Lululemon Case Study

Lululemon Case Study

Jack Welch Management Institute

Jeffrey T Smith

Marketing in the Global Environment 518

7/24/2016

Executive Summary

     This paper will analyze the marketing strategy employed at Lululemon prior to the 2006 timeframe when the founder and CEO Chip Wilson sold a controlling share of his company and stepped down as CEO and appointed Robert Meers as CEO.  This paper will look the current state of the following: marketing goals and objectives, target audience, competition, competitive advantage, marketing research effort and marketing measures of effectiveness.

     Once we have analyzed their current strategies, the paper will then use the same areas discussed and present viable alternatives for the marketing efforts moving forward. The paper will wrap up with a conclusion of the marketing plans and how this will affect the company moving into the future.

Introduction

     Lululemon is a Canadian based company that was founded in 1998 by Chip Wilson. The company currently operates about 354 stores worldwide. The company started by focusing on the yoga community and providing clothing to suit their needs. The company eventually expanded into offering athletic wear to men and also younger girls to help expand its market.

     The company tended to target the sophisticated woman who was willing to pay a higher price for quality products. In this case mainly yoga pants and tank tops. The company was successful and profitable by maintaining low employee turnover and low marketing costs due to them using more of a “word of mouth” marketing plan. This enabled them to develop a loyal following that resulted in rapid growth for the company in the early years.

Lululemon’s Current Marketing Program

Marketing Goals and Objectives

     In 2005, the company had a goal of expanding on its 4 existing U. S. stores and opening another 15 stores annually in the U. S. over the next five years. From 2000 to 2005 the number of yoga participants increased from three million to 16.5 million. The company was looking to capitalize on this growth opportunity.

     The women’s market was currently a $15 billion market and 25 percent larger than the men’s market. Lululemon was currently experiencing double digit growth in this market and their future plans were to continue this growth trend.

Target Audience

     The company’s target audience in 2006 was mainly the sophisticated woman that was involved in yoga as a way to get fit and stay active. The company recognized that the women involved in this had special needs because the fabric needed to be able to stretch and move with them. The company also targeted local yoga instructors and got them to be their ambassadors that would connect them to the local communities.

Competition

     Lululemon had initially created for itself a “blue ocean”, an uncontested market space where competition is irrelevant. (Kim & Mauborgne, 2004). This allowed them rapid growth and expansion, and also allowed for high profits due to lack of competition. There were some smaller retailers that caught on, but from a global perspective the main competitors were Nike, Reebok and Wal-Mart. There were only a couple of other yoga-inspired companies like Kharma and Tonic.

     The company’s main concern in 2006 was the look-alike products. The company had already registered its trademark worldwide and was now spending money defending its trademark. Chip Wilson was noted as saying, “if you don’t protect your trademark, you lose it”. (Lululemon Case Study, 2006)

Competitive Advantage

     As noted above, the first competitive advantage that the company had was that they had created their own marketplace that was devoid of any major competitors. This allowed them to charge a higher price and enjoy lower marketing expenses. The clothing also appealed to women because of its flat-seamed design to avoid chafing or rubbing during wear. Additionally, all jackets and pants were pre-shrunk to avoid any shrinkage after its first washing. The company also had its own line of proprietary fabrics that moved moisture away from the skin and had a four-way stretch to allow for a full range of movement. (Lululemon Case Study, 2006)

Marketing Research Effort

     The company’s marketing research effort used a group of professional athletes or dedicated consumers in “design sessions” twice a year. These were used to get input on how the garments could be made better. Another method used was to rely on customers to provide feedback on garments by writing comments or attending design sessions. Finally, each store had either a clipboard outside the dressing room or a binder at the register where comments would be taken from customers regarding design improvements.

Marketing Measures of Effectiveness

     The only measures of effectiveness that I can find is the fact that their sales rose from $200,000 in 1999 to between $80 million to $120 million in 2005. The company had very little debt and an estimated free cash flow of 10 to 20 percent of sales.

Recommendations for Improvement

Marketing Goals and Objectives

     The company’s strategy has been to focus on its Lululemon Athletica and Ivivva Athletica brands as being conducive to a fun and healthy lifestyle. (Thangevelu, 2015) Since 2010 sales have increased from $711million to $1.8 billion in 2015 with the company being on track to hit $2.3 billion for fiscal year 2016.

     The company sells primarily through its retail outlets and through online sales. The company currently operates 373 stores with plans to open more. The company has plans to continue to expand into new markets.

Target Audience

     The company’s products mostly are targeted at women who aim for a healthy lifestyle while balancing a busy life. The company has also expanded its reach by bringing in men and youth into its fold. In fact, encouraged by the sales of its products geared to men, Lululemon is looking to open a New York City store geared to men only in late 2015. (Thangevelu, 2015)

     The company definitely needs to expand more into the men’s clothing side of the business. It has been shown that while men don’t do a lot of shopping for themselves, the women will buy it for them. This means that if you have a strong following of women for your products, they will also trust in the quality to purchase it for the men.

Competition

     The company’s main competitors are Nike, Adidas and Under Armour. As athleisure, the trend of wearing athletic clothing as casualwear, becomes more popular, companies such as Nike, Under Armour, and Victoria's Secret are trying to cash in on the trend. (Schlossberg, 2015) Lululemon has developed a very loyal customer base that will continue to help them grow their year over year sales.