrade sales usually require the least investment of your marketing dollars and are therefore the most profitable.

Astonishingly, some of the businesses I work with don’t know – when I start working with them – who their best customers are. They are aware that a limited number of people are buying a lot of their stuff, but they don’t keep a list of those people or make special efforts to sell to them.

Big mistake.

Your best customers have not only already spent the most money on your products, they are also the ones who will spend the most money on your products in the future.

If you don’t know who your best customers are, find out.

If you know who they are but aren’t marketing to them (a) more frequently, (b) more personally, and (c) with increasingly expensive products, make a plan to do so.

As I’ve said before, what those customers paid for when you acquired them in the first place was not only the product but also the experience of being sold to and making the purchase. I’m talking about the intangible benefits – the promise of fulfilling dreams, hopes, and desires – that are present in any good selling/buying experience.

One of the best resources on how to master the selling experience is the ETR University course: Internet Marketing 101.  

Start selling. Keep selling. And make sure you continue to give your customers the intangible benefits that will feed their buying frenzy and keep them coming back for more.

Maybe one day the people at Tiffany will start reading ETR and figure out just how important this is. Maybe they’ll realize how good it makes me feel to buy and give gifts in that little blue box … and get me to buy and give even more of them.

Mark Morgan Ford

Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Wealth Builders Club. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.