Rebuilding Lululemon Athletica
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FSF 2014 Rebuilding Lululemon Athletica Jameel Mohammed, University of Pennsylvania class of 2017—Philosophy, Political Science, and Economics major Part 1 – Current Position Lululemon Athletica Fabletics Athleta - Quality Product - Celebrity - Many product Strengths - Brand Equity Endorsed categories - Perceived - Low price point - Lower Price customer focus - Personally - Large Distribution - Synonymous with curated - Big and Tall sizes yoga category selection - Perceived gender - New brand - Less personal specificity with unclear connection with Weaknesses - Niche Market direction customer - Perceived quality - Lower - Less lifestyle downgrade perceived centric quality - Exclusively - Gender specific women’s wear - New Product - Introduction - Expand into categories into brick and menswear Opportunities - Expand sizing mortar - Wholesale - Clothes that - Non yoga distribution transition well apparel with throughout the day similar styling - Subsequent - Newest - Lululemon has manufacturing entrant longer heritage Threats issues - Tied too much - Expanding too - Increasing to Kate Hudson quickly Competition Exhibit A: SWOT analysis of Lululemon Athletica and key competitors. Lululemon’s value proposition is simple; it is fashionable and functional. Seeing a gap in the market for athletic apparel that catered to women, Lululemon launched and grew to massive acclaim. But these days the vision is much less rosy. A perfect example of the state of the consumer sentiment can be seen in Exhibit B below. The first comment is from a customer who is clearly upset about the perceived quality of the product, while another is thoroughly convinced that the product quality is unparalleled. Exhibit B: A search reveals conflicting perceptions of the product quality. Moving Forward These must be Lululemon Athletica’s core objectives if it hopes to rebuild its following and its sales: 1. Raising consumer confidence in the quality of the product 2. Convincing the customer that the product is worth the premium it commands 3. Balancing the desirability of luxury with the accessibility that drives sales Marketing Plan Campaign—“Always There” Lululemon Athletica’s worth as a brand is about so much more than the clothes themselves. It’s about catering to the needs of a previously unappreciated consumer: the woman who wants both form and function, fashion and fitness. It’s about providing products that lead to a more holistically healthy life. Lululemon cares about women, about what they really need, and about what they want. It delivers value by valuing them, it always has, even when other companies didn’t. That’s why Lululemon grew to such an acclaim and, if the company can manage to communicate this message again, it’s why it will grow to acclaim again. The Campaign The “Always There” campaign addresses the company’s goals in three key ways: First, it coyly addresses what many former customers have taken as evidence of the brand’s quality issues: the sheer yoga pants debacle. It presents Lululemon as a company that provides coverage, security, and support, one that has your back, literally and figuratively. It’s also in keeping with the brand’s personality of humor and wit.1 Second, it establishes that Lululemon is a company that cares about its customers, one that delivers and provides for their needs on a consistent basis. It suggests an ongoing relationship, something that is particularly pertinent in convincing older customers to return. Third, it suggests that the product is accessible and available, helping to convince the person on the margin that they too can be a part of the Athletica experience. Media Allocation Guerilla: Experiential marketing, also termed guerilla marketing, has proven effective in breaking through the clutter of traditional advertising. It has also proven to have a huge ROI, as guerilla campaigns are recorded and introduced to social media sites where they go viral. A great example is Dove’s Real Beauty Sketches video campaign. In one six minute short film Dove filmed women sitting with a sketch artist to describe themselves, and then women describing each other, the conclusion being that the women consistently described each other more positively than they described each other. The entire video could not have cost more than fifty thousand dollars to produce (a liberal estimate), and it has now been viewed by sixty four and a half million people. Lululemon could utilize a similar strategy to generate a huge amount of exposure and interest in the brand. By creating experiences Athletica can communicate what sets it apart from its competitors. Lululemon pioneered the in- 1 This brand personality is especially visible through the company’s advertising; previous campaigns like “Say no to cameltoe” give the impression of a fun, humorous, brand identity. See Appendix for mockup of the campaign. store yoga class concept, which has since been copied by competitor Athleta. Lululemon could reassert its ownership of the idea by offering public yoga courses in environments where people might otherwise be stressed in different markets throughout the country. For example, classes could be held in branded Lululemon pavilions at malls during the holiday shopping season, or at campuses of large tech or banking firms that tend to be stressful work environments. Imagine, a group of women are walking out of the office for lunch and are stopped by yoga instructors, provided with free yoga gear, and invited to take a moment to become centered, step back from workplace stress, and care for themselves in a way that their jobs might normally have them neglect. Lululemon health instructors could come to college campuses during finals, offer students well-made healthy food and an opportunity to unwind, mentally and physically. By recording these events, Athletica could publish them, demonstrating its belief in the importance of self-care and esteem, while positioning itself as the company best suited to deliver these attributes. Print: Print ads in publications relevant to the lifestyle of the target consumer are a sound way of gaining brand awareness, and awareness of the new campaign. In combination with the other two marketing efforts print can provide access to millions of potential customers and encourage brand adoption2. Social Media: Social media advertising leaves much to be desired. A recent investigation revealed an abysmal click- through rate of 0.01 percent3. But ads on social media sites like Facebook are good at exposing the right customers to the product, and since Lululemon’s brand awareness4 has yet to hit its peak it makes sense to pursue this aim (Null, 2014). Ultimately though, because of the low click-through rate making it difficult for the investment to translate into actual sales, social media advertising doesn’t represent the core of the marketing strategy. Traditional Media August September October November December January Total Magazine $75, 000 $25,000 $50,000 $100,000 $150,000 $50,000 $450,000 0 TV 0 0 0 0 0 0 Facebook 0 0 0 0 0 0 0 Non-traditional Total Media August September October November December January Guerilla $150, 000 $0 $50,000 $150,000 $250,000 $0 $550,000 Exhibit C: Marketing spend for the season Distribution Distribution is incredibly important as it’s the last consumer touch point and will determine both sales and customer retention. It has to fall in line with the rest of the strategy, helping to accomplish the core goals of ensuring consumers 2 For a mockup of the print campaign see Appendix. 3 Null, C. (2014, March 14). Do social media ads really work? We put them to the test! Retrieved October 21, 2014. 4 This understanding that brand awareness has not reached its peak is understood even internally. The 2014 10-k notes that part of the growth strategy is to, “ continue focusing on increasing brand awareness and customer loyalty”, Lululemon Athletica, Inc. - Annual Report. (2014, March 27). Retrieved October 21, 2014. of product quality, clarifying value, and sustainable expansion of the customer base. Each of the following distribution points addresses one or more of these goals, helping to reestablish Lululemon as the key player it has been. 1. Worth—Lululemon Athletica No one can better establish the worth of the product than us. Customers are used to shopping with us; it’s a valuable part of the experience of the brand that they have responded to for more than fifteen years. Vertical distribution offers the most control of the retail environment and, at this juncture, control is incredibly important. For example, a recent study found that the fitting room experience is critical to customer retention and purchase. It was noted that, “With music, décor and other atmospherics, consumers can be encouraged to change their Exhibit D: Lululemon’s own stores help to attitudes toward fitting rooms, reevaluating them as appealing clarify the company’s aesthetic vision and and comfortable. These attitudes are more likely to result in a brand personality. positive outcome and more sales”5 (Freier, 2011). Third party distribution does not offer Lululemon the level of control over the environment it needs to tweak these attributes to really drive home its value proposition to customers, only private stores do. Thus, the core of the distribution should remain vertical. 2. Quality—Nordstrom Still, there are some things to gain by distributing through other retailers. Distribution through a retailer like Nordstrom would help validate the brand’s luxury positioning because, although they carry products at many different price points, the prevailing conception is of a luxury retailer. Some of the finest products in the world pass through their doors, and the public knows it. Further, Nordstrom has a total of 117 consumer retail doors along with 154 Nordstrom rack locations6, nearly doubling the number of doors through which potential customers could gain access to the brand7 (Businessweek,2014). Nordstrom would also be a good distribution point because of its ability to leverage its low-price, high quality arm Nordstrom Rack, to invite more people to experience the brand while still establishing and maintaining high quality perceptions.