Case Study

Stung by slow sales, Zippo turns to brand extensions.

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The Problem: Zippo has a strong brand name, but stagnant sales. Can the fabled firm market its way out of the doldrums?

Violet Snyder, global licensing manager of Zippo Manufacturing Co., was in a Park Avenue elevator when she got her wake-up call. On her way to visit the offices of the National Football League, a Zippo licensing partner, a fellow passenger spotted her Zippo tote bag. "Zippo -- cool!" he said. She smiled. "Are they still in business?" he continued. Snyder stopped smiling. "Here I am on my way to visit a major customer and the world is not even sure we're alive," she says.

When she related the incident back at the home office in Bradford, Pa., there was rueful sympathy but little surprise. Zippo, the fabled 72-year-old maker of cigarette lighters, had been battling reports of its demise for years. The company dominates the refillable lighter business with an enviable two-thirds market share. But that market has been steadily shrinking for years. In 2001, just over 20% of American adults were smokers, according to the Centers for Disease Control. That's down from 24% in 1998 and 42% in 1965. Zippo sales, which boomed in the mid-'80s thanks to an international expansion, have been flat for much of the last five years. Sure, it may be one of America's storied brands, carried by U.S. soldiers during World War II, with current recognition in the 90% range. But thanks to its association with the embattled tobacco industry, many assume it is already extinct.

George Duke, grandson of the company's founder, a lifelong employee and current chairman of the board, is on a mission to beat that back. But getting a third-generation family-owned business to change course has not been easy. By the mid-'90s, the company was owned by six family members, all with equal control, equal-size offices in the company headquarters, and equally passionate views on which way the company should go. "It was difficult to come to a consensus in a timely manner," says Duke. "It was very hard to embark on a strategy." Not that they didn't try. There was the ZipLight, a battery-powered flashlight in a traditional lighter casing. There were Zippo pens, belt buckles, and money clips. There was the ambitious attempt to license the Zippo name to upscale Swiss watches. That project flopped when retailers balked at the three-figure price tag. And there was the push to expand Zippo's offerings in the collectible market. That met with plenty of approval from current Zippo customers but did almost nothing to expand the company's market. As such attempts failed, executives pulled back and nerves began to fray. "There was a stay-the-course, stick-to-your-guns, keep-banging-out-the-same-product mindset," says Mark Paup, now head of global marketing, then a junior member of the sales department. "It was a very frustrating time."

No one was more frustrated than Duke, who was convinced that Zippo had to change -- and fast. In 1998, he began secret negotiations to buy out his cousins. By 2000, he was controlling owner, along with his mother, who is now retired. He took another big step by replacing the company CEO, Michael Schuler, a CPA and former Zippo controller, with Greg Booth, who had spent years as a marketer with Kendall Motor Oil, Sunoco, and W.R. Case & Sons, a cutlery company. With new management in place, Duke broke another age-old family tradition: He looked outside the company for advice. Zippo commissioned two studies, one by Prophet, a San Francisco firm run by branding guru David Aaker, and the second by Pittsburgh-based Prescott & Associates. Both studies came back with the same findings: that Zippo had tremendous brand recognition and strong possibilities as a licensed line. "Brand is really the only thing we have," Booth says. "If we think of ourselves as a lighter company, we are nowhere." The question was how to act on that revelation.

The Decision

In 2001, Zippo officially abandoned the strategic mindset of a one-product manufacturing business and entered the 21st century world of brand management. First up: the Zippo Multi-Purpose Lighter, which hit stores in 2002. This longer, slimmer lighter is made to handle noncigarette lighting chores, such as grills, fireplaces, candles, and lanterns. Launched with a major television ad campaign, it made its debut on cable's Home & Garden Television channel. Industry watchers estimate the product sold about 2 million units in its first year -- a small slice of the market for such lighters, but a good start for a new product. Even more encouraging, buyers skewed mostly female and younger than the average Zippo customer. And the new product opened new doors for Zippo. Its base of retailers expanded by 40%, as new chains like Bed Bath & Beyond became Zippo sellers. A second version of the multipurpose lighter, this one larger and geared for outdoor use, is set to debut next year.

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