Sizing Up The Active Wear Market Marketing Essay

Sizing Up The Active Wear Market Marketing EssayIn the wake of falling gross sales and change magnitude pro buy the farm margins, Harrington Collection is evaluating the opportunity to expand into the high- move upth active-wear market value. The idea of expanding into lower tolld fashion result lines was not new to the company (Tedlow Beckham 2008) which was renowned for its sophisticated high signifier roots. However, after three years of consecutive lacklustre sales and margins Sara Huey, Vice President of Strategic Planning and her team have to take a vital look at the active-wear product line option as a possible solution to reverse the companys negative performance tr sack. To come up with expert decision Harrington Collection executives would have to analyze the financial implications of the opportunity, assess trade and competitor reactions, consider the risks, and determine whether they have the capacity to successfully launch and sleep with the new product line . This basically means that they allow for have to assess consumer behaviour, product introduction and financial implications.Consumer behaviourConsumer purchasing look refers to the buying behavior of final consumers (individuals households) who buy goods and services for personal consumption. This is generally affected by consumer culture, social, personal and psychological characteristics. Consumer products be frameed to be attractive to consumers, so that they receive encouraged to buy. This makes it mandatory for any brass instrument to understand and manipulate product attributes so as to positively influence consumers to buy. However, buying behavior is excessively a function of the competing products in the marketplace and the rat marketing strategy applied by that given firm. In order to design the best product, it is necessary to understand not just the physical and chemical nature of the product, but also the psychology of consumers and the sociology of consume r groups.Harrington Collection is a company with decades of expertise (Tedlow Beckham 2008) that has an excellent relationship with its retail trade (Tedlow Beckham 2008) thitherfore their knowledge of consumer behaviour is high. Moreover we atomic number 18 told that the company also commissioned surveys and focus groups which revealed that their target customers showed considerable interest in buying active-wear clothing (Tedlow Beckham 2008). The push for introduction of a new product line is also supported by three factors that determine consumer behaviour i.e. loyalty, sociology and psychology.Loyalty is defined as that tendency for consumers to stick to the same products. Loyalty is also manifested through what is referred to as the memory effect, which represents that tendency of consumers in returning to products they had previously employ, after seek virtuallything new they then did not like. The focus groups commissioned by Harrington Collection showed that a subse t of Harrington customers who had been loyal throughout their cargoners were interested in something fresh and comfortable that would fit their active lifestyles (Tedlow Beckham 2008).On the other hand the sociology factor was heightened by the popularity of active-wear among Hollywood celebrities. Sociology in this context implies how one persons buying is influenced by that of others. We are told that this trend toward much than contemporary athletic fashions resulted in rapid growth for firms that offered these lines. Harrington Collection estimated that over seven and a half million active-wear units were sold in 2007 with the projection that this would grow to 15 million by 2009 (Tedlow Beckham 2008). Moreover by 2009 it was expected that 40% of the 15 million buyers would prefer the better category which is what Harringtons nada division specialise in. brawninesss market expertise could come in handy in deploying the active-wear better product line.Psychology covers wha t, and how, aspects of the actual items on the shelves influence people to make their choices, perhaps buying something different from previously. Most firms would use advertising to influence consumer psychology. Harrington on the other hand we are told was known for its top in-house design staff, extensive home(a) advertising campaigns and its exceptional quality and styling (Tedlow Beckham 2008). Plus, after analyzing the better sets of active -wear that were in the market Harrington knew that the standards they had could not allow them to produce such poor quality products. wherefore a launch of a product line in active-wear could provide Harrington with an opportunity to display their master key products to the low end consumer market and thus quickly increase their market share and probably pull though a customer lock-in.Also we undersurfacenot ignore the fact that introduction of a new product onto the market by as renowned a fashion company as Harrington has the abili ty to change the way consumers, or at least some of them, view the other demoed active-wear brands. Harringtons quality and styling might draw attention to some quality which was not previously much regarded by consumers in this category, or it might make people give different weightings to the established products when making their decisions.If Harrington Collection decides to go ahead with the idea to add an active-wear product line to its lively business then they would have to model their target consumers behavior. They will need to look at the orthogonal stimuli that assist the consumer to make the decision to buy their product. An external stimulus that Harrington Collection has govern influence over is the marketing mix product, place, price, promotion, people, change and physical evidence.Product is the active-wear itself and here decisions regarding the features of the product, quality level, product lines and branding will be addressed. Place caters for decisions on c hannel type, service levels, managing the channels, transporting and delivering, market exposure, intermediaries, locations and stores. Pricing in this lawsuit is vital considering that the target market is price sensitive and there are other large competitors such as Liz Clairbornes Juicy Couture. Decisions regarding the discounts to be allowed, allowances and whether pricing will change with product life cycle will also depend on the breakeven analysis that we shall be looking at later in this paper.Promotion decisions regard the communications mix, the type, qualifications and number of salespeople needed the undeniable media, sales promotion, and publicity. People decisions regard the type of customers, the customer care personnel and their knowledge, qualifications and motivations for participating during the service encounter. The bear upon factor looks at the length of the movement, the activities that can be through with(p) during the process and technologies that will facilitate the process and finally, physical evidence is concerned with decisions on the types of tangible evidence available to customers.In spite of all the theories and models make with respect to consumers it is still acknowledged that the buyers decision process is a black box that even with knowledge of characteristics that affect consumer behaviour.Product IntroductionThe introduction process of a new product into any market is highly complex. It requires ability to coordinate work of numerous teams within an presidency, as well as with the elongate network of partners and suppliers. The new product in here would be the active-wear apparel (hoodies, tee-shirts and pants). One aspect of the complexity is derived from the use of several different new parts, from each one of which may need unique design, specifications, reading, and other specialized conditions. This complexity is compounded further by the myriad of tools used during the new product introduction (NPI) proces s e.g. computer aided design (CAD) applications, project management tools and enterprise resource intend (ERP) systems.A typical new product development and introduction process would consist of three core phases 1) product definition, 2) product development, prototyping, and testing, and 3) product build and ramp to production. Each of these phases requires effective project management to ensure that at the end we have optimized productivity and results. In modern best-in-class NPI processes, a collaborative show up is encouraged, that is, where manufacturing integrates into the design phase early, ramping up the manufacturing effort as the design progresses to production. Engineering continues to enrol even in the production phase to ensure the design is correctly built (Arena 2007). This joint approach shortens new product introduction time to market and enhances product quality. However, it also necessitates greater levels of communication and coordination amongst the project teams.The first phase in the new active-wear apparel introduction would be product definition. At this stop the design and marketing teams come up with new ideas either from market research. The NPI team for Harrington Collection would then perform technical feasibility studies and business result analysis (which we shall look at later in this paper using the breakeven analysis). This is duly followed by the creation of initial market and product requirements. These initial planning documents outline the objectives and goals for the new product introduction (NPI). The real challenge at this stage is in the selection of the right ideas and managing them to commercial success. It is advisable for organizations to develop a disciplined portfolio management process that they shall be using to aid them in consistently choosing the better product ideas and NPI processes to bring better products to market, before their competitors do so. by and by product definition we proceed with the product development phase. How this phase is managed generally determines how quickly the innovative idea reaches the market. New product development is complex partly due to the huge number of participating groups required to collaborate e.g. the design team, sourcing, quality control and others. These teams carry out hundreds of activities, such as design, prototyping, sourcing, quoting, testing, manufacturing and planning. This situation could be worse for global outsourced players because of the geographical distance and the extension of the teams beyond the boundaries of a single company.To deal with such a complex team environment the organization would need to set up a centralized and divided project and data management infrastructure, so that cross functional and cross enterprise teams are able to access the latest design files, work instructions, change orders, task list, and project plans as and when they are revised. The idea that Harrington Collection should pursue thi s product development under its Vigor division is heavily supported by this point. Being a division that is already running we would expect most of the infrastructure required for data management and information sharing to be in place in contrast to having to set up everything a new in the case where a new division is formed to handle this new product line.Also, with the increasing environmental and regulatory compliance pressures from different countries where the active-wear would eventually be sold, an organization at this product development phase must seek cost-effective solutions to meet product and process compliance requirements such as Restriction of unsafe Substances (RoHS), Global Best Practices for Clothing Manufacturers and ISO standards. Harringtons is advantaged here since it has not outsourced its manufacturing. In an outsourced environment, companies need to assess compliance risks of all outsourced activities, implement necessary controls, and create documentation to establish an audit trail. This adds to complexity and has high cost effects too.The final key phase for NPI is the production phase. To ensure that manufacturing is efficient and cost-effective all teams (operations, manufacturing, testing, component manufacturing and design engineering etc.) must work together to ensure that a given design is manufactured to correct specifications. The earlier teams begin to collaborate the better furnished they will be for a rapid production ramp.According to Arena to facilitate efficient and accurate communication of product bills of materials (BOM), companies must ensure that the product record is available to all involved in the production and change implementation, including internal groups, contract manufacturers, and suppliers. Providing contract manufacturers and suppliers with selected visibility to centralized product record allows them direct access to the most recent changes. It removes the data communication bottlenecks that resul t from relying upon individuals and reduces the potential costly revision errors (Arena, 2007, p5).It is our opinion that having the product line run under Vigor division would be more efficient and effective than establishing a new division to do it because it has a seasoned team, supportive infrastructure in place and Harrington Collection could more easily develop a cross-functional product development process which is important to ensure the success of the new product introduction (NPI). From the shared project and data management infrastructure within Vigor division teams involved in the NPI would be able to access the latest project plans and tasks that are related to parts, sub-assemblies, and assemblies. It is also easier to ensure that project revisions are accessible to everyone involved.Demand and gainability Analysis TemplateTable 1 Start up be tableStart Up costAmount ($)Start-up Costs knickerbockers Plant1,200,000.00Start-up Costs Hoodie and Tee-shirt Plant2,500,000 .00Equipment Pants Plant2,000,000.00Equipment Hoodie and Tee-shirt Plant2,500,000.00Launch PR, publicizing2,000,000.00Fixtures for Company Stores*2,500,000.00Total Start-up Costs12,700,000.00Annual Depreciated Start-up Costs**2,540,000.00*For Fixtures for Company Stores we assumed that just the exclusive Vigor stores would be stocked with active-wear apparel. The company owned stores are 120 in come but exclusive Vigor stores are 50 (Tedlow Beckham 2008). Fixtures for each Company Store would cost $50,000.00 (Tedlow Beckham 2008). The figure obtained above was thus obtained by multiplying $50,000 by 50 stores.**We are told that all launch fixture, plant start-up, and equipment be would be depreciated over a five year period (Tedlow Beckham 2008). We used the straight-line depreciation methodTable 2 total fixed operating costsAnnual Ongoing Operating Costs FixedOverhead Pants Plant3,000,000.00Overhead Hoodie and Tee-shirt Plant3,500,000.00Rent Pants Plant500,000.00Rent Hood ie and Tee-shirt Plant500,000.00Management / Support1,000,000.00Advertising3,000,000.00Total Fixed Operating Costs11,500,000.00Table 3 total direct covariant costsDirect covariant CostsHoodie ($)Tee-shirt ($)Pants ($)Sew and Press3.252.002.85Cut1.150.400.70Other Variable Labor3.202.403.05Fabric9.102.207.50Findings3.850.502.30Total Direct Variable Costs20.557.5016.40Table 4 total unit direct variable costDirect variable costs translated into unit costHoodie ($)Tee-shirt ($)Pants ($)20.557.5016.40multiply by0.501.501.0010.2811.2516.4037.93Table 5 Vigor unit Retail PriceSuggested Retail Unit priceHoodie ($)Tee-shirt ($)Pants ($)100.0040.0080.00220.00Wholesale unit price = 50% of Retail unit price = $110Table 6 total variable costs as % of Wholesale PriceTotal variable costs as % of wholesale priceworking capital requirements3.00sales commissions4.00inventory costs1.00bad debt0.70 conveyance of title0.24miscellaneous0.159.09Table 7 total variable costs per unitIndirect variable costs Wholesale unit price110.00Total variable costs as % of wholesale price9.09Indirect variable costs per unit10.00Direct variable costs per unit37.93Indirect variable costs per unit10.00Total variable costs per unit47.92Table 8 contribution per unitContributionWholesale price per unit110.00less(prenominal) total variable costs per unit47.92Contribution per unit62.08Table 9 Breakeven unitsBreakevenFixed annual costs (operating and depreciated start-up)14,040,000.00 Contribution per unit62.08Breakeven Units226,174.37Table 10 Vigor active-wear approximate revenueVigor active-wear approximate revenueTotal units sold in 20077,500,000.00Vigor Market share %7.00Vigor total unit sales for 2007525,000.00Vigor retail unit price220.00Approximate Vigor revenue for 2007115,500,000.00Table 11 Profit MarginProfit MarginRevenue115,500,000.00less fixed annual costs14,040,000.00less total variable costs (Vigor total unit sales for 2007 x total variable costs per unit)25,160,100.00Profit before tax76,299 ,900.00Profit margin before tax %66.06Making the DecisionBased on the breakeven analysis we see it would be prudent for Sara Huey to approach the board and advise them to embark on the new active-wear product line because within a year Harrington Collection would have been able to not only breakeven but make a pre-tax profit of $76.3 million. Secondly we believe that the new product line of active-wear should be folded within the Vigor division so that it can benefit from the already existing infrastructure and sales channels. Moreover, like Myers suggested, the active-wear line would be a perfect add-on to the Vigor division because it also concentrate on better wear plus fewer than 2% of respondents in their customer research survey felt that a less-expensive active-wear line would cheapen the brand (Tedlow Beckham 2008). This is a big thumb up from the most important public for the Harrington Collection, i.e. the consumer. We have also seen from the consumer behavior analysis t hat Harington Collection has got a lot more to gain from introducing the active-wear line for example we are told that the aging baby boomer population wanted clothes that would not make them feel old. In addition to that, another survey showed that 10% of customers purchasing apparel in the $100 $200 price range would buy an active-wear set if they could get one with superior styling, fabric and fit, which is what Harrington Collection was intending to manufacture and sell.