A New Blend for Gevalia Proves to Be Successful
Today, Gevalia is a successful continuity program delivering coffee by mail to a significant number of customers on a regular basis.
The Gevalia catalog was added in 1993 in order to sell incremental items related to the coffee experience. In spite of growth in volume and circulation, revenue was shrinking, and the catalog profit and loss statement was running in the red. The catalog at its best represented only 6 percent to 7 percent of total revenue for the business. As a result, the budget was reduced. The house file began shrinking, and prospecting within the main coffee business resulted in low response rates and low average order. In addition, product selection was getting stale, with less than 10 percent new products offered each season.
Gevalia was also at a transition point, with new management in place taking a strategic look at all elements of the business. The catalog was at a point of "do-or-die." As a result, Gevalia went in search of a new agency to invigorate its catalog business. A request for proposal was issued and after an extensive review process, Bel-Aire Associates was awarded the account, beginning with fall 1998.
The challenge to the agency was clear:
• Take the Gevalia Kaffe catalog business into a new dimension.
• Create a strategic plan that addressed new sales growth with brand equity investment.
• Strategically reposition the catalog.
• Increase awareness of the catalog.
Bel-Aire began its due diligence with in-depth analysis of the catalog, focusing on:
• Revenue, catalog expenses, fulfillment and income.
• Catalog circulation, cost per book and sales per book.
• Revenue, fulfillment and operating dollars.
• Revenue, returns, net sales, cost of goods and margin dollars.
• Segment performance response rate percentages.
• Product line merchandise margin percentages.
• Seasonal price point distribution of items and demand dollars.
We thought the solution to arresting the current decline was to build Gevalia's brand equity by repositioning the catalog. It would develop a total new approach to the creative platform and a new direction on the copy voice. We needed a more strategic customer segmentation methodology to be put into place. New merchandise would be introduced and product lines developed. New marketing and circulation strategies would enhance relationship marketing.
The creative posed a particular challenge that all catalogers face at some point in a catalog's life. It had established a consistent look for eight years that the agency felt was not compatible with its new positioning of Gevalia as a contemporary catalog with European roots, targeted to an affluent customer who was well-traveled and enjoyed a lifestyle consistent with this profile.
Bel-Aire felt it had to make a clear break with the old look, which was conservative and traded on the Swedish coffee heritage. Although at first it considered incremental changes, Gevalia finally decided to throw caution to the wind and go for it.
The new design was more contemporary and stylized with large features to create hero items that drew the reader into the pages of the book. Copy followed suit, romanticizing the European roots of Gevalia coffee and by association the supporting products, thus reaching the targeted customer on a more personal level. Lastly, the photography reflected this new approach through soft, natural lighting, delicate props that reflected a European point of view and a somewhat unorthodox selective focus. This created a feeling of spontaneity, intimacy and European sensibility, which proved to be right on target.
In order to complete its strategic direction, Bel-Aire concentrated on what it considered were five key drivers:
• Circulation. Increase the number of drops, refine the quantities and target higher demographics in new customers.
• Margin. Increase exposure of core items, more products exclusive to the catalog and new product categories.
• Merchandise. Keep winners and build upon trends, increase the number of items per spread and increase the percentage of new merchandise.
• Price point. Bridge more prices, offer order starters less than $20 and present more opportunity for cross-sell and upsell.
• Annual volume. Decrease dependency on Christmas and cater to broader seasonal activities.
As a result of these initiatives, the decline in gross revenue was arrested in 1998, and gross revenue grew substantially the following year, with a corresponding increase in average order value. Gevalia's success reflects its confidence in fiscal year 2000, by agreeing to increases in both mail and enclosure quantities, prospecting for new customers, the number of mail drops and the number of pages.