DC Shoes - Brand Mgmt Research Paper


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DC Shoes - Brand Mgmt Research Paper

  1. 1.       Brand Management Brian Slattery May 2010 Copy provided for Ken Block Co-Founder & Chief Brand Officer
  2. 2. Brand Mgmt - DC Shoe Co. Table of Contents Introduction 3 Situational Analysis 4 Company 4 Customer 8 Climate (Current & Historical) 9 Competition 10 Product 14 Price 15 Placement (Distribution) 16 Promotion 17 SWOT Analysis 21 Strengths 21 Weaknesses 22 Opportunities 23 Threats 24 Current Brand Status 25 Brand Triangle Model 26 Brand Positioning 28 Brand Identity Prism 29 Brand Equity 30 Proposed Brand Alterations 31 Brand Matrix 32 Segmenting, Targeting & Positioning 33 Measurement 35 Appendix 37 References 39   2 
  3. 3. Brand Mgmt - DC Shoe Co. Introduction During the course of this last semester, we have learned foundational concepts with which to analyze and determine core values of brands, product life cycles in a brandʼs portfolio, brand extension models and more. All of these concepts comprise the arsenal with which an informed brand manager can capably direct a brandʼs path and ongoing profitability. However, thereʼs no more integral a model with which to analyze a brand than that of the Brand Triangle. This high-level model expresses the balancing act that a brand needs to effectively achieve as their productʼs relevance, the market and even the consumer preferences continually shift. A brandʼs business model (product or service), core idea and brand imagery comprise the corners of this triangle. With the structural integrity for which a triangle is known, each corner equally bears applied force, in this case, the responsibility of profitably sustaining the brand in the future. With this lynchpin model in mind, along with other tools, I determined I had to conduct my research on the DC Shoes brand. The DC Shoes brand is, as a territory sales source indicated, “A global action sports brand that is dedicated in developing the best in skateboard footwear, apparel & snowboarding products to consumers of all ages and demographics.” (DC Shoes Source) I have developed a growing interest in the brandʼs founders, the demand for authenticity with the marketʼs consumer and the creative promotional endeavors that have turned thousands of consumers into true brand advocates. While specific information about this brand is cloaked by itʼs parent   3 
  4. 4. Brand Mgmt - DC Shoe Co. company in recent years, it has nonetheless made an impressive splash in the action- sports manufacturing world and become a poster-child to which start-up apparel brands look in developing brand communities. In this paper, I will assess the DC Shoes brand on the basis of brand analysis models, situational factors, as well as other elements expected of brand management that weʼve learned. Based on the knowledge of the brandʼs current position, I will also work to develop some recommendations for the brandʼs forward-looking strategy. Situational Analysis Company DC Shoes USA, a subsidiary of parent company Quiksilver, has made its name as a manufacturer of specialized action-sports and casual footwear and apparel, with the core of its business originating in the skateboard world. “The history of DC Shoes is, essentially, the history of the modern skateboard shoe,” marketing material and more than one documented interview have claimed. (Vuckovich, 2003) The brand had fundamental preceding iterations, beginning with Eightball Clothing in 1991, which produced silkscreened T-Shirts out of its initial 740 sq ft. “production warehouse.” At this point, along with Ken Block, co-founder and new friend Damon Way jumped on-board. Way assisted with design and manufacturing, in addition to being an equal partner financially. Droors Clothing jeans was added to the product offerings a year later and so too was the business and accounting know-how of a “down-and-out” Clay Blehm, whose experience easily fit him into a financial advising role in the fledgling apparel company.   4 
  5. 5. Brand Mgmt - DC Shoe Co. In the early 90ʼs the shoe manufacturing aspect of the business began to really take shape. Damon Way along with his brother, Danny agreed with Blockʼs belief that by 1993 skateboard shoe designs had become “stagnant and [that] there was plenty of room for improvement.” (Blehm, 2003) Contact with the French founder of Etnies, Pierre Andre Senizergues, led to the first production DC shoe, the Danny Way model in 1994. Resounding success with this model brought about demand for more and the Danny Way was followed quickly by the Colin McKay model in 1994 as well. Licensing disagreement with Senizergues soon led DC to continue manufacturing on their own however. At this point, the brand had established itself as a preeminent manufacturer who not only understood the needs of skateboarder, but the need for product innovations designed to withstand the punishing demands of the sport. To house several brands including Eightballʼs new name as Dub Outerwear, Droors Clothing and a new a snowboard periodical called Blunt, Incorporation was granted under the name Circus Distribution in 1993. Finally, in 1998 a renaming initiative removed Circus Distribution in favor of DC Shoes as the lasting brand. (DC Shoes, 2010) The dynamic path towards DC Shoes mimics the multi-faceted lifestyles of founders Ken Block and Damon Way. One is a former skateboarder turned World Rally Car driver, the other a once an up-and-coming skateboarder turned entrepreneur and creative director, respectively. The name Way may look familiar to some, particularly because of the co-founderʼs younger brother, Danny who currently sits atop the list of world-class skateboard phenoms. Credibility in the skateboard community only begins there however. This is because of the athlete-sponsor relationships that DC long ago   5 
  6. 6. Brand Mgmt - DC Shoe Co. began galvanizing in the skateboard streets as well as the integrated promotional campaigns that continue to be the “bread-and-butter” of the brandʼs values and identity. DC has risen through the ranks of other action-sports organizations in the market because of continued product innovation and additions to its consumer base. This has been achieved by branching into new apparel lines and establishing a broader focus when defining their core customer, such as has been seen with DCʼs entry into the surf, BMX, motocross and snowboard markets. The company, made up of approximately 400 employees, remains headquartered in Vista, California, where it was founded. In 2004, the company was acquired by surf sport giant Quiksilver Inc. for $87 million in a deal that both parties felt was mutually beneficial. In the acquisition, Quiksilver sought to more solidly establish itself as a contender against industry heavyweights such as Adidas-Salomon AG and Nike Inc. (Kang, 2004) The appeal of DC Shoes was seen in the expertise that the company could bring in the way of sports/lifestyle footwear to help improve Quiksilverʼs revenues in an otherwise increasingly complex brand portfolio. “Quiksilver hope[d] to use DC to bulk up its shoe business, which accounted for about 5% of company sales in 2003.” (The Wall Street Journal, 2004) Fears and rumors emerged that the authenticity and independent spirit that had driven DC to its success would be affected by the transaction. This is evidence of the corporate cynicism that exists within the core counter-culture adolescent action-sports consumer. Yet, acknowledgement needs be given to the trust and authenticity that this   6 
  7. 7. Brand Mgmt - DC Shoe Co. public expectation demands of an organization, something of which DCʼs founders seem more than conscious. In fact, founder Block openly addressed these fears, alluding to the fact that it would help deliver even better products to the customers demanding it. “ʼThe Quiksilver deal will have no effect on DCʼs independence. Now we have better stuff in the back office, so we can focus even more on innovation,ʼ he says.” (Advertising Age, 2004) Fellow founder, Way ensured the end-line benefit to the core customer as well, claiming, “ʼQuiksilver is the ideal partner for us…Their understanding of our vision as it relates to product development, marketing, distribution, global strategies and athletes could not be any better.ʼ” (Sporting Goods Business, 2004) For a company that met success from a grassroots approach, the deal was certainly not something that they were going to let threaten their legacy customers, their brand community and therefore arguably, their friends. Initial indicators of the dealʼs success were very favorable, as the up-start acquisition contributed approximately half of Quiksilverʼs annual consolidated sales growth during only its first six months under the new organization. (Quiksilver Investor Relations, 2004) DC Shoes recorded revenues of $305 million in 2008, which was nearly a $50 million/year revenue increase from itʼs initial position generating $100 million in 2004 at the point of acquisition. Even in light of suffering consumer spending and dropping target pricing, the brand managed to contribute to 23% of Quiksilverʼs revenues in 2009. (The Daily Deal, 2009)   7 
  8. 8. Brand Mgmt - DC Shoe Co. Customer DCʼs true core customer remains middle to late teen, male and moderately fashion-conscious. The crux of their business and source of the brandʼs credibility in professional circles is still based on designs for the true skate and action-sports enthusiast. While genuine functional benefits of the product are the fundamental motive for DC, the aesthetic and “skate-chic” appeal of the various product lines canʼt be discounted either. “Visuals are everything in the fashion-conscious skateboarding world, and Mr. Block still keeps DC focused on its target audience of teenage males 13 to 18 years old,” offers Ad Age in a 2004 profile of the brand. (Advertising Age, 2004) Some have gone so far as to say that the skateboarderʼs shoe is emblematic of the type of skater and person wearing them, another point of strength for DCʼs founding product line. (Manila Bulletin, 2010) However, recognition of new markets and the assumed role as a “lifestyle” brand has added new dimensions to what the brand would consider its core customer. From 2003 to 2008, the greatest gains in the athletic apparel markets were by far in the womenʼs segment. “Demand for womenʼs athletic apparel advanced 6.2 percent per year…the fastest gains among the market segments, to $13.9B,” reveals extensive segmentation studies of the industry. (The Freedonia Group, 2009) This goes hand-in- hand with the rapid influx of women to the professional skateboard scene. Not only does this further cultivate a generation of young female consumers, but it also provides a new promotional platform from which DC can market.   8 
  9. 9. Brand Mgmt - DC Shoe Co. Climate (Current & Historical) The skateboard subculture in the American youth demographic has seen a rapid rise in the last two decades. This trend has been followed quickly thereon by an aggressive marketing embrace by the clothing and apparel manufacturing industry and media alike, as they seek to define and occupy brand positions in the developing action- sports merchandise space. Brand awareness, advocacy and promotion are particularly unique in this niche and DC Shoes has been innovative enough to consistently remain in the leading pack of growth brands. As marketing efforts for this category spread to new product lines and acquisitions equip larger apparel brands with the tools to quickly tap into the lucrative global space, the consumer space has become less “niche” and more mainstream. Therefore, an ongoing concern for DC Shoes is making sure to remain relevant with its key constituents, communicating authenticity and keeping closely aligned with that consumerʼs developing needs. The “lifestyle” brand nature of DC and parent Quiksilver apparel is supported by figures suggesting that the bulk of spending on athletic apparel goes toward clothing that the consumer does not intend to use for sports or other athletic activities. “Instead, these clothing items are more likely to be purchased for comfort or fashion reasons.” (The Freedonia Group, 2009) This “lifestyle” brand status promotes a casual western U.S. genre, further leveraging share-of-mind and putting a broader set of products into the closets of DC “lifestyle” customers. While the breadth of DCʼs product offering has begun to capture the female segment and casual wear shoppers, the brandʼs symbolic appeal still appears to be an associative type. Based on demographics served and price   9 
  10. 10. Brand Mgmt - DC Shoe Co. points, DC remains a brand that the common consumer can purchase and a community to which they can relatively easily belong. This is in keeping with the careful balance that DC has navigated between demographic growth, authenticity to its core constituents and aesthetic appeal. While not exactly struggling, DC Shoes does have a slew of worthy marketplace competitors that make the ongoing balance of this brand triangle anything but simple. The market has arguably gone through its discovery stage and entered a steady phase of growth. However, outsiders should not be fooled. The fact that the action-sports apparel market has seen entry by numerous other players and consolidation of larger brands, the necessity for innovation in order to maintain, much less grow market share has become a primary brand challenge. Additionally, recent national and global economic setbacks have significantly hurt consumer spending overall, which in turn has affected the profitability of both apparel retailers as well as manufacturers. Competition While parent company Quiksilver does battle with the likes of Nike and Adidas AG, DC Shoes specific market competitors hail from just an hour north on I-5 in southern California. Stüssy, Inc. headquartered in Irvine and Vans, Inc. of Cypress both have similar product offerings in the skate and action sports apparel category. A slightly further afield competitor is Billabong International Limited, a surf-based apparel manufacturer out of Queensland, Australia. And finally, an industry giant, Nike now makes its presence known in the skateboard world with its Nike SB sub brand.   10 
  11. 11. Brand Mgmt - DC Shoe Co. Stüssy, Inc. predominantly focuses their product portfolio on apparel and accessories, more so than shoes. Seeing strong growth through the 1990ʼs, Stüssy became synonymous with T-shirts, shorts, caps and sunglasses worn throughout the surf community. Domestic distribution of Stüssy product has been in skate, surf and snowboard shops, as well as department stores and specialty boutiques. Growth through the 90ʼs led the company to establish branded stores, licensing agreements and retail relationships internationally in Europe, Asia, Canada and Australia. (Hooverʼs, 2010) The company managed to culturally branch out from action-sports and was widely worn and endorsed by the U.S. DJ and hip-hop communities. Growth in the companyʼs female offerings became a point of focus as management transitioned from founder Shawn Stüssy to Frank Sinatra, Jr. in 1996. (Fundinguniverse.com, 2010) After brief, unsuccessful talks of a Diesel Jeans SpA buyout in 2001, the brand has continued to blend the lines of fashion with underground culture and itʼs original surf heritage. A distinct competitive advantage for Stüssy is its ten-year-plus history of profitable global distribution. Vans, Inc. may most closely resemble DC Shoes in its values, product lineup and promotion. From a fledgling rubber company that manufactured custom shoes in the late 1960ʼs, Vans was able to ride the growth of the surf community loyalty of southern California all through the 80ʼs and 90ʼs with their Era and Slip-On shoe sales. The basis of their lineup has always been their unique footwear and today the company boasts custom designs that customers can even create and have manufactured from   11 
  12. 12. Brand Mgmt - DC Shoe Co. the brand website. Furthermore, the brand has developed what is now a comprehensive line of menʼs womenʼs and kidʼs casual wear that is heavily promoted in action sports such as skateboarding, snowboarding, surfing, BMX and motocross. Vans earnings suffered through the 90ʼs while the company ran afoul of immigration laws and severe chargeoffs accrued due to a primary plant closing. Yet, thanks in part to the surge of Vans snowboard boots, the company reclaimed a competitive position in the market at the turn of the millennium. (Fundinguniverse.com, 2010) Vans distribution network is extensive in national chain stores, surf and skate shops as well as specialty stores globally with licensed merchandise. The brand also owns and operates over 200 stores in the western U.S. and Europe. Similarly to both DC and Stüssy, Vans has heavily cross-promoted into the musical scene of the action sports generation. This includes sponsorship of rock bands and music festivals. Current professional sponsored skateboarders include local names as Anthony Van Engelen, Geoff Rowley and John Cardiel. Vans has also embraced the skate community by opening highly publicized skateparks located in Orange County, Orlando, Virginia, New Jersey, Texas and Colorado. Brand awareness, distribution and history are notable advantages that Vans brings to the competitive marketplace. Billabong International Limited produces Billabong apparel and accessories for the surf, skateboard and snowboard markets. Founded by Gordon Merchant in 1973, the company has steadily grown their product line to over 2,000 items and their company portfolio boasts subrands such as Element, Nixon and DaKine. Billabong has   12 
  13. 13. Brand Mgmt - DC Shoe Co. aggressively built its distribution structure such that licensed products are now offered not simply in specialty action sports stores, but also branded stores in over 100 countries. Online sales remain a competitive forum in which to grow sales as the brand closed their fiscal year 2009 with sales of $1.346B and net income of $123.0M. The brand actively sponsors athletes and action sports events in Australia, South Africa and Spain. Nike SB, or Nike Skateboard, was Nikeʼs second attempt to penetrate the growing skateboard market after a simple Nike-branded entry failed. The first several shoe offerings still struggled to bring the success that the giant was expecting. A sponsorship deal with world-class professional skateboarder, Paul Rodriguez seemed a last-ditch effort to keep Nike SB afloat in the action sports market. After developing a Paul Rodriguez shoe and subsequent collectible offerings, Nike SB sales steadily increased. Subsequent pro-branded shoes have further allowed the company a foothold in the market. However, a sizable portion of the brandʼs shoe sales comes from collectible pairs that may never be worn, but are instead sold and traded at prices well above MSRP. This is where Nike diverges from the core of DCʼs consumer base. While the ubiquitous Nike name has been able to stabilize and gain clout in the skateboard market, through shoes and related apparel, it still appears to lack credibility from the core consumer that has demands beyond the cosmetic. Purists still seem to remain connected to the smaller, cultish Vans and DC brands and the product innovations that they are able to develop. Nike SB produced itʼs own video in 2007 displaying Rodriguez   13 
  14. 14. Brand Mgmt - DC Shoe Co. and other professional notables as a means of further promoting the brand. Nikeʼs global distribution network precedes it, of course; yet, as of 2004, Nike only enjoyed a 5% market share of the $1B skate-shoe marketplace and revenues from SB only contributed to about 1% of Nikeʼs overall bottom-line. Some criticism remains in the highly loyal skate community about Nikeʼs true intentions and dedication to the sport. That being said, the parent companyʼs plans to rollout upwards of 100 SB stores continues in a community-based approach to grow its share in the domestic and ultimately international markets as well. The competitive landscape continues to develop and now that the appeal of the action-sports category endures, the muscle of more scalable and globally equipped organizations step formidably into the market. Even in light of this, DCʼs rising awareness in the core skate customer and reputation for innovative, quality products seems to favorably equip them for the market as consumer spending begins to regain momentum now through 2013. Product DC now offers a variety of products serving customers in a spectrum of action- sports capacities. The product line-up is a far cry from the first few series of T-shirts that Block and Way produced over 15 years ago. The fundamental skateboard shoe advances are what has really put DC on the map in the national and international markets. “The skate shoe defines, perhaps, all that needs to be said about the skateboarder…the skate shoe has become hip symbol of an emerging sport, its   14 
  15. 15. Brand Mgmt - DC Shoe Co. intended purpose to withstand abusive flip tricks and jumps, just two of the many core moves of the sport overshadowed by the aesthetics.” (Manila Bulletin, 2010) In addition to the menʼs, womenʼs and kids footwear, apparel and accessories lines, DC made a rather momentous addition to their product line in 2008. “DC has also recently gotten more involved in snowboarding –making boots [,boards] and apparel. (Sporting Goods Business, 2004) With snowboarding as an underlying passion of the founders and a sport that had now fully gained global cultural acceptance, it seemed a natural progression for the shoe brand. Embarking on this new sector of business also brought elements of snowboard hardware into DCʼs product lineup as well. Rossignol originally partnered with DC in 2008 in the production of these boards. Yet, DC was upfront in addressing that the boards, “Are unique and will not be Rossi boards stamped with DC logos. ʻBut we are tapping into their resources and knowledge, says Block.” (Sporting Goods Business, 2008) This rationale by the founder was one that seemed very cognizant of the long-term brand implications that this new branch of the business could bring: “We have already built a brands in this market and a customer base…We are not looking to expand our distribution, just go wider and deeper with the partners we already have.” (Sporting Goods Business, 2008) A cross-section of DCʼs product line is viewable in the Appendix. Price DC Shoes products remain in the mainstream level of affordability. The brand aims to promote and spread its product throughout a community that typically canʼt be   15 
  16. 16. Brand Mgmt - DC Shoe Co. categorized as wealthy save for the sponsored professional riders. Branded T-shirts range from sale items online at $5.99 to $35.00. Hooded sweatshirts and long-sleeve vintage button-downs range in price from $24.00-$54.00. Jeans range from $52.00- $78.00 and footwear also ranges from $15.00 sandals to $150.00 “Life Collection” collectible editions. Specialty motorsports driving shoes are $199.99 and snowboard boots can reach as high as $220.00 “Caliber” snowboard boots. Even in their pricing, DC seems to strive to remain in the affordable range for those who know best the advantages that the street-influenced innovation brings. While Block has always brought an eye of fashion and design to the product line, DC remains relatively affordable gear that provides accessible skate lifestyle fashion. Placement-Distribution DC began by selling through skate and surf shops and continues to do so with a number of added channels to distribution. A small network of branded retail outlets also exist, but are primarily concentrated in the southern California area. DC also maintains a presence in Canada, especially the West Coast and Manitoba. Additionally, DC has opened a Concept Corner store in Qatarʼs City Center Mall. Sources also offered that, “Asia Pacific has had consistent growth & Puerto Rico has been exceeding all their goals. We are also doing DC concept stores throughout the world like Hanoi, Vietnam – Manila, Philippines & Bali to name a few.” (DC Shoes Source) The brand also enjoys distribution channels far beyond specialty shops (Zumiez, Inc., Active Ride, Loserkids, Inc., Pacific Sunwear) including sporting goods chains (Dickʼs Sporting Goods,   16 
  17. 17. Brand Mgmt - DC Shoe Co. Copeland Sports) and department stores, (Nordstromʼs) especially due to the nature of the acquisition by Quiksilver. Additionally, DC has been able to realize significant profits through their website, which offers their complete product lineup: Menʼs, Womenʼs and Childrenʼs footwear, apparel, and accessories. This direct channel offers a seamless integration of events information, product and sponsorship promotion as well as deeper information about upcoming apparel seasons than a retail environment of dealer alone could provide. (Sporting Goods Business, 2004) Promotion The area of promotion is one of the distinguishing elements of DCʼs brand. While recruitment of the most progressive street and vert skaters is always at the forefront of DCʼs promotional initiative, they have exquisitely managed to embrace the “lifestyle” category into which they have now been placed as an apparel brand. “ʻWe operate in a very cynical and cultish industry where the look and feel have to be exactly right,ʼ he [Ken Block] says.” (Advertising Age, 2004) By branching into music, DVDs, a book, celebrity endorsement and even integrated-industry conferences like SXSW, DC has made its style and brand know across boundaries that other action sports apparel manufacturers might otherwise find exceedingly difficult. The core credibility on which DC stands has been itʼs continual connection with the pulse of modern skateboarding through itʼs sponsored riders. Early on this included early 1990ʼs sensations such as Jordan Richter, Sal Barbier, Frank Hirata and Danny   17 
  18. 18. Brand Mgmt - DC Shoe Co. Way. Way has remained a steadfast sponsored rider, partially through his extremely close connection to the business through brother and co-founder, Damon, as well as long-time friend and fellow co-founder, Ken Block. Having professionally skateboarded now for over 20 years and gained iconic status in the sportʼs history by way of never before attempted tricks and punishment of his body in honor of the sport, Way has been an irreplaceable platform for DCʼs street credibility to become second-to-none. From within DC, the message rings even truer. “We have the best athletes in all action sports categories, MTV with Rob Dyrdek and Travis Pastrana really expanded our customer base & with the introduction of Rally –Ken Block we really broaden our exposure. We have some “legends” in skateboarding like Danny Way who in my opinion is a “world changing skater” but right now one of DCʼs focuses is to find the new up & comers which will solidify us with the new generation of skaters.” (DC Shoes Source) This continues to speak to DCʼs desire to remain at the cutting-edge of the sport that helped them to attain their success originally. Also notable among the DC figures (as previously mentioned) is Rob Dyrdek, who signed while the brand was known as Droors Clothing. The incredible work ethic of this professional is only outmatched by his humorous and contagious persona. A continued connection to Dyrdek as DC has formed and grown has provided authenticity to the brand but also promotional media outlets and philanthropic opportunities that may never have been realized without him. DC gained widespread popularity among non- skate consumers when featured extensively on three seasons of Dyrdekʼs MTV show “Rob & Big” about life with his friend and bodyguard, Chris “Big Black” Boykin. DC   18 
  19. 19. Brand Mgmt - DC Shoe Co. remains highly visible in Dyrdekʼs latest action-sports induced MTV serial, “Rob Drydekʼs Fantasy Factory”. While the antics of the scrawny, accomplished skater are a distinguishing feature of the Dyrdekʼs personality, larger-scale objectives led him and DC to join in the Rob Dyrdek – DC Shoes Skate Plaza Foundation. The primary goal of this initiative is a mutual love of skateboarding and desire to preserve and cultivate the “street skating” on which so many kids grow up, Dyrdek included. In cooperation with municipalities, the goal is to design and build quality urban-style skateparks that legally allow the sport to grow and give kids a positive outlet. The first park opened in Kettering, Ohio, where Dyrdek grew up. Dyrdek has since opened his first SafeSpot SkateSpot in Los Angeles with sponsorship from Carlʼs Jr. Dyrdek envisions a network of these parks across the U.S. that allows for growth and acceptance of the sport in its purest form and provide alternative positive motivation for adolescents. Current sponsored skaters beyond Way and Dyrdek are notables such as Nick Dompierre, PJ Ladd, and Colin KcKay. Music collaboration began early in Eightballʼs business, as Block would routinely send hip-hop groups and bands such as Cypress Hill, Green Day, Sonic Youth and Beastie Boys articles of the brandʼs clothing, which they began to routinely wear. This high-visibility and celebrity-level validation continues as a successful promotional strategy with the brandʼs apparel. Figures from Jennifer Aniston to Red Hot Chili Peppers, Blink 182 to Adam Sandler have been long-time supporters of the brand and visible advocates of the footwear and apparel. (Blehm, 2002) This type of collaboration actually led in one case to a limited edition “remix” shoe line produced in partnership   19 
  20. 20. Brand Mgmt - DC Shoe Co. with Linkin Park frontman, Mike Shinoda. This DC/MS line displayed the artistʼs unique artistic influence and mixed American/Japanese heritage. DCʼs initial skate video, titled The DC Video, gave rise to an unprecedented level of buzz for the brand in 2003. It illustrated to millions the connections that it maintains to the heart of the sport and that DC is skateboarding. From the camerawork, editing, tricks, personalities and music the video seemed to assert that only those that came from the sport knew how to portray it this accurately. Well before the term “buzz”, YouTube, and “viral” became part of the modern marketing vernacular; DC was combining the necessary ingredients to reap the benefits of word-of-mouth advocacy created through the videoʼs publicity. Numerous other promotional platforms have been utilized along the way as well. Sponsorship of Blockʼs World Rally Car and foundational appearances on Blockʼs Gymkhana viral videos (Of which, Gymkhana 2 has garnered well over a combined 15 million YouTube views since itʼs June 2009 release) are among notable other promotional endeavors. DC has been present at South-by-Southwest (SXSW), which combines interactive, film, music and now fashion. “They feel Austin is a great melting pot of styles,” says Austin Cremer, an Austin brand specialist. (Austin-American Statesman, 2010) DC has even gone so far as to sponsor a soybean oil-fueled bus to ensure that riders and skiers have an ecologically responsible way to get to ski at the north Vancouver resort, Grouse Mountain. “We want to make sure all local riders and skiers   20 
  21. 21. Brand Mgmt - DC Shoe Co. can access Grouse Mountain while keeping mother earth healthy,” said DC marketing manager, Shawna Olson. (Vancouver Sun, 2010) Whether itʼs in the skate world from which DC originated, the motorsports into which its founders have found promise and passion or the slopes, where DC now forges new trails, promotion is a key component of the business. DC has been able to tailor this portion of the marketing mix to nothing short of a core strength. SWOT Analysis Strengths DC Shoes has numerous strengths that have helped it obtain a cult-like status over the course of its 17-year history. Most notably though is DCʼs ability to innovate shoes specifically that meet the needs of skateboarders and action sports enthusiasts first and foremost. While apparel lines and accessories have quickly followed suit in their product lines, the heart of their business was born from the footwear and continues to be viewed as such. However, this is where the product strengths of DC blend with the organizationʼs values and promotional abilities. As DC has been able to prove its relevance to the core action sports community, word-of-mouth promotion and sponsorship opportunities with the key professionals in skateboarding, snowboarding and rollerblading communities have naturally arisen. DC has managed to maintain a very authentic message and sense of unity with its customer base, due largely in part to the nature of itʼs founderʼs direct involvement in and lifestyles built around action sports. This has proven critical in establishing and maintaining   21 
  22. 22. Brand Mgmt - DC Shoe Co. relationships not just with the public customer, but also channel partners, media, employees and team riders. Even as younger generations are exposed to the brand as something that came about before their time, DC has navigated growth without losing credibility among its core “counter-culture” customer base. Weaknesses Weaknesses are somewhat difficult to find based on the strong growth. Perhaps the one internal threat presenting the most difficult future branding decisions are really borne of DC Shoes success. Product expansion has been into a more diverse product portfolio, including a womenʼs apparel line, kids apparel line, accessories line and now snowboarding. Market demands of an associative brand such as DC requires that the brand recognize and meet new needs in order to realize revenue potential from these new consumer pockets. Yet, it poses a series of questions regarding long-term brand strategy standards about which DC will need to remain vigilant. How far does a brand go to satisfy market movement? In what way does a brand signal to its core customer (who will remain with the brand through recessions, new product line releases, etc) that they remain the valued “holy of holies” to the brand? How does a brand navigate the temptation of new markets and increasing investor value demands without neglecting the identity that inspired the brand from its silkscreen start-up origins? Conversations with company employees reveal that Quiksilverʼs President & CEO, Robert McKnight, Jr. thinks of skateboarding as DC Shoesʼ “sun” and that all else for DC should still revolve around that core business for the long-term. Other within the brand indicate that there might   22 
  23. 23. Brand Mgmt - DC Shoe Co. have been a tendency in the last several years for DC to have strayed from their core constituents, and that the near-term goal is to rekindle that flame. Another area of what can now be considered somewhat “internal” consideration is the financial strife which parent company Quiksilver has been enduring. With current stock price at approx $4.80 per share, the company has suffered significantly since its 2005 high point of approx $17.50 per share. A mid-2009 private equity refinance gave the organization a second chance at life in order to work to pay down its then over $600 million in existing debt. The prior year revealed a Quiksilver sale of apparel brands consortium Rossignol Group to an affiliate of Macquarie Group Ltd for less than half what Quiksilver was initially seeking. Additionally, in the six months preceding this most recent refinance deal with Rhone Group plc, Quiksilver recorded a loss of $191 million. Typically, this wouldnʼt reflect directly on a brand like DC, but earlier in 2009 reports had arisen that Quiksilver was looking to sell DC Shoes to VF Corp after it rejected an offer made by Nike Inc. Yet, analysts have noted that for parent Quiksilver to attempt to stop bleeding through a DC sale would “leave Quiksilver without its most attractive asset.” While the refinance ensures that DC will remain with Quiksilver, the skateboard subsidiary needs to keep astutely abreast of the ongoing financial struggle of its current holding company. Opportunities Opportunities for DC Shoes exist in international distribution, segmentation and product offerings. As far back as 2000, Ken Block is noted as recognizing the opportunities that DC could realize internationally, especially Europe. While distribution   23 
  24. 24. Brand Mgmt - DC Shoe Co. to the continent is underway at some fashion retailers, the market remains somewhat untapped. With the distribution leverage of its parent company, and more widespread acceptance of the “skate look” globally, DC could further diversify its customer base as the apparel market recovers. Additionally, forecasts through 2013 indicate that womenʼs athletic apparel will continue to lead all other segments, “Advanc[ing] 3.9 percent annually…to 16.8 billion.” (Freedonia, 2009) While DC has developed an extensive line of offerings among womenʼs apparel and accessories, it seems the perfect market opportunity to maintain a focus on product innovation for this market in particular. Lastly, the demographic that began the apparel journey with DC continues to reach milestones in their lives as they age. The company has introduced some dressier options especially among the denim, shorts and jackets categories as some fashion trends have favored less baggy and more streamlined looks. Yet, more research and innovation around these products might allow aging skaters to remain DC brand loyal for in their casual or professional lives. Parent brand Quiksilver has attempted this with some of their surf-wear. As long as conscious consideration of values and consultation with DCʼs customer base is conducted, further line extensions to meet this marketʼs needs may help retain a demographic that knows and loves the brand. Threats Threats for DC Shoes seem to exist on two levels: near-term climactic and long- term competitive. One is entirely dependent on the recovery of the U.S. and global economies to aid in mending consumer-spending patterns. The other pits DC and itʼs   24 
  25. 25. Brand Mgmt - DC Shoe Co. parent company, Quiksilver in much more strategic battles with stalwart industry legacy brands such as Nike and Adidas. The last two to three years have been a struggle industry-wide and an overnight rebound is simply not in the equation. “In the short term, growth will be inhibited by the economic downturn, which will constrain discretionary spending,” admits research on the athletic apparel industry. (The Freedonia Group, 2009) While DC is not in any particular way affected more than other brands by the downturn in consumer spending, it does present significant tactical dilemmas. While larger competitors may have more ability to manipulate their supply chain in order to reduce costs to keep afloat, DC will need to be sure that any tactics with pricing and promotion donʼt sacrifice their standing and overall values-based strategy. Current Brand Status Weʼve come to recognize that the word “brand” can represent numerous things to various people, whether on the selling side or the buying side. To some it is an asset, to others a differentiator; still others will contend that it is simply a logo. Most will say that it is something that persuades or helps to influence buying decisions. This is because for as much as a brand helps to simplify the purchase decision (whether low-involvement or high-involvement), it does so because of an element of trust. This is an area of brand management that DC Shoes has been able to seemingly master. Even in light of itʼs past brand success, the continual mandate for authenticity with its customer keeps this trust central to the brandʼs overarching market differentiation.   25 
  26. 26. Brand Mgmt - DC Shoe Co. Brand Triangle Model The components of the brand triangle, once again are: idea, business model (product and/or service) and brand imagery such as logos, trademarks, etc. DCʼs idea at its core seems to be to continually provide the most innovative, dependable and quality skater-influenced products. While the organization has certainly tapped into other action sports, through its surf and motorsports divisions, maintaining this direct tie to the streets, skateparks and half-pipes of America is paramount to DC values. The idea is one of credible manufacturing of quality products not for the masses, as larger manufacturers would aim, but for those who know the demands and needs of skateboarders. This underlying respect and passion for the sport, its figures and the   26 
  27. 27. Brand Mgmt - DC Shoe Co. unsung thousands that continue to skate, fall down and get back up in search of that one perfect rail-grind or switch frontside air is the essence of the idea behind DC Shoes. The business itself is one that built scalable manufacturing on top of a knowledge set and experience of action sports that only DCʼs founders could bring to business. While Way and Block are arguably the “geniuses” that CFO Blehm claims them to be, their initial lack of business acumen may well have been exactly what built their success. The avid distrust of corporate America in the skate community paired with the personal relationships did much to actively spread the initial innovations of Eightball, Droors and ultimately, DC Shoes. This is where their business model differs from most others: The founders have skin in the game (quite literally in many cases!). Theyʼve effectively instilled their business with credibility by living the lifestyle of their consumer, remaining grounded even in light of their business success and reinvested financially, intellectually and physically in their venture at every step of the way. The logos for DC have gone through quite the set of iterations, having started off as two separate entities prior to DC ever being born. Yet, one could easily assert that DCʼs brand existed from the very beginning. Though many core consumers would recognize some of these early names eventually lost to trademark issues, most recognize the interwoven black-and-white ʻDʼ & ʻCʼ with inserted 7-point star. This evolved from earlier versions of the logo that appeared on the original Danny Way shoe advertisements and Colin McKay edition shoes.   27 
  28. 28. Brand Mgmt - DC Shoe Co. The “DC Shoe CO USA” logo that is used throughout advertisements, press releases, web sites and more was derived from a version that Block developed after being inspired by ESPN Sports Centerʼs Helvetica lettering. The use of “USA” is incorporated “for one simple reason: ʻAmerican pride,ʼ says Block.” (Blehm, 2002) Lastly, a simple “pill-pattern” is used on the soles of DC shoes, which was discovered to be a great pattern for best traction, but also somewhat fortuitously resembles a stylized pattern of Dʼs and Cʼs. DCʼs simple imagery has been seen countless times on the brandʼs shoes, but even more in branded apparel, bumper stickers and now hardware produced by the company. It is rare to find a skateboard periodical or film that doesnʼt have a half-pipe adorned with the logos or concrete corner plastered lovingly with the endorsement. Brand Positioning Though understandably the brandʼs proprietary information is protected, the following is my estimation of what DC Shoes positioning might be: “To the professional skater or the skater-at-heart, who is inspired by the action sports lifestyle, DC Shoes brand provides the most innovative, skate-inspired footwear and apparel on the market because of our love of the sport, passion for the lifestyle and connection to those that continue to evolve action sports.”   28 
  29. 29. Brand Mgmt - DC Shoe Co. Brand Identity Prism “Performance products inspired by the worldʼs best athletes.” This is one of the most concise descriptions that DC gives of itself in a promotional video. As we have learned the brand identity prism has both an internal and external manifestation. The difficulty that DC Shoes presents is that due to the nature in which it was founded and the passion for action sports that lives in the offices, warehouses and manufacturing floors, the vast divergence that other brands might exhibit between internal and external is less evident here. This illustrates one of my fundamental points about the success of this brand: itʼs authenticity. The way in which DC remains transparent to the consumer, even in light of all its success manages to retain that foothold of credibility in the action sports community, with the brand seeming to exist more as a partner and facilitator than a manufacturer with strictly business goals. These values are evident below:   29 
  30. 30. Brand Mgmt - DC Shoe Co. Brand Equity As the paper thus far has elaborated, DC is an authentic, accessible and desirable symbol of a deeper community and lifestyle. While the foundation of the company was based on innovative products that served the need, as DCʼs equity grows the weight of the brandʼs symbolic benefits have certainly challenged the functional benefits of its core performance products. This could certainly be in large part due to the expansion that DC has experienced in its apparel lines with demographics that are not fundamentally skaters first. Even so, the clout of the brandʼs present day equity is very apparent. We have come to understand that the components of brand equity can be grouped into five categories: Awareness, Perceived Image, Loyalty, Other Associations and Assets. Thanks to the creative cross-promotional efforts and maintaining direct ties to the world of action sports, awareness of the brand is relatively high. “Both companies have retained core credibility by offering high-quality product and maintaining rosters of athletes who are among the best in action sports.” (Sporting Goods Business, 2004) The brand community has done well to spread the visibility of DC and embrace itʼs authentic and functional perceived image. The brandʼs image continues to be skate- chic, but without an air of elitism. Rather, DC conveys an air of independent spirit, non- corporate values and dedication to a punishing set of sports. Loyalty is very high among core customers as well as those exposed only to the apparel or accessory lines. Other associations involve all the events in which DC has been involved, skate park initiatives, lighthearted involvement in reality TV (Rob Dyrdek) and a persistence to push the sports   30 
  31. 31. Brand Mgmt - DC Shoe Co. further. Whether this involves Danny Way dropping into a vert half-pipe from a helicopter, Robbie Maddison jumping the Corinth Canal on a dirt bike or simply following an up-and-coming local like Matt Miller while he demonstrates a switch180 trick, all associations lead back to the streets, dirt or snow in which the sports are lived out everyday. Assets include logos, sponsored team members, business partnerships and the firsthand knowledge of the sports held by those who sit in the c-suite positions in the company. Yet, in light of all this, DC insiders seem to agree that a rekindling of its core is now more appropriate than ever. With the rapid expansion post-merger, some have said, “the only area we currently need to focus on or “tweak” is our brand perception in the “core” tier 1 skate channels. Any time a “skateboard” company such as DC starts expanding into other distribution channels such as Rally, Moto, BMX, MTV etc the foundation of our brand in skate automatically feels neglected or that we are losing “touch” of who we are.” (DC Shoes Source) Proposed Brand Alterations Based on analysis of the athletic apparel industry, the DC brand path and current developments in the action sports world, I would propose a re-assertion by DC that skateboarding is still the foundational inspiration for the brand. I believe that in light of the recent economic strains, rapid product-line growth and parent company volatility this would serve to continue to build brand equity while weathering the storm of low   31 
  32. 32. Brand Mgmt - DC Shoe Co. consumer spending. As consumer spending contracts, it behooves the brand to validate its first audience: skateboarders. They are likely to put a known brand that they trust ahead of other purchases when prioritizing spending. Also, I think that an existing smaller market that is underserved could be identified and more openly embraced in product offerings and marketing communications to women. The sport is growing among women and DC seems poised to capitalize on the demographic, so long as it continues to remind consumers that they know skateboarding better than any other brand options available. Brand Matrix As we cover areas of future brand goals, the most appropriate matrix analysis for DC I believe to be the Product Development/Market Development Matrix. Current Products New Products Current Penetration New Product Markets Development Strategy (Market Needs) New Market Diversification Markets Strategy Development I believe that DCʼs rapid growth into other action-sports, while at the time certainly a way to capitalize on market demands and spread the DC approach to the skate business may have led to a slight dilution of the brand in its core capacity as a   32 
  33. 33. Brand Mgmt - DC Shoe Co. skateboard products manufacturer. I by no means question the decision to enter the snowboard, motorsports and surf markets, yet I believe that as marketplace spending has contracted at the retail level it presents DC with an opportunity to thank and embrace itʼs core skate consumer and community. Therefore, I believe that moving forward penetration strategy and market development should be primary strategies for DC. Innovation of course is a fundamental tenet of the brand, which I would not suggest to put on hold at all. But my branding efforts would focus on the skateboard product line, itʼs consumer and a developing market within that community, namely women. Segmenting, Targeting and Positioning The expansion of DCs markets and therefore product line is evident from first visit to its website. While clean, colorful and great compositionally, the plethora of satellite sites is lengthy: Skateboarding.tv, Snowboarding, Community, Surf, Moto, BMX and Auto. This is an example of the reason why a reconsolidation in appearance is important. The markets that DC has penetrated in their various product lines has built depth with consumers and helped to cross-sell other action sports-related goods. Yet, I believe a promotional campaign in the near future reminding DC consumers that skate is the “sun” to their market solar system, as Quiksilverʼs CEO put it, would be of great use to the brand. This by no means should be done at the expense of their other aspects of the business, but as we grow closer to nearly twenty years of the DC Shoes brand, it could be asserted from a historical perspective: We are DC. We are the heart of skateboarding.   33 
  34. 34. Brand Mgmt - DC Shoe Co. Conversation from a couple people within the company reveals that some believe the strong business growth in the last five years has naturally pulled a degree of focus away from this core of the brand. Recognition of this from within the brand as well as from parent Quiksilverʼs CEO gives strong indication that any straying that may have occurred from desired strategic brand path is working to be corrected. Whether this reassertion of the brandʼs fundamental dedication to skateboarding before all else comes in the way of a campaign introduced at events, a vintage or limited edition product offering or renewed embrace of the skate park initiative begun with the Rob Dyrdek – DC Shoes Skate Plaza Foundation, more resources should be focused back on this foundation of DCʼs business. Another area of opportunity that might aid in achieving this goal is an increased involvement in the womenʼs skateboard community. Ever since the 2003 X-Games in which womenʼs skateboarding was introduced, a broader acceptance of the womenʼs legitimacy in the amateur and professional realm of action sports has taken shape. Not only does this reassert DCʼs position as the brand with itʼs finger on the pulse of the sport, but it further develops a market that may currently purchase the brandʼs goods based more on symbolic benefit than functionality. As young girls begin to grow up in a world where a woman skateboarding is not only normal, but also a potential professional career, this marketʼs sports and business potential becomes a reality. Further support to a focus on the woman consumer is merited by recent analyses of both the Apparel Retail and Athletic Apparel industries. While the athletic apparel industry has seen a drop in growth since 2006, the share of revenue generated by   34 
  35. 35. Brand Mgmt - DC Shoe Co. womenʼs wear has accounted for roughly half the U.S. market, $162B in 2008. (DataMonitor, 2009; The Freedonia Group, 2009) Womenʼs athletic apparel is expected to outpace menʼs and kidʼs in the next two years at a rate of 3.9% (The Freedonia Group, 2009) This is also in light of the fact, as was mentioned in the Climate (Current & Historical) section, that womenʼs athletic wear grew at roughly twice the rate of menʼs during the period of 2003-2008. While the industry CAGR is expected to decrease further leading to 2013, echoed in the European and Asia-Pacific markets, development of products and promotion aimed at women seems to go hand-in-hand with the trends of the skateboarding community. Measurement A method to determine whether the desired effect is being achieved would be to conduct unaided awareness studies with the focal female adolescent and twenty- something population. In addition to measurement of “above-the-line” influence, a year- on-year analysis of womenʼs product revenue growth would be crucial. Analysis of the types of products that are being purchased more frequently would be important too (i.e. Are more shoes and technical gear being purchased or is the growth steady across the fashion offerings as well?) Iʼm sure that a comprehensive ongoing analysis of the brandʼs valuation has likely been conducted either in-house or by parent Quiksilver. However, these brand valuation calculations can have multiple approaches and ultimately produce a nebulous output. I would encourage a more qualitatively based analysis of return on objectives for both the rekindling of DCʼs skateboard core and womenʼs initiatives. While the awareness study   35 
  36. 36. Brand Mgmt - DC Shoe Co. would be included in this, one might also add in brand attitudes, brand associations, website and social media metrics and sentiment and influence indicators. Since the pervasiveness of social media has reached deafening pitch, with certain demographics engaging in sharing of brand information, influence and even skate-related media, it is important to take this into consideration in measurement of the recommended initiatives. Suggested starting points for this would include more commonly accepted web- presence metrics such as Razorfishʼs Social Influence KPI, KD Paineʼs Optimum Content Score and/or Brian Solisʼ Share of Voice KPI. I believe that these are only general suggestions to help DC manage an incredibly successful brand. I suppose this is exactly the type of planning that is ideal in business: To have successfully grown and reached a number of markets with high brand-recognition only to need to rekindle the origins in order to ensure continued credibility and relevance to your foundational skateboarders and brand advocates. I look forward to seeing the direction of DC over the next few years and hope that the next couple decades are as exciting and authentic as my research has shown me the last two have been.   36 
  37. 37. Brand Mgmt - DC Shoe Co. Appendix – Product Line Cross-Section   37 
  38. 38. Brand Mgmt - DC Shoe Co.   38 
  39. 39. Brand Mgmt - DC Shoe Co. References Blehm, E. (2003). Agents of Change: The Story of DC Shoes and Itʼs Athletes. New York, NY: Reagan Books. Cassidy, H. (2004). DC Shoes Steps Up Action from the Board. Brandweek 45(1), 4. DataMonitor (August 2009). Apparel Retail in the United States. Retrieved April 30, 2010 from DataMonitor database. Fitzgerald, K. (November 1, 2004). DC Shoes. Retrieved April 30, 2010 from the Advertising Age website. Foundation Makers Staff. (2009). Rob Dyrdek/DC Shoes Skate Plaza Foundation Case Study. Retrieved April 30, 2010 from Foundation Makers website. Freedonia Group, The. (April 2009). Freedonia Focus on Athletic Apparel. Retrieved April 29, 2010 from The Freedonia Group database. Griffin, C. (April, 2004). Quiksilver and DC Strike a Deal. Sporting Goods Business 37(4) 17. Griffin, C. (January, 2008). DC to Launch Snowboard and Binding Line. Sporting Goods Business 41(1) 10. Harper, M. (March 11, 2010). Music. Film. Interactive. Fashion? Austin American- Statesman. Retrieved April 29, 2010 from Dow Jones/Factiva database.   39 
  40. 40. Brand Mgmt - DC Shoe Co. Hunter, J. (February 12, 2010). Fast Fashionʼs Effect On Action-Sports Apparel. Retrieved April 30, 2010 from Transworld Business website. MacFarlane, L. (February 12, 2010). Grouse Mountain skiers ride ʻgreasebusʼ; Waste vegetable oil fuels vehicle. Vancouver Sun. retrieved April 30, 2010 from the Dow Jones/Factiva database. Manila Bulletin Staff. (March 27, 2010). Undeniably chic, skater look grows up. Manila Bulletin. Retrieved April 30, 2010 from Dow Jones/Factiva database. Kang, S. (March 9, 2004). Surf-Wear Maker Quiksilver Adds To Sport-Shoe Line. The Wall Street Journal March 9, 2004 ed., B.6. Kristensen, K. (February 2, 2010). Skateboarding Stays In The Grind. Sporting Goods Business 33(3) 73. Levine, B. (February 4, 2010). Surf, skatewear companies gear up for 2010. Retrieved April 30, 2010 from the Orange County Register website. Quiksilver Staff. (September 14, 2009). Quiksilver Names Anton Nistl President of DC Shoes. Quiksilver Press Release, September 14, 2009. Stein, C. (October/November 1998). Can They Stay Cool? Your Company 8(6) 34 Zadvydas, T. (June 9, 2009). Daily Deal. The Deal Newswire from June 9, 2009. ME Company Staff (May 10, 2009). DC Shoes Opens Its First Concept Corner in Qatar. AME Info, May 10, 2009 Newswire.   40