The North Face Case Competition Presentation

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The North Face Case Competition Presentation

  1. 1. the Tri-Peak Plan
  2. 2. 2
  3. 3. OR DOYOU? 3
  4. 4. the Belief AUTHENTICITY 4
  5. 5. the RealityINNOVAtION AUtheNtICItY 5
  6. 6. 6
  7. 7. the Innovation Radar 7
  8. 8. the Current Innovation Radar 8
  9. 9. the Future Innovation Radar 9
  10. 10. the Tri-Peak Plan Outdoor Performance Action 10
  11. 11. the Tri-Peak Plan Outdoor Performance Action 11
  12. 12. the Innovation Path 12
  13. 13. Product Innovation TV sPoNsorsHIPs PrINT sTAY THE CoUrsE BUIlD AwArENEss DIgITAl APPs 13
  14. 14. Mobile Base Camp • Leverage the name recognition of our elite athletes • Showcase the technical superiority of our products • Educate and engage the consumer 14
  15. 15. Product Innovation MonetaryExperience User/ societal Pre-Design Discover Design Market+sell After sale 15
  16. 16. Product Innovation MonetaryExperience User/ societal Pre-Design Discover Design Market+sell After sale 16
  17. 17. Leveraging New MediaCreating an Emotional Bond Through Digital Experiences
  18. 18. Live direct or indirect view of a physical, real-world environment whose elements are augmented by computer-generated sensory input, such as sound or graphics 18
  19. 19. A Consumer Visits TheNorthFace.com 19
  20. 20. Then Prints Out the Special Symbol 20
  21. 21. Then He Holds It In Front Of His Webcam 21
  22. 22. And Can Virtually “Try-On” Items. 22
  23. 23. the In-Store ExperienceThe In-store Experience is the Decision Epicenter
  24. 24. (FITCH study, 2005)of purchase decisions are made in store 24
  25. 25. the Retail Making Framework Emotional Benefit-oriented High Value sTorY sENsE MAKING MAKING DECIsIoN PATH MAKING MAKING rational Feature-oriented low Cost Pragmatic Hedonistic Cognitive Intuitive Conscious subconscious 25
  26. 26. the Retail Making Framework sTorY sENsE MAKING MAKING DECIsIoN PATH MAKING MAKINGCreate a holistic, emotional but pragmatic experience for the HArDCorE ACHIEVEr 26
  27. 27. Modern Storytelling Aspirational Mannequins and SignageLots ofMerchandise The North Face Experience Today 27
  28. 28. Maintain Modern Storytelling Related Themed Merchandise Story Making Centerpieces such asThe North Face a Walk in Freezer to Test JacketsExperience Tomorrow 28
  29. 29. STORY MAKING EXTENDED TNF rETAIl sPECIAlITY & sTorEs MAss MErCHANTs• In-Store Signage • On Rack Signage - Highlight Latest Technology • On Tag Stories - Increase Athlete Story Telling to Raise Emotional Connection• Elements from Flagship Stores 29
  30. 30. What About The Other Peaks? Outdoor Performance Action 30
  31. 31. ‘11 ‘12 ‘13 ‘14 ‘15 OUTDOOR Penetration Events, Athlete Sponsorships, Digital, Local Print ACTION & PERFORMANCE Awareness & Education Mobile Base Camp Store Renovation Co-Op Ads, Athlete sponsorships, National Print, In-store signage, TV Web 2.0 New stores Engagement Flagship Stores 29% 29% 29% 29% 29%SG&A % of Sales SG&A % of Sales SG&A % of Sales SG&A % of Sales SG&A % of Sales $508 MM $582 MM $669 MM $768 MM $881 MM SG&A SG&A SG&A SG&A SG&A
  32. 32. 32
  33. 33. FINANCE APPENDIX
  34. 34. Finance Appendix•Revenue assumptions & analysis•Simulation analysis – Revenue w/ Strategy & Focus•Marketing mix analysis•Simulation analysis – Revenue w/ Marketing
  35. 35. Revenue Analysis
  36. 36. Revenue Analysis
  37. 37. Revenue Analysis
  38. 38. Revenue Analysis
  39. 39. Simulation - RevenueStatistics: Forecast values ($mm)Mean $3,040Median $3,041Standard Deviation $70Minimum $2,833Maximum $3,248
  40. 40. AssumptionsAssumption: Action Sports Segment Triangular distribution with parameters: Minimum 9% Likeliest 13% Maximum 20%Assumption: APAC market growth Normal distribution with parameters: Mean 30.5% Std. Dev. 10.0%Assumption: EMEA market growth Normal distribution with parameters: Mean 16.4% Std. Dev. 3.0%
  41. 41. Assumptions Assumption: USA market growth Normal distribution with parameters: Mean 16.9% Std. Dev. 3.0%Assumption: Outdoor Activity Segment Triangular distribution with parameters: Minimum 67% Likeliest Assumptions` 72% Maximum 81%Assumption: Performance Activity Segment Triangular distribution with parameters: Minimum 3% Likeliest 8% Maximum 15%
  42. 42. Moving Sensitivity
  43. 43. Scenario & Sensitivity 2015 Revenue Sensitivity Analysis Downside Upside $2,900 $2,950 $3,000 $3,050 $3,100 $3,150 $3,200 USA market growth 13.1% 20.7% APAC market growth 17.7% 43.3% Performance Activity Segment 12% 5% EMEA market growth 12.6% 20.2% Action Sports Segment 17% 11% Outdoor Activity Segment 70% 77% 2015 Revenue Input Variable Downside Upside Range Downside Upside Base CaseUSA market growth $ 2,955 $ 3,112 $ 156 13.1% 20.7% 16.9%APAC market growth $ 2,999 $ 3,068 $ 68 17.7% 43.3% 30.5%Performance Activity Segment $ 3,061 $ 3,003 $ 58 5% 12% 9%EMEA market growth $ 3,005 $ 3,062 $ 57 12.6% 20.2% 16.4%Action Sports Segment $ 3,051 $ 3,012 $ 39 11% 17% 14%Outdoor Activity Segment $ 3,023 $ 3,046 $ 24 70% 77% 73%
  44. 44. Current Marketing mix Co-Op 10% 21% National Print Advertising Marketing Mix Event Sponsorships 18% Retail Media Efforts PR 13% In-Store Merchandising 10% Interactive Marketing 9% Local Print Advertising 9% 4% 6% TelevisionProposed Marketing mix 9% 9% Co-Op National Print Advertising 8% 15% Event Sponsorships Retail Media Efforts 9% PR 6% In-Store Merchandising 21% Interactive Marketing 6% Local Print Advertising 17% Television
  45. 45. 2011 2012 2013 2014 2015 Status Quo % Change Over Previous Year Over Previous Year OverYear Difference % Change Over Previous Year % Change 2015 Previous Year % Change % Change Over Previous GoalCo-Op 21% 0% -3% -3% -3% -3% 9% -12%National Print Advertising 13% 0% -1% -1% -1% -1% 8% -5%Event Sponsorships 9% 0% 0% 0% 0% 0% 9% 0%Retail Media Efforts 6% 0% 0% 0% 0% 0% 6% 0% Marketing ROMIPR (including Mobile BaseCamp) 4% 0% 1% 1% 1% 1% 6% 2%In-Store Merchandising(including store redesign)** 9% 0% 1% 2% 3% 1% 16% 7%Interactive Marketing (incl web2.0) 10% 0% 3% 3% 3% 3% 20% 10%Local Print Advertising 18% 0% -1% -1% -1% -1% 14% -4%Television 10% 0% 0% 0% 0% 0% 9% -1% ROI/$ ROI/$ Interactive Marketing In-Store Merchandising PR Retail Media Efforts Event Sponsorships National Print Advertising Co-Op $0.00 $1.00 $2.00 $3.00 $4.00
  46. 46. Current MarketingTactics Impact Marketing Impact Proposed Marketing $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $- 2015 2020 Current Marketing Proposed Marketing % Increase 2015 $ 3,040 $ 3,615 19% 2020 $ 5,750 $ 6,500 13% ROMI $ 1.17 $ 1.50 29%
  47. 47. Marketing SimulationStatistics: Forecast valuesMean $3,547Median $3,544Standard Deviation $263Minimum $2,781Maximum $4,453
  48. 48. Marketing SimulationStatistics: Forecast valuesMean $6,700Median $6,587Standard Deviation $1,130Variance $1,277,687Minimum $4,011Maximum $10,948
  49. 49. Assumption: APAC 10yr growth Assumptions Normal distribution with parameters: Mean 30% Std. Dev. 10% Assumption: APAC AROMI Triangular distribution with parameters: Minimum 0% Likeliest 21% Maximum 40%Assumption: EMEA 10yr growth Normal distribution with parameters: Mean 13% Std. Dev. 3%Assumption: EMEA AROMI Triangular distribution with parameters: Minimum 0% Likeliest 21% Maximum 23%
  50. 50. AssumptionsAssumption: USA 10yr Growth Normal distribution with parameters: Mean 9% Std. Dev. 2%Assumption: USA AROMI Assumptions Triangular distribution with parameters: Minimum 10% Likeliest 21% Maximum 31%
  51. 51. Moving Sensitivity
  52. 52. Moving Sensitivity
  53. 53. Scenario & Sensitivity2015 Revenue w/ Marketing Sensitivity Downside Upside $3,000 $3,200 $3,400 $3,600 $3,800 $4,000 USA 10yr Growth 7% 11% EMEA 10yr growth 9% 17% APAC 10yr growth 17% 43% USA AROMI 15% 26% EMEA AROMI 7% 21% APAC AROMI 9% 31% 2015 Revenue w/ Marketing Input Variable Downside Upside Range Downside Upside Base Case USA 10yr Growth $ 3,287 $ 3,765 $ 478 7% 11% 9% EMEA 10yr growth $ 3,395 $ 3,654 $ 259 9% 17% 13% APAC 10yr growth $ 3,421 $ 3,644 $ 223 17% 43% 30% USA AROMI $ 3,406 $ 3,621 $ 215 15% 26% 21% EMEA AROMI $ 3,460 $ 3,551 $ 92 7% 21% 16% APAC AROMI $ 3,498 $ 3,533 $ 35 9% 31% 20%
  54. 54. Scenario & Sensitivity 2020 Revenue w/ Marketing Sensitivity Downside Upside $5,000 $6,000 $7,000 $8,000 $9,000 APAC 10yr growth 17% 43% USA 10yr Growth 7% 11% EMEA 10yr growth 9% 17% USA AROMI 15% 26% APAC AROMI 9% 31% EMEA AROMI 7% 21% 2020 Revenue w/ Marketing Input Variable Downside Upside Range Downside Upside Base CaseAPAC 10yr growth $ 5,703 $ 7,861 $ 2,158 17% 43% 30%USA 10yr Growth $ 5,767 $ 7,140 $ 1,373 7% 11% 9%EMEA 10yr growth $ 5,953 $ 6,986 $ 1,033 9% 17% 13%USA AROMI $ 6,226 $ 6,557 $ 331 15% 26% 21%APAC AROMI $ 6,297 $ 6,489 $ 192 9% 31% 20%EMEA AROMI $ 6,291 $ 6,460 $ 169 7% 21% 16%
  55. 55. Scenario & Sensitivity 2020 Revenue w/ Marketing Sensitivity Downside Upside $5,000 $6,000 $7,000 $8,000 $9,000 APAC 10yr growth 17% 43% USA 10yr Growth 7% 11% EMEA 10yr growth 9% 17% USA AROMI 15% 26% APAC AROMI 9% 31% EMEA AROMI 7% 21% 2020 Revenue w/ Marketing Input Variable Downside Upside Range Downside Upside Base CaseAPAC 10yr growth $ 5,703 $ 7,861 $ 2,158 17% 43% 30%USA 10yr Growth $ 5,767 $ 7,140 $ 1,373 7% 11% 9%EMEA 10yr growth $ 5,953 $ 6,986 $ 1,033 9% 17% 13%USA AROMI $ 6,226 $ 6,557 $ 331 15% 26% 21%APAC AROMI $ 6,297 $ 6,489 $ 192 9% 31% 20%EMEA AROMI $ 6,291 $ 6,460 $ 169 7% 21% 16%
  56. 56. MARKETING TABLE OF CONTENTS1. Authenticity Equation 14. Current 2010 Marketing Mix2. Innovation Radar Defined 15. Projected 2015 Marketing Appendix3. Why target Hardcore Mix Achievers? 16. Marketing Mix Change by4. Youth Happens? Year5. Very Active Person Club 17. Initiative Costs6. 2012 Americas Mobile Base 18. Competitor SWOT (Nike & Camp Tour Adidas)7. Integrated Marketing 19. Store Roll-Out Plan by Year8. Official Guidebook 20. Run-off (aka Halo effect)9. In-Store Insights 21. EMEA timeline10. In-Store Insights (2) 22. APAC timeline11. CRM to CEM 23. SHRM12. CRM to CEM (2)13. Implementing CEM
  57. 57. Authenticity Equation TNF is looking to leverage data-drive decisions-making combined with aunique relationship with consumers whodemand high performance outdoor gear that the company defines as authentic.Authenticity = Innovation + Trust + Protection
  58. 58. Innovation Radar Defined
  59. 59. Hardcore AchieversPenetration Outlook Activities Outdoor Action Performance High Technical Needs Medium Low Strongest Strong Medium Weak
  60. 60. Youth happens? We purposefully didn’t target youth• Youth happens.• Majority of purchasers of youth clothing (infant to 14 years) are captured in other segments (e.g., Hardcore Achievers, Trendsetting Competitors)• By targeting Hardcore Achievers, all other segment are boosted because of halo effect
  61. 61. Very Active Person Club V.A.P• Cater to heavy brand users• Provide incentives to reward loyalty• Turn in to brand ambassadors• Understanding consumer better through CRM information collection, analysis, and use
  62. 62. Mobile Base Camp2012 Americas Mobile Base Camp Tour
  63. 63. TV Integrated Marketing Print Sponsorships Apps DigitalCommunication Objective: Bridge the gap between innovation and authenticity by linking the brand experience (highly functional production) with the inspirational exploration that our HA consumers crave
  64. 64. CRM to CEM• Recruit consumers from the current CRM via email to participate in a North Face advisory panel (via email) as well as through the Digital Ecosystem• Shift will allow consumers to opt-in to provide insight and feedback on products, advertising messages, promotions, lifestyle, adventures, etc.• Cost investment - $120,000/year initial and $10K/year thereafter
  65. 65. CRM to CEM (2)Source: Understanding Customer Experience; Meyer & Schwager; Feb 2007
  66. 66. Implementing CEM
  67. 67. Official Guide Book Part of North Face’s Consumer Co-Creation Strategy Partner with consumers and engage them in sharing their experiences, insights, and advice to help other “High Achievers” achieve their adventure goals. Results: Further reaches and engages consumer segments lower in the “peaks” Builds brand equityCo-Authored By:Our Consumers
  68. 68. In-Store InsightsUtilize Augmented Reality Technology In-Store
  69. 69. In-Store Insights (2)Changes with seasonalityStore within a store concept
  70. 70. Current 2010 Marketing Mix TNF 2010 Marketing Mix (Current)Category % $ (MM) ROI/$ Hist ROI ContCo-Op 21% 85 $0.98 $83.76National Print Advertising 13% 53 $1.38 $73.02Event Sponsorships 9% 37 $1.29 $47.25Retail Media Efforts 6% 24 $0.57 $13.92PR 4% 16 $3.18 $51.77In-Store Merchandising 9% 37 $2.09 $76.56Interactive Marketing 10% 41 $3.15 $128.21Local Print Advertising 18% 73 N/A N/ATelevision 10% 41 N/A N/A $474.48
  71. 71. Projected 2015 Marketing Mix TNF 2015 Marketing MixCategory % $ (MM) ROI/$ NewROI ContCo-Op 9% 79 $0.98 $77.70National Print Advertising 8% 70 $1.38 $97.26Event Sponsorships 9% 79 $1.29 $102.28Retail Media Efforts 6% 53 $0.57 $30.13PR 9% 79 $3.18 $252.14In-Store Merchandising 16% 141 $2.09 $294.61Interactive Marketing 20% 176 $3.15 $555.03Local Print Advertising 14% 123 N/A N/ATelevision 9% 79 N/A N/A $1,409.16 197%
  72. 72. Marketing Mix Change By Year % Change Over % Change Over % Change Over % Change Over % Change Over 2015 Goal Difference Vehicle Status Quo Previous Year Previous Year Previous Year Previous Year Previous YearCo-Op 21% 0.0% -3.00% -3.00% -3.00% -3.00% 9% -12%National Print Advertising 13% 0.0% -1.25% -1.25% -1.25% -1.25% 8% -5%Event Sponsorships 9% 0% 0.00% 0.00% 0.00% 0.00% 9% 0%Retail Media Efforts 6% 0% 0.00% 0.00% 0.00% 0.00% 6% 0%PR (including Mobile Base Camp) 4% 0% 1.25% 1.25% 1.25% 1.25% 9% 5%In-Store Merchandising (including 0% 1.00% 2.00% 3.00% 1.00%store redesign)** 9% 16% 7%Interactive Marketing (incl web 0% 2.50% 2.50% 2.50% 2.50%2.0) 10% 20% 10%Local Print Advertising 18% 0% -1.00% -1.00% -1.00% -1.00% 14% -4%Television 10% 0% -0.25% -0.25% -0.25% -0.25% 9% -1% Assumption: All segments (Hardcore Achievers) respond similarly to the marketing mix across all geographies (source: Q&A session with brand representatives)
  73. 73. Initiative CostsNew Initiative 2011 2012 2013 2014 2015 TotalMobile Base Camp* $ - $ 540,000 $ 60,000 $ 60,000 $ 60,000 $ 720,000Store Renovations** $ - $ 1,200,000 $ 1,800,000 $ 1,020,000 $ 4,020,000Web 2.0 (incl augmented reality) $ - $ - $ 500,000 $ 500,000 $ - $ 1,000,000New Stores (company owned)*** $ 9,000,000 $ 9,000,000 $ 36,000,000 $ 45,000,000 $ 15,300,000 $114,300,000Flagship Stores (2)***** $ 20,000,000 $ 20,000,000 $ 40,000,000Total $ 9,000,000 $ 10,740,000 $ 38,360,000 $ 66,580,000 $ 35,360,000 $160,040,000proposed SGA budget $508,000,000 $582,000,000 $669,000,000 $768,000,000 $881,000,000percent of SGA proposed budget 1.77% 1.85% 5.73% 8.67% 4.01%Assumptions:*6 mobile base camps; cost includes car, wrap, labor, mileage**67 current store renovations at $60,000 renovation***$900,000 initial cost per store, opened according to roll-out schedule****2 flagship stores (Denver and Minneapolis) at $20MM per store
  74. 74. Competitor SWOTNike SWOT Adidas SWOT
  75. 75. Store Roll Out Plan by Year Status Quo Additional Added by Year Goal 2010 2011 2012 2013 2014 2015Owned 67 10 10 40 50 17 194Partner 133 5 10 15 12 10 185 *Ramp up in 2011 and 2012; peak in 2013 and 2014; finalize goals in 2015 source: Case Facts
  76. 76. Run-off effect (aka Halo effect)WHAT IS IT?Halo effect explains the biasness showed by customers to certain products orservices based on some favorable or pleasant experience (e.g., advertising,product experience) with some other products or services offered by thesame manufacturer.CASE STUDY (FROM ANOTHER CATEGORY):Apple introduced the iPod some years ago and it was creative in its functionand design. The product introduced a gateway to novel thinking andextremely eye-pleasing experience for iPod users.The positive perception about Apples iPod then had a positive effect onother Apple products, especially the MacBook.
  77. 77. EMEA Timeline
  78. 78. APAC Timeline
  79. 79. TNF has a fantastic employee base to leverage an innovativecustomer experience . Innovation must be engrained deep in the Value Creation Chain starting with employees and fostering a creative environment. SHRM

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