Lululemon Marketing Study


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Lululemon Marketing Study

  1. 1. centercenter100000100000Lululemon AthleticaKenneth Chow, Muneet Bhatia, Ornila Rahman, Pranab Pandey, Peter Jacob, Vishal Sajnani, Tony Wang<br />Part 1 – lululemon as a market driven business<br />Founded in 1998, lululemon was conceived based on a need for more technical clothing required for the growing phenomenon of Yoga. Chip Wilson, founder of lululemon and former skate and snowboarder, first discovered yoga in the early 1990’s and felt the post yoga feeling to be similar to that of his previous activities. Having founded an earlier sporting apparel company in 1979, Westbeach Sports, he seized the opportunity to pair his knowledge of athletic clothing material with yoga. The first lululemon store was opened in Kitsilano, BC which doubled as a design and yoga studio by night. Chip tested his clothing on the yoga instructors to see where they could be improved for the movements associated with yoga, eventually perfecting on the technical aspects of the clothing. The original concept for the store was to be “a community hub where people could learn and discuss the physical aspects of healthy living from yoga and diet to running and cycling as well as the mental aspects of living a powerful life of possibilities” (website). However, with its growing popularity, it was quickly discovered that this was just not possible to service the client in an effective way. To remedy this, the task of educating was shifted to the staff person or “lululemon educator”. From here, lululemon quickly expanded based on a “grow or die theory”. Today, lululemon has 142 stores in the U.S., Canada and Australia with plans to open 300 more in North America and intentions to explore overseas locations. Its objective has also since morphed to become the “# 1 women’s athletic apparel brand” (Day). In 2009, lululemon launched ivivva, a subsidiary brand targeting girls 6-12 years of age. <br />Lululemon’s inception was based on fulfilling a market need, that is, it was very market driven in its beginning. Chip identified a market which wasn’t being served and produced a product that could satisfy the demand in that market. He gained the trust and loyalty of his customers by educating them on yoga and healthy living, and further empowered his staff to become the leads on the education mandate. By transforming his retail store into a community hub, he created a culture of personal service, in that people did not feel pressured to purchase, and were further encouraged to just hang out and absorb the learning’s offered at his store. Thus lululemon as an organization became aligned both internally and in its operations to deliver value for its customers and employees. This strategy proved to create a quick following to the lululemon brand to cater to the demand to learn more about yoga. <br />Over the years, however, lululemon has gradually shifted from being an extreme market conscious firm to being less so as they expanded their product offering.<br />-63795103016Market DrivenSales DrivenOriginal PositionCurrentPosition00Market DrivenSales DrivenOriginal PositionCurrentPosition-107954318000<br />The rational in coming to this conclusion is based on the fact that as lululemon expanded, they standardized their product offering across all markets and further incorporated fashion into their product design. This served to create appeal to consumers who were not serious yoga practitioners, in effect broadening their consumer base. This acted to dilute their target market and generalise their consumer focus slightly. However, that being said, we still position them closer to the market driven end of the spectrum as opposed to the sales driven side as they have empowered their stores to offer services and features which are based on market preferences. For example, it is lululemon policy to provide each store with a paint allowance and allow them to choose colours based on what they feel works best for their community. Of course, colours which are not considered consistent with the lululemon brand can be vetoed by head office. Along with this, each location is empowered to provide customized services and marketing campaigns which appeal most to the demographics of their market. As lululemon expanded the number of stores they had, they decided to not standardize the layout of each store. Rather they positioned their stores in 3 areas of priority: Hip urban, affluent, and suburban. Their store layouts differ per region, and could be safe to say that no two stores are exactly the same. <br />Further, lululemon has maintained their educational approach to selling and training their “lululemon educators” on the materials that go into their garments and how they benefit the consumer. <br />As lululemon continues to expand, they will face the challenge to stay competitive while remaining market driven. Given the popularity and following of lululemon they are well positioned to further segment their market to better serve the needs of their consumers. <br />Should lululemon want to remain market driven, it is recommended they identify the needs and characteristics of the demographic they serve in each of their markets, initiate movement to differentiate the product offering to their respective demographics and launch separate product lines to cater to the needs of the various markets. <br />Within 1 year, lululemon should focus their market research on further segmenting their consumers in their respective markets. Realising that they currently serve consumers in the hip urban, affluent and suburban markets, they should further identify the characteristics of each segment to eventually offer differentiated products to them. The Hip Urban and Affluent markets share similar characteristics. The Hip Urban markets are typically located in metropolitan areas which contain a mix of lululemon consumers who are both fashion forward and place high value on leading an active life. These consumers have many outlets to practice yoga and other active engagements. That being said there is a clear distinction between those consumers who value the clothing as a trend signal and who don’t engage in active living and those who purchase lululemon’s clothing for the technical benefits it has to offer. Within the affluent market, the consumers have the means to purchase activity based-clothing meaning they are more susceptible in spending the extra money for clothing designed specifically for certain purposes. <br />In the suburban markets, in general, people are less likely to keep up with the trends, and would prefer clothing which might sacrifice technology to incorporate fashion to avoid purchasing separate garments. These markets generally have fewer venues to engage in active living, i.e. yoga classes. <br />Within 1-2 years, lululemon should begin developing separate product lines that can address each of these segments. For the Hip Urban/Affluent markets, products designed specifically for performance as well as products which are more focused on fashion should be offered to their products. It would be important to note that even the clothing not specifically geared towards performance would still have a performance elements associated with it, but would include more functional features which are required by the casual, fashion focused consumer. <br />After 3 years, lululemon would launch this new product line and offer the various product lines at different locations to address the needs of the specific demographics in each market. Lululemon educators would need additional training to ensure they were adequately prepared for technical questions which may arise from their more performance driven consumers. They would also outfit their stores in their suburban markets to offer more avenues for their consumers to practice the yoga. <br />Part 2 – lululemon’s customer profile and value<br />As mentioned previously, lululemon was founded to provide clothing to a very specific demographic. The market to which lululemon originally catered to could, in its own right, be considered a “tribe”. These people lead a very active lifestyle, predominantly stemmed from yoga. Common to most yoga practitioners, is their passion for creating happier, healthier active lives. That being said, since its inception, lululemon has expanded and targeted a broader consumer base, thus allowing more tribes to become interested to interact with the brand. For the purposes of this paper, we will focus on the “tribe” which spawned the need for lululemon, which is the group of people who was actively involved in the yoga community, “Yogi’s”, and benefitted the most from technological enhancements lululemon garments offered. This group have commonly been described as people who are “engaged with the world and who dedicate(s) their practice to the betterment of others” (yoga, tribe and culture). They share a passion for healthy living, the improvement of the world, kindness, excellence and of course yoga. However, it is the dedication to yoga which ties our “tribe” together, along with their pursuit of excellence. This specific “tribe” consists mainly of women, though there are men included; they are from varying income brackets and professions, and are united in their passion for yoga; they are commonly educated in the practice of yoga and it’s peripheral teachings such as healthy living and eating; and come from a variety of geographic locations, but are mainly located in metropolitan areas. This specific “tribe” is primarily concerned with improving their connection with the ancient art of yoga and are completely integrated with that culture. They may not all subscribe to the same extra-curricular activities (outside of yoga) or spend their 9-5’s completing similar jobs of similar pay, but in the yoga studio, they are all connected by this common passion and are all equals. As such, they are all interested in performing at the highest level they can which is where lululemon fits into their lives. Lululemon provides the clothing in which they all come together in. They love lululemon because their garments meet the technical requirements needed by this strenuous activity. This “tribe” employs the service of lululemon’s garments because they are designed with the Yogi in mind. Their garments, allow the Yogi to better perform the variety of positions required of the activity, while keeping them from overheating. The garments fit better and do not require frequent readjustment due to their design. As such, the Yogi is able to improve their abilities in yoga by focusing intently on yoga rather than their body temperatures and clothing fit. Furthermore, lululemon, with the following they have generated, has effectively provided a uniform which differentiate those who are serious Yogi’s vs. those who are “just getting into it”, as it is the serious ones who would be most willing to spend the premium dollar for the superior garments which lululemon provides. <br />To determine our tribe’s perception of value of lululemon’s product offering, we look to their psychological requirements for quality and how well lululemon’s garments satisfy those requirements. We know that our tribe is primarily focused on the technical advantages lululemon’s garments provide them when engaging in yoga. They are also members of the yoga community who are health conscious and looking for garments to aid them in the quest to improve their abilities in yoga. The majority of these consumers are mid-to-high income earners who have a passion for lululemon and what they stand for. As such they are extremely loyal to the brand and view the “other brands” as just trying to hop on the band wagon to capture market share. Normally, this tribe would be very price sensitive, as there are substitutes for lululemon’s garments. As true as this maybe, lululemon’s community involvement, which is aligned with their corporate strategy, further reinforces the bond between lululemon and this particular tribe. As the lululemon educators are educated to thoroughly explain the materials their garments are produced with along with the benefits they provide, the consumer, regardless of whether they make a purchase or not, always leave the retail outlets with something, even it is just information in aiding them with future purchases. <br />The aforementioned requirements directly translate into perceived quality for lululemon’s garments. The customer services that guests receive during each visit are met not only by the aid in finding the right fit and garment for each consumer, but further by the educational value they receive through the educators. Further, as each store provides tailored after hour services such as yoga classes and dietary advice, this acts as another way that consumers find value in what lululemon stands for.<br />The tangible traits lululemon provides its consumers are found in the materials used in their garments. This is the founding objective for lululemon and the greatest benefit its products provide their consumers. It is these materials which allow our “tribe” to excel at yoga and further serves to differentiate them from other Yogi’s are perhaps at the beginning of their yoga career. <br />Similar to the customer service quality metric, the intangible aspects of the brand can be found in the education provided by the lululemon educators. Additionally, lululemon’s involvement in their communities and the empowerment they provide their staff to innovate and develop personal goals for themselves, further serve to promote their intangible benefits associated with their brands. Lululemon’s CSR initiatives are also aligned with their consumers personal beliefs of world betterment. Part of lululemon’s manifesto is “what we do to the earth we do to ourselves”.<br />Considering the costs associated with lululemon, perhaps its most negative feature, we need to consider how they relate back to the culture of the tribe who subscribes to lululemon. Some could argue given the premium price tag associated with lululemon garments, that the power distance is high, in that only those who have higher amounts of disposable income can afford to make these purchases. However, looking at this from a different perspective renders a different opinion. If you consider lululemon garments and purely casual clothing, then perhaps they are on the expensive side. But if we view lululemon garments as the “equipment” necessary to allow high performance athletes to improve on these skills, then the prices that lululemon charges are justified. Typically as athletes improve in skill, the equipment required to further improve those skills increases in price as the athlete’s sensitivity to the features performance enhancing equipment provides increases. <br />We then consider the degree to which lululemon’s consumers are considered as individuals. While they are brought together with their passion in yoga, they are often encouraged to generate individual benefits to society. The same is true amongst lululemon’s staff. “We encourage our employees to be responsible for their individual actions so that during their time with lululemon and beyond, doing the right thing is an automatic reaction” (Legacies). Further, through their Grassroots program, individuals take “personal responsibility to create change in their communities” (Legacies). <br />Looking at the way gender roles affect this tribes culture, while it is predominantly comprised of women, more and more men are taken up yoga and adopting lululemon’s notion of culture. The same is said about their internal practices. <br />Resulting from the above analysis, is the conclusion that given the tribes perception of the quality lululemon’s garments offer relative to the price of their clothes in relation to competitors, they find good value in the brand and product offering. As further justification to this point, lululemon has been growing in size, popularity, consumer base and in corporate value of the last few years. It can also be said that they have considerable amount of accountability for turning new comers onto the sport of yoga. <br />Summary<br />Through the above analysis, we have shown how lululemon is considered to be a market driven business, though having become less so over their years of expansion, which was necessary to survive as a company and to continue providing quality service and products to its cult like consumer base. <br />We then focused our assessment on a specific “tribe” which subscribes to the lululemon culture and showed how lululemon’s consumer focus has resulted in a high value perception of the brand. <br />We conclude by reinforcing that lululemon has correctly identified the priorities of their consumer base. That is, they have realised that their consumers are looking first and foremost for the technical aspects of their garments. It is of most importance to Yogi’s that their equipment satisfies the rigors of yoga, and lululemon does just that. Further, they educate their consumers on how their garments will benefit them in their physical activities. <br />Secondly, their consumers are looking for the fashion aspect of the clothing to which lululemon has already addressed. Addressing this need has since served to aid in lululemon’s expansion into the 140 stores they are today. It also serves to increase their consumer base, from not only the Yogi’s, but to those who are looking to stay trendy and comfortable. <br />Lastly, lululemon’s consumers are heavily entrenched in the culture of yoga which includes making strides to improve the world. Again, their consumers find value in lululemon as they are heavily involved with their communities and encourage their staff to get involved on an individual basis as well. <br />Bibliography<br /><ul><li>Lululemon Website - History:
  2. 2. Yoga, Tribe and Culture website:
  3. 3. Lululemon Website, Day, Christine, CEO lululemon. June 14, 2011; “William Blair & Company Growth Stock Conference”.
  4. 4. Lululemon Website - Legacies:
  5. 5. The 7 Secrets of Market-Driven Leaders</li></ul>Exhibits<br />Manifesto<br />