Kodak targets soccer moms for digital products

Analysts say it should target teenagers

Antonio Perez, chief executive officer of Eastman Kodak Co, says the 129-year-old company must sell its digital cameras and printers to suburban soccer moms to succeed. Analysts say he should think younger.

Soccer moms, or women with young children who participate in sports and other activities, are a target audience because they take and print a lot of photographs, Perez, 63, said in a February 5 interview. He’s used to defending his strategy.

“My oldest daughter, she’s been arguing with me for life that printing was a stupid thing to do,” Perez said. “She was married two years ago, she has a baby. Now things have changed. All of a sudden, I’m an intelligent man.”

 

With 2009 revenue projected to drop for the fourth-straight year, analysts and an investor say Kodak needs to reach younger customers who fuel technology sales.

The company hasn’t managed it yet, according to 24-year-old Tim Czerwienski, an editorial assistant at Boston College’s alumni magazine. “I sort of think of them in terms of film, you know like actual canisters,” he said.

That’s a problem for the Rochester, New York-based company, which lost 84 per cent of its market value in the last 12 months as it struggled to show investors it could succeed as demand for traditional film disappeared.

“They have not reached the young yet,” shareholder Rusty Robinson said. His Brentwood, Tennessee-based Robinson Investment Group owns 12,900 shares among the $102 million it manages. “If they reach teenage boys, that’s the engine that drives technology.”

Czerwienski said he hasn’t used Kodak Gallery, the online photo-sharing site that announced a partnership with Photobucket March 4. He thinks of Yahoo! Inc’s Flickr, closely held Facebook and News Corp’s MySpace when considering sharing photos.

Kodak non-entity

“In terms of the way that I look at photos and collect photos online, Kodak isn’t really even an entity for all intents and purposes,” he said. “I don’t have like a shoebox full of photographs.”

While younger people prefer online photo-sharing, new parents and others still print, Perez said last month at Bloomberg’s headquarters in New York. That’s why after spending 25 years at Hewlett-Packard Co helping develop inkjet printers, he has hinged Kodak’s turnaround in part on a new line of those devices, whose pricing model he changed.

More than competitors

Kodak printers sell for 15 per cent to 35 per cent more than competitors such as those from Hewlett-Packard and Seiko Epson Corp, while the ink costs about half as much, according to the company. That enables customers to save an average of $110 on ink a year, Kodak says on its Web site.

The company will advertise “more and more” this year, Perez said, without elaborating, and added that it “has a lot of work to do” in spreading awareness. Last quarter, Kodak introduced infomercials, which Perez said were “cheap.”

The company’s focus is people who take and print a lot of photos, spokesman Dave Lanzillo said. “It’s not really an age thing,” he said. “It’s really people who print a lot, who see value in saving money on their printing.”

Kodak shares are down 89 per cent since the company announced May 11, 2005, that Perez would become CEO. Revenue advanced 5.6 per cent in 2005 before falling 26 per cent in 2006, while the company was in the midst of a four-year restructuring to focus on digital products.

Kodak was unprofitable in three years out of four through 2008, posting earnings only in 2007. Five analysts tracked by Bloomberg recommend selling the stock, while one says hold. None recommend buying.

Brand loyalty

Kodak needs to target younger consumers to establish brand loyalty, said Ron Glaz, a program director for Framingham, Massachusetts-based technology research firm IDC.

“If you start grooming people at a young age to use Kodak technology, as they become soccer moms five or ten years down the road, they’re more likely to use a Kodak printer,” Glaz said in an interview.

Most important is that Kodak define its brand for the digital era, said Tim Calkins, clinical professor of marketing at Northwestern University’s Kellogg School of Management, in Evanston, Illinois.

“My sense is that Kodak has a little bit lost track of what the brand really means,” Calkins said in an interview. “Kodak as a brand had such incredible value. Clearly they haven’t found a way to capture it.”

In 1999, Kodak ranked 16th on the 100 Best Global Brands list compiled annually by consulting firm Interbrand Corp, a subsidiary of Omnicom Group Inc. That was ahead of Nike Inc and Kellogg Co Last year, it slipped out of the top 100 after falling to 82nd in 2007.

“They’ve failed to understand how their consumers’ lifestyles have changed,” Interbrand Global Chief Executive Officer Jez Frampton said in an interview.

Kodak’s ranking in the markets in which it competes is a better measure of brand strength, Lanzillo said.

“We rank in the top three in nearly all of the markets we serve, and first in many,” he wrote in an e-mail. “That tells us that our customers embrace our value proposition.”

The way back to the top isn’t necessarily through an expensive national television campaign or chasing younger consumers, Calkins said. Most important is defining the brand and getting it in front of the right audience, he added.

“Young people, I suspect, have less feeling for Kodak,” he said.

Companies have orchestrated brand turnarounds before. In 2007, Hewlett-Packard edged up in Interbrand’s rankings with a campaign emphasizing the “personal” in personal computers, according to BusinessWeek Magazine, which has published the Interbrand list since 2001. Kodak has to find a message that plays to its strengths, Calkins said.

“What Kodak stood for was really memories,” he said. “That is still an incredibly important thing even though the technology has changed.”

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net