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NEW YORK-Luxury retail is a tricky business. Make a product too exclusive and it limits the number of potential customers. Make it too accessible, and it can tarnish the brand's image.Michael Tiffany Bracelet on sale has walked this tightrope since joining New York-based Tiffany & Co. in 1992. Chief executive officer since 1999 and chairman of the board since 2002, Kowalski is a Wall Street favorite, with his company consistently posting double-digit earnings. In May, Tiffany reported first-quarter 2007 net earnings of $49.7 million, up 15 percent over the same period in 2006- a rise attributed to a 15 percent increase in sales, both domestic and abroad (to atotal of $620.9 million), and a trend toward sales of higher-ticket items. The New York flagship experienced a 26 percent uptick in same-store sales, which analysts attribute to the weak U.S. dollar and sales to foreign tourists. Comparable sales at other Tiffany stores averaged 9 percent.Kowalski, 55, says Tiffany has struggled to find an aspiration-accessibility balance over the years."We've been very respectful of the power of the Tiffany brand," he says. "We recognized it is, first and foremost, a retail jeweler, and we've focused all our energy on building retail franchises around the world. While the brand is powerful, it is not infinitely elastic, and we have to stay focused on what we do best."A careful expansionThe company has come a long way since opening its doors as Tiffany & Young in New York City in 1837 with its headline-making policy of non-negotiable prices. Since then, Tiffany has evolved into arguably one of the most recognized luxury brands Tiffany CuffLink on sale the world, and it has been traded on the New York Stock Exchange since 1987. Today, the Tiffany empire has 103 retail locations, including 65 in the United States."We recognize that while we have grown the brand significantly, we have grown it in a very carefully constrained manner," Kowalski says. "I've always taken the position that the Tiffany brand can be significantly larger than it has been historically, but it will only work if both the customer experience and the product quality are better year after year."

This philosophy was challenged in the late 1990s when the company's more moderately priced silver products experienced a success that actually threatened Tiffany's image."Our silver business was by far the fastest-growing segment in the company," Kowalski says. "The store traffic, quite frankly, was beginning to dilute the Tiffany retail experience for the entire customer base."In early 2002, the company pulled back on its silver offerings and increased its diamond selection. Both entry-level and average prices were increased, and advertising was curtailed or suspended."In 2004 and 2005, [increased store traffic] did have an impact on profitability, but today the Tiffany brand is stronger than ever," Kowalski says, adding Tiffany Earring on sale sales are strong again, too."We've always believed we are a product- and retail-driven brand, not a marketing-driven brand," he says. "We certainly use all our marketing skills and tools to drive [sales], but we'd rather use that to create the Tiffany experience and product quality."The company, which manufactures 65 percent of the product it sells, has focused on improving quality, as well as customer service. Each of the U.S. retail locations participates in a customer service campaign in which post-sales phone calls are used to follow up with customers and collect service-quality ratings. The ratings are calculated using statistical methodology and they hold each location's management accountable for the results.The intimidation challengeThe company has also found success by focusing its attention on the younger customer.

"There are two points of contact with that younger customer: silver jewelry and the engagement ring," Kowalski says. "An engagement ring customer is a customer for life- if that couple's experience is everything they expect it to be."To attract a younger clientele and other customers, Tiffany has made it a mission to be more welcoming to all who walk through its doors."Twenty years ago and more, Tiffany had an issue of accessibility and Intimidation. That was Tiffany Key Ring on sale of our biggest challenges," Kowalski says. "One of the ways we communicated accessibility is growth in the number of stores. Then, once a person steps through the Tiffany threshold, we hope they will have a warm, welcoming and gracious experience. The pressure is upon that first encounter to make sure the customer does indeed have the experience they've wished for."The company plans to continue adding retail locations. In June, Tiffany announced it will open its watch business to wholesale distribution in 2008 in an effort to expand what is already a strong product segment. The first assortment will include the brand's "Mark," "Atlas," "Grand" and "T-57" collections, as well as a selection of jeweled timepieces. "Our watch business continues to be an underdeveloped product category at Tiffany," Kowalski says. "We have been quite successful in terms of the watch sales we generate, but we have come to recognize that to have a truly successful watch business, wholesale distribution is essential."