Martha Bets the Farm on...Martha


By Pallavi Gogoi Free at last. On Aug. 31, icon Martha Stewart will shed the electronic ankle bracelet she has worn since her release from prison in March. Her term of detention and house arrest may be over, but for Stewart, her darkest days never really stopped her from branding her famous name everywhere.

In fact, Stewart has been on a tear for months, signing deals galore even during her home confinement. She's recording two new TV shows, Martha and her own version of Donald Trump's The Apprentice, which begin broadcasting in September. She's launching a 24/7 radio show on Sirius Satellite radio. And her new book, Martha's Rules, hits bookstores in October. She's even developing a new line of DVDs on fine living.

In essence, she has thrown out the strategy adopted by her own company, Martha Stewart Living Omnimedia (MSO), to diversify away from Martha. Instead, Stewart has decided that her identity is integral to the MSO brand after all.

Can she pull off such a stunning comeback with such a counterintuitive marketing strategy? Here are some answers:

Does Martha Stewart's name still have cachet, even after she served jail time for a felony conviction?

Just look at MSO's share price. At $31.79, it has more than tripled since her sentencing last year and reflects the confidence investors have in her ability to reshape the company's destiny. She's back -- and she may have more cachet than ever. Celebrity is funny like that sometimes (see BW Online, 8/9/05, "Betting on the Buzz").

What happened since Stewart went to jail to increase her cachet?

Stewart's stock-in-trade -- do-it-yourself advice on home decorating, cooking, and gardening -- is hotter than ever. With Cable TV channels like HGTV and the Food Channel and shows like Extreme Makeover: Home Edition and Trading Spaces, entertainment formats that Stewart pioneered became wildly popular, even as she battled a criminal investigation and charges, and then served time.

Now she's free to retake the stage -- and many people believe the time is more than right for more Martha Stewart. "She's the queen of home improvement -- in fact she helped launch this segment," says Nicki Gondell, principal at Trend House, an outfit that follows fashion and design. "I don't think people are going to even remember that she was in jail once she comes along coaching us how to make the perfect collage."

What about that detached perfectionism that was always her stage-presence trademark? Will she come back with a new image?

People used to joke that hearing Martha Stewart's name made women's heart rates race because they got so stressed just thinking about meeting her exacting standards. However, all signs point to a gentler, more human Martha, say branding experts. "Nothing like a jail sentence to humble you," says Gondell. In fact, people might warm to the notion of getting advice on how to grow amazing azaleas from Martha now, envisioning her as a person who's as fallible as everyone else.

But this is a tough balancing act, isn't it?

It could be. She needs to be able to persuade people to like and respect her again and at the same time promote the products and services that her company makes. That means she can't afford any mistakes that reinforce a negative image of her again. But astute businesswoman that she is, Stewart realizes that with all the media attention focused on her, this is her best opportunity for a comeback.

Doesn't she run the risk of being overexposed? Too much Martha?

Perhaps. It was one thing when Martha hosted a weekly TV show and graced the pages of her magazines. But Martha all over, on radio, TV, and on book and DVD shelves, could lead to media saturation (see BW Online, 8/9/05, "All Martha, All the Time"). "What makes a brand compelling is its exclusiveness, intrigue, and its special quality. If it's everywhere, people might wonder, how special is that?" says Wendy Liebmann, president of WSL Strategic Retail, a brand retail strategy firm. "Indeed, if she's in too many places, people might say: 'Enough already!'"

Does saturation media have an upside?

More revenue for MSO could be an immediate benefit. The Martha show already sold some advertising bundled up together with the magazine. And Sirius Satellite Radio has guaranteed a payment of $7.5 million a year for four years for 24/7 Martha Stewart radio programming. MSO CEO "Susan Lyne is working aggressively to leverage the brand into new revenue opportunities," says William Drewry, analyst at CS First Boston. "The new syndicated TV show combined with the satellite radio licensing agreement could represent strong future cash flow streams." However, Drewry also warns that MSO is a long way from sustained profitability.

Is that why Martha Stewart and MSO are working closely together again?

When Stewart was on trial, MSO stock fell to almost $5, and the syndicated show on CBS was canceled, taking away one of MSO's main revenue sources. So, the company decided it was time to diversify away from Martha. It launched Everyday Food magazine and a TV show of the same name on PBS. It also acquired Body & Soul magazine, which focuses on natural living.

Though these moves weren't enough to make up for lost revenue from the show, they brought in diversity that shareholders like in a company's portfolio. But then, MSO CEO Sharon Patrick, a friend of Stewart's, was cut loose for choosing to diversify out of the Martha name. "Somehow someone convinced Martha that it wasn't the right way, and we're back to square one now," says Dennis McAlpine managing director of McAlpine Associates, an investment advisory firm.

Susan Lyne was brought in as chief exec in November, 2004, on the heels of developing two of ABC's biggest new hits -- Desperate Housewives and Lost. Cautions McAlpine: Lyne must remember "even a friend can be fired for taking the advice of experts."

Does Stewart still hold a stake in MSO?

She continues to own more than 60% of its shares and draws a compensation package worth more than $1 million a year. As MSO gains, so does Stewart. Ultimately, the make-or-break factor in her branding strategy will be Stewart herself.

---------------------------------------------------------

In response to a previous story, "Can Martha Cook Up a Zinger?", readers sent BusinessWeek Online several possible tag lines that Martha could make her own, much like Donald Trump has made "You're Fired" his. Cast your

vote now for the one you like best.

Gogoi is a reporter for BusinessWeek Online in New York


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus