New Balance Case study Essay Example for Free

New Balance Case study Essay Good Management structure e. g. Van Rooyen the general manager Wide range of products across every sporting category Functional technological design in terms of fit. Foot widths have been incorporated in the design of the shoe. This distinguishes/ differentiates New Balance product from its competitors. Brand has been kept affordable in terms of price Inspired well-taken care of employees who are performance driven because of the culture of the company Is established in many countries and has quite a big global footprint Good relationship with retailers. They have been accommodated and close bonds have been formed with them. Good marketing techniques, focussing on strategies that the major competition have neglected OPPORTUNITIES (in order of the most lucrative) Nowadays people wear sneakers for leisure/fashion purposes and New Balance could target that market. New balance could establish other lines within their range for Leisure or even high end market, kids market etc. Target the soccer/ black market ( new balance has made little advancement in this sector) New balance was places as number one in the trail category. They should ride this wave; sponsor the person who won in that category. Create branded/ concept stores South Africa has a strong sporting culture that the company could capitalise on ( Netball, court, walking), New Balance needs to have more market share in these sectors Advancement in technology and innovation. New balance has the opportunity to update its products and come up with new innovations to keep up and to penetrate the market. Make headway into the online retailing sector. There is a growing level of health awareness in the public and more people are leading an active lifestyle. This has led to more sales of the running/sports gear. And New Balance has an opportunity to grow. Sports has become a source of entertainment and therefore there is more demand for it, and an opportunity to grow within the market In South Africa particularly there has been large growth in the middle income sector, and that is an opening/ gap market for the company to target. More product lines. WEAKNESSES Limited product line. New Balance has focused mainly on running. However, the market has been shifting to not only include serious athletes, but it now also caters to the more fashion-oriented crowd. This crowd tends to be from the younger generation, the part of the population that New Balance has so far not been focusing on. New Balance needs to expand into new product areas and remain competitive in the changing market. Manufacturing costs. With its competitors outsourcing most of their manufacturing to other countries such as China, Nike, Adidas and Reebok have been able to cut their manufacturing costs significantly. New Balance on the other hand manufactures its shoes in the USA. Has to order stock from abroad. New Balance falls behind its other major competitors, Nike, Adidas and Reebok, in the area of marketing. Unlike its competitors, New Balance does not undertake celebrity endorsements. This puts them at a disadvantage when it comes to brand building. This also causes the company to be at a disadvantage on gaining awareness on a global scale and they lose out on publicity from major global events. Most global brand names generate strong brand recognition through celebrity endorsements in sporting events (e. g. soccer and rugby world cups) that would give them the needed momentum to carry their brand name further into the global market. The fact that new Balance has multiple widths also adds to the cost of manufacturing Van Rooyen’s statement of: ‘’not wanting the shoe to be a giant, but to become known as better’’. Bigger is better, the words are synonymous with each other; there is no need to sacrifice the one to have the other. The company can be both bigger and better. THREATS The sportswear industry is growing and becoming more competitive so the will be new producers and entries in the market with new ‘’aces up their sleeves’’. More competition in the market Sales on the technical running market have been on the decline according to (exhibit 1) in the New Balance Case Study, and this is New Balances’ stronghold. Becoming myopic and not scanning the periphery. Not seeing that there are gaps in the market and focussing mainly on running. Not considering fashion focussed brands such as Puma as competition. This is a myopic trait of assuming indispensability Summary Much of the strengths of New Balance lie in the quality of their product and the good relationships they have with their retailers/ distributers. Their weaknesses are in that they are too focussed on the functionality of product, whereas the market is constantly changing and they need to be evolving with the market. Opportunities lie in the diversification of the product and making it more contemporary. They also need to employ stronger marketing techniques. Question 2: Would you consider New Balance a niche player in the athletic footwear industry New balance is a niche player with regards to their marketing technique. They utilised niche marketing strategies that the bigger firms overlooked. 1. Van Rooyen chose to create awareness at smaller sports club levels e. g. life-saving clubs, rugby clubs and hockey clubs etc. Or doing in store promotions to create awareness about the shoes. These are clubs that the major competitors were not concentrating on, but rather focussing on big marathon races such as the Two Oceans and the Comrades. In store campaigns were a great way to connect with the customer personally. 2. Van Rooyen dedicated a big chunk of the company’s expenditure into the sponsoring of events. This gave the company a lot of exposure. These events ranged from the Total Sports Challenge’s Knysna Marathon, Surf Ski Series and school events. They also targeted top schools in South Africa that are well known for their cricketing, netball. And through this New Balance was on everyone’s mouth. 3. Another way they utilised in-store promotions was to assemble a Fit Tracks Machine, which is a foot scanner that advises a person which shoe product and size a new runner would need. This is a strategy the major brands were not using and this gave New Balance an edge above them, and it also marketed the functionality of their product. 4. Corporate branding and clothing. This is a growing gap in the market that the big giants weren’t focussing on. The opposition targeted soccer teams while NB went for the Army, air force, Police force. 5. Advertisements in running magazines. Other brands had stopped putting adverts in running magazines as this was costly. New Balance saw a gap and advertised in every single issue of Runner’s World Magazine. And this paid off to an extent that the competitors copied them and once more started advertising in athlete magazines. The above marketing strategies are typical concentrated (niche) target market strategies. Although the company did not suffer from limited resources, they chose this route because it was more effective and efficient for their brand. They had thorough knowledge of the market they were targeting (serious, technical sportsmen) and they used this knowledge to get their product into the market. Characteristics of niche targeting (pg. 11, Principles of Marketing Hand-outs): Strategic Factors Niche Targeting New Balance example Target Market One Narrowly defined consumer group Serious Athletes Distribution Carefully selected outlets. Few exclusive distribution New balance targeted independent retailers mostly ( big firms were not supplying these) and although they do supply big shops such as Edgars, Total Sports and such. The independent distributers make up a large portion of their share price Marketing Communication Specialised media e. g. specialised magazines The media strategy that New Balance chose to use was specialised in a sense that it wasn’t mass media and all over the place. They rather targeted specific sectors they wanted to make themselves known in. Sectors that other major players had neglected. Price One price range tailored to the consumer group. The entry level price for New balance ranges from R399-R599 where as for the competitors it ranged from R399-R1500 Strategy emphasis Appeal to one specific consumer group via highly specialised marketing programme New Balance’s appeal is to the serious athlete who prefers functionality over fashion. Their marketing programme (see numbered bullets above) was highly specialised and set them apart from competitors. Question 3: New Balance’s approach to segmenting the market New Balance’s market segmentation approach is that of a concentrated market strategy. New Balance’s segmentation approach is ‘functionality over fashion’. Therefore stressing the functionality of the shoe and targeting the technical sportsman is how New Balance ( pg. 5, New Balance Case Study) has segmented his market. New Balance has chosen this approach because of their: a. Product range/variability. They offer mainly specialized technical running shoes for professional sportsmen. b. Market variability, the market has various sectors but they have decided to target the specific market of running. c. Competitors marketing strategies. Their competitors are focussed on the larger chunks of the South African sporting market e. g. soccer Question 4: New Balance’s marketing mix Product New Balance offers technical running shoes for the serious athlete. They also have a wide range of products in every sporting category e. g. men’s footwear, trail walking, cross-training, court, children’s, soccer and athlesuire. Their product is differentiated from their competitors in that their shoes come in a form of multiple widths and lengths across all the product lines. In order to expand their product range and therefore have a larger customer base I would recommend New Balance: venture into the fashion/leisure market as there is a gap for them there create a line for the children’s market in future, get into the soccer / black market as that is one of the most popular sports in the country and demographically forms a larger part of South African sports players have a high-end line for the more exclusive market which, pricewise will be higher than the entry level of 399-599 that they currently have. New Balance also has the opportunity to do more research and development on their product and come up with other innovative technical features for their shoes. They could come up with other breakthrough technologies that will make them market leaders in speciality sportswear. Branding In branding their product, New Balance has taken an ‘’endorsed by no-one approach, which I believe works well with what the company stands for. There are pitfalls to having a celebrity or well-known sports star as the face of a brand as that places the brand’s image in the hands of one individual. A problem that has affected New Balance’s competition Nike in the recent months. New Balance has therefore kept their image of function over fashion and will be known for that . The company’s focus in on quality and performance which will therefore sell the brand. On the other hand it is good to note that the Michael Jordan and Nike collaboration brought about the world’s bestselling sneaker to date, and therefore meaningful endorsements can push the global image of the brand and give the brand and edge. New Balance could use the world’s best trail runner as the face of their trail category since they are the leading brand in that category. Price New Balances’ aim is to attain 38% to 40% margins and they therefore have kept the brand affordable at the price of R399-R599 for a new balance entry level shoe(pg. 3 New Balance Case study) . Considering that entry level shoes form the bulk of New Balance’s sales another strategy might be need. As mentioned earlier a new high-end line that is for the more exclusive target market can be made with the entry level shoes starting at a much higher price. The customers would be the kind of customers who associate price with quality, and functionality and prestige. The middle income market is growing in South Africa, and therefore with rising incomes people can afford more high-end products. Place New Balance’s retail strategy involved targeting independent sports stores that had been neglected by the their major competitors, these stores ended up making 36% of the company’s business while the bigger stores e. g. Edgar’s, Total sports etc. made the rest of the share. You could say that even their distribution technique was that of a ‘’niche’’ type of strategy, since they targeted what was bypassed by their major competitors. Opening braded shops in the weak areas like Namibia and ‘’keeping a low profile’’, is not a great move. I would recommend that new balance open branded shops in the cities as well. That’s where most activity and population density is, and also where the brand itself can showcase all the aspects of their brand and products that retailers cannot stock. They may be afraid of competing with their retailers, but I believe there is enough room for the retailers and New Balance concept stores to both thrive in the market without cancelling each other out. New Balance can also establish an online retailing system where consumers can order products directly online. Promotion Publicity New Balance has a good form of a public relations strategy to get the name of New Balance out there to the customers. . This infact, formed a big part of their strategy as they would sponsor events, and this made up a big part of their expenditure. This gave them a lot exposure through print media and television e. g. total sports challenge, school sporting events. Advertising New balance created awareness in smaller sports clubs and taking part bin promotions at shops. They also used direct marketing where they kept databases of their customer’s e. g runners in marathons and retailers and directly marketing their new products and events to them. They also advertised in magazines, and went the co-branding route to get their name out there. CHECK EXHIBITS AT THE BACK FOR RECOMMENDATIONS!!! Personal selling The instore campigns wre a graet way to establish a more personal relation ship and connect with the customer.