Some Brands Thrive Without Advertising

ByCatherine Valenti

Aug. 23, 2001 -- Like urban legends or e-mails that somehow get passed around the world, some consumer brands have thrived simply on buzz generated by word of mouth.

Products like Krispy Kreme doughnuts and the hair and skin care treatments of Kiehl's have been so successful from word-of-mouth publicity that they haven't even needed to advertise.

And even though these companies are growing rapidly — last year saw both the initial public offering of Krispy Kreme and L'Oreal USA's purchase of Kiehl's — don't expect to see television commercials for them any time soon.

That's because for these companies, consumers' experiences with these products have been more valuable in establishing their place in people's hearts than any Pepsi commercial with Britney Spears could achieve, say marketing experts.

No Ads Necessary

"The key is to recognize that in terms of brand equity, all that really matters is that the customer develops a positive image," says Kevin Keller, professor of marketing at Dartmouth's Tuck School of Business. "Experience or word of mouth is probably the best way to do that."

Krispy Kreme has more than doubled its store locations since 1997 to an enthusiastic audience. At every grand opening of a new Krispy Kreme shop, hordes of cult followers line up outside well before the store opens. The approach has apparently paid off — in the latest earnings reported today, revenues rose almost 28 percent in the quarter ended July 29.

Krispy Kreme Earnings

First produced in a shop in Winston-Salem, N.C., in 1937, part of what has made the doughnut chain so popular is buzz from transplanted Southerners, said Stan Parker, the company's senior vice president of marketing.

"For a lot of people, it's an emotional connection with the brand," says Parker.

Much of the doughnut maker's promotional efforts have focused mainly on community involvement, like allowing groups to sell Krispy Kremes as part of their fund-raising efforts. Despite the company's increasing size, Parker doesn't see it straying from that down-home strategy.

"We haven't ruled it out, but right now [an advertising campaign] is not in our plans," he said.

Kiehl’s Appeal

Likewise, Kiehl's, whose salespeople give out generous samples of its hair and skin care products for customers to try before they actually make a purchase, isn't likely to exchange its low-key, low-pressure image for a slick ad campaign.

The cult favorite of fashion aficionados is sold in department stores in the United States, Europe and Asia and in its only two shops — the small shop in New York City in which it was founded in 1851 and a new store recently opened in San Francisco. The company had sales of around $40 million last year.

Kiehl's, whose philosophy of not spending money on advertising or packaging has endured throughout its existence, plans to stick to that policy even as part of multinational L'Oreal. The company's core values, which include a 100 percent money-back guarantee, a staffing level that is two times the industry average and free consultations, have been key to establishing its rapport with customers.

"We hold the wisdom and intelligence of our customers in the highest regard," according to the company's values statement. "We refrain from hyperbole and make no false claims. On the contrary, we try to uphold the standards of honesty, fairness and integrity that have come to characterize Kiehl's."

Cult Favorites

In this age of information, it might seem strange that companies with virtually no advertising can manage to quietly make a name for themselves among a wide audience of dedicated fans. But marketing analysts say often the lack of advertising is precisely what endears some products to their customers.

"Part of the reason people like all these brands is that their neighbors don't have them," says David Aaker, president of Prophet, a San Francisco-based brand strategy consulting firm.

Further, jumping on board a glossy ad campaign could actually hurt brands more than help them by turning off customers who liked a company for its unobtrusive customer service. The challenge for smaller, niche brands is not to alienate their customer base with a dramatic change in their advertising or marketing strategies as they get larger, says Aaker.

And indeed, companies like Krispy Kreme seem mindful of this as they go forth and preach the word of doughnuts to the masses.

"Some passionate Krispy Kreme customers might be disappointed if we did [advertise]," says Parker.

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