Executive Summary In this report, we will look at the company 7 for All Mankind, which is a premium denim manufacturer, which has expanded to other apparel and accessories in recent years. Founded in California in 2001, 7 for All Mankind was acquired by VF Corporation in 2007 and joined their diverse brand portfolio. We will examine 7 for All Mankind’s current market situation and how they can enhance their market share in the future given projected market conditions. The first section of the report will look at the current market situation of 7 for All Mankind.
First, we will start with an in-depth look at the current macro environment using a PEST analysis. Using this tool, we will see that the coming recession and perceptions of luxury spending has the potential to drastically affect 7 for All Mankind’s business. Furthermore we will look at the luxury apparel industry itself, using Porters Five Forces to determine the relative attractiveness of the industry and how this impacts 7 for All Mankind. Next in this section we will analyze the competition, including major brands like Rock & Republic and True Religion.
Through this analysis we will see 7 for All Mankind ‘s top market share position and how it’s products are positioned in comparison to other premium denim manufacturers including the ones previously mentioned. Lastly for this section we will analyze 7 for All Mankind relative strengths and weakness’ and why these elements are crucial for their future strategy. After this analysis we will look in-depth at what their strategy should be in the future. This strategies goal is to recognize the brand as a long-term thing and not something that should be strategized for only in the short term.
This strategy highlights using their premium product position to maintain the image of the product going into the future. In order to achieve this 7 for All Mankind needs to further expand their product line in order to carry product in every stage of the product life cycle. Additionally, in this report we will explore the reasoning behind their premium high quality position and why it needs to be maintained to guarantee success into the future. We will also look at the marketing mix that should be executed in order to execute this strategy, which includes pricing, product, distribution and promotion.
Lastly, we will look at the implementation plan that will allow 7 for All Mankind to maintain their market share position and grow into the future. Market/Category Size-Up Seven for all Mankind is a premium denim brand that has had steady growth in earnings since it was founded in 2001 . As you know Seven for all Mankind has been acquired by VF Corporation which has a wide variety of apparel brands under their corporate umbrella including several denim brands such as Lee and Wranglers (Exhibit 1).
This diversity in your portfolio is something that will prove very beneficial for Seven for all Mankind in the future. Currently, this segment of your portfolio accounts for some of the greatest growth in your portfolio, which was a growth of 7% from 2007 to 2008 (Exhibit 2). Using a PEST analysis to examine the macroeconomic environments and it’s affect on the premium denim market we can see that there are many external elements that have the potential to drastically effect Seven for All Mankind in the future (Exhibit 3). The factor that is on the forefront of everyone’s mind is the economic factors.
Consumer retail spending in the past year has taken a sharp decline with stores like Saks Fifth Avenue, which currently sells Seven denim, posting a fourth quarter loss for last year blaming slowing sales in luxury apparel . This economic factor is something that will be shaping the strategy that 7 for All Mankind, should take in the future. It provides both possible opportunities that if leverage right could prove to sustain 7 for All Mankind’s growth in the future and possible threats that could damage the brands continued success.
Furthermore, linked with the changing economic climate is a socio-cultural factor that has influenced purchasing habits, which is that people that haven’t been as affected by the economy are turning away from brands that showcase extravagant displays of wealth. One of the leading factors in the success of the brand has been the status that has come with buying the denim; it was a display of wealth, as consumers recognize 7 for All Mankind as a luxury brand. In order to take a closer look at the attractiveness of the premium denim ategory we can look at a Porters Five Forces analysis (Exhibit 4) for the premium denim industry. If you take this out of the context of the current economic factors, we see that there are relatively low barrier of entry and the high profit margins of the product can make it attractive to new entrants. As this is a fashion product there is consistent change in consumer perceptions of what brand is in style and which isn’t, as a result there is a constant influx of small designer denim brands hitting the market.
The benefit that 7 for All Mankind has in this situation, is that they have a high brand awareness, which means that although there will always be a high number of competitors, 7 for All Mankind is positioned in the eyes of the consumer as a staple premium denim brand. If we take this Porters Five Forces analysis with the economic factors that are currently affecting the industry we know that the actual attractiveness of the industry is low, given the decline in sales, increase in raw material costs and number of entrants in the market.
The premium denim industry itself is a relatively new trend and as previously mentioned has a high degree of competition between brands. A senior vice president of fashion merchandising for consulting firm Donegar Group describes the conditions as follows: “There are certainly not a lack of denim brands to pick from. ” These competitors are brands like Rock and Republic, True Religion, Citizens of Humanity, Paige Premium Denim, Paper Denim and Cloth, Habitual Denim and Joe’s Jeans.
These competitors offer relatively undiversified products with negligible points of difference to consumer; the difference lies in the consumers’ perceptions of the brands. These perceptions are highlighted in the following perceptual map (Exhibit 5), where we see that 7 for All Mankind is differentiated by its commitment to classic design and tendency to stay away from trendy items. This brand perception seems to have worked well for 7 for All Mankind; as of 2007 they are the leader in market share against two of the biggest competitors in the market, Rock & Republic and True Religion (Exhibit 6).
The important thing to note about these figures is the fact that Rock and Republic is gaining market share against 7 for All Mankind, and has possibly already overtaken the brand as market leader in this industry. This is information is particularly crucial as this brand has currently launched a “Recession” Line for the current economic conditions. This strategic move is important in considering what 7 for All Mankind should do in the future.
Now that we have taken an in-depth look at the premium denim industry, we need to look more closely at the brand 7 for All Mankind itself and see where its strengths and weaknesses lie (Exhibit 7), and how we can leverage these strengths and weaknesses in the current economy. One of the biggest strengths of this brand that appears to be a point of difference for consumers is that the fit of the denim is said to be superior to any other brand and the cut of the jean is supposedly done in a way that enhances the fit to most consumers This attribute is something that can be leveraged to showcase the high quality of the brand.
Furthermore, 7 for All Mankind benefits from being one of the first in the market, which means that the brand has high awareness among consumers. This quality of product and perceived value is something that must stay with the brand in order to guarantee future success. Some of the weaknesses of the brand which will be highlighted further in the strategy for the future is their low levels of advertising spending, in both the creation of advertising campaigns and the level of media buys, as well as the high price point of the product, limited number of retailers of the product and the aging image of the brand.
These factors may have limited the sales of the product in some segments of the market but have also worked to enhance the image of the product in 7 for All Mankind’s targeted segment of the population. Furthermore, given the strengths and weaknesses of the brand there are many opportunities and threats. The relevant threats to the brand have already been detailed above, but there are also some opportunities that they could exploit.
These include the aging baby boomer population whose retirement was not affected by the volatility of the market, the rising wealthy upper class in Asia, the reduced advertising expenditures of their competitors and the increasing of their product line. Lastly, we want to take a quick look at 7 for All Mankind’s customer profile. The current customer is a man or a woman who enjoys a classic quality product, they want the status of owning a luxury brand without seeming flashy.
This consumer has a higher disposable income, and is usually between the age of 14 and 40, though they have recently introduced a line for children. This consumer is usually a loyal purchaser who values the longevity and fit of the product, may be influenced by celebrities who regularly wear the product and most likely lives in North America, where the majority of purchases take place. Objectives/Goals The main goal for 7 for All Mankind is to maintain a leadership position in the premium denim industry.
At the same time we recognize that although 7 for All Mankind’s sales originate primarily from denim, the broad market definition of what they do is that they provide premium products that not only provide cover, but also enhance the general aesthetics of the consumer. This definition provides us with the opportunities that haven’t been fully capitalized on, which is to not only enhance to enhance 7 for All Mankind’s market share advantage but to also capitalize on a product line advantage strategy by further expanding the product line in to different segments.
Furthermore, we need to recognize that although the economic climate currently is not supporting the brand we need to look at what is best to maintain 7 for All Mankind’s leadership position into the future, and not make decisions that benefit the brand only in the short term. Our goal for this brand is to implement a strategy that is not reactive to the competition but innovative in responding to the environmental conditions, understanding that a brand is not a short term commodity. Strategy Overview
The overlying theme that is defining our strategy is that we need to support the strengths that got 7 for All Mankind to where it is today, and not abandon them in light of temporary market conditions. Although it may be tempting to significantly lower prices or to come up with a new lower priced product line, this is not in the best interest of either VF Corporation or the 7 for All Mankind brand. From the perspective of VF Corporation it makes little sense to have multiple entries into the same market, as this will result in some degree of cannibalization.
Currently, VF Corporation has denim brands for different price points below 7 for All Mankind’s high price point. Furthermore, they can afford to support a brand that may have slightly decreased or stagnant sales over the next few years. From the perspective of 7 for All Mankind, by lowering their price they would compromise key foothold in the market, which has been that 7 for All Mankind is a premium product and always will be and that as competitors are reducing the quality of their product, 7 for All Mankind needs to stand by their mission of having premium products.
If they were to come up with a lower priced lower quality product they would lose any advantage they have over the large competition in the mid price jean market. Any advantage that came from introducing a lower priced product is in the form of publicity that has already been taken from the first mover, Rock & Republic. Unlike Rock & Republic, 7 for All Mankind can afford to wait out the downturn while making adjustments to their strategy to guarantee long-term success.
Thus unlike the competitors 7 for All Mankind’s brand image will not be cheapened by changes made for purely short term reasons. The strategy that is best for 7 for All Mankind is to recognize the untapped market that exists and can capitalized on by using their high brand equity to guarantee success with new product line extensions and target markets. These untapped markets exist as both a change from a solely market share advantage strategy in the premium denim industry but also to one of a product line advantage.
Using product life cycle theory, we can see that premium denim can be seen as a product that in the next ten years or possibly sooner will be on its way to being a mature market, as growth has slowed (even prior to the recession), and the market is becoming saturated. This means that in order to have continued success, 7 for All Mankind must create products that can become a star in their portfolio. In other words using Drucker’s Portfolio Theory, they need to come up with tomorrows’ breadwinner and understand that premium denim may be Today’s Breadwinner but that this will most likely not always be the case.
This means systematically introducing new products that capitalize on thee 7 for All Mankind brand. They currently sell some clothing, footwear and handbags but this is an aspect of their portfolio that they need to expand. Specifically, they need to introduce products which are at a premium price for the product category, but not a premium price overall. This means things like wallets, belts, and other accessories, which consumers will still purchase in a market decline. The logic behind this strategy is that consumers, who can’t justify a two hundred dollar pair of jeans, can justify a sixty-dollar belt to go along with those jeans.
These profits will help 7 for All Mankind weather the temporary economic conditions. Lastly, although I will not expand on this point, they need to capitalize on markets abroad specifically in Asia where the culture supports a consumer behavior of investing in quality products rather then buying a large quantity. This culture would fit 7 for All Mankind’s strengths very effectively. Segmentation/Targeting/Positioning The crux of the future strategy is to keep with the current targeting and positioning of the product to maintain its premium brand image.
As was highlighted in previous sections, the cost of changing the positioning of the product is too great in relation to the benefit of changing positioning to suit changing economic conditions. This is especially true, as we have established that the positioning of the product as a premium high quality product is what drives their sales. Furthermore, according to Roger Best a top marketing specialist ““Many customers are not seeking the lowest price, and many are willing to pay a higher price for products that deliver important customer benefits.
Differences in product quality, reliability, and performance can attract customers who are seeking products that perform better than average products. ” This is the case with 7 for All Mankind especially as the competitors leave the market. They need to position their product as an investment, as instead of buying two pairs of jeans in a given period buy one that will stand the test of time. This quality enhancer will help them to maintain their current customer base and market shares. The segment that 7 for All Mankind should be targeting is the consumer who has not been drastically affected by the current economic situation.
Although it seems that this would be a small base to target, there is still a significant portion of the population who would purchase a premium product if it was marketed as an investment piece. Potential segmentation base could also be to extend the customer lifetime value by targeting the product to baby boomers as well, so that not only will you increase sales through new customers but as current customers age they will continue to see 7 for All Mankind as their brand of jeans. Marketing Mix Product The point of difference in 7 for All Mankind product portfolio is the high uality of the products and their timelessness in avoiding following extreme fashion trends. These product attributes will be crucial for the future given the economic conditions. This brand over almost any other premium denim brand is one that is an investment piece that as a result of its high quality will last longer over cheaper options that are available to the consumer. Overall, 7 for All Mankind 7 for All Mankind needs to ensure that the consumer sees the value of the products and why they demand such a premium price.
A key aspect of the strategy for the future is to invest in new product lines, especially in the accessories market, which is a market they have yet to invest in. This will require capitalizing on currently high brand equity to ensure that they have products in all areas of the product life cycle. Therefore, 7 for All Mankind Accessories will be a range of products, which are high quality, and durable products. These products include wallets, belts and socks. All of these accessories compliment products currently in their portfolio but will demand a lower price point then the more substantial products in their portfolio.
As a result of this fact, we hope to capture consumers who want to purchase a 7 for All Mankind product but can’t afford it. Additionally, we will be able to expand the value of 7 for All Mankind’s current customers who will hopefully purchase add-ons to the products that they are already purchasing. Price Currently, 7 for All Mankind uses a pricing strategy that is skim pricing, which means that they are charging premium pricing for a product that has superior customer value. In order to maintain the brand image of 7 for All Mankind they need to maintain this price point.
To reduce the price point would mean to give up what makes 7 for All Mankind the brand that it is. Though it may be tempting to reduce prices, anything less then a drastic change will go unnoticed in this saturated market and will not work to increase profits. Additionally, given VF Corporations current brand portfolio, a reduction in price will only result in cannibalization of their other denim brands. For the expansion into other product categories, 7 for All Mankind needs to again maintain their current price strategy to ensure that the brands image of a high-end product stays intact.
As previously mentioned the line of accessories should demand a high price point for the product as it will have a premium level of quality, but at the same time these products will have a low relative price in comparison to the other 7 for All Mankind products. This will allow the consumer to purchase the high end product they desire but not invest a large amount of money at the same time. Overall this pricing strategy will follow market based pricing, as it is priced at the perceived value of the product. Place for All Mankind needs to continue to expand their distribution network and push to sell some of their non-denim products in more retailer. Currently, not all retailers sell their non-denim line and this is something that definitely needs to change in the 2009-20011 periods, as it will be a keystone in their future strategy. Additionally, they need to continue with their online store as this is a distribution channel where they can attain higher profit margins and is the place where they can offer any pricing promotions that they deem suitable.
Furthermore, 7 for All Mankind has been opening stores around the country over the past few years. Given the high expense of opening these stores and the current recession this is a mode of distribution that should be postponed until consumer spending begins to increase again. Promotion The reduction in advertising spending by competing brands offers a very interesting opportunity for 7 for All Mankind. As a result of the company being a part of a relatively diverse large corporation 7 for All Mankind has an opportunity to leverage some of the cash that is potentially available to them.
They should increase their advertising spending marginally over the next couple of periods. This increase in advertising joined with competitors decrease in advertising spending will keep 7 for All Mankind in the consumers mind and have a greater impact then during any other time in recent history. Additionally, these advertisements should be used to build awareness about the new product line extensions. The promotional message that should be conveyed through the promotion is one of 7 for All Mankind products being an investment piece. There products will save the consumer money in the long run by lasting longer as a result of its uperior materials and construction, and as a result of the high quality fit you will not need to have any tailoring done to the product. This message will further cement the position of the product as one of high quality and classic, it is not brand that offers anything less then the best products. The promotional mix is one that focuses on advertising as that form of promotion is one that fits effectively with the 7 for All Mankind image. These advertisements should combine as many different media as possible and use pulsing message reinforcement to keep a relatively constant level of sales, during the predicted future volatile market.
Lastly, these advertisements should be using a pull strategy to try and entice consumers to purchase the product, instead of trying to push them into a purchase. This will be most effective for the premium priced products Implementation Over the next year, 7 for All Mankind should be increasing advertising spending to capitalize on competitors cutting back. As mentioned they need to solidify in the consumers mind the value of the product and why it maintains a premium price point.
Additionally in the next year they should be developing the new product line extensions and creating buzz about the product launch on their website and other media outlets. They should be strengthening the relationship with their current distributors in order to expand the sales of their non-denim items. In the year 2010, 7 for All Mankind should be launching their new accessories line, as well as putting increased advertising spending behind the launch. They should also begin researching possible store locations for an economically positive time period and further developing international unsaturated markets.
During this time period, they should continue to highlight the value of their product through advertising and other promotional efforts. In the year 2011, they should commence with their plan of opening more stores given that market conditions have improved. Also, by this time they should have further developed their product lines, which should be selling in most of the retailers that sell their denim line. Again given that the market has improved they should be reducing advertising spending to match competitors and rely on their high brand equity and awareness to pull sales.
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