Maketing Strategy Of Calvin Klein, Inc.

Marketing Strategy of Calvin Klein, Inc.

Calvin Klein Inc. is a fashion brand founded in 1968 by Calvin Klein. The company is headquartered in Midtown Manhattan, New York City[1] and currently owned by Phillips-Van Heusen. Like other fashion brands, Calvin Klein established a world famous monogram: the "cK" emblem.

Statistics

Wholly Owned Subsidiary of Phillips-Van Heusen Corporation

Incorporated: 1967 as Calvin Klein Ltd.

Employees: 900

Sales: $170 million (2001 est.)

NAIC: 315232 Women's and Girls' Cut and Sew Blouse and Shirt Manufacturing; 315233 Women's and Girls' Cut and Sew Dress Manufacturing; 315234 Women's and Girls' Cut and Sew Suit, Coat, Tailored Jacket, and Skirt Manufacturing; 315999 Other Apparel Accessories and Other Apparel Manufacturing

Company Perspectives

We believe our expertise in brand management, product design, sourcing, and other logistics provides us with the ability to successfully expand product offerings and distribution under the Calvin Klein brands while preserving the brands' prestige and global presence. As a result, we believe we have the opportunity to realize sales growth and enhanced profitability.

Key Dates

1968: The Calvin Klein brand is launched.

1973: Klein wins his first Coty American Fashion Critics Award.

1979: Calvin Klein controls one-fifth of the designer jeans market.

1982: Klein enters the underwear business.

1985: A new perfume called Obsession is launched with a $17 million advertising campaign.

1989: A Unilever Co. subsidiary purchases the Calvin Klein cosmetics/fragrance line.

1994: A unisex fragrance, cKone, is introduced; the company's underwear business is licensed to Warnaco Group Inc.

2000: Klein files suit against Warnaco Group and its CEO Linda Wachner.

2003: Calvin Klein is acquired by Phillips-Van Heusen Corporation.

Company History

Calvin Klein, Inc., designs, licenses, and, in some cases, produces clothing, accessories, fragrances, and home furnishings bearing the name of designer Calvin Klein. Since its inception, the company was a partnership between Klein and his childhood friend Barry Schwartz. Named by Time magazine in 1996 as one of the 25 most influential Americans, Klein made his impact not only by designing but also by marketing his wares through high visibility and often controversial advertisements created by the company's in-house agency, CRK Advertising. In 2002, worldwide retail sales of Calvin Klein products surpassed $3 billion. Most of these goods were manufactured and sold by other companies under license--licensed products account for over 90 percent of company revenue. After three years of shopping around for a buyer, Schwartz and Klein inked a deal with Phillips-Van Heusen Corporation, the largest shirtmaker in the United States. The $430 million transaction was completed in February 2003.

Rocketing to Stardom in the 1970s

Born and raised in New York City's borough of the Bronx, Calvin Richard Klein decided he wanted to be a fashion designer at an early age. After graduating from the Fashion Institute of Technology in 1963, he worked for women's coat and suit manufacturers in Manhattan's garment district before opening his own business in 1968. A childhood friend, Barry Schwartz, loaned him $10,000 in start-up money and joined the firm a month later, after the family supermarket in Harlem that Schwartz had inherited was gutted in the riots that followed the assassination of Martin Luther King.

Klein rented a dingy showroom to exhibit a small line of samples. His big break came when a vice-president at Bonwit Teller stopped at the wrong floor of the building, liked what he saw, and invited Klein to bring his samples to the president's office. Klein wheeled the rack of clothes uptown personally and won an order of $50,000 (retail) on the spot. Bonwit's gave the merchandise impressive exposure, with window displays in its flagship Fifth Avenue store and full-page ads in the New York Times. Soon after, Calvin Klein was besieged by orders. The fledgling company booked $1 million worth of business in its first year, reaching sales volume of $5 million by 1971.

Klein mainly designed women's coats and two-piece suits until 1972, when he began concentrating on sporty sweaters, skirts, dresses, shirts, and pants that could be mixed and matched for a complete wardrobe. The clothing featured the simplicity of line, muted earth tones, and classic fabrics that characterized his work and gave it an air of understated elegance. Klein won a Coty American Fashion Critics Award--fashion's Oscar--in 1973. He received an unprecedented third consecutive Coty Award for women's wear in 1975 and, at age 32, was elected to the group's Hall of Fame. That fiscal year (ending June 30, 1975) the firm shipped $12 million worth of merchandise, including swimsuits and dresses. It earned another $2 million to $6 million from licensing furs, umbrellas, sheets, shoes, scarves, belts, dresses, sunglasses, suedes, and patterns. Klein not only designed every item carrying his name but closely watched every step of the production process.

Company revenues rose to $40 million in fiscal 1976 and a startling $90 million in 1977. Because its prices were generally below those of its two major competitors, Ralph Lauren and Anne Klein, the firm won the loyalty of young working women as well as older, wealthier buyers. Calvin Klein merchandise was so hot that the company could pick and choose among stores that wanted to carry the company's products and blackball those that dared to try to return unsold goods. Seven hundred buyers and reporters were turned away from Klein's fall 1978 fashion show; the buyers who got in placed $28 million worth of orders within 48 hours.

Klein introduced his first menswear collection in 1978, telling the New York Times Magazine that he approached men's clothing "with the same philosophy as the women's. They're for Americans who like simple, comfortable but stylish clothes--but with nothing overscale or extreme." No less than 779 fabrics were used in the European-produced collection, which ranged from neckties to suits and overcoats. The production and sale of most of the men's clothing was licensed to Bidermann Industries. Also in 1978, Calvin Klein introduced his own line of fragrances and a complete makeup collection of 18 beauty and skin-care products that stressed neutral colors to give the face a natural effect. However, the lightweight, rosy perfume (at $85 an ounce) needed to anchor the collection never caught on with the public. The fragrance and cosmetics business was sold to Minnetonka, Inc. in 1980.

Calvin Klein jeans, by contrast, were to become the company's biggest hit. Klein's first attempt, in 1976, to capitalize on the designer-jeans craze--at $50 a pair--was a failure. The following year, however, his company cut a deal to design the product for Puritan Fashions Corp., the largest dress manufacturer in the world. Klein raised the groin in his jeans to accentuate the crotch and pulled the seam up between the buttocks to give the rear more shape. A Times Square billboard of model Patti Hansen on her hands and knees, her derriere arched skyward and the Calvin Klein label on her right hip visible, caused a sensation and remained in place for four years. By 1979, Calvin Klein was second to Gloria Vanderbilt in designer-jeans sales, with one-fifth of the market. A company spokesman observed, "The tighter they are, the better they sell."

The biggest lift to Calvin Klein's jeans was the television campaign directed by Richard Avedon that featured 15-year-old model/actress Brooke Shields provocatively posed in a skin-tight pair of Calvin Klein jeans. In the best-remembered spot, she pronounced, "Do you know what comes between me and my Calvins? Nothing." In another she declared, "I've got seven Calvins in my closet, and if they could talk, I'd be ruined." These suggestions of underage sexuality struck a public nerve and, following a flood of complaints, the New York flagship stations of all three networks banned the two ads from the air. Klein could shrug off the criticism because sales of his jeans were then climbing to two million pairs a month. He added a jeans-inspired collection that included shirts, skirts, and jackets, also licensed to Puritan. These products accounted for about $100 million in sales in 1980.

Branching Out in the 1980s

In 1982, Calvin Klein entered the underwear business, once again exploiting the allure of youth in provocative poses to push the product. Photographer Bruce Weber's beefcake ads featured a brawny Olympic pole vaulter in various states of well-endowed undress. When the company rented space in 25 New York bus shelters to display advertising posters featuring the underwear, all 25 had their glass shattered and posters stolen overnight. The follow-up was predictable--a line of women's underwear featuring male-style briefs and boxer shorts that retained the fly front. Both campaigns were hits. The men's line was part of the Bidermann license, which lapsed in 1987, while the women's skivvies so outstripped Calvin Klein's own manufacturing capabilities that in 1984 this division was sold to Kayser Roth Corp., a unit of Gulf & Western Industries, for about $11.2 million. Calvin Klein continued to design and create advertising for women's underwear, later adding hosiery and sleepwear

...