Going Premium

Every now and then, I’ll see a conversation online about a successful brand or retailer where a commenter will say something about how excited they are to see when the firm goes premium: offering more expensive products, like gold-nibbed or high-end pens. It’s almost always expressed as an inevitability, like a star athlete moving up to the big leagues, and yet it almost never happens in reality. In fact, the opposite seems to occur more frequently: brands that were once premium like Parker and Waterman barely compete in the upmarket space anymore. In today’s post, I thought it would be interesting to explore why firms aren’t always so eager to make the move upmarket, and look at Goulet Pens and Twsbi as two case studies.

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Rethinking Esterbrook

I don't want to focus on this topic any more than you want to read about it, but I think I’ve made a mistake and it needs to be discussed. The last time I spoke about Esterbrook, I thought they were trying to be a contender in the FP market and was totally dismissive about their approach. I could not see any possible strategy that would lead them to success and was critical of the guy behind it – Rob Rosenberg – for even trying. Lately, I’ve been having second thoughts about that and the recent Taxonomy series gives us a framework for helping to see things in the same way that I do.

The thing that stuck with me was Rosenberg – and his father’s – experience in the industry. They weren’t inexperienced outsiders; they had experience with brands like Parker and Waterman and founded a distributor, Kenro. My impulse was to dismiss this experience, to say maybe the father (who sadly passed some years ago) had the nous and the son was trying his best but lacked that skill.

Later, I was struck by a comment of Rosenberg’s that I saw repeated on Facebook or FPN (I apologise for not being able to provide a link) where he claimed not to be aiming for the online pen community, not the enthusiasts and lovers of FPs. I interpreted this as a snide, petty dismissal of a community that had already dismissed Rosenberg – but it stuck with me.

Finally, I was thinking about how foolish it was for someone like Rosenberg to try and imitate the least competitive firms in the market, firms like Cross and Parker, who had the reputation and history to dominate the market in spite of their low-value products. Even if his pens were slightly cheaper, they were still terrible quality, and you’re never going to win over the enthusiasts by being slightly better than awful.

Then it struck me: this is the Esterbrook strategy. He was being genuine when he said that the business wasn’t intended to appeal to the enthusiast community, he was going after exactly the same segment of buyers that buy modern Parkers: people who give these pens as gifts to students and relatives, people who don’t know much about FPs or use them personally, and make the purchase decision on reputation alone. Resurrecting the Esterbrook brand was never about the old products or love for the brand itself; it was because Rosenberg understands that these brands compete on history and reputation. And the unregistered Esterbrook brand was an opportunity for him to quickly gain access to a long history, to produce pens under a storied, respectable name and sell to consumers who don’t really know (or care) about the products that they are buying.

It is actually a pretty smart strategy and I have to give Rosenberg some credit for that. I can totally see why he saw it as a valuable opportunity. Now, some of my readers are smart people: they work at FP manufacturers, distributors, and retailers. Maybe you guys picked up on this right away and are a bit disappointed by my naivete. That is totally fair and I have to admit that I didn’t see this immediately, I wrote my post on Esterbrook long before I connected the dots here, and I was completely wrong. We were never the targets for the Esterbrook strategy at all, and Rosenberg isn’t the idiot I assumed for thinking we would want to buy those terrible, terrible pens.

So the strategy is to resurrect the brand, play on the history and innovation, get the product into the brick and mortar stores – the department stores, the newsagents, wherever pens are sold by people who don’t try before buying – and sell to the buyers who want a respectable, premium gift for someone they don’t see terribly often. The question is: will it work?

The first part of this question means thinking about whether that segment of the market can sustain another business. Right now, it’s dominated by Cross, Parker, Sheaffer, and Waterman (to some extent), and Diplomat and Monteverde play a small role. That’s a lot of brands, and Esterbrook would have to offer something special to stand out. Certainly the brand name has more history and cachet than either of the last two, but it doesn’t have the reputation, recognition, distribution, or production capacity of the big four. But those things can be built up.

My opinion is that the market is already crowded and for Esterbrook to succeed, it would have to steal market share from the other brands and that would probably lead to one of the smaller guys being pushed out of the market – and being careful that Esterbrook itself isn’t the one that gets pushed out. That is a hard thing to pull off but it’s theoretically possible.

The second part of the question is whether Esterbrook – whether Rosenberg – could actually pull it off, and I’m much more negative about this.

First, the relaunch has been a disaster and building the reputation is probably turning out to be something that is much more difficult than expected. Although the brand definitely has a history, I’m not sure that it can be said to have a reputation – I doubt many consumers will recognise the name of a pen company that folded around 40 years ago. Everything depends on the ability of Rosenberg to transform Esterbrook’s history into reputation, and I can see little evidence of that happening so far.

Second, I think there’s a real question of whether you need the support of the enthusiast community to build a brand that sells primarily into the B&M stores. Obviously Rosenberg feels he can tell us to go straight to hell – and maybe that’s true. But it seems like it might’ve been a smarter idea to work with the community and have them evangelise for you – providing some much-needed feedback on product design, and early revenue to sustain the business while growing the distribution network. But my feeling is that Rosenberg is arrogant; he seems to believe that he knows best and working with the community is a waste of time. So be it. I’m obviously negative on Rosenberg’s ability to make this transformation (especially when the online environment is so incredibly hostile) but I’m not going to say failure is a foregone conclusion.

I’ve already been wrong on Esterbrook once and maybe I’ll be wrong again, but I don’t see this working out for them. Sure, the business is actually more competitive than I originally thought; there is definitely a business case here and I would say a reasonable chance such a strategy could lead to a multimillion-dollar payday. But while I can respect the strategy, I don’t see Rosenberg as having the ability or temperament to pull it off: he’s a bully who threatens people and lets his emotions get in the way of good decision-making. It’s hard to imagine someone with that kind of disposition convincing the market that his brand, virtually unknown beyond the enthusiast community, is worthy of their trust and respect. I guess we’ll soon find out if I’ve been wrong again.