Patagonia Case Study PDF

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PATAGONIA WRITE UP Group 3: Nathan Yoon, Gabrielle Schimdt, Eyob Green, Brandon Dringman, Armina Suljic, and Matt Rossen

Memo Executive Summary: The most important goal for Patagonia is to have a growth rate of 12% in sales. The main impediment to achieving this goal is getting more consumers to purchase Patagonia products. The best solution for overcoming the impediment and achieving the goal is to position a marketing strategy around their environmental and sustainable efforts. Problem Analysis The most important goal for Patagonia is to have a growth rate of 12% in sales. This goal is suitable for Patagonia because they are a highly noticeable brand that stands for their “gogreen” values and quality amongst their products. Some may suggest a more adequate goal for Patagonia, such as introducing fast fashion, which would reduce product prices and increase demand for their products. However, according to The Economic Times, many brands are turning away from fast fashion practices because they are trying to position a marketing strategy around their “go-green” values. For example, Zara, who is known for utilizing fast fashion, is turning towards a more sustainable route; The Economic Times quoted, “The attention to sustainability by Zara is hardly surprising” (Dewan, N.). Similarly, H&M, is also making a transition; the Sourcing Journal quoted, “H&M’s overarching goal is to be the most loved design group in the world and it plans to get there by driving sustainability.” Since Patagonia is already known for their environmentally conscious and sustainable endeavors, the suggested goal is attainable because they can leverage off of their current brand offering. In addition, getting consumers to purchase Patagonia products is the key impediment because consumers may not be willing to purchase products from Patagonia due to its hefty price tag. Consumers may already be satisfied with similar products from other brands that are more affordable or reasonable, even though those brands do not incorporate sustainable practices. Stating that, getting more people to purchase Patagonia products is more important than the other factors that might impede with reaching this goal. Solution Analysis The proposed solution of positioning a marketing strategy around their environmental and sustainable efforts is the best because research shows that consumers are becoming more aware of brand values and their utilization of sustainable practices. From our survey, 80% of the sample size of 25 answered that they are willing to pay a premium price for sustainable sourced products (Survey Results Q. 2). In addition, the Harvard Business Review quoted, “last year said a survey turned up that 65 percent of people say they want to buy from "purpose-driven brands

that advocate sustainability" ” (Hays, K.). This proves there is a consumer lifestyle shift that is in favor of companies who are transitioning towards or have already been incorporating sustainable practices. Patagonia is already known to be one of the companies who have been practicing sustainability, so the proposed solution seems to be more adequate for this company. The positioning statement should be: For all individuals who are looking for high quality products made from sustainable materials, Patagonia is an excellent brand that values quality, durability, and sustainability for your everyday activities.

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Appendix 1: 5Cs Analysis Exhibit A: Company SWOT Strengths: • • •

eco-friendly company High quality products Loyal customers

Opportunities: • increase number of stores • expanding target markets • going global • increase in product types

Internal Weaknesses: • price • limited suppliers • few targets market Threats: • Climate Change • Global Pandemic • well known competitors External

Portfolio Analysis: Patagonia apparel is a star because they have the best market share, and the company receives a lot of cash through this product. The companies gear as well as their shoes are cash cows as market growth is low and market share is high. Growth Strategy: The Growth Strategy is market penetration because Patagonia has existing products in an existing market.

Exhibit B: Collaborators Patagonia currently has several collaborators that they work with to create and distribute their products. These collaborations began with Danner when the company had just begun. They use Primaloft for their materials and other companies like Our Common Waters and the Footprint Chronicles to carry out the company's specific goals in terms of giving back as well as building their brand. A brand that Patagonia could begin to partner with is Marine Layer. Marine Layer makes it their mission to take used clothes that people give to them and they give the person a discount on their next purchase. Working with Patagonia they could bring this concept to a higher level and start to convince consumers across the world that recycling your clothes can end up impacting our environment in a positive way.

Exhibit C: Context Factor Demographic

Commentary - Targets ages 18-35 mainly - Disposable income at hand - Targets both males and females - Regulations on manufacturing goods Political-Legal - Inflation on prices of goods and Economic services - Fluctuating economy - Consumers values (Sustainability, Socio-cultural Environmental Conscious, Recyclable Materials) - Consumers’ needs (Quality, Durability, Comfort) - Efficiency in processing or Technological manufacturing goods - Can create specific preferences on products - Resource depletion Natural - Pollution - Production Processes The most important factor is Socio-cultural, Economic, and Natural because Patagonia as a brand values the sustainability of the environment and its social and economic value through business.

Exhibit D: Customers (STP) We have chosen a lifestyle segmentation approach for Patagonia. Segmentation Tree Environmental Conscious Consumers

Product Utility Focused

Product Variety Focus

Activity Focus

Innovative Tech Focus

Activity Focus

Benefits Sought: - Specific product engineering to meet needs of individual activities and consumers

Benefits Sought: - Fits their needs - Differentiates products from competitors

Benefits Sought: - Meets a larger consumer demand - Competes with industry leading brands

Product Sustainability Focused Benefits Sought: - Conscious buyers - Variety Seeking - Minimal carbon footprint

Exhibit E: Competitor Analysis Because of the nature of the retail industry, Patagonia is in a highly competitive market due to the fact that there are numerous companies out there that sell comparable products. For instance, the top leading brands going against Patagonia are Marmot, Arc-Teryx, Columbia, and North Face. Although, given our proposed plan, the competitive environment Patagonia faces is within the environmentally conscious circle of retail brands. This includes top competitors of Toad & Co, United by Blue, and Outer-known. Within this more specific circle, because Patagonia is one of the top leading outdoor-wear brands, and eco-friendly, there is not much competition for them for our proposed plan.

Competitor Marmot

Comparability • Estimated revenue of $280 million (2019) • Products have lighter materials with higher weather performance • More affordable prices • Whenever possible, Marmot works with sustainable materials with ethicallysources down, organic cotton and others. Arc-Teryx • Global net sales of $19.1 million (2019) • More expensive brand due to their digital die cutting machines to cut their fabrics • Products are made more for advanced and professional outdoor activities Columbia • Global net sales of $3.04 billion (2019) • Cheapest prices compared to most. • Competes with sportswear retailers more, rather than outdoor wear. North Face • Full year fiscal revenue $2.6 billion (2019) • High performance outerwear performs better in colder weather • More mainstream styles made to last. • North face has improved their ethical and sustainable practices over the years but hasn’t made much progress compared to its competitors. Toad & Co • Annual revenue of $14.45 million (2020) • Produces 8 different types of sustainable fabrics that reduces the brand’s carbon footprint • Casual oriented clothing • Cheaper than Patagonia United by • 100% recycled materials, best for ecoBlue friendly outdoor clothing. • For each product sold, it removes one pound of trash from oceans and waterways • Products range typically from $50-$100.

Patagonia Estimated $800 million in revenues (2018) Average cost of jackets can go from $100-$400, smaller products such as hats and other accessories retail for around $30-$50. High quality clothing made to last with Patagonia specific materials such as PrimaLoft PURE and Yulex natural rubber. While also sustainable materials such as recycled fishing line polyester, and nylon. Fair trade certified collections

Outerknown

• •

Over 90% of products are made from organic, recycled, or regenerated materials. Surf lifestyle-inspired essentials that are affordable

Positioning Map: More Product Variety North Face Patagonia Arc-Teryx. Marmot

Most Sustainable Toad & Co United by Blue

Least Sustainable Columbia

Outer-Known Less Product Variety Targeting Matrix:

Price Quality Materials

Price Quality Sustainabi lity

ActivityFocus 4 4 4 Mar mot 3 4 3

Arcteryx 2 5 3

Tech-Focus 3 3 4 Columbia 2 5 3

Product Utility 4 3 4

Variety-Focus

Sustainability

4 3 3

3 2 4 Toad & Co 4 3 4

United by Blue 4 4 4

Outer-known 4 4 4

Appendix 2: Solution Exhibit F: Marketing Matrix (4ps) 1. Product: Patagonia’s product strategy revolves around doing the most they can using sustainable and recycled products. The brand has incorporated numerous environmental and animal welfare programs to ensure that they are using Fairtrade certified fabrics and materials to create their products. Because of how they manufacture their products, it benefits our marketing plan immensely. This is because the brand won’t have to change anything in order to meet our goal. Their assortment ranges from activewear to outdoor wear to sportwear, with a variety of individual products and product lines to meet the demand of their consumers. In addition, Patagonia also has a great brand familiarity with its customer because of its easy recognizable logo on its products and their variety of advertisements. 2. Price Strategy: Patagonia prices their company based on the value that is put into their products. For that reason, it lies on the higher end of the spectrum in regard to its’ competitors. You might expect to pay upwards of $300 for a top-of-the-line Patagonia jacket, not nearly the cost of similar products from several competitors such as Arc’teryx. Yet, certainly not as affordable as brands such as Columbia or The North Face. I don’t see the current pricing of Patagonia being an issue in the slightest. Customers that are in the market to buy a high-end, highly functional product, are typically willing to pay this premium price for the quality received. 3. Place: Patagonia uses their own stores as well as lots of retailers to help sell their products. They use stores like REI and other sporting goods stores to distribute to consumers. This allows for Patagonia to get their products out to thousands of locations throughout the country to connect with consumers all over. Patagonia would make up just a portion of these retailers who sell all different things for multiple companies. However, having their own specific stores eliminates competition while consumers shop, the whole store would be made up. of just their products where customers who know exactly what they want can shop. Along with this these physical stores they have their own shop on their website where customers can choose from all the products and look around. 4. Promotion: Patagonia often has several different sales promotions going on during the year. There are frequent sales discounts customers may experience that occur year-on, and then there are seasonal discount promotions that are additional discounts on top of the daily sale markdowns. Patagonia also offers free shipping when a customer spends a certain amount of money on products. Since Patagonia does not have any advertisement, a recommendation would be to start putting out advertisements not only about their products but their sustainability practices as well in order to reach a larger intended audience. An example of helpful advertising would be to make an institutional advocacy ad discussing Global Warming and Climate Change and ways the company is trying to help fight these issues.

Appendix 3: Goal Support Patagonia should pursue a sales goal. This goal would be the best fit for the company as a portion of their revenue comes from the sales of their products. A market share goal would be less relevant as they already have a relatively high market share when it comes to the sustainable retail market. A customer retention goal would be less applicable as customer retention is a subset of increasing sales. Having a high customer retention inadvertently allows for a rise in a company's sales because repeat customers are constantly buying products which results in increasing revenue. Given the lack of financial reporting, the following are assumptions that can be made. 199.7 mil Sales 800 mil Net revenue **Patagonia is a private company, so their Financial Statements are not released to the public making the financial information extremely limited. Given the following assumptions, Patagonia had a gross 199.7 mm in sales in the previous year. A 12% increase in sales would result in 223.664 mm in total sales for the current year by year end. It is also important to acknowledge that the current economic situation may have an impact on this calculated number. Increasing the sales by 12% would increase net revenue from 800 mil to 896 mil excluding any additional costs that might arise. Appendix 4: Counterarguments v Argument The solution to our marketing goal is to capitalize on Patagonia’s renowned sustainability values and practices. This can be accomplished by further informing the consumer base, via advertisements, on all the sustainable practices and efforts being made by Patagonia. Some might offer that a good growth method for Patagonia could be achieved through adapting to a more fashion forward approach with potentially cheaper materials, and thus the ability to lower their price, attracting customers. Though fashion is a substantial factor in consumer buying behavior, and lower prices always seem attractive, we believe this would be not only ineffective, but entirely contradictory to values of Patagonia. Being that sustainability is such an important value of Patagonia, and their products are intended for functionality and longevity, and changes that would reduce quality or use less sustainable methods would be a complete step in the wrong direction. Many Patagonia customers are loyal to the company because they know the quality behind the products, as well as the ethics going into the products. If we can inform more people of these attributes, that will lend to a greater and more loyal customer base.

References: Primary data (Survey) Survey Questions: 1) Are you aware of any major retailers practicing sustainability in their operations/ manufacturing? 2) Would you be willing to pay a premium price for sustainably sourced products? If you have done this previously, what brand? 3) Do a company's environmental practices have an influence on your choice of purchase or willingness to support said company? 4) When thinking of the retail company, Patagonia, what comes to mind? 5) Do you own any Patagonia products? If yes, why do you choose it over other brands? 6) Does your home region (PNW, Westcoast, East coast, Southeast, etc.) influence your decision to buy Patagonia or Patagonia-like products? 7) If so, does their sustainable reputation have weight on your choice, or are there other reasons? 8) What is one sustainable practice that you would like to see more in businesses? 9) Do you see sustainability as the future of most business models? 10) Where are you from, and how old are you? Survey Results: -

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We had a survey sample size of 25 people. Question 1: 44% (11 of 25) answered “Yes”. Question 2: 80% (20 of 25) answered “Yes” and 60% (12 of 20) answered “Patagonia”. Question 3: 30% (8 of 25) answered “Yes”. Question 4: 90% (23 of 25) answered something relating to their sustainable practices and their premium products that come at a notable price. Question 5: 12% (3 of 25) answered something relating to their environmentally conscious values and 80% (20 of 25) answered something relating to their durability and insurance on their products. Question 6: 60% (15 of 25) answered “Yes”. Question 7: 60% (15 of 25) are residents of the PNW and elaborated their answers on the PNW’s bi-polar weather conditions; only 20% (3 of 15) answered something relating to their sustainable reputation. Question 8: 84% (21 of 25) answered something relating to a company’s pollution or contribution to greenhouse gas emissions. Question 9: 90% (23 of 25) answered “Yes”. Question 10: 60% (15 of 25) are residents of the PNW; 30% (8 of 25) are residents of California; 10% (2 of 25) are residents of Colorado; the age range of the whole sample size was ages 18-22.

Secondary Data 1. Academic Journals: Hays, K. (2020). Will sustainable fashion ever beat value fashion?: Women's wear daily. Wwd, , 1-15. Retrieved from https://gonzaga.idm.oclc.org/login?url=https://wwwproquest-com.gonzaga.idm.oclc.org/trade-journals/will-sustainable-fashion-ever-beatvalue/docview/2398611336/se-2?accountid=1557 Donaldson, T. (2017). H&M bets on these sustainability innovators to help it dial back fast Fashion’s impacts. Sourcing Journal (Online), Retrieved from https://gonzaga.idm.oclc.org/login?url=https://www-proquestcom.gonzaga.idm.oclc.org/trade-journals/h-amp-m-bets-on-these-sustainabilityinnovators/docview/2272301104/se-2?accountid=1557 2. Newspapers: Dewan, N. (2019, Nov 20). From Zara to H&M, fast fashion face the age of reckoning [SME sector]. The Economic Times Retrieved from https://gonzaga.idm.oclc.org/login?url=https://www-proquestcom.gonzaga.idm.oclc.org/docview/2315588804?accountid=1557 Au-Yeung, Angel. “Outdoor Clothing Chain Patagonia Starts Selling Online Again After Unusual Decision To Pause Its E-Commerce Due To Pandemic.” Forbes, 23 Apr. 2020, www.forbes.com/sites/angelauyeung/2020/04/23/outdoor-clothing-chain-patagonia-yvonchouinard-starts-selling-online-again-after-unusual-decision-to-pause-its-e-commerce-dueto-coronavirus-pandemic/?sh=68700acd1c48 3. Magazines: MacKinnon, J. B. “Patagonia’s Anti-Growth Strategy.” The New Yorker, 21 May 2015, www.newyorker.com/business/currency/patagonias-anti-growth-strategy. Carus, Felicity. “Patagonia: a Values-Led Business from the Start.” The Guardian, 17 July 2012, www.theguardian.com/sustainable-business/patagonia-values-led-business-benefit-corp....