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December 13 Lululemon Athletica Marketing Communications Plan Jessica Massoni Lululemon Athletica: to introduce “REPEL”, a water and sweat resistant product line. The following Marketing Communications Plan includes: Lululemon Athletica organization, industry, competition, and product analysis; marketing objectives based on new product introduction supported by marketing research; and target audience analysis and rationale. Market and Audience Analysis: Final Project 2015 I. Situation Analysis Description of Organization Founding in 1998 in Vancouver, British Columbia Canada, Lululemon Atheltica is a multinational corporation in the 152 billion dollar athletic apparel industry.i The Lululemon corporation is composed of 302 corporate owned stores in the United Stated, Canada, Australia, New Zealand the United Kingdom and Singapore, an ecommerce site, multiple wholesale accounts, and 2,861 employees. Lululemon is a publicly owned company, trading on the New York Stock Exchange as LULU at approximately $49.90 and reported revenue of 1.37 billion for the 2014 fiscal year. Lululemon’s mission is to “create components for people to live longer, healthier, fun lives”.ii Lululemon engages in a grassroots marketing strategy with a communitybased approach and seeks to serve as a hub where people in the community can come together and practice fitness centric lifestyles with one another. Lululemon practices a vertical retailing strategy, selling their products only in their corporate owned stores and specific high-end yoga studios and lifestyle centers. The company believes that their vertical retail strategy and commitment to boutique style selling allows them to retain more control over their brand, customer experiences, produce higher margins as compared to their competitors, and to hold their position in the market as a premium athletic wear retailer. Competition Lululemon operates in the highly competitive athletic apparel industry and competes directly with many direct sellers and wholesalers of athletic apparel ranging from established companies to new market entrants. Lululemon’s product form competition includes, Nike Inc., Adidas, Under Armour, Inc., Puma, Reebok, Columbia, Quicksilver and also retailers specifically focused on women’s athletic apparel including Victoria’s Secret Sport, bebe stores Bebe Sport product line, The Gap Inc. product line Athleta, Lucy Activewear Inc., Ellie, and Lorna Jane. Their product category competitors include: Dick’s Sporting Goods, Model’s, Sport’s Authority, Macy’s, Nordstrom, H&M Sport, and Forever 21 Sport. Lululemon’s generic competition includes retail store branded items – Kohl’s, Target, boutiques, consignment shops, and other department stores and wholesalers. Finally, their budget competition includes no-brand shoes, sneakers, makeup, handbags, accessories, sunglasses, and other non-discretionary opportunities. Product Lululemon Athletica offers a comprehensive line of apparel and accessories for women, men, and the female youth categories. Their products include pants, shorts, tops, jackets, and accessories including bags, socks, underwear, yoga mats, and water bottles geared toward people who participate in healthy lifestyle activities. Lululemon is committed to providing their customers, whom which they refer to as “guests”, with technically advanced fabrics and innovative functional features that are different than their competitors.iii The corporation does not own or operate any of their manufacturing facilities and relies on a limited number of suppliers to produce their products. Lululemon is devoted to continuously innovating their products to match changing customer needs and industry trends. The lululemon product design team is composed of designers, international designers, athletes, and users of their products in an effort to create new customer-centric products.iv 2 Due to compelling customer needs determined through marketing research efforts, Lululemon Athletica has decided to introduce a new sweat and water resistant product line into their product mix. The product line will consist of running and general fitness inspired pants, shorts, tops, and jackets made out of technologically innovative and cutting edge resistant fabric. Our new products will not only be designed for optimal performance in fitness related activities, but also be comfortable, versatile, and on trend with the current fashion in both athletic and non-athletic apparel industries. This sweat and water resistant fabric is made out of high-performance, microfiber, polyester that is designed to repel sweat away from the body and to the surface of the fabric where it then evaporates.v The products will then be coated with a thin layer of waterproof material called polyurethane, which works as a water repellant.vi Based on the characteristics of their new product line, Lululemon has decided brand the new products under the name “REPEL”. II. Market Research & Marketing Objective Marketing Objective Our marketing objective is grounded in primary marketing research data collected though research questionnaires in effort to identify new marketing opportunities. The data was collected online and analyzed to draw specific conclusions. The purpose of our research was to find out more about our customers behaviors in order to tailor our new product line to match their specific evolving needs. Following an analysis of the data, Lululemon Althetica identified our new marketing opportunity to be designing a sweat and water repellant line of athletic apparel, made of top performance fabrics and based on current fashion trends, to meet the needs of our target audience who are tasked with balancing an active lifestyle with education, careers, and families. Our marketing objective is, with the introduction and marketing of Lululemon’s new sweat and water resistant fashion product line, “REPEL”, to increase overall brand sales by 10%. Marketing Research The athletic apparel industry is highly competitive and the size and resources of some competitors enable them to compete more effectively than others. vii According to the following global market share performance chart, Lululemon Athletica does not hold a large enough market share in the athletic apparel industry to be individually noted on this graph and remains a member of the “other” brand category. viii 3 However, Lululemon does not seek to compete directly with their larger competitors, such as Nike and Adidas, but rather, to cater to a smaller, niche market, of high-end, trendy crowds committed to a healthy lifestyle. Our objective is to increase sales 10% which would generate approximattely $137 million dollars in overall brand sales. Research Method Lululemon Athetica conducted primary marketing research using an anonymous questionnare distributed online via social media sites in order to produce quantifable market data. The questions on the questionnare were asked in a pre-determined order in an effort to produce unbiased results. The questions to include on the survery were selected based on the demographic and psychographic information the researcher was looking to collect, along with feedback from external sources, such as suggestions by other researchers. The survery was administered in english and was a total of 10 questions in legnth. The distribution method, online via social media, was determined based on the method the researcher found most realistic and time efficient. Response Rate This survey was distributed online across multiple social media platforms and was conduced ananymously, therefore, was not conducted within a defined sample group. Due to the exposure posts on social media are suseptible to, there is no way to determine how many people saw the survery posted online compared to how many who chose to respond, therfore, calculating the exact response rate of this study is not possible. Data Analysis The survery had a total of 75 responses, most of which were woman, due to the fact that the researcher administring the survery has a social media following composed of more woman than men. The ratio of women’s responses to this survery as compared to men’s were 61/14 and is depicted in the graph below: These results, indicating that the survery received more responses from women than men, are still applicable in regards to Lululemon considering most of their customer base is made up of women, and a small, but increasing, percetange of their customers, due to their new product line “Lululmen”, are, in fact, men. 4 The next survery question that aided in Lululemon’s decision to create a sweat and water resistant product line that is both performance and fashion centered was a question geared toward gaining a deeper understanding of our customer’s preferences about althetic appareal, and if they purchase their products more for their performance material, their fashion/style, or a combination of the two. The results were on point with what our researchers had thought and provided us with data indicating that 74.67% of our subjects prefer products that are geared to performance and fashion combinded. The following bar graph depeicts the described data: The next question was intended to gauge how important the combination of fashion and performance material were to our subjects. This question was strategically placed after the above “do you purchase your athletic wear more for fashion/style; technical/performance material; or both?” and was designed to clarify and reinforce the data that our customers are, in fact, more likely to purchase athletic wear that is both fashionable and made of performance fabircs. The response data from this question indicated that even a higher number of responders, 94.67%, were in favor of products that are both fashionable and made of technical fabrics. The graph below provides us with a visual represenation of the described data: 5 The purpose of the following question was to determine if our audience wear athletic apparel soley to engage in fitness related activites or if they also wear athleitc apparel for daily acivities such as running errands or relaxing at home. The resuts from this question depicted that 85.14% of our respondents do in fact wear athletic clothing on days they are not particiapting in specific fitness activities. The data from this question furthered our idea to create a new product line that was not only performance efficent, but that is comfortable and versitale in order to compliment the lifestyles of our customers. The following graphic depicts these responses: The data we collected through our research efforts aided us at Lululemon to pinpoint a specific marketing objective and determine the ideal characteristics for our new product line based on customer needs. The data above, as well as the additional data collected in the survery, indicate an overall trend that most people are more likely to purchase atheltic apparel that is both, made out of quality performance material, and fashionable, so that is exactly what we did. We created a new product line that is egineered to be a leader in performance ability and is a collection of functional versatile pieces for our customers to add to their everyday wardrobes. Based on the analysis of the purchasing patterns of our customers, we are confident that we will be able to accomplish our marketing objective of increasing overall brand sales by 10% within one year of our “REPEL” product line launch. III. Target Audience Lululemon’s overall business strategy targets higher-end consumers who are willing to spend more on their athletic apparel in exchange for its’ qualiy and versatility. Lululemon strives to be known as a premeir retailer of athletic apparel and their retail prices reflect that mentality. Lululemon makes products for both genders, however, 70% of our products are for women. As stated in our 2014 annual report, Lululemon Athletica’s ideal target customer is “…a sophisticated and educated woman who understands the importance of an active, healthy lifestyle. She is increasingly tasked with the dual responsibilities of career and family and is constantly challenged to balance her work, life and health. We believe she pursues exercise to achieve physical fitness and inner peace”.ix 6 The demographic characteristics of Lululemon’s target audience are young well-educated, professional women, ages 25-35, in the high-income bracket. Women with families are also a large part of Lululemon’s target audience. The psychographics behind the women Lululemon targets are women who are busy in both their careers and family lives, but are still concerted about living healthy and fitness-oriented lifestyles. These women are concerned about their fitness and about how they look and feel in their workout gear. Lululemon customers are willing to pay premium prices for quality looks and products. These women regard their athletic apparel as clothing for before, during, and after a workout, that is socially and fashionably acceptable. Furthermore, Lululemon targets customers who are inspired through the sense of community the Lulu brand brings to life, x which further supports our grassroots marketing strategy. IV. Target Audience Rationale Based on the below industry research, this pie chart indicates that that Nike holds a larger market share, 7%, than any of Lululemon’s other competitors, followed closely by Adidas with 6% market share, and the smaller competitors ranging between 2-3% accordingly, followed by an overall category labed “others” encompassing the rest of brands, including Lululemon, operating in the athletic apparel market which hold the remaining 76% of the market. Nike reported a revenue $27.8 billion for the 2014 fiscal yearxi, which is over 20 times the reported revnue of Lululemon Athletica. Lululemon understands that due to the size and resources of Nike, Inc., at this time, our corporation does not have the financial backing, interal, or external resources to comepte at the Nike Inc. level. However, Lululemon seeks to be known as a premeir retailer of athletic appearl in the industry and therefore, engages in a vertical retail strategy, unlike Nike and many of Lululemon’s larger competitors who sell their products to large department stores.xii Through their vertical retailing strategy Lululemon has been able to strategically place their boutique styled retail stores in areas that cater to high-end, trendy, crowds and seeks to provide a personlized consumer experience for each one of their “guests” through personal selling and expert employees. Lululemon does not seek to comepete directlty for many of the cusomters the Nike and Adidas brands cater to, such as professional sports franchises. Rather, Lululemon seeks 7 to develop products and experiences for the sophistacted and well-educated women willing to pay substaintale prices for workout and lifesyle gear. Lululemon is one of the only premier athletic apparel retailers in the industry with a focus mostly on womens clothing which gives them an upper hand in this niche market. In an effort to maintain the exclusivity of the Lululemon brand, Lulu does not rely on any print or media advertising, but rather a community based maketing strategy. The target audience we selected is one made up of young professional women who are concerned about their fitness and are drawn to a more community based marketing appraoch rather than intense and creative campaigns of some of our largest competitors. Our customers want high-quality products that keep up with the fashion trends, and by using an intergrated vertical retailing strategy, we are able to update our products in stores in one month’s time, keeping only the newest and most advanced products readily available to our customers. Based on our market research survery data we found that most people wear their athletic apparel not only for fitness acivities but as a part of their daily lifestyle. Therefore, we developed our new prodcut line and marketing objective specficially around our target audience. We found that we not only had to create a product line that was going to be technologically up to par but also fashioanbly up to par. Furthermore, we found that our research indicated that 21.33% of our respondents do not excersise at all, which led us to believe there was even more of a need for a product line that can double in perfomance capabilities and every day wear capabilities. Due to the exlusivity of our brand, reputation as a premier athletic reatiler, and the loyalty, income level, and spending habits of our target market, we are confident that with the introduction of our new “REPEL” product line, we will be able to increase sales by 10% across our brand. V. Footnotes i Industry Statistics- http://www.statista.com/statistics/254489/total-revenue-of-the-global-sportsapparel-market/ About: Lululemon.com http://www.lululemon.com/about Guests: Lululemon Athletic Form 10-K Annual Report Filed March 26, 2015 http://investor.lululemon.com/secfiling.cfm?filingID=1397187-15-16 iv Product and Competitor Information, Lululemon Form 10-k Annual Report Filed March 26, 2015 http://investor.lululemon.com/secfiling.cfm?filingID=1397187-15-16 & Product Education, Lululemon Website http://info.lululemon.com/education v Sweat resistant material information: http://help-enus.nike.com/app/answers/detail/a_id/204/~/what-is-nike-dri-fit%3F vi Water proof material information: https://en.wikipedia.org/wiki/Waterproof_fabric vii Competitor Information, Lululemon Form 10-k Annual Report Filed March 26, 2015 http://investor.lululemon.com/secfiling.cfm?filingID=1397187-15-16 viiiAthletic Apparel Global Market Share Chart: http://bruhenbu.com/2014/01/marketshare-apparel-industry/ ix Lululemon Target Audience Information: Lululemon Annual Report: http://investor.lululemon.com/secfiling.cfm?filingID=1193125-12-126444 ii iii 8 Further Lululemon Target Market Information: Storify Retailer Profile- Lululemon Athletica: https://storify.com/acarron/lululemon-athletica-s-history xi Nike Revenue Information: Nike’s 2014 Form 10-K: http://investors.nike.com/files/doc_financials/2014/docs/nike-2014-form-10K.pdf xii Lululemon Vertical Retailing Strategy Information: University of Oregon Investment Group: http://uoinvestmentgroup.org/wp-content/uploads/2012/04/LULU1.pdf x 9