l.l.bean explore new things 11 december 2014 by: danielle

L.L.Bean Explore New Things 11 December 2014

By: Danielle Annecston, Emma Tremblay, Heather Provost, Rachel Sylvia and Amelia Whitten

L.L. Bean: Explore New Things

Executive Summary:

L.L. Bean is one of the leading businesses in the outdoor recreation market. The

company’s dedication to customer satisfaction and the manufacturing and distribution of durable

and longlasting products have made L.L. Bean one of the most successful familyrun

businesses. L.L. Bean has a very large and loyal customer base around the East Coast and in

different nations across the globe. Surprisingly, L.L. Bean has a limited presence on the West

Coast. Because the West Coast has geography and a climate similar to that of the East Coast,

along with consumers who engage in corresponding outdoor activities and utilize similar

products, the company would greatly benefit from expanding westward. L.L. Bean is currently

losing market shares, and therefore loyal customers, due to its lack of representation on the

West Coast. If the company was to increase its presence on the West Coast through a targeted

integrated communications strategy, L.L. Bean could capture some of its competitors’ market

shares and increase its sales revenue. This integrated communications strategy would be

placed in areas such as California, Washington, and Alaska. The plan would target active

consumers who are 19+ and enjoy outdoor activities. The campaign will focus on raising

awareness for L.L. Bean, as well as promoting the products and services the company has to

offer consumers, compared to competitors. Some differentiations between L.L. Bean and other

companies in this industry include an award winning website, worldclass customer service,

and a lifetime warranty on all products. The plan includes a phase of advertising, followed by

personal selling to increase market shares and sales revenue, seen by a doubling growth rate in

the year 2016.

I. Situation Analysis

A. Description of Organization and Product/Services

L.L. Bean is an ecofriendly, American based company focused on providing everything

needed for outdoor activities. The company was founded in 1911 by outdoorsman, Leon

Leonwood ("L.L.") Bean. The company’s values originate from the belief that Bean was raised

1


on: “Nature is something to be revered. Family ties are a priority. Being neighborly is a matter of

course. And ‘do unto others’ is not just a saying, but a way of life” (“About L.L.Bean: Company

Information”, 2014). These values can be seen in the Bean’s mission statement, or “golden

rule:” "Sell good merchandise at a reasonable profit, treat your customers like human beings

and they will always come back for more" (“About L.L.Bean: Company Information”, 2014).

As time went on, L.L. Bean entered the growing outdoor recreation market, offering

every essential an outdoorsman could need, resembling the L.L. Bean corporation we see

today. The fundamentals and foundation Bean created for his company still hold true today.

Catalogs and wordofmouth are still L.L. Beans main source of advertising, and customer

satisfaction is the main goal of the company. This is highlighted by a noquestionsasked return

policy and a 24 hour, 365 day unlocked headquarters in Freeport, Maine.

B. Industrial Analysis:

a. Industry Overview

L.L Bean originally aligned itself with the outdoor recreational market, which has

expanded into the general sporting industry. Outdoor recreation alone is $646 billion industry, of

which over 70% of Americans participate in regularly, including customers of L.L. Bean. The

industry grows approximately 5% every year (The Outdoor Recreation Economy, 2014).

Because L.L. Bean is a private company, the financial projections of the company are not widely

available. However, Columbia, a competitor, has a market share of 2%, a likely comparable

market share to L.L. Bean. With the employment of this proposal, the market share of L.L.Bean

is anticipated to grow by 2%, matching the growth rate of the company. The outdoor recreation

industry is expected to have a long life cycle, as there is a prevalent use and need for such

merchandise. Although most industries fluctuate over time, the outdoor recreation industry is

only expected to grow in the foreseeable future. Because the company creates products with

environmental sustainability and conservation in mind, insufficient resources or the deficiency of

vital materials are not likely to be a problem. The consumers in this industry highly value the

2


quality and longevity of the products because of the rigorous use of the merchandise. Since L.L.

Bean places a high value on its customers the company has been able to consistently succeed

and grow as a company over the years.

b. Porter’s Five Forces

L.L Bean customers are looking for reliable products that will hold up against nature’s

harshest weather conditions, as well as good customer service (Loyle, 2003). These consumers

receive enjoyment from the status of these products, as well as the benefits that come with

investing in the brand, such as the lifetime warranty. This is a moderate area of concern for the

company because even though L.L. Bean has a strong sense of customer loyalty on the East

Coast, the company is relatively unfamiliar to consumers on the West Coast.

Like any industry, the outdoor recreation industry has strict rules and regulations that

must be followed. When expanding, this is a low area of concern considering L.L. Bean not only

faithfully follows these government regulations, but also upholds to higher expectations of their

company. Since the recession, consumers have been more dedicated to buying

Americanmade products. When expanding, this is a low area of concern because L.L. Bean is

an American based company. In the area of technology, L.L. Bean is a leader. Therefore,

technology is also a low area of concern. L.L. Bean focuses on greener technology, and has

joined multiple organizations who make efforts to reduce the impact manufacturing their

products have on the environment. L.L. Bean has made strides by using biodiesel trucks for

large shipments and utilizing hybrid cars more often (“About L.L.Bean: Company Information”,

2014).

L.L. Bean’s main competitors include all other outdoor equipment suppliers. Some of

these companies include Columbia, Patagonia, The North Face, and Lands’ End. This is a

relatively high area of concern because many of these companies already have a presence on

the West Coast and, therefore have strong customer loyalty.

3


L.L. Bean clearly outlines their business model and customer value proposition. In the

Company Values section of their website, L.L. Bean defines what being a customer means to

them. “A customer is not dependent on us, we are dependent on him. A customer is the most

important person ever in this company – in person or by mail.” These concepts have been vital

to the company’s success (“About L.L.Bean: Company Information”, 2014). This would be a low

area of concern for the company because once a consumer has tried an L.L. Bean product, they

are likely to be a customer for life.

Since Leon Leonwood Bean first started L.L.Bean, the company has been built on a

foundation of values Bean felt were necessary for success. Collaborators of L.L.Bean share

many of the same business values such as being honest when helping customers and creating

quality products (“About L.L.Bean: Company Information”, 2014). This is a low area of concern

as the company’s collaborators are high in number and move across many different industries.

C. Environmental Analysis

As with any company, there are several factors that can pose threats or create

opportunities for L.L. Bean. L.L. Bean is committed to selling products that are manufactured

under legal, safe and fair working conditions. However, not all companies adhere to these moral

regulations. This political issue can create an opportunity for L.L. Bean, as other companies

frequently make headlines for mistreatment of their employees. L.L. Bean has won numerous

awards for its website and successful use of many social media accounts, including YouTube,

Twitter, and Trailmix blog, creating a technological competitive advantage for the company.

Finally, economic issues, such as the recession and impact of high unemployment rates, have

also created an opportunity for L.L. Bean to its increase its customer base, as consumers are

constantly searching for deals and companies that provide the best products for their

hardearned money.

D. Key Industry Success Factors

4


In the outdoor recreation industry, there are many standards that a company must meet

in order to be considered a quality and trustworthy brand. The first key success factor is the high

quality of a product. Brand image is another success factor. In this industry, there is a need for

sustainability, while also being mindful of the conservation and protection of the environment.

This industry manufactures products for a wide range of outdoor activities, the industry appeals

to a wide range of consumers, with different tastes and necessities. Customer relationships are

one of the most important key success factors in this industry. This is what impels a satisfied

consumer to continue returning to the product brand. The final success factor is comfort.

Lifestyles that are centered around outdoor activities require durable products that are both

comfortable and longlasting.

E. Company Analysis The company has several strengths that have led to its success. The expertise of the

staff, the highly valued mission statement, fair pricing, and the philosophy surrounding the

importance of the customers have helped augment the prosperity of the company as a whole.

These characteristics are just some of the reasons why customers put their faith in the L.L.

Bean brand. However, the company does have weaknesses in the areas of marketing

communications and brand awareness on the West Coast. The company does not use a wide

range of advertising techniques and the bulk of its 115 storefronts are located primarily in New

England. However, the strong points of the company can be utilized to help strengthen these

areas and help L.L. Bean become an even more successful company.

F. SWOT

5


L.L. Bean is a prominent company in the outdoor recreational market. The company has

implemented a feature on its website called Outdoor Discovery Schools, where customers can

take classes on how to use their purchased products. This environmentally conscious company

has an excellent return policy with a lifetime guarantee on all products. Although this company is

extremely successful, it does have notable weaknesses. The bulk of stores is located on the

East Coast, primarily in New England. Finally, because of a high demand for such a limited

product, the company has a high number of backorders, especially during the holiday season

(See Appendix A). By employing the use of its social media accounts, L.L. Bean has the

opportunity to hold weekly hashtag competitions on Twitter or creating photography contests for

customers using its Trailmix blog. The possibility of expanding to the West Coast and the

feasible implementation of newer advertising techniques are other opportunities the company

can take to further its success. However, L.L. Bean is situated in a very competitive market,

competing against other strong brands. The customer loyalty of these other companies poses a

threat for L.L. Bean when trying to enter into these new geographical and younger markets

(Appendix B).

Competitive Analysis Some direct competitors of L.L. Bean include, Lands’ End, Columbia, Eddie Bauer, and

The North Face. Each competitor mentioned above have market share in the retail and apparel

market, but share similar missions, product offerings, and target market. Comparing L.L. Bean

to Lands’ End and Columbia highlights where L.L. Bean is unique in its market, and where it

needs to further differentiate itself from its competitors (See Appendix C). For example, L.L.

Bean, Lands’ End, and even Columbia all share the same age group target market, showing

that L.L. Bean should attempt to reach a different and broader demographic of consumers.

Additionally, in the sidebyside comparison, L.L. Bean has the least amount of promotional

strategies, using only their catalogue and social media to promote their products. Looking at the

6


weaknesses of L.L. Bean, it is a company only wellknown on the East Coast, as compared to

its competitors, who are known to at least the entire continental U.S., but also stretching to

countries outside the Western Hemisphere. However, there are also some key characteristics

that set L.L. Bean apart from others in the industry. L.L. Bean’s offers and policies, such as their

lifetime guarantee and free shipping policies, are unmatched by their competitors, making their

products and services more attractive to consumers. Additionally, L.L. Bean focuses on being

an environmentally conscious brand; an attractive selling point to potential markets.

H. Key Issues Three Key issues of L.L.Bean are backordered items, lack of representation, and lack of

advertising. L.L.Bean values their customers, so it would be beneficial if they paid more

attention to what items are most popular and do their best to keep them stocked. Items that are

most popular and often backordered should be produced in higher quantities. Another key issue

is their lack of representation, the company has no locations on the West Coast causing them to

miss out on potential customers. Lastly, the lack of advertisement causes L.L. Bean little

recognition outside of the East Coast. L.L.Bean can maximize their profits and consumer base

by resolving these key issues.

II. Marketing Goals and Objectives: L.L. Bean is one of the most successful familyrun businesses. Not only has the

company revolutionized outdoor footwear, but also its philosophy regarding the value of

customers has withstood the test of time. The company has been rated number one in

customer satisfaction by two leading customer research firms, StellaService and ForeSee

(About L.L. Bean Company Information, 2014). These acknowledgements, as well as the

company’s recognition for its excellent return policy and website, make L.L. Bean a truly

remarkable and favorable company. The bulk of L.L. Bean’s stores are located on the East

Coast, primarily in New England. However, the geography and weather of most western states

are very similar to that of the East Coast. In fact, the kinds of outdoor activities these western

7


consumers partake in are nearly identical to those of New England consumers. Customers on

the West Coast demand the same high quality and trusted merchandise L.L. Bean provides to

the East Coast. In this way, L.L. Bean has the opportunity for expansion.

In order to reach these consumers, this proposal suggests that the company utilize a

wider range of advertising techniques, previously not employed by L.L. Bean. Although word of

mouth and the distribution of catalogs across the United States and other countries have

proved to be successful advertising tactics for the company, the employment of more

substantial advertising is necessary for the company’s expansion to the West Coast. The

implementation of print ads and personal selling will help L.L. Bean build brand recognition on

the West Coast and ease its entrance into this competitive market. Although companies such

as Eddie Bauer and Columbia have greater market share and a competitive advantage over

L.L. Bean on the West Coast because of their strong customer loyalty, L.L. Bean’s high

customer satisfaction ratings and wellknown brand name will allow the company to be

successful in its expansion.

Through these opportunities to expand and make use of a variety of advertising

tactics, L.L. Bean will increase its sales and broaden its customer base by providing

consumers from western states with the products they need. This improvement will be seen

through the company’s financial statements with an increase in sales revenue. By monitoring

the website, the company will observe an increase in the number of views from these western

states. The views from these states will hopefully double. This can be measured by the

company’s growth rate, as the company is projected to see an increase in growth from 2.6% to

4% by the end of 2017, after implementing these new tactics at the start of the fiscal year in

2016. The viewing of the website from this new market will not only let the company know that

consumers are interested in its products, but also allow it to discover what products these

consumers are interested in. L.L. Bean can utilize this information later on when developing

8


new products and when determining how much of each product should be stocked. The

company should see these developments, in terms of website viewing, by the end of 2016.

III. Marketing Strategy and Tactics A. Target Market and Marketing Segmentation

L.L. Bean has since expanded from its original target customers– men and women 35

years old and older, middleclass, and white (Fontenelle, 2010), looking for long lasting, high

quality comfort rather than trendy products, to a younger audience when they released their

Signature Collection in 2010 (Silverstein, 2010). However, as stated by Chris Fuller, Vice

President of L.L. Bean marketing, L.L. Bean’s demographics have not changed all that much

since the company started just over 100 years ago: “Our customers, generally speaking, are

people who enjoy the outdoors. Their average age is late 40s to early 50s. They’re active, fairly

comfortable financially, but shrewd with their money. We like to say: They can afford to stay at

the Ritz, but they prefer the Marriott” (Loyle, 2003). L.L. Bean customers also have a passion for

outdoor activities and seek adventure. The brand name is associated with family and is passed

down through the generations (Day, 2002).

Along with their current target market, L.L. Bean also has the potential to expand to a

new, younger demographics, such as college students, especially as the company expands to

the West Coast. In states such as Colorado and Washington especially, there is a high

population of both old and young consumers who participate in outdoor activities that would

benefit from the products and services that L.L. Bean has to offer. We can attract younger

consumers with our already established social media, as well as pushing our popular Signature

Collection, while also maintaining our original demographics with our quality products and

services. This will be a beneficial strategy, because L.L. Bean customers are highly loyal, so the

earlier we can establish a connection with the customers, the longer L.L. Bean will have their

business.

B. Points of Difference

9


L.L. Bean is focused around three concepts: quality products, customer experience, and

environmental consciousness ("Social Responsibility at L.L.Bean", 2014). These values will in

turn continue to be prevalent when expanding the West Coast. The plan engages customers in

a pleasant experience with expert advice and service from our staff, while providing them with

quality and eco friendly products which will last a lifetime.

While L.L. Bean has several comparable competitors, such as Lands’ End, L.L. Bean

has set itself apart due to its exceptional service and quality products. When compared to

Lands’ End, L.L. Bean received higher ratings in the following categories: social media

presence, making the company more accessible to the younger demographic, pricing and

packaging, everyday free shipping policy, payment methods accepted, and the company’s

returns and exchanges policy. ("Lands' End vs. LL Bean: SidebySide Comparison", 2014).

With all of these great benefits that other competitors are not offering, we expect new western

customers will flock to L.L. Bean and reap the benefits of better prices, better policies, and

better and more accessible information about our products and the company itself.

a. Positioning Statement “A company that emphasizes the importance of reliable merchandise paired with above

and beyond customer service, to ensure its customers the the best outdoor experience ever,

wherever that may be.”

IV. Marketing Program A. Company Strategy:

a. Company Description For over a hundred years, L.L. Bean has been outdoor enthusiasts’ first stop for expert

advice, outdoor equipment and quality apparel (About L.L.Bean: Company Information, 2014).

The company’s brand is rooted in its phenomenal customer service. The company has loyal

customers because the brand personality evokes an emotion of trust and dependability,

stemming from a mission statement that emphasizes the importance of reliable merchandise

paired with above and beyond customer service. The company takes this mission statement to

heart, by offering a lifetime warranty on all of its products (About L.L.Bean: Company

10


Information, 2014). Because of this warranty, L.L. Bean employs a productquality leadership

pricing strategy, utilizing higher prices in the market to finance product quality and an

unsurpassed warranty. Also, as a reflection of L.L. Bean’s brand, the company’s packing is

simplistic, using natural colors and recognizable images of nature (See Appendix D) .

b. Pricing Strategy When expanding to the West Coast, the company needs to emphasises its wellknown

brand, to maintain a productquality leadership pricing strategy. However, it is important to note

that L.L. Bean’s prices are fairly competitive, considering other competitors in the market price

according to a productquality leadership pricing strategy.

c. Distribution Strategy To distribute goods to customers L.L. Bean uses primarily direct channels. The

company provides its product directly from its own manufacture to the customers, whether that

be at the company’s retail stores, or through online orders and shipments. L.L. Bean uses a

direct distribution to ensure the highest quality product at the lowest possible price. L.L. Bean

would continue to use direct channel when expanding to the West Coast.

B. Marketing Communication Strategy Currently, L.L. Bean relies on wordofmouth advertising and direct mail through catalogs

to promote its company and products. The company is notorious for doing very little commercial

advertising. In a recent survey, 88% of respondents said that they heard about L.L. Bean

through wordofmouth or because it was a family brand. Only 11% of respondents said they

had learned about L.L. Bean through advertising (Tremblay, 2014). When expanding to the

West Coast, it will be important to not stray too far from traditions. However, as the company

expands to a new market, it is imperative to launch a campaign that utilizes different marketing

techniques to capture the attention of new customers.

The best outcome would result by creating a new marketing campaign and using an

integrated marketing communication strategy to capture the new target market. The campaign

would appear on a small number of billboards which would cost $7,500 approximately ("Request

11


and Compare Advertising Rates for Free.", 2014).The new campaign would primarily appear in

popular camping and outdoor sporting magazines in target areas such as Outdoor Life,

Northwest Sportsman Magazine, etc. The ads would be classic pictures of nature, and people

enjoying outdoor adventures, paired with the phrase “Explore New Things” (See EH). We aim

to entice customers to try new things, like the L.L Bean business. This phase of advertising

would cost $11,800 ("Magazine Advertising Rates", 2014). Paired with these ads, we would

encourage our target market to send their pictures of their favorite local places to our website to

be entered to win a prize and see their picture in a later ad. This phase of the integrated

marketing communication strategy would have a combined cost roughly $20,000.

After theses ad has been in circulation for a period of time, and awareness of the L.L.

Bean has increased, we would move to the next stage of the marketing strategy. The goal of

this marketing stage is for the West Coast to persuade consumer to explore L.L. Bean’s

products. The company would appear in trade shows, such as the International Sportsmen’s

Expositions, or College Day at local universities, to give the customers a chance to see what

L.L. Bean has to offer first hand. Through these trade shows, a mailing list would be compiled of

interested customers to send catalogs. This phase of the integrated marketing communication

strategy would cost roughly $11,000 (“International Sportsmen's Expositions”, 2014).

Through out the implementation stages of both phases of the marketing program there

will be distant benchmarks. At the time of advertising the company would monitor the website

activities in the target areas. Once the direct mail has been sent out L.L. Bean would keep track

of the incoming orders from those catalogs in the target areas.

The overall cost for this marketing strategy would be roughly be $33,000. This budget,

though larger compared to previous years for the company, would allows L.L. bean to enter an

area the company has previously never been and address a new and larger target market. As a

result of this budget, L.L. Bean’s growth rate would likely double. This can be seen in the

financial projects of 2012 through 2017.

12


V. Financial Projections A. Sales Forecast

For the first year of the advertising campaign, sale projections are expected to grow by

2.56%, just enough to break even from the expenses of the advertising campaign. By the end of

the campaign, sales will grow by another 8.92% over the course of four years (Appendix I). The

main goal of the advertising campaign is to expand on the company’s growth rate. L.L. Bean

currently has a steady growth rate of 2.6% ("L.L. Bean, Inc. Company Profile Yahoo Finance",

2014). The goal of this campaign is to expand the growth rate of 2.6% in 2013 to 4% by 2017.

B. Financial Statements L.L. Bean released a sales revenue for 2012 of $1.52 billion, and a sales revenue for

2013 of $1.56 billion ("L.L. Bean 2014 Company Face Sheet", 2014). A growth rate of 2.6% was

found of this specific company ("L.L. Bean, Inc. Company Profile Yahoo Finance", 2014),

allowing to estimate the future sales revenue for 2014, 2015 and 2016. The estimate for 2017

sales revenue was based on the idea of the growth rate changing to 4%. By 2017, sales

revenue is project to be at 1.79 billion. (Appendix J)

For cost of goods sold, Columbia sportswear was used to estimate L.L. Beans costs

since L.L. Beans cost are not public. Reported costs for 2012 were 953 million, and for 2013

around 941 million ("Columbia Sportswear Company", 2014). To estimate future cost, each

former year was multiplied by the growth rate plus one. For 2014 to 2016, the rate was 2.6%,

but 2017 growth rate was 4%. This leaves to a final cost in 2017 of 1.05 billion. (Appendix J)

The financial projections with Gross Margin are all positive percentages, meaning L.L.

Bean will be making enough profit to cover costs. To find each gross margin rate, Cost of Goods

Sold was subtracted from Sales Revenue then divided by the Sales Revenue to find the

percentage of how much is covered. by the end of the campaign, it is estimated the Gross

Margin will be 41.08%. (Appendix J)

Fixed cost will not start until the beginning of year 2015. For the first year of our

advertising campaign, ads will be focused on billboard ads in five different cities along the West

13


Coast, and four different magazines that each target a different state along the West Coast. The

average cost of a billboard was $1,500 ("Request and Compare Advertising Rates for Free.",

2014) and the average cost for magazine ads was $2,950 for 12 full page ads in four color

("Magazine Advertising Rates", 2014). To find the total fixed cost, the average of billboards was

multiplied by 5 for the five cities, and magazine ads was multiplied by four then added to the

cost of the billboards to get $17,800. There was also the fee for going to the trade show, which

is $10,400, bring the fixed cost total for 2015 to be $28,200. The fixed cost for 2016 is projected

to go down for the plan involves not continuing the billboard ads. (Appendix H)

The projected profit for 2015 was estimated to cover cost for that year. For 2016,

projected profits was estimated by multiplying it by the growth rate of 2.6% plus one ("L.L. Bean,

Inc. Company Profile Yahoo Finance", 2014). Then for 2017, projected profits from the the

previous year of 2016 was multiplied by the new growth rate of 4% plus one to end with the

estimate of $42,362. (Appendix I)

The goal is to break even with the ad campaign in 2015, the same year its due to launch.

Since the point of the campaign is to bring knowledge of the store instead of just one specific

item, computing the break even point cannot be done.

VI. Monitoring and Control The L.L.Bean’s website will be tracked after implementation of the marketing plan to help

determine if it’s working effectively. Online orders will be tracked to see what locations they are

coming from. The focus would be on locations with the new ads, this shows where the ads are

working best. Areas where the ads are proving most effective will have the most potential

customers. The ad campaign will be implemented in January 2015. Online orders will be

monitored from January 2015 throughout June 2015. Tracking the website provides an idea of

how well the ads are working. This is a result of the lack of storefronts in the western states

(More Ways to Shop: Retail Stores and Outlets, 2014 ) [1]. Tracking the website will benefit

L.L.Bean when they are deciding where new storefronts would be most successful. Monitoring

14


our sales while tracking the website shows not only where customers are ordering from but the

monetary value for the sales as well. If through monitoring sales and tracking the website it is

found that the ad campaign is not proving effective, changes will be made. These changes

would be minor; new incentives would be offered that would help L.L.Bean stand apart from

competition in the industry and encourage people to shop at L.L.Bean.

Conclusion: The overall goal of the marketing plan is to increase awareness of the brand. From the

survey it was discovered that many people outside of New England haven’t heard of the

company as a result of few storefronts (More Ways to Shop: Retail Stores and Outlets, 2014).

This is causing the company to miss out on a huge potential market in the West. If knowledge of

the company is increased through new marketing tactics L.L.Bean can get a foothold in this

potential market. Marketing tactics such as billboard and magazine ads will get people thinking

about L.L.Bean. Introducing the company with an ad campaign will help if L.L.Bean were to

eventually put a storefront in any of these Western locations.

15

l.l.bean explore new things 11 december 2014 by: danielle

Documents