NOVEMBER 2005 :: MARKETING

'Keepers of Family Memories'
Kodak Rules Digital Photography by Focusing on Its Best Customers: Women

By William M. Bulkeley
Staff Reporter of The Wall Street Journal

When film ruled home photography, women took about two-thirds of all pictures and ordered most of the prints, according to industry statistics. But things changed when digital cameras started becoming popular: Suddenly men got behind the camera-and many of the shots ended up trapped inside a computer.

It was a disaster for Eastman Kodak. Sales of film and photo paper, its biggest sources of profit, tumbled. Kodak's long-successful strategy of courting women, emphasizing not so much fancy technology as the chance to capture "Kodak moments," was in deep trouble.

Today, Kodak is clawing its way to the top of the digital world by bringing its best customers into that world with it. Starting four years ago, Kodak set out to make digital photography female-friendly. The company's research showed that women wanted digital photography to be simple, and they wanted high-quality prints to share with family and friends.

So Kodak revamped its line of digital cameras, stressing simple controls and larger display screens. It invented a new product category, the compact, stand-alone photo printer, which could be used to easily make prints without a computer. And it pushed to make digital-image printing simpler through retail kiosks and an online service.

No.1 Seller

The result has been a slow but steady turnaround in Kodak's fortunes in the digital arena. The company is now the No. 1 seller of digital cameras in the U.S., up from a distant No. 3 as recently as 2002, according to market researcher IDC. Although rivals have followed, Kodak remains tops in stand-alone photo printers. Kodak's photo paper for inkjet printers, introduced just last year, is the No. 2 brand after Hewlett-Packard.

And evidence is growing that women are returning to retail stores to print their photos. There, Kodak gets its revenue through a network of digital print-making machines.

Kodak executives say they knew that digital imaging would one day overtake film photography, but they had assumed that the transition would take much longer. In its regular customer research starting about 2000, Kodak found that men had taken control of photography in many households.

Susan Stoev, Kodak's world-wide director of consumer insights, says women complained that their husbands didn't bother to print pictures, preferring to view them on their computer screens instead. Men "took the picture and put it in the computer. But then it was like a Roach Motel for pictures. They never got out," says Ms. Stoev. The Photo Marketing Association says men print 25% of their digital images, while women print 35%. Although two-thirds of all film images were taken by women, by 2001 women were buying just 35% of digital cameras.

But women still wanted snapshots that they could hold, pass around and stick on refrigerators, Kodak's researchers found. "It's an extremely important part of the culture," says Ms. Stoev. "People run into burning buildings to save their pictures." In the past, Kodak says, 35% of all prints were given to others, 80% of the people who make a habit of giving away photos are women.

Kodak isn't arguing that women lack the aptitude to deal with digital photography. In surveys, women simply say they aren't that interested in fiddling with cables and connectors. So Kodak has worked to keep things simple, while most rival camera makers focused on developing high-tech features and marketing them to techies.

"Men are from Canon, Women are from Kodak," was the title of a recent report by Lyra Research, a research firm that follows the industry. The report noted that Kodak is No. 1 among female digital-camera users with a 20% share, but it is No. 4 among men with just 11%. Kodak's approach is "right on the money," says Charles LeCompte, president of Lyra. He says that Kodak has always known most pictures are taken by women "and they've done a great job targeting that market."

In an interview, Kodak Chairman Daniel Carp says "women have just as much aptitude and ability," as men to use digital products, but they don't want to spend time making them work. "Throughout history," he adds, "women have been the keepers of family memories."

Strategy Is on Track

Kodak's turnaround in digital has been masked, to some extent, by the rapid decline of the company's traditional, film-photography business. Over the past four years, Kodak's revenue has fallen 3.4% and earnings have dropped 60% as it has scrambled to adapt to the digital world.

Kodak has outlined a plan to phase out film operations, while building up digital sales in medical imaging and commercial printing as well as consumer digital lines. Kodak says revenue from digital products will top film revenue for the first time this year. But the transition has been bumpy. Kodak is now competing with consumer-electronics specialists like H-P and Sony, which are used to rapid product cycles and cutthroat price competition.

Still, Kodak says that its success with women shows that its strategy is on track. Brendan Burnett-Stohner, a management recruiter, bought a Kodak digital camera and snapshot-printer after her granddaughter was born two years ago. "I print in bulk and send them to my mother, my mother-in-law and daughter. Sometimes I make photo albums," Ms. Burnett says. "I don't think my husband has ever printed a picture."

Kodak isn't alone in realizing that women are a key market. With digital cameras accounting for four out of every five new camera sales, and U.S. film processing expected to decline 18% this year to $3.7 billion, getting new revenue from women is vital for retailers and photo-finishers alike.

At Canon, Rick Brooks, director of consumer-products advertising in the U.S., says his company is "making sure that we include both" men and women when it designs and markets products. He notes that Canon, which has long been personified by macho tennis player Andre Agassi, recently started featuring Maria Sharapova in some ads, because she appeals to both men and women.