Overview of Patagonia

Patagonia is a designer of clothing and gear for many outdoor adventurous sports, such as skiing climbing, surfing, snowboarding, etc. Patagonia was founded in 1973 and is based in Ventura, California. The Patagonia company that exists today grew out of a small company that used to make tools for climbers. Patagonia’s values reflect the minimalist style promoted by many of the athletes of those outdoor adventure sports, as evidenced by their simplistic products and brand. Patagonia also works towards helping the environment by donating their time and service and giving 1% of their sales to various environmental groups. Patagonia also uses only organic cotton in their clothing, in an effort to reduce the harm from the pollution that is created as a byproduct.

Why does Patagonia need to be repositioned in the market?

Patagonia markets their products towards people who enjoy the outdoors, but we believe that because Patagonia has been marketing strictly to the outdoorsy folk, consumers who are not as outdoorsy are not aware that Patagonia has a decent size selection of casual-wear clothing. Instead of restricting their marketing to those with a passion for the outdoors, they could remove that restriction and potentially grab a share of a much bigger market with their casual wear products.

Economic Climate

The Hiking and Outdoor Equipment Stores industry did $423.35 billion in 2016, and is expected to do $424 billion in 2017. Since 2012, the annual growth rate has been 1.3% and it is expected to continue at that rate for the next five years. Patagonia’s market share for this time period has risen to 12.7% over the past five years (IBISWorld US).

A big part of this growth has come from the rise in participation in outdoor activities. In 2013, participation is up 17% for people age 6-24 and up 11% for people over 25. Spending on recreational activities moves closely in line with per capita disposable income. Patagonia has become a major player in this industry over the past five years growing 15.4% in that time. In 2016, they did $518.7 million in revenue (IBISWorld US)

Competition

The competitive landscape for the industry is concentrated, with three larger companies taking a large market share and the brand loyalty of many industry customers.

Technological

Most high-end retailers do research and development to make outdoor gear stronger, better, and last longer. LL Bean has recently released innovative outdoor wear that has been in the headlines for the industry. Most of VF Corporation’s brands make new innovative gear every year.

Patagonia is a leader in innovative usage of earth friendly materials. Their website has a page dedicated to all of materials they use in their products. Patagonia recycles nylon, polyester, down, and wool. Yulex and Tencel Lyocell are two innovative sustainable materials that Patagonia uses in their products to keep environmental impact minimal. Patagonia has also developed multiple materials on their own, such as Primaloft Insulation, which maintains its high level of insulation even in wet conditions. The Portable Self Inflation vest is designed to be un-encumbering for daring surfers, but easily inflated should they be in danger. Patagonia is still testing the vest, but it is an example of their creativity and innovation in their industry.

Regulatory

Most states have retail or clothing sales tax, which vary by state.

Employees/Labor

Patagonia employes over 2,000 people between retail employees at a number of locations, corporate headquarters in Ventura, CA, headquarters in a few different countries, as well as “brand ambassadors.”

According to IBISWorld US, wages in Patagonia’s industry was 10.5% of revenue in 2016.

Social-Cultural

A quote on bass pro shop, one of the biggest names in the outdoor industry says, “Johnny’s passion for the outdoors and his feel for the products and shopping experiences desired by outdoor enthusiasts helped transform the industry. Bass Pro Shops locations are more than just stores — they are true destination experiences that draw more than 120 million visitors annually. Each location is heavily customized to reflect the character of the region.” Bass pro shop wants to make each location unique to your area. There is always that outdoor feel, but every location is made to connect with the majority of customers that will come to that store. Instead of forcing a culture on you they utilize the culture that is already there.

Ecological

Patagonia is number 5 on a list of 11 companies that are best for the environment. “Founded 41 years ago by outdoor enthusiast Yvon Chouinard, who used to make climbing tools in his Ventura, CA blacksmith shop, the company pledges that three quarters of its materials are “environmentally preferred,” meaning they are recycled, organic or otherwise environmentally sound. The company’s environmental record stretches back to the early ‘70s when it urged climbers to use nuts and runners instead of pitons, which damage rock. In 1985 it started a practice of gifting 1% of profits to environmental preservation groups. Since 1995, employees have gotten up to two months off with full pay to volunteer for an environmental organization.” Clearly it is important for the company to hold itself to a high ecological standard. This is shown not only in their products, but also by how it is taught to its employees throughout the organization. It seems to be an important part of Patagonia’s past, present, and future.

Complete and discuss a SWOT analysis.

SWOT Analysis

Strengths:

Image. Patagonia is seen as a trustworthy and charitable company. It is also an American company. Those factors can be big in American markets.
Very high quality and durable products.

Weaknesses:

Sales are going to be seasonal, because they make mostly outdoor clothing for colder weather.
Their products are generally pretty expensive, so unattainable for some customers.

Opportunities:

Non-cold-weather markets. For example: nobody in Los Angeles is in the market for anything from Patagonia unless it is for a trip somewhere else. There are entire markets who have no interest in Patagonia clothing, simply because it’s usually warm where they live. They are starting to create more warm weather clothing, but it is not really well known.
Less expensive clothing. Most outdoor brand companies have products at around a similar price range. If they could make some products that undercut everyone, there could be an opportunity to capture sales.
International markets: there is always an opportunity there.

Threats:

North Face: makes similar outdoor clothing at a similar price point. North face is much more well-known. They have a better website. Their product mix has expanded more from just outdoorsy clothing than Patagonia has, and they have been successful.
Nike: Not known for outdoor cold weather gear, but is the most well known clothing company in the world. Many people are going to know and already trust this brand. They make products in every category, and although they don’t have as many niche outdoor products as Patagonia, they compete with them on some of Patagonia’s major items like jackets. Price point is similar to Patagonia as well.
Marmot: outdoor clothing brand, just as focused on that category as Patagonia. Prices are again similar. They are probably less known than Patagonia, but they are present in major retailers like REI.
L.L. Bean: pretty well known. Have more of a physical presence because they have their own stores. Most of their outdoor clothing is a similar price to Patagonia, but they do have some cheaper items.

You are required to provide a SWOT matrix.

SWOT Matrix

Patagonia

Opportunities

External Positive

Threats

External Negative

Strengths

Sturdy products

Syrupy Appeal

Sustainable Business Practices

Prominent Brand Image

Strengths

The durable products are in the interest of the Patagonia. The management can increase its outdoor clothing line to attract the customers and enhance the visibility of the long-term products

The brand appeal can be enhanced through consideration of different social media channels

,,To sustain in the market, this is a great change to increase the product line and depict penetration pricing

The company can also aware people regarding the significance of outdoor activities to boost the brand image

Threats

Long term products are in danger due to the competition, as business people who are outdoor enthusiast can convert themselves

The appeal is necessary to sustain, as many companies have reasonable merchandises.

The business sustainability contradicts with the impaired economic conditions in the United States, which can revert the outdoor enthusiast into the offices to save the money

The downsizing in different organizations may restrain the target customers to enjoy the outdoor activities. Thus, this can decrease the brand image, as products are highly priced.

Weakness

Limited Products

Expensive for customers

Lack of advertisement

Limited outdoor activities

Opportunities

Due to the enhancement of the outdoor enthusiast product line, the management can encounter this issue.

Segments in the target market can help the company to produce products at low rates.

People who contain over $60,000 income can have access through the advertisement on different social media channels. In addition, the management can attract them through the concrete jungle activities.

Again, the concrete jungle activities will eliminate the limited activities issues, as new plan and promotion seem worthy. Through the natural environment visualization, the company can enhance the activities.

Weakness

Due to the differentiation and targeting along with intense product line, people who contain high income (over $60,000) can have different alternatives.

Due to the sluggish economic conditions, the income level of the customers will go down. It may decrease the attraction and sales in a country.

People (28 to 45), the outdoor enthusiasts see the products and services on social media channels. Thus, the lack of advertisements may decrease the sales.

Due to the limited customers, which are business people containing reasonable income, the limited outdoor activities can lead towards the limited revenues as compared to the other companies in the market.

Communication objectives of repositioning the campaign

Communication objectives:

To promote effective communication in the field of marketing through advertising, public relations, sales promotion, personal selling and Internet marketing

To promote a product or service through advertising: In metropolitan areas where people do a lot of walking: billboards, street, and bus advertisements would be very effective. They are not very expensive and, if spread well throughout a city, will be impossible for someone to not see one if they go outside.

To promote Public Relations (PR) in the market: Patagonia’s charity and sustainable processes have become very well known through their public relations. For this new less outdoorsy market that approach probably will not capture as many sales as it would with the outdoorsy. Our plan is to not abandon sharing those aspects of our company completely, but slightly reduced. We are focusing on a younger market, and younger people tend to care more about the environment than older people, so there is a good chance it would still help sales. Instead, we can focus more on the good quality of the clothing.

To promote sales of products and services: Awareness is very low right now, so we feel that a sales promotion would be ineffective.

To facilitate direct marketing: For direct marketing, we believe that handing out fliers in the city would be effective. It would give a short paragraph about Patagonia, and how they do not only make outdoor rugged gear, and then show some of their more casual clothing. Maybe make the flyer out of compostable materials or something like that, as another way to get our message across.

To promote personal selling: As far as personal selling, we think the only place we could practice that is in stores where it would be sold. We would have to make sure that the employees know some background information on our company and products, and can inform the customers coming into the store.

To improve internet marketing: Internet marketing is very effective with a younger population. Ads highlighting our causal products on websites like YouTube, and Facebook, and Pinterest would be pretty effective and less expensive than full TV advertisements. Ads would direct customers to our website.

-Our goal is to increase awareness with people who have not heard of Patagonia because their lifestyle keeps them outside of Patagonia’s current target market. Their current target market is outdoor enthusiasts, age 28-45 years old, with an annual income over $60,000. Patagonia already has a relatively decent sized selection of clothing that is not just for rugged outdoor use, like pants and t-shirts, but most people who have not been on the Patagonia’s website are not aware. The aim is to increase awareness in the market of non-outdoorsy people, ages 20-40’s with an annual income over $60,000.

-Our campaign is aiming for 90% awareness of Patagonia’s range of offerings in our new target market. It is our estimate that that among our new target market, the awareness of Patagonia’s more casual wear is less than 10%, so our campaign is aiming for around an 80% increase in awareness. Although it is a large increase, it is attainable with a well thought out IMC strategy. In order to measure awareness, a survey of the market would be taken before we start our new marketing, and a year later.

-Our financial objective would be to see a 5% increase in sales above previous sales projections in our first year. According to IBIS World, 2017 projections are roughly $520.7 million. In part five, we hope to nail down costs associated with new IMC plan to see how this would affect Patagonia’s profits for that year.

We believe this objective is attainable as they have not yet put forth marketing efforts to attract this new audience. So we do believe by increasing awareness about Patagonia’s products as something for them, we can attract a small part of that market.

Patagonia’s Sales 2011-2016

Year	Revenue	Percentage Change	Operating Income	Percentage Change
2011	$253.4 M	N/A	$21.1 M	N/A
2012	$292.7 M	15.5%	$24.4 M	15.6%
2013	$408.7 M	39.6%	$29.7 M	21.7%
2014	$446.1 M	9.2%	$36.3 M	22.2%
2015	$474.1 M	6.3%	$42.2 M	16.3%
2016	$518.7 M	9.4%	$61.7 M	46.2%

Source: IBIS World

Part 3

-Business People- Patagonia is strongly known as a store for people that are more into the outdoors. However, that doesn’t mean that somebody that is more into the business lifestyle and doesn’t prefer the outdoors will not like some of the apparel that they have to offer. For example, many people enjoy the comfort and look of flannel, not just those who appreciate the outdoors. There are plenty of people in the business world with a lot of disposable income that would have no problem spending a lot of money on a nice jacket or coat. They might not be used to go on a hike, but instead to just wear casually in public on a cold day, or a walk to the of Market Segments

Patagonia is a manufacturer of upscale, outdoor clothing. This leads them to have a various amount of potential market segments. Patagonia specifically focuses on customers with needs of a product that will last long, a product of value, and customers who felt the need to assist in environmental issues. First off, the company donates a portions of its revenue to assist in environmental causes. By doing this, Patagonia is able to reach consumers who feel the urge to purchase products that support these causes. One other thing Patagonia does to help with the environment, is it uses solar energy at its company’s headquarters. Patagonia also attracts customers with needs of a product that will last a long time. They do this by recycling old products, forcing the customer to believe that their product that they purchase will last a long time. The company thrives off the fact that although a vast array of their products are recycled, does not lower the quality or the time and effort going into producing the product. The company states that ideally, soon, all of their products will be recycled. In November of 2011, Patagonia ran a very unique ad in which the ad showed a picture of a Patagonia sweater with the text “Don’t Buy This Jacket.” This ad was extremely successful and helped Patagonia grow their revenue tremendously. The reason that this advertisement was so successful, was because of the timing of it (right before black Friday) and because it challenged the consumer to think for themselves and gave them a much needed voice in their selection process. This ad challenged the consumer to consider why an apparel product would be valuable to them and did so with the Patagonia brand right in their eyes. The demographics of Patagonia are mainly people aged from 24-35 who are male and have an annual income of $40-$70K. Overall, Patagonia has a wide array of segments that they target in their marketing. The segment they target the most is consumers who feel the need to assist in environmental issues, followed by consumers that need a product that will last long and finally consumers who need value from a product.

-Strategy

The strategy for us is to focus more on Patagonia’s advertisements. Patagonia has been noted saying that advertisement is one of the last of their worries and we feel like they leave an untapped market with that mentality. Specifically, we think that Patagonia should focus on targeting people that are into the business lifestyle. Patagonia does a fantastic job selling to people that love the outdoors and the numbers show that, but we believe that by implementing our strategy of focusing their advertisements around business people, they can grow their revenue and potential market segments. This strategy is a mixture of the psycho-demographic with the lifestyle that people live, and the geographic segmentation with where people live. Typically, people that are into outdoor activity live in more rural areas than people who do not. By focusing on business people, and people whom live that lifestyle, we are focusing our strategy mainly on people who live in or near a city. Part of our strategy includes centering advertisements around city areas to market towards them. Overall, we would like for Patagonia to focus more on their advertisements and also focus on broadening their target market, mainly focusing on people who live a business lifestyle.

-Select one or more target markets of your choice. Defend your choices.

People that fit the traditional Patagonia target market/audience, but aren’t necessarily outdoor enthusiasts. Not everyone who cares about Patagonia spend their weekends hiking and fly fishing. Not everyone who cares about sustainability and the wellness of the environment are outdoorsmen. And not everyone that likes Patagonia’s outerwear cares about its sustainable materials.

These people at the least already have interest or are aware of the company and its products. We believe even that some of these people are already users of Patagonia products.

We would like to promote and advertise towards this large group, and get them to be a part of the Patagonia community. This group is likely already at or past awareness, so with some proper communication efforts we believe the time will be well spent and this audience is likely to respond well.

-Briefly discuss your early thoughts on appropriately communicating with your target market:

Promotions:

In Patagonia stores could do displays, using products that are more focused towards this new audience. Stylish pieces, as well as branded pieces. As opposed to top performance gear. Having this new audience going into stores and seeing these pieces in the forefront will make it easier to get them to the trial or usage stage.

The overall communication efforts wouldn’t necessarily to change perceptions, but be more inclusive and enticing to a larger audience.