Adidas Marketing Strategy Assignment

Adidas Marketing Strategy Assignment Words: 3211

||| Contents ||| Background3 adidas in India3 Industry Scenario5 Scope of Study6 Consumers7 Consumer Behaviour8 Environmental Analysis10 Retail12 Competitors13 Segmentation15 Targeting & Positioning16 Recommendations19 Appendix21 ||| Background ||| adidas AG is a German sports apparel manufacturer, part of the adidas Group. It registered as adidas AG on 18 August 1949 (with lower-case lettering: “adidas”). The company was named after its founder, Adolf (Adi) Dassler, who started producing shoes in the 1920s in Herzogenaurach, near Nuremberg, with the help of his brother Rudolf Dassler who later formed rival shoe company PUMA AG.

The company’s clothing and shoe designs typically include three parallel stripes of the same color, and the same motif is incorporated into adidas’ official logos. adidas plans to become the leader in the organised sports footwear and sportswear market. ||| adidas in India ||| adidas first entered India in 1989 through a licence agreement with Bata. adidas later re-entered India for the second time in 1996 through a joint venture with Magnum International Trading Company Ltd with an initial investment of $2. 5 million to form adidas (India) Trading Pvt. Ltd. adidas holds a 100 percent stake in the company.

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The company launches every six months between 600 and 800 new designs in footwear and between 1,500 and 2,000 new designs in apparels. The apparel range is priced between Rs279 and Rs2700, while the footwear is priced between Rs499 to over Rs12499. adidas’ products in India are sold through 140 own outlets (excluding multi-brand outlets). The company, which is known for football and running shoes, introduced its cricket gear in India in 2004. The company adheres to strict quality and design specifications and uses the manufacturing unit of Lakhani Footwear to manufacture the locally produced adidas range in India.

Around 30-40 percent of the components are locally sourced. ||| Industry Scenario ||| (as of 2003-04) Footwear brands drew up ambitious plans targeting a larger audience and higher market share. MNC brands like Reebok and Adidas launched television commercials after a gap of four years and brand shops were filled with a fresh and upgraded product line-up. The new distribution strategy focused on extending the reach rather than exclusivity and at broad-basing distribution through tie-ups with branded retailers and setting up shop in shopping malls.

For adidas, sales of higher priced footwear recorded strong growth in 2003-2004 and the company expected to close the year with a 30 percent growth. Pre-1997, adidas had tied up with Bata and Woodland and first began exploring multi-brand outlets and retail malls. Reebok was slated to grow by almost 30 percent against 22 percent in 2002-03 and focused on its global Performance Range products. Bata started retailing other brands like Reebok, Nike and Lee Cooper. As of 2005-06, the current premium sports goods market in India was valued around Rs 500 crore.

Within this market, adidas enjoys considerable brand equity and is considered among the leading international brands in the country. ||| Scope of Study ||| Our group has selected the Indian Footwear (Athletic) as Product Category. The main multinational players in this industry are Nike, Puma, Fila, adidas & Reebok. Indian players include Action Shoes Ltd. , Liberty Footwear Co. , and Bata India Ltd. This report will mainly consider Nike & Rbk (Reebok) as competitors for adidas. By way of research, we have conducted a consumer survey, as well as spoken to a few retailers of the 3 top brands in the industry. || Consumers ||| In 1999, when adidas entered the Indian market, it introduced the cheapest range of shoes it had ever sold. The new line took into account the importance of affordability in the Indian market, and the company expected the move to expand their customer base by 20%. But today, the customer has changed. Andreas Gellner, MD of adidas India, tells us: “Today’s Indian customer is aware of international fashion and technology and he cares about them. He is also a big sports enthusiast. We have also noted the need for constant change???which implies faster turnaround for designs and therefore newer products.

On the other hand, the buying experience is becoming crucial. The retail scenario in sportswear is changing accordingly???marketers are focusing on shop design and service and on brand consistency across outlets; they are paying a premium on technology and innovation. This has also been impacted to a large extent by the mall mania and the growth of the high street. ” From our meeting with adidas’ marketing executives we gathered information about how they defined their target demographic. They target the 15-35 age group, both males and females, with a monthly income of over Rs15000.

The consumer is typically an image-conscious sports fan, but not necessarily a sportsman. ||| Consumer Behaviour ||| Our market research delves into the customer mindset, trying to assess the population and coming up with demographic details as to who our target customer is. This is being done by a two-pronged strategy of reaching out to the young working class on the one hand (in and around NCR) and also by assessing the student strata who are pursuing their post-graduation (IMT, DSE, FMS etc). This would leave us with roughly 120 separate assessments on buyer behaviour on which we plan to base our studies.

Status so far: Respondents: 118 Dates of response: 27-08-2006 to 17-09-2006 Demography: Students (post-graduate ??? 107, young working class ??? 11) Method of survey: Online Some of our observations so far: Only around 3% of the total respondents cited Price as the number one factor influencing their purchase decision, and another question showed that comfort, weight and styling of the shoe were important elements of the shoe. This initially seems to indicate that the Indian customer no longer fits the price-sensitive stereotype, but a closer look at the results shows a different picture.

The survey also showed that 62. 93% budgeted less than Rs. 2000 for their sports shoes. This shows that while Price is almost never the most important factor for most respondents, it is certainly a very important consideration. More respondents own a Reebok pair than adidas (second place) and Nike (third), but when asked which brand they would like to own, Nike topped list, followed by adidas and Reebok. This shows that Reebok’s Indian pricing has managed to attract more market share than its rivals, but Nike still has the highest brand equity and perceived value.

Nike being the world-wide leader does well on advertisements and viewer/customer attention-catching and carries the best image of the 3 top brands. It is the brand that people want to own. The survey also revealed that customers felt that Sales Staff Service was the most important part of the buying experience. With 51. 46%, it beat the other 4 factors by a long way. ||| Environmental Analysis ||| FIFA World Cup 2006 and other Football Tournaments The World Cup’s global TV and Web audience was bigger than the Olympics’ or the Super Bowl’s — 38 billion in-home viewers worldwide.

Adidas was an official sponsor and paid for the rights to shut Nike out of TV advertising in the U. S. for all 64 games. The retailers we spoke to acknowledged that the World Cup caused a sharp spike in sales, both of the football (Teamgeist) and footwear & jerseys. Globally, by end-June 2006, adidas had already sold $1. 5 billion worth of football products this year owing to the then ongoing World Cup. Football-related sales were expected to stabilise at slightly above 1. 0 billion euros in 2007 before rising again in 2008, when the football European Championships take place.

It had already sold a record three million replica jerseys in the wake of the football event, including 1. 5 million jerseys of the German national team. At the previous World Cup in 2002, the company sold 1. 5 million federation jerseys and 250,000 German jerseys. It has also sold more than 15 million of its “Teamgeist” World Cup match balls, compared with 6. 0 million of the replica ball for the 2002 tournament. Adidas is an official sponsor, supplier and licensee of the World Cup and is sponsoring six national teams in the tournament, including host country Germany.

Three teams sponsored by Adidas – Germany, France and Argentina – reached the quarter-finals and France went through to the finals. Adidas estimated its global share of the soccer footwear market rose by 1-2 percentage points to 35-36 percent at the end of the first quarter. The company also announced that it has signed a long-term partnership to be the global sponsor for Euro 2008, which will take place in Austria and Switzerland. It has also extended its partnership with the UEFA Champions League to become the official ball supplier until 2009. BPO Boom

This booming industry has emerged as a boon for the hundreds of thousands of job-hunting Indian youth and aims to grow into Rs. 100,000 crore industry generating over 1. 1 million jobs by 2008. As we shall explain later, the Call Centre Crowd is characterised by high disposable income, which is spent on lifestyle products. Therefore, this constitutes a segment of increasing importance for adidas. ||| Retail ||| We visited retailers of leading footwear brands in Saket (South Delhi), and we gained an insight into the workings of the retail business.

Periodical meetings are held, where the company shows samples of its various models and products to the retailers. It is up to the retailers to decide which products they will stock in their shops, how and when they will put them on display and when they will be put up for sale. Thus, retail outlets of the same brand might well have different stocks of different products at the same time. Sales staff is another important factor. The Reebok retailer told us that Reebok does not allow retailers to hire their own sales staff without company approval. All sales staff must pass the company’s test before getting the job.

The same does not apply to adidas though. Retailers for this company are allowed to hire salespersons they feel will be effective. Training for salespeople, however, happens across the board. Reebok believes that investing in salespeople is a cause for their higher sales, and will be a source of sales growth in the future. Area Sales Managers (ASMs) are in constant touch with their retailers and actively take their feedback and suggestions. adidas mentioned that they occasionally employ mystery shoppers to get a better feel of the customer’s perspective.

The decor and ambience of the stores is under the control of the retailer, but still guided by the company’s direction. The number of posters within the store, the type of music, etc. generally conforms to company policy. ||| Competitors ||| Nike Nike, Inc. is a major American manufacturer of athletic shoes, apparel, and sports equipment. It is well known for its strong sponsorship agreements with athletes, leagues and federations, as well as many of the world’s top football clubs and national teams, including Manchester United, Arsenal F. C, Brazil and even India. Nike is the leading brand in sports footwear worldwide.

In India, we have seen that although its brand image is good, its sales are not. Nike products don’t compromise on quality, and are always full-price. They do not have post-season discount sales on footwear unlike adidas and Rbk. While no brand can neglect the highly price-sensitive consumer, Nike certainly does not target them. They use their higher perceived value to charge a premium for their products. Reebok Also known by its contraction Rbk, Reebok International Limited is an Anglo-American Fortune 500 company, now subsidiary of Adidas AG, and producer of athletic footwear, apparel, and accessories.

Founded in 1895, the family-owned business proudly made the running shoes worn in the 1924 Summer Olympics by the athletes, Harold Abrahams and Eric Liddell celebrated in the film Chariots of Fire. In August 2005, one of the company’s largest rivals, Adidas, announced that it would acquire Reebok for $3. 8 billion. The acquisition would increase adidas’ market share in North America and allow it to pose a serious threat to the world’s biggest maker of sports apparel, Nike. The deal was completed in January of 2006. We gathered from the retailers that in India, adidas and Reebok are still very much in competition with each other.

Both are trying to get to the #1 position presumably to garner as much market share as they can, and in the process take some from Nike as well. ||| Segmentation ||| For adidas the market segments in consideration are based on demographics, psychographics and behaviour. The demographic segmentation is based on age, gender, income and occupation. The market is segmented into three main categories based on age. These segments are age groups 1-15 years, 15-35 years and above 35 years. Based on monthly household income the market is segmented into below Rs. 15000 pm, Rs. 15000 to Rs. 0000 pm and above Rs. 50000 pm. The market is also segmented based on gender and occupation (which leads to differential disposable incomes). Psychographic segmentation is of great importance for the sport shoe industry. The higher income groups are classified based on their tendencies into four major categories; the innovators, thinkers, achievers and experiencers. As for the groups with lesser resources, they are categorized into believers, strivers, makers and survivors. Under behavioral segmentation an important user group is the sports and fitness conscious population.

This segment is further subdivided into gym regulars, professional and amateur athletes and even drawing-room sports enthusiasts. ||| Targeting & Positioning ||| Based on information gathered from retailers and adidas executives, it is evident that the major demographic segment targeted by adidas is the age group of 15-35 years. Very few footwear products are aimed at the female market. adidas targets households with monthly incomes greater than Rs. 15,000. Households with incomes between 15,000 and 30,000 rupees per month don’t buy a new pair as often as higher income brackets.

This is primarily because they use shoes as shoes and not as style/image products. It is important that when this group enters the market with an intention to buy, they should buy from adidas. To ensure this, adidas should sell durable, comfortable shoes at a reasonable price to this group. A crucial segment adidas has identified is the Call Centre Crowd. This segment is substantial in the metros and is expected to continue its rapid growth. It consists of image-conscious youth who are earning but are not yet independents. This means that their entire income is disposable. didas seeks the highest share of wallet from these consumers. Under psychographic segementation, adidas targets… ???Experiencers: young, enthusiastic, impulsive people who seek variety and excitement. ???Strivers: Trendy and fun-loving people who are resource-constrained but favour stylish products that emulate the purchase of those with greater material wealth. ???Image Drivers: The wealthy few who set the trends in their social circle. This is the segment responsible for the selling out of the Rs. 12499 adidas One – adidas’ most expensive shoe in India.

The company targets behavioural segments also: The sports and fitness conscious population is further subdivided into gym regulars, professional and amateur athletes and even drawing-room sports enthusiasts. adidas has specific products for each of these sub-categories. Cross-training shoes, running shoes, etc. are aimed at gym regulars and runners. Shoes are designed specifically for sports like cricket, football, basketball and now even adventure sports like rock-climbing. We can take a particular segment which we call Hardcore football. It refers to young footballers, passionate about playing the sport, with the means to pay.

A good example here would be adidas’ “Predator”, which sets the standard for football studs. adidas rightly sees themselves as the world leaders in football shoes. This is the only sport market in which they lead Nike. The brand has been synonymous with football ever since Adi Dassler invented the first adjustable rubber screw-on studs. An interesting fact: Every World Cup winning team before 2006 wore adidas football boots! Sport-inspired designs are incorporated into adidas’ lifestyle products for the sports enthusiast. For example, there is a shoe that is designed like an F1 driver’s shoe.

The heel is molded to fit into the floorboard of an F1 car and the sole is made of Goodyear rubber ??? the same rubber that F1 tyres are made of! Despite the effort put into design and manufacturing of the shoe, it is still meant to be a lifestyle product. ||| Recommendations ||| After analysing the data, we find that although adidas has a greater market share than its arch-rival Nike, it still lags behind in brand image. To tackle this problem, we will now show you what very few Indians have seen. Globally, adidas sells products under 3 divisions. www. adidas-group. com provides us with a clear definition of these divisions.

Divisional Strategy The divisional strategy has been developed to provide three distinct consumer segments with product and marketing concepts that fulfill their unique needs and desires. The three divisions are: Sport Performance Division Innovate to perform. This division is completely focused on the athlete who demands performance first and style second. Every sport is important, but the main categories of running, football, basketball, as well as the women’s segment, are the primary focus in terms of both footwear and apparel. Sport Heritage Division Celebrate Originality.

This division looks to our past for inspiration and direction for the authentic and contemporary products of the future. These are footwear and apparel products that clearly have a foundation in sport but are meant for lifestyle and street wear. Sport Style Division Modern Sportswear. The newest division is directed at the style and fashion conscious consumer who still desires the look and attitude of sport but in a new, more sophisticated interpretation. It is the foundation in sport that adidas and this consumer share that makes this division so exciting and full of potential for both footwear and apparel. didas can claim the prime position in the elite SEC, capturing share of both mind and heart if they introduce adidas Originals (also known as Heritage) and adidas Style. These are extremely up-market products: High profile designers of the likes of Stella McCartney and Yohji Yamamoto combine cutting-edge technology with unique styling and passion for sport. This will enable adidas to target the Achievers psychographic segment, i. e. “success, goal-oriented people who focus on career and family and favour premium products that demonstrate success to their peers. (Kotler & Keller) After acquiring a stagnating Reebok for 3. 8 billion pounds, adidas must prove the deal was more than a market share grab and integrate the companies smoothly. Considering that adidas themselves admitted that the female market is not catered to properly but still has great potential for growth, we think that Reebok should be used to tackle the relatively untapped women’s sport shoe market. It could additionally tackle the price-sensitive market. Reebok has previously grown on the base of an urban, street, hip-hop image.

This image does not conflict with any of adidas’ target markets and should thus be exploited to the full. adidas could benefit from taking a leaf out of Reebok’s retail book. Reebok does not allow retailers to hire sales staff. All sales staff have to have passed a centralised test. This ensures that Reebok hires employees that are equipped with the right knowledge and attitude towards service that is required to succeed in the Indian market. We know that service at the point of sales is a crucial element of the buying experience because 51. 46% of the respondents of our survey marked it as the single most important element.

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