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Marketing plan written for MBA Marketing Capstone course.

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    Easy tone marketing plan Easy tone marketing plan Document Transcript

    • Reebok Launches EasyTone<br />Greatest Success in Years<br />Marketing Plan<br />March 9, 2010<br />Alexis Kushner<br />Eileen McInerney<br />Alecia Muth<br />Table of Contents<br />Executive Summary3<br />Situational Analysis4 <br />SWOT Analysis12 <br />Marketing Strategy13 <br />Performance Plan19 <br />Conclusion21 <br />Works Cited22 <br />Appendices24 <br />Part One: Executive Summary<br />In the highly competitive global sporting shoes and apparel market, companies must identify regional consumer behavior and the practicality of their marketing strategies for attracting these customers. Reebok International, Ltd., a large athletic shoe and apparel manufacturer, is no exception to this trend. In a strong effort to attract new customers, especially those of Generation X CITATION Tar09 l 1033 (Parker-Pope), Reebok launched EasyTone, a women’s walking shoe that claims to tone gluteus and leg muscles more effectively than your average walking shoe CITATION Adi09 l 1033 (Adidas Group). EasyTone’s sexy, provocative, and very cutting edge marketing campaign seeks to grab the attention of the Generation X female demographic within the United States and the international community CITATION Joh07 l 1033 (Zerio). This target demographic is the first generation to grow up completely surrounded by the internet and communication technologies, changing the dynamic of the workplace. Efficiency is a necessity for this generation and Reebok has begun to capitalize on this requirement through EasyTone. EasyTone offers busy, multi-tasking individuals an efficient, multi-tasking shoe that offers promises of sculpted lower bodies. <br />The athletic shoe industry in the US is a very mature market comprised of fierce competitors and a variety of segments including walking, running, basketball, tennis and cross training. Reebok identified a niche product opportunity by specifically targeting women and walking. This niche category of athletic shoes is called the “fit shoe” market and includes products from Skechers, MBT, Fit Flops, RYN Sports, Earth Footwear, and Xsensibles. In order to compete in this growing market, Reebok launched a savvy and aggressive marketing plan.Part Two: Situational Analysis<br />Current Performance<br />The footwear industry achieved $25 billion in retail revenues in 2009 (First Research i). Within the footwear industry, athletic shoes hold 30% market share with 2009 global sales of $88.26 billion (First Research 29). Sales are projected to have fallen 2.2% in 2009, demonstrating that the athletic shoe market is not immune to the recession (First Research 27). Athletic shoes are shoes that are designed for sporting activities, such as running, basketball, soccer, football, and walking. A relatively new entrant into the athletic shoe industry is the “fit shoe,” which combines the usefulness of a walking shoe with the idea that creating a shoe that is naturally off-balance will engage more muscles while walking. Because the fit shoe market is relatively new, we will assume that it represents a 0.5% market share of the athletic shoe category, which translates to approximately 18 million units sold and $1.78 million in retail sales in 2009 (First Research 29). <br />Reebok was purchased by Adidas Group in 2006 and in 2008 constituted 20% of Adidas’s total sales at $2.94 billion (Adidas Group 45). In the same year, Reebok held a 3.6% market share in the US of the athletics shoe industry. By 2009, Reebok’s market share had fallen to 1.9% (Abelson). Although the athletic shoe industry as a whole saw a fall in sales through the recession of 2008-2009, sales are expected to return to positive growth at 7.1% in the 2009-2012 period (First Research 36). Outside of the United States, American athletic shoe brands remain very popular. International markets therefore represent an opportunity for growth beyond the US market, which is very mature by global standards (First Research 36). <br />In July, 2009, Reebok launched the EasyTone, its first entrant into the fit shoe market. Priced in the $100-$110 range, this new shoe’s “technology involves two balance pods under the heel and forefront of the shoes that create natural instability with every step, forcing the muscles to adapt and develop tone” (Adidas Group 53). Marketed as a walking shoe, EasyTone allows women to “take the gym with them” (Adidas Group 138). Seen as an innovative product in the athletic shoe industry, Reebok’s EasyTone has entered the market as a competitor to existing fit shoes: Skechers’ Shape Ups, Fit Flops, the MBT, and other small label brands. Since its launch, EasyTone has proved to be Reebok’s most successful new product in five years (Parker-Pope). EasyTone’s primary non-internet retail channels saw an overwhelming purchasing response of the shoe, which remains on backorder for many retailers today. Many Nordstrom stores have not had any EasyTone shoes in-stock since late 2009, which the store attributes to the design aesthetics of EasyTone over its competitors.<br />Market Demand<br />Since EasyTone launched in 2009, Reebok is now expected to hold 6% of the fit shoe market. Given this market share, EasyTone reached retail sales of 1.08 million units in 2009, valued at $106 million. In 2009, EasyTone represented 4.5% of Reebok global brand sales. Additionally, 2% of Reebok’s entire marketing budget was spent on EasyTone in 2009, totaling $17 million. Based on this analysis, EasyTone represented $3 million in net marketing contribution in 2009. Please see figure 1 below for further marketing performance information. <br />FIGURE 1 – Marketing Performance<br />EasyTone Performance (millions)2009Market Demand (units) 1.08 Market Demand (retail sales)$106.59Sales Revenues$106 Percent Margin37%Gross Profit$39 Marketing, Sales & Admin$17 Net Marketing Contribution$3 Marketing ROS21%Marketing ROI133%<br />The fit shoe market is expected to continue to grow as Reebok and its competitors raise brand awareness and new shoes from New Balance and Avia enter the market. Not only are existing brands expected to grow by volume, but the entire fit shoe market is expected to grow 35% for the period of 2009-2012. EasyTone is currently only available for female customers but is expected to expand into men’s sizes and styles in the near future. EasyTone is expected to grow 49% from 2009-2012. With shoe prices remaining constant, Reebok could anticipate that its current EasyTone sales will double from $106 million in 2009 to $207 million in 2012 (Appendix 4).<br />Competition and Industry Attractiveness<br />The Fit Shoe is a new segment of the athletic shoe industry that evolved from a walking shoe. Given that women’s lifestyles have become increasingly busy, Reebok EasyTone and competitors created a shoe that provides the benefits of going to the gym in a specially designed walking shoe. Currently, a handful of companies have designed and are selling fit shoes. Below is the analysis and position of highlighted competitors (Appendix 1).<br />
      • Skechers: These shoes, called Shape Ups, have a price tag similar to EasyTone and retail for about $110 per pair. These shoes are for both men and women. Shape Ups are bulky and unattractive. They have a large rocking bottom that simulates walking in sand. These shoes are designed to improve gluteus, calf, thigh and abdominal muscles. Additionally, these shoes promote better posture, less knee stress and improved circulation. Skechers has clinical studies demonstrating that muscles are used more and that these shoes promote weight loss and muscle toning (Skechers USA).
      • MBT: The price of the MBT shoe is much higher than Reebok EasyTone and tops other competitors at $270 per pair (New York Times). These shoes are designed for both men and women and MBT refers to their product as the “anti-shoe”. These shoes are bulky, weighing around three pounds (New York Times), and have a large rocking sole to create an unstable walking experience. These shoes improve posture, decrease joint stress and increases body tone. There are multiple studies proving this technology (MBT).
      • Fit Flops: These flip flops are priced around $55 per pair (Macys). These shoes are designed for men, women and girls. These shoes have a flat sole and utilize a gradient change in sole density to improve posture, tone muscles, reduce joint stress and reduce foot pressure. These sole have a patent pending and are backed by research (Fitflop Footwear)
      • RYN Sports: The price of the RYN Sport shoe is higher than EasyTone and is priced at $265 (New York Times). RYN makes shoes for both men and women. These shoes are large, approximately two pounds (New York Times), and bulky. These shoes use the rocking sole technology to primarily improve posture while walking. However, RYN does state that the shoes improve muscle tone and decreases stress on joints. No clinical studies were found backing these shoes (Ryn Footwear).
      Some of the competitors listed above are private companies, so financial analysis and market share data were not readily available. Of the total athletic shoe market, Reebok has a 6% market share, Skechers has a 5% market share, New Balance has a 6% market share and potential competitor Nike has a 31% market share. Although Reebok currently has the most attractive and affordable fit shoe on the market, strategic marketing is integral to keeping the company’s current position in the marketplace CITATION Wik10 l 1033 (Wikiinvest). <br />FIGURE 2 —Market Share Analysis<br />Total Athletic Shoe MarketCompetitionSales (billions, 2008)Market ShareRelative Share (of top 3 competitors)Reebok$2.70 6%13.64%Nike$18.36 31%70.45%Puma$3.07 7%15.91%New BalanceUnknown6%13.64%Asics$2.29 5%11.36%Skechers$1.44 5%11.36%OthersUnknown18%40.91%<br />The fit shoe industry involves multiple competitors and yet has proved to be a favorable and profitable shoe category, especially since it is a new, innovative, and evolving section of the athletic shoe market. To assess industry attractiveness, six areas were examined: barriers to entry, barriers to exit, customer buying power, supplier selling power, product substitutes and competitive rivalry. Each area was rated on a scale of one to ten, one is unfavorable and ten is favorable. Overall, the Fit Shoe Industry scored a 60 out of 100 for all six forces indicating that is a profitable industry for business (Best, Appendix 2).<br />
      • Barriers to Entry-2: Barriers to entry are relatively low because a company can easily enter the business, outsource to China to make these shoes and use a distribution center. Through research, no patents were found to prevent companies from easily replicating the fit shoe design.
      • Barriers to Exit-8: Weak competitors can easily leave the market by selling off shoes at a discount or at an outlet store. Especially if a company is outsourcing production, then the only major asset for liquidation is inventory.
      • Customer Buying Power-6: Currently customers do not have many choices when it comes to purchasing fit shoes. There are around ten competitors and many do not have strong brand recognition. Reebok beats these competitors with brand, style and price. However, a major issue is that competitors can easily enter this market and put EasyTone in competition with a very similar shoe. For instance, New Balance is designing a shoe and with their brand and design could give customers a new and attractive option and thereby increasing buyer power.
      • Supplier Selling Power-9: Suppliers are plentiful and many cheaper outsourcing options exist. Especially for larger companies, they can easily find new suppliers and negotiate attractive terms.
      • Product Substitutes-7: The two main substitutes for the EasyTone are athletic shoes and walking shoes. These shoes do not offer the added benefit of muscle fatigue from just wearing them. Instead, a woman has to wear the shoes and exercise in them in order to get added benefits. Because of this, substitution is weak because the products are inferior.
      • Competitive Rivalry-4: Currently the competitors’ shoes are unattractive and very bulky. Reebok out-competes the other shoe companies with their price point and style. Even though Reebok does not have very many competitors, other shoe companies like Nike, New Balance or Puma can easily create a similar shoe, enter into the market and increase rivalry.
      Share Position<br />Reebok EasyTone currently holds about 6% of the fit shoe market. This market share is estimated based on three factors: EasyTone is new to the fit shoe market, Reebok has incurred inventory issues with EasyTone in department stores and retail chains, and EasyTone shoes are designed solely for women. With 94% of the market not being served, EasyTone is in a position to increase its market share. In conjunction with increasing the served market size, EasyTone can build customers brand awareness. Currently, EasyTone’s market share index is 1% with the potential to grow to 4.9% by 2012. EasyTone is only serving about 30.6% of the potential market and is in a strong position for growth (Appendix 3).<br />Customer Needs<br />Reebok is targeting women in their 20s and 30s, prompting them to “Ree-think” the definition of sport. Through this campaign Reebok is trying to transform its image as a hard-core sports brand into an image of a sports lifestyle brand CITATION Ell10 l 1033 (Elli). Specifically, the EasyTone customer is a fitness-oriented, body conscious female. She is predominately between 20-30 years old, though may range from 18-55. The EasyTone customer is looking to increase muscle tone of the lower body and is attracted to new trends in the fitness category that will allow her to do so with minimum effort. This style conscious, price sensitive, educated, tech savvy, individual has a fair amount of disposable income to invest in higher-end athletic shoes. <br />EasyTone is primarily targeted at women of Generation X, those born between1965-1980, as well as the tail end of the baby boomers and the beginning of Generation Y. These customers are highly efficient. This demographic is the first working generation to utilize new available technologies at home as well as in the workplace. Increased access to the internet represents a chance to reach buyers who are more likely to spend their leisure time in front of a computer screen CITATION Joh07 l 1033 (Zerio). This demographic traditionally looks for no fuss products that will get the job done. These customers are looking for assistance in building balance and increasing muscle tone of the lower body, helping them to look their best with as little work possible. Furthermore, the customer is looking for a more stylish option than the competition as she does not want to walk around with clumsy, bulky, un attractive shoes. <br />The purchasing behavior of the Reebok EasyTone customer is that of someone who is interested in trends, wants to try better products, and is willing to take a financial risk on a slightly more expensive product CITATION The l 1033 (The Walking Site). The average EasyTone customer is looking to try something new. She is intrigued by the product and is willing to invest $100 in an innovative shoe that offers increased muscle tone and strength for the legs and gluteus. <br />EasyTone customers represent a very lucrative market. Marketers around the globe are out to break into this demographic. They are the ideal demographic for many new products, as they have trendy, current and outgoing attitudes on consumer product goods. Lifestyle influences of this demographic are individualism, balanced life, and technology. <br />Individualistic: In the era of two income families, this demographic is comprised of women who have rejoined, or entered the workforce. This generation is fiercely independent and time strapped and desires freedom and efficiency. Members of Generation X are largely in their 30’s and early 40’s. On the whole, they are more ethnically diverse and better educated than the Baby Boomers. Over 60% of Generation X attended college CITATION Obl03 l 1033 (Oblinger). <br />Value Work/Life Balance: The EasyTone customer, and most members of the targeted demographic abide by a philosophy of work to live rather than live to work. They appreciate fun in the workplace and espouse a work hard-play hard mentality. EasyTone is successfully targeted to this demographic. <br />Technologically Adept: As the first generation to grow up with computers, technology is woven into the lives of this demographic. This demographic values efficiency, technology, and products that work and abhors false claims, as demonstrated through the impact of social media networking. Customers are vocal and will let the world know their opinions if they are not satisfied with their purchases. This demographic is both active and inactive. Technology has a way of making people more sedentary, while innovations including the Wii, iPod, fitness machines, workouts and diets makes people active CITATION Obl03 l 1033 (Oblinger). <br />Furthermore, EasyTone’s target demographic usage behaviors also enhance the bottom line for Reebok EasyTone. These customers replace products regularly and the product lifecycle is of critical importance to these users. On average, the typical athletic shoe is only built to last 350 to 500 miles (3 to 6 months). While walkers are not pounding their shoes as hard as runners, one is unlikely to continue to get good support and cushioning past 500 miles. If customers are walking 30 minutes a day, or an average of 3 to 4 hours a week, the recommended replacement rate is six months. This bodes well for Reebok EasyTone (about.com).<br />Competitive Position and Value<br />Customers who are intrigued by the fit shoe industry do not worry about the cost and style of shoes on the market. Reebok's EasyTone’s campaign says, " tones butt and leg muscles," and the shoes are designed very differently from those of EasyTone’s competitors. EasyTone shoes are built with air pockets under the ball of the foot and heel, which give the wearer the feeling of stepping on a mini balance ball. Customers perceive this product as a more stylish and cost friendly version of the various fit shoes on the market.  The shoes claim, " Get a better butt and legs with every step." The Balance ball technology emulates walking on sand, engaging foot and leg muscles, which results in more muscle activity. The ads claim, " 88% of men are speechless. 76% of women are jealous. EasyTone helps you get better legs and a better butt with every single step” (Haydu). The idea that one can give muscles a better workout simply by switching shoes is a very compelling thought. The EasyTone campaign claims that customers will activate and tone their calves and gluteus muscles 11% and 28% more when wearing the EasyTone than traditional walking shoes. <br />Reebok’s EasyTone weighs 10 ounces, which is comparable to regular walking shoes. Reebok commissioned a study from the University of Delaware in which women wore EasyTone shoes while walking on a treadmill. The study tested the use of leg and gluteus muscles of a person wearing EasyTone versus regular walking shoes. The study measured electrical muscle activities and showed that EasyTone wearers encountered 28% more muscle activity than those wearing a typical Reebok walking shoe. The study was limited and tested only five individuals walking 500 steps each. However, initial reports from individuals who have tried EasyTone shoes are optimistic and EasyTone continues to be the fit shoe of choice for many customers entering into the fit shoe market. <br />EasyTone shoes range from $100-$130 depending on style and color options. Although EasyTone may be more expensive than traditional walking shoes on the market, the added benefits the shoe makes the purchase price less of a concern for many customers. The value of toned leg and gluteus muscles varies from customer to customer, however those concerned with these problem areas are willing to invest in a slightly more expensive product that offers greater results. The relative performance of the EasyTone shoe compared to the relative price indicates that customers find the purchase well worthwhile. Women who are concerned about their body image are open to paying a premium for an efficient product and additional benefit. Furthermore, the value of wearing an aesthetically more appealing shoe than the competitors is an additional benefit. <br />Market research shows that four out of five women are interested in products that tone legs and gluteal muscles. Perhaps the greatest proof of the customer value is that Reebok EasyTone has progressively become harder to find, due to a lack of inventory. “One LA sporting goods store reported that its Reebok sales more than doubled in November” CITATION Tar09 l 1033 (Parker-Pope).<br />Marketing Mix<br />Product: EasyTone is a fit shoe that works to enhance muscle tone in legs and butt. EasyTone is Reebok’s new technological breakthrough that allows women to “take the gym with them.” The shoe helps tone key leg muscles through balance ball technology under the toe and heel. With every step muscles are forced to engage, increasing muscle tone. <br />Price: The price of EasyTone ranges from $99.99-$129.99, dependent on various colors and styles. As the price of athletic shoes continues to decrease, as competition increase, Reebok’s price strategy is to remain constant. <br />Place: EasyTone is available for purchase online at Reebok.com, Zappos.com, and Amazon.com. Strategic retail partners include Footlocker, Sports Authority, The Finish Line, and Nordstrom. <br />Promotion: EasyTone uses sexy advertisements that are very colorful and playful. The ads are attention grabbing and have been featured on social media platforms ever since the launch of the product. <br />People: The ideal customer is a woman between her 20s-30s, although the true customer demographic ranges from 18 to 55. The target customer is a trend setting, tech savvy, stylish, educated, fitness oriented, and body conscious woman.<br />Part Three: SWOT Analysis<br />Given EasyTone’s current situation with regard to product, value, price, and customer, the SWOT analysis below synthesizes the strengths, weaknesses, opportunities, and threats that Reebok will need to consider moving forward with EasyTone’s marketing strategy.<br />
      • StrengthsBalance Ball TechnologyReebok Brand EquityStyle preferred to other fit shoesReebok’s most successful product in 5 yearsPriced at mid-point of fit shoesLight-weight and less chunky than competitorsEarly entrant into “fit shoe” marketDesign, style, and color optionsTrendyWeaknessesProduct currently only available for womenProduct on backorder for major retailersShoe effectiveness not proven with larger study groupShoe still new to market and fit shoe category not well knownMore expensive than regular walking shoesSupply chain issues and unable to predict popularity of shoeOpportunitiesExpand into a male marketDevelop an EasyTone shoe for runningInternational market expansion Create partnerships similar to Nike and iPodCreate strategic partnerships with 24 Hour Fitness, The Biggest Loser, Oprah, Weight Watchers, etc.Improvements to supply chain management will ensure shoe availability in retail storesExpand into children’s shoe marketCreation of entire fit shoe lifestyleThreatsNew entrants/competitors (New Balance)Studies to prove effectiveness are self-commissioned, reducing credibility.Fit shoe trend could fail to catch onAthletic shoe market very mature in US2008-2009 recession will continue to affect purchasing behavior going forwardLarger study could prove that EasyTone is not effective
      Part Four: Marketing Strategy<br />Strategic Marketing Plan<br />Reebok is a consumer driven brand whose strategy is to make working out fun again. The strategic launch of the EasyTone targets a very lucrative segment of the fitness apparel industry. Moving forward, the plan is to change how women, and perhaps men, think about fitness by challenging customers to fulfill their potential and by providing products that inspire individuals to have fun and get in the best possible shape. CITATION Adi08 l 1033 (Adidas Group) To achieve these strategic objectives, EasyTone will seek additional business partners to enhance brand equity and awareness. By partnering with health and fitness trend setters like The Biggest Loser, Weight Watchers, and celebrity sponsors like Kim Kardashian CITATION Cel l 1033 (Buzz), EasyTone will strategically place itself onto the feet of more women within its targeted demographic. Product placement in television, movies, and print ads is another strategic marketing initiative for EasyTone products. Marketers will work with production crews to increase strategic product placement. This effort will increase brand awareness, leading to increased sales and return on investment of marketing budgets. In an effort to combat high demand and low inventory issues, EasyTone is launching “try-on trucks” that will be located near the parking lots near its stores CITATION Dar10 l 1033 (Rovel).<br />Share Objectives<br />The fit shoe industry’s annual sales are shown to be $1.7 billion and growing (Appendix 4). Fit shoes, like Reebok’s EasyTone, are selling at double the average price of walking shoes, and a huge market of walkers are looking to buy them CITATION Ale10 l 1033 (Sage). The fit shoe segment’s growth is in sharp contrast to the 1.4 percent decline in overall athletic footwear sales in 2009. The athletic shoe market leader, Nike, was reportedly caught off guard by the trend, and is not expected to enter the market, leaving Reebok as the leader in the fit shoe space CITATION Ale10 l 1033 (Sage).<br />EasyTone’s share objectives are to increase market size by increasing its penetration rate into its target demographic and by launching a male oriented product. Additional research will be completed to see if EasyTone can be launched as a running shoe, further increasing market share in the athletic shoe market as a whole. Currently Reebok is capturing just 6% of the total athletic shoe market while EasyTone holds 6% of the fit shoe market (Appendix 4). As the fit shoe category gains steam and increases in popularity, EasyTone will become the market leader capturing an estimated 7.5% of the total fit shoe industry by 2012. <br />Positioning Strategy<br />EasyTone’s positioning strategy is to stand out as a sexy alternative to competitor’s fit shoes. Produced by a leader in fitness shoes, EasyTone offers customers the comfort of a Reebok product with the edgy sex appeal of the EasyTone brand. Positioning efforts to remain the industry leader will include increased distribution channels, increased product placement, and increased partnerships. These efforts will position the EasyTone as current, stylish, and effective, further proving to be the shoe that every female wants. EasyTone will be more than a trend and will always remain on the forefront of fitness. <br />Price Strategy<br />Reebok currently retails the EasyTone line between $99.99 and $129.99. At this price point, Reebok has captured 6% of the fit shoe market. In order to grow its market share, remain competitive within the fit shoe category, and to have a price that is reflective of both quality and performance, Reebok will maintain its price range for the immediate future. At these prices, EasyTone will remain an attractive alternative to more expensive fit shoe brands and less aesthetically pleasing options. As new shoes are launched by competitors in the coming year, Reebok will be able to maintain its price ranges because EasyTone carries a strong brand, offers a unique design and look, and will be offering line extensions from its original EasyTone walking shoe.<br />EasyTone’s market share is expected to grow through 2010 and into the next two years. Greater shoe availability, retail sales growth, and brand extensions will allow EasyTone to capture a larger share of the fit shoe market. Additionally, new entrants into the fit shoe category from existing and new competitors will contribute to a larger market overall. EasyTone is expected to grow its market share from 6% in 2009 to 7.54% in 2012 (Appendix 4). These numbers may change depending on the popularity of EasyTone’s male shoe brand extensions and the ability of new competitors in capturing market share. To understand EasyTone’s position within the fit shoe market, both market size and market variety will be addressed and may call for a reassessment of EasyTone’s pricing if projected growth is not achieved.<br />Channel Strategy<br />FIGURE 3 – EasyTone Channel Strategy<br />The majority (85%) of athletic shoes are manufactured in developing countries, with China standing as the largest exported of textiles and clothing (First Research 66). However, recently China has begun experiencing increasing exporting difficulties, new labor laws, and increased minimum wage. China, with labor costs up 40% since 2008, is no longer the cheapest country for athletic shoe manufacturing. India may become the sourcing country of choice for athletic shoe companies because of its availability of raw materials and labor, labor costs, and EU laws against Chinese footwear dumping (First Research 70). Retail buyers are also becoming more aware of corporate responsibility in the athletic shoe supply chain in addition to demanding quality and reliability (First Research 70). Despite enormous cost savings by sourcing from developing countries, athletic shoe companies encounter hidden costs and risks by not having complete control over quality, reliability of manufacturing and delivery, and production time. Reebok’s shoe manufacturing is primarily (95%) sourced through direct relationships with contract factories around the world. Reebok’s country offices oversee manufacturing relationships with these factories (Reebok). The production cycle from creation to sourcing to retail launch is approximately eighteen months. Six months prior to retail launch Reebok evaluates global product demand to determine the number of units to produce (Reebok). Should any disruption in the production cycle occur or should a product prove to be more popular at the retail level than anticipated, Reebok may not be able to fulfill retailer and customer demand.<br />When Reebok launched EasyTone in March, 2009 the shoes were an immediate success. Proving to be Reebok’s most successful new product in over five years, EasyTone sales surpassed company expectations three-fold (Adidas Group 19). For many large retailers carrying EasyTone products, demand has far exceeded supply. Reebok, unlike several of its competitors including Skechers, Nike, and New Balance, does not operate its own retail stores outside of the outlet category. Therefore, it must rely on other large retailers and e-commerce for shoe sales. Nordstrom and Lady Footlocker, two large retailers that began selling EasyTone shoes in 2009 found themselves out of stock of EasyTone in late 2009 and remain on backorder indefinitely. For customers eagerly attempting to buy EasyTone shoes, the dearth of product availability is affecting both customer demand and company sales potential. <br />Moving forward, Reebok will commit more resources to ensuring wider availability of its EasyTone products, particularly as new line extensions are introduced to the marketplace. Reebok underestimated the popularity of its EasyTone line and was ill-equipped for ensuring that its products would be available given a large customer demand. Reebok will work with its manufacturers and suppliers to develop a more efficient supply chain. Just as many other players in the athletic shoe industry are reevaluating their relationships with Chinese factories, Reebok will actively look to other countries to help strengthen its supply chain management. Reebok is entering 2010 with a better understanding of its customers’ needs and a commitment to guaranteeing that its retailers will carry its growing line of EasyTone shoes. Given the growing number of EasyTone designs, colors, and sizes, Reebok will concentrate on better managing its shoe delivery from manufacturer to customer. <br />Reebok will continue to work with its retail partners to strengthen its relationship with these outlets and will also work to build its online presence through both its Reebok.com website and other online retailers (see figure 3). A limited number of EasyTone shoes will be made available at Reebok outlet stores in addition to a limited number of other discounted retailers. Reebok will focus on wider distribution and availability of the EasyTone brand in order to fulfill the overwhelming customer demand that caused many retailers to be out of stock of these shoes for several months. Additionally, Reebok will closely monitor the purchasing behavior of its customers in order to better understand which channels are most popular and therefore require focus and dedication to inventory availability. Reebok believes that brick and mortar retail outlets will continue to serve as the most popular channel for EasyTone purchases because the EasyTone shoe remains unique and new to the market. Reebok understands that customers may want to try the shoe on first in order to feel the toning experience. As the fit shoe category builds momentum, customers may be more inclined to purchase without having this test experience. Finally, Reebok is now expanding its customer profile with the introduction of men’s sizes and designs. Reebok will therefore expand its retail channels to include other athletic shoe stores and higher-end department stores.<br />Communication Strategy<br />FIGURE 4 – Communication Strategy<br />End-User Target Market<br />Reebok’s EasyTone communication strategy will include a mix of push and pull communications in order to build brand and customer awareness (figure 4). Communication with channel intermediaries, primarily through retail outlets, industry influencers, and strategic partnerships, will create the necessary push that both the fit shoe and EasyTone market will need to grow. Direct communication with customers through Reebok-related online marketing and print and media advertising will build greater brand awareness and will help to promote the quality and design of EasyTone. Both push and pull communication will be necessary in order for EasyTone to be able to compete in the growing fit shoe market, especially as it begins to promote its brand extensions.<br />Communication with retail stores, industry influencers, and strategic promotions will allow Reebok to market the EasyTone brand to intermediaries that are important to the promotion and presentation of EasyTone. Reebok will work with retail outlets including Lady Footlocker, Nordstrom, Footlocker, DSW, and its own discount stores to create more prominent shoe displays that integrate variations on EasyTone’s provocative advertising campaign depending on store culture and level of conservatism. Reebok will also offer free pedometers with each EasyTone pair purchase. Finally, Reebok will offer training for store managers on how to communicate the toning benefits of EasyTone and its new product extensions for a wide customer audience. Industry influencers are also important for the marketing of EasyTone and the communication of its product benefits. Reebok will work with professionals in the health care and fitness industries to communicate the benefits of this fit shoe to the individuals who can then prescribe the shoe to their patients and clients. Reebok will also work to promote EasyTone through morning and afternoon talk shows and health and style magazines. By entering into this channel, Reebok can communicate its EasyTone message to a wide variety of customers. Finally, Reebok will begin to pursue strategic partnerships with organizations whose goals are in line with the benefits of the EasyTone brand. Weight Watchers, Jenny Craig, 24 Hour Fitness, and The Biggest Loser are all avenues for promoting EasyTone. Additionally, by becoming a promotional partner for large organized walking races such as The Race For The Cure, Reebok will be able to promote the health benefits of its EasyTone shoe while also gaining the marketing benefits of being aligned with charitable organizations. Through its strategic partnerships, Reebok will offer EasyTone giveaway contests. By pursuing these three areas of push communication, Reebok will significantly enhance its EasyTone brand.<br />Direct and advertising communication will play a large role in Reebok’s strategic marketing plan. Reebok will continue to use both print and media advertising to pull its customer into the EasyTone brand. A very sexy and provocative advertising campaign jump started the introduction of the EasyTone shoe into the athletic shoe market. Reebok will continue to target its growing market through advertising placement in carefully chosen magazines and newspapers. Advertising will be pursued in health, fitness, and lifestyle magazines for both men and women. Television advertising will continue to be used. Strategic billboard placements will also be used in larger cities. Reebok.com will enhance its EasyTone site by including more information on the health and fitness benefits of EasyTone and walking. Reebok will also move to increase its social media presence through blogs and better use of Twitter, Facebook, and other social networking sites. Reebok will devote a large amount of its marketing budget towards the EasyTone brand to build awareness of the basic women’s shoe that is available now and to ease the introduction of line extensions, particularly as Reebok prepares for the launch of a men’s version in later 2010. <br />Both the push and pull communication strategies will educated costumers and intermediaries on the benefit, design, and equity of the EasyTone brand while better informing the public of the growing fit shoe market. Across all channels, communication will focus on the problems EasyTone shoes solve and the cost benefit analysis of why these shoes are superior to others in the market. EasyTone provides the benefits of a stylish, comfortable walking shoe with the added fitness element of providing a level of instability that engages ones leg, hamstring, and gluteus muscles more than a normal walking shoe would. Reebok’s communication strategy will focus on this message along with the idea that wearing EasyTone shoes will help one’s body exercise more efficiently without breaking a sweat. The product value that is communicated to the customer will underscore product effectiveness, style, design, and quality.<br />Part Five: Performance Plan<br />Marketing Budget and Revenue Plan<br />While Reebok EasyTone is currently performing very well within the fit shoe industry, it is important that Reebok increases its marketing budget each year to continue growing its share of the fit shoe industry. In 2010, Reebok will budget $21.65 million to earn 6.21% of the fit shoe industry, a 0.2% increase in market share dollars from the previous year. This will increase sales revenues to $132.50 million, accounting for about 5.5% of Reeboks total sales. By 2012, EasyTone will have a marketing budget of $35.61 million with a 7.54% market share, a 1.33% increase in market share dollars from 2010. Sales revenues will increase to $207.03, 56% increase from 2010 sales. By 2012, EasyTone will account for 7.9% of Reebok’s total sales. This is one of Reebok’s most successful and promising products (Adidas Group, Adidas Group, Newbery, Appendix 5).<br />Profit Plan<br />Between 2010 and 2012, gross profit margins are expected to increase due to more efficient shoe production. Gross profit in 2012 is forecasted to be $82.81 million compared to $50.35 in 2010, a 64% increase. The marketing efforts between 2010 and 2012 are expected to make increasing contributions, as shown by the net marketing contribution (NMC). In 2010 the NMC of $3.52 million increases to $5.80 million in 2012, a 64% increase. This results in increased marketing return on sales, 2010 is 21.7% and 2012 is 22.8% (Adidas Group, Adidas Group, Newbery, Appendix 6).<br />Break Even Analysis<br />As mentioned previously, Reebok introduced EasyTone in 2009. In 2009, Reebok did not hit a breakeven point for sales or market share. In 2010, Reebok expects to hit the breakeven point for both sales and share. The share-risk premium for 2010 is 1% and sales are in excess by $21.97 million. By 2012, the share-risk premium is 3.9% and sales are in excess by $107.03 million. The EasyTone product quickly recouped Reebok’s investment to produce a new fit shoe (Adidas Group, Adidas Group, Newbery, Appendix 7).<br />Performance Scorecard/ Income Statement<br />Since the Fit Shoe Industry is relatively new, growth is estimated to be 24% for 2009-2010, 25% for 2010-2011 and 25% for 2011-2012. Compared to the athletic shoe industry, these numbers are high because the industry is newer. The athletic shoe is expected to grow 1.6% for 2009-2010, 2.7% for 2010-2011 and 3.2% for 2011-2012. Because of the rapid fit shoe industry growth, Reebok will increase their market share from 6.2% in 2010 to 7.5% in 2012. In addition, customer awareness will increase, EasyTone consideration will increase and EasyTone preference will increase. This results in the market share index increase from 1.5% to 4.9% (Adidas Group, Adidas Group, Newbery, Appendix 8).<br />Increased market share and improved profit margins are products of better financial results for EasyTone. EasyTone pre-tax return on sales will increase from 4.4% in 2010 to 4.7% in 2012. The pre-tax return on assets will increase from 6.3% in 2010 to 7.1% in 2012. Reebok’s marketing and superior shoe design places the EasyTone as a strong financial contributor to the Reebok group and Adidas overall (Adidas Group, Adidas Group, Newbery, Appendix 8).<br />Part Six: Conclusion<br />Reebok’s entry into the fit shoe category proved extremely successful and has placed Reebok’s product, EasyTone, at the forefront of this niche market. As the market grows, Reebok is expected to see its own product grow in sales and product line extensions. Reebok’s marketing plan as the fit shoe industry further develops involves penetration into the key areas that will capture the attention of EasyTone’s target market – women ages 18-55. Reebok will continue to build on its provocative and sexy advertising campaign and will develop new marketing material that will begin to capture the attention of a male customer audience. Communication and channel management will be key to EasyTone’s marketing plan. Reebok will devote significant resources to developing its supply chain in order to prevent future inventory issues that plagued Reebok during the crucial holiday shopping season. Reebok will also develop strategic relationships with partners such as 24 Hour Fitness, Weight Watchers, and The Biggest Loser to build brand awareness, equity, and association. Reebok’s strategies will help to grow the EasyTone brand and will allow EasyTone to remain a top competitor in the fit shoe market. As an early entrant into this category EasyTone has proved itself as a fit shoe stronghold. However, significant resources and attention must be given the EasyTone’s marketing strategy going forward, especially at the fit shoe category grows in numbers and competition.<br />Works Cited BIBLIOGRAPHY Abelson, Jenn. " Reebok Hopes to Launch Fan." 9 April 2009. The Boston Globe. 16 February 2010 <http://www.boston.com/business/articles/2009/04/09/reebok_hopes_to_launch_fad/>.Adidas Group . " Nine Months Report 2009." Quarterly Report. 2009.Adidas Group. Annual Report. Annual Report. Herzogenaurach: Adidas Group, 2008.—. " Annual Report 2008." Annual Report. 2009.—. " Annual Report 2009." Annual Report. 2009.Best, Roger J. Market-Based Management. Upper Saddle River: Pearson Education, Inc, 2009.Boston Hearald Staff. " Reebok Makes Toning Easier With New Sneakers." 21 December 2009. The Boston Herald. 1 March 2010 <http://online.wsj.com/article/SB10001424052970203278404574413002408468102.html?KEYWORDS=Reebok+easytone>.Business Pundit. " Reebok EasyTone Shoes Promise to Tone Your Butt. Fad Alert!" 12 November 2009. Business Pundit. 1 March 2010 <http://www.businesspundit.com/reebok-easytone-shoes-promise-to-tone-your-butt-fad-alert/>.Buzz, Celebrity. Kim Kardashian. <http://kimkardashian.celebuzz.com/>.Elli. " ReeTone: Reebok Advertises its EasyTone Shoes." 25 February 2010. Plus Size and/or Tall. <http://www.plus-size-tall.com/reetone-reebok-advertises-its-easytone-shoes-5124/>.First Research. " Industry Profile: Footwear Manufacture, Wholesale, and Retail." Industry Report. 2010.Fitflop Footwear. 2010. 3 March 2010 <http://www.fitflop.com/>.Johannes, Laura. " Shoes That Rock Your Muscles." 15 September 2009. The Wall Street Journal. 1 March 2010 <http://online.wsj.com/article/SB10001424052970203278404574413002408468102.html?KEYWORDS=Reebok+easytone>.Lefton, Terry. " Reebok's shine dims post Adidas deal." 17 April 2009. Boston Business Journal. 1 March 2010 <http://boston.bizjournals.com/boston/stories/2009/04/13/daily41.html?page=1>.Macys. 2010. 3 March 2010 <www.macys.com>.MBT. 2010. 3 March 2010 <http://us.mbt.com/>.New York Times. 2008. 3 March 2010 <http://www.nytimes.com/slideshow/2008/12/03/fashion/20081204-physical_index.html>.Newbery, Malcom. Global market review of active sportswear and athletic footwear - forecasts to 2016: 2009 edition. Periodical. Bromsgrove: Just-Style, 2009.Oblinger, Diana. " Understanding the New Student, Boomers & Gen-Xers, Milleninals." 2003.Parker-Pope, Tara. " Firm Body, No Workout Required?" 7 December 2009. The New York Times. 14 February 2010 <http://www.nytimes.com/2009/12/08/health/08well.html?r=2>.—. " Firm Body, No Workout Required?" The New York Times 7 December 2009.Reebok. " Our Business Practices." 2010. Reebok.com. 3 March 2010 <http://www.reebok.com/Static/global/initiatives/rights/text-only/business/our_supply.html>.Rovel, Darren. Sports Biz. 3 March 2010. <http://www.cnbc.com/id/35687695>.Ryn Footwear. 2010. 3 March 2010 <http://www.ryn.ie/>.Sage, Alexandria. Toning Shoes, While Hot, Could be bad Nike Fit. Press Release. San Francisco: Reuters, 2010.Skechers USA. 2010. 3 March 2010 <www.skechers.com>.The Walking Site. <http://thewalkingsite.com/faq.html>.Wikiinvest. 2010. 4 March 2010 <http://www.wikinvest.com/wiki/Skechers>.Zarda, Brett. " Why are Reebok's EasyTone Sneakers for Ladies Only." 30 July 2009. Popsci. 1 March 2010 <http://www.popsci.com/entertainment-amp-gaming/article/2009-07/reeboks-new-easytone-sneaker-keeps-women-fit-through-air-movement-technology-honed-days>.Zerio, John. " Reebok: in Pursuit of Generation X." Case. Thunderbird School of Global Management, 2007.<br />Appendices<br />
      • Competitor Analysis
      Price AttractivenessShoe AestheticHighLowLowHighFitFlopEasyToneChung ShiSkechersMBTBasic ShoeXsensibleRYN Sport<br />
      • Industry Analysis
      • Share Performance
      • Assumptions
      Assumptions/ Financial DataIndustry Performance (M)2009201020112012Athletic Shoe Market Demand (units)3600370537953922Unit Growth100.00%102.92%102.43%103.35%Athletic Shoe Market Size ($)$88,826.00$90,229.45$92,692.71$95,631.07$ Growth100.00%101.58%102.73%103.17%Adidas Performance (M)2009201020112012Group Sales (Euros)€ 13,125.00 € 13,518.75 € 14,059.50 € 14,621.88 Sales Growth100%103%104%104%Operating Income (Euros)€ 620.00 € 644.80 € 677.04 € 717.66 Operating Income Growth100%104%105%106%Income Before Tax€ 457.33€ 480.20€ 509.01€ 544.64Income Before Tax Growth100%105%106%107%$/Euro$1.40$1.40$1.40$1.40Group Sales ($)$18,375.00$18,926.25$19,683.30$20,470.63Operating Income ($)$868.00 $902.72 $947.86 $1,004.73 Income Before Tax ($)$640.27$672.28$712.62$762.50Assets (Euros)€ 9,553.00€ 9,553.00€ 9,553.00€ 9,553.00Assets ($)$13,374.20$13,374.20$13,374.20$13,374.20Sales to Asset Ratio1.371.421.471.53Reeboks Performance (M)2009201020112012% of Adidas Sales16%16%16%16%Reebok Branded Sales 80%80%80%80%80%Reebok's Sales ($)$2,352.00$2,422.56$2,519.46$2,620.24Reebok's Growth100%103%104%104%Reeboks Operating Income$111.10 $115.55 $121.33 $128.61 Income Before Tax$102.44$107.56$114.02$122.00Fit Shoes (M)2009201020112012Fit Shoe Market of total athletic shoe industry (units)0.50%0.58%0.65%0.70%Fit shoe market growth (units)100.00%115.1%112.3%108.4%Fit Shoe Market (units)18212527Fit Shoe Market ($) of total athletic shoe industry2.00%2.36%2.65%2.87%Fit Shoe Market ($)$1,777.00$2,132.40$2,452.26$2,746.53Fit Shoe Market Growth ($)100.00%120.0%115.0%112.0%EasyTone % of Fit shoes6.0%6.2%6.8%7.5%# of Walkers117117117117EasyTone (M)2009201020112012EasyTone Sales ($)$106.62$132.50$165.63$207.03EasyTone % of Reebok Sales4.53%5.47%6.57%7.90%EasyTone Sales ($) Growth100%124%125%125%EasyTone Operating Income$5.04 $6.32 $7.98 $10.16 Income Before Tax$4.64$5.88$7.50$9.64EasyTone Price (not in M)$100.00$100.00$100.00$100.00EasyTone Demand (Units)1.071.331.662.07EasyTone Fit Shoe Mkt Share6.00%6.21%6.75%7.54%Other Expenses (Assumption)45%42%40%40%EasyTone Business Metrics (M)2009201020112012Channel Discount50%50%50%50%Gross Profit Margin %37%38%39%40%Gross Profit $39.45$50.35$64.59$82.81Mkting, Sales and Admin %43%43%43%43%Mkting, Sales and Admin $$16.96$21.65$27.78$35.61Mkting Expenses % of Sales15.9%16.3%16.8%17.2%Awareness65%75%85%90%Consideration60%75%85%90%Preference70%75%78%80%Purchase90%90%90%90%Break Even Volume1.221.111.031.00Break Even Sales$121.62$110.53$102.56$100.00Break Even Share6.8%5.2%4.2%3.6%<br />
      • Marketing Budget
      Marketing BudgetReebok EasyTone (M)2009201020112012Budget$16.96$21.65$27.78$35.61Revenue PlanReebok EasyTone (M)2009201020112012Market Demand$1,777.00 $2,132.40 $2,452.26 $2,746.53 Market Share6.00%6.21%6.75%7.54%Sales Revenues$106.62 $132.50 $165.63 $207.03 Revenue per Customer$0.91 $1.13 $1.42 $1.77 Customers (# US Walkers)117117117117<br />
      • Profit Plan
      Profit PlanReebok EasyTone (M)2009201020112012Sales Revenue$106.62$132.50$165.63$207.03Percent Margin37%38%39%40%Gross Profit$39.45$50.35$64.59$82.81Mkting, Sales and Admin %43%43%43%43%Mkting, Sales and Admin $$16.96$21.65$27.78$35.61Net Marketing Contribution$3.02 $3.52 $4.52 $5.80 Marketing ROS21.1%21.7%22.2%22.8%Marketing ROI133%133%133%133%<br />
      • Breakeven Analysis
      Break Even AnalysisReebok EasyTone (M)2009201020112012Share Objectives6.0%6.2%6.8%7.5%Sales Revenue$106.62$132.50$165.63$207.03Percent Margin37%38%39%40%Gross Profit$39.45$50.35$64.59$82.81Mkting, Sales and Admin $$16.96$21.65$27.78$35.61Break-Even Sales$121.62$110.53$102.56$100.00Break-Even Share6.8%5.2%4.2%3.6%Share-Risk Premium-0.8%1.0%2.6%3.9%<br />
      • Performance Scorecard/ Income Statement
      Performance ScorecardReebok EasyTone (M)2009201020112012Market Share6.0%6.2%6.8%7.5%Market Share Index1.5%2.4%3.4%4.9%Market Served6.0%6.2%6.8%7.5%Awareness65.0%75.0%85.0%90.0%Consideration60.0%75.0%85.0%90.0%Preference70.0%75.0%78.0%80.0%Purchase90.0%90.0%90.0%90.0%  Sales Growth Rate100%124%125%125%Percent Margin37%38%39%40%Mkting, Sales and Admin %43%43%43%43%Marketing ROS21.1%21.7%22.2%22.8%Marketing ROI132.6%132.6%132.6%132.6%Income StatementReebok EasyTone (M)2009201020112012Sales Revenue$106.62$132.50$165.63$207.03Percent Margin37.0%38.0%39.0%40.0%Gross Profit$39.45$50.35$64.59$82.81Mkting, Sales and Admin $$16.96$21.65$27.78$35.61Net Marketing Contribution$3.02 $3.52 $4.52 $5.80 Marketing ROS21.1%21.7%22.2%22.8%Other Expenses45%42%40%40%Operating Income$5.04 $6.32 $7.98 $10.16 Pre-Tax ROS4.4%4.4%4.5%4.7%Pre-Tax ROA6.0%6.3%6.7%7.1%Sales to Asset Ratio1.371.421.471.53<br />