North Face promotional strategy and 2010 sales growth plan

North Face Apparel Company Promotional Plan for 2010

Despite a very turbulent year in retailing, online sales and multi-channel retailing across the sportswear marketplace, the North Face has successfully retained a loyal customer base which sets the foundation for future growth. Given the severe price reductions by competitors and a few going out of business or being acquired (Pendle, 2009) industry analysts predict the sportswear market the North Face competes in will grow modestly between 2009 and 2010 and throughout the remainder of the decade in 2013. Analysts predict the market to be valued at $280B as of 2009 (Pendle, 2009). Capitalizing on the strength of the North Face installed base of customers and the creative use of Web 2.0 and social networking technologies, in addition to concentrating on augmenting multichannel retailing, the North Face can achieve a 5% increase in sales in 2010. This promotional plan defines the strategies to attain this objective.

Market Assessment

The overall market for athletic and casual clothing including accessories and shoes is expected to achieve 3% growth between 2009 and 2010. Throughout the remainder of the forecast period only slight growth is projected. See Table 1: Athletic & Casual Clothing Growth History and Forecast for specifics.

Table 1: Athletic & Casual Clothing Growth History and Forecast

Forecast real revenue growth %

2008

2009

2010

2011

2012

2013

as published May 2008

4.0

3.0

2.0

4.0

3.0

6.0

New Revised Forecast

3.8

1.8

1.3

3.6

3.8

4.8

Source: (Pendle, 2009)

The entire industry has been impacted by the global economic recession, which has led to a reduction in disposable income spent on clothing and shoes, in addition to hobbies (Newbery, Arouch, 2008). North Face primarily completes with Nike, Patagonia Corporation, and the Timberland Company. Each of these competitors has expanded their product lines to reach into product and service segments the North Face does not participate in. Nike is the most diversified competitor, with over two dozen businesses and eleven brands they actively market. Figure 1: Nike's Growth/Share Matrix provides an overview of the key brands and businesses the company markets today. Comparing this to the North Face, which competes in a small subset of these brands and product lines that Nike has, provides the company with greater opportunity to focus on key messaging and unique selling propositions over time.

Figure 1: Nike's Growth/Share Matrix Comparing Businesses and Brands

Star Products

Question Marks

Cash Cows

Dogs

Source: (Nike Annual Report Analysis, 2007)

Patagonia Corporation is even more narrowly focused in terms of its product line that the North Face, with product liens dedicated to clothing and accessories for extreme and outdoor sports. Patagonia's segmentation strategy is also heavily influenced by their approach to psychographically-defined segments (Wann, Zapalac, Pease, 2008). As a result of this focus, the company specializes in alpine climbing, fly fishing, hiking and trekking, rock climbing, surfing, trail running, travel and yoga. Patagonia's ability to define a unique brand experience (Pine, Gilmore, 2000) continues to be key to their success. The last competitor, the Timberland Company has an exceptionally strong brand image in the key demographic and psychographic markets, and has continued to see significant revenue growth from global operations as well. As a result of these strengths the company continues to be successful in building their brand globally. As all major brands have faced the threat of counterfeit goods, Timberland has been hard hit with losses of sales throughout the rapidly expanding Pacific Rim nations they are attempting to expand into. Timberland is unique in that they do not have a tightly integrated supply chain and as a result are often at a negotiating disadvantage with suppliers as a result. Due to these factors the company has seen a significant drop in profitability over the last fiscal year, including a significant reduction of gross profit margins. All of this has resulted in a continual reduction in market share over the last twelve months. For the North Face, which has comparable demographics defined for segments and uses a comparable set of offers for attracting sports enthusiasts, all of these factors are contributing to the potential to offer Timberland customers special deals on shoes. This can be accomplished using the Business Intelligence (BI) software applications that the North Face has invested in to better understand its key markets (Briggs, 2007). The North Face has the ability to selectively define key attributes of customer segments and audiences, and through the use of business analytics applications, tailor specific programs aimed at competitor's customer bases. It is widely acknowledged that North Face has one of the most advanced and insightful uses of business analytics in the retail industry (Kusterbeck, 2008).

Consumer Purchasing Trends and Demographics

The lifestyle segmentation that the North Face relies on is psychographically based, where customers are grouped by their common interested and group self-identity. (Wann, Zapalac, Pease, 2008). Their segmentation model parallels the findings of researchers who have found the link between psychographics and sports affiliation (Wann, Zapalac, Pease, 2008). Demographic segmentation shows that 18- to 34-year-old age groups of both genders are the most active with the North Face products. Figure 2: Demographic Segmentation of North Face Products provides the distribution of Sales in 2008 by age group.

Figure 2: Demographic Segmentation of the North Face Customer Base

Market Segment

2008

Share

Males 18-45

37.0%

Females 18-45

28.0%

Males

Females

Males >45

6.0%

Females >45

2.0%

Sources: (Newberry, Arouch, 2008) (Newberry, 2008)

The North Face Brand Positioning

Already aligned with extreme sports and using video on the website to have product experts explain the design objectives and trade-offs of their tents and equipment, the North Face has the beginnings of a solid brand positioning campaign. Yet to make an impact on competitor's customers and attract those new to the sport, the brand needs to increase its inclusion of women's sports. Today the branding is male-dominated. To include more of the sports and outdoor activities women prefer will also position the North Face in the high growth, high market share areas that Nike is addressing as shown in Figure 1. The North Face needs branding and messaging to extend their unique selling proposition to encompass women's fitness more completely and seek to take market share away from all competitors in this segment. Concentrating on this segment will also give the North Face a platform on which to define media mix planning, public relations, direct marketing and sales planning.

Public Relations, Direct Marketing and Sales Promotion

Consistent with the strategy of using social networking as a critical part of the media mix is the need to integrate as many aspects of Web 2.0 technologies into the PR, direct marketing and sales promotion programs as possible. Web 2.0 has been defined by Tim O'Reilly, founder and CEO of O'Reilly Media, who created the graphic shown in Figure 3.

Figure 3: Web 2.0 Definition Map

Source: (O'Reilly, 2005)

Pr specifically needs to look at how the company can connect with existing customers and potential prospects using the rapidly expanding social networking applications available today. Creating a Facebook, Friendfeed and Twitter account is a start, yet each of these areas need to be continually monitored to ensure they are delivering up-to-date product information and valuable insights into how to get the most out of the North Face products. By doing this, the North Face can capitalize on the "groundswell" of interest occurring online (Bernoff, Li, 2008) and also build and enhance the brand as well. As Zappos.com does, the North Face could offer discounts on specific products only to Twitter followers for example. This would create a significant amount of buzz as well.

Direct marketing and sales promotion are also going to be more aligned with social networking and Web 2.0-based platforms that the traditional approaches including direct mail or traditional print advertising. As the former approaches have proven to be ineffective in the recession, the reliance on social networking needs to be pervasively focused on. Second, there is also the need to create more excitement over the brand, and this needs to include the sponsoring of extreme sports events and the support of independent (indie) artists that typify they high energy and risk taking the brand wants to associate with itself. These events must focus women artists who are breaking stereotypes of women athletes by being strong and self-sufficient. As the women's sporting goods market is the high growth segment today, that is a critical focus for the North Face to concentrate on.

The need to embrace social networking and make it a core part of the PR, direct marketing and sales promotion strategies of the North Face is evident by the rapid growth of Facebook, Friendfeed, Twitter and many other sites emerging. The reliance on Web 2.0 technologies (O'Reilly, 2005) forces a high level of transparency and trust when these applications are used to ensure trust is created and maintained. The North Face needs to look beyond the hype of social networking to see it as a way to deliver a differentiated, highly valued and trusted experience to its customers (Pine, Gilmore, 2000). By connecting with customers in entirely new ways the company will be able to attain the 5% growth. If trust is achieved, then this growth will be possible.