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Patagonia | Final Presentation - Goodwin Procter Program
This document proposes a partnership between Patagonia and Nike to develop a hiking boot powered by Nike's wearable technology. It considers the wearable technology market, entry strategy, branding, and financial implications. Key points analyzed include developing the boot independently versus partnering with Nike, targeting different customer segments, marketing to promote sustainability, and minimizing effects on each company's brand. The recommendation is to partner with Nike to leverage its expertise while protecting Patagonia's brand, ensuring customer data ownership, and gaining access to Nike's customer base and technology at a lower investment risk.
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Patagonia | Final Presentation - Goodwin Procter Program
- 1. Proposing aPatagonia Hiking Boot Powered by Nike+ Technology By: Team 4-the-win 1
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- 3. • Wearable TechnologyMarket • Market Entry Strategy • Strategic Considerations • Financial Considerations • Branding Considerations • Recommendation for a Successful Nike Partnership 3
- 4. • Consumers todayhave a number of convenient options to enhance recreational activities with fun, easy-to-use technologies • Companies are finding a variety of ways to meet customer needs for information in a variety of contexts 4
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- 6. 1) Still agreat Patagonia product • quality, comfort, & durability 2) Basic functionality • distance, time, elevation, & calories burned 3) Emergency GPS signal • lost, injury, avalanche 4) The TrekTracker App • records trip data & connects other app users • provides real-time location updates: • flora/fauna identifications • weather and conditions alerts • terrain updates • scenic overlook/trail meeting spot locator 5) Sustainable Steps Program • Patagonia/Nike charitable partnership supporting sustainable practices • user miles-hiked points translate directly to dollars for the charity 6
- 7. • Target CustomerSegment: Weekend Warriors • Easy to also capture Fitness Fanatics • Will not alienate Hardcore Outdoorspeople • same shoe plus new safety capability Weekend Warriors, 50% Hardcore Outdoorspeople, 10% Trendsetters, 10% Fitness Fanatics, 30% 7
- 8. 8 Partner with NikeDevelop On Our Own • Existing technology plus new features • Existing relationships with suppliers/manufacturers • Traction with target customers • Lower investment risk • New business segment • New hires • New supply chain relationships • Greater investment risk
- 9. • Licensing/Development Agreement •Collaborate on additions/modifications to existing hardware and software • Nike owns technology, but bears costs and risks • Grant of continuing rights to use and modify technology • Exclusivity: Restrict Nike from working with competitors 9
- 10. • White-label versionof Nike+ Platform, with additional, hiking-specific features • Patagonia owns all customer data • No data sharing obligations • Option to interact with Nike+ apps at user’s discretion 10
- 11. 2 0.2 12 1.2 0 1 2 3 4 5 6 7 8 9 10 11 12 Initial Investment AnnualCapEx $inMillions Capital Investment Partner Build 11 • Greater risk associated with development • Nike already has the expertise • Longer time to recoup CapEx • Investment likely higher than $12M model forecast 6X Investment cost
- 12. Partner With Nike •IRR = 38% • NPV = $4.2M • Recoup Initial Investment by late 2019 Develop On Our Own • IRR = 22% • NPV = $5.3M • Recoup Initial Investment by 2021 12 Takeaway: Financial Projections are similar (and suspect) in both cases, with a slight edge toward working with Nike
- 13. • Market shareand consumer category adoption rates • Sensitivity analysis on key consumer groups shows extreme fluctuation • Possibility of capturing new customers 13
- 14. • Potential Competition: •Patagonia Tracker’s Unique Features: 14
- 15. • Weekend Warriorsvalue seamless integration with social media • Market to add value for different consumer segments: • track fitness • create community of hikers • document hikes • ensure safety • “Climb Smarter” slogan 15
- 16. • Customer perceptionof Nike • Marketing sustainability • Patagonia as an ambassador of sustainable practices via Sustainable Steps feature • Prevent alienation of existing Patagonia customers • Minimize Nike branding • Nike+ “swoosh” logo integrated onto hiking boot tag only • Product design shows that this is still a Patagonia product 16
- 17. • Depth ofResearch to Date: • Consumer survey • Financial models • Product Development: • Primary consumer research results • Life Cycle 17
- 18. • Conduct additionalresearch • Negotiate favorable financial terms with Nike • Define intellectual property rights • Draft licensing agreement • Develop strategic marketing campaign 18
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