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Case Study

‘Hello Kitty’

A Japanese Superbrand

© 2006 The Icfai Center for Management Research (ICMR). All Rights Reserved. For accessing and procuring the MARKETING MASTERMIND 60 June 2007 case study, log on to www.ecch.cranfield.ac.uk or www.icmrindia.org

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‘Hello Kitty’ She (Hello Kitty) is the original, and it is hard to replace her. She became the icon of cute for a whole generation. You can’t buy that kind of lucky coincidence.1 – Ken Belson Co-author, Hello Kitty: The Remarkable Story of Sanrio and the Billion Dollar Feline Phenomenon, in 2004. Hello Kitty was propelled from day one by the character’s cute and simple design. After 30 years, we’re glad to see that people are still buying her products.2 – Bill Hensley Marketing Director, Sanrio Inc., in 2003.

Hello Kitty was the name of a cartoon cat developed in 1974 by Sanrio Co. Ltd. (Sanrio), a Japanese company that sold character-branded goods in Japan and other parts of the world. Sanrio initially used the character to adorn petty merchandise like coin purses and pencil boxes targeted at small girls. However, after Hello Kitty became hugely popular, Sanrio extended the brand to a variety of other products. By the early 2000s, Hello Kitty featured on products ranging from vacuum cleaners to DVD players, toilet paper to cars, and computers to candy, and was thought to be one of the most powerful brands in the world. This case discusses the reasons for the popularity of Hello Kitty, and tries to analyze the unique features of the brand. It also talks about the various steps Sanrio took over the years to revive and reinvent Hello Kitty when sales showed signs of flagging. The role of celebrity endorsements in creating brand value is also discussed. The case concludes with a commentary on Sanrio’s efforts to convert Hello Kitty into a luxury brand.

Hello Kitty Goes Luxe
In early 2005, Sanrio Co Ltd. (Sanrio), the Japanese company which created the popular cartoon cat Hello Kitty, entered into a licensing agreement with jewelry designer Kimora Lee Simmons’ (Simmons) company, Simmons Jewelry Co., to create a line of diamond jewelry— the “Hello Kitty Collection by Kimora Lee Simmons.” Simmons’ jewelry line, which included pendants, rings, and diamond watches, was priced in the range of $350 to $3,5003, and was launched in March 2005. The diamond watches, which were reportedly the best selling items in the line, were priced between $1,875 and $3,250 and were available in eight different designs. All of Simmons’ jewelry was available exclusively at NeimanMarcus outlets across the US. (Refer to Exhibit I for pictures of some of Simmons’ jewelry pieces). Diamond jewelry was only a small part of the Hello Kitty merchandising universe. The Hello Kitty brand was also used on designer apparel, accessories, and perfumes. High-end pet accessories were sold
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under the label the “Hello Kitty Collection by Little Lilly” at upscale boutiques in the US. On the technology front, a Japanese company called Business Design Laboratory created a 20-inch tall Hello Kitty robot4 that could perform the job of front-desk personnel in the early 2000s. Apart from luxury products, consumers could also buy affordable products like Hello Kitty pencil boxes, purses, and apparel from various stores worldwide. Reportedly, as of early 2006, there were thousands of different Hello Kitty products available in over 40 countries around the world. Sanrio first introduced Hello Kitty in 1974, as an embellishment on a small coin purse sold by the company. Children, especially small girls, loved the cartoon and the cat became very popular. Keeping the character’s popularity in mind, Sanrio produced several Hello Kitty branded products, aimed at small girls and preteens over the late 1970s. However, during the 1980s, the growing popularity of other cartoon characters such as Doraemon (another cat) resulted in the Hello Kitty

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Edward Gomez, “Pop: How Hello Kitty came to rule the world,” http://www.sfgate.com, July 14, 2004. Parija Bhatnagar, “Hello Kitty’s a whisker away from 30,” http://money.cnn.com, November 14, 2003. Dollars ($) refer to US Dollars in this case study. The robot could recognize as many as 10 faces, ask visitors to speak their names, and tell them when the person they had come to see was ready. 61 June 2007

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Exhibit I: Hello Kitty Diamond Jewelry Collection by Kimora Lee Simmons

brand once again by associating it with jewelry and luxury products.

Background
Shintaro Tsuji (Tsuji), the founder of Sanrio, was born in 1927 in the Yamanashi region of Japan. Tsuji was an engineering graduate, and worked for the Japanese government before resigning to pursue his entrepreneurial ambitions. Tsuji set up the Yamanashi Silk Center (YSC) in 1960, through which he sold silk goods like purses, slippers, etc.7 However, Tsuji did not find much success in this business initially. In 1962, Tsuji started selling a line of slippers that had the picture of a strawberry on them. These slippers went on to become a huge success and gave a boost to Tsuji’s struggling business. Tsuji realized then that consumers were more attracted to items that had been embellished with some design or character. He was later quoted as saying, “If you attach added value or design to the product, they sell in a completely different way.”8 After the success of the slippers Tsuji concentrated on developing designs and pictures that could be used to adorn his merchandise. In the meantime, he received a license from Charles Schulz9 to use the famous Snoopy character on his merchandise. Apart from this, Tsuji also began selling Hallmark 10 greeting cards and Barbie11 dolls in Japan. However, these products did not find a good market in the country as Japanese consumers considered them to be too “western”.

Source: Cheryl Kremkow, “Licensed to sell,” http://www.modernjeweler.com, June 1, 2006.

brand losing some of its appeal. Therefore, in the mid-1990s, Sanrio repositioned the brand to make it appealing to a wider age range of female customers. The repositioning was successful, and Hello Kitty regained its popularity. Over the years, Sanrio launched the Hello Kitty brand in various countries in Southeast Asia, Europe, and the Americas. In Southeast Asia, analysts noted that girls showed almost a fanatical devotion to the brand. Apart from Southeast Asia, Hello Kitty was also hugely popular in the US—so popular that she was considered to be in the same league as car5 6 7

toon characters like Mickey Mouse, Snoopy, and Winnie the Pooh. Such was Hello Kitty’s popularity that she was chosen the UNICEF 5 ambassador for the USA in 1983 and for Japan in 1994. By the early 2000s, however, Hello Kitty began facing brand fatigue6 in its domestic market, Japan. In 2002, Winnie the Pooh replaced Hello Kitty as the best-selling character among female consumers in Japan. This in turn had an impact on Sanrio as Hello Kitty was the company’s main brand and Japan its key market. In the early 2000s, Sanrio was trying to reposition the

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Established by the United Nations in 1946, UNICEF is the acronym for United Nation’s Children’s Fund. Brand fatigue occurs when consumers get bored of a particular brand, after purchasing too many products of the same brand. The YSC did not actually manufacture any of these products. The manufacturing was contracted out to smaller companies, and YSC concerned itself only with the marketing of the products. “Pick of the Litter,” http://metropolis.japantoday.com, Issue 513. Born in November 1922, Charles Schultz was the creator of the famous cartoon strip, Peanuts. Snoopy, a dog, was one of the main characters in these cartoon strips. A Missouri, US based company, Hallmark is one of the largest manufacturers of greeting cards in the world. Barbie is one of the most well-known and also one of the best-selling dolls in the world. It is manufactured by the US-based toymaker, Mattel Inc.
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‘Hello Kitty’ Over a period of time, Tsuji recruited artists to develop characters that could be used to decorate items like key chains, cups, etc. By the end of the 1960s, he had put together an in-house creative team that was responsible for churning out new designs and characters. Tsuji’s intention was to take advantage of the Japanese custom of giving gifts. In Japan, people often exchange small and inexpensive gifts like key chains and other tokens. Even children like to exchange small gifts and small stationery items. Tsuji noted that there was a huge market for merchandise such as pencil boxes, small purses, etc., that young people could afford to buy. In 1973, Tsuji incorporated YSC as Sanrio Co. Ltd. The company adopted the motto “Small Gift, Big Smile, ” implying that a small gift could bring great joy to both the giver as well as the receiver, and that gifts were a form of expressing one’s feelings to another person. Sanrio focused on selling character-branded goods to young people. The company defined its main business as “social communication gift products” or small gifts that were exchanged socially. During the early 1970s, Tsuji and his creative team introduced various characters and designs for use on merchandise. Prominent among these were Patty and Jimmy (cartoon characters of a girl and a boy) and Hello Kitty, in 1974. Hello Kitty became an instant hit with children, who took a liking to the cute cat with the oversized head. Hello Kitty’s sales grew quickly, and this contributed to Sanrio’s success in the 1970s. Soon, Hello Kitty had become so popular that many companies started approaching Sanrio for permission to use the image. In 1976, Sanrio started licensing the Hello Kitty image to various companies for use on

Exhibit II: Sanrio’s Main Businesses as of Early 2006
Segment Social communication gift business Subsegment Social communication gift products Greeting cards Publications Movies, videos Theme park business Theme park service Tie-up commissions Plays Other businesses Restaurants Theatre Real estate Major Businesses Stationery, kitchen and tableware, interior decorative goods, portable goods, apparel, etc. Birthday cards, Christmas cards Gift books, general publications and magazines Film distribution, video software sales Amusement park, sales of merchandise, restaurants. Commissions from collaborating companies Revenues from musicals and other plays Restaurants, Kentucky Fried Chicken (franchise) Revenues from performances at Sanrioowned theaters Real estate rental

Adapted from www.sanrio.co.jp.

their merchandise. Over the years, Sanrio introdu ced several other popular characters like Chococat, Keroppi, Cinnamoroll, etc., but Hello Kitty remained its most successful character. The brand’s success made Sanrio one of the leading companies in the lucrative character branded goods market in Japan. Sanrio also made money by licensing its other cartoon characters to other companies in Japan and worldwide. Apart from marketing characterbranded goods, Sanrio also produced movies. In 1978, Tsuji received an Academy Award in the “best documentary film” category for the movie Who are the Debolts and Where Did They Get 19 Kids? However, most of the company’s revenues still came from its “social communication businesses” or the sale of characterbranded merchandise. Over the years, Sanrio continued to introduce new cartoon characters at regular intervals while retiring
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some of the older characters. However, Hello Kitty remained the company’s main brand. (Reportedly, the Hello Kitty brand was providing almost half of Sanrio’s revenues by the early 2000s.) Sanrio opened an amusement park called Puroland in Tokyo, Japan, in 1990. In 1991, the company opened another amusement park called Harmonyland in Oita, Japan. Sanrio’s product range, which comprised mainly stationery items in the 1970s, was extended to a wide array of products including apparel and accessories by the early 2000s (Refer to Exhibit II for Sanrio’s major businesses in early 2006). Over the years, Sanrio launched its characters in various countries mainly through licensing. In 2006, the International Licensing Industry Merchandisers’ Association (LIMA) inducted Tsuji into the Murray Altchuler Licensing Industry Hall of Fame. According to LIMA, Tsuji was recognized for his 30-year ca-

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Case Study reer in the licensing industry, during which time he had built up Hello Kitty into a “global licensing phenomenon”. 12 Although Sanrio expanded its overseas market over the years, Japan remained its key market throughout. Tsuji was considered to be the equivalent of Walt Disney in Japan because of the success achieved by Sanrio’s characters in the country and around the world. As of early 2006, Sanrio sold its products in more than 40 countries in Asia, Europe, and the Americas (Refer to Exhibit III for the various subsidiaries of Sanrio as of early 2006). the company asked its creative team to develop new characters based on these animals. In 1974, Shimizu Yuko (Shimizu), one of the designers who mainly designed wallets for the company, created several characters including designs for a cat, a dog, and a bear. The design of the cat character was interesting in that it had an oversized round face with two dots as eyes, a button nose, and no mouth. It also had six whiskers and a red bow on its left ear. The cat, like most other cartoon characters, sat in a human-like posture. One of the most striking features of this cat, however, was that its face was completely expressionless (Refer to Exhibit IV for a picture of the first Hello Kitty design). Sanrio first u sed the cat (which had no name at the time) to decorate a coin purse, which it sold along with other wallets in 1974 (Refer to Exhibit V for a picture of the Hello Kitty coin purse). Over time, Sanrio observed that the purses featuring the cat were selling better than the others. To make the most of the cat’s popularity, the company decided to give it a solo launch in 1975. Sanrio named the character “Hello Kitty”, and began selling toys, stationery items, and other small gift articles with pictures of Hello Kitty. Explaining the rationale behind the name, Bill Hensley (Hensley), marketing director, Sanrio’s US business, Sanrio Inc.13 said, “Gift-giving is an important part of the Japanese culture. In Japan, ‘Hello’ communicates the idea of open communication. That’s why she was named Hello Kitty.”14 Tsuji initially targeted the Hello Kitty merchandise at girls aged between 4 and 6. The goods were priced low so that they could be bought by the target consumers.

Hello Kitty Through the Years
During the early 1970s, Sanrio carried out a consumer survey which revealed that the most popular cartoon characters in Japan were those of dogs, bears, and cats. Accordingly,

Exhibit III: Various Subsidiaries of Sanrio as of Early 2006
Name Sanrio Inc. Sanrio Do BrasilComercio e Representacoes Ltda. Sanrio (HongKong) Co.,Ltd. Sanrio Korea Co. Ltd. Sanrio Taiwan Co.,Ltd. Sanrio GmbH Sanrio (Shanghai) International TradingCo., Ltd. Sanrio Puroland Co.,Ltd. Harmony Land Co., Ltd. Sanrio Far East Co.,Ltd. Location San Francisco, USA Tamboré, Brazil Hong Kong Seoul, Korea Taipei, Taiwan Schleswig-Holstein,Germany Shanghai, China Major Businesses Business Relationship Social communication gifts Imports and sales of Sanrio products, loyalty trading Social communication gifts Import and sales of Sanrio products Social communication gifts Manufacturing of Sanrio products, loyalty trading Social communication gifts Manufacturing of Sanrio products, loyalty trading Social communication gifts Manufacturing of Sanrio products, loyalty trading Social communication gifts Imports and sales of Sanrio products, loyalty trading Social communication gifts Manufacturing ofSanrio products,loyalty trading Social communication gifts Manufacturing ofSanrio products,loyalty trading Theme parks Theme parks Purchase & sales of Sanrio products, loyalty trading Purchase & sales of Sanrio products, loyalty trading

Sanrio AsiaMerchandise Co.,Ltd. Hong Kong Tama-Shi,Tokyo Hinode-cho, Hayami-gun, Oita Shinagawa-ku, Tokyo

Social communication gifts Manufacturing of Sanrio products, loyalty trading
Source: www.sanrio.co.jp

Note: This is the not the complete list of Sanrio’s subsidiaries.
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http://www.licensing.org/news. Sanrio opened its first shop called “The Strawberry Shop” that sold Sanrio merchandise in the US in 1969. Later in 1976, the company set up its American subsidiary, Sanrio Inc., in California. Parija Bhatnagar, “Hello Kitty’s a Whisker Away from 30,” http://money.cnn.com, November 14, 2003.
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‘Hello Kitty’

Exhibit IV: The First Design of Hello Kitty

Source: www.sanrio.co.jp

Exhibit V: The Hello Kitty Coin Purse

Source: “Hello Kitty Celebrates Thirtieth Anniversary,” http://web-japan.org, March 2004.

Hello Kitty became an instant hit with small girls because of her “cuteness”. As a result, Hello Kitty merchandise began selling well in the market. The fact that the merchandise was priced affordably added to its success. Hello Kitty’s popularity continued to increase throughout the 1970s. Meanwhile, Sanrio launched Hello Kitty and other characters in the US. Here too, the company noticed that Hello Kitty was more popular than its other Sanrio counterparts. However, in the 1980s, Hello Kitty began losing its cachet in Japan, due to the growing popularity of new anime15 characters such as Doraemon. Anime continued to grow
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in popularity throughout the 1980s and the early 1990s, not only in Japan, but also in other countries (Mainly in Southeast Asia and North America). In the mid-1980s, Sanrio recruited a new designer, Yamaguchi Yuko (Yamaguchi). Yamaguchi was believed to be responsible for extending the Hello Kitty brand to a wide array of items including candy, accessories, clothes, and electronic goods. By this time, Sanrio had begun efforts to make the Hello Kitty brand more attractive to teenaged girls (going beyond its traditional market of small girls) in a bid to revive the fading brand. Reportedly, Sanrio got the idea after a high-school girl wrote a letter to the company in 1986 complaining that it did not produce products for girls of her age. After this, Yamaguchi visited various shops in Japan to find out what customers expected from Hello Kitty. She realized that although the company had positioned Hello Kitty as a character for small girls, the brand’s appeal went far beyond the original target market. Consequently, she convinced the company to take steps to make Hello Kitty acceptable to diverse age groups. She even introduced a sober black and white Hello Kitty design in order to attract older consumers. However, in spite of these efforts, Sanrio was not very successful in reviving the brand. Hello Kitty got a fresh lease of life in the mid-1990s, after Sanrio managed to successfully change the positioning of the brand. This period was called the “Kitty boom” by some in-

dustry observers. In 1996, Yamaguchi designed “hip” products like Hello Kitty mobile phone cases, etc., targeted at high-school girls. These products were popular, and sold well. Some analysts, however, believed that Hello Kitty’s revival during this time was the result of several factors, and could not be completely credited to Sanrio. They believed that Hello Kitty experienced a sudden rise in popularity due to the voluntary endorsement of the brand by Tomomi Kahara (Kahara), a young Japanese singer, in the mid-1990s. Kahara, who was very popular with high school girls, proclaimed herself to be a big fan of Hello Kitty, and sported a variety of Hello Kitty products during her public appearances. Said Takahashi Ko (Ko), marketing executive at Sanrio, “Kitty experienced the greatest rise in popularity since her creation thanks to pop singer Kahara Tomomi. She went on the highly rated TV program —Utaban and told the hosts that she loved Kitty-chan16 more than anything. Within days sales in our outlets had nearly doubled.”17 Analysts also attributed the popularity of Hello Kitty among teenaged girls in Japan to another fad prevalent in Japan during the mid-1990s — Print Club kiosks18. These kiosks were mainly used by female consumers aged between 13 and 28. Sanrio, spotting a business opportunity, set up Print Club kiosks in its shops. According to the company, young girls who were waiting to use a kiosk browsed around the shop and bought Hello Kitty merchandise.

Animation is referred to as anime by the Japanese. Anime is also the term popularly used the world over for Japanese animation work. Hello Kitty was popularly called “Kitty-chan” by her Japanese fans. Alex Jordan, “Big in Japan—Hello Kitty!” http://metropolis.japantoday.com. Photo booths, popular in Japan. A typical booth is large enough to hold up to eight people, and some are even larger. They typically cost between 300 and 600 yen per session. Once the money is inserted, between two to ten different pictures can be taken. Once the pictures have been taken, the occupants select those that they wish to keep and print using a touch sensitive screen or pen-sensitive screen. The pictures can then be decorated on the screen with a vast array of virtual stamps, borders, and text. (Source: http://en.wikipedia.org/ wiki/Print_Club)
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Case Study Another reason for Hello Kitty’s revival, according to industry observers, was that young women who had been fans of Hello Kitty in their childhood continued to buy the brand even after they grew up. It was noted that women liked to decorate their office desks with Hello Kitty merchandise. Further, young mothers were buying merchandise for themselves (like toasters, hair curlers, etc.) as well as their children, and Hello Kitty had, by the early 2000s, become a brand that attracted female consumers in the age group of 4 to 30. Interestingly, a “Kitty boom” occurred outside Japan too at this time. During the 1990s, Hello Kitty had become hugely popular in the US and some Southeast Asian countries. Apparently, Hello Kitty’s popularity among celebrities was not restricted to Japan. The brand became a favorite with many celebrities in other Asian and western countries, especially in the US, during the late 1990s. Reportedly, celebrities in the US like singer Christina Aguilera, musician and TV personality Lisa Loeb (Loeb), supermodel Tyra Banks, and singer Mariah Carey (Carey) were big fans of Hello Kitty. Carey made headlines when she showed off her Hello Kitty hair dryer and boom box19 while appearing in an episode of a popular television show, MTV Cribs, in the early 2000s. Loeb, a popular singer in the US, even dedicated an album to Hello Kitty. The album was aptly titled Hello Lisa.20 Many celebrities such as Cameron Diaz, Mandy Moore, Heidi Klum, Carmen Elektra, Nicky Hilton, Ashley Judd, Madonna, and others posed for fashion magazines dressed
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Exhibit VI: Celebrities Endorsing the Hello Kitty Brand

Cameron Diaz wearing a Tarantino necklace

Mandy Moore with a Hello Kitty beaded purse Source: www.sanrio.com.jp

Nicky Hilton wearing a Hello Kitty Heatherette dress

in outfits with pictures of Hello Kitty and accessories (Refer to Exhibit VI for pictures of celebrities with the Hello Kitty brand). Becoming a “Hollywood favorite” helped Hello Kitty gain visibility worldwide. Sanrio also acted quickly to make the most of this popularity. During the “Kitty boom” the company entered into several licensing agreements and brought out a host of Hello Kitty products. It licensed Hello Kitty for varied products targeted at different consumer groups. While on the one hand, Hello Kitty was featured on small items like pencil boxes for small girls and accessories for highschool girls, there was also a Hello Kitty car targeted at young women. Thanks to voluntary endorsements by celebrities, Hello Kitty had become a fashion symbol by the early 2000s. This allowed Hello Kitty to gain acceptance as a “premium brand” even though the brand was still used by Sanrio and other companies (under license) for small stationery items like pencils and sharpeners. In the early 2000s, the Hello Kitty brand had reached near saturation point in traditional products. Therefore, Sanrio looked for tie-ups with

high-end luxury items. The fact that it was voluntarily endorsed by celebrities helped Hello Kitty’s new positioning as a luxury brand. In April 2003, the Hello Kitty brand was used by Heatherette, a fashion label in the US, for its Spring/Summer 2003 collection. Designers Richie Rich and Traver Rains launched a new line of clothing featuring exclusive Hello Kitty designs. Swarovski21 offered a range of Hello Kitty merchandise like watches, jewelry, charms for mobile phones, etc. By this time, there were collectors of unique Hello Kitty merchandise. The items ranged from high-end products like a Hello Kitty watch by Swarovski to limited edition dolls like the Hello Kitty wedding collection by Sanrio. In November 2004, Hello Kitty completed 30 years. It was interesting to note that organizations other than Sanrio were also keen to celebrate Hello Kitty’s 30th “birthday”. For example, the Japan Mint produced 200,000 commemorative coin sets to commemorate the anniversary. Another Japanese company, Tanaka Kikinzoku Kogyo KK, made 12 solid platinum statues worth $30,000 each, and sold all 12 (Refer

Boom box refers to a portable stereo system. Kelly Carter, “Hello Kitty is the Cat’s Meow,” http://www.usatoday.com, April 21, 2002. Founded in 1895, Swarovski AG is a Switzerland-based company that is popular for its crystal glass products sold under the name Swarovski. As of early 2006, the company sold jewelry, fashion accessories, home accessories, and eyewear under the brands Daniel Swarovski and Swarovski.
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‘Hello Kitty’ to Exhibit VII for a picture of the Hello Kitty platinum statue).

Exhibit VII: The Hello Kitty Platinum Statue

Sanrio’s Licensing of Hello Kitty
According to analysts, Sanrio’s decision to put Hello Kitty on a wide variety of products was largely responsible for keeping the brand in the public eye for more than three decades. After featuring the cat on a coin purse in 1975, Sanrio had, over the years, branched out to include several other items under the Hello Kitty brand. Analysts commented that Sanrio had put Hello Kitty on practically everything. Only Hello Kitty featured on items ranging from vacuum cleaners to DVD players, toilet paper to cars and computers to candy. Said Bruce Guiliano (Guiliano), senior vice president of licensing, Sanrio Inc., “In Japan, it’s possible to have your entire house decorated and fixturized in Hello Kitty…. There’s even a Hello Kitty dishwasher.”22 Sanrio was able to feature Hello Kitty on a variety of products through its licensing agreements with companies. For instance, in Japan, toymakers like Takara Co. Ltd. 23 and Bandai Co. Ltd. (Bandai)24 produced Hello Kitty toys under license from Sanrio. Matsushita Electrical Industrial Co. Ltd. (Matsushita)25 had the license to make Hello Kitty toasters. Mitsubishi Motor Corp. (Mitsubishi)26 created a prototype “champagne pink” Hello Kitty minicar in 2006. Sanrio also offered Hello Kitty video games and mobile games in associa22 23 24

Source: “Platinum Hello Kitty on sale in Japan,” http://www.platinum.matthey.com, February 4, 2004.

tion with gaming companies. For instance, in 2006, Sanrio and MOffy, a Hong-Kong based mobile games developer, launched a series of mobile games called Hello Kitty Saves the Beach, Hello Kitty Magic Block, Hello Kitty Amazing Circus, and Hello Kitty Joyful Balloon. It was also through licensing that Sanrio was able to extend the Hello Kitty brand to luxury products. For instance, Daiwa Resort Co. Ltd., a popular hotel chain in Japan, offered Hello Kitty-themed suites to its customers under license from Sanrio. Tarina Tarantino (Tarantino), a famous designer in the US, launched a new line of jewelry called the “Hello Kitty Pink Head Collection” under license from Sanrio. In addition to licensing out the brand, Sanrio also introduced new

items of its own every year. (Reportedly, 90% of the creative design team at Sanrio’s headquarters were women. According to some analysts, this went in favor of the company as the designers understood the needs and preferences of the target market well.) Sanrio replaced old Hello Kitty branded merchandise in shops with new items every six months. This kept the merchandise trendy and relevant. Sanrio’s amusement parks Puroland and Harmonyland were “Kittythemed”, and they even offered Hello Kitty-theme weddings. By the early 2000s, Sanrio was introducing close to 100 new designs of Hello Kitty products per month, worldwide. 27 Even though the Hello Kitty brand was used on a range of items, Sanrio took measures to protect the brand’s image from being sullied. For example, Sanrio did not permit companies to use the Hello Kitty brand for three categories of products—alcohol, firearms, and tobacco. Reportedly, Sanrio spent ¥1.5 bn28 every year on measures against unauthorized copying to control its charactergoods business. It was also worth noting that Sanrio used minimal advertising to promote Hello Kitty. The advertising mostly consisted of print and online advertising, which was primarily created in-house. The company believed that word-of-mouth was more powerful than promoting the product in the media through TV advertisements, movie tie-ins, etc. Said Hensley, “The publicity feeds word-

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Sandy Cohen, “Hello Kitty’s Sweet Puss on Everything from Toys to Toasters,” www.dailybreeze.com, November 4, 2004. Founded in 1955, Takara Co. Ltd., is a well-known toy company in Japan. Bandai is a major toy manufacturing company in Japan and belongs to Namco Bandai Holdings Ltd. As of early 2006, Bandai was the third largest manufacturer of toys in the world. Founded in 1918, Matsushita is an electronics goods company based in Kadoma, Japan. It produces several electronic goods like home appliances, automotive components, microchips, etc., under the brand names Panasonic, Quasar, Ramsa, Nais, Technics, and National. Mitsubishi is one of the largest auto manufacturing companies in Japan. http://www.toydirectory.com As of July 17, 2006, 1 Japanese yen was equivalent to 0.00862738 US$.
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Case Study of-mouth better than advertising does, and that word-of-mouth is really what drives the Sanrio experience.”29 Sanrio, unlike other cartoon companies, did not produce Hello Kitty based comic strips, movies, or TV shows on a regular basis. However, Sanrio actively participated in co-branding and other promotional programs. For instance, in 1999, Sanrio entered into a marketing tie-up with McDonald’s30 in Taiwan. As a part of the promotional program, McDonald’s gave away a limited edition of Hello Kitty wedding collection dolls with every “Happy Meal”. The campaign was so successful that it led to stampedes and fights among consumers. Reportedly, many fans purchased Happy Meals only to throw them away while keeping the dolls. The limited edition dolls were later sold for thousands of dollars as collectors’ items. In 2005, Sanrio permitted Eva Air, a Taiwanese airline, to decorate some of its aircraft in the Hello Kitty theme. It was said that these flights were booked more than 90% on an average. The carrier also did brisk business in Hello Kitty branded dutyfree goods. In the US, Sanrio worked with some retailers to develop products that met their specific requirements. For instance, Target, a USbased retailer, carried an exclusive line of Hello Kitty merchandise such as party invitations, small inflatable chairs, etc. Target even had a special Hello Kitty princess costume consisting of a Kitty-themed dress, wand, footwear, etc. By the early 2000s, the Hello Kitty was recognized in more than 40 countries in Asia, Europe, and the Americas. Hello Kitty was believed to
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be one of the most successful commercial images in the world.

What Made Hello Kitty Click?
Over the years, experts have tried to analyze the reasons for Hello Kitty’s extraordinary popularity worldwide. They were puzzled as to why only Hello Kitty, from among the many other characters created by Sanrio, clicked in the market. They have tried to discover the reasons that made Hello Kitty the “Queen of cute” for many female consumers worldwide. Many analysts attributed Hello Kitty’s success in Japan to the prevalence of the Kawaii31 culture in the country. The Japanese, regardless of their age, were known to have a passion for “cute” objects. For instance, it was considered normal for grown women in Japan to be seen with mobile phone cases that were adorned with cartoon characters, or for banks to print check books with pictures of cartoons. The postal department issued stamps featuring popular cartoon characters, and it was said that even the local police departments in Japan had cute-looking mascots. The Kawaii culture began to gain prominence in Japan during the 1970s, and persisted through the 1980s and 1990s. It helped that Hello Kitty came into existence at a time when the Kawaii culture was at a high in the country. Because of this, it was widely believed that Hello Kitty had become an icon of “cute” for the Japanese. Another reason for Hello Kitty’s success was considered to be its design. It was generally believed that the simplicity of the character’s design appealed to consumers. The Hello Kitty design consisted of simple

lines and very little detail. Besides, the design was kept unchanged over the thirty years of its existence. While other cartoon characters had evolved over time, Hello Kitty remained almost the same. For instance, when Mickey Mouse was first introduced, he looked like a rat. However, over time, Disney “toned down” the look to make him more likeable to children. The only major change in the design of Hello Kitty was made in 1993 when Sanrio replaced the cat’s bow with a flower. Later on, the company began selling Hello Kitty designs that had either a flower or a bow. (The bow, however, remained the favorite.) It was interesting to note that Hello Kitty’s “look”, however, changed with the times although the basic design remained the same. The change in looks was initiated by Yamaguchi in the mid1980s after she had spent time with customers at various Sanrio shops to find out what they expected from Hello Kitty. Yamaguchi found out that consumers wanted to see Hello Kitty in a variety of costumes. Based on this feedback, over the years Yamaguchi dressed Hello Kitty up as a bride, a nurse, a teacher, and a rock star, among others. She also introduced the character in various postures — standing, playing the piano, etc. According to many analysts, children and adults alike were fascinated with the different looks sported by Hello Kitty. In Japan, Sanrio introduced close to 200 “localized” Hello Kitty dolls by 2003. The company introduced localized Hello Kitty for every region and major city in Japan, and this represented the region’s specialty. Some examples were those of Hello Kitty peeking out of a cabbage in Gunma and one dressed like

31

James Betzold, “Bill Hensley,” Advertising Age, October 8, 2001, Issue 41. McDonald’s Corporation is a US-based fast food restaurant chain company with operations spread in over 119 countries. The company operated close to 30,000 local restaurants all over the world. Kawaii means cute in Japanese.
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‘Hello Kitty’ Momotaro, a legendary character belonging to the region, for the Okayama region. Unlike other cartoon characters that were originally developed for cartoon strips, TV shows, etc., and later used on merchandise, Sanrio developed Hello Kitty purely for its merchandise. Although Sanrio did release some Hello Kitty movies, comic strips, and video games, it was done only after the character had already been established in the public eye. Many also noted that Sanrio, unlike other companies, did not develop Hello Kitty’s character traits. For instance, children could easily distinguish between the nature and personality traits of Mickey Mouse and Donald Duck or Winnie the Pooh. The characters were generally developed with the help of TV shows and movies. Hello Kitty, in contrast, was a “mysterious” cat. Although Sanrio’s website did give a brief biography of Hello Kitty, her family, and friends, it did not make an attempt to communicate it aggressively to the consumers (Refer to Exhibit VIII for the biography of Hello Kitty). According to the company this was done deliberately. “We work very hard to avoid things that would define the character. All of Sanrio’s characters are very minimalist,” said Giuliano. 32 Much was also made of Hello Kitty’s lack of a mouth. Some people opined that Hello Kitty’s lack of a mouth (which implied that she could not speak) appeared to be more ‘Zen33-like’ to the consumers. “This Zen-like technique, intentionally or not, has allowed Kitty to become at once the princess of purity to tod32 33 34 35 36 37 38

Exhibit VIII: A Brief Biography of Hello Kitty
Hello Kitty was born in suburban London on November 1. Her real name is Kitty White. Hello Kitty’s family consisted of her father, George White, mother Mary White and a twin sister, Mimmy. Other family members included Anthony and Mary White, Hello Kitty’s grandfather and grandmother respectively. Sanrio also created several friends for Hello Kitty.
Source: www.sanrio.co.jp

dlers, a cuddly playmate for young girls, and a walk down memory lane for adults yearning for another taste of childhood,” said Ken Belson and Brian Bremner, authors of Hello Kitty: The Remarkable Story of Sanrio and the Billion Dollar Feline Phenomenon. 34 Further, the lack of a mouth also gave Hello Kitty an emotionless face, in stark contrast to the faces of other cartoon characters, which were very expressive. Some people believed that the emotionless face allowed consumers to project their own emotions onto Hello Kitty. Said Nakajima Seiji, a Sanrio employee, “Without the mouth it is easier to imagine (that) Kitty-chan shares whatever feeling you have at that moment. If Kitty-chan was smiling all the time, and you’d just broken up with your boyfriend or something and were very sad, the last thing you’d want to look at was a grinning Hello Kitty. Without a mouth you can imagine she is sad with you.”35 Some analysts, however, attributed Hello Kitty’s rise to popularity to just plain luck. According to them, Hello Kitty had gathered a huge fan following thanks largely to the proclamations of certain celebrities that they were Kitty’s fans. For instance, Tarantino, a famous designer in the US, was quoted as saying, “She’s so sweet, it just radiates from her cute

little face.”36 She, along with a host of other celebrities, created unique Hello Kitty items while celebrating the 30th ‘birthday’ of Hello Kitty in November 2004. On the Hello Kitty craze among celebrities, one executive at Sanrio commented, “Our characters are all intended to look cute. But these people seem to think of Hello Kitty as something ‘cool’ and we haven’t exactly figured out why. Kitty wouldn’t be cool if we meant her that way.”37 However, according to Hensley, “Kitty appeals because she’s really cute and we create functional stuff with a fun design. We listen to what’s going on in the customer’s lifestyle and make things with Hello Kitty. So whether it’s a teenage girl going to the prom or Tyra Banks going to the MTV Awards, she can carry that fun Hello Kitty sequin purse.”38

Is Hello Kitty Losing Her Charm?
Even though Hello Kitty was still among the top-selling brands in Japan as of early 2006, the avenues for future growth seemed limited. The increasing popularity of Winnie the Pooh among female consumers prompted analysts to say that Hello Kitty’s cachet was at risk in Japan. Analysts noted that Sanrio had succeeded in reviving the brand in

“Pick of the Litter,” http://metropolis.japantoday.com, Issue 513. A Japanese Sect of Mahayana Buddhism that aims at attaining enlightenment through meditation. Yuki Allyson Honjo, “Kitty power,” http://www.japanreview.net. Charles Spreckley, “What’s up Pussy Cat?” http://metropolis.japantoday.com. Sandy Cohen, “Hello Kitty’s Sweet Puss on Everything from Toys to Toasters,” www.dailybreeze.com, November 4, 2004. Tomoko Otake, “Hello Kitty, Pokemon, Doraemon Battle for Global Supremacy,” http://www.japantimes.co.jp, September 9, 2003. Kelly Carter, “Hello Kitty is the Cat’s Meow,” http://www.usatoday.com, April 21, 2002.
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Case Study the 1990s by repositioning Hello Kitty to make her appealing to a larger number of people. However, they were doubtful if the company could pull off the same trick a second time. There were several reasons for this. Hello Kitty had already been placed on a wide range of items and there were few new items left. Further, a demographic shift was taking place in Japan, with the number of young people decreasing over the years owing to low birth rates. This in turn limited sales as Sanrio’s target consumers were young people. Also, as the character-goods business in Japan had its roots in the Kawaii culture, brands like Hello Kitty and others were expected to lose their appeal once the culture died out in the country. Apart from these problems, analysts also opined that Sanrio could soon face succession problems. Tsuji, who was largely acknowledged to be the driving force behind the company’s growth, had turned 78 in 2005, and it was thought that his eventual exit would create a leadership vacuum in Sanrio. According to analysts, Sanrio’s financial performance was also likely to suffer as a result of Hello Kitty’s decreasing popularity. This was because the brand contributed almost half of the company’s revenues. “It’s needless to say that Kitty is Sanrio’s most powerful product, their fortune,” said Kazuo Rikukawa, president, Character Databank 39. Adding to Sanrio’s woes was the fact that it had been making losses in the amusement park business and was relying heavily on its social communication business (Refer to Exhibit IX for Sanrio’s operating profit from various business segments).
39 40 41 42 43

Exhibit IX: Operating Profit/(Loss) of Sanrio by Business Segment from 2004 to 06 (In ¥100 mn )
Segment Social communication gifts business Theme parks business Other businesses For the year ended March 31, 2004 70.37 (20.86) 0.41
Source: www.sanrio.co.jp

For the year ended For the year ended March 31, 2005 March 31, 2006 82 (11) (1) 83 (2) (0)

Sanrio had been increasingly focusing on the overseas market to improve the revenues from the Hello Kitty brand. “In Japan, Hello Kitty is a mature brand, even though it has seen substantial growth over the years,”40 said Hensley. He also said, “Our biggest market for her is still Japan and Southeast Asia, but our big push going forward is the Western hemisphere, primarily the US market.”41 Sanrio also appointed Mas Imai, a former Disney executive, as president and chief operating officer of Sanrio Inc. in 2005 in order to lead Sanrio’s US operations. Sanrio continued with its licensing strategy, bringing out a variety of Hello Kitty products like a guitar, a credit card, etc., in the US. In October 2004, the company started offering co-branded debit cards in association with MasterCard Inc. targeted at girls aged between 10 and 14. In the same month, it entered into an agreement with Nokia, a major mobile phone manufacturer, and Cingular Wireless, a service provider to offer Hello Kitty mobile phones. In 2006, Sanrio and Fender Musical Instruments Corp. 42 launched a guitar called “Hello Kitty Stratocaster”. The guitar was priced at $229 and was sold on the company’s website and at participating Sanrio boutiques in the US.

By 2005-06, Hello Kitty was undergoing another image overhaul in a bid to attract older consumers. As of early 2006, the Hello Kitty brand was used on a variety of luxury goods that were available at high-end retailers like Neiman-Marcus, Saks Fifth Avenue, etc., in the US. Sanrio’s target customers for Hello Kitty in the US mainly consisted of Asian and Hispanic consumers. But in 2005-06 Sanrio was trying to target female consumers belonging to all age groups, and all ethnic and cultural groups. Said Giuliano, “Hello Kitty is finding increasing acceptance as (a) symbolic icon of feminine style and taste.”43 However, it remained to be seen whether Sanrio’s extensive licensing of the Hello Kitty brand would add to the brand’s value or dilute it. r
SS George Director, The Icfai Center for Management Research (ICMR), Hyderabad. The author can be reached at ssgeorge@icfai.org Shirisha Regani Faculty Associate, The Icfai Center for Management Research (ICMR), Hyderabad. The author can be reached at shirisharegani@icmr.icfai.com Smitha Moganty Former Research Associate, The Icfai Center for Management Research (ICMR), Hyderabad.

Reference # 10M-2007-06-12-02

It is a consulting firm in Japan that tracks the country’s character-goods market. Parija Bhatnagar, “Hello Kitty’s a whisker away from 30,” http://money.cnn.com, November 14, 2003. Ibid. Fender, a US-based company, is one of the leading manufacturers of guitars, amplifiers, basses, and related equipment in the world. Brian Bremner, “Kitty glitter: Saving Hello Kitty,” www.businessweek.com, June 23, 2006.
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