Final lululemon project


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Lululemon Athletica Database Marketing Plan and Project

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Final lululemon project

  1. 1. LululemonAthletica, Inc. Database Marketing Strategy LululemonAthletica Inc. Database Marketing Strategy By MufaddalZaveri YuvrajLal SedefAkinci HuzefaChiniwala 1 B409 Winter 2013
  2. 2. LululemonAthletica, Inc. Database Marketing Strategy Situation Analysis Company History: After 20 years of doing business in the surf, skate and snowboard business, the founder chip Wilson took the first commercial yoga class offered in Vancouver. After doing the yoga he realized that yoga is an ideology whose time had come. So chip then started a design studio that became a yoga studio at night to pay the rental expenses. The success of clothing depended on the feedback from yoga instructors who were asked to wear the products. The Lululemon name was chosen by surveying from a hundred people, 20 brands and 20 logos. Lululemons first store opened in the beach of Vancouver called Kitsilano in November 2000. The prime motive of the store was to be like a community hub where people could talk about and share regarding physical aspects of living from yoga, diet cycling etc. But unfortunately for this concept, the store became very busy and it was difficult to educate the customers as well as sell products. So the focus of training solely to educate the Lululemon staff and train the eople so well that they could have a positive influence on their families, educator and staff. (LululemonAthletica:Company History) Products: Lululemon’s product line includes jackets, hoodies, pants, and shorts for both men and women as well as bras, underwear, and tank tops for women. The stores signature products are its pants that are offered in both regular and tall lengths . The majority of Lululemon garments are pre-shunk to ensure a quality first time fit. Lululemons pants are often lauded that appeals to female fashionistas, soccer moms, professionals and the men that gifts them. Lululemon basically makes products for women that practice yoga. The products are designed to offer performance, fit and comfort incorporating style. Lululemon prides itself of using cutting edge, quality fabrics to their customers. Lululemon co-ordinates with the world’s best fabric suppliers to develop trade make fabrics like the ―All moisture wicking‖ that pulls away moisture from the fabric and spreads it evenly through the fabric to dry quickly. They also have the low impact fabrics that are made from natural fibers. The outwear fabrics are designed to protect against wind and rain. Other innovative features on the products are flat seems, tear out 2 B409 Winter 2013
  3. 3. LululemonAthletica, Inc. Database Marketing Strategy tables and thumbholes for credit cards, audio players and heart rate monitors.The company recently expanded their product range to appeal to the men and youth segment. lululemon also sells fitness-related accessories including bags, socks, underwear, yoga mats, instructional yoga DVDs, and water bottles. 3 B409 Winter 2013
  4. 4. LululemonAthletica, Inc. Database Marketing Strategy Mission and Vision: On LululemonAthletica's website there is no traditional mission statement, and it is clear that that they are more focused on their vision and goals. Every employee is encouraged to set a personal goal and vision for themselves regarding how to build a healthy life. Their Vision and goal setting program is based on 6 main concepts: 1. Possibility 2. Vision. 3. Balance. 4. Audacity. 5. Format 6. Integrity. (The six core concepts of vision and goals). Current target market: The company makes clothing for both sexes, 70% of the product is catered to women. The typical lululemon customer is catered to women. The typical Lululemon customer is female, age 25-35, educated professional, relatively high disposable income because their products aren’t cheap, people who are active socially and physically conscious and open to the spiritual aspect of living lives. 4 B409 Winter 2013
  5. 5. LululemonAthletica, Inc. Database Marketing Strategy Historical Marketing Communication Strategy Building a brand is the most essential component of marketing strategy. LululemonAthleticaunderstands this by taking the brand beyond a good logo and advertising. The reason behind lululemon’s success is it found a savvy way to exploit women’s deepest insecurities.It was the first brand that allowed women to wear workout clothes without feeling embarrassed.Unlike competitors which relies on celebrity endorsements, worth millions of dollars Lululemon relies on unpaid ―ambassadors‖ — Instructors at local gyms wear the apparel and during free classes held at Lululemon stores. The ambassadors provide valuable feedback to Lululemon on latest fashion trends. They receive up to $1000 worth free merchandise for modeling the Lululemon apparel and gain clients for regular classes after store sessions. These promotional efforts are accelerate by little print advertising in running and yoga magazines. As Lululemon grows so does its social media presence.The brand’s main Facebook page has over 800,000 followers, including pages dedicated for the individual stores. Lulu is actively involved in social media sites like Tumblr, Pinterest Foursquare, Instagram, and was the first brand on Zite (a customizable magazine on the iPad/iPhone). The viral video ―Shit Yogis Say‖ was created by Lululemon.In the famous ad there is a lady that talks about how yoga is good for her how good she feels after doing yoga. They basically make the ad in such a way that it is funny and humorous and talks about the benefits of doing yoga. Lululemon markets hyper-locally by tapping into the interests of its individual communities and building events around them.Local marketing is done by building events around individual communities by tapping into their interest.The strategy of Lulu is to get involved even before a new store opening in a community.Lulu’s loyal following is not only devoted to its merchandise they also support its lifestyle. They encourage leadership by displaying mantras on its bags, websites and walls.(such as ―dance, sing, floss and travel‖)The employees do not just set work goals but also life goals which encourages them to work and live better.It is a brand that is directly understands the women. (Business in Vancouver). 5 B409 Winter 2013
  6. 6. LululemonAthletica, Inc. Database Marketing Strategy Market Analysis: Business Overview: Lululemon sells mens and womens clothing for yoga, dance, exercise and other sports, catering to high-income, trendy active adults willing to pay high prices. Lululemon apparel is sold in the company's own-branded stores (both Lululemon and two special OQOQO stores that focus on organic apparel) as well as in high-end lifestyle centers and yoga studios. On June 27, 2011 LULU said it expects to reach $1 billion in sales for the fiscal year 2012. The company reported store productivity is up to nearly $2004 per square foot, confidently shaking off concerns of encroaching competition of high-end lines from large competitors such as Nike (NKE) and Adidas AG Segment Analysis:  Corporate owned stores (89.3% of net revenue): The Company has 103 corporate-owned stores in Canada and the US. The company plans to increase North American net revenue by opening additional corporate-owned stores.  Franchises (4.6% of net revenue[): As Lululemon was emerging into the clothing industry, it entered into franchise agreements to more quickly expand its brand name and increase net revenue. In exchange for the use of Lululemon's brand name and right to operate stores in certain regions, franchises pay the company a one-time franchise fee and ongoing royalties based on their gross revenue. [ According to Lululemon's SEC filings, opening new franchise stores is "not a significant part of our near-term growth strategy." The company has franchise stores in North America and Australia.  Other (6.1% of net revenue): Other net revenue includes wholesale sales, telephone sales, and sales through a limited number ofcompany-owned showrooms. Wholesale customers include premium yoga studios, health clubs, and fitness centers. 6 B409 Winter 2013
  7. 7. LululemonAthletica, Inc. Database Marketing Strategy Retail Strategy:  Lululemon apparel is sold in the company's own-branded stores (both Lululemon and two special OQOQO stores that focus on organic apparel) as well as in high-end lifestyle centers and yoga studios.  Most of Lululemon's stores are located in urban shopping districts, malls and lifestyle centers, and they cater to high-income, trendy active adults willing to pay high prices for Lululemon's apparel. LULU's growth has been dependent on store expansion. The company also has one of the highest sales per square foot figures in retail , averaging $1,700 of sales per square foot in its corporate-owned stores (compared to $489 at Abercombie and Fitch and $398 at GAP).  Lululemon is unique in that it does not rely on television or print advertising to promote its product, but rather relies on building strong community relationships (e.g. building strong relationships with yoga studios and gyms in the communities in which it operates). Competitive Advantage  High-end retailers such as Lululemon appeal to customers in the upper-income bracket whose absolute spending power is less affected by macroeconomic downturns. Lululemon's high prices, around $50-60 for a t-shirt, cater to the upper-class consumer willing to pay premium prices for workout gear. While the wallets of the lower- and middle-classes are pinched during economic downturns, Lululemon's core customers typically have wealth that allows them to continue purchasing trendy and pricey exercise apparel despite downward trends in the economy.  combination of small stores and high prices help to create large profit margins for Lululemon by increasing the difference between the company's operating costs (store operating expenses are lower for smaller stores: rent, utilities, number of employees needed to cover the selling floor, etc.) and overall revenue. The average Lululemon corporateowned store size is only 2,900 square feet, compared to average store sizes of 7,089 square feet and 12,504 square feet at Abercombie and Fitch and GAP, respectively. With a significantly smaller store and its high priced items (over $60 for t-shirts), Lululemon is 7 B409 Winter 2013
  8. 8. LululemonAthletica, Inc. Database Marketing Strategy able to achieve sales per square foot of $1,700 in its corporate-owned stores, over three times as much as sales per square foot at Abercombie and Fitch ($489) and GAP ($398). All of this translates into lower costs and higher revenue for Lululemon. Competition: Lululemon is one of the only major retail chains and clothing manufacturers dedicated to yoga and fitness apparel, giving it a powerful position as a niche player in the apparel retail market. It's primary competitors are small businesses that operate individual yoga-wear shops and retail shops located in gyms and fitness centers, as well as sporting goods retailers such as Dick's Sporting Goods (DKS) which sell fitness apparel. It is nearly impossible to compare Lululemon to these competitors as the smaller stores are too small and sporting goods giants like Dick's Sporting Goods (DKS) derive most of their business from product categories, such as sporting equipment and footwear that Lululemon does not carry. However, Lululemon's advantage over these smaller operations is the popularity of the Lululemon brand among yogaenthusiasts that has risen with the company's tremendous growth over the past five years. On a larger scale, Lululemon competes with sports industry giants Nike and adidas which produce athletic apparel and accessories. Each of these companies is incredibly larger than Lululemon in terms of sales and channel presence as they have their own stores in addition to being carried in a multitude of online and brick-and-mortar stores. Sports apparel and footwear manufacturer Under Armour is also a competitor of Lululemon as the company produces hightech apparel for exercise and athletics. Under Armour (UA) is closer in size to Lululemon, although Under Armour targets young team sport athletes while Lululemon focuses on customers involved in yoga, running and other individual exercises.However, Nike, adidas and Under Armour all have significant footwear operations, which is not part of Lululemon's business. (See appendix) 8 B409 Winter 2013
  9. 9. LululemonAthletica, Inc. Database Marketing Strategy New Product Initiatives: In September 2009, Lululemon launched a spinoff brand, ivivvaathletica – dance inspired clothing for active girls, ages 6-12 . We believe the launch of a separate brand was a good business decision rather than making ivivva a brand extension. Furthermore, it positions Lululemon as an aspiration brand when girl customers grow out of ivivva. LULULEMONS SHARE FALLS BY 5%: The stock market darling Lululemon saw its share fall down by 5.2% on Friday afternoon. Lululemon has been the favourite of the retailers but the company warned the investors last month that the company sales are going to be low in the high single digits from the 4 th quarter of 2012. Lululemon have to increase their discounting both in stores and online as a shift in strategy. The company began an initiative in 2011 to increase inventory to meet the growing demnds of people for yoga equipments.They have been working on their pricing and other strategies as well to increase their market share. It has been a challenge for lululemon to reach a fine balance between hving too much inventory and have less of it. (Lululemon’s share falls by 5%). 9 B409 Winter 2013
  10. 10. LululemonAthletica, Inc. Database Marketing Strategy SWOT ANALYSIS Strengths High Quality Products Innovative features and style Vertical retail strategy: Produce everything and sell it in own store. Premium store locations. Community centered marketing approach-building brand awareness, relationships and philantrophic activities. OPPURTUNITIES International expansion E-commerce development. New market segment- man and youth. Growth in U.S market Weakness Weak brand recognition in the U.S-may not be in the consumers consideration set. Slow growth strategy due to lack of mass marketing. Decentralization marketing-each store has control over own message. Few retail outlets-maynot be able to reach all customers especially males. THREATS Economic conditions may decrease consumer spending. Lack of consumer knowledge. Fluctuations in stock market might affect the image of the company Build U.S brand recognition 10 B409 Winter 2013
  11. 11. LululemonAthletica, Inc. Database Marketing Strategy Target Market Primarily Lululemon's target market has been active young thinking women woman who are well educated appearance conscious give physical well being priority and also love yoga. These women are generally aged around 20-45 and are part of upper middle class families. Lululemon practice a Niche Marketing strategy going after a very narrow and well defined target segment in which they have had great success. More than 85% of Lululemon's sales are from this target market and they will always remain the primary target market for Lululemon. Our marketing strategy is going to target males, Lululemon already has a male clothing line and has been trying to get the male-workout market share for a while now. Males usually don't prefer shopping at Lululemon due to their over positioned status of being a female clothing line. Our Marketing strategy will try to acquire males who have similar attributes to Lululemon's female target market that is educated young thinking men aged 20-45 who are appearance conscious are physically fit and active. OBJECTIVES: The marketing campaign that we will launch will be called 'Manhunt'. The primary objective of our program is to increase the number of male customers of Lululemon through the existing customers that Lululemon already has. This will be achieved through a combination of referral Acquire new male customers through referrals. Increase spending of existing customers through the loyalty program. Increase retention through both loyalty and referral programs(referred customers tend to be more loyal). Increase referred customers by giving incentives to both referred and referring customers. Increase sales and attract male customers to Lululemon. Acquire information about the referring and the referred customer and thus know their descriptive profile (geography, demographics and income), behavioral (product interaction, shopping habits). 11 B409 Winter 2013
  12. 12. LululemonAthletica, Inc. Database Marketing Strategy STRATEGIES: The overall strategy is to have a referral and loyalty program to acquire new male customers and retain current customers through loyalty program. The marketing and communication program will be word-of-mouth, in store advertising and post on websites and social media pages (facebook, youtube, twitter, instagram) as always because Lululemon does not practice mass marketing. It will focus on building awareness among males through underground marketing and guerrilla marketing. The program will be a combination of a loyalty and referral program where existing customers will refer new male customers which will qualify both of them for a one time discount and automatically add them to the loyalty program as well. The benefits of the program to the customer is that after registering for the program by referring a male friend, they will both be eligible for a one time discount on their next purchase at Lululemon. They also qualify for the loyalty program where they earn credit points for every purchase they make. It is easy for the customer to accept the offer since they derive benefits from the program immediately and in the long term. The program is very straight forward as the customer only has to provide information to get the unique loyalty Card which they can use to redeem collect points after every purchase. With this program the information to be managed will increased and a proper system will be required to handle it and staff will have to be trained to use it. 12 B409 Winter 2013
  13. 13. LululemonAthletica, Inc. Database Marketing Strategy TACTICS: Our tactics used to implement our strategy are as follows:The program will be marketed in stores, websites and social media (facebook, twitter, youtube) and information about the new program will be given by our staff to the customers during the purchase. To be eligible for the program the customer has to register with a male friend of theirs where both have to fill out a form giving basic personal information Each customer will be assigned a card with a UNIQUE I.D that will identify the customer and record all future transactions with Lululemon. After registering the customer will be entitled to aaone time 10% discount on their next purchase. Following that they will earn 10 credit points for every $100 they spend. On earning 100 credit points they can redeem these points for a $100 gift card to buy any product at Lululemon. Customers can terminate their cards at any time they want by calling a number given on their card. This number can also be used for enquiries such as number of points they have earned or offers given by Lululemon on their products. All the information provided by the customers will be in compliance with privacy laws and ethical business practices. 13 B409 Winter 2013
  14. 14. LululemonAthletica, Inc. Database Marketing Strategy DATABASE REQUIREMENTS: The database will require the customer to give basic information of themselves. An example of the form and its content is given below: NAME DATE OF BIRTH GENDER ADDRESS City PROVICE Postal Code TELEPHONE EMAIL ADDRESS MUFADDAL ZAVERI 24th NOVEMBER 1990 MALE 85,Thorncliffe Park Drive Toronto Ontario M4H 1L6 (647)-773-4783 SIGNATURE 14 B409 Winter 2013
  15. 15. LululemonAthletica, Inc. Database Marketing Strategy LTV Estimates Lululemon Referral LTV Year 1 Year 2 Year 3 Customer 2,000,000 2,000,000 1,900,000 Spending Rate $500 $550 $600 Retention rate 0 90% 90% Retained Customers 0 1,800,000 1,710,000 Referral Rate 0 5% 8% Referred Customers 0 100,000 152,000 Total customers 2,000,000 1,900,000 1,862,000 Total Revenue $1,000,000,000 $1,045,000,000 $1,117,200,000 Variable cost % 43% 49% 45% Variable cost $430,000,000 $512,050,000 $502,740,000 Program Cost(50$) 0 5,000,000 7,600,000 Fixed Cost $130,000,000 $130,000,000 $130,000,000 Total Cost $560,000,000 $647,050,000 $640,340,000 gross Profit $440,000,000 $397,950,000 $476,860,000 Discount rate 1 1.16 1.35 NPV $440,000,000.00 $343,060,344.83 $353,229,629.63 Cumulative NPV $440,000,000.00 $783,060,344.83 $1,136,289,974.46 LTV $220 $391.53 $568.14 15 B409 Winter 2013
  16. 16. LululemonAthletica, Inc. Database Marketing Strategy MEASUREMENT TESTING AND EVALUATION: We can measure the success loyalty program by having a count of the number of forms filled up and the loyalty cards given to the customers. It will also give us a count of the new male customers that have purchased from Lululemon. We can measure the increase in life time value from the previous years with respect to the new LTV which is due to the referral program. CAPITAL REQUIREMENTS: Cost of making loyalty cards and forms $500000 Cost of training staff- $500000 Cost of in house advertising and website updates Social Media advertising Database and CRM software $500000 $50000 $1000000 Total Cost $2550000 16 B409 Winter 2013
  17. 17. LululemonAthletica, Inc. Appendix-A Database Marketing Strategy Lululemon Manifesto 17 B409 Winter 2013
  18. 18. LululemonAthletica, Inc. Appendix-B Database Marketing Strategy Lululemon’s Quality Stand 18 B409 Winter 2013
  19. 19. LululemonAthletica, Inc. Appendix-C Database Marketing Strategy Lululemons Competitors 19 B409 Winter 2013
  20. 20. LululemonAthletica, Inc. Appendix-D Database Marketing Strategy Base LTV for estimation: Lululemon LTV Customers Year 1 $ Retention Rate 2,000,000.00 Year 2 $ 90% 1,800,000.00 Year 3 $ 1,600,000.00 $ 600.00 90% Spending Rate $ Total Revenue $ 1,000,000,000.00 $ 990,000,000.00 $ 960,000,000.00 Variable Cost % 43% 49% 45% Variable cost $ $ 430,000,000.00 $ 485,100,000.00 $ 432,000,000.00 Fixed Cost $ 130,000,000.00 $ 130,000,000.00 $ 130,000,000.00 Total Cost $ 560,000,000.00 $ 615,100,000.00 $ 562,000,000.00 Gross Profit $ 440,000,000.00 $ 374,900,000.00 $ 398,000,000.00 Discount Rate 1.00 1.16 1.35 Net Present Value Profit $ 440,000,000.00 $ 323,189,655.17 $ 294,814,814.81 Cumulative NPV Profit $ 440,000,000.00 $ 763,189,655.17 $ 1,058,004,469.99 $ $ $ Lifetime Value 500.00 220.00 $ 550.00 381.59 529.00 20 B409 Winter 2013
  21. 21. LululemonAthletica, Inc. Database Marketing Strategy Bibliography: Works Cited: “Company History” :;company_history “Current target market” : “Mission and Vision” : “Company sales falls by 5%” :Freeman, Sunny. "Lululemon Shares Fall by Five Per Cent." Telegraph-JournalJan 05 2013. ProQuest. Web. 12 Apr. 2013 . ―MarketAnalysis‖ etrics "Lululemon’s Marketing Strategy | Grewal Levy Marketing News." Grewal Levy Marketing News. N.p., n.d. Web. 12 Apr. 2013. <>. "Brands of the Year: Lululemon takes local to the next level » strategy." strategy. N.p., n.d. Web. 12 Apr. 2013. <>. 21 B409 Winter 2013