On Jan. 3, 2007, Mr. John Brown, president of L. A. Gear, Incorporated, asked me to conduct a marketing audit of his company. The purpose for this audit was to review the company’s current marketing techniques, issues and problems the company must address and recommended improvements the company can make to improve its sales and profits. Following an in-depth review of L. A. Gear, the audit was completed and recommendations were submitted to Mr. Brown on Jan. 23, 2007.
The information used for this marketing audit comes from a variety of sources, including the Internet and University of Phoenix Library. Sources include datamonitor.com, Footwear News, Answers.com and Los Angeles Times.
These sources helped provide information to conduct a valid marketing audit of L. A. Gear. The information ranges in date from 1991 through 2006. Using this information, I was able to research the company’s progress, determine its current status and provide recommendations for the company’s future success.
The major findings for L. A. Gear are listed below.
A SWOT Analysis was performed for the company. The major strength is the company provides a large product line for all styles and occasions for female consumers between 18 and 44 years old. However, there is a weak consumer presence among males, childrenfor individuals age 55 and over. While able to spot trends in the market introducing appealing products to the customers, inflation causes a constant threat. Customers may not be able to afford the items they want.
L. A. Gear’s two major competitors are Nike and Reebok. The sales and market trends for each company is shown below:
59% of females purchase athletic shoes in the past year
52% of males purchase athletic shoes in the past year
Males prefer Nike shoes for performance
Females prefer Reebok and L. A. Gear for fashion
Reebok and L. A. Gear stress fashion over performance
While each of these companies shares a common objective to increase market share, they use different approaches to the market.
Nike provides testimonials of satisfied customers to prove the athletic performance of its shoes.
Reebok is introducing performance shoes along with its fashion lines. The company uses aggressive advertising “that targets Nike and emphasizes Reebok’s new performance image” (Case 5).
L. A. Gear targets its market by building product image and brand awareness. This company is also emphasizing athletics to attract more male customers.
The demographics for L. A. Gear include:
In the Northeastern and Midwestern regions purchases by females are higher than purchases by males.
In the Southern and Western regions more males purchased L. A. Gear footwear than females.
The younger females tend to buy athletic footwear from this company.
The majority of males tend to purchase Nike gear.
A strong presence in all regions for female customers
A strong presence in the 18-44 age brackets for female customers
A strong presence in the 25-54 age bracket for male customers
Female sales in each age bracket higher than male sales
A weak consumer presence among lower-income females-under $10,000 annually A weak consumer presence for children
L. A. Gear’s marketing objectives, strategies and tactics were evaluated. These are listed below:
Objectives- L. A. Gear must have clearly defined marketing objectives that are consistent with the corporate mission statement and objectives. For 2007, the corporation created three marketing objectives to target more male consumers and more children, while continuing to offer its line of athletic gear to females.
Build brand awareness by 50%.
Improve marketing and advertising to the male by 50%.
Increase marketing attempts to the children’s market by 25%.
Strategies-To build brand awareness, L. A. Gear is using different nontraditional marketing strategies. To show individuals what the brand is all about. Even though these two strategies are focusing on the male and female markets, the company needs a marketing strategy to target the children’s market.
Tactics- L. A. Gear realizes that the company must be innovative when it comes to marketing. One strategy L. A. Gear used to help build this awareness is the launch of its web site, http://www.Lagear.com, which shows its current product line. The web site visitors can view the current product line and understand the benefits of purchasing from the web site. Another tactic the company uses is a bus that tours its key selling markets. This bus holds entertainment events, offering product sampling, and so on.In this marketing audit, I also evaluated the 4 Ps-Product, Price, Place and Promotion. L. A. Gear is now offering a variety of products. Managers must know how customers feel about the quality of the athletic apparel they purchase.
L. A. Gear must improve on its pricing strategy if the company wants to gain market share. Even though the web site has a product line boasting athletic shoes in the $35 to $40 price range, L. A. Gear is introducing new styles that will retail 20 to 25 percent higher. L. A. Gear is focusing on other athletic segments such as cross training and running.
In addition to the L. A. Gear web site, customers can find the company’s athletic apparel in department stores such as Target, Wal-Mart and some more expensive stores like JC Penny, Sear and Kohl’s. Athletic shoe stores like Dick’s Sporting Goods also sell the L. A. Gear line.
The company must evaluate the current distribution channels to see how the athletic gear is selling. The executives after reducing manufacturing costs should consider using the discount stores to sell the athletic shoes and apparel
L. A. Gear is using different advertising and promotion strategies to gain customers and promote brand awareness. Different promotions are used to drive customers to the L. A. Gear web site. L. A. Gear also uses direct mail to its existing customers.
As each sales objective is met, L. A. Gear can set new obtainable objectives. This company has a long road ahead of them to become the Number One seller of athletic gear. Even though this company does exceptionally well in the fashion market, L. A. Gear must also concentrate on manufacturing and selling more performance shoes.
To help reduce manufacturing costs, I recommend that L. A. Gear outsource production to countries outside the United States. L. A. Gear can sell its high quality athletic apparel for lower prices.
At the conclusion of this marketing audit, I believe there are possibilities for L. A. Gear. I highly believe that this company, upon following my suggestions, will, in the near future, become the Number One manufacturer and seller of athletic footwear.
SWOT Analysis
Strengths
Producing footwear that symbolizes the Southern California lifestyle
Large product line for all styles and occasions
Producing athletic footwear that targets younger women
Weaknesses
- Weak consumer presence among males and children
- Weak consumer presence for individuals earning $10,000 and less a year
- Weak consumer presence for individuals age 55 and older
Opportunities
- “Able to spot trends in the market, while continuing to introduce products that appeal to its current customers””(Case 5).
- Advertising on cable channels such as MTV allows LA. Gear to reach target markets
- Young artists and designers help produce templates of shoes “designed with bright colors, multiple laces, inlaid rhinestones, stylish trims, leather accessories, and buckles” (Case 5).
Threats
- Intense competition
- Inflation/Recession
- Overflowing inventories
- Loss of sales in discount stores
Economics
The recession and inflation have impacted the economy. With the recent rise in cost of living, where income s do not go up, customers cannot afford the luxuries they want. What income individuals make must go towards the necessities such as housing, groceries and clothing. The recession “has prompted the company and many other suppliers to discount slow-selling merchandise” (Silverstein, 2001). This results in lower earning.
By reducing labor and raw materials costs, L. A. Gear is producing lower quality athletic footwear. For example, during a televised basketball game, L. A. Gear Sneakers, worn by a player, fell apart. Issues such as this hurt the image of the corporation.
It is not sufficient to respond just to the domestic economy. L. A. Gear must also consider the economy of other countries. This organization must think globally since people from other countries purchase athletic gear. L. A. Gear has a “growing international operation” (L. A. Gear Opens London Office) with a strong sales and marketing presence in Europe.
L. A. Gear has made adjustments to handle the economic issues. McAllister (1993) lists several actions that show that the organization can become “a healthier, more vital enterprise” (McAllister, 1993):
- Cuts in selling, general and administrative expenses
- Eliminating borrowed debt
- Reducing inventory
By eliminating and reducing costs, debts and expenses L. A. Gear can concentrate on innovating new products. However, by reducing inventory, L. A. Gear lost money in profits, because the corporation sold the footwear at highly discounted prices.
Trefoil Capital Investors L. P. suggests that the corporation should:
- Appoint a chief operating officer
- Create strategic planning and marketing departments
- Strengthen the financial and accounting departments
Demographics
The population and other demographic trends impact L. A. Gear in different ways. For example, in the Northeastern and Midwestern regions purchases by females are higher than purchases by males. However, in the Southern and Western regions more males purchased L. A. Gear footwear than females. Since more females purchase from this organization than males, the corporation can see why sales to males in these two regions were more successful than the other two.
Another trend L. A. Gear must look into are the ages of the majority of the customers. The younger females tend to buy athletic footwear from this company. However, as these individuals get older, they often purchase either Nike or Reebok. The majority of males tend to purchase Nike gear.
L. A. Gear marketers must understand the behavior factors of its customers. For example, people who purchase footwear from this company are looking for something different.
The demographic profile for L. A. Gear consists of the following:
- A strong presence in all regions for female customers
- A strong presence in the South and West for male customers
- A strong presence in the 18-44 age brackets for female customers
- A strong presence in the 25-54 age bracket for male customers
- Female sales in each age bracket higher than male sales
- A weak consumer presence among lower income females-under $10,000 annually
- A weak consumer presence for children
The behavior factors for L. A. Gear consumers consists of the following:
- Customers are looking for footwear that is comfortable
- Customers are looking for “attractive shoes that represent the wearer’s personality and lifestyle” (Case 5)
- Customers are looking for something different
For L. A. Gear to be the number one seller of athletic footwear, the company must concentrate on product innovation. L. A. Gear first must make more designs for the male customers. For example, in 2004 the company created the Catapult basketball shoe line. With this and other athletic shoes for males, L. A. Gear can target more male customers. The company is also looking into creating new lines of fashion shoes for females and children.
The future adjustment L. A. Gear is looking into is targeting the 25 to 44 year old female markets. Since this market has a strong consumer presence, L. A. Gear is planning new women’s apparel line. This will “include colorful ribbed tanks, hoodies and matching skirts and vivid athletic sets in cottons, nylons and microfibers”(Sarkisian-Miller, 2004).
Competition
L. A. Gear’s two major competitors are Nike and Reebok. “Although the shoes sold by Nike, Reebok, and L. A. Gear appeal to consumers of all ages, incomes, and both genders, there are significant differences between the customer profiles for the brands””(Case 5).
The sales and market trends are shown below:
- 59% of females purchase athletic shoes in the past year
- 52% of males purchase athletic shoes in the past year
- Females prefer Reebok and L. A. Gear
- Reebok and L. A. Gear stress fashion over performance
While each of these companies shares a common objective to increase market share, they use different approaches to the market.
Nike uses professional athletes in its advertising. This company also provides testimonials of satisfied customers to prove the athletic performance of its shoes.
Reebok is introducing performance shoes along with its fashion lines. The company uses aggressive advertising “that targets Nike and emphasizes Reebok’s new performance image” (Case 5).
L. A. Gear targets its market by building product image and brand awareness. This company is also emphasizing athletics to attract more male customers.
L. A. Gear must understand the weaknesses of both Nike and Reebok. Knowing these can help create opportunities for the company. One of Nike’s weaknesses is a fluctuating cash flow from operations. Even when these fluctuations are higher than previous years, this “injects a note of uncertainty into the company’s long term financial plans” (datamonitor.com). L. A. Gear can focus on this weakness by comparing its results on a year-to-year basis. When seeing a noticeable fluctuating cash flow, they can understand what caused these to fluctuate and plan accordingly.
A weakness Reebok faces is a danger of stockpiling products by retailers. Approximately 70% of this company’s orders are made in advance by its retailers. However, if the retailers order more athletic footwear that they can sell, orders will stop coming in, “leaving the company with large inventories and a decrease in sales” (datamonitor.com). Reebok recently faced this problem, when the company had unsold merchandise in inventory. Even after reducing this inventory by selling at a large discount, L. A. Gear lost money in profits. This is one lesson L. A. Gear learned and does not want to repeat again.
Another weaknesses L. A. Gear can capitalize on is there is a low market share in athletic apparel. The need for athletic footwear is slowing. With different competitors, L. A. Gear must include a “larger and more diverse range of product, keeping the market fast moving” (datamonitor.com).
While using the competition’s weaknesses to help create opportunities, L. A. Gear must also know the strengths of the Nike and Reebok. These can be considered as threats for the company. Both Nike and Reebok have growing sales revenues and a strong market position and brand. Many customers are familiar with the purchasers of athletic footwear. L. A. Gear must form a brand image that shows “strong product recognition, customer loyalty and a significant edge over its competitors” (datamonitor.com).
Both these competitors have excellent strategies. Nike’s strategy involves the company out-sourcing to developing companies to manufacture shoes and gear to save costs. Reebok uses marketing campaigns to promote its products. One example, “Reebok created a marketing campaign entitles Reebok’s “Sounds and Rhythm of Sport,” which fuses music and entertainment with sports and performance” (datamonitor.com). Reebok must look into its own manufacturing and marketing strategies to determine what changes need to be made. Without improving on these, L. A. Gear will continue to be a distant third in athletic marketer of athletic footwear and apparel.
The major successful adjustment L. A. Gear made is using licensing to strengthen the brand and achieve growth. This company is adding a diverse product line along with the athletic footwear line. Ellis (1999) lists three licensees that can help increase the company’s future sales, allowing them to keep up with the competition:
- Jerry and Leigh (t-shirts, knits, jackets and fleece for women and girls)
- Farash & Robins )digital and analog watches for men, women and children)
- Kilgore Hosiery (sport and fashion hosiery for infant and adult sizes)
Marketing
Objectives
L. A. Gear must have clearly defined marketing objectives that are consistent with the corporate mission statement and objectives. For 2007, the corporation created three marketing objectives to target more male consumers and more children, while continuing to offer its line of athletic gear to females.
- Build brand awareness by 50%.
- Improve marketing and advertising to the male by 50%.
- Increase marketing attempts to the children’s market by 25%.
These marketing objectives aligns with the company’s mission of making a profit by manufacturing and selling athletic footwear and gear. These can be evaluated by comparing marketing results from the previous years’ marketing attempts. Marketers can understand what worked and what did not work on previous marketing campaigns. The marketers must evaluate these objectives on a monthly throughout this year. This way they can see if they will be able to meet the objectives and make modifications as needed, since market conditions will, most likely, change. Marketers must be flexible and willing to make adjustments.
Strategies
To build brand awareness, L. A. Gear is using different nontraditional marketing strategies. “LA Gear has a high level of awareness…The problem is people don’t know what the brand is all about. We wanted to create an image to show we’re back” (Johannes, 2005).
Another marketing strategy L. A. Gear used was not to use superstars to promote its product line. Since an endorsement budget was set at $8 million dollars, the company decided that it “would no longer spend mammoth amounts on superstar sponsors” (Answers.com). They would use retired athletes such as Joe Montana and Kareem Abdul-Jabbar to endorse athletic shoes for men.
Using these two strategies will be helpful in reaching each objective. The marketers must take the economy into consideration, since the recession is a threat for this company. However, with the launch of its web site, L. A. Gear can expect more sales when customers have the convenience of shopping at home, rather than using gas to drive to a store to purchase the athletic gear. Even though these two strategies are focusing on the male and female markets, the company needs a marketing strategy to target the children’s market.
Tactics L. A. Gear realizes that the company must be innovative when it comes to marketing. Using tactics similar to those of Nike and Reebok may not attract the customers they need.
One strategy L. A. Gear used to help build this awareness is the launch of its web site, http://www.Lagear.com, which shows its current product line. The company offers incentives such as sweepstakes for gift certificates apparel and exercise equipment. The web site visitors can view the current product line and understand the benefits of purchasing from the web site.
Another tactic the company uses is a “bus that tours its key selling markets (bus holds entertainment events, offering product sampling, etc.)) (Delany Report, 2006). This tactic works, however, the company should plan on adding more buses to make this a nationwide campaign.
As in establishing the marketing objectives, the marketers must be flexible as make modifications as needed. They must monitor these tactics and see how they are working. Since market conditions are constantly changing, they may have to make changes to the existing tactics and add new tactics to attract more customers.
4 Ps
Product L. A. Gear is now offering a variety of products. This includes footwear, fitness apparel and watches. Another company, “Kidfusion is producing a collection of L. A. Gear swimwear and related apparel for kids” (Answers.com).
The only way to determine if the current product line is appropriate is by getting customer feedback. Managers must know how customers feel about the quality of the athletic apparel they purchase. They also must measure feedback from why consumers do not purchase a certain product-it may be it costs too much or it may not be attractive to the consumer. This allows the managers to determine whether to modify or discontinue a product. By knowing how satisfied the customers are, and what they are looking for in a product-managers can plan to add new image building products in the future.
Price
L. A. Gear must improve on its pricing strategy if the company wants to gain market share. Even though “Goldston said 95 percent of the LA Gear line will retail for less that $65” (McAllister, 1993), the competitors Nike and Reebok offer a majority of their athletic shoes for under $50. Even though the web site has a product line boasting athletic shoes in the $35 to $40 price range, L. A. Gear is introducing new styles that will retail 20 to 25 percent higher. L. A. Gear is focusing on other athletic segments such as cross training and running. The brand has also set its sights on rising the quality of its products by integrating higher-grade materials and improved detailing into its designs…This will justify the higher price tags and consumers would recognize the price-value equation” (Niemi, 2006).
While these shoes may be made with higher quality materials than the Nike and Reebok lines, the consumers may still believe that this may be too expensive, especially when they can purchase athletic shoes from the competitors at lower prices.
To gain the competitive advantage, the marketers must make a strategy to lower the manufacturing costs. This way they can sell their high quality shoes at a lower cost and still make a profit.
Place
In addition to the L. A. Gear web site, customers can find the company’s athletic apparel in department stores such as Target, Wal-Mart and some more expensive stores like JC Penny, Sear and Kohl’s. Athletic shoe stores like Dick’s Sporting Goods also sell the L. A. Gear line. However, when the company faced the problem with their inventory filled with unsold merchandise, the company “stopped selling shoes in discount outlets, swap meets” (Case 5) and other discount stores.
The company must evaluate the current distribution channels to see how the athletic gear is selling. They must abandon then stores that are not making sales. The executives after reducing manufacturing costs should consider using the discount stores to sell the athletic shoes and apparel
Promotion
L. A. Gear is using different advertising and promotion strategies to gain customers and promote brand awareness. As stated before, “LA Gear has a high level of awareness…The problem is people don’t know what the brand is all about” (Johannes, 2005).
Different promotions are used to drive customers to the L. A. Gear web site. The most popular one is using sweepstakes where prizes include exercise equipment, certificates for gyms and health clubs and LA Gear apparel and footwear. To advertise this campaign, individuals distribute postcards and stickers to consumers. LA Gear also uses direct mail to its existing customers.
Sales
“Executives are once again seeking to return the brand to its glory days, hoping to expand sales by 15 percent to twenty percent” (Niemi, 2003). By having these objectives, the sales force will know whether they will be able to meet or achieve these each year.
The sales teams attend training each month so when new products are introduced, they understand the benefits of each new product. This was they can stress the benefits to the distributors.
L. A. Gear must provide incentives to the sales force so that the objectives can be met each year. As each sales objective is met, the company can set new obtainable objectives.
Recommendations
L. A. Gear has a long road ahead of them to become the Number One seller of athletic gear. Even though this company does exceptionally well in the fashion market L. A. Gear must also concentrate on manufacturing and selling more performance shoes. Executives and marketers must be able to “spot trends and market products to men as well as it does for women” (Case 5).
L. A. Gear must “have a strong product design and marketing position…in more than one athletic shoe market gender segment” (Case 5). Therefore, I recommend that this company executive create more advertising strategies to promote performance shoes for males. Using more advertising and sales promotions will increase consumer demand and help build a “unique brand image” (Case 5).
To help reduce manufacturing costs, I recommend that L. A. Gear outsource production to countries outside the United States. Production costs by using subcontractors in countries such as China, Mexico and Korea will be lower than using subcontractors in the United States. L. A. Gear can sell its high quality athletic apparel for lower prices.
Using these recommendations, L. A. Gear can see a more productive and profitable future.
References
1991. L. A. Gear opens London office. Footwear News. 47(41)22. Retrieved 01/13/07 from Thomas Gale Power Search.
1991. Trefoil proposes changes at L.A. Gear (Trefoil Capital Investors L. P. is investing in L. A. Gear Inc. and proposing management changes. WWD. 162(22) Retrieved 01/03/06 from Thomas Gale Power Search.
2006. Driving Gear. Delaney Report. 17(11)4. Retrieved 01/08/07 from Business & Company Resource Center.
Case 5. L.A. Gear. Retrieved 12/19/06 from University of Phoenix rEsource
Ellis, K. Building the brand through licensing. WWD. 31-33. Retrieved 01/05/07 from Business & Company Resource Center.
http://www.answers.com/topic/l-a-gear-inc. Retrieved 01/11/07 from the Internet.
http://www.datamonitor.com. Company financials. Retrieved 01/17/06 from Univesity of Phoenix Library database.
Johannes, A. 2006. LA Gear launches interactive campaign, sweeps. Promo. Retrieved 01/08/07 from Business & Company Resource Center.
McAllister, R. 1993. L. A. Gear sees brighter future. Footwear News. 49(16)1-2. Retrieved 01/12/07 from Thomas Gale Power Search.
Niemi, W. 2003. LA Gear seeking stronger spring sales with more diverse products. Footwear News. 4-5. Retrieved 01/15/07 from Business & Company Resource Center.
Sarkisian-Miller, N. 2004. Pony, LA Gear jump into apparel. WWD. 10-13. Retrieved 01/02/07 from Business & Company Resource Center.
Silverstein, S. 1991. L.A. Gear Says loss in quarter to Top $4 Million retail: The Athletic shoe maker cited the recession, which has prompted discounts on Slow-selling merchandise. Los Angeles Times. (1). Retrieved 01/02/06 from Proquest database.
