Lululemon Athletica Database Marketing Plan and Project

1. LululemonAthletica, Inc.
Database Marketing Strategy
LululemonAthletica Inc.
Database Marketing Strategy
By
MufaddalZaveri
YuvrajLal
SedefAkinci
HuzefaChiniwala
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2. LululemonAthletica, Inc.
Database Marketing Strategy
Situation Analysis
Company History:
After 20 years of doing business in the surf, skate and snowboard business, the founder chip
Wilson took the first commercial yoga class offered in Vancouver. After doing the yoga he
realized that yoga is an ideology whose time had come. So chip then started a design studio that
became a yoga studio at night to pay the rental expenses. The success of clothing depended on
the feedback from yoga instructors who were asked to wear the products. The Lululemon name
was chosen by surveying from a hundred people, 20 brands and 20 logos. Lululemons first
store opened in the beach of Vancouver called Kitsilano in November 2000. The prime motive
of the store was to be like a community hub where people could talk about and share regarding
physical aspects of living from yoga, diet cycling etc. But unfortunately for this concept, the
store became very busy and it was difficult to educate the customers as well as sell products. So
the focus of training solely to educate the Lululemon staff and train the eople so well that they
could have a positive influence on their families, educator and staff.
(LululemonAthletica:Company History)
Products:
Lululemon’s product line includes jackets, hoodies, pants, and shorts for both men
and women as well as bras, underwear, and tank tops for women. The stores signature products
are its pants that are offered in both regular and tall lengths . The majority of Lululemon
garments are pre-shunk to ensure a quality first time fit. Lululemons pants are often lauded
that appeals to female fashionistas, soccer moms, professionals and the men that gifts them.
Lululemon basically makes products for women that practice yoga. The products are designed
to offer performance, fit and comfort incorporating style. Lululemon prides itself of using
cutting edge, quality fabrics to their customers. Lululemon co-ordinates with the world’s best
fabric suppliers to develop trade make fabrics like the ―All moisture wicking‖ that pulls away
moisture from the fabric and spreads it evenly through the fabric to dry quickly. They also have
the low impact fabrics that are made from natural fibers. The outwear fabrics are designed to
protect against wind and rain. Other innovative features on the products are flat seems, tear out
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3. LululemonAthletica, Inc.
Database Marketing Strategy
tables and thumbholes for credit cards, audio players and heart rate monitors.The company
recently expanded their product range to appeal to the men and youth segment. lululemon also
sells fitness-related accessories including bags, socks, underwear, yoga mats, instructional yoga
DVDs, and water bottles.
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4. LululemonAthletica, Inc.
Database Marketing Strategy
Mission and Vision:
On LululemonAthletica's website there is no traditional mission statement, and it is clear that
that they are more focused on their vision and goals. Every employee is encouraged to set a
personal goal and vision for themselves regarding how to build a healthy life. Their Vision and
goal setting program is based on 6 main concepts:
1. Possibility
2. Vision.
3. Balance.
4. Audacity.
5. Format
6. Integrity.
(The six core concepts of vision and goals).
Current target market:
The company makes clothing for both sexes, 70% of the product is catered to women. The
typical lululemon customer is catered to women. The typical Lululemon customer is female, age
25-35, educated professional, relatively high disposable income because their products aren’t
cheap, people who are active socially and physically conscious and open to the spiritual aspect
of living lives.
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5. LululemonAthletica, Inc.
Database Marketing Strategy
Historical Marketing Communication
Strategy
Building a brand is the most essential component of marketing strategy.
LululemonAthleticaunderstands this by taking the brand beyond a good logo and advertising.
The reason behind lululemon’s success is it found a savvy way to exploit women’s deepest
insecurities.It was the first brand that allowed women to wear workout clothes without feeling
embarrassed.Unlike competitors which relies on celebrity endorsements, worth millions of
dollars Lululemon relies on unpaid ―ambassadors‖ — Instructors at local gyms wear the
apparel and during free classes held at Lululemon stores.
The ambassadors provide valuable feedback to Lululemon on latest fashion trends. They
receive up to $1000 worth free merchandise for modeling the Lululemon apparel and gain
clients for regular classes after store sessions. These promotional efforts are accelerate by little
print advertising in running and yoga magazines.
As Lululemon grows so does its social media presence.The brand’s main Facebook page has
over 800,000 followers, including pages dedicated for the individual stores.
Lulu is actively involved in social media sites like Tumblr, Pinterest Foursquare, Instagram,
and was the first brand on Zite (a customizable magazine on the iPad/iPhone). The viral video
―Shit Yogis Say‖ was created by Lululemon.In the famous ad there is a lady that talks about
how yoga is good for her how good she feels after doing yoga. They basically make the ad in
such a way that it is funny and humorous and talks about the benefits of doing yoga. Lululemon
markets hyper-locally by tapping into the interests of its individual communities and building
events around them.Local marketing is done by building events around individual communities
by tapping into their interest.The strategy of Lulu is to get involved even before a new store
opening in a community.Lulu’s loyal following is not only devoted to its merchandise they also
support its lifestyle.
They encourage leadership by displaying mantras on its bags, websites and walls.(such as
―dance, sing, floss and travel‖)The employees do not just set work goals but also life goals
which encourages them to work and live better.It is a brand that is directly understands the
women. (Business in Vancouver).
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6. LululemonAthletica, Inc.
Database Marketing Strategy
Market Analysis:
Business Overview:
Lululemon sells mens and womens clothing for yoga, dance, exercise and other sports, catering
to high-income, trendy active adults willing to pay high prices. Lululemon apparel is sold in the
company's own-branded stores (both Lululemon and two special OQOQO stores that focus on
organic apparel) as well as in high-end lifestyle centers and yoga studios.
On June 27, 2011 LULU said it expects to reach $1 billion in sales for the fiscal year 2012. The
company reported store productivity is up to nearly $2004 per square foot, confidently shaking
off concerns of encroaching competition of high-end lines from large competitors such as Nike
(NKE) and Adidas AG
Segment Analysis:

Corporate owned stores (89.3% of net revenue): The Company has 103 corporate-owned
stores in Canada and the US. The company plans to increase North American net revenue
by opening additional corporate-owned stores.

Franchises (4.6% of net revenue[): As Lululemon was emerging into the clothing
industry, it entered into franchise agreements to more quickly expand its brand name and
increase net revenue. In exchange for the use of Lululemon's brand name and right to
operate stores in certain regions, franchises pay the company a one-time franchise fee and
ongoing royalties based on their gross revenue. [ According to Lululemon's SEC filings,
opening new franchise stores is "not a significant part of our near-term growth strategy."
The company has franchise stores in North America and Australia.

Other (6.1% of net revenue): Other net revenue includes wholesale sales, telephone sales,
and sales through a limited number ofcompany-owned showrooms. Wholesale customers
include premium yoga studios, health clubs, and fitness centers.
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7. LululemonAthletica, Inc.
Database Marketing Strategy
Retail Strategy:

Lululemon apparel is sold in the company's own-branded stores (both Lululemon and two
special OQOQO stores that focus on organic apparel) as well as in high-end lifestyle centers
and yoga studios.

Most of Lululemon's stores are located in urban shopping districts, malls and lifestyle
centers, and they cater to high-income, trendy active adults willing to pay high prices for
Lululemon's apparel. LULU's growth has been dependent on store expansion. The company
also has one of the highest sales per square foot figures in retail , averaging $1,700 of sales
per square foot in its corporate-owned stores (compared to $489 at Abercombie and Fitch
and $398 at GAP).

Lululemon is unique in that it does not rely on television or print advertising to promote its
product, but rather relies on building strong community relationships (e.g. building strong
relationships with yoga studios and gyms in the communities in which it operates).
Competitive Advantage

High-end retailers such as Lululemon appeal to customers in the upper-income bracket
whose absolute spending power is less affected by macroeconomic downturns. Lululemon's
high prices, around $50-60 for a t-shirt, cater to the upper-class consumer willing to pay
premium prices for workout gear. While the wallets of the lower- and middle-classes are
pinched during economic downturns, Lululemon's core customers typically have wealth
that allows them to continue purchasing trendy and pricey exercise apparel despite
downward trends in the economy.

combination of small stores and high prices help to create large profit margins for
Lululemon by increasing the difference between the company's operating costs (store
operating expenses are lower for smaller stores: rent, utilities, number of employees needed
to cover the selling floor, etc.) and overall revenue. The average Lululemon corporateowned store size is only 2,900 square feet, compared to average store sizes of 7,089 square
feet and 12,504 square feet at Abercombie and Fitch and GAP, respectively. With a
significantly smaller store and its high priced items (over $60 for t-shirts), Lululemon is
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8. LululemonAthletica, Inc.
Database Marketing Strategy
able to achieve sales per square foot of $1,700 in its corporate-owned stores, over three
times as much as sales per square foot at Abercombie and Fitch ($489) and GAP ($398). All
of this translates into lower costs and higher revenue for Lululemon.
Competition:
Lululemon is one of the only major retail chains and clothing manufacturers dedicated to yoga
and fitness apparel, giving it a powerful position as a niche player in the apparel retail market.
It's primary competitors are small businesses that operate individual yoga-wear shops and
retail shops located in gyms and fitness centers, as well as sporting goods retailers such
as Dick's Sporting Goods (DKS) which sell fitness apparel. It is nearly impossible to compare
Lululemon to these competitors as the smaller stores are too small and sporting goods giants
like Dick's Sporting Goods (DKS) derive most of their business from product categories, such
as sporting equipment and footwear that Lululemon does not carry. However, Lululemon's
advantage over these smaller operations is the popularity of the Lululemon brand among yogaenthusiasts that has risen with the company's tremendous growth over the past five years.
On a larger scale, Lululemon competes with sports industry giants Nike and adidas which
produce athletic apparel and accessories. Each of these companies is incredibly larger than
Lululemon in terms of sales and channel presence as they have their own stores in addition to
being carried in a multitude of online and brick-and-mortar stores. Sports apparel and footwear
manufacturer Under Armour is also a competitor of Lululemon as the company produces hightech apparel for exercise and athletics. Under Armour (UA) is closer in size to Lululemon,
although Under Armour targets young team sport athletes while Lululemon focuses on
customers
involved
in
yoga,
running
and
other
individual
exercises.However, Nike, adidas and Under Armour all have significant footwear operations,
which is not part of Lululemon's business. (See appendix)
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9. LululemonAthletica, Inc.
Database Marketing Strategy
New Product Initiatives:
In September 2009, Lululemon launched a spinoff brand, ivivvaathletica – dance inspired
clothing for active girls, ages 6-12 . We believe the launch of a separate brand was a good
business decision rather than making ivivva a brand extension. Furthermore, it positions
Lululemon as an aspiration brand when girl customers grow out of ivivva.
LULULEMONS SHARE FALLS BY 5%:
The stock market darling Lululemon saw its share fall down by 5.2% on Friday afternoon.
Lululemon has been the favourite of the retailers but the company warned the investors last
month that the company sales are going to be low in the high single digits from the 4 th quarter
of 2012. Lululemon have to increase their discounting both in stores and online as a shift in
strategy. The company began an initiative in 2011 to increase inventory to meet the growing
demnds of people for yoga equipments.They have been working on their pricing and other
strategies as well to increase their market share. It has been a challenge for lululemon to reach
a fine balance between hving too much inventory and have less of it. (Lululemon’s share falls by
5%).
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10. LululemonAthletica, Inc.
Database Marketing Strategy
SWOT ANALYSIS
Strengths
High Quality Products
Innovative features and style
Vertical retail strategy: Produce
everything and sell it in own store.
Premium store locations.
Community centered marketing
approach-building brand awareness,
relationships and philantrophic
activities.
OPPURTUNITIES
International expansion
E-commerce development.
New market segment- man and youth.
Growth in U.S market
Weakness
Weak brand recognition in the U.S-may
not be in the consumers consideration set.
Slow growth strategy due to lack of mass
marketing.
Decentralization marketing-each store has
control over own message.
Few retail outlets-maynot be able to reach
all customers especially males.
THREATS
Economic conditions may decrease
consumer spending.
Lack of consumer knowledge.
Fluctuations in stock market might affect
the image of the company
Build U.S brand recognition
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11. LululemonAthletica, Inc.
Database Marketing Strategy
Target Market
Primarily Lululemon's target market has been active young thinking women woman who are
well educated appearance conscious give physical well being priority and also love yoga. These
women are generally aged around 20-45 and are part of upper middle class families. Lululemon
practice a Niche Marketing strategy going after a very narrow and well defined target segment
in which they have had great success. More than 85% of Lululemon's sales are from this target
market and they will always remain the primary target market for Lululemon. Our marketing
strategy is going to target males, Lululemon already has a male clothing line and has been
trying to get the male-workout market share for a while now. Males usually don't prefer
shopping at Lululemon due to their over positioned status of being a female clothing line. Our
Marketing strategy will try to acquire males who have similar attributes to Lululemon's female
target market that is educated young thinking men aged 20-45 who are appearance conscious
are physically fit and active.
OBJECTIVES:
The marketing campaign that we will launch will be called 'Manhunt'. The primary objective
of our program is to increase the number of male customers of Lululemon through the existing
customers that Lululemon already has. This will be achieved through a combination of referral
Acquire new male customers through referrals.
Increase spending of existing customers through the loyalty program.
Increase retention through both loyalty and referral programs(referred customers tend
to be more loyal).
Increase referred customers by giving incentives to both referred and referring
customers.
Increase sales and attract male customers to Lululemon.
Acquire information about the referring and the referred customer and thus know their
descriptive profile (geography, demographics and income), behavioral (product
interaction, shopping habits).
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12. LululemonAthletica, Inc.
Database Marketing Strategy
STRATEGIES:
The overall strategy is to have a referral and loyalty program to acquire new male
customers and retain current customers through loyalty program.
The marketing and communication program will be word-of-mouth, in store
advertising and post on websites and social media pages (facebook, youtube, twitter,
instagram) as always because Lululemon does not practice mass marketing. It will focus
on building awareness among males through underground marketing and guerrilla
marketing.
The program will be a combination of a loyalty and referral program where existing
customers will refer new male customers which will qualify both of them for a one time
discount and automatically add them to the loyalty program as well.
The benefits of the program to the customer is that after registering for the program by
referring a male friend, they will both be eligible for a one time discount on their next
purchase at Lululemon. They also qualify for the loyalty program where they earn
credit points for every purchase they make.
It is easy for the customer to accept the offer since they derive benefits from the
program immediately and in the long term. The program is very straight forward as the
customer only has to provide information to get the unique loyalty Card which they can
use to redeem collect points after every purchase.
With this program the information to be managed will increased and a proper system
will be required to handle it and staff will have to be trained to use it.
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13. LululemonAthletica, Inc.
Database Marketing Strategy
TACTICS:
Our tactics used to implement our strategy are as follows:The program will be marketed in stores, websites and social media (facebook, twitter,
youtube) and information about the new program will be given by our staff to the
customers during the purchase.
To be eligible for the program the customer has to register with a male friend of theirs
where both have to fill out a form giving basic personal information
Each customer will be assigned a card with a UNIQUE I.D that will identify the
customer and record all future transactions with Lululemon.
After registering the customer will be entitled to aaone time 10% discount on their next
purchase. Following that they will earn 10 credit points for every $100 they spend. On
earning 100 credit points they can redeem these points for a $100 gift card to buy any
product at Lululemon.
Customers can terminate their cards at any time they want by calling a number given
on their card. This number can also be used for enquiries such as number of points they
have earned or offers given by Lululemon on their products.
All the information provided by the customers will be in compliance with privacy laws
and ethical business practices.
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14. LululemonAthletica, Inc.
Database Marketing Strategy
DATABASE REQUIREMENTS:
The database will require the customer to give basic information of themselves. An example of
the form and its content is given below:
NAME
DATE OF
BIRTH
GENDER
ADDRESS
City
PROVICE
Postal Code
TELEPHONE
EMAIL
ADDRESS
MUFADDAL
ZAVERI
24th NOVEMBER 1990
MALE
85,Thorncliffe Park Drive
Toronto
Ontario
M4H 1L6
(647)-773-4783
mufaddalzaveri@ymail.com
SIGNATURE
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15. LululemonAthletica, Inc.
Database Marketing Strategy
LTV Estimates
Lululemon Referral LTV
Year 1
Year 2
Year 3
Customer
2,000,000
2,000,000
1,900,000
Spending Rate
$500
$550
$600
Retention rate
0
90%
90%
Retained Customers
0
1,800,000
1,710,000
Referral Rate
0
5%
8%
Referred Customers
0
100,000
152,000
Total customers
2,000,000
1,900,000
1,862,000
Total Revenue
$1,000,000,000
$1,045,000,000
$1,117,200,000
Variable cost %
43%
49%
45%
Variable cost
$430,000,000
$512,050,000
$502,740,000
Program Cost(50$)
0
5,000,000
7,600,000
Fixed Cost
$130,000,000
$130,000,000
$130,000,000
Total Cost
$560,000,000
$647,050,000
$640,340,000
gross Profit
$440,000,000
$397,950,000
$476,860,000
Discount rate
1
1.16
1.35
NPV
$440,000,000.00
$343,060,344.83
$353,229,629.63
Cumulative NPV
$440,000,000.00
$783,060,344.83
$1,136,289,974.46
LTV
$220
$391.53
$568.14
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16. LululemonAthletica, Inc.
Database Marketing Strategy
MEASUREMENT TESTING AND
EVALUATION:
We can measure the success loyalty program by having a count of the number of forms filled up
and the loyalty cards given to the customers. It will also give us a count of the new male
customers that have purchased from Lululemon.
We can measure the increase in life time value from the previous years with respect to the new
LTV which is due to the referral program.
CAPITAL REQUIREMENTS:
Cost of making loyalty cards and forms
$500000
Cost of training staff- $500000
Cost of in house advertising and website updates
Social Media advertising
Database and CRM software
$500000
$50000
$1000000
Total Cost $2550000
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17. LululemonAthletica, Inc.
Appendix-A
Database Marketing Strategy
Lululemon Manifesto
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18. LululemonAthletica, Inc.
Appendix-B
Database Marketing Strategy
Lululemon’s Quality Stand
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19. LululemonAthletica, Inc.
Appendix-C
Database Marketing Strategy
Lululemons Competitors
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20. LululemonAthletica, Inc.
Appendix-D
Database Marketing Strategy
Base LTV for estimation:
Lululemon LTV
Customers
Year 1
$
Retention Rate
2,000,000.00
Year 2
$
90%
1,800,000.00
Year 3
$
1,600,000.00
$
600.00
90%
Spending Rate
$
Total Revenue
$ 1,000,000,000.00
$ 990,000,000.00
$ 960,000,000.00
Variable Cost %
43%
49%
45%
Variable cost $
$ 430,000,000.00
$ 485,100,000.00
$ 432,000,000.00
Fixed Cost
$ 130,000,000.00
$ 130,000,000.00
$ 130,000,000.00
Total Cost
$ 560,000,000.00
$ 615,100,000.00
$ 562,000,000.00
Gross Profit
$ 440,000,000.00
$ 374,900,000.00
$ 398,000,000.00
Discount Rate
1.00
1.16
1.35
Net Present Value Profit
$ 440,000,000.00
$ 323,189,655.17
$ 294,814,814.81
Cumulative NPV Profit
$ 440,000,000.00
$ 763,189,655.17
$ 1,058,004,469.99
$
$
$
Lifetime Value
500.00
220.00
$
550.00
381.59
529.00
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21. LululemonAthletica, Inc.
Database Marketing Strategy
Bibliography:
Works Cited:
“Company History” : http://www.lululemon.com/about/history?mnid=ftr;company_history
“Current target market” : http://www.charleson.ca/pdfs/05_brand_Lululemon.pdf
“Mission and Vision” :http://www.lululemon.com/education/sixcoreconcepts.
“Company sales falls by 5%” :Freeman, Sunny. "Lululemon Shares Fall by Five Per Cent."
Telegraph-JournalJan 05 2013. ProQuest. Web. 12 Apr. 2013 .
―MarketAnalysis‖http://www.wikinvest.com/stock/Lululemon_(LULU)/Data/Key_M
etrics
"Lululemon’s Marketing Strategy | Grewal Levy Marketing News." Grewal Levy
Marketing News. N.p., n.d. Web. 12 Apr. 2013.
<http://grewallevymarketing.com/2010/09/13/lululemon%E2%80%99s-marketingstrategy/>.
http://www.charleson.ca/pdfs/05_brand_Lululemon.pdf
"Brands of the Year: Lululemon takes local to the next level » strategy." strategy. N.p.,
n.d. Web. 12 Apr. 2013. <http://strategyonline.ca/2012/09/28/brands-of-the-yearlululemon-takes-local-to-the-next-level/>.
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