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Market analysis of reebok

Reebok the United Kingdom based ancestor company was founded in 1890 by J.W Foster, for one of the best reasons possible “athletes wanted to run faster” (www.reebok.com). Since then Reebok has evolved itself through various stages to become one of the top three market leaders in the sports shoes, fitness and apparels. The brands success is built upon its creative designing and marketing strategy. The right balance between the designing and marketing has taken Reebok to such height. McDonald, M (2000 p.5) defines marketing as “process for understanding markets, for quantifying the present and future value required by the different groups of customer within these markets”. Starting from its first hand made shoes to the recent innovative Easytone and ReeZig footwear Reebok proved its individuality, authenticity and its creative thinking and potential. The company was taken over by Adidas in 2006 which gave both Adidas and Reebok a strong market share to take on the common rival and the market leader Nike. Though the company is taken over, Reebok and Adidas are still two different brands under the group. Reebok has a strong hold in US market and sponsors for different sporting events like NFL, NBA, WNBA and NBDL. Branded as a discounted shoe manufacturer in the past, Reebok has slowly changed its face to high fashion, high comfort and premium product by raising its price in the market and incorporating new technologies for the sports and fitness category. The latest launch in their product line Easytone and the upcoming ReeZig has got more technical and design values, the technology which is actually designed by a NASA engineer(www.corporate.reebok.com) and the re-launch of its classic models reveals the company’s change in focus. Reebok in the early 2000 started its marketing campaign with fusion of Sports Music and Technology featuring industries best performers of the period, from music industry Jay-Z, Daddy Yankee, 50 Cent; top athletes Allen Iverson, Donovan McNabb, Curt Schilling, Kelly Holmes, Iker Casillas and Yao Ming; screen stars Lucy Liu, John Leguizamo and Christina Ricci; and skateboarder Stevie Williams., and Thierry Henry, Alexander Ovechkin, driving ace Lewis Hamilton, MS Dohni and Nicole Vaidisova.

Easytone the company’s launch of the year 2009 is its one of the most successful product line. Easytone feature with first of its kind the balance pod technology, designed for women’s fitness and sport. Reeboks commitment towards women fitness and sport is long lasting from its first ever exclusive footwear for women Step introduced in 1989 which fore fronts the aerobic movements, and now the Easytone forefronts toning of lower abdomen parts like the calf muscle, thigh muscle and the bum. Reeboks marketing approach for Easytone is “take the gym with you” (www.reebok.com) which emphasis on women who were busy with their routine life but still wanted to maintain their figure. Custom made shoes are also available by ordering and designing over the internet, which gives customers the option of variety and uniqueness.

Marketing Environment

Macro Environment

Kotler, P., Armstrong, G. (2010) describes macro environment as a force which is more societal and affects the micro environment directly. The global footwear industry is $196.25billion in 2009 with CAGR of 3.7% from 2005 to 2009(www.marketlineinfo.com). Reebok’s international operations and its presence over 55 countries with different cultural and economical background is a concern for its performance, with the present market scenario where the European and American market is facing financial crisis, Reebok has got its major customers base in these regions it faces major loss in sales, while the Asian market shows positive sign, Reebok’s sales in India and china is second to Nike, but the percentage contribution towards the revenue in international currency is low.

Reebok faces legal threats from its manufacturing units in South East Asia where they operate with cheap labours in unethical work conditions. In general the sporting accessories are more famous among the 16 to 24 age groups. The increase in number of unemployed and fresh graduates finding difficult to find jobs among this particular category has caused a major concern for the industry, in addition to countries like UK where the government has increased the tuition fees will be a major political and economical factor which affects the whole footwear industry. The increase in raw material cost making the situation worse, which led to low stock maintenance and irregular supply to the channel. The footwear industry is always subjected rapid changes in customer needs and the changes are more oriented toward the socio-cultural forces, Reebok adapted to those variations in socio cultural forces by combining the product with Music and sport in US market, fitness and sport in the European market and sport and entertainment in Asian market.

Figure 1: Macro Environment

Reeboks Easytone is designed with the technology which is never been used before and sets a landmark in the sports shoe market. Easytone is designed to comfort with Moving Air Technology, while most of the other competitors do have similar technologies Reebok should really look into more innovative and sophisticated technology which will be the unique selling point in the competitive market.

Micro Environment

Every brand has its own unique selling point which targets the particular category of customers, in general the footwear industry customers can be categorised into Performance conscious consumers like runners, aerobics, players, athletes, and exercisers and Fashion conscious customers who buy for style and comfort. Customers buy products that has value and satisfaction among the range available in the market, Kotler, P et al.(2009).

Figure : Micro Environment

Reebok Easytone is designed and marketed to the fitness loving women’s segment. With the strategy of launching a new product every year with newer technology and invention, Reebok has always targeted the focus group, and so as Easytone targets the fitness loving women. Reebok has always positioned itself as customer centric, which caters the needs and requirement of the focus group, though it has the diversity in product when compared to its competitors. Because of the diversity in its products Reebok has always been in competence to different competitors in different category and product range. The main competitors are Nike, Adidas and Puma. Reebok sells through various channels, which includes the retail outlets, Reebok concept showrooms, franchisee outlets and associated sponsored sporting organisation.

Marketing Mix

The primary objective of an organisation is to offer a product which has a competitive edge or differential advantage over its competitors, Brassington, F., Pettitt, S. (2006). This can be achieved by marketing mix which is studied with the basic research on 4P’s.

Product

Product management has always been the core factor in the marketing mix, which involves the basic understanding and the requirement for launching the new product in the market and then developing it with the right marketing strategy which benefits the organisation and then manufacturing in the right way which benefits both the organisation and the society. The organisation should transfer its knowledge into product which will be a drive for growth, John A. Quelch (2006).

Figure 3: BCG Matrix,( source:www.reebokeasytone.net)

Reebok has the strategy of launching one core product every year, and the launch of Easytone is for the year 2009, it was the critical time to launch any new product because of the economy, hence Reebok has to come out with a very strong product and marketing strategy. The tangible attributes has to be so strong and the message was clearly sent out with Easytone with its high fashion, design and technology. The footwear is innovative and new to the market, designed in a way that it gives us the feeling of walking in the soft sandy beach and the science behind is when we walk on the sandy beach it’s hard to keep the balance hence we work hard to keep the balance which in turn burns the calories of calves, hamstring and the gluteus maximus muscles. Reebok has also ensured that Easytone is available across the globe and the visibility of it is more in the retail outlets, which created awareness and also a noise in the market about the new product with new technology and performance. Though Reebok claims theoretically it can prove that, by using Easytone will tone the legs 26% more when compared to other sport or fitness shoes, there are still controversies about the actual performance of the product. Reebok did break the controversies with the total sales of Easytone worldwide, this proved practically the strength of marketing strategy by Reebok and the performance in the market. On the other hand with all the controversies the general image of the brand which changed over the period of time from a discounted brand to a respected brand, contributed to the overall performance, which has also bought value to the brand, Easytone has got its uniqueness and feature to rock the market. The strength of the product always lies on its core benefits, the core benefit of Easytone is fitness in the simple way, which is a necessity and hence has its value anticipation and demand. The actual product which is built upon its core benefit is its features style and quality and as an augmented product Reebok gives warranty up to three months and any after sales issue has been taken to R&D department for rectification and thus by giving the customer the maximum benefit and trust in the product. The Easytone can be classified as speciality goods, where in an extensive market research was done which gives customer the maximum benefit by using the product. After the successful launch of Step in 1989 and Easytone in 2009, both products have shown its individuality and very minimum level of competition from other brands, which gives the product a cutting edge and the customers reluctance to go for any other brands.

Product Life Cycle

The product life cycle gives the clear picture of the stage in which the product is, the four stages are Introduction, Growth, maturity and termination. Determining the stage in which the product belongs will decide the marketing strategy to follow Kotler, P (2003). For the footwear industry the entire product life is short because of the new trends in the market, different categories in the customer base and due to wear and tear because of the regular usage. Any new product that is launched should differentiate itself from the others and should have uniqueness. Easytone launched in July 2009 with more anticipation and excitement in the market, took up the pace immediately because of the marketing activity carried out by Reebok prior to its launch, the launch was a grand one with star studded performance and celebrities form various industries took part in it.

Figure 4: Easytone PLC Stage

The growth stage of Easytone in terms of sales is pretty much vertical and by end of 2009 it reached the maturity phase. Reebok focused on different strategy during its various course of the stages, during the introduction stage Reeboks marketing objective was totally to build a strong brand image and expand its market share to the next level, Easytone was priced at the higher end, since its targeted to the focus group, the fitness loving women segment, during the growth phase Easytone penetrated through the focus group, where some of the customers were brand loyal to Reebok, Reebok has the strong product mix, when Easytone was in its matured stage Reebok introduced its next model the ReeZig, targeting the male segment, thus by lining up its product in the market and continuously creating the awareness targeting various categories of the customer base. Since the Easytone is targeted to the focus group, Easytone positioned well itself as a fitness wear and pioneered in its category.

Later in its matured stage Reebok repositioned its product focusing not only on the busy working women category who could wear it for their work place, they also started focusing on the regular women category who does workout everyday by launching different variants like ReeInspire, ReeFlipflop, Go Outside, Rush, Diva and also introduced custom designs, were customers can design from the various patterns available in their website and can choose the colours also. “New Products are key to company’s continued survival,” (Lancaster, G., & Reynolds P, 2005, p.108). Within the product line Reebok developed various products and introduced in different stages which enabled them to actually extent the product life cycle. Countries in Asia Pacific and Middle East are very slow in responding to new product particularly in footwear industry, where they used to wait and watch if the product is really worth and anticipate for price drop. Reebok extended its Easytone’s product life by launching it in these regions with a time gap, after proving it successful in US and the Europe market.

Pricing

The variants within the brand and the competition play a major role in pricing the Easytone, been branded as the discounted sales brand in the past, Reebok changed its face by changing its pricing methods, sports and fitness industry customers will always look out for the latest technology and high comfort brand were they give less importance to cost. Though they will compare with the other brands with the same features, low priced products which claim to have the innovative and most effective technology will always create a lack of confidence to the customers. According to McDonald (2000, p.352) pricing may influence the other marketing mix also. Reebok priced its Easytone in the higher end when compared to its previous fitness shoes for women like Step or Pump, in competition to the other brands with similar product features though William j. Stanton (1994 p.335) says that for a new product to take a high market penetration should price its product relatively low when compared to other brands.

Figure 5: Easytone Pricing Strategy

In the early 2010 Easytone price was dropped marginally when it reached the maturity stage, the marginal decrease in its price was effective to its secondary market like Asia pacific and Middle East markets, which is competitive to its regional players, the secondary market customers have always been wait and watch customers where the always believe in the bargain purchase, while the primary market customers are the early responders. Reducing its price was marginal, Reebok was so conscious of not falling back to its earlier brand image, also it exploit the actual market opportunities by acquiring customers out of its focus group. The pricing factor though didn’t affect much of its primary market, its influenced the secondary market. With regards to market penetration Reebok had a different strategy by introducing one pound shoes in the tertiary market like Bangladesh and African countries. Easytone is also priced up when compared to the other product line because of its additional features and the latest technology. When pricing internationally they adopted the polycentric pricing where the regional office decides the price, this is easily achievable because of the production unit is present in the Asian subcontinent where pricing in relative to expenses is made, which is a biggest advantage to easily price polycentrically. Easytone is made available by ordering online with a price discount, which saves the overall expenditure for the management of retail outlets and showrooms, which is passed on to the customers.

Promotion

Reebok started its promotional activity for Easytone even before the launch, in order to create awareness. The promotional activities were concentrated towards the technology the main features and the advantage of using the product, since the product is targeted towards the focus group, fitness loving women, most of its promotion activity featured young women with tonned legs and bum, which stimulated the customers mind. The advertisement by Reebok for Easytone created a shock among the viewers, but still its shock averts are not new, it depends on the market, the products speciality and the circumstance of social priorities, Evans M., & Moutinho L. (1999, p123).

Figure 6: Easytone communication strategy

Reebok spent most of its money in media advertisement which created awareness amongst the focus group and also regular viewers who were also simulated to use the product. This is a major success for Easytone as it captured the core strength or the unique feature of the product fitness and beauty. Easytone targeted the creamy layer of the customer group, women between the ages 16 and 24, and their ad campaign has always been different to different product lines, when it first started it marketing campaign with “Reebok Planet” in 2005, then in 2006 they tie up with Thierry Hendry and Ryan Giggs for their campaign “I am what I am”, and further on like “Pump Up”, “your Move”, “Because life is not just a spectator sport” which feature Lewis Hamilton showing his fitness skills with Reebok, and now for the Easytone “take the gym with you” which sends out a clear message to the focus group, and the line of celebrity includes Kelly Brook in UK, Bipasha in India.

Figure 7: Pounds spend for advertisement

Though Easytone spent more in media advertisement, it focused on other promotional activities also, like print, out-of-home, digital and in-store executions. Reebok’s spent in sales promotion is as much as it spent in media advertisement, the promotions were mainly aimed towards churn in customer and creating demand in the market, they have also launched online blogs to create a customer database and to get feedback from customers and to develop the product further according to their requirements. Though as a brand Reebok has very good promotions by sponsorship Easytone has its limitations were it could not enter in to the sports category, they have to rely more on the entertainment sector to promote the product. Easytone in Reebok’s concept store was given the priority and merchandising was also primarily focused on Easytone, with all the above factors it created a pull strategy in the market. The Easytone advert in most of the places were considered unethical and also caused a negative impact on the product, which many of the viewers considered too much. But still as a campaign Easytone had a successful period and sales through their communication strategy.

Place

Reebok’s access to the target market is one of its successes, because of the growing awareness among the customers, right customer in right attitude should be targeted, and also knowing the potential of individual market in a global environment.

Figure 8: Sales region wise(2009), source: (www.marketlineinfo.com)

Knowing about the social and cultural behaviour of the local market before positioning a product is vital for planning a marketing strategy, Lancaster G., & Reynolds P (2002). Reeboks decentralised operations allowed the local management team to target the local customer base. Reeboks channel structure is simple when compared to its sister company Adidas, from manufacturing unit to its different warehouses in different regions and the to its retail outlets like speciality sports retailers, online retailers, concept stores, and other retailers. Reebok retail outlets has got a better image in terms of its merchandising and product placements, because of its simple structure in reaching the end customers the logistics is also made simpler and will be faster.

SWOT

Strength

Unique Product features

Celebrities and sports stars endorsed to brand

Balance pod technology

Media advertisement

Concentrated on focus group

Manufactured in Asia

Brand loyal customers and awareness

Custom made shoes

Prime location in retail and concept stores

Only for women category

Premium pricing

Weakness

Targets only focus group

Only for women category

No further development to the product

Single product line

Mostly relied in retail sales

Premium pricing

Controversial advertisement

Discounted retail sales

Vertically integrated brand

Opportunity

Developing the product

Untapped markets

Unisex models

Focus on emerging market

Wholesale market

Integrated marketing campaign

Threats

Manufacturing units in Asia and Cambodia

Competitors variants

Competitors pricing

Counterfeit and replicas in secondary market

Manufacturing standards

Decline in footwear sales

Recommendation

Based on the critical analysis done with SWOT, the following recommendations are suggested. Starting from the priority matrix of nine and urgency and importance level three, Reebok though having some very unique featured Easytone, variants among the product is very less when compared to the other brands in the same category, still Reebok can claim that it has custom made shoes which gives customer the variation and to their likeness, the basic product is the same, which will not change the mindset of the customer. Reebok have to develop new variants within the product line in order to satisfy all its customer needs. Reebok has very good secondary market but with regards to Easytone there is a large potential in secondary markets which they had missed out as they concentrate mainly on their low range products which put them in second to NIKE, but lose their position in terms of product like Easytone which has technical values and change the brand image from discounted brand to high street fashion, sports and fitness brand, which can be overcast by more ethical media averts and focusing on the fitness loving women category in these markets. The other weakness of Easytone is its vertical integration, where it does not involve any whole selling like its sister concern Adidas, this make them to rely on its retail outlets for its maximum sales where as other brands have horizontal integration which spreads their market area, Reebok should come out of its present integration and spread its market area which in turn will create more opportunity for sales and market share. In terms of new product development, like the fusion of music, sport and entertainment, Reebok should try combining sport, fitness and casual models. Easytone concentrates only on it focused group which is an advantage to maximise it sales but should also think of the other segments like the male fitness loving groups, though by its advert and promotions the product in not much relevant to male segments, still using Easytone tone your leg, calf muscle and hamstring. This would have put Easytone on the wider market and increased sales. The adverts should have casted both male and female models where the male segments concentrate on the calf and hamstring, the female segments with butt. In the era where the macro elements talk more about environment and human rights and work ethics Reebok should have adopted to those factors much earlier wherein it wouldn’t have faced legal and ethical threats, having manufacturing units in Asia and Pacific regions will provide them with cost effectiveness, but always have the risk of standards in manufacturing and work culture, the recent change in their work environment ethics will clear any further damage to the brand but still whatever it faced will always impact the future market. By changing the pricing strategy where it priced premium price for Easytone had a negative impact in the market, the change in pricing methods should have happened in slow phase, rather than suddenly increasing its price because of its innovative technology and feature. Though this created a new brand image in the market customers were ready to wait for the price fall, which they have always experienced with Reebok in the past.

Appendix 1

SWOT Analysis - Matrix

SWOT

VS

Urgency

Importance

Probability

Priority (9-max, 1-min)

S ←O

1

1

3

3

3

9

 

4

2

3

3

1

7

 

2

2

1

2

1

4

 

8

3

2

3

2

7

 

11

3

2

3

1

6

 

5

4

3

3

2

8

 

4

4

3

3

3

9

 

2

5

2

2

1

5

 

4

5

2

2

1

5

W→O

1

1

3

3

2

8

 

1

2

3

3

3

9

 

2

2

2

2

1

5

 

3

1

3

3

2

8

 

3

3

3

3

2

8

 

3

4

2

2

1

5

 

4

6

3

3

1

7

 

5

1

3

2

2

7

 

5

3

2

2

2

6

 

6

5

3

3

2

8

 

7

6

2

2

2

6

 

8

4

3

3

3

9

S ← T

 

1

 

 

 

0

 

3

2

3

2

2

7

 

5

2

2

2

2

6

 

11

3

3

2

1

6

 

11

4

2

2

2

6

 

8

4

3

2

2

7

 

6

5

3

3

2

8

 

7

5

3

3

2

8

W↓T

1

1

3

3

2

8

 

4

3

2

2

2

6

 

6

5

3

2

2

7

 

4

8

2

2

2

6

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