GWG Marketing Case Analysis

TheGreatWesternGarmentCo.

HistoryintheMaking

MarketingManagementIMGT8571 ProfessorRonaldSchill MontereyInstituteofInternat MontereyInstit uteofInternationalStudies ionalStudies

May2,2011 MelissaSummers,NicholasTaylor,XiangganGao,YiL MelissaSummers,NicholasTay lor,XiangganGao,YiLu,LarisaMakshanova u,LarisaMakshanova

2 I.ExecutiveSummary

Levi Strauss is debating whether they should take back their Great Western Garment (GWG) brand from the licensee and sell the brand themselves. In order to provide a definite recommendation we needed to do in-depth research in order to answer several questions that were on the minds of those involved. What value would Levi Strauss gain from revitalizing and selling the GWG brand themselves as compared to continuing to license it. What is the target market and what would be needed in order to revitalize the  brand image. Lastly, who are the competitors in this market and how does this affect the GWG brand. With these questions answered, we explore several possible options that are available to Levi Strauss before coming to our final recommendation. We have decided to recommend that Levi Strauss try to license the GWG brand to another company for a trail  period. Upon the completion of the trial period, should the GWG brand not have gained any market share, Levi Strauss should sell the GWG brand and all its assets. II.ProblemDefinition

Given the poor image of Levi Strauss’ Great Western Garment brand, their low market share, the large number of competitors in the market and the trend towards more fashionable jeans, should Levi Strauss take the GWG brand from the licensee and sell the  product themselves? Levi Strauss is currently considering the possibility producing and marketing GWG jeans themselves in response to the low profitability of the GWG brand. The decision to take the brand from their licensee will be determined based on two factors. First, is that the brand must have a decent value proposition with a high chance of  market growth and profitability. Second, will the GWG brand be able to compete in the marketplace with so many competitors selling jeans. From here we will go into detail, exploring the various components that will lead to a recommendation to either let the licensee hold onto the brand or to take it back. The GWG brand is now classified as a “dog” brand according to the Growth Share Matrix because it has relatively low market share coupled with a low growth rate.

III.DecisionstobeMade • • • • •

Define the value proposition Define the target market Analyze the competition Explore the various options available Offer our recommendation

3 IV.ValueProposition

GWG offers traditional, quality, comfortable jeans that are built to last because there is history in their making. Consumers describe GWG jeans as “rough, rugged and durable with a good fit,” as well as “sturdy “sturdy and well-made”. Another value that is inherent inherent in GWG’s value proposition is is their role in the history of jeans. GWG jeans are widely viewed as traditional and remembered as one of the original pioneers in the jeans industry. One consumer is quoted to have said that, “forty “forty to fifty years ago the world of    jeans was synonymous with GWG”. The GWG brand offers consumers quality jeans with workability – the original, traditional jeans. V. Target Market Levis: In the year 1873, when Levi Strauss first invested jeans, its target market was comprised merely of individuals who needed to wear durable, extra strong pants when seeking gold. Later, the market extended to workers who wanted to wear something comfortable and strong. As celebrities began wearing jeans in the 1950s, it became an everyday common garment for various target markets, ranging from manual labor to high fashion. Unfortunately, Levi's jeans have fallen out of favor with today's youth who regard Levis as their “parents’ jeans.” GWG: Opened in 1911, the Great Western Garment Company was the first jeans wear company in Canada. In 1972, GWG was a leading   brand in Canada, controlling 30 percent of  the market. GWG jeans are now worn mainly   by men in construction, trucking, farming and similar occupations. The brand appeals to the comfort and durability needs of its customers, who are generally over the age of  35. GWG has never been positioned as a  brand for females.

a. Consumer segments and preferences Consumers Preferences Fashion-conscious Flare jeans consumers Younger hip-hop consumers Ultra-baggy Workers Casual wear  •

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4 b. Consumer segments and preferences Consumers Preferences 15-to-24-year-old Fit Fashion relevancy Cool Brand image 25-45 years old, Male  Not terribly price sensitive Wants value for money Will not compromise on fit Owns few pairs of jeans and wears them longer  Currently not brand loyal Buy for themselves Don’t shop for pleasure Focus on fit & comfort Will pay extra for quality Older consumers Relaxed Fits for comfort Good price Women Change style with fashion trend Variety of style preferences Men Don’t care about brand Don’t care about familiarity • • • • • • • • • • • • • • • • • • • •

VI.CompetitorAnalysis a.Analysisofcompetitorc a.Analysisofcompetitorcharacteristics haracteristics,pricesandpro ,pricesandproducts ducts Competitor Characteristics Top brand awareness among consumers Great varieties of jeans fits and finishes for both men and women Keep innovating and updating existing brand lines Levi’s Available in every kind of store Prices generally range between $29.99 – $49.99 Targeted at the age 15 to 24 men’s and women’s market “Western” and “country” style VF Corp Levi’s largest branded competitor  Price relatively low, ranging from $19.99 – $29.99 Targeted at customer ranging between certain ages (different age groups) Private Label Wide spread of retail stores Strong promotional pricing strategy High flow of potential customers • •

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Specialty Retailers

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Premium Brands

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Targeted at customers ranging between certain ce rtain ages (different age groups) Price ranges from $34.99 – $49.99 Offer a wider range of apparel products Small market share Substantial advertising budget High price ranging from $69.99 to more than $100 Highly fashionable and stylish Limited to upscale stores

Summary: Given the fact that GWG is sold with an average price of $19.50 and with limited fits, its main competitors will be those private labels. Since GWG has little to offer in order to differentiate itself from its current competitors, it would be extremely hard for it to survive in the highly competitive retail industry. Moreover, if Levi’s decided to revive the GWG brand, it may run the risk of cannibalizing its own business which seems pretty promising at the current stage. However, there is potential in allowing GWG to grow in a specific market segment in which Levi’s does not have a large share, such as the work-clothing segment currently dominated by brands like Carhartt Carhartt,, and Dickies.. Dickies b. Brand maps of the jeans market The brand maps below illustrate the target markets of GWG and its primary competitors. Specialty retailers are not depicted in either chart due to their tendency to cover large and diverse segments of the market.

VII.OptionsAvailable a. Option 1: Keep the same license agreement with Jack Spratt Manufacturing Inc. Advantages Disadvantages  No additional money spent from the Continuing decline of the market marketing budget of the company share means that no changes in Allows to concentrate on the more marketing will eventually lead the •

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vital problems, i.e., the decline of the two market-leading brands (Dockers and Levi’s) Steady, predicted income for the next year. According to the license agreement Levi’s gets 8% on the net wholesale dollars. 2001: 220,000 units at average price $19.50 –  $343,200

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 brand to the ground Low profit margin and low chance of increasing the profit margin

Summary:  Low potential  – given the low brand awareness and declining market share (1% in 2001) with no changes in marketing plan of GWG, the brand will eventually cease to exist. b. Option 2: Take the GWG brand back to the Advantages Possible revitalization of the brand Opportunities of the bigger market share •

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company Disadvantages  No guarantee of growth High marketing expenses, which Levi’s does not have a budget for   Necessity to find their own retailers Threat of cannibalizing the existing  brands of the company

Summary:  Low potential  – given the low brand awareness and declining market share (1% in 2001) with no changes in marketing plan of GWG the brand will eventually cease to exist. c. Option 3: Find a new licensee, who would be willing to improve the brand image/portfolio (Carhartt, Dickies…) Advantages Disadvantages Exploring all the brand’s Could be potentially hard to find a  possibilities before giving up on licensee who would be able to take finding new market opportunities for  the declining brand the declining, yet historic brand  No guarantee of growth High marketing budget will be required to revitalize the brand, licensee must have the budget •

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Summary: Medium potential  – Finding a new licensee under agreement that they will revamp the marketing and portfolio of the brand will ensure that Levi’s explored all the options available before discarding a brand that has such a strong historic image in the mind of consumers.

7 VIII.Recommendations GWG has a limited market share, and a fairly simplistic and traditional value proposition that leave the brand unable to match competitors in the industry who offer more modern styles, washes and fits. fits. If GWG were to try to compete with the biggest names in the industry, it would have to undergo an overhaul, invest substantially in brand marketing and seriously vamp up its operations. operations. An investment of this level would not be justifiable considering the minimal expected return that would result, but it would be unwise to discard the brand’s reputation out of hand.

GWG jeans are remembered as an iconic symbol of the quintessential everyman’s working jeans and as a pioneer in the jeans industry. GWG brand jeans have specific specific qualities that are valued by consumers and the brand enjoys a long-standing reputation as one of the very first to enter the industry. While GWG currently holds a limited market share, it would be unwise to end such a traditional brand without first trying to reinvigorate sales by leveraging the current qualities enjoyed by consumers. GWG jeans are valued for their strength and durability. durability. We would suggest re-licensing for a trial   period of three years to a producer who focuses on one particular segment of the industry: work clothes. We would recommend licensing the brand to a company that would leverage its existing strengths and qualities – sturdiness and durability. We recommend re-licensing to an organization such as Carhartt’s Super Casuals or  Dickies that cater to a very specific market segment that seeks out clothing with the desired characteristics of strength and durability. These garments are not designed to be stylish or modern, they they are designed to be worked in and to last. last. Carhartt’s jeans boast features such as: 11.75-ounce denim, triple-stitched seams, bar tacks at stress points, tool   pockets, a hammer loop, a ruler pocket and leg opening that fits over work    boots. Dickies jeans come in styles styles such as “relaxed,” “relaxed,” “carpenter,” “double knee,” and “workhorse.” Re-licensing to a company that serves this work clothing market would mean that GWG jeans would require minimal updates and changes to the styles, and would turn the qualities that make them undesirable as a fashion jean into the most highly desirable qualities sought in a work jean. However, as part of this recommendation, we insist upon the trail period of two to three years in which the brand must must demonstrate substantial growth. The brand’s steady decline in recent years, and its failure to produce revenue makes further investment unjustifiable unless the the brand can demonstrate potential for for immediate growth. If the relicensing of the brand within the re-focused market segment fails to generate growth within this time frame, then we will let the giant lay where it has fallen and discontinue our efforts to revive it.