Cath Kidston: Nostalgic Fantasy
In certain respects, cross-comparing personal products such as key
That Creates Value for Consumers
This case study examines the pricing strategy of Cath Kidston, one
UK-based company that sells furnishings, home and personal
accessories as well as clothes, operating mainly in the UK, Europe
and Asia regions.
How much are you willing to pay for a key ring? The market
price charges just a bit more than $1. But would you pay $2 for a
comparable product? How about $7? A low-price strategy is often
used by companies if their products are not well differentiated.
Although a low-price strategy might seem attractive, especially in
an economic downturn, some companies are focusing on creating
value for customers and adopting customer-value added pricing
strategy. Cath Kidston Ltd is one UK-based company that
understands that sometimes it pays to charge more. Cath Kidston’s
key rings sells for roughly $7 to $9.50, whereas the market price
charges less than a third of that. To understand how Cath Kidston
has succeeded with this pricing strategy, let’s look at what makes
the brand so special.
The cheery colors and fun patterns Cath Kidston created allows it
not to focus on price-sensitive market segments but instead lure
customers with a value-added pricing strategy. It is important for a
brand to create something that people respond to with their hearts,
which is a sure-fire way to breed success for a brand. Cath Kidston
is one of the brands that is confident in its design style and fun in
its character.
From Humble Beginnings
Cath Kidston Ltd was founded in 1993 when designer Cath
Kidston opened a tiny shop in London’s Holland Park with a
$23,800 investment in her business, selling towels, vintage
fabrics and wallpaper, and brightly painted “junk’ furniture she
remembered fondly from her childhood. Cath Kidston’s cleaver re-
working of traditional English country style made her tiny shop
soon become a cult success. Today, the brand carries a wide
product range, everything from furnishings, crockery, cutlery,
cloths, toys, china, bed linen, and bags, to women’s and children’s
wear and accessories, charging price premiums that fans are gladly
paying.
In 2012, Cath Kidston had 57 shops and concessions in
the UK, 2 in Ireland, 27 in Japan, 7 in South Korea, 3 in Thailand,
and 1 in Taiwan. The business is also driven by successful web,
mail-order, and wholesale divisions, with UK, Euro, and US
transactional Web sites. Cath Kidston has become a powerhouse of
British design and retail, up there with the likes of Burberry and
Pringle.
Design is core part of Cath Kidston’s brand. However, it is more
than the vintage-inspired patterns and the stunning shop interiors.
Walk into any Cath Kidston shop and you are able to “experience”
the brand that other retail shops do not offer. And this “experience”
permeates Cath Kidston’s Web sites and all of its printed
communications. If you are a fan, you can feel the essence of the
brand in every aspect. In color psychology terms, Cath Kidston is
pure spring—fun, creative, warm, inspiring, and young, adding a
splash of color and vintage charm to a routine day.
Cath Kidston not only offers a wide product range but is actually a
lifestyle store. You can buy almost everything for your home,
children, or yourself. The broad product range maximizes the
brand’s appeal and means that it works for both gift and personal
purchases. Cath Kidston allows its brand personality (fun and
brightness) to shine through its brand identity (colors and
typography), hence becoming a brand consumers can fall in love
with.
Value versus Price
rings can be problematic, because there is so much variation in
both features and price. But consider some popular Cath Kidston
products. Its scarfs sell for roughly $76, whereas comparable
products from apparel retailers such as Marks & Spencer or
Monsoon range from roughly $20 to $55. Cath Kidston’s
plasticcoated fabric bags sell from roughly $47 to $119 whereas
other apparel retailers only charge similar prices for their leather
bags.
The fantasy of the English country childhood that Cath Kidston
creates for customers enables the brand to charge price premiums
as compared to competitors, such as John Lewis, Marks & Spencer,
and Monsoon. For the fans of Cath Kidston, her products excite
them in a way that IKEA and other competitors cannot hope to
grasp.
In terms of competition, in the product category of home
accessories, Cath Kidston competes directly with UK retailers like
John Lewis and Marks & Spencer. In the clothing category, apparel
retailers such as Monsoon and Marks & Spencer are the key
competitors of Cath Kidston, while it competes with retailers like
IKEA in the furniture category. Compare to the above main
competitors, the weakness of Cath Kidston is its product offerings
are still relatively limited and narrow. However, Cath Kidston’s
unique strength is the product design offers its customers strong
personal statement and identify that other competitors found hard
to achieve. The biggest challenge of Cath Kidston brand is to
continue its success with the traditional English country style and
fun brand character, while satisfying its loyal customers with
innovative product design and product line extension.
Retro Brands in Hard Times
Given the harsh economic climate, you might expect to see the
cheerful floral prints that made Cath Kidston a household name
withering a little. However, Cath Kidston has survived the
recession very well, selling the retro-styling and a rose-tinted
antidote to an uncertain world in the uncertain economic climate.
The brand is now a seemingly recession-proof “global lifestyle
brand.”
In 2009, while other brands were chalking up serious losses due to
the economic downturn, Cath Kidston saw profits leap by 60
percent, and sales rose from roughly $30 to $49 million. The
reason for this phenomenon is that in these uncertain times,
consumers, although cash-conscious, have an appetite for nostalgia.
The products of Cath Kidston fulfill consumer needs for value and
meaning, because they are inspired by a comforting and familiar
1950s aesthetic.
For Cath Kidston, its premium pricing strategy coincided with
a trend of consumer preference toward nostalgia, which seemed to
provide comfort in the time of recession. Thus, the value derived
from Cath Kidston products was enough to justify the high prices
for many of its products. In an economic downturn, consumers
want a bit of security and comfort, and this trend shows in the
recession of the 1990s and today. UK retailers such as Asda
reported a surge in sales of nostalgic brands, as people seem to
look back to their childhood in an attempt to cheer themselves up.
Consumers want the comfort and security that retro brands can give
them, reminding them of their childhoods and even their parents’
childhoods.
In times of economic downturn, people are worried about the
credit crunch and losing jobs, and thus brands that act as an
antidote to anxiety will do well. A lot of people didn’t see the most
recent economic crisis coming, and that makes them nervous about
looking forward. The reflex is to seek comfort in things that
reference the past. Also, as people stay at home more in a recession
time to reduce consumption, stylish home comforts become more
important, which also helps explain why Cath Kidston has done
well in hard times.
Cath Kidston is conquering the world with her floral and polka dot
designs, and it is not surprising to see how such a powerful brand
can divide people. Consumers either love it or hate it.
For those who hate it, the products of Cath Kidston look like the
junk from a late granny’s attic. However, as the key target
audiences
of Cath Kidston are 30- to 40-year-old middle-class working
women, their strong purchasing power sustains the growth
of the brand. Spotting the brand’s potential to expand in all
directions, Cath Kidston embarked on a series of collaborations,
including a range of mobile phones for Nokia, eco-bags for the UK
supermarket chain Tesco, a flower-covered Sky TV box, tents for
Millets, and radios for the retro-styled Roberts range. To the fans
of Cath Kidston, the brand offers them a dream of a simpler and
nicer world that make them think of happy childhoods, homemade
cakes, picnics, and the seaside.
In 2010, Cath Kidston became the subject of a high-profile
buyout, when a $159 million deal saw the sale of Cath Kidston Ltd
to a newly incorporated company owned by the US private equity
firm TA Associates. Cath Kidston Ltd had an equality sale valuing
it at $119 million, while the funder and designer Cath Kidston
retained her remaining 30 percent share valued at $39.75 million,
and continued her design role for the brand.
Pressing on with Price Premiums
The core idea of Cath Kidston brand is a product-centric strategy.
The control and expansion of the brand to a wider product range is
still the focus after the shifting of company ownership. The
product-centric concept of a brand is a business model that
embodies perhaps the most essential brand ingredient for business
success: simplicity. Cath Kidston Ltd is far from resting and is
looking for further business expansion, with plans to open 50 shops
in Japan and the Far East, including China, Hong Kong, and South
Korea. The brand is pressing on with its nostalgic designs
that create value for its customers, justifying the premium
price of its products.

Questions for Discussion

1. Does Cath Kidston’s pricing strategy truly differentiate it from
the competition?
2. Could Cath Kidston have been successful as a design-focused
product marketer had it employed a low-price strategy? Explain.