A database marketing initiative for Lululemon Athletica that could be implemented to increase customer retention and profitability. Project included in-depth study of Situation and Target Market Analysis for Lululemon Athletica. Development of Objectives and Strategy of the Retention Program, Tactical and Database Requirements, Lifetime Value (LTV) Estimates, Capital Requirements and Measurement process.

1. Table of Contents
Situation Analysis
......................................................................................................................
2
Company sales volume
......................................................................................................................
2
Brand positioning
...............................................................................................................................
2
Historical Marketing Activities
.......................................................................................................
3
Category-Market Growth
.................................................................................................................
4
Segment analysis
.................................................................................................................................
4
Competitive Analysis
.........................................................................................................................
4
Market
and
Consumer
Factors
.....................................................................................................
5
SWOT Analysis
..........................................................................................................................
6
Target Market for Lululemon Customer Rewards Program
..........................................
7
Program Objectives
...................................................................................................................
7
Strategy
........................................................................................................................................
8
Marketing and Promotional Tools
..................................................................................................
9
Tactical Requirements
...........................................................................................................
10
Database Requirement
..........................................................................................................
12
Customer Life Time Value
...................................................................................................
13
Measurement, Testing and Evaluation
..............................................................................
16
Capital Requirements
............................................................................................................
16
Work cited list
.........................................................................................................................
17
Appendix A
..............................................................................................................................
19
Appendix B
...............................................................................................................................
19
Appendix C
..............................................................................................................................
20

2. Situation Analysis
Company sales volume
Lululemon has increased 21% of its net sales revenue for the first three quarters of fiscal
year 2013 to $1,070.2 million from $884.9 million in the same period of fiscal year 2012.
It ended the third quarter of fiscal 2013 with $600.7 million in cash and cash equivalents
compared to $439.4 million at the end of the third quarter of fiscal 2012 (Lululemon
Athletica Inc. 1)
Market Share & Growth Rates
2
Market
Share
of
Global
Sports
7%
33%
2%
Brand positioning
Company CAGR
(2010-2012)
Adidas
(includes
Reebok)
8.1%
Nike 12.3%
Puma 10.6%
Under
Armour 27.4%
Lululemon
athletica 38.7%
Asics 4.9%
43%
• Target Customer/Core customer: Young educated women who are concerned
about balancing their work and life. They incorporate yoga and sport activities to
fulfill the balance
• Point of Parity: Lululemon Athletica chooses to concentrate on the design and
production of technical athletic apparel
• Point of Difference: Creating and delivering technical apparel for a specific
segment of the market: yogis (a practitioner of yoga) by offering their first unique
fabric, their signature "Luon" at premium price
8%
7%
Apparel
Market
2012
Adidas
(includes
Reebok)
Nike
Puma
Under
Armour
Lululemon
athletica

3. 3
Historical Marketing Activities
- Yoga Class at nearly all stores
- Ambassadors programs who embody the Lululemon lifestyle: Certified yoga and
fitness instructors in the community are offered a 15% discount on purchases, in
return for written feedback to be provided on the items purchased
- Lululemon promotes its brand, its community and its culture with local events
Social Media Channel
Social network # of Followers Posts Comments
Facebook.com
911,196 likes ·
Total posts:
https://www.facebook.com
6,060 talking
n/a
/lululemon
about this
Like and share photos of new
products, recent events, Yoga
Pose
Youtube.com
https://www.youtube.com/
user/lululemon
17,037 subscribes
6,152,483 views
Total posts:
200+ Video
Introduce product function,
yoga events, yoga lessons,
ambassadors sharings
Twitter.com
https://twitter.com/lululem
on
583K Total posts:
58.5K
Yoga pose featured by
lululemon prduct, sport
activities photos
Pinterest.com
http://www.pinterest.com/l
ululemon/
1,923,239 Total posts:
1313
Lululemon events and store
all over the world.
Instagram.com
http://instagram.com/lulule
mon
498,799 1275 Feature all sport activitites
Blog
http://blog.lululemon.com
Blog, articles relates to
lifestyle, health and sport
activities
Current Status
Lululemon is a global leader of yoga inspired women's athletic apparel. Currently
Lululemon is available for purchase only in North America and Australia. International
expansion is in the works with show-rooms in Hong Kong and London.

4. 4
Category-Market Growth
• Revenue has increased $40.7 million in 2004 to $1.0008 billion in 2011 which
shows compound annual growth of 58%
• Net revenue in 2011 was $1.008 billion in compare to $711.7 million in fiscal
year 2010 resulting 41%increment in revenue
• Corporate owned stores comprise 89.3%of net revenue. Company has 103
corporate owned stores in Canada and US
• Store productivity is approximately $2004 per square foot in 2011 in compare to
$1726 in the fiscal year 2010
• Franchises contribute 4.6% of the net revenue for Lululemon
• Other contribution comes from wholesale sales; telephone sales and sales through
company’s showroom provides 6.1% of the net revenue
Segment analysis
Two major segments of global sports and fitness clothing markets are:
1. Sports apparel
2. Fitness clothing
Sports and fitness clothing market is increasing day by day due to the general awareness
and interest in more sports related activity. Consumers are leading healthier lifestyle by
taking participation in different sports. Increase number of women participation in sports
and yoga represents growth trend and opportunity for apparel and fitness clothing.
Competitive Analysis
Top competitors of Lulu lemon are Nike, GAP and Adidas.
Ø NIKE-Nike is the leading and most recognized brand in sportswear
Strength-
• Strong brand awareness
• Strong global market presence
• Nike makes very strong marketing effort and endorse top athlete like Michel
Jordan and Derek Jeter for their marketing campaign
Weakness-
• It is considered as “the expensive brand”
• Broke Labour law in third world countries by paying the labours below
minimum wage

5. Ø The Gap Inc.-GAP is leading global speciality wear. The company offers product
under the name of Gap, Old Navy, Banana Republic, Piper Lime.
5
Strength-
• Increase in revenue helped the company in internal funding for expansion of
its operation further
• Strong product portfolio and brand recognition
• Wide geographic presence-Gap operates 3095 stores across North America,
Europe and Asia
Weakness-
• Dependency on third party manufacturer-company purchase private and non-private
level from approximately 1000 vendor from 40 countries. This may
affect its ability to meet any emergency
• Companies various product recalls generate negative publicity among their
consumer
Competitive Chart
70
60
50
40
30
20
10
0
Market and Consumer Factors
• Demographics – study of population changes
- 29% of Canadian population comprises of people from Baby Boomer
Generation (born between 1946 – 1965) and 27% of the total population, belong
to the children of baby boomers generation (born between 1976- 1994). This
generation is often called Millennial. (Generations in Canada)
• Health Trend:
- The percentage of Canadian adults, age 20 to 39, at risk for health problems
because of expanding waistlines has quadrupled in the last 30 years, from 5% to
21% for men, and from 6% to 31% in women (Yoga
in
the
Workplace)
• Growth of Yoga Industry:
- There are 250 million yoga practitioners worldwide which lets yoga to become a
cash cow among North American Yogis. (Yoga’s
evolution)
-­‐10
Lululemon
Addidas
GAP
Nike

6. SWOT Analysis
STRENGTHS OPPORTUNITIES
6
Ø Global market leader in yoga
apparel
Ø Premium quality and
innovative products
Ø Personalized customer service
and highly trained staff
Ø Actively engaging towards
local community through
Brand Ambassador program
Ø Strong social media presence
Ø Utilizing customer feedback
through its blog and feedback
website tool
(heylululemon.com)
Ø Growth of Yoga industry
worldwide can lead to
international stores expansion
Ø Increasing number of
Canadians are classified as
being overweight and they can
be its new target market
Ø Brand recognition in Asia and
Europe
WEAKNESSES THREATS
Ø Weak brand recognition in
Asia and Europe
Ø Lacking stores expansion
outside North America
Ø Competitors, such as Nike and
GAP, are now having yoga
product line
Ø Competitors are having
cheaper price for similar
products

7. Target Market for Lululemon Customer Rewards Program
Specific and Niche approach
Lululemon has had a rough year in 2013 in terms of its sales, marketing, and Public
Relations strategy. After its CEO controversial public comments on Lululemon yoga
pants and women’s bodies; as well as banning its own loyal customer to shop there just
because they are reselling their Lululemon’s product through other online distribution
channel, Lululemon has lost its loyal customer brand engagement. This reflected on their
stock market shares that slipped dramatically (Shaw).
Lululemon needs to develop innovative strategies to win its loyal customers back.
Currently, Lululemon is actively engaging towards local community through their brand
ambassador program.
Target market is as below:
• Female, age 25-39 years, high income, well educated, sophisticated, mature
professional, have urban, dynamic, and trendy lifestyle
7
Needs:
• Active & busy females seeking for a better work life balance towards
yoga/meditation and other range of sport activities
Value:
• Lululemon successfully developed a specific target market and worked hard to
satisfy them through personalized customer service & its growing local
community
• Their product has reflecting the dynamic women’s needs in balancing style and
performance for a wide range of activities (InterBrand)
• Consumers are willing to pay higher price for premium quality product and the
service too
Program Objectives
• To successfully launch LuluCard program by May 1st, 2015
• To acquire 400,000 customers to be a member of LuluCard by the end of fiscal
year 2015
• To gain 10% referral rates for LuluCard membership by the end of fiscal year
2016
• To achieve 30% Return on Investment (ROI) of LuluCard membership by the end
of fiscal year 2016

8. 8
Strategy
• Lululemon Customer Rewards Program (LuluCard)
o Target market will be Lululemon existing loyal customer (including
Lululemon Brand Ambassador & Female Yogis) in Canada
o Rewards Program is based on points system. There are 3 levels for this
program (Silver, Gold, and Platinum)
• Integration between LuluCard and Lululemon Brand Ambassador
o The Ambassador program is presented to unique individuals in each
Lululemon store communities who characterize the Lululemon lifestyle
and live the culture
o Main focus for the first year of launch will be to engage with Lululemon
Brand Ambassador and encourage them to join Lululemon rewards
program. As Brand Ambassador, they will be the most loyal customer for
Lululemon and will represent positive association towards the brand
• Brand reactivation for Lululemon Om Finder Yoga App
o Adding features to existing Lululemon Om Finder Yoga Apps. For
example: customer logins using LuluCard username. From that login they
can track their purchase and reward points, refer their friend, and view
current promotions
Benefits for Member
• Member can track their points and purchase history through Lululemon website
and Om Finder Yoga Apps 24/7
• Member can refer a friend and get 20 bonus points + 10% Discount for their next
purchase
• Member will be the first to receive notice of promotions and deals, through Om
Finder Yoga App or email newsletter
• Monthly exclusive promotions only available for LuluCard member
• Special birthdays’ promotion for member. Member will receive advance notice
through email, explaining what their birthday promotions are
Point of Difference
The only customer rewards program in sport/yoga apparel category that provide customer
with convenience access to track their account (through Om Finder Yoga App), earn
bonus points + discounts for referring a friend, and engage with their local store
community.

9. 9
Marketing and Promotional Tools
• Advertising
Promote LuluCard through:
o Online Advertising (Lululemon official website, Google ad)
o Social Media (Lululemon FB, Twitter, Instagram, Twitter)
o Print (Women Magazines, Health & Lifestyle Magazines)
o In store display (poster, banner, and brochure at each Lululemon store)
• Public Relations
o Use existing Lululemon blog to gather reviews from Brand Ambassador and
loyal customer
o Invite media relations to LuluCard launch and promotional event
• Event Marketing and Sponsorship
o LuluCard launching party
o Sponsor sports and yoga event to create positive brand association
o LuluCard booth at each sponsored events to gain awareness from customer. The
booth will have at least 1 Lululemon Brand Ambassador as a representative that
will explain all the features and benefits of LuluCard.
Drawbacks From This Program
• Customer information may be partial or misleading
• Risk of failing of Privacy Act

10. 10
Tactical Requirements
1) Features & Benefits:
For Consumers:
- The “Om Finder App” will allow customers to track the reward points that
they earn from their subsequent purchases
- Customers can redeem their points directly by converting into equivalent
dollar value or by participating in promotional offers
- Elite Ambassadors and Platinum Card holders shall be Lululemon’s brand
advocates and will gain additional media points upon each referral
- Ambassadors achieving premium target points for referrals shall receive
special invitation for ‘new brand line launch’ every pre-season
- Elite Ambassadors and Platinum Card holders will have unlimited access
to in-store yoga classes
For Lululemon:
- Track consumer buying behavior for efficient inventory management
- Act as a prediction tool to gather insight of what Lululemon customer
needs and wants
- Encourage referrals to grow revenue
2) Member administration process
Signups / Inquiries:
- The membership card will be available at the purchase counter of all stores
across Canada
- The staff will be specifically trained to encourage all customers to sign up
for the rewards program
- Referred customers can directly sign up for the rewards card online and
collect the card in-store, upon their first purchase
Terminations:
- All customers and ambassadors can at anytime terminate their rewards
program
- Upon termination, all benefits of the rewards program shall be withdrawn
3) Levels (if there is more than one)
- Lululemon Silver Card: This is the basic card which every customer shall
get upon signing up to the loyalty rewards program
- Lululemon Gold Card: Upon accumulation of 800 points, the customer
gets upgraded to Gold Class
- Lululemon Platinum Card :Upon accumulation of 1500 points, the
customer gets upgraded to Platinum Card

11. 11
4) Offer and Fulfillment:
- “With every $50 spent on your purchase of tops / bottoms / accessories or
swimwear, get 20 points on your reward card”
- Gold Card customers will have access to additional seasonal discount
which is reserved for optimum members only
- Platinum Card customers will have access to premium weekly deals,
exclusively for Platinum Customers and by invitation only
- Elite Ambassadors & Platinum Card customers will receive 1 additional
points for every $1 dollar spent above single purchase worth $300 and 50
points for every referral
5) Redemption Process:
- Every 50 points carry a dollar value of $2
- Points can be converted to equivalent dollar value and subsequent discount will
be applied on the current purchase
- Points can also be redeemed to purchase weakly deals
6) Customer Communications Process:
- All communications with the customer will be done via postal mail and
email
7) Privacy Laws:
- All communications with the customer shall be done complying under
PIPEDA and CASL
- The customer will sign and agree to the privacy terms and policy before
taking part in the rewards program

12. 12
Database Requirement
Registration for Lululemon Silver Card
- Customer Personal Details
1) Title
2) First Name*
3) Last Name*
4) Address*
5) Email Address*
I would like to receive messages / offers from Lululemon Reward Program and its
Sponsors to my email address.
6) Phone Number
- More Information
7) Gender
8) Language
9) Date of Birth (yyyy/mm/dd)*
10) Income (under $35,000 / $35,000 – 49,999 / $50,000 – 74,999 / $75,000 –
99,999 / $100,000 +)
11) Marital Status (Married / Common-Law / Separated / Divorced / Widowed
/ Single)
12) Household Size (1 / 2 / 3 / 4 / 5+)
I have read and agree to all of the Terms & Conditions and the Privacy Policy.
I am 18 years of age or above
* Required Field
Existing Internal Data Sources
• The buying behavior of consumers will tracked from the existing database
of online registered customers in www.lululemon.com
• After RFM analysis, proposal of enrollment to the rewards program shall
be rolled out to the most recent and frequent online customers
• The UPC Scanner data shall be utilized to identify consumer behavior
across stores to plan the in-store promotion of the rewards program

13. Customer Life Time Value
Assumption 1: Acquiring 400,000 customers
The number of 2,096,000 female aged from 25 – 35 from main provinces are prospective
customers of Lululemon. (Appendix)
Using rule 80/20, which 80% of major revenue comes from 20% customers. In the other
words, 20% of 2,096,000 female (400,000) are assumed to be the major spenders or
heavy users of Lululemon. Therefore, in this program we will aim to acquire 400,000
customers.
Assumption 2: 300$/customer/year. Retention rate increase in the future.
According to TickerMine's survey, most shoppers spend around 75$ per visit. Every
customer is expected to return to the store 4 times a year (every 3 months). Thus, an
average customer spend $300 per year. Increase 18% year 2, 20% year 3.
In future years the retention rate grows. The loyalty of retained customers is higher than
that of newly acquired customers. As customers stay with Lululemon, their number of
orders per year and their average order size tends to increase. Thus, Spending rate and
retention rate are expected to both increases.
Assumption 3: Variable cost takes up 50% of Sale revenues
In year 1, 40% in year 2, and 35% in year 3.
The cost typically goes down after the first year. The cost of customer service to existing
customers is usually lower than that to new customers.
Assumption 4: Acquisition cost is $40/customer.
Acquisition cost is calculated covering all the marketing program, advertising cost, sales
cost. With the amount of $16 mil, acquiring 400,000 customers is achievable.
Assumption 5: Discount rate 1.16 in year 2, 1.36 in year 3
Factor of risk = 2. Current interest rate = 8%.
Therefore, D year 2 = 1.16, D year 3 = 1.26
Assumption 6: Referral rate 10% in year 2, 15% in year 3
With the effectiveness and efficiency of tools and methods used in referral program, in
year 2, we believe to acquire another 10% customers who are referred by brand
ambassadors and loyal customers (who are maybe their friends, colleague, relatives, etc).
13

14. Base
Case
–
Lululemon
Customer
Life
Time
Value
Year
1 Year
2 Year
3
#
Customers
400,000 180,000 90,000
Retention
Rate
45% 50%
Spending
Rate $300 $354 $425
Total
Revenue 120,000,000 63,720,000 38,250,000
Variable
costs
% 50% 45% 40%
Variable
costs
$ $60,000,000 $28,674,000 $15,300,000
Acquisition
Costs
(
$16,000,000 0 0
$40)
Total
Costs 76,000,000 28,674,000 15,300,000
Gross
Profit $44,000,000 $35,046,000 $22,950,000
Discount
Rate 1 1.16 1.36
Net
Present
Value
Profit
$44,000,000 $30,212,069 $16,875,000.00
Cumulative
NPV
Profit $44,000,000 $74,212,069 $91,087,069
LTV
–
Lifetime
$110.00 $185.53 $227.72
Value
Referral
program
-­‐
Lululemon
Customer
Life
Time
Value
Year
1 Year
2 Year
3
#
Customers
400,000 400,000 220,000
Referral
Rate 0 10% 15%
Referred
Customers
0 40,000 33,000
Retention
Rate
45% 50%
Retained
Customer 400,000 180000 110000
Total
Customer 400,000 220,000 143,000
Spending
Rate $300 $354 $425
14

15. Total
Revenue 120,000,000 77,880,000 60,775,000
Variable
costs
% 50% 45% 40%
Variable
costs
$ $60,000,000 $35,046,000 $24,310,000
15
Acquisition
Costs
(
$40)
$16,000,000
0
0
Program
Cost
($20)
800,000 660,000
Total
Costs 76,000,000 800,000
24,970,000
Gross
Profit $44,000,000 $42,034,000 $35,805,000
Discount
Rate 1 1.16 1.36
Net
Present
Value
Profit
$44,000,000 $36,236,207 $26,327,205.88
Cumulative
NPV
Profit $44,000,000 $80,236,207 $106,563,413
LTV
–
Lifetime
Value $110.00 $200.59 $266.41
Year
1 Year
2 Year
3
New
LTV $110 $200.59 $266.41
Original
LT $110 $185.53 $227.72
Change
in
LTV 0 15.06 38.69
Potential
net
Profit
or
loss
@
400,000
0 6,024,000 15,476,000
From this table, we can see, acquiring new customers does not yield profit. Customers, in
this case, become profitable only in the second and third years. This is typical. It is why
money spent on increased retention has a higher payoff than money spent on acquisition.
It is much more profitable to conduct the referral program which can yield the amount of
15.5 mil in the third years.

16. Measurement, Testing and Evaluation
• Daily performance measurement report using Customer Relationship
Management software tools (SAS Marketing Automation). This tool will
specifically measure number of customers acquired, spending rates, and referral
rates.
• Monthly LuluCard marketing team meeting to review our objectives.
• Monthly promotion plan evaluation through AC Nielsen rating report
• Online survey for every LuluCard members on their 3 months anniversary as a
member. Survey will focus on measuring customer satisfaction and customer
engagement.
16
Capital Requirements
• Database tools will be empowered by IBM Power and Windows Server
Cost for IBM Power and Windows Server:
Total
First Year Database Software $50,000 $143,000
Hardware required
(PC’s and server to
host the database)
$20,000
Hardware Maintenance $5,000
System Administrators
(Development Cost,
Support, Back-up
Staff)
$73.000
Second Year Hardware Maintenance $5,000 $78,000
System Administrators $73.000
Third Year Hardware Maintenance $5,000 $78,000
System Administrators $73.000

17. Work cited list
GAP. “Credit Card Rewards”. Web. 24 March 2014.
<
http://www.gap.com/customerService/info.do?cid=44651>
Google Sites . "Competitive Advantage.". Web. 16 Apr. 2014.
<https://sites.google.com/site/mngt255tina/managementenvironment/competitive-advantage>
Interbrand. “Best Retail Brand 2013: Lululemon Athletica”. Web. 24 March 2014.
<http://www.interbrand.com/en/BestRetailBrands/2013/LululemonAthletica>
International Technology Group. “Management Brief.” Editorial. VALUE
PROPOSITION FOR IBM POWER SYSTEMS AS DATABASE SERVER IN
MIDSIZE COMPANIES (2008): 2. Print.
Lululemon Athletica. “Community @ Lululemon”. Web. 24 March 2014.
<
http://www.lululemon.com/community/?mnid=mn;community>
Lululemon Athletica. “Who Is Lululemon Athletica?”. Web. 24 March 2014.
<http://www.lululemon.com/about/?mnid=mn;education;about-us>
Lululemon Athletica. “Lululemon Athletica Inc. Announces Third Quarter Fiscal 2013
Results” Rep. VANCOUVER, British Colombia. Web. 16 Apr 2014.
<http://files.shareholder.com/downloads/LULU/3024194148x0x713422/2481a4d
6-3ce2-4397-
b2f908905ba88fd7/LULU_News_2013_12_12_General_Releases.pdf>
Marketing Teacher Ltd. "SWOT Analysis Nike, Inc." Nike SWOT. n.d. Web. 14 Apr.
2014. < http://www.marketingteacher.com/swot/nike-swot.html>
NASDAQ.com.
"Lululemon
athletica
inc.
(LULU)
Forecast
Earnings
Growth."
N.p.,
n.d.
Web.
15
May
2014.
<http://www.nasdaq.com/symbol/lulu/earnings-­‐
growth>.
Peppers, Don. “5 Best Practices for Loyalty Program”. Fast Company. 9 July 2012. Web.
1 April 2014. <http://www.fastcompany.com/1842195/5-best-practices-loyalty-programs>
SAS. “SAS Marketing Automation”. Web. 24 March 2014.
<http://www.sas.com/en_us/software/customer-intelligence/marketing-automation.
17
html>

18. Shaw, Hollie. “’We Get It,’ Lululemon says, as it pledges to win back customers after
blunder-filled year”. Financial Post. 14 January 2014. Web. 28 March 2014.
<
http://business.financialpost.com/2014/01/14/lululemon-athletica-brand-blunders/>
Statistics Canada. “Population, by province and territory, Canada, 2010”. 13 May 2013.
Web. 24 March 2014.
<http://www.statcan.gc.ca/pub/89503x/2010001/article/11475/tbl/tbl003-
eng.htm>
Statistics Canada. “Population, by age group, Canada, 2010”. 13 May 2013. Web. 24
March 2014.
<http://www.statcan.gc.ca/pub/89-503-x/2010001/article/11475/tbl/tbl002-
eng.htm>
Tapper, Josh. "Yoga’s Evolution: From Basement Studios to Big Business”. Toronto
Star." Web. 19 March 2013. Web. 16 Apr. 2014.
<http://www.thestar.com/life/health_wellness/fitness/2013/03/19/yogas_evolution
_from_basement_studios_to_big_business.html>
Tucker, Erica. “Why Is Lululemon so successful?”. Global Toronto. 6 December 2012.
Web. 28 March 2014. <
http://globalnews.ca/news/316659/why-is-lululemon-so-successful/>
WikiInvest. "Lululemon (LULU) Stock:/Bulls”. Web. 16 Apr. 2014
< http://www.wikinvest.com/stock/Lululemon_%28LULU%29/Bulls>
Yoga in the Workplace. "Yoga in the Workplace." N.p., n.d. Web. 16 Apr. 2014.
< http://www.yogaintheworkplace.ca/2005/01/statistics-canada-released-canadian.
18
html>

19. 19
Appendix A
Appendix B
Province Female (Thousands)
Quebec 3,986.70
Ontario 6,700.30
Manitoba 620.3
Alberta 1,820.50
British Columbia 2,284.20
Total 15,412.00
Age 25 – 35 (13.6%) 2,096.03
Source: Statistics Canada

20. 20
Appendix C
Source: Euromonitor