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Plotting the fortunes of Kate Spade, the handbag brand, can feel like riding a rollercoaster, with steep inclines, dramatic drops, and even a loop-the-loop or two.

When an editor at Mademoiselle, known for her style and combination of vibrant colors with classic lines, started Kate Spade in 1993, women snapped up the chance to look as if they had just stepped off the pages of a fashion magazine. In 1999, Neiman Marcus bought the company. But the retailer failed to maintain the cutting-edge, fashion-forward brand image. By 2006, Kate Spade reached an apparent low point, with a reputation for angular bags carried by suburban moms.

That same year, Liz Claiborne bought the brand from Neiman Marcus and instituted a change in management. The new managers worked diligently to reposition the purses, appealing more to young urban professionals who appreciated great design. Through market research, they identified the ideal “Kate Spade customer” by photographing New York and Los Angeles women carrying the bags. These images personified the target: She may be fun-loving, but she also wants to appear neat and polished. She also wants to be the most interesting person in the room.

Knowing who their customers were, the brand managers had to find a way to combine fashion with functionality, such as including cell phone pockets in their handbags. The information also prompted the creation of jewelry and broader apparel lines, to meet all the customer’s accessory needs. In a ramped up design process, Kate Spade’s “inspiration room” became a white cube with paper over the windows, so the focus is only on the fabric and the patterns.

The rollercoaster has thus reached a peak: Kate Spade is now Liz Claiborne’s best performing brand, outpacing such consumer favorites as Juicy Couture, Mexx Europe, and Lucky Brand.

Discussion Questions:

  1. How has Kate Spade used market research?
  2. What was the risk when Kate Spade shifted its target market from suburban moms to urban professionals?

Source: Cotton Timberlake, “Kate Spade’s Got a Brand New Bag,” Business Week, February 24, 2011