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.
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.
In addition to such brand extensions, Zippo revisited its licensing efforts. The company was no stranger to licensing -- but it was almost always as a canvas for other brands, such as the NFL, Harley-Davidson, and Jim Beam. This time, things would be different. Booth hired Nancy Bailey & Associates, a licensing agent with clients such as Crayola, Hostess, and Mr. Clean, to create a broad licensing strategy. After a year of pounding the pavement at trade shows, the agency's strategy was in place.
In 2005, a new generation of Zippo licensed products will debut, these ones founded on consumer research rather than family wisdom. The licensing program sticks close to Zippo's core brand image as a reliable flame and will feature grills and outdoor accessories -- such as Tiki torches and patio heaters. If all goes well, those will be followed by camping equipment and other outdoor gear. More traditional licensed products, such as watches and fashion items, will be focused primarily in international markets. Here in the U.S., Zippo hopes eventually to provide retailers with in-store boutique "flame centers," featuring the entire array of Zippo products. "We think the brand can go far, but we want to take it one step at a time," says Duke. "We'll crawl before we run."
Finally, Zippo is hard at work addressing its aging boomer problem. Ever see the lighter salute at a rock concert? Zippo hopes tapping into that time-honored tradition will help attract younger fans. This year, it is sponsoring a rock band competition, the Zippo Hot Tour, with nightclub performances at 72 events across the country. Using a dedicated website, bands are invited to submit their work; online fans will determine who advances to the live performances. When the site went live in June, so many fans logged on in the first hour that the server crashed. Says Paup: "I got a voice-mail message from our CFO. He said, 'Well, you certainly got someone's attention," says Paup. Zippo is also courting younger consumers by developing new products, including a sleeker, high-tech version of its trademark lighter, code-named Blue Flame.
Booth has big dreams for his brand extension program: double company revenue -- currently estimated at about $200 million -- by 2010, with half coming from nonsmoking-related products. Already this year, sales are trending upward, Duke says. That makes him confident that the company he passes on to his sons, now 12 and 14, will be a sophisticated, marketing-driven enterprise rather than the old-style manufacturer he inherited. "Zippo will be a lifestyle," Duke predicts.
The Experts Weigh In: Can Zippo license its way to growth?
Zippo's bid for younger consumers has potential. The secret to success -- as a product and as a brand -- lies in knowing what Generation Y (22 and younger) wants and how they want it. They want marketing to reflect their real-life experiences. Zippo has keyed into this by sponsoring music tours. Of course, concertgoers pull out their lighters at key moments as part of the happening. But it is critical for Zippo to reach Gen Y's early. Brand names are important to this generation.
Ann A. Fishman
President, Generational-Targeted Marketing Corp., New Orleans
It's a good idea to move on from collectibles. But whether or not licensing is a good bet depends not just on the brand equity, but on whether the equity is leveraged into a product that is unique and meaningful to the consumer. It is also dependent upon good execution. There are lots of venerable classic brand names. Zippo clearly has equity; however, any foray into additional product lines will require that the brand have a point of difference that is meaningful to the consumer.
Chairman, The Himmel Group
There are two ways to go with any licensing program. The stupid way is to sell your brand to as many people for as much money as you can. The smart way is to license your brand in categories that reflect your brand's strengths. It appears Zippo is taking the smart path. Zippo is about ruggedness and durability. It could give Coleman a major run for its money in the camping category. But if Zippo starts putting its brand on a nightgown or fashion jeans, it's over.
Author, The Revenge of Brand X: How to Build a Big Time Brand on the Web or Anywhere Else