Is that the reason that you prefer to do it on your own? Very much, no, I'm more conservative than she is. I like to be able to buy my pinstripe suits. I must have six pinstripe suits of different colors, and that's what I like. We are watching a seldom seen ritual of modern corporate marketing. The men beyond the glass are the subjects of minut scrutiny. What are their habits? What makes them feel comfortable? What, in short, will make them want to buy a new product? But the world's largest apparel manufacturer is preparing to sell to them and to you this week on enterprise, Levi's not buy jeans alone.
I'm Eric severide and I predate the blue jean era. When I was young, they were worn only by farmers and laborers. They were work clothes. In the 1950s, the image of jeans began to change. Marlon Brando and James Dean wore them as symbols of rebellion. In the 60s, jeans emerged as a uniform of a generation receiving a priceless seal of disapproval, and they were banned from schools around the country. And about that time Levi Strauss and company began as rather lucky rise to the top of its industry. Today it's the world's largest clothing manufacturer, but with over five hundred million pairs of jeans now in the collective American wardrobe and competition from designer jeans. Of all things, the market is both saturated and changing. This week, on enterprise, we will watch Levi Strauss attempt to end its dependence on dungarees before the fashion fad of the century begins to fade away. San Francisco, home of Levi Strauss and company the largest apparel manufacturer in the world.
In 1980, Levi's gross 2.8 billion dollars, over 50% from jeans. Levi's recently produced its 2 billionth pair of jeans. Sales have grown an average of 23 percent each year for the last decade. But no corporation believes in limits to growth. Staying the same size is commercial class for me. The jeans market is saturated for Levi's. The question is: what next? This is Peter Haas jr, Harvard MBA, son of Levi's chief executive officer and the great-great grand nephew of Levi Strauss himself. In June of 1980, Haas became general manager of a new marketing division created specifically to introduce the most expensive and formal clothing ever to carry the Levi's name. How many? The marketing director for launching the new product is Steve Goldstein. Goldstein Yale 61 has marketed everything from ultrasonic plastic welding equipment to liquid yogurt too cold capsules. He's been with Levi for five years. Paws and Goldstein are charged with extending Levi Strauss and company's name into a different and lucrative segment of the menswear market. Levi's is in all kinds of businesses today. We make shirts, hats, socks, belts, skirts, glasses. All of them are in moderate price points.
If we want to grow, we're probably gonna have to go to upper moderate price points and somewhat higher taste levels for our products. In order for a company like Levi Strauss to extend its sales and profit growth, we need to diversify, to develop new products, and this is a lot more difficult than it was when we're just filling demand for a five pocket Western Jean. Filling an existing need is one thing, uncovering new needs is another. Levi Strauss has spent millions attempting to predict consumer behavior.
Hoss and Goldstein's new product is not based on hunch but on an extensive market segmentation study involving over 2000 consumer interviews. We took apart the men's market about 18 months ago and examined five basic segments within it, and we really understood what's going on within each one of those five segments.
The q3 segment we call the utilitarian jeans customer. This guy's our old, familiar Levi's loyalist. He doesn't care much about clothes and he wears jeans for work and for play. He's a big chunk of the men's apparel market- about 26%. Q4 we called trendy casual. He's basically you're John Travolta tights. He buys high fashion brands. He loves to be noticed. Me wear jeans to work, but he really comes to life after dark. The q4 occupies 19% of the market. Q5 customer we've all seen as a price shopper. His main concern is the price of his goods, The Shops at department stores and discount stores, wherever the bargains are best. When we come to the two largest segments of the pie, the q1- our mainstream traditionalist. The q1 loves polyester. He's probably over 45 years old, married hard core department store shopper. Most likely he's a conservative, both in his political views and in his tastes. He likes to shop with his wife and he values her opinion. You really is the heart of our Levi's action slack and Levi's action suit business, which at the moment makes up a good portion of all of the sales for the menswear division. The most significant thing about the menswear segmentation study was the uncovering of this q2 segment. We call it the classic independent. The classic independent is a fascinating animal. He's a real close horse. He spends more on his clothes than any other group. He buys 46% of the wall in more blended clothing sold, yet he's only 21 percent of the market. Looking right is real important to him. His dress is traditional, lapels are never too wide and never too narrow. He really likes to shop and he really likes to shop alone, not with his wife or his girlfriend. He knows what he likes and he goes to specialty stores to buy it. We're going after this guy tooth and nail and the bait: a full line of tailored clothing for men: slacks, sport coats and, most notably, three-piece suits. The suits will be sold as separates. Jacket, slacks and vest can be selected by the customer in his correct size, eliminating the need for tailoring. The cut will be traditional, not faddish. The fabrics will be wool and wool blends in conservative colors and patterns. 30 to 45 dollars for the slacks, 85 to 100 for the jackets, and the three-piece suit will retail for about $160- just what the target consumer, the Q 2, should be looking for. The man in charge of design and production of the new line is Steve Schwartz Bock, a garment industry veteran from New York. In August 1980, one year before Levi's tailored classics will be in the stores, Schwarz bak brings samples from other manufacturers to serve as models for prototype garments. Are you gonna make this, this garment? Yeah, that's one. Okay. Now we want a belt loop garment which is basically the Tod. Okay, except that we want to drop the watch bottle. So it's a Tod. Well, I shouldn't say it's a Tod, because actually there's no simulated topstitch. A vital part of Levi's strategy is selling in department stores for volume sales, not in specialty stores. Work you to, consumers habitually shop. The sales manager for tailored classics, George Miguel Drake, has the formidable task of selling this new approach to department store buyers. The success of the line rests ultimately on the shoulders of McGoldrick and his 12 salesman. Well, the sales force is extremely excited. They've been very antsy to get going with this concept and they know we have something that's good, potentially going to be some very large business down the road to come in 1850. A television commercial will be crucial to the campaign mode. But the message will need to be very different from the casual image that has appealed so successfully to the q3 segment, the jeans worries. These ads mirrored the values held by young consumers in the 70s: nonconformity and doing your own thing.
The stranger came into our town. He was tall and had eyes that could look right to the bottom of you. But aren't we different the same. The commercial for tailored classics must be ready for September of 81, to coincide with the introduction of the line. It will be carefully designed to appeal to the q2 consumer. It will definitely not have a woman in the commercial along with him as a support for for his purchase. That would antagonize this guy. We know that he doesn't want to have somebody telling him that he looks good or he doesn't look good. There's an awful lot of research under underlayment that has to go on and it is that's going on right now. In November 1980, the tailored classics marketing team gathers behind a one-way glass to watch their target consumers being interviewed. Whether you prefer a shopper, but I don't always have a choice I want- the discussion leader is Malcolm Baker, an independent research consultant. The consumers are paid $20 to participate. They all match the q2 profile in a preliminary telephone interview. I don't agree on what I should wear. Very often is that the reason that you prefer to do very much so, and I'm more conservative than she is and I like to be able to buy my pinstripe suits. I must have six pinstripe suits of different colors and that's what I like. Goldstein and advertising manager Leslie Schumann have arranged consumer discussions, known as focus groups, in New York and Atlanta, as well as here in San Francisco. The basis of the discussion is a fairly new concept in men's clothing. This is a full line of traditionalist styled men's suits or slacks and blazers made of a natural and blended fabric. The clothes are reasonably priced and they require no tailoring, but your reactions to them. There's a big difference between something that you take off the rack and something that you can have a little something done too. If you can spend $30 for something you can walk out of the store with, but if you can spend 45 and have them do a little tailoring on it, it looks terrific on. You spend $15 more and look like something, but you're damn right, do not wanna feel mass-produced to it. If they are mass-produced, it's the last thing they want to be reminded a we're willing to put it on but and compromise at the rack, but they don't want to be told it's like millions of others in their minds that it can't be done.
So it goes back to the ritual significance of having a tailor there and a few adjustments that make it your own thing, so that you're being pinstriped is your blue pinstripe and it's not the same as mine. So you should stress the idea that an hour separates we can make a suit because the top fits your top and our bottom fits your bottom. Final peel away tells us that this line of clothing will be made by Levi's. The party-like atmosphere and the booth changes abruptly. The use of the Levi's name is a critical issue. So the idea of Levi's producing a line of traditionally styled men's slacks and blazers that works, doesn't you? You feel that Levi would do that while traveling?
So sure I think we might hide. You know, I think jeans, yeah, if they're meeting suits, I'd have to be convinced. What about its gel? Acts are okay. What about blazes, sort of thing that Jack is wearing? Well, better be hard. That would be easier to convince me than suits. So here the same thing over and over. You're right, real, it's gotta be right. Well well, consumer research continues. George Miguel Drake is on the road, presenting the concept of tailored classics to retailers. Stores need to place orders by February to ensure delivery in August, and the salesmen are eager to get started. The only concern they have right now is is one of price. We're going into a tough year economically and we're hoping that the consumer will see the value of our garment and be willing to pay the price. We don't think we're going to have that much of a problem selling it to the retailer in early December. A sample from the factory is ready for approval by Steve Schwartz Bach. To feel big on you, would you? It feels large on me, okay, I have an awful lot of room, I think the middle, I think in front of the code a little, the back seems to be the back is perfect.
Yeah, okay, I think we don't have to take that front end a little bit. If you were in the market for a navy blue pinstripe suit and we made these adjustments, you think that could be something you'd be inclined to buy.
Absolutely sure, no problem at all in the market. Maybe blue pencil isn't work, but it's not just any navy blue pinstripe suit, it's a Levi's suit and consumer perception of the Levi's name is a prime topic when the tailored classics team meets for a debriefing with the focus group leader. We had people saying: well, if I mean I, if I wore this suit and I went to work and someone said to me: hey, that's a nice you, Joe, who sue, is it? And I said Levi, I would not feel comfortable. And I think it has. It has a lot to do with with with their agent, with and with convention, rather than the belief that Levi is not capable of making a suit that would function perfectly well and it would look alright.
So you're saying that maybe they would feel very comfortable about wearing it as long as they put someone else's label in it. Yes, yes, what does that lead you? In terms of where we, what we should be doing in terms of that, how well my right a messenger or I can't- oh, I'm going to talk about message in a minute, but my record basic recommendation at the moment is lead with slacks and sports coats and it suits slipstream with Levi's images.
It's currently is. With this segment, however positive, I think the image is still a little too casual. You're absolutely right. The thing that's gonna overcome the Levi's image for casualness, as no other thing can do, is a suit that's made by Levi's that doesn't look like all the other stuff we've made, and once that gets in on the shelves or on the racks, they're gonna be a lot of people who will put a little asterisk on the Levi's image which says, oh, and also, they can make up a good suit when they, when they put their mind to it. December 15th, the selling of Levi's tailored classics begins. Schwartz Bach presents the line to buyers from weinstock's department stores is our expression: twill, stretch, brushed, done in the hall, hosted colors including basics. After the buyers have shown the entire tailored classics line, the talk turns to Levi's wholesale prices. Here and here you're talking 1590 for the slack and you're talking $43 for the coat.
The wholesale prices are higher than wine stocks had anticipated. Retail prices will need to follow suit. Big jump to the customer. Last year we were at $28 on this slack. I just I have to be leaving in a couple of minutes. I just wanted to come in and find out any observations or questions- that heat Hawes is acutely aware that stated classics are priced higher than the competition. He is beginning to feel nervous about his first new product launch with the company and is anxious for firm commitments to buy. When do you think you'll be be giving us paper, actually making selection in order, just so that we know? In 30 days I would see, Jeff, you'll be finished up with only all the four of them, do you think often, as I? Essentially by February first. Now you've gotta get a new suit by Saturday. No problem, Levi's tailored classics, it's not the only game in town. A very similar line of clothes is offered by Hager, introducing Hager Imperial separates for the no problem suit and 100% wool and wool- black figures ad is not aimed at the cute Orem but at the more casual dresser who needs a suit for special occasions. And Hager speaks from experience. We've been in this business since 1926. We make all of our own products. We control our quality and our track record, unlike our friends that you mentioned.
They're a fine firm, but they were making another type of product, completely different than what they're making. Levi's venture into finer clothing is certainly a risk and initial sales are not encouraging. After months of optimism, doubts begin to service. I think about this a lot. No, I don't dream about it, but I do think about it. And that is: we really have one shot at this. I mean, everything we do relative to this line has to be right, everything I mean. If we could all.
January 5th 1981. Mcgoldrick is having a tough time, money is tight, department stores are cautious and the salesmen are getting discouraged. Ok, listen, as much as we need to book those goods, I think you still have to get to Detroit. We've got it. We've got to get placement in Detroit right away. You can call in, call Dayton from there, and if they're not willing to give you a paper right away, then maybe I can call them. Maybe next week I'll even come in.
Despite slow sales pattern, layout and cutting begin at the factory in San Antonio, Levi's contract with Burlington Mills gives option dates by which additional fabric must be ordered. If sales don't improve soon, the February first option will not be exercised. By late January. The sales picture is worse. Two of McGoldrick sales reps have quit the line. They aren't selling enough to make their Commission's. High prices are blamed and McGoldrick is feeling frustrated. Well, I think it's a lot of emotions from someone to punch someone in the mouth to wanting to leave and never come back. Well, hey, Mike, I would spend the day here or spend a week on the road and come home and get a call at 11 o'clock at night. You know, damn, and I can't do this. I can't do that. You know this one's throw me on. I want to leave, you know. And then you got to calm down and you end up talking to people half the night to keep them going, cuz they have to get up and go out the next day. Listen, pal, you're number two in the whole region. You've done a phenomenal job. You've been thrown out of accounts before we all have listen. This is one tough season. Something had to be done. On the morning of January 29th, after much debate, pitas made a desperate move. Daily News record, the trade paper of the garment industry, carried the news.
Wholesale prices were dropped four to seven percent and McGoldrick took immediate action. The biggest department store in the United States is is bamberger's, which is part of the Maisie organization. They, I knew we're going to pass us and they are big. They were going to Dallas, Texas, to work with with our competition and place orders. And the day that Pete got authority to roll back the prices, I caught a one am plane to Dallas, found these people in their hotel eating breakfast at 7:00 in the morning, ten minutes before our competition sent the limousine to pick them up and save the day. I felt like the cavalry rode covered, but they flew right from Dallas to San Francisco and they gave us about good garlic must have been three, four hundred thousand dollars worth of goods. March 10th: the first selling season is over. The tailored classics team flies to Los Angeles for the menswear trade show called magic. Magic is an opportunity for thousands of manufacturers and retailers to get together to display new products, to make deals and to celebrate sales successes. See, Haggar had done well. Sales of their Imperial line had more than tripled in the past year. But the tailored classics team is not celebrating.
Despite the price rollback, they've achieved only 65% of their modest sales goals. Tailored classics are not being prominently displayed at Levi's exhibit. The emphasis in the menswear division has shifted to a new line of washable polyester suits. This line is seen by Levi's senior management is having more immediate profit potential. Bob Segall, Pete Hodges boss, is losing confidence in tailored classics. He has canceled plans for the television commercial and put all research on hold. Hawes and Goldstein are fighting to keep the line alive. One of the major stumbling blocks is the Levi's name itself - better merchandise is an unknown and we'll never know that. If I just started to retail never and I'd like to get it out and get it settled, I'd like to find out that it can't be. It doesn't work. If this does not work, upon returning from magic they decide to confront the dissonance between a casual Western image and elegant clothing head-on.
The agency prepares an ad for the sunday New York Times magazine for September 81: Levi's tailor classics. You expected Bruins perhaps. I love the juxtaposition of a horse and an elegant man, and of you expected Ribbit's Ribbit's, perhaps because of Levi's azan and I'm- and you have it confront- a guy issue directly. So the selling of Levi's tailored classics moves forward, but at a walk, not a gallop. There will be no big television commercial, but the newspaper ad will run in New York. They will feature a sport coat, not a suit. They will try to gradually warm up retailers to their ideas and await the verdict from the consumer. I would be much happier if this new business of ours had taken off and flown brilliantly. But you know, that's that's business. Most new products fail. Most new products fail. One feels a responsibility. Would have liked to have done better than we did. Would have liked to have had 20/20 foresight instead of 20/20 hindsight. I don't see how we can come in like the Messiah and teach people how to make money that nobody else can, because we're new in the business too. But I think there's that if you never take a chance, you can never have a success. You win some and you lose some. In July 81, George McGoldrick resigned after 16 years with Levi Strauss. He was unhappy with trying to sell better clothing would the Levi's name. He is now a National Sales Manager at rpm, a pants manufacturer in New York.
Pete Haas has a new position. He has been assigned to the office of Levi's chief operating officer. Steve Schwartz buck now has primary responsibility for tailored classics. It's really his baby now. Steve Goldstein has been spending considerable time marketing the washable polyester suits. He is every bit as enthusiastic about that as he was about tailored classics. I'm getting to see a snake about almost anything.
You know I can get it to see a thing about a cheeseburger. As of November 1981, consumer response to Levi's tailored classics is mixed. Sport coats and slacks are selling well, but suit separates are moving slowly.
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