A Jewel of a Company

In 1837 at age 25, Charles Lewis Tiffany ventured from his home in Killingly, Connecticut, to open a store in New York City. The cash receipt ledger for that first day of business – September 21, 1837 – showed sales of $4.98. Hardly an auspicious beginning for what would become one of the most prestigious purveyors of fine artifacts, jewelry and silver creations the world has ever seen. In fact, in the century and a half since Tiffany opened the fancy goods store bearing his name, the store has become an American icon and the name Tiffany has become synonymous with class, refinement and special grace. More than just a symbol, however, Tiffany & Co. is a profitable, internationally respected firm with 82 stores worldwide, over $680 million in sales and current profits approaching record levels.

Tiffany’s balance sheet didn’t always look so bright. When direct sales giant Avon purchased Tiffany in 1979, management in both organizations soon realized that the corporate marriage couldn’t last. With mass market Avon at the helm of class conscious Tiffany the company began to drown in a sea of red ink. A rescue plan emerged when the vice president of retail and direct mail sales at Avon, William R. Chaney, saw the value in both mass and class marketing and recognized Tiffany’s tremendous sales potential.

In 1984 he organized a leveraged buyout and in 1987 took the company public. In an exclusive interview, Chaney, who has been Tiffany’s chairman for the past decade, told Personal Selling Power that taking the company public was his biggest sale ever – over $100 million worth of shares.

To back up his Wall Street coup with sales reality, Chaney assembled a highly talented team and hammered out a threefold agenda to remake Tiffany & Co. into a major player. The team decided to enhance product appeal, expand distribution and improve sales and marketing. To help other sales managers turn visions of sales magic into reality, Chaney and three senior Tiffany executives have agreed to share the secrets behind Tiffany’s brilliant new golden age with Personal Selling Power.

Enhanced Product Appeal

Historically, Tiffany directed its marketing efforts toward the world’s elite. Many European kings, queens, princes and princesses bought fine jewelry at Tiffany’s. U.S. presidents, including Abraham Lincoln, asked Tiffany & Co. to design special pieces of jewelry and china. But Chaney quickly realized that a business that sells only to the elite fails to capture the most lucrative potential sales. The puzzle facing Chaney and managers throughout the Tiffany organization was thorny. How could they capture greater market share yet retain the Tiffany image of class and refinement?

To increase sales across the globe, Chaney decided to expand the product line. The decision to diversify and open Tiffany’s doors to a much wider audience would have shocked the five preceding heads of Tiffany, but the strategy paid off. Chaney has created a strategic link between the design division, the merchandising division and the sales division while creating a product line that caters to a wider spectrum of customers than it did 10 years ago.

Today, Tiffany & Co. is a place where a billionaire can shop in a private suite and examine a $1 million diamond necklace while on the main floor a young couple can try out a $1,000 Tiffany engagement ring. Stunned industry insiders watched in awe as Chaney’s team pulled off this seemingly impossible marketing coup without sacrificing quality, losing upper-crust customers or compromising the company’s proud heritage. The Tiffany icon, in fact, gained in strength and appeal.

More people have discovered that Tiffany offers high-quality products at very affordable prices. As a result, sales keep growing. Today, customers can purchase elegant gift items that represent a high value. For example, a sterling silver ballpoint pen is reasonably priced at $95, but looks like a $200 writing instrument. A baby gift that consists of a beautifully painted colored plate and a matching porridge saucer costs only $60, including the prestigious blue Tiffany box. An elegant sterling silver bookmark is only $25, and is handed over the counter with the same care and courteous smile as a $25,000 pearl necklace. Today, retail sales at Tiffany & Co. are close to $2,000 per square foot.

Good Design Sparks Sales

Chaney confides: “There has been a long-standing motto at Tiffany that good design means good business. That is what distinguishes us from our competition. Our designers are very innovative and highly creative people. They enjoy a great deal of freedom that allows them to be at their best. It also takes a very experienced merchandising organization to read the market and analyze the selling characteristics of different products and product categories.”

Mike Kowalski, executive vice president of merchandising and sales, told Personal Selling Power: “Good design has always defined our history and it will also guide our future. We believe that the true value of an object is not expressed by the price. When you look at objects produced by great designers, you will recognize the value of timeless designs.” Such objects have lasting beauty and are passed from one generation to the next. Chaney encourages his designers to keep in mind that a high-quality product must not only satisfy the customer today but delight future generations as well.

Although the Tiffany logo carries weight, it does not compete with the design for top billing. Chaney, who wears an elegant Tiffany gold watch with a matching gold band, says, “Great design does not need a logo to look attractive. Great design creates its own spotlight.”

During the past decade, Chaney has expanded the staff of award-winning in-house designers and relied on exclusive collaborations with such world-renowned designers as Elsa Peretti, Paloma Picasso (Pablo Picasso’s daughter) and Jean Schlumberger. Product sales from these three designers alone have created several hundred million dollars in sales.

The Appeal of Fine Craftsmanship

For many years Tiffany & Co. has set the highest standards for manufacturing. Chaney explains: “When you select a gift, you can feel very comfortable because the material is of very high quality and the craftsmanship is clearly superior. Tiffany has chosen to work within a limited range of materials such as gemstones and precious metals.”

Mike Kowalski adds: “It is fairly easy to get high quality materials, but fine craftsmanship has become very rare. The greatest cost component is in the value that is added through skilled labor. We have some of the greatest silversmiths in the world. These craftspeople have developed unique talents that are more scarce than gold or diamonds.”

While many American companies move manufacturing overseas to benefit from lower labor costs, Tiffany has imported some of the world’s most experienced craftsmen to work in Tiffany-run ateliers. Although most of Tiffany’s products are manufactured in the U.S., there are a few notable exceptions. Tiffany watches are assembled in Switzerland and there is a special porcelain painting studio in Paris. In addition, to ensure continuity, Tiffany & Co. has developed a series of apprenticeship programs and skills maintenance programs.

Quality Creates Repeat Business

To gain a competitive edge many companies promote quality in advertising and PR campaigns. Tiffany blazes a different trail into the market. A Tiffany product continues to broadcast a message of quality and value for decades. The result? More customer satisfaction. Mike Kowalski reasons: “Great quality is not expensive. It’s simply the most cost-effective way of doing business. We have a very high number of repeat customers. Why do these people come back? Because our products generate the type of customer satisfaction that creates the desire for more. If we continue to invest in great quality, we don’t have to invest that much in marketing.”

Although many people associate high quality with high price, Kowalski quickly points out that high quality costs much less, considering the life cycle of the product. He says: “If you look at our financial statements, you realize that our margins are not excessive. We try to educate our customers about our quality standards and they understand that if you divide the price over the long life cycle of our product, we indeed offer an incredible value.”

As a way of illustrating this example, a Tiffany gold watch that sells for $11,000 today could be enjoyed by father, son and grandson. By the time the grandson turns 18, the value of the watch is likely to be higher than the cost of his first year of college.

Expanded Distribution

Before Bill Chaney took over as chairman, Tiffany had only eight stores in the U.S. and a very small wholesale distribution system in Japan. Today, Tiffany & Co. has 18 stores in the U.S. and operates in 64 strategic international locations. To boost sales in Japan, Chaney bought back management control of its boutiques from the Mitsukoshi department store chain.

Chaney outlines the risks involved in global expansion: “We knew from our research that there was tremendous potential in Asia and Europe, but we really couldn’t measure it until we put our foot in the water and gave it our best effort. We were heavily leveraged, we were not profitable and at times we were scared. We sensed the risk, but we also had a sense of confidence because we believed in what we were doing and we knew that we could make it work.” The worldwide sales expansion plan boosted international sales from below 10 percent of total sales in 1984 to 40 percent in 1994.

Another important source of revenue comes from direct mail sales. Direct mail complements the retail division by marketing a special selection of Tiffany products to existing customers and new prospects. Tiffany mails over 16 million catalogs per year. Last year, the direct marketing and corporate division contributed $90 million in sales. To further expand its reach, Tiffany offers a unique collection of products through highly prestigious retail stores throughout the world.

Tiffany Delivers Motivation

Jim Quinn, executive vice president of sales, told Personal Selling Power: “Tiffany has become a major provider of corporate recognition programs. Many companies are using Tiffany awards for recognizing outstanding achievement. A Tiffany gift conveys a message of special appreciation to the recipient, whether it is your employee or a client. Recognition programs become an important part of the corporate culture.”

Quinn explains the financial wisdom of keeping people happy: “We feel that there is a direct relationship between recognition, motivation and the bottom line. Once an incentive program has proven its value, companies are going to renew it for years and years.”

In order to accommodate the special needs of corporate clients, Tiffany will customize such off-the-shelf products as clocks and watches, or design a new product for exclusive use by the company.

Tiffany awards are a great hit within its own staff of 3,000. A special “Milestones” program recognizes people for important occasions in their lives. Tiffany employees receive thoughtful gifts for weddings and births. Important job anniversaries (starting with five years’ tenure) are duly recognized with a special gift in a blue box. Even new employees receive a gift on their first day on the job.

Improved Sales and Marketing

To romance its demanding New York customers as well as out-of-towners who come to the city to see the famous Fifth Avenue store, Tiffany creates the most famous display windows in the world. Small, almost tiny in size, the windows represent a microcosm of everything Tiffany has meant to fastidious shoppers for decades. The windows are tiny gems that show off to perfection the rare and glittery merchandise they hold. Designers vie for display space and compete year after year to outdo in creativity and glamour what their predecessors have built inside the lilliputian portholes to elegance. For example, a potbellied stove served as the visual hook in the window to enhance the warm glow of rubies. A few summers ago, Tiffany used a real waterfall as a backdrop to showcase sparkling jewels. Since New York had a water shortage, the window designer, Gene Moore, resorted to Seagram’s gin. Instead of water, pure gin cascaded down the slope and Tiffany became the toast of the town when newspapers wrote about the politically correct window dressing. Last Christmas was very special for Moore, since he decided to retire at age 84. To top off his 57-year career, he placed cheerful-looking teddy bears (including a Santa bear) in five windows. Moore was quoted in the New York Times saying that he did the windows for the children, “because if you please the young children, you please the old children too.”

Educated Customers

Buy Better Diamonds

To expand its marketing muscle, Tiffany stepped up advertising to over $20 million in 1994. One of their most successful sales campaigns focused on diamond engagement rings. Through research Tiffany found that a typical customer purchasing a diamond engagement ring will shop in seven or eight places before making a decision.

To simplify the decision-making process for the customer, Tiffany developed a small booklet titled How to Buy a Diamond, which is distributed at no charge. The booklet quickly became a great success story. Jim Quinn told PSP that over 100,000 copies have been requested. Buyers can quickly learn the four critical “Cs” of diamond-buying: cut, clarity, color and carat.

In a special Q & A section, customers are reassured that Tiffany engagement rings, complete with certificate, start at just $850. A recent ad echoed the clever sales strategy with this slogan: “For less than you may have believed, a Tiffany diamond is more than you ever imagined.” Chaney asserts that since the introduction of the campaign diamond solitaire ring sales have increased by 36 percent. Given the success of this customer education program, Tiffany recently published a new booklet titled A Guide to Tiffany Pearls.

Since the diamond sales campaign relied heavily on customer education, Tiffany decided that their salespeople must follow a rigorous training program before they are allowed to sell diamonds. If a salesperson has not been certified, he or she is not authorized to sell that product line and must call on a team member who has been certified.

How Tiffany Cultivates

Consultative Selling Skills

Pleasing customers is top priority in all Tiffany sales training programs. Bill Chaney told Personal Selling Power, “The objective of our sales training is to give the customer that extra touch of care and consideration that people expect from Tiffany.” The chairman wants customers to be welcomed by salespeople who are “exceptional, engaging and ready to serve and to please.”

During the past few years, Tiffany has gradually shifted its selling process from product selling to consultative selling. Jim Quinn told Personal Selling Power: “Very often, customers are not sure what they want. That is why we train salespeople to create a discussion with the customer where they can jointly discover the best course of action. There is a great deal of emotional content in a retail sales environment. That is why the consultative process is more productive, yet it requires a great deal more patience, sensitivity and skill.”

Quinn explained that the consultative approach establishes a better human connection with the customer. He said, “It takes time, professionalism and a caring attitude to build a trusting relationship with the customer.” The payoff? More satisfied customers, more repeat sales and more sales opportunities. Tiffany’s sales managers deliver the consultative sales training program while they continuously coach their salespeople.

How do Tiffany salespeople benefit from the consultative sales approach? They enjoy the fact that customers ask for them by name. They enjoy the referral business and the repeat sales that come from relationships that often go on for several generations. Best of all, they are happy to work in a sales environment where discounts are nonexistent. Personal Selling Power learned that when President Eisenhower wanted to know if he could get a discount he was politely told, “Lincoln didn’t get one.”

How Tiffany develops

A circle of winners

Today, Tiffany employs 400 retail salespeople in the U.S. with 100 additional salespeople in the corporate sales department. To encourage professional achievement, Tiffany’s definition of sales success goes far beyond counting dollars in the cash register. Chaney and his top management team created two special recognition programs, the Winner’s Circle and the Chairman’s Circle. In order to qualify, salespeople are evaluated based on the following criteria: Have sales progressed according to plan? Has the salesperson demonstrated exemplary customer service? Has the salesperson enhanced the team environment? How well has the salesperson developed his or her client base? Did the salesperson develop new product knowledge? Did the salesperson improve selling skills? What kind of floor leadership did the salesperson demonstrate?

Quinn told Personal Selling Power: “We pay attention to the entire spectrum of professional performance. If you didn’t meet your sales plan, you won’t be considered. If you didn’t help other team members succeed, you won’t qualify. To be fair, we have to consider every part of your performance as a sales professional.” Salespeople get nominated by their management and a special management team reviews nominations and selects winners.

Tiffany’s Future Goals

Bill Chaney feels that Tiffany has a tremendous potential for future growth, saying: “The market for our products is enormous. It’s greater than most people think. Although we are very prominent in our industry, we still have only a two percent market share in the United States and only a one percent share in Japan. My vision is to have several times that in a number of years. We plan to continue to grow in sales and in profitability. That is the only way we continue to strengthen the company while we increase the security for our employees and the opportunity for our shareholders.”

One major, but often overlooked, challenge companies face during periods of sales expansion is maintaining quality. Chaney explains: “We know that the respect for Tiffany depends on the quality of the product as well as design and craftsmanship. That is why we rigidly control those quality elements, and that is why we can achieve our expansion goals.”

Chaney’s quiet enthusiasm shows that he enjoys his job at Tiffany: “I enjoy being part of an organization that likes to work together as a team. I love to see people succeed.” In his spare time Chaney works in his 20-acre vineyard where he grows Chardonnay grapes. After several years of cultivating his crop, last fall the vineyard produced 5,000 cases of wine that he calls Chamard. It appears that no matter what enterprise Chaney engages in, it turns into gold. n

Tiffany Goes High-Tech

Tiffany uses video-conferencing technology to keep 3,000 employees connected across the globe and aligned with the company’s mission. Mike Mitchell, VP of human resources, told Personal Selling Power, “We continue to rely on local leadership and use technology to build knowledge and to share important, time-sensitive information.” Tiffany beams new marketing plans, new product introductions or special management information via satellite to all corners of the globe. There are weekly product broadcasts, inventory reviews with merchants and special training programs. Says Mitchell: “We supplement video conferences with custom-produced video. For example, each branch location has a repair facility and an engraving function. When products change, we provide training on how to perform each new step.”

Mitchell feels that teleconferencing enhances Tiffany’s ability to respond to customer needs: “An organization has to change and to adapt continuously. Teleconferencing helps us to be more responsive so our employees can be proactive in the market.”

Teleconferencing has also helped Tiffany shift to a global management standard. Mitchell explains: “We have a clear idea of who we are as a global corporation. We don’t ever impose a U.S. standard. We allow our international talent to go to work for our customers.”

As an illustration, Mitchell mentions that the traditional Tiffany diamond setting did not turn out to be a hot seller in Europe. He says, “We learned that European customers prefer a much more understated setting and our designers came up with a new collection of engagement rings that have become very popular worldwide.”

Mitchell takes pride in Tiffany’s aggressive use of technology, but emphasizes that the human element plays the dominant role in the success of a global sales organization. He says: “A good sales organization begins with the selection of the right people. We look for people who feel a greater sense of purpose in serving our customers. You can train people to be consultative in their approach to the point that they master the mechanics of the sales process, but you can’t teach someone to care.”

157 Years of Sales Success

1837 Charles Lewis Tiffany was a born salesman. At age 15 he was trained to take charge of the family dry-goods store. Fueled by the desire to sell a more exciting product line, he started a “fancy goods” and stationery store at age 25. On the first day, receipts totaled $4.98.

1848 Tiffany’s partner, John Young, went on a business trip to Paris where he found that the French aristocracy sold diamonds far below U.S. market value. Young snapped up as many diamonds as he could and Tiffany promoted the new product line to a bauble-hungry American public. The press dubbed him “King of Diamonds.”

1858 Taking a lesson in showmanship from his friend P.T. Barnum, Tiffany bought several miles of the first transatlantic telegraph cable, cut it into short sections and used it for paperweights, watch fobs and lapel pins.

1862 Abraham Lincoln purchased a beautiful pearl necklace (price tag: $530) for his wife, Mary Todd Lincoln (below), to wear at his inauguration.

1887 Tiffany expanded sales to London and Paris and supplied jewels to European monarchs.

1893 Louis Comfort Tiffany, son of Charles Tiffany, added his artistic talents to the company. He developed handblown glass called Favrile to create screens, lampshades and other objects. Louis Comfort believed that each piece of jewelry “acts as a little missionary of art.”

1955 With Walter Hoving at the head of Tiffany, sales expanded to Japan. Hoving brought in new, talented designers, initiated a series of table settings and wrote a book on table manners for teenagers.

1956 When President Eisenhower made a purchase at Tiffany’s he asked the salesperson if he would get a discount. The answer: “Lincoln didn’t get one.”

1960 Audrey Hepburn and George Peppard filmed the famous scene for the film “Breakfast at Tiffany’s.” The sales staff in the movie was selected from Tiffany’s own sales team. Salespeople received overtime pay from Tiffany plus actors’ wages during the filming.

1965 Breaking with the formality of previous White House china services, Mrs. Lyndon Johnson commissioned Tiffany & Co. to design a porcelain service featuring American wildflowers.

1984 William R. Chaney, current chairman of Tiffany & Co., sold $135 million worth of Tiffany shares to take the company public after a leveraged buyout from Avon.

Bill Chaney’s Keys to Sales Success

1. Know and love

your product

2. Enjoy serving people

3. Put integrity first

4. Work hard

5. Be positive and

stay motivated

6. Never give up and

never accept defeat

7. Manage adversity

and problems early

and squarely

8. Be open-minded

about change

9. Keep on learning

10. Plan for success

The Sales Magic of the Blue Box

Over a hundred years ago, Charles Lewis Tiffany chose the color for the box now recognized worldwide as a symbol of timeless elegance, style and quality. For the past century Tiffany & Co. has packaged every purchase in its now-famous trademark robin’s egg blue box. Even today, whether you buy a $35 silver key ring or a $600,000 diamond necklace, it is presented in the signature box, wrapped with a soft, white satin ribbon.

Why Tiffany chose the color often described as Wedgwood blue, sky blue or forget-me-not blue is unknown, but may stem from a Victorian custom in which bridesmaids received a dove set with turquoise as a reminder of the bride. His choice of the turquoise color may represent a shrewd marketing move intended to promote Tiffany & Co. as the source of the perfect wedding gift.

Regardless of its origins, the Tiffany box has taken on a magic all its own. As early as 1906 attempts were made to purchase the boxes themselves, but the iron-clad rule was that no box bearing the Tiffany name was to leave the building without a legitimate Tiffany purchase.

Decades later, the box still stirs feelings of mystery, excitement and joy, for everyone knows that Tiffany has presented precious jewels in blue boxes to royalty and heads of state. Some explain its magic by pointing out its symbolic connection with the company’s legacy and its VIP customers. Others suggest that the blue box marks its recipient as unique, special, precious and beloved. It is not uncommon for the boxes to be saved for decades. When a Tiffany heirloom is handed down to a new generation, it is often presented in its original package, wrapped in a white satin ribbon.

It is said that the excellent is new forever. It is the sales magic of the blue box that makes Tiffany presents a delight to give, to receive and to share with future generations.