MBA 676 – Marketing Presentation D6A4

Heath RossMark Susor

Francis Ukpolo

Patagonia

Agenda• Company Summary, Business Model and

Strategy• Product Introduction• Product Description• Target Market• Strategic Initiatives (Goals)• Situation Analysis

– Market Dynamics– Customer– Product– SWOT Analysis– Positioning Statement– Competition

• Strategies/Tactics

• Marketing Program– Product– Place– Promotion– Pricing, Positioning and Branding

• Financial Overview– Break-even Analysis– Expense Forecast– Sales Forecast

• Website Presence• Privacy/Security Issues• Monitor Your Results

– Product Evaluation– Controls

• References

Company Summary, Business Model and Strategy

Patagonia History– Founded in 1972 by Yvon Chouinard– Outdoor and Equipment Company– Focus on impacting consumption patterns and sustainability– Utilized Direct-mail Catalogs

• Sell outdoor clothing and equipment• Promote social causes supporting sustainability

Strategy: Environmental differentiation strategy

Business Model: Innovation through its processes, product and services, and business model

– Create value through operational excellence, customer intimacy, product leadership, and environmental stewardship

“Patagonia is built on the principle of living and examined life”, Rose Marcario, Patagonia CEO

Product Introduction• Patagonia’s Organic Cotton Line

– Made from 100% organic cotton

– Superior quality, durable

– Free of harmful chemicals

Target MarketThe LOHAS Community

• Our marketing program will target the Eco Tourism and Natural Lifestyles segments which makes up $52 billion of the LOHAS market.

• The two segments consist of tourism travel, adventure travel, apparel, social change philanthropy, indoor/outdoor furnishings, organic cleaning supplies, and compact fluorescent lights.

• The integrated marketing campaign will focus on acquisition and conversion of LOHAS members building on the existing Patagonia environmental differentiation strategy.

Strategic Initiatives (Goals)• Patagonia is launching an organic product line intended to support sustainability within the

apparel industry and attract the LOHAS Community consumer; they are the “future of your business and also the future of progressive social, environmental and economic change in this country” (LOHAS, 2014).

– This particular product line will focus on two of the identified segments with the LOHAS Community; they represent a $52 billion of the $290 billion LOHAS market: Eco Tourism and Natural Lifestyles.

• By 2014, Patagonia’s organic apparel intends to capture $52 million of the LOHAS Community Eco Tourism and Natural Lifestyle consumer spend in 2014 in the US. Moreover, the Patagonia’s organic apparel will sell $104 million of organic cotton apparel in 2015, $156 in 2016 and $208 in 2017.

• We will establish a relationship with the LOHAS Community that generates 1% donations to Patagonia grass-root environmental causes.

• We will obtain Patagonia organic cotton apparel and LOHAS Community as a Google level one category hits for 90% of all users that search for designated tags. Such strategy will ensure Patagonia’s exposure to a large audience base in the US LOHAS Community.

• We will monitor web traffic by state and the goal will be to obtain a 10% conversion in each state versus total clicks.

Situation Analysis

• Top quality and long lasting products• Environmental friendly• Leaders in ethical business practice• Strong brand presence

• Expensive product line due to high quality and manufacturing process.

• No loyalty programs. • Limited models, styling, and

outdated trends compared to competitors

• Introduce more models• Keep up with newest trends• Ship to more countries• Increase brand awareness

• Competition from more popular brands (Columbia Sgm, North Face)

Strengths Weaknesses

Opportunities Threats

Market Dynamics • The Market dynamics represented by the organic cotton retail segment is best described by worldwide double digit growth with tremendous opportunities to expand and leverage a consumer that is looking for products that are sustainable and whose manufacturing processes protect the environment. According to the 2012 and Preliminary 2013 U.S. Organic Cotton Production & Marketing Trends:

• The number of facilities becoming certified to GOTS [Global Organic Textile Standard] increased 11 percent to surpass the 3000 mark in 2012, growing from 2,714 facilities in 2011 to 3,016 facilities in 2012, according to the GOTS International Working Group. The U.S. ranks 13th with the number of GOTS-certified facilities increasing from 40 to 44 facilities from 2011-2012.

• The increased adoption of GOTS is in part the result of rising awareness of U.S. organic textile policy which requires companies claiming their organic fiber products are “organic” to be certified either to GOTS or the U.S. Department of Agriculture National Organic Program’s standards.

Competition

Competition

o Started in 1966o Eventually bought out by VF

Enterprises, publicly tradedo Co-creator of Conservative

Alliance with Patagonia, REI & Kelty

o Very small selection of organic cotton products

o Big focus on Responsible Down Standard Program

o Close the Loop recyclying program

o Started in 1938o Incorporated as non-profit

coop in 1956o Functions more as a re-seller

rather than manufacturero Limited ability to control

sustainability efforts during production process

o Re-sells other brands organic cotton apparel, including some of Patagonia’s

o Started in 1938o Publicly traded companyo Bought Sorel, Montrail, and

Pacific Trail outdoor gear companies

o Focused on water-based adhesives for footwear

o Focused on recycled polyester

o CEO and President are the daughter and grandson, respectively, of the founders

o Does have organic cotton products

The North Face REI Columbia Sportswear

Strategies/TacticsGoal #1: To capture $52 million in Patagonia Organic Cotton Apparel sales from the LOHAS

Community during 2014 in the North American market. To obtain $52 million of Patagonia

Organic Cotton Apparel sales in 2014, $104 in 2015, $156 in 2016, and $208 in 2017.

Strategy: To monitor sales trends and marketing effectiveness monthly, adjusting our strategy

accordingly.

Tactics:•Rigorously execute and monitor progress of all aforementioned LOHAS Eco Tourism and Natural Lifestyle marketing initiatives weekly. “Winner’s Circle” segment.•To execute and monitor Common Threads Partnership with eBay. “Shotguns & Pickup” segment.•Increase brand awareness, drive traffic to Patagonia website, and increase customer loyalty while attracting new customers.

Strategies/TacticsGoal #2: To generate $520,000 or 1 percent of revenue from the LOHAS Community in socially

responsible donations to Patagonia’ grassroots environmental organizations. The goal is to increase

these LOHAS Community donations to $1,040,000 in 2015, $1,560,000 in 2016, and $2,080,000 in

2017.

Strategy: To show consistent growth per month with LOHAS Community customer base by

generating donations toward Patagonia’s grassroots environmental organizations.

Tactics:•Increase traffic to Patagonia’s website through various internet-based marketing such as SEO, PPC, Email Marketing, Social Media, Blogging, CRM/Loyalty Programs and Affiliate Marketing.•Execute aggressive advertising campaigns in states with a higher percentage of click-through behavior. •Incorporate Patagonia Organic Cotton Apparel success stories into online marketing programs.

Strategies/TacticsGoal #3: To obtain Patagonia Organic Cotton and LOHAS as Google level one category hits for

90% of all users that type in the following search tags: “Organic Cotton,” “LOHAS,” “Natural

Lifestyle,” “Eco Tourism,” etc.

Strategy: To convince Google of the environmental benefits of Patagonia’s Organic Cotton Apparel

and establish an effective advertising partnership.

Tactics:•Provide Google with advertising space on Patagonia.com•Work with Google executives monthly in order to research and expand search tags that will provide Level One Category hits for Patagonia Organic Cotton Apparel or LOHAS Community.•Offer varying week-to-week incentives for consumers that visit website (i.e. % off product price, Eco T-shirt, water bottle, etc.)

Strategies/TacticsGoal #4: To obtain a 10% conversion in each state versus total clicks.

Strategy: To adjust and re-direct marketing campaign accordingly in order to ensure

appropriate exposure in each state.

Tactics:•Set up peak-hour infomercials in struggling states.•Offer incentives for social media channels to discuss the benefits Patagonia Organic Cotton Apparel and the website incentives being offered.•Increase the number of peak-hour local channel commercials based on tracked website traffic patterns per state.

Marketing Program

In order to best serve our target market in theLOHAS community, Patagonia will focus on

itsorganic cotton line as it fits the lifestyle, needsand ethical beliefs of the ‘natural lifestyles’target market

o Organic Cotton line will be available in retail locations as well as websites.

o Limitations will be set on how many and which websites & retail locations product can be found, in order to preserve authenticity of the product

Our promotional goals are to increase brandawareness, drive traffic to Patagonia’s website,increase customer loyalty while attracting newcustomers and to increase sales on OrganicCotton Apparel

The pricing of the Patagonia Organic Apparel is based on the fact that it is a revolutionary and innovative product line that is differentiated from the competition by its unique materials and manufacturing processes.

Product Place

Promotion Pricing, Positioning and Branding

Promotion

We will launch a “Buy One, Give One” program that allows customers to accumulate points on purchases made which can be donated to a charitable organization supported by Patagonia.

A series of email newsletters will be sent to Patagonia’s listserv on a regular basis to highlight new products, new initiatives, stories that inspire social change philanthropy, etc.

Social media channels would also be used to strengthen Patagonia’s brand, and to engage/interact with our audience.

CRM Strategy Email Campaign Social Media

Financial, Budgets, Forecasts

Year 1 Revenues

$52 million

Year 1 Units Sold

473,000

Year 1 Advertising Budget $300,000

Product Evaluation

o Informercial run in a variety of states

o Offering viewers a free t-shirt for completing an online survey

o Banner on informercial will give text info specific to that state in order to receive link for survey

o Organic cotton products come with certification insert. Insert will provide link to take a satisfaction survey

o Consumer has one month from purchase date to complete survey

o As incentive to complete survey, they will be entered in drawing for a free eco weekend trip

o Hold 2 monthly marketing initiative evaluation meetings with consumers for first 3 months

o Have consumers view all marketing materials such as commercials and ad print

o Collect feedback and ratings from consumers concerning marketing initiative

o Incentive of free t-shirt and entry into drawing for eco tourism weekend trip

Evaluation 1 Evaluation 2 Evaluation 3

Controlso Revenue: Monthly and Annualo Expenses: Monthly and Annualo Customer Satisfactiono New Product Developmento Marketshare Increase/Decreaseo Competition/Industry Innovations

Website PresenceAs part of our strategy to increase sales, we will redesign the product page on the website to enhance the user experience, and optimize it for search engines by including product descriptions, keywords, and YouTube videos which has been proven to improve SEO

Website Presence – Cont’d

Patagonia will also use Pay-Per-Click advertising to drive traffic back to our website and to increase awareness of the brand.

Privacy/SecurityPatagonia will follow the Fair Information PracticePrinciples, and will remain transparent to customersby featuring a privacy policy page.

We plan to acquire an SSL certificate to further protect our customers information from being compromised. The SSL certificate encryptions when sending customer data to our servers.

ReferencesB Lab. (2014). What is a B Corporation. Retrieved from Certified B Corporation: http://www.bcorporation.net/what-are-b-corps

Ball, J. (2009, December 28). Patagonia Clothing: Making a Profit and Meeting Environmental Challenges. Mother Earth News.

Retrieved July 24, 2014, from http://www.motherearthnews.com/nature-and-environment/patagonia-clothing-

zmaz09djzraw.aspx?PageId=1#axzz38QgDED2X

Casey, S. (2007, May 29). Patagonia: Blueprint for green business. Retrieved from

http://archive.fortune.com/magazines/fortune/fortune_archive/2007/04/02/8403423/index2.htm

Columbia Sportswear. (2014). Our History. Retrieved from Columbia Sportswear:

http://www.columbia.com/history/About_Us_History,default,pg.html

Ebay.com. (n.d.). "Patagonia - About Us." Patagonia - About Us. Retrieved from http://campaigns.ebay.com/patagonia/about/.

References

French, S. & Rogers, Q. (2010). Understanding the LOHAS Consumer Understanding the LOHAS Consumer: The Rise of Ethical

Consumerism. Retrieved from http://www.lohas.com/Lohas-Consumer

Hoover’s Inc. (2014). Patagonia, Inc. company profile. Retrieved from http://www.hoovers.com/company-information/cs/company-

profile.Patagonia_Inc.06a3d0522670035c.html

Kasperkevic, J. (2014, February 9). Patagonia's new CEO: 'You should build a product that lasts'. Retrieved from

http://www.theguardian.com/business/2014/feb/09/patagonias-new-ceo-you-should-build-a-product-that-lasts

Lohas. (2010). LOHAS Background. Retrieved from http://www.lohas.com/about

Mahlich, J. & Schneider, M. (2013, November 30). Environmental Differentiation Strategy of Patagonia [PowerPoint slides]. Retrieved from

http://www.slideshare.net/johannesmahlich/environmental-differentiation-strategy-of-patagonia

ReferencesOrganic Trade Association. (2014, January). 2012 and Preliminary 2013 U.S. Organic Cotton Production & Marketing Trends. Retrieved from

http://www.ota.com/index.html

Patagonia. (2014). Our reason for being. Retrieved from http://www.patagonia.com/us/patagonia.go?assetid=2047

Patagonia. (n.d.). "Patagonia - About Us." Patagonia - About Us. Retrieved from http://campaigns.ebay.com/patagonia/about/

Patagonia and Organic Cotton: A Case Study. (n.d.). Patagonia Environmentalism Essay: Organic Cotton Case Study. Retrieved from

http://www.patagonia.com/us/patagonia.go?assetid=2066

REI. (2014). REI History. Retrieved from REI: http://reihistory.com/1950/

Segment Explorer. (n.d.). PRIZM > Market Segmentation Research, Tools, Market Segment Research. Retrieved from

http://www.claritas.com/MyBestSegments

The North Face. (2014). About Us. Retrieved from The North Face: http://www.thenorthface.com/en_US/our-story-experience/#years/1