How should Reebok get its market share back? Introduction Reebok International Ltd. is a distributor of sports, fitness, and lifestyle products, and its main products are athlete shoes. Reebok footwear and apparel have been an international brand since 1984. In 2003, its worldwide sales were about $3. 5 billion.? It is a number two brand in the athletic shoe market in U. S. , however, the industry in growth rate is decreasing (Zerio 2005). In this paper, I would like to present the best way for Reebok to market their products in such industry situation. The Problem Statement
Considering the changing urban culture and the athletic shoes market, determine the best way for Reebok to approach the marketing of its products to the urban market and worldwide. Summary on the Situation Reebok Reebok offers three other brands besides its sportswear and accessories line; Greg Norman (men’s casual wear), Rockport (walking and casual shoes), and Ralph Lauren and Polo (dress and athletic shoes). Reebok has more than 205 retail stores and sponsors sports stars such as Allen Iverson (a NBA basketball player) and Venus Williams (a tennis player) (Zerio 2005).
Reebok has a long-term long-term strategic partnership with the National Basketball Association under which Reebok designs, manufactures, sells and markets licensed merchandise for the NBA, the Women’s National Basketball Association (WNBA) and the National Basketball Development League (NBDL), the NBA’s minor league (Reebok International n. d. ). In 2002, Reebok launched a new collection, RbK, which was street-inspired footwear and accessories designed for young urban consumers who sought to communicate their individuality through cool, edgy, and authentic lifestyle products (Zerio 2005).
Reebok rolled-out an integrated marketing campaign that fused together sports, music, technology and entertainment, and was designed to connect the Reebok Brand to millions of new consumers around the world (Reebok International n. d. ). RbK carried the Ice Cream footwear collection. The Ice Cream collection was produced by Pharrell Williams, the music producer and artist of the groups Neptunes and N. E. R. D. (Reebok International n. d. , Zerio 2005) This collection was available in limited distribution at high-end boutiques worldwide (Zerio 2005). Athletic Shoe Industry
In the global athletic shoe industry, the traditional competitors of Reebok are Nike, Puma, and Addidas Salomon. There are also new rivals; high-end fashion brands. Prada, Hermes, Chanel, and Max Mara introduced new casual sporty lines which include city/street business. They concentrated on the style, not the athletic performance (Zerio 2005). The sales of athletic shoe industry in U. S. is increasing between 1999-2002, but the market share growth is decreasing over 6%. The major players expected the 2004 Olympic Games to have a favorable impact on growth.
As a category, the athletic footwear market grew about 5% over the previous five years, while the casual sector grew more than 45% (Zerio 2005). The U. S. and Western European markets were similar in sales and market share growth but there are difference between consumers in U. S. and Europe. The U. S. consumers buy athletic shoes for fashion use, whereas 80% of athletic purchases in Europe were for athletic use (Zerio 2005). Thus, Reebok must come up with a marketing campaign which can approach two ways; fashion and athletic quality.
The sales of Reebok is not decreasing from 2001-2003 but as the market is not growing, it is losing the market share (Zerio 2005). Thus, at this point, Reebok needs to find how to market its products to a broader market or introduce products to new target. Alternative #1: Remain as it is and be on the plan it has. (Here, the current Reebok’s plan is to market to young urban males, focus on fashion and athletics in the U. S. and Europe respectively using celebrities for endorsement. In other words, Reebok is becoming a “super cool” brand of the youth urban culture worldwide. ) The advantages of this alternative are: No additional cost -No additional time regulation -No additional risk -Have brand name recognition -Can maintain present markets and consumers -Good quality product The disadvantages are: -Losing opportunity costs -The number of young male consumers is decreasing -Remaining the target as young generation -Threats from others such as copying ideas -No universal recognition of celebrities -Strong competition from both traditional and new rivals -Athletic shoe market is getting smaller -Athletic shoe market is matured in the U. S. and Europe -Different uses of athletic shoes in the U. S. nd Europe According to Paul Fireman, Reebok International’s CEO, Reebok is aiming to become the world’s “most relevant and contemporary athletic footwear” and Reebok introduced RbK in 2002 (Zerio 2005). In this marketing strategy, Reebok should choose athlete celebrities as their commercial endorsements who have universal recognition. Allen Iverson is a very famous basketball player because not only he is a great player but also for his appearance. However, since he only plays in NBA, it is probably hard to get the universal recognition. I think Venus William is great example of endorsement.
She is a Wimbledon winner and her matches are on TV all over the world. If she wears very fashionable clothes and shoes, it shows that Reebok produces a very fashionable yet great quality. So, it can target both U. S. and European markets. With an endorsement with Iverson, RbK, and the Ice Cream collection, it seems that Reebok only targets U. S. market, where the athletic shoes are purchased for fashion use. Alternative #2: Hire a new designer and create a new collection for women’s apparel and sneakers. The advantages of this method are: -Introducing new design -Expecting higher sales Combining the fashionable style and athletic quality -Increasing brand image and recognition -Matching corporate goals of Reebok The disadvantages are: -Increasing of cost. -Increasing of risk of accepted by customer or not -Losing traditional value and brand image This alternative is similar to the repositioning its image using RbK, and the Ice Cream collection. The difference is it targets female customers and will not be exclusive and expensive. Generally, female customers like shopping more than male customers and tend to spend more money on shoes and clothes than male customers regardless of their ages.
Some female customers are willing to buy shoes in different colors even they are same style. If Reebok For example, Reebok can hire a designer who has experience designing high-end fashion brands such as Prada, Hermes, and Chanel. And Reebok can have young idol, for instance Madonna, for the commercial endorsement. She is a worldwide well-known pop star and she is also known for her fashion styles. This can definitely target young female. Also, it matches with the current corporate goal. However, hiring a known designer and someone like Madonna add cost and there is a risk which the customer likes the concept.
Alternative #3: Expand its business in emerging economies. The advantages are -Targeting larger market -Greater potential of growth than in U. S. -Sourcing advantages (e. g. shipping cost) -Transferring experience -Increasing the brand image/awareness -Regulations The disadvantages are -Additional cost of marketing -Increase in risk due to the cultural and lifestyle differences -Regulations -Competition -Control difficulties of operation -Foreign exchange rate risk One of a candidate location is in India.
It is definitely an emerging economy and since many products are produced in China, the shipping cost (they can be delivered by trains) and reduce the shipping cost. If the regulations of a emerging country favors foreign subsidized companies, it can be a great opportunity for Reebok. However, since it will be in a new market, Reebok probably needs to put a substantial amount of money in marketing to understand the culture and preferences living in the area. For example, cricket is popular in India and Reebok might need to change the commercial endorsements by local or well-known cricket players.
Also, Reebok must consider its competitors and regulations, and these costs are also included in marketing cost. Alternative #4 Start a new business line for emerging market, for example, a spin-off line which products are lower than regular line. The advantages of this method are: -Obtaining wider variety of products. -Expanding the targeted market. The disadvantages are: -Increasing cost. -Increasing risk of accepted by customer or not -Losing traditional value and brand image Since the population of young people is decreasing in U. S. and Europe, there is a great potential in the emerging countries.
But since the disposable income is not as high as developed countries, the market cannot afford high-quality athletic shoes. So, to catch the market, Reebok must produce products which the market can purchase. Thus, a spin-off line can be a second line with different name. This alternative probably can gain the market’s attention easier than selling the regular products but to start up a new line, the inception cost can be high and there is a risk which the customer likes the concept. And as I mentioned in the alternative #3, the const in marketing is also very high.
Recommended Alternative My recommendation is Alternative #2: Hire a new designer and create a new collection for women’s apparel and sneakers. I think this is the best alternative among four of them because it fits with the corporate goal; becoming “most relevant and contemporary athletic footwear” and relatively less expensive and risk, and solves the problem statement. Also, the cost of marketing will not be as high as Alternative #3 and #4 since the marketing campaign called “Sounds & Rhythm of Sport” will be similar since they already have RbK line (Zerio 2005).