Lululemon marketing case study PDF

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case study about the life and legacy of lululemon and all of their branding and pr ...

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Case Study #7 Lululemon Athletica: An Iconic Canadian Sportswear Brand Lyndsey Diggs November 29, 2016 Dr. Pitts Sport Marketing

Phase One: Situation Summary Step One: Situation Summary When it comes to premium athletic wear Lululemon Athletica can compete with the best of the best. Lululemon was founded in 1998 and was conceived based on the dyer need for more technical clothing to accommodate the needs of the avid yoga participant. According to statistics and research compiled by Danylchuk and Wood (2009), “In Canada, the value of the sporting goods equipment, apparel, and footwear market according to the Sporting Goods Manufacturers Association (SGMA; now the Sports and Fitness Industry Association) in 2008 was $7.5 billion” (65). Dennis “Chip” Wilson, founder of Lululemon, happened to be a former skate and snowboarder recognized this deficit and as a result of his passion and expertise in technical athletic fabrics, he launched Lululemon. According to their website, Lululemon store’s original concept prided itself on the following foundational principle, to maintain “a community hub where people could learn and discuss the physical aspects of healthy living from yoga and diet to running and cycling as well as the mental aspects of living a powerful life of possibilities.” Lululemon’s first store front opened in Vancouver in the year 2000 in a beachy area known as Kitsilano, with a second store opening two years later in Toronto; since then Lululemon has vastly expanded to the international market with stores all across Canada, the United States, Australia, New Zealand, United Kingdom, Singapore and China. The expansion continued as the brand proceeded to open showrooms in other locations throughout the world in places like Hong Kong, Germany and the Netherlands. Worldwide the company has over 300 stores and showrooms! Today, as we know it, Lululemon creates yoga-inspired athletic apparel for everything from yoga itself all the way to running and dancing and everything in between. While the company has a strong consumer base and has sky-rocketed in its appeal with the younger demographic, it has had its fair share of adversity since its inception over a decade ago. The company selected its name based on the survey results of 100 people. Lululemon is a company that sets its platform based on one word: quality! “Quality is the heart of who we are. Quality shows up in our people, our conversations and of course, our product. Product quality is the foundation we stand on; we build it with a relentless focus on three key areas: fabric, performance and craftsmanship” (Danylchuk and Wood, 2009, p. 67). Since its inception, just under 20 years ago, Lululemon has evolved as a brand, despite overcoming its fair share of adversity. Lululemon has managed to stay afloat amidst ethical concerns surrounding the company’s expansion of factories into third world countries, the fabric misleading mishap that oversold and undelivered leaving many to question the company’s integrity, the Olympic scandal that portrayed them as greed money-mongers when they sought to allegedly profit from the Olympic Games without being a legitimized sponsor and of course the 2008 sinister message recall, the 2010 lead-laced packaging recall and 2013 luon “peek-a-boo” see through yoga pants recall. Despite all of the controversies, with the departure of Chip Wilson the future of Lululemon looks uncertain but if data proves anything it will be bright, considering its humble beginnings to status as a premium brand and retail phenomenon. While it has sometimes been plagued by demonizing labels like overpriced, cultish and faddish,

Lululemon has managed to maintain its status as an iconic Canadian sporting apparel brand with more than 300 stores and showrooms on a global scale and revenue surpassing the $1 billion mark on an annual basis. Step Two: Current 4P’s  Product: Sportswear; however, they specialize in performance apparel for both males and females as well as female youth. Additionally, they take a niche focus in providing clothes primarily for young. Their product lines include the following: pants, tops, jackets, shorts as well as bags, water bottles, yoga mats, socks, headbands and sports bras. 

Place: Lululemon Athletica was founded in Vancouver, Canada, however the company does work with factories internationally including the U.S., China, Taiwan, South Korea, Israel, India, Bangladesh, Indonesia, Cambodia, Peru, Malaysia, Vietnam, Switzerland and Sri Lanka (Danylchuk and Wood, 2009, p.68).

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Price: Lululemon would be considered premium apparel and therefore often has an above-average market price. Lululemon’s prices run about $50-$60 for a top and about $100 for pants and therefore are aimed at the upper-class consumer who are willing to pay premium prices for workout gear.

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Promotion: Lululemon doesn’t exert an abundance of their time, effort or resources into promotion. Their current marketing model is virtually identical in Canada and the U.S. and takes a seemingly grassroots approach, relying heavily on word-of-mouth marketing. Free yoga classes are taught once a week at select locations and Lululemon staff (educators) often teach at local yoga studios and are therefore able to spread the word about the brand and its accompanying benefits. Each Lululemon location is individually responsible for marketing and building a reputation in their own respective community, making their approach very decentralized. On a national level, the only two places that Lululemon advertises are in Yoga Journal and Runner’s World magazines.

Step Three: Current 4C’s  Consumer: Lululemon has a somewhat exclusive clientele or consumer base. While they make products for men and women alike, their consumer base is female-saturated. Their primary consumer could be described as young, hip 1834 woman who embraces fitness and athletic activities, in particular avid participants in yoga. In fact Lululemon stated in their annual report that their target customer would be best described as a “sophisticated and educated woman who understands the importance of an active, healthy lifestyle” 

Company: Lululemon was founded in 1998 by Chip Wilson. Lululemon creates yoga-inspired athletic apparel for a multitude of sports including running, dance, yoga and other healthy living pursuits for both males and females.

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Competition: Lululemon has a wide array of competitors including all athletic brands such as Under Armour, Nike, Adidas, Puma, New Balance, and celebrity produced athletic lines such as Fabletics by Kate Hudson and even athletic wear retailers such as Target, Walmart, Kmart, JCPenney and Elder Beerman.

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Climate: the overall climate is difficult to holistically assess. However, their legal climate certainly leaves room for much improvement. Since its inception, Lululemon has been dodging controversies left and right some of which could have ended much worse and could have been their ultimate downfall. In regards to their economic climate, they gross $1 billion annually so while that sounds like a good number, with over 300 storefronts and showrooms worldwide that number could use some boosts, considering that leading competitor Nike generates roughly $13.9 billion in revenue (excluding footwear). So clearly there’s room to grow economically speaking as well. In regards to their geographic climate, Lululemon has a global presence but could afford to increase their footprint in North America in an effort to increase their sales and brand awareness.

Phase Two: Problems and Causes Step One: The Problems Throughout this case study there were a few things that really jumped out at me as being problematic with the Lululemon Athletica: the labor practice issue, the fabric issue, the 2010 Vancouver Olympics issue, product recalls and pricing. Let’s take these one at a time. First, the labor practice issue. In February of 2005, although Lululemon staunchly expressed a commitment to ethical clothing production, they came under fire for their expansion into store networks abroad including China and other Asian countries. This decision was met with public outcry and protest. Chip Wilson insisted that “third world children should be allowed to work in factories because it provides them with much-needed wages” (Danylchuk and Wood, 2009, p.71). During the time of this controversy some consumers decided to stop purchasing products from Lululemon. However, despite that, the company continued to grow and expanded their factories into Cambodia and Bangladesh and according to company data contracts to 85 factories, with less than 3% of those being located in Canada. They defended this by explicating that Canadian products are often produced in sweatshoplike conditions and therefore their actions of offshore production and manufacturing is not only justifiable but ethically upstanding. However, that still left a sour taste in the mouths of some of their consumer base. Moving on, another issue that arose was the November 2007 fabric faux pa. Their clothing line VitaSea is unique in that it is made with seaweed fiber because of the ability of the fabric to release marine amino acids, minerals and vitamins into the skin upon contact with moisture and as a result of those engineering fabric components stress is reduced and there are additional anti-inflammatory, detoxifying, antibacterial and even hydrating benefits (72). Why would those amazing benefits be bad? Well, because as it turned out the product was on 24% seaweed fiber and 70% cotton and

therefore yielded no significant difference in the mineral levels of the VitaSea product and the plain ol’ run-of-the-mill cotton T-shirt. The third plague, infecting the Lululemon brand was the 2010 Vancouver Olympics. Essentially, Lululemon had lost their bid to be the official sponsor of the Olympic Games to Hudson Bay’s Company and decided not to let that hold them back from leaving their brand imprint. What Lululemon did was design an exclusive line entitled “Cool Sporting Event that Takes Place in British Colombia between 2009 and 2011” Edition and the product line included things like sweatshirts, hoodies, toques and t0shirts in an assortment of colors that demonstrated Canada, United States, Germany and Sweden because those countries were estimated to bring in the most amount of visitors. They even had differentiating colors for the zippers to represent different countries. While the company maintained their innocence throughout these tumultuous times, it was no secret that while they may not have blatantly violated any of the Olympic marketing rules or implored the deceitful tactic of ambush marketing, that they were dancing on the line of much legal action and also received a less than desirable response from the Vancouver Olympic Organizing Committee, shunning them for poor display of sportsmanship after seeking to profit from the games without legitamitely supporting the games in any shape, form or fashion. Lululemon still couldn’t find themselves out of the powerful grip of controversy. In 2008, 2010 and 2013 more problems arose for Lululemon as they were tasked with overcoming the devastation of product recalls. In 2008, products were recalled for being accompanied by sinister messaging such as death threats on their famous red and white shopping bags. In 2010 tragedy struck the company again when they were forced to recall their popular reusable bags because they were contaminated with lead. And then in 2013 they suffered yet another hit when consumers discovered that their luon yoga pants that were all-the-rave, were also all the way see through! Uh-oh! It is clear that over the last decade, Lululemon has endured their fair share of faux pas. And add to that all of the public relations problems that Chip Wilson created for the brand and it’s easy to see why they are in need of some refocusing, rebranding and revitalizing. Step Two: The Causes All of the wounds Lululemon endured was a result of their own actions. So, in short, the causes were self-inflicted. It’s like a case of internal combustion. There’s definitely more to it. There tribulations came as a result of poor execution, or as I like to say over promising and under delivering combined with taking some short cuts and sprinkle in poor public relations decorum and that equates to Lululemon’s long list of problems. Step Three: Identify the Area(s) of Management I have identified the following areas as the ones that require the most attention from Lululemon in an effort to avoid controversies and continue growing, expanding and maximizing revenue. Those areas: consumer behavior, product distribution and advertising Phase Three: Objectives, Solutions, Plans Step One: Identify objectives and solutions

The areas of management that the Lululemon brand needs to prioritize and take deliberate actions on improving are the following: promotional enhancement, increase utilize the unique vertical retail distribution strategy by enhancing the supply chain using a three-pronged approach, consider more store expansion options, revamp store layouts to be more inviting to other demographics, establish a more effective ecommerce business model, capitalize on strategic tie-in. Step Two: Develop a strategic plan In order to aid Lululemon in a more successful promotion, marketing and revenue generating campaign to ensure their longevity and success I have composed a strategic plan with meticulous instructions that I believe, if they implement, would create a boost in sales, and create a plausible framework for increasing brand awareness and greater customer satisfaction. In regards to promotional strategies, Lululemon’s focus should be on retaining current consumer base as well as bringing in maternity, men and youth in a more dramatic fashion. Additionally, Lululemon should aim to open 30 new stores and 5 showrooms in the United States within the next three years. As it stands currently, the distribution strategy is based more along the lines of exclusivity as opposed to an intensive distribution model. In an effort to expand and increase appeal Lululemon needs to indetify potential locations for new company owned stores that align with the brand’s aspirational image. Also, the store layout could use some definite modifications. The store layout should change to display men’s product range in a separate section of the store with a virtual golf station to invite and engage affluent men. Moving on, Lululemon should take a more vested interest in improving their ecommerce business. Direct to consumer channel is convenient for the core customer and makes products accessible to more markets than the corporate owned store channel alone. In attempting to increase e-commerce business it is equally important to leverage social media outlets and online marketing techniques to increase website traffic by 15%. To further contribute, promoting a BOPS (Buy Online, Pickup in Store) model to avoid stock outage and encourage better inventory planning could go a long way. Lastly, listing products on high end fashion e-tailers such as LYST to build premium image and increase market penetration would be extremely advantageous. Lastly, but certainly not least is commitment to the strategic tie-in. While I know this is the smallest contributor to Lululemon’s revenue, it’s important that we don’t neglect the importance of it. With that being said, Lululemon should identify high end fitness centers, yoga studios and gyms across the U.S. and collaborate for the sale of Lululemon products. Additionally, it will be imperative that Lululemon leverage these partnerships by using their space for a dual purpose as a communication vehicle as well, which could manifest in the form of digital screens in the lounge with Lululemon branding. Finally, Lululemon merchandise as an incentive with annual membership to golf/racquet/country clubs.

References Wood, L., & Danylchuk, K. (2009, May). The connection between human personality brand personality, and loyalty to a sport brand. Paper presented at the 24th North American Society for Sport Management Conference, Columbia, South Carolina....