LEVI'S HIGH QUALITY FINAL

MARKETING AUDIT

BRYCE SORENSEN, JED PRETTYMAN, DAVID LEE, CADE HUSKINSON

TABLE OF CONTENTS IMARKETING AUDIT

CONTENTSEXECUTIVE SUMMARY

MARKET SITUATION OVERVIEW 1VISION OVERVIEW 1KEY RECOMMENDATIONS AND PLAN OF ACTION 1REVIVE SOCIAL MEDIA CAMPAIGN 1INCREASE SWITCHING COSTS 2PROMOTE WATER CONSERVATION 2CONCLUSION 2

INDUSTRY ANALYSISDEMOGRAPHIC TRENDS 5

HISPANICS 5BABY BOOMERS 5MILLENNIALS 5THE ASIAN MARKET 5WOMEN 6

ECONOMIC TRENDS 6WHOLESALE AND E-COMMERCE 6CONSUMER CONFIDENCE 6OVERSEAS MARKETS 7

ENVIRONMENTAL & NATURAL RESOURCE ISSUES 7

GLOBAL WATER USE 7DYE/DISTRESS PROCESSES 7TEXTILE WASTE 8LABOR ABUSE 8

SCIENCE & TECHNOLOGICAL INDUSTRY ADVANCEMENTS 9

AUTOMATING LABOR 9SOFTWARE’S ROLE IN BUYER EXPERIENCE 9THE AGE OF SYNTHETICS 9

REGULATORY ISSUES 10CULTURAL AND SOCIAL TRENDS 10

ATHLEISURE 10FAST FASHION 11DESIGNER DENIM 11SOCIAL MEDIA 11

TECHNOLOGICAL TRENDS 11CONCLUSION 12

COMPETITIVE ENVIRONMENTMARKET LIFE CYCLE 15

CUSTOMER BARGAINING POWER 15SWITCHING COSTS 15PRODUCT DIFFERENCES 16MARKET SATURATION 16

COMPETITORS IN THE INDUSTRY 16MEN’S MARKET 16WOMEN’S MARKET 17FASHION-FORWARD COMPANIES 17

BARGAINING POWER OF SUPPLIERS 18COTTON 18DYEING PIGMENTS 18LABOR 18

POTENTIAL ENTRANTS 18SATURATED MARKET 18ADVERTISING COSTS 19FAST FASHION 19

COMPETITIVE SUBSTITUTES 19YOGA PANTS/ LEGGINGS 19JOGGERS 19THRIFT STORES 19COUNTERFEITS 19

STAKEHOLDERS/INFLUENCERS/SHAPERS 20

FITNESS ADVOCATES 20SOCIAL MEDIA 20ENVIRONMENTALISTS AND LABOR RIGHTS 20ONLINE REVIEWS 20

CONCLUSION 21THREATS 21OPPORTUNITIES 21KEY OBJECTIVES MOVING FORWARD 21

MARKET STRATEGYSTRATEGIC MARKET POSITION 27

TABLE OF CONTENTSII MARKETING AUDIT

MISSION STATEMENT 27

PRODUCT PORTFOLIO ANALYSIS 27STARS 27CASH COWS 27QUESTION MARKS 28DOGS 28

COMPETITIVE ADVANTAGE ASSESSMENT 28

KEY STRATEGIC INITIATIVES 28

SUSTAINABLE COMPETITIVE ADVANTAGE 28

VALUED BY THE CUSTOMER 28RARE 29IMPERFECTLY IMITABLE 29NO STRATEGICALLY EQUIVALENT SUBSTITUTES 29

KEY INITIATIVES FOR MARKET POSITION IMPROVEMENT 29

SOCIAL MEDIA 29RECYCLING 29SWITCHING COSTS 30SYNTHETIC MATERIAL CLOTHING LINE 30

CONCLUSION 30STRENGTHS 30WEAKNESSES 30RECOMMENDATIONS 31

PLAN OF ACTIONACTION PLAN 35

SUMMARY 35

IMPROVED MARKET POSITION 35MISSION STATEMENT 35

STRATEGY 36MAJOR OBJECTIVES 36

SWOT ANALYSIS 36STRENGTHS 36WEAKNESSES 36THREATS 36STRATEGY SCOPE 36

COMPETITIVE ADVANTAGE TO BE ACHIEVED 37

ACTION PLAN 37NECESSARY STEPS 37IMPACT ON MARKETING MIX 37NEW MARKET MIX & TARGET MARKET SEGMENTS 37

PRODUCT STRATEGY AND PROGRAMS

PROMOTION AND SOCIAL MEDIA STRATEGY 41

CURRENT SOCIAL MEDIA PROFILE 41SOCIAL MEDIA STRATEGY 41DIAGNOSTIC PROMOTIONAL MIX PROFILE 41DIAGNOSTIC SOCIAL MEDIA PROFILE 42PROMOTION AND SOCIAL MEDIA RECOMMENDATIONS 42PRICE 43DISTRIBUTION 43PRODUCT 43

WORKS CITED

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY 1MARKETING AUDIT

MARKET SITUATION OVERVIEW

Levi Strauss & Co. is the oldest denim retailer in the apparel industry with a very strong brand name and a long history of providing authentic clothing lines. They stand for providing an authentic, sustainable line of clothes that will allow generations to express themselves through what they wear. However, in recent years, Levi’s has struggled to maintain market share in a very mature industry that is particularly susceptible to competitive products, such as cheap, trendy clothing known as “fast fashion,” and synthetic substitutes for cotton based clothes, like polyester, that use less water to create. The greatest opportunities for Levi’s sustainability exist in furthering their brand positioning as the industry leader in green initiatives. Millennials, the industry’s target consumer base, are particularly sensitive to environmentally-conscious products and processes. Aligning Levi’s marketing efforts and general strategy will give them a clear advantage in the market.

VISION OVERVIEWOur analysis shows that despite Levi’s powerful brand name and company history they have, as of recent years, been slow to respond to emerging trends. Additionally, they have been subject to some criticism from environmentalists due to their water and energy intensive products and manufacturing processes. Levi’s needs to respond to their environmental critics while simultaneously answering the needs and wants of their target consumers, which are millennial women. Our recommendations to address these problems are as follows:

• Introduce the Levi’s Live On product line campaign by instituting a new line of recycled clothing made from old denim to reduce textile waste, create re-sale opportunities, and be more socially responsible by donating recycled products to developing countries.

• Revitalize the waterless campaign by introducing

a line of synthetic products to capitalize on the prominent trend of athleisure while simultaneously promoting less water intensive clothing lines.

• Increase switching costs, brand loyalty, and customer participation by introducing the Levi’s Club; a subscription model that provides personalized seasonal collections to participating members.

KEY RECOMMENDATIONS AND PLAN OF ACTIONPositioning Levi’s as the industry leader in green initiatives while satisfying market demands will be crucial to their long term sustainability. The following recommendations will help Levi’s gain a clear advantage as the industry leader in social responsibility efforts, appeal to Millennials, increase switching costs, and improve brand loyalty.

REVIVE SOCIAL MEDIA CAMPAIGNLevi’s current social media campaigns don’t create any desire to constantly visit their pages and see what they’re doing. Outside of the time when making a purchase, there isn’t a need to stay up to date on Levi’s current initiatives. Levi’s Facebook, Twitter, Instagram, and YouTube channels need to be revamped to tell the story of Levi’s. Charitable events they hold, pictures from their new Levi’s Lives On recycling campaign, and infographics on how their processes are environmentally friendly need to be shared with consumers. This will create brand loyalty by creating an emotional connection between Levi’s and their customers.

Additionally, we recommend enabling their social media advocates with an ability to share their own stories, pictures, and videos relating to their accomplishments in Levi’s. This is in an effort to foster a community of activists that share common environmental goals and clothing preferences. Millennials in particular will feel included in a greater solution and want to support the good cause by sharing on social media channels what

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY2 MARKETING AUDIT

good things they are doing to be apart of the Levi’s community.

INCREASE SWITCHING COSTSLevi’s customers currently have no incentive, other than personal preference, to remain loyal. If a customer needs clothing and doesn’t have immediate access to Levi’s, they can easily find clothes from a competitor. Levi’s Club will be a subscription model that allows users to pay a monthly fee to receive Levi’s outfits that are put together by a professional stylist. To reduce the hesitancy of online purchasing, Levi’s should license True Jeans technology. This allows consumers to answer questions about their body type and current clothing preferences, in order to provide them with perfectly fitting clothes delivered right to their door. To help kickstart Levi’s Club and the new recycled clothing line, the outfits sent out in the Levi’s Club subscription will exclusively contain products from the new line of recycled clothes. Recycled clothes, delivered to your door, will provide an authentic story people can share about their clothes and use to make them feel apart of something special. This will help tie the Levi’s social media efforts of creating a community and their reduced carbon footprint efforts together.

PROMOTE WATER CONSERVATIONThe majority of ads shown by Levi’s are focusing on re-branding their products as comfortable. This needs to be done, but they also need to gain a more responsible view in the public’s eye. They’ve done a good job of changing their jean creation process by using less water and claiming less water is needed to maintain their jeans, but their corresponding marketing to the public doesn’t fully reflect those initiatives. Creating more commercial ads that show how much water they are saving, due to their unique process, needs

to be advertised as a brand story that will allow more Millennials to get excited about Levi’s.

Recently Levi’s has lost market share to synthetic substitutes. Accordingly, we believe there is a solution that will help regain market share and answer the demands of consumers while simultaneously pushing our waterless campaign. Introducing a line of synthetic athleisure products will protect Levi’s from losing customers to power-house companies like LuluLemon that have flooded the market with trendy synthetic offerings. Also, we recommend releasing our own line of athleisure products as a part of our waterless campaign; emphasizing the stark contrast in water use between cotton and synthetics throughout the products’ life cycles. We estimate this will appeal to our target consumers: Millennial women.

CONCLUSION

By following these recommendations, Levi’s will proactively address consumer preferences by adapting to new social and demographic trends, which in turn, will yield a sustainable company for many years to come. Levi’s will further establish themselves as the green-industry leader by instituting our proposed Levi’s Lives On campaign for the purpose of creating re-sale opportunities, while also helping needy communities around the world. Levi’s will guard against losing market share to substitutes by adopting their own line of waterless synthetic products. Levi’s will raise switching costs by promoting their Levi’s Club, which will regularly provide subscribers with a personalized clothing ensemble that has been designed by a professional stylist. With other companies primarily focusing on brand repositioning, this will allow Levi’s to maintain a competitive edge and maintain the position of industry leader.

INDUSTRY ANALYSIS

INDUSTRY ANALYSIS 5MARKETING AUDIT

INTRODUCTIONLevi Strauss & Co. operates primarily in the denim category of the apparel industry. Specifically, the casual apparel industry. This industry consists of clothing that is typically worn in a more relaxed setting. Although casual apparel can be manufactured from a variety of natural and artificial fibers, cotton is by far the most prominent base material found in apparel today.

DEMOGRAPHIC TRENDS

The most important demographic groups for the apparel industry to be aware of are (1) Hispanics, (2) Baby Boomers, (3) Millennials, (4) Women, and (5) Asians.[1] The demographic landscape in the apparel industry has changed drastically over the years and the quick advancements in technology have created a climate in which social trends and information spread rapidly.

HISPANICSIn the United States the fastest growing demographic is the hispanic population. The typical hispanic consumer is very price sensitive and usually chooses stores based on prices. When shopping for more expensive items, Hispanic buyers will “shop around” to find the best deal.[2] Comfort is key is selling to this demographic. Even with this price sensitivity, hispanic buyers, especially those 18-29 years of age, are very brand loyal.[3] This is a huge opportunity to a firm if they can capture this demographic.

BABY BOOMERSThe baby boomer generation is the most valuable generation in many ways. At 80 million, The baby boomer generation makes up one fourth of the US population. In addition to being a large demographic, the baby boomer generation is entering retirement and has the most disposable income.[4] In fact, a majority

of retailers can attribute nearly 50% of their sales to this group. Baby boomers are loyal to their brands and aren’t particularly price sensitive.[5]

MILLENNIALS Millennials are the up and coming generation, those between the ages of 18-33. Millennials are very social and tech savvy with 87% using between two and three tech devices at least once on a daily basis. In the US, millennials are 80 million strong, accounting for one fourth of the population. They are difficult to connect with because the traditional methods of advertising have proven ineffective in garnering attention. They are far more likely to rely on social media and reviews when learning about a product or service. 60% of millennials say that they are brand loyal, while 75% say that it is very important that a company gives back to society and does good.[6] Unlike baby boomers, many millennials are just entering the job market and have little disposable income to spend on their favorite brands. In fact, due to financial restrictions, more millennials than ever are moving back home with parents.

THE ASIAN MARKETThe overseas Asian market is one that companies in the apparel industry need to be watchful of. The five asian countries with with most growth in consumer spending are China, India, Indonesia, Philippines, and Thailand. With a projected combined worth of $8.3 trillion in consumer spending by 2020 this is a market that cannot be ignored.[7]

As China is the country that will see the largest growth in consumer spending, this demographic analysis focuses on Chinese consumers. The two most critical Asian consumer groups are those who are growing up in a wealthier China. Namely: (1) Chinese consumers ages 20-30 and (2) the New Generation.

Chinese consumers from ages 20-30 save less than

[1] https://www.academia.edu/3377109/Marketing_to_the_US_Hispanic_Consumer_Apparel_Preferences_and_Strategies [2]http://blog.viacom.com/2012/09/hispanic-millennials-how-they-decide-to-buy-clothes/ [3]http://boomagers.com/Boom_WWD_2014_08_2.pdf [4]http://www.businessinsider.com/sc/how-millennials-and-baby-boomers-shop-2015-4 [5]http://www.refinery29.com/millennials-brand-loyalty [6]http://www.forbes.com/sites/danschawbel/2015/01/20/10-new-findings-about-the-millennial-consumer/2/[7]http://www.chinabusinessreview.com/understanding-chinese-consumers/

INDUSTRY ANALYSIS

INDUSTRY ANALYSIS6 MARKETING AUDIT

their parents and tend to spend their money quickly on entertainment, electronics, and trendy goods. They frequently shop online and buy products that will reflect their personalities.[8] The New Generation, those under 20, generally do not have a disposable income. However, this generation is key in influencing the buying decisions of their parents. This up and coming generation shops online and is the most “westernized” and open to new products. This is attributed to growing up with social media and greater access to information and trends. Social media is the best way to market to this group for that reason.

WOMENA study by Goldman Sachs in 2013 researched how much women spend on clothes, according to age. Women tend to buy more and more clothes until the age of 45 when it peaks and then gradually spend less on clothing as they age.[9] Research from the NPD group, a research firm, gives us some additional insight. Younger female consumers have turned to fast fashion retailers such as H&M and Zara, Rarely shopping at department stores like Macy’s, Bloomingdales, and Kohl’s . Women 35 and up tend to patronize those national department stores.[10] The retailers that appeal to both age groups are off-price retailers like Marshalls, Ross, and T.J. Maxx. Wharton University studied the shopping habits of men and women and found that 83% of consumer spending in the U.S. comes from women.[11] For a company in the apparel market to succeed in is imperative that the company captures and appeals to women. This study also found that women tend to look at shopping as an experience.

ECONOMIC TRENDS

The biggest economic trends in the apparel industry are (1) wholesales and e-commerce - where most companies

in the industry generate the majority of their sales (2) Increasing consumer confidence, and (3) international markets. Opportunities to lower distribution costs, give access to customers online, and expand into international markets are all opportunities for apparel companies.

WHOLESALE AND E-COMMERCEThe cost of owning and operating your own apparel store is too high for most apparel companies to maintain. Even the biggest apparel companies like Nike and V.F. Corp, who have their own stores, obtain 79% and 74% of their revenues from wholesale channels. This means apparel companies need to focus heavily on distribution channels. Becoming a cost leader in getting your product into stores is a big opportunity for apparel companies to gain a competitive advantage over their competitors.

With online shopping becoming more and more popular, companies are looking to capture the online shopping market. Converting your distribution channel to sell direct to consumers instead of retailers will allow companies to experience higher margins by cutting out the middle man.

CONSUMER CONFIDENCEIn 2008 The United States went through a recession that really hurt the apparel industry. Consumers were unsure about their job security and cut back on spending. By 2010 the unemployment rate had jumped to 10%. For the majority of 2015 the unemployment rate has steadied around 5%.

The poor consumer confidence in 2010 was shortly followed by record high gas prices in 2011 where the national average topped out at $3.99 per gallon. As of December 1, 2015 the national average for a gallon of gas is $2.07.

[8]http://blog.euromonitor.com/2013/11/top-5-emerging-asian-consumer-markets.html[9]http://fortune.com/2015/05/26/women-clothing-purchases-ann-taylor/[10]http://www.businessinsider.com/how-much-women-spend-on-clothes-2013-11[11]http://knowledge.wharton.upenn.edu/article/men-buy-women-shop-the-sexes-have-different-priorities-when-walking-down-the-aisles/


These two positive economic shifts have caused an increase is consumer spending and given the apparel industry a boost and provided an opportunity for companies to regain some of the lost profits during those hard times.

OVERSEAS MARKETSThe United States apparel industry is very saturated. In 2015, the Share of Personal Consumption Expenditure is down to 3.1% from 5.2% in 1990. This has pushed many companies to look internationally for sales. Big companies such as Nike, Fossil, and Crocs are getting over half of their revenues from international markets. Though consumer spending in The United States is growing, in 2015 apparel exports were up 4.4%, while imports were only up 4.1% from 2014. IBIS World projects the US market to level off, but the international apparel markets are expected to experience significant growth, especially in the Asian markets. This presents an opportunity for companies to gain market share in a growing segment and maintain healthy growth.

ENVIRONMENTAL & NATURAL RESOURCE ISSUES

The four primary environmental issues facing the apparel industry are (1) the correlation between textile base materials like cotton and their depletion of water; (2) the pollutant nature of chemicals used in the dyeing and distressing of apparel; (3) the massive amount of textile waste that is created by a fast fashion society; and (4) the global abuse of laborers tasked with mass producing apparel for the fashion industry. These are all issues that Levi Strauss & Co. has to grapple with in order to offer their consumer base a more socially responsible and environmentally conscious product line. Each of these challenges will be discussed in detail in the sections to follow.

GLOBAL WATER USEOf the base textile materials in use today none are as prominent as cotton. Cotton, for thousands of years,

has been the most used natural fiber in the production of fabric and clothing. It is not pretentious to assert that cotton is the backbone of the global apparel industry. The issue arises in the correlation of cotton products and their over-consumption of water. Growing the cotton to manufacture a single pair of jeans requires an estimated 2000 liters of water and that is only 50 percent of its total water consumption, when factoring in washing the garment through its product life cycle.[12] Environmental Leader states that, the world’s resources cannot keep up with our increasing demand for throw-away fashion. Cotton, for example, a key input to the apparel industry, is responsible for 2.6 percent of the global water use. However, a gap already exists between water supply and demand. If we do nothing to correct this imbalance, by 2030 demand for water will exceed supply by 40%.[13] This creates a significant threat for clothing supplier’s existing manufacturing and maintenance processes.

DYE/DISTRESS PROCESSESThe manufacturing of raw materials into textiles and ultimately wearable apparel requires copious amounts of chemicals. Start to finish chemicals are applied in processes like wet finishing to create in the fibers a desired performance or aesthetic effect. Modern fashion calls for innumerable combinations of dyed and distressed clothing to satisfy the demands of a society that is fixated on differentiation. The danger is that dying and distressing apparel are brought about through potentially hazardous chemical processes. Among other health hazards certain common chemicals used in the dye process have been reported to deposit cancer-causing amines in the clothing.[14] Environmental Leader states, Furthermore, an estimated 17 to 20% of industrial water pollution comes from textile dyeing and treatment and an estimated 8,000 synthetic chemicals are used

[12]http://www.greenbiz.com/article/levi-makes-green-while-saving-big-blue[13]http://www.environmentalleader.com/2014/10/06/assessing-the-environmental-impact-of-the-fashion-world/[14]http://www.greenpeace.org/international/Global/international/publications/toxics/Water%202012/ToxicThreads01.pdf[15]http://www.environmentalleader.com/2014/10/06/assessing-the-environmental-impact-of-the-fashion-world/


throughout the world to turn raw materials into textiles, many of which will be released into freshwater sources.[15] Until manufacturers can create more environmentally-friendly ways of producing textiles this dependency on potentially hazardous chemicals creates a threat for for an industry whose consumers are increasingly aware of the environment.

TEXTILE WASTEFast fashion is a societal trend that results in high turnover of apparel. The underlying concept is that fashion retailers are refining their production and shipping processes in order to offer the consumer relatively inexpensive apparel as regularly as fashion changes. Reducing costs along the supply chain generally involves slightly lowering the quality of the apparel resulting in a shorter product life cycle. As fashion changes and consumers cycle through apparel faster this creates large amounts of excess textile waste. Environmental Leader states, with the rise of ‘fast fashion’ sending materials hurtling towards end-of-life quicker than ever. In the U.S. the average person discards 32 kg of clothing annually. The Agency estimates 85% of these wind-up in landfills or incinerators, and that’s just America. Sadly, the story around the rest of the world isn’t much different.[16] This creates an opportunity for companies that can successfully position themselves as environmentalists by instituting methods for textile recycling, second-hand clothing sales, and potentially donations to the developing world.

LABOR ABUSEIn efforts to cut manufacturing costs more and more production is being moved to 2nd and 3rd world countries where labor is least expensive. This offshoring not only creates problems for domestic unemployment rates but also brings to attention the inhumane labor customs of these foreign producers. Manufacturing hubs are often located in nations without humane labor laws to protect the interests of their labor force. A recent

study in Cambodia found, Workers in Cambodia’s garment factories—frequently producing name-brand clothing sold mainly in the United States, the European Union, and Canada—often experience discriminatory and exploitative labor conditions. The combination of short-term contracts that make it easier to fire and control workers, poor government labor inspection and enforcement, and aggressive tactics against independent unions make it difficult for workers, the vast majority of whom are young women, to assert their rights.[17] Another study found that circumstances in the U.S. might not be much better.[18] The result is that major global consumers of apparel are mass manufacturing their products at the expense of basic human rights. There is an opportunity here for companies that manufacture their products domestically. Companies that can position their products as being home made will have a marketing advantage over competitors that are using overseas facilities. The opportunity arises in successfully drawing attention one’s dedication to employ local citizens as well as an ability to expose your competitors for outsourcing and offshoring.

In conclusion, these environmental and human rights issues are not only a challenge to the apparel industry in general but specifically to Levi Strauss & Co. in every category. Considering their primary product lines are composed almost exclusively of cotton the issue of over consuming water is easily relevant when measuring the amount of water required to grow the base material, manufacture the apparel, and ultimately wash it throughout its lifecycle. Levi jeans are among the most dyed and distressed of all apparel product offerings and resultantly play a major role in the toxicity of clothing, as well as the water supply, and the ever-increasing amounts of textile waste. Finally, recent reports indicate that Levi Strauss & Co. will close its last manufacturing plants in the United States and Canada, eliminating nearly 2,000 jobs.[19] This offshoring diminishes domestic employment while simultaneously

[16]http://www.environmentalleader.com/2014/10/06/assessing-the-environmental-impact-of-the-fashion-world/[17]https://www.hrw.org/report/2015/03/11/work-faster-or-get-out/labor-rights-abuses-cambodias-garment-industry[18]http://america.aljazeera.com/articles/2015/9/9/sweatshop-conditions-in-la-garment-industry.html[19]http://www.cbsnews.com/news/levi-strauss-shuts-all-us-plants/


empowering cultures that are renowned for capitalizing on the uneven bargaining power of their laborers.

SCIENCE & TECHNOLOGICAL INDUSTRY ADVANCEMENTS

The three most prevalent advancements in the apparel industry include (1) automating the production process; (2) software that improves the selection and purchasing process; and (3) improvements to comfort, durability, and elasticity. Each of these categories has either emerged as a key indicator of success or has the potential to revolutionize the ever-advancing apparel industry. Levi Strauss & Co. must take these trends into consideration if they hope to offer our technology-intensive society product lines that are relevant and competitive. Each of these three categories will be discussed in detail in the following sections.

AUTOMATING LABORSeeking to cut manufacturing expenses the apparel industry has followed the global trend to offshore production to the least expensive industrial labor providers. This creates employment and human rights challenges. Recent technological advancements have the potential to revolutionize the production process. Specifically, robots with the capacity to sew could cut production costs tremendously. According to recent reports, this technology is on the horizon. In 2014, an Atlanta-based engineer, Steve Dickerson, developed a prototype of a robot that can perform sewing. The robot, or “sew-bot” as it is being called, was showcased at the techtextile trade fair and was enthusiastically received. If the robot is able to perform the necessary functions, it will result in a huge boost for the industry and the textile sector as a whole... The robot is expected to be tested at American Apparel’s factory in Selma, Alabama, and Dickerson believes it will be ready for mass production in about two years and could significantly reduce labor

costs for industry operators.[20] The projections regarding “sew-bot’s” readiness would position this technology as a staple in the manufacturing process as early as next year (2016).

SOFTWARE’S ROLE IN BUYER EXPERIENCETechnology has opened the door wide for creating a better customer experience when it comes to shopping. Traditional brick and mortar store locations have seen enough competition from online shopping sites over the last decade that most major brands have adopted online shopping in order to stay relevant at all. However, previous to now online shopping has found it difficult to replicate some of the benefits of handling apparel in person, such as trying on clothing to ensure an accurate fit. Recently, software developers have made giant strides in making these advantages a reality for online shoppers as well. Some suppliers have begun asking shoppers for their measurements, along with a tally of their best-fitting clothes, to match them with the right sizes. Software such as the True Jean Technology takes into account body measurements in order to personalize clothing to perfectly complement the uniqueness of its wearers body. It is estimated that at some point, data about your body type will be saved along with your credit card information and you’ll never have to visit a fitting room again.[21] Even further, some companies are developing and employing 3D body scanners that measure shoppers’ exact dimensions in order to create a perfectly customized product offering.[22]

THE AGE OF SYNTHETICSThe apparel industry has experienced massive shifts over the last decade. Specifically, consumer priorities relating

[20]http://clients1.ibisworld.com.dist.lib.usu.edu/reports/us/industry/industryoutlook.aspx?entid=342[21]http://www.forbes.com/sites/jjcolao/2012/12/13/five-trends-driving-traditional-retail-towards-extinction/2/[22]http://mashable.com/2011/11/02/fitted-fashion/#FDTHjQvRDmq1


to fit and overall comfort have changed considerably with the advent of new synthetic materials. Cotton, having served as the primary base fiber for clothing for thousands of years, is steadily being replaced by man-made materials. Synthetics such as polyester, nylon, and spandex are increasingly finding their way into clothing lines due to their flexible and contouring nature. Additionally, synthetics can be manufactured to be wrinkle free, flame resistant, water resistant, stain resistant, and even moth repellant. The overwhelming advantages that synthetics have are that they can be modified in the creation process in order to achieve impossible feats for natural fibers. This advancement in man-made fibers has translated into a growing customer preference for greater comfort, more flattering fit, and a longer product life cycle; all of which are available through synthetic materials. Traditional cotton-based clothing lines are finding it difficult to adjust to the shift toward products that incorporate the benefits of synthetics, such as the growing market share of athleisure.[23]

In conclusion, as technology advances generally innovators will find ways to incorporate new capabilities into all industries along the supply chain. Seeking to capitalize on positioning themselves on the cutting-edge companies will adopt these advancements as quickly as they are able. The apparel industry is no exception to this mad dash for technological advancement as a means of differentiation. Levi Strauss & Co. will need to take careful consideration of these trends in order to competitively position themselves in the market. From the potential for decreasing manufacturing costs by automating the process to creating perfectly tailored apparel for their consumers, Levi’s will need to evaluate the potential that these drivers might have for revolutionizing the industry. It is no secret that Levi’s is already wrestling with their loss of market share due to the industry-wide shift toward synthetic materials. They will need to carefully examine their values and make

necessary adjustments to regain their lost profits and stifle new entrants to the industry.

REGULATORY ISSUES

Most companies in the apparel industry that are regularly importing and exporting need to be aware of taxes and tariffs. This added cost is a threat to many companies as they now have to factor these in their cost of goods sold.

With such high opportunities in international markets companies are working the costs of exports into their pricing. As for importing, it only makes sense to import if you can get it for less than it would cost you to make yourself so companies will look to import and pay the extra fees, to save on manufacturing costs.

CULTURAL AND SOCIAL TRENDS

There are four main cultural and social factors that affect the apparel industry today. They are (1) the prominence of athleisure; (2) the trending use of fast fashion; (3) a rising demand for designer denim; (4) increased use of social media; and (5) technology trends. Each of these issues could have major implications towards the success or demise of Levi Strauss & Co. if they are not carefully considered and addressed. Further light will be shed on each of these trends in the following sections.

ATHLEISURE Being healthy and fit is a growing trend among Americans (especially among women).[24] This trend has given rise to articles of clothing that can be just as easily worn shopping as to the gym; these types of clothes are most generally referred to as athleisure. Yoga pants are the prime example, as they have become commonplace just about everywhere you turn. In fact, athleisure is expected to become a $100 Billion market by the year

[23]http://www.bloomberg.com/graphics/2015-levi-strauss-confronts-the-yoga-pant/[24]http://www.cnbc.com/2015/08/18/nd-form.html[25]http://www.bloomberg.com/graphics/2015-levi-strauss-confronts-the-yoga-pant/


2020 [25] This poses a great threat to the apparel industry, because as people spend more money on stretchy pants and other athleisure apparel, they reduce the space in their closet and their budget for other clothing.Many key players in the apparel industry, such as Nike, Reebok, and adidas have entered the athleisure movement by producing yoga pants and other high-stretch clothing. Levi Strauss & Co. almost missed the shift towards athleisure when they “misread stretchy pants as a trend when they were more like a clothing revolution”.[26] Levi’s recently launched their new 700 Series which added significantly more stretch to their pants. While not willing to conform to the yoga pants revolution, they are taking action to provide what consumers want; comfort along with functionality.

FAST FASHIONConsumers have always wanted desperately to keep up with current fashion and style; that has become increasingly hard as world-wide connectivity has accelerated the rate at which those styles change. Fast fashion is the idea of providing clothes that conform to current styles at a very low cost. As a result of providing such low costs, these clothes are produced at a very low quality standard. Following this trend, consumers are now able to stay trendy without breaking the bank, and discard apparel that is out of style. This poses a huge threat to Levi Strauss & Co, a company that has built its foundation on quality and durability. Fast Fashion is also placing a higher emphasis on importing apparel.[27] IBIS World predicts that by 2020, imports will make up 99.4 percent of men’s and boy’s clothing demand.[28] Some companies, such as H&M, have built their businesses around the idea of affordable and disposable fashion, and have seen huge success because of it.DESIGNER DENIMAs a whole, the apparel industry has taken a turn for the worse as revenue continues to decline at a rate of 5.8 percent annually.[29] The one exception to this decline is designer denim. The revenue for domestic jeans and

trousers has increased significantly due to the perceived high quality of designer denim. Levi Strauss & Co. could benefit greatly from this emphasis on quality denim products from designers.

SOCIAL MEDIA The far-reaching effects of social media have not been absent in the apparel and fashion industry. The connectivity that almost all consumers now have through Facebook, Instagram, Twitter, etc. is having great impacts on how fashion is perceived and even acquired. One way that social media has impacted the apparel industry is the availability of fashion shows from around the world at the click of a button.[30] Social media also provides a way for businesses to get feedback on their products and services, often without even having to ask for it. Many existing companies in the industry have fully embraced the digital age, and shifted their sights to social media marketing. Levi’s started this shift as early as 2009, and they have managed to create a consistent message that creates a positive experience for millennials and others using social media channels.[31]

TECHNOLOGICAL TRENDS As technology advances, consumers are becoming more and more dependent on it. Most people don’t get through a single day without using multiple devices, such as smartphones, tablets, laptops, and portable fitness tracking devices.[32] This is especially true among millennials. Changes in the demand for technology drive changes in the way we keep that technology close to us. Consumers wishing to keep their technology close present a need that the apparel industry could easily fill.

[26]http://www.bdlive.co.za/world/americas/2015/09/10/levis-hopes-to-reverse-denim-decline-with-stretch-vintage27]http://clients1.ibisworld.com.dist.lib.usu.edu/reports/us/industry/currentperformance.aspx?entid=342 [28]http://clients1.ibisworld.com.dist.lib.usu.edu/reports/us/industry/industryoutlook.aspx?entid=34229]http://clients1.ibisworld.com.dist.lib.usu.edu/reports/us/industry/currentperformance.aspx?entid=342 [30]http://yourbusiness.azcentral.com/social-media-fashion-industry-11833.html# [31]http://www.na-businesspress.com/JABE/MohrI_Web15_2_.pdf[32]http://www.pewinternet.org/2013/03/13/teens-and-technology-2013/


Music, in particular, is becoming increasingly important to consumers.Many clothing suppliers have adapted their clothing by adding pockets, liners, and even built-in headphones to accommodate music playing devices. Levi Strauss & Co. has not participated much in this technology-welcoming movement.

CONCLUSIONThe most significant opportunities and threats facing Levi’s and the apparel industry, from above, are the following: women under age 45 are buying more clothing (opportunity), millennials love technology and giving back to the environment (opportunity), consumers are increasingly aware of industrial waste and more driven to protect the earth (threat), the rise of atleisure (threat), and increased desire for fast fashion (threat). Considering these opportunities and threats, Levi Strauss & Co. should explore available options to gain the loyalty of millennial women, care for the environment, and compete in the fast fashion sector.

COMPETITIVE ENVIRONMENT

COMPETITIVE ENVIRONMENT 15MARKETING AUDIT

MARKET LIFE CYCLEIn the United States, the men’s and women’s apparel industries are both in their mature stages. A recommendation for companies in their mature industry stage is to look for market expansion strategies, or look for mergers. No companies appear to be doing either of these strategies. This creates a big opportunity for the first company to do so. In the United States, men’s and boys’ apparel sales are expecting to grow at a rate nearly twice what women’s and children’s will. Below is a map that shows where both segments lie on the industry life cycle.

The apparel industry in The United States is very saturated, which means many companies are taking advantage of niche markets and segments. This allows companies to merge with other companies that wouldn’t compete with their current business. This would create an opportunity for a company to consolidate the market and become an industry leader. This approach isn’t being taken by any companies at the moment.Companies are currently looking to rebrand their products. Specifically, the denim apparel industry is trying to take on a more comfortable persona. Brands like Lee Jeans are launching advertising campaigns that show celebrities wearing their jeans and saying you don’t have to sacrifice comfort for style[33]. Their attempt at differentiation is a good approach due to the threat of athleisure and current trends shifting towards comfy, casual wear. However, this alone isn’t going to save them in the apparel industry.In mature industries, companies need to avoid price wars. With such low switching costs for consumers companies are often finding themselves in price wars. Fast fashion has become a major threat for companies who charge premium prices. The fad has been around since 1999,

but really took off shortly after the 2008 recession and hasn’t gone away even with the market recovery.[34] Many new entrants in the market are focusing on fast fashion. This is forcing consumers to make a choice. Pay higher prices for higher quality clothes, or low prices for cheap clothes. The middle ground is fading away. This takes away market segments and makes companies compete with their direct competitors based on price.

CUSTOMER BARGAINING POWERConsumer bargaining power in the apparel industry is high. The market is highly saturated and the only incentives consumers have to stick with one company or another is personal preference and price. Companies need to find ways to build brand loyalty and value for their customers that stick around. The three biggest customer bargaining factors that affect the apparel industry are 1) switching costs are almost non-existent and since each customer needs multiple items of apparel it is common to shop around for your products; 2) Many companies have been slow to differentiate their product and adapt to the changing apparel industry to fulfill their customer’s wants; and 3) Firm saturation in the apparel industry is extremely high which gives customers access to multiple brand/product options when buying clothes. Based on these three reasons, customer bargaining power is high.

SWITCHING COSTSWhen the 2008 recession hit, many apparel companies suffered. Customers were forced to choose a side and either went towards less expensive clothing or suffered the cost of paying higher prices for clothes. A 2011 study conducted by the Cotton Incorporated showed that 74% of denim jeans in America are priced below $39.99. This is because the majority of the buyers chose to start purchasing less expensive clothing. However, the average price of a pair of Levi’s in America was $42.50. Though this example focuses on jeans, most of Levi’s products are priced higher than the apparel industry average. We can now see how low switching costs, increased price sensitivity, and Levi’s being a more expensive product, hurt their brand.

[33]https://www.youtube.com/watch?v=_HDUtrLegN8[34]http://www.tandfonline.com/doi/abs/10.1080/09593960903498300

COMPETITIVE ENVIRONMENT

COMPETITIVE ENVIRONMENT16 MARKETING AUDIT

PRODUCT DIFFERENCESThe most important thing you can do in any business is listen to what your customers want and fulfill that need! Levi’s has refused to differentiate their product and fulfill customer wants for more casual wear. Fashion-conscious buyers have abandoned Levi’s as the new style has changed to a casual athletic line of clothing. Sticking to your staple product, despite consumer wants, in a highly competitive market is a recipe for disaster as changing fashion has turned into a major threat for Levi’s stubborn ways.

MARKET SATURATIONAs the previous two threats have been discussed, there is one thing that could make Levi’s situation worse, high competition. Many of Levi distributors are located in malls. According to a study done by the Verde Group, 49% of people say if a mall isn’t diverse, they tend to shop other places. This means in order for a mall to keep customers coming in, they need to have many different retailers, increasing competition. As a result, when you go to buy a pair a Levi’s you’ll have to walk past dozens of other stores that are selling the same product you’re going after.

COMPETITORS IN THE INDUSTRY Competing companies in this industry present a high level of threat. This is because the apparel industry is very mature and denim in particular is a staple product offering of apparel giants and clothing upstarts alike. In this industry there are many factors that create challenges to marketability and profitability, including (1) the influence of conglomerates such

as VF Corp in the men’s category; (2) high market share of certain companies in women’s lines; and (3) a long list of fashion-forward companies that are seeing and implementing consumer trends earlier than the majority of the market. The following sections will explore these barriers to entry.

MEN’S MARKETV.F. Corporation maintains a conglomerate of apparel brands including Lee and Wrangler. In the past, both Lee and Wrangler have performed very well in the men’s category considering their marketing to the rugged working class man. Wielding considerable capital, V.F. Corp has controlled major segments of the men’s denim market, creating challenges for single companies to gain momentum in an established market.[35] Recently, VF Corp has slightly modified their approach due to all the same factors threatening other established brands like Levi Strauss & Co. Many of these larger established companies are recognizing that they have failed to anticipate the future preferences of consumers and have missed out completely on certain trends. In a recent statement VF Corp announced, “In 2015, we’ll see the opening of our Global Jeanswear Innovation Center, where we will assemble teams of chemists, scientists, engineers and designers who’ll combine their expertise in technology and new materials with VF’s proprietary insights and deep understanding of consumers’ wants and needs.” This reflects an acknowledgement from V.F. Corp that the market is changing and that in order to maintain a strong presence they are going to make advancements by way of innovation. This shift towards innovation will only offer greater competition for other companies as Lee and Wrangler expand their target market and begin to gain market share in more than just the working class men category.

[35]http://reporting.vfc.com/2014/brands/jeanswear.html[


WOMEN’S MARKETThe women’s market is an area that has been largely monopolized by companies with a strong emphasis on fashion and trendiness. Companies such as Gap Inc. and American Eagle Outfitters were earlier adopters of industry trends such as colored denim and synthetic more comfortable fabrics.[36] Foreseeing shifting trends has allowed these and others like them to cater to teens and young adults, gaining popularity and brand loyalty along the way. A recent report of Gap Inc. describes the threat they are to the apparel industry, “With its strong understanding of consumer preferences and wide customer reach, Gap Inc has established a strong image for itself in the U.S. apparel market. By consistently delivering products that resonate very well with trend conscious buyers, the retailer has sustained a steady sales growth rate even amid an unconducive retail environment.” The companies that have been historically myopic will remain the market minority so long as they are late adopters of emerging trends and technologies.

FASHION-FORWARD COMPANIESRemaining competitive in an ever changing market requires an ability to foresee consumer trends and align one’s marketing and product offerings with the direction of the market. Companies that have successfully achieved this anticipation of the market have given themselves clear advantages over their more sluggish competitors. In forecasting the direction of the denim market it has been reported that, “Premium denim accounts for roughly 26% of the overall Jeans market with the highest market potential and is also the fastest growing segment of the market. Many premium denim companies in the market are focusing on opening more stores in developing countries, augmenting the market to grow at a CAGR of over 8% until 2019.”[37] Premium denim is one of the newer sectors of an antiquated and heavily fragmented denim market. Accordingly, it is projected to have the greatest potential for growth in coming

years. Companies such as 7 for All Mankind, Diesel, and True Religion pour their resources into creating product lines that demand a premium price. From their domestic production to superior materials these companies have elevated the quality of their products in the eyes of their consumers. A statement regarding 7 For All Mankind draws attention to their marketing strategy, “Since 2000, much has changed in the world of denim, but 7 For All Mankind’s legacy as the first to create what is defined today as luxury denim (jeans priced between $150 and $250) remains. “We focus on superior fit, the finest quality fabrics we can find, and manufacturing right here in Los Angeles to ensure the ultimate in creativity, efficient speed to market, and the opportunity to address the most fashion-forward trends in a very rapid way,” said Gaylord.”[38] Many companies are not presently positioned to maneuver their way into the luxury denim category and accordingly are losing opportunities for higher margins on premium products and market share in which they are currently not a player. This shift toward premium denim is a single example of a market trend that is paying dividends to fashion-forward companies that have capitalized on a change in consumer preferences.

In conclusion, the denim category of the apparel industry is very prone to strong competition in every category. In a mature market consumers have already developed brand opinions and associations. As an example, through years of marketing men’s lines and value lines are heavily associated with Lee and Wranglers. These predeveloped associations can be difficult to break into for companies hoping to position themselves in a similar space. Women’s lines are monopolized by certain companies that have created a culture of providing trendy fashion-forward offerings. This is difficult to replicate for companies that lack the market research ability or culture to anticipate and implement upcoming shifts in consumer preferences.[39] It should be stated that in such a volatile market with ever changing preferences it

36]http://www.forbes.com/sites/greatspeculations/2014/06/16/better-market-conditions-complement-gap-incs-strong-position-and-brands/[37]http://www.technavio.com/report/premium-denim-jeans-market-analysis-and-forecast-2015-2019[38]http://www.retail-merchandiser.com/index.php/featured-reports/535-7-for-all-mankind[39]http://clients1.ibisworld.com/reports/us/industry/operatingconditions.aspx?entid=300


[40]http://clients1.ibisworld.com/reports/us/industry/industryoutlook.aspx?entid=37[41]http://clients1.ibisworld.com/reports/us/industry/industryoutlook.aspx?entid=460 [42]http://clients1.ibisworld.com.dist.lib.usu.edu/reports/us/industry/ataglance.aspx?entid=342

is essential that companies scan the peripheral in order to discern future opportunities. These factors create a very difficult environment for companies that hope to thrive in the denim category of the apparel industry.

BARGAINING POWER OF SUPPLIERSThe bargaining power of those who supply goods and services to apparel companies, like Levi Strauss & Co. is medium. There are two primary suppliers that contribute to the success of this industry, and they are 1) raw cotton used in the production of clothing and 2) dyeing pigments. This threat level is based on nearly global access to cotton, rising prices of dye, and a high demand for quality products. Both of these suppliers will be more closely examined in the following sections.

COTTON The United States, Pakistan, India, Africa, and Central Asia have all benefitted from technological advances in agriculture, which has increased productivity of materials like cotton. Because each of these sectors is now exporting more cotton, each is competing for the lowest price, allowing textile manufacturers more freedom to shop around. The United States is currently the largest exporter of cotton, but it is expected that Pakistan and several countries in Africa will soon control larger portions of world cotton production, driving world prices down. IBISWorld predicts an annual decline of .6% over the next five years.[40]

DYEING PIGMENTSProducers of pigments that are used in the dyeing and coloring of clothing have a little bit more bargaining

power than cotton suppliers. As environmental awareness and concern become more prevalent, the producers of dyes are forced to invest more in their production processes to provide a more environmentally friendly product.[41] Increasing the cost of production forces these producers to raise the price of the dye they sell. Since there are no alternative dyeing processes, Companies like Levi Strauss & Co. are forced to pay whatever dye producers are charging, in order to provide the product that consumers expect.

LABORThe availability of inexpensive labor in other countries has weakened the power of those supplying labor to the apparel industry. In fact, IBISWorld states that “the United States has lost about 90.0% of its apparel manufacturing jobs over the past 20 years due to high import penetration”.[42] Similar to the situation faced by cotton suppliers, purchasers of labor are increasingly able to shop around for suppliers.

POTENTIAL ENTRANTSPotential entrants to the apparel industry present a medium level threat. This is because while the technology and accessibility of materials needed to produce jeans are relatively easy to overcome, there are many barriers to entering the market, including… (1) a highly saturated market; (2) high advertising costs; and (3) fast fashion. The following sections will explore these barriers to entry.

SATURATED MARKETDue, to an abundance of apparel manufacturers and limited room for variety in jeans, this market is already saturated. Many of the competitors already in the market have existing contracts both with textile producers and apparel wholesalers, which makes it very difficult for new entrants to carve out a place for themselves.[43]


ADVERTISING COSTSThe sheer cost of introducing and advertising a new product makes it extremely difficult enter a new market. New companies wishing to compete against well-established brands, such as Levi’s will have little chance of overcoming this barrier. Since many producers and retailers have already built loyalties to certain brands, it would be difficult to overcome those ties.

FAST FASHIONThe increasing popularity of “fast fashion” has poised companies like H&M to block retailers from reaching many customers. Americans are becoming less and less willing to spend money on apparel; this leads to the cheap disposable clothing categorized as fast fashion.[44] As consumers get used to paying less for their jeans, they may lose sight of the superior quality available. New entrants to the apparel industry may have to make excessive sacrifices to the pricing of their products, as a result of this trend.[45]

COMPETITIVE SUBSTITUTESThe competitive substitutes for jeans are very real threats. These substitutes come in the form of (1) athleisure substitutes namely yoga pants and leggings and cheaper substitutes in the form of (2) thrift stores and counterfeits.

YOGA PANTS/ LEGGINGSThe athleisure movement has changed fashion in a big way. Today’s consumers are looking for clothing that is comfortable and feels great. Denim has had its day and the age of yoga pants and leggings is here. Leggings offer extreme comfort and freedom for the wearer while jeans have a stigma for being uncomfortable.

[43]http://clients1.ibisworld.com/reports/us/industry/competitivelandscape.aspx?entid=342#BTE [44]http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=342 [45]http://clients1.ibisworld.com/reports/us/industry/operatingconditions.aspx?entid=300 [46]http://www.businessinsider.com/jogger-pants-are-taking-over-menswear-2014-8 [47]http://www.theguardian.com/fashion/fashion-blog/2012/mar/28/charity-shops-thrive-during-recession[48]http://www.cnn.com/2013/06/11/living/thrift-store-style/[49]http://www.racked.com/2014/12/1/7566859/counterfeit-goods-products-museum-exhibit[50]http://www.usatoday.com/story/money/business/2014/03/29/24-7-wall-st-counterfeited-products/7023233/

JOGGERSAnother recent substitute that has cropped up due to athleisure is the “Jogger pant” or “Joggers”. Joggers are a fancy hybrid of sweatpants and conventional pants. Made out of wool, chino, or fleece the Jogger has a drawstring waist and tapered legs with elastic cuffs. The trend in fashion has been moving towards comfort and I would say that the jogger pant is the male equivalent to the female yoga pant.[46]

THREATThese two substitutes fit under the athleisure/leisure trend and are extremely threatening to Levi’s business because they offer something that Levi’s hasn’t been able to duplicate, that being comfort. Levi’s will really need to innovate and change their product to be able to compete head to head with these substitutes. Another reason this is such a real threat to Levi’s is that these substitutes are also much cheaper to make than denim jeans, resulting in them being more profitable for the retailer and cheaper for the consumer. As Levi’s innovates to compete head on they will need to consider certain price points to really ensure their future.

THRIFT STORESThe recent recession has reached into the pockets of almost everyone and left them with less disposable income. With an increased sensitivity to their budget, consumers have turned to thrift and secondhand stores for apparel shopping.[47] This spike in thrifty and frugal consumerism is great for thrift shops but a medium-high threat for retailers and suppliers.[48]

COUNTERFEITSIn 2013 the U.S. seized over 10,000 Shipments of


counterfeit goods. A 26% increase from the prior year.[49] Because a clothing’s value is based largely on the brand and logo, it is very easy for counterfeiters to duplicate. This does more than just eat up potential sales. Poor quality counterfeits can tarnish a brand’s image because the logo is now associated with subpar products. This is a medium-high threat to the apparel industry.[50]

STAKEHOLDERS/INFLUENCERS/SHAPERSStakeholders and topics that are shaping the apparel industry and specifically the denim industry are (1) fitness advocates, (2) Social Media Growth, (3) Environmentalists and Labor Rights Advocates, and (4) Online Reviews.

FITNESS ADVOCATESThe latest trend in health and culture has been transforming fitness into a lifestyle . This includes dressing the part. It’s not enough to look fit. you’ve got to flaunt it and wear the current trendy active wear. This shift is a huge threat to the denim industry as athleisure clothing has moved into the casual wear space that denim once dominated.

SOCIAL MEDIAAs social media has permeated our lives, society has adapted to an “online” lifestyle. This has caused our culture to be more sensitive to how we present ourselves.[51] Studies have shown that social media posts tend to be exaggerations of real life. This has affected how we perceive others and ourselves. In fact, the rate of depression has increased due to how easily we compare our lives to others lives on social media.[52] This has shaped the apparel industry by becoming an avenue for people to present lifestyles that they don’t necessarily live. Athleisure is only magnified by this desire to be perceived at our best.

ENVIRONMENTALISTS AND LABOR RIGHTS

Consumers want to buy from companies that are socially reputable and responsible.[53] Two main facets of social responsibility are Environmental sustainability and Labor rights. Studies show that 80% of consumers who are aware of a company’s “green” initiatives use that knowledge to guide their buying decision.[54] Consumers want to be a part of a bigger cause. This social concern extends all the way down the supply chain. Companies must ensure that suppliers are also ethical and socially responsible. Association with a manufacturer that has less than satisfactory working conditions and requirements can lead to scrutiny and in some cases boycotts.[55] This is a very real threat in this industry.

ONLINE REVIEWS

As our society has grown more connected, It has become easier for consumers to share experiences and opinions. The millennial generation is more trusting of social media and reviews than advertising. This means that companies, now more than ever, need to monitor what people are saying and feeling about their company. One negative comment from the right person could ruin a company.[56] But, in comparison, The right review from the right person could boost sales and brand perception greatly.

False reviews are also of concern. These are reviews that are made either by competing companies or from consumers who never actually tried the product. It is important that when receiving negative reviews the company resolves those issues and complaints quickly.

[51]http://www.huffingtonpost.com/lorne-jaffe/5-reasons-why-facebook-is_b_7295816.html[52]http://www.forbes.com/sites/alicegwalton/2015/04/08/new-study-links-facebook-to-depression-but-now-we-actually-understand-why/[53]http://www.businessinsider.com/the-top-10-benefits-of-convincing-your-company-to-care-about-sustainability-2012-3[54]http://business.time.com/2012/06/15/want-more-customers-become-a-green-company/[55]https://www.hrw.org/report/2015/03/11/work-faster-or-get-out/labor-rights-abuses-cambodias-garment-industry[55]http://www.inc.com/eric-markowitz/do-your-manufacturers-treat-workers-fairly.html[56]http://nautil.us/issue/12/feedback/one-percenters-control-online-reviews


CONCLUSIONTHREATSLevi Strauss & Co. is facing tremendous competition from rivals due to a heavily saturated denim industry. Their men’s lines are consistently losing market share to VF Corporation’s key denim brands Lee and Wranglers. Their women’s lines are overshadowed by trendier more feminine suppliers. All the while their brand is unequipped to pull off a premium product offering, therein missing higher profit margins and the opportunity to break into an altogether promising market.

Customers also hold significant bargaining power in this particular industry. Switching costs are low across the board and price sensitivity has increased since the recession of 2008. Levi’s has failed to make necessary adjustments to appease consumer demands. To make matters worse, the lifestyle shift toward casual wear has been relatively ignored by Levi’s which has stifled their market expansion. They presently are struggling to compete with the benefits that synthetic materials have introduced to the market. Synthetic substitutes are cheaper and more comfortable and accordingly are creating challenges for the denim industry.

OPPORTUNITIESLevi’s could very realistically differentiate themselves from other denim suppliers by initiating environmentally focused campaigns. With increasing pressure from an environmentally conscious base of Millennials they can separate themselves from a heavily saturated denim market by positioning themselves as green. This will come by way of building on their water-less campaign and looking for ways to decrease mass waste. Levi’s has an opportunity to remedy their mistake in missing the boat on athleisure by using their enormous brand strength to open a line of synthetic athleisure products. They are presently not operating in the parallel market of synthetics and that has left them at a disadvantage while consumers make their preference for athleisure apparent.

Considering Levi’s history of charging prices that exceed the market average for comparable products they are likely losing consumers that have tendencies toward fast fashion. Levi’s has an opportunity to adjust their product

offering in order to cater to fast fashion proponents. With necessary decreases to quality or insertion of synthetics they could charge a more competitive price and position themselves to catch more of the revenue that has been driven by the fast fashion industry.

KEY OBJECTIVES MOVING FORWARDOur suggested plan of action starts with Levi’s breaking from their myopic view of the industry and adapting to the societal shifts toward athleisure and fast fashion. By adopting a line of synthetic products they could get their hand into a market that they’re presently absent from entirely. The inexpensive nature of synthetics would also allow them to offer less expensive prices, therein appealing to fast fashion proponents, while all the while maintaining strong profit margins. Levi’s has the brand strength to successfully launch a synthetic line that could compete with relative newcomers to the apparel industry. Athleisure is a trend that has evolved as of the last 5 years and accordingly the major contenders in that industry are far younger brands than Levi’s. If they were to enter with force they could have a significant impact.

Such an action would also inevitably help their present market share in the women’s category. Considering athleisure pillars, such as yoga pants, are marketed specifically to women, a comparable athleisure line of their own could only help their market share in the women’s category. Competitors in the denim industry would be left playing catch up not only to traditional athleisure suppliers but also to Levi’s; the first of the mega denim suppliers to break from their myopia.

Additionally, redistributing resources to accommodate this shift toward athleisure could be spun as an environmentally driven decision. Levi’s has been reluctant to change their traditional denim offerings but has also suffered huge losses to the rise of athleisure and is criticized widely for their waste that inevitably accompanies denim throughout its life cycle. This would be an easy way make their products more relevant while simultaneously offering the market a more environmentally conscious line of products. They could even call the adjustment a part of their green initiative to produce water-less products.


SUBSTITUTES:THREAT LEVEL HIGH

• THEATHLEISURETRENDHASDRIVENCONSUMERSTOWEARMORECOMFORTABLE“ACTIVE”CLOTHESINEVERYDAYSITUATIONSWHEREJEANSUSEDTOHOLDTHEMARKETSHARE(-)

• DUETOTHERECESSION,PURCHASINGUSEDCLOTHINGISBECOMINGMOREACCEPTED.I.E.THRIFTSTORES(-)

SUPPLIERS BARGAINING POWER:THREAT LEVEL LOW

• TECHNOLOGICALADVANCESINAGRICULTUREHAVEINCREASEDAVAILABILITYANDDECREASEDPRICEOFCOTTONWORLDWIDE(+)

• ENVIRONMENTALCONCERNSAREDRIVINGUPPRICESOFDYESUSEDINPRODUCTION(-)

• LABORISINEXPENSIVE(OUTSIDEU.S.)(+)• MANUFACTURINGOPERATIONSAREBEING

INCREASINGLYOUTSOURCEDOROFFSHORED(+)

• DUETODECLININGSALES,EMPLOYEESAREFEELINGMOREDOUBTTOWARDSAPOSITIVEFUTURE(-)

STAKEHOLDERS:THREAT LEVEL LOW

• ENVIRONMENTALISTSAREVERYCONCERNEDWITHJEANSBECAUSETHEYAREVERYWATERINTENSIVETOPRODUCE(-)

• LEVI’SRELEASEDA“PRIDECOLLECTION”TOEDUCATECONSUMERSONHISTORYOFLGBTQEQUALITY(+)

• LEVI’SSTADIUMRECOGNIZEDASCUTTINGEDGEBYWHITEHOUSESMARTCITIESINITIATIVE(+)

• LEVI’SSTADIUMTOHOLDSUPERBOWL50INEARLY2016(+)

• “SKINNYJEANS”CAUSEWOMANTOBEHOSPITALIZED.MEDIAQUESTIONSHOWSLIMJEANSCANBEDAMAGINGTOHEALTH(-)

• OURWORLDISEVERMORECONNECTED.CUSTOMERSOPINIONSOFABRANDHAVEABROADERREACHTHANEVER(-/+)

PORTERS 5 FORCES ANALYSIS


POTENTIAL ENTRANTS:THREAT LEVEL LOW

• THEMARKETISALREADYHIGHLYSATURATED(+)

• INCREASEDACCESSTOCHEAPMANUFACTURINGOVERSEAS(-)

• MANYMANUFACTURERSANDRETAILERSALREADYHAVETIESWITHEXISTINGCOMPANIESININDUSTRY(+)

• ADVERTISINGCOSTSPRESENTMAJORHURDLEFORNEWENTRANTS(+)

CUSTOMER BARGAINING POWER: THREAT LEVEL HIGH

• SWITCHINGCOSTSARELOW(-)• MANYCOMPETITORSGIVECUSTOMERS

CHOICE(-)• CONSUMERDEMANDFORDIFFERENTIATED

BRANDSISHIGH(-)

RIVALRY AMONG COMPETITORS:THREAT LEVEL HIGH

• VERYMATURE/HIGHLYSATURATEDMARKET(-)

• RIVALSOFFERCOMPARABLEPRODUCTOFFERINGSINEVERYPRODUCTCATEGORY(-)

• VFCORPORATION(WRANGLERS&LEE)ISSIPHONINGMARKETSHAREINTHEMEN’SCATEGORY(-)

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MARKET STRATEGIES

MARKET STRATEGIES 27MARKETING AUDIT

STRATEGIC MARKET POSITION

Levi’s current market position is attempting to appeal to craftmen. Their roots target craftsmen such as miners, railroad workers, and cowboys. Since that is a dwindling market segment, they are trying to generalize what craftmen means and appeal those who specialize in a skill. Such as, musicians, singers, and artists. This strategy started out as a niche market, targeting the working class. During the late 80s, Levi’s started to shift away from serving a niche market and tried to serve many niche markets.[57] The majority of Levi’s sales (85%) comes from department stores. Many of these department stores started making their own brands to compete with Levi’s. Since Levi’s stopped building brand loyalty their customers started making the switch. Maintaining “cool” in your consumer’s eyes is not easy. It takes constant evolution. Levi’s has continued to evolve, but they have gotten away from the roots of what made people love them, which is their story.[58]

Levi’s mission statement is very generic. It focuses on sustainability and has a lot of generic statements about how safe their workplace will be and sustainability. However, nothing in their mission statement is passed on into their communication with the public. Their advertisements on social media focus on sales and trends. Levi’s is no longer telling the story of their brand and why they’re great.

Sales peaked at $7.6 Billion in 1996, and Levi’s had 18.7% of the U.S. market. This is when the apparel industry trends began to change. Baggy jeans became cool and Levi’s failed to capture that market. By 2001 revenues had dropped to $4.25 Billion and Levi’s only had 12.1% of the U.S. market share. This downward trend has continued and in 2012 revenue had dropped to $1 Billion. They veered from their market position and it hurt them badly. Levi’s needed to keep brand loyalty high and get consumers stoked on their brand.

Their current strategies haven’t done this and as a result have not been successful.[59]

MISSION STATEMENTLevi’s mission statement, in brief, is to continue balancing profitability with sustainability. As Levi’s has grown, the company has been constantly looking for new innovations or changes that would drive sustainability in both the environment and internally in the firm.

PRODUCT PORTFOLIO ANALYSIS

STARSStar products in the apparel industry are currently athleisure. Levi’s doesn’t have a star product and could use this opportunity to create a line of clothes made from synthetic material and create a star product. Synthetic material uses much less water than cotton and leaves a smaller environmental footprint. Creating a new line, as done with Dockers, will appeal to the new athleisure trend and also correlate with Levis’ efforts to be environmentally friendly. This will also allow them to help capture the millennial women target market which Levi’s currently lacks in. Creating a star will allow Levi’s to sustain profits and have another potential clothing line turn into a cash cow, helping secure their future.

CASH COWSLevi’s and Dockers are currently the cash cows for Levi Strauss & Co. Dockers has a high market share in the khaki pant niche, and Levi’s is leading in the denim apparel niche. The men’s and women’s apparel industry are both in the mature stage and the market isn’t experiencing much growth. Since they have high market share with both brands, they are gaining most of their revenue from them and focusing most of their efforts on sustaining them.

[57]http://articles.economictimes.indiatimes.com/2010-03-24/news/27580796_1_levi-jeans-market-brand-strategy[58]http://www.entrepreneur.com/article/243412[59]http://www.brandstories.net/2012/07/21/levi-strauss-how-an-american-classic-lost-its-plot/[60]http://www.levistrauss.com/wp-content/uploads/2014/01/annual-report-2014.compressed.pdf [61]http://www.levi.com/US/en_US/category/men/clothing/collections/levi-collections-waterless

MARKET STRATEGY

MARKET STRATEGIES28 MARKETING AUDIT

QUESTION MARKS

Very few question marks exist in the apparel industry. Under Armour is a company who is trying to invent a new type of clothing that will track things like heart rate, calories burned, steps taken, and so forth, but it’s a big question mark.

DOGSLevi’s key product lines are Levi’s, Dockers, Signature Levi Strauss & Co, and Denizen from Levi’s. Levi’s is easily the biggest contributor to net income. Dockers controls the majority of the khaki pants industry. Signature Levi Strauss & Co. and Denizen from Levi’s together, only make up 4% of the company’s net income.[60]

COMPETITIVE ADVANTAGE ASSESSMENT

KEY STRATEGIC INITIATIVESEarly on, Levi’s competitive advantage was the rivets they used on their jeans which made them last longer.

This was their key differentiator from the late 1800s all the way into the early 1930s. Starting in the 70s and 80s, Levi’s brand took on an identity of its own and became associated with rebellious youth, hippies, and rock stars. Levi’s accepted this shift from their more traditional working man persona and it paid off. They rode this image and used their brand popularity as their competitive advantage all the way into the mid 90s. All of their TV ads involved a chart topping song and was targeted at baby boomer generation. As the 90s went on, baby boomer tastes changed, as well as the fashion industry. Hip Hop became big, and with that, so did baggy clothes. Levi’s failed to capitalize on this trend and lost a lot of their customer base due to not evolving. Even worse, they were not viewed by their target customer as un-cool and no longer trendy. Levi’s failed to recognize their biggest asset was their story and the connection they had with their customers.

SUSTAINABLE COMPETITIVE ADVANTAGE

VALUED BY THE CUSTOMERLevi’s most loyal customers stick with them because of their long heritage. They have built a brand that stand for something. Their target has always been aimed at craftsmen, someone who specializes in something. When people wear Levi’s clothing, they feel authentic, as if their clothes say more about their lifestyle and personality than anything else. Many brands try and gain this type of image in their customer’s eyes, but Levi’s has been the leader in doing so for most of their existence. With the emergence of the millennial market, corporate responsibility is something many consumers expect. Levi’s has launched a new line of clothes they call their “waterless” line of clothes. With such a large amount of water going into the production of blue jeans, specifically faded/washed jeans, Levi’s faced a lot of criticism for not being environmentally friendly. This


has caused them to re-do their process and cut down on the amount of water used in manufacturing.[61] When consumers see companies taking steps like this to be more responsible, they value it and look to support them when they make purchases.

RAREA clothing brand that can define a generation is rare. Having the ability to set yourself apart and fit into a desired category simply by wearing a certain brand is something people value. Levi’s has created this public image and its allowed them to be industry leaders. IMPERFECTLY IMITABLEterms of tangibility, Levi’s can easily be imitated. This is something that has hurt their sales in the past. Most of their sales are in department stores. Due to their success, many department stores came out with their own line of clothing that imitated Levi’s which cut into their profits. Levi’s has also fought hard to protect their “v” shaped pattern on the back of their jeans so they can easily be differentiated from their competitors. Levi’s has sued almost 100 companies since 2001 for trademark infringement on this design, including Fossil, Von Dutch, and Lucky Jeans. As for intangible goods, Levi’s has one of the most authentic brands. They have been around the longest and they were apart of the formation of America. With roots of being innovators, market leaders, and respectable in all circles, most brands cannot gain this same level of authenticity.

NO STRATEGICALLY EQUIVALENT SUBSTITUTESAs of right now, there are no substitutes for clothing. However, Levi’s primarily operates in the denim niche of the clothing market. This has a major substitute known as athleisure. Athleisure is a new trend of athletic clothing that can be worn in many social events and circles. These places include the work place, date nights, hanging out with friends, and even family events. Many of these occasions used to call for something a

little dressier, such as, a pair of good-fitting blue jeans. Athleisure is made from synthetic material that conforms to your body shape and has a lot of flexibility. This new level of comfort, coupled with its social acceptance, has made Levi’s denim look rough, uncomfortable, and out of style.

KEY INITIATIVES FOR MARKET POSITION IMPROVEMENT

SOCIAL MEDIARight now, Levi’s has a large group of followers on social media, especially Facebook, and campaigns are used to advertise sales. This would be a good approach to advertise a new seasonal collection, or a major sale, but the rest of the year social media needs to be used to tell their story. Social Media posts and pictures need to show more of their waterless clothing line and help roll out their new recycled clothing line. Visuals that show how much water they’re saving, how many jeans they can make now versus the industry average, and how much their recycling campaign is reducing their carbon footprint. To get the word out, Levi’s can conduct SEO, Pay Per Click, and keyword campaigns to drive more traffic to their social media websites and spreading the word on the good they are doing.

RECYCLINGSustainability is achieved by a group. Levi’s needs to get their customer’s on board and willing to give back. This is where Levi’s can roll out a new line of recycled clothes. Customers will be encouraged to send in their old jeans and Levi’s will recycle these jeans and sell them as a new product line, along with their waterless campaign. A major demographic Levi’s is suffering with is millennial women. This will help capture that audience due to their environmentally conscious mindset.

One of the most durable, warm, and stylish blankets on the market are denim ones. Levi’s can also use jeans

MARKET STRATEGIES30 MARKETING AUDIT

that are too worn to be recycled into resellable jeans, and create blankets to donate to developing countries. This will give them more advertising opportunities to show the public they care about the world and the environment, creating more brand loyalty. To incentivize people to send in their old clothes they will receive discounts depending on how much clothing they donate. Customers can then use the discounts towards new product, or towards the cost of the Levi’s Club subscription.

SWITCHING COSTSThe apparel industry has little to no switching costs. Brand loyalty is everything. We’ve discussed how Levi’s can strengthen their brand loyalty, but they can also create switching costs. This is where Levi’s Club comes in. Levi’s Club is a monthly subscription service where a new outfit is delivered right to your door. This outfit will be picked out by a stylist, based off your pre-selected style preferences. To alleviate most of the stress of buying clothes online, Levi’s will license out “True Jean” technology which will allow their customers to enter characteristics about their current clothes and body type to ensure they get good-fitting clothes and don’t return the things they are sent. Since Levi’s new recycling initiative will be aimed at millennial women, this subscription based service will be catered towards men, who don’t care as much about the shopping experience and just want good-fitting, stylish clothes.

SYNTHETIC MATERIAL CLOTHING LINELevi’s has been criticized for two things, not evolving to give customers what they want, and leaving a big carbon footprint. An opportunity exists to solve both of those issues by creating a new line of clothing that uses synthetic material. Synthetic material is what is used in most athleisure apparel, and uses much less water to

make. Levi’s can couple this new clothing line with their waterless initiative to really put those allegations to rest.

CONCLUSION

STRENGTHSIn conclusion, Levi’s is one of the oldest and most established retail providers in the industry. This has translated into significant advantages by way of brand strength and recognition. As has been stated, the name Levi’s has nearly become synonymous with jeans themselves. This has largely been achieved by acquiring trademarks that protect key features of their most common products. This trademarking helps Levi’s maintain some differentiation in an otherwise highly saturated market that is flooded with comparable product offerings. Additionally, Levi’s has continued to focus on the innovation of their traditional merchandise. They have dedicated many of their resources to developing more customer-conscious versions of their primary denim product lines. The influence associated with a brand as established and innovative as Levi’s opens many potential door’s for the company’s growth.

WEAKNESSESWhile Levi’s has a number of competitive strengths in the market, they are also prone to various shortcomings. Chief among these shortcomings is their tendency to approach innovation in the market reactively instead of proactively. They respond to shifting trends after market share is pulled from them instead of searching for weak signals on the periphery in order to get ahead of the changing trends. This is made apparent in their struggle to regain losses forfeited to the athleisure movement by pouring efforts into making their jeans comfortability and flexibility comparable to synthetic substitutes. Along another vein, Levi’s dependency on cotton as the base material of their products has been publicized as having a negative environmental impact. Levi’s has recognized the consumers’ shifting preference for green products and manufacturing processes and has


accordingly initiated certain green marketing efforts. While this is a step in the right direction, they have not yet rolled out a company-wide method or process for mass producing their products in a way that will silence their environmental challengers.

RECOMMENDATIONSOur primary objective is to position Levi’s as a proponent of green initiatives in order to gain momentum among its target consumer base, Millennials. We have a number of suggestions that we estimate will help Levi’s accomplish this objective. Namely, we suggest (1) that Levi’s take their green initiatives to the next stage by releasing a recycled denim product line in addition to their waterless campaign; (2) that Levi’s increase their social responsibility contributions by donating recycled clothing to developing countries; and (3) by broadening their product offering to include synthetic lines of clothing that are less water intensive and more in line with current fashion trends. Additionally, (4) we recommend the implementation of a subscription based offering in order to raise switching costs and jump start the recycled clothing product line.

Our emphasis on market expansion and environmental advancements lead us to suggest a denim recycling program. This program will both diminish textile waste and increase the company’s contributions to society as a whole. As consumers cycle through their clothing Levi’s will encourage them to send their used jeans back to the company in order to recycle the material for the use of denim blankets and other recycled clothing products. These recycled denim products will be distributed to the needy both domestically and abroad. This effort is a genuine effort to reduce waste, help those in need, and position Levi’s as a socially conscious industry leader.

Our next recommendation for Levi’s future sustainability is to apply their traditional differentiation strategy in ways that are nontraditional to their industry. Namely,

we suggest that they must differentiate themselves from like-minded competitors by leveraging their company’s history and brand strength to cross boundaries, embracing the apparel industry’s shift toward athleisure. Their tendency to focus their innovative energies on improving their traditional products will likely make their already loyal customers more loyal, but do very little to gain new customers. We see a need to focus on market expansion by expanding their product offerings to appeal to athleisure loyalists. This adaptation will help Levi’s environmental efforts as some synthetics replace the more water-intensive cotton; it will help them reach consumers that have aligned themselves with athleisure as a lifestyle preference; it will even help them be more open minded in the future as they realize they can safely broaden their scope while remaining true to the fundamental components of their company.

We also see an opportunity for retaining present customers and increasing brand loyalty by raising switching costs. This we hope to achieve by providing a subscription business model for generating regular income while simultaneously narrowing our customer’s attention to our product lines. Aside from our customer’s traditional online shopping we will provide a membership program that enables those who opt in to receive new product lines on a monthly or seasonal basis for a set monthly price that corresponds to the regularity of their shipments. We anticipate this will increase customer participation, improve customer loyalty, and decrease the tendency of our customers to browse the market for competitors’ products. This initiative will also be rolled out as a method of infusing recycled and waterless clothing into the market. All of the clothing distributed through our subscription model will be green products that tote the Levi’s mission to reduce waste and benefit the planet. This distribution method will increase awareness that recycled clothing lines are just as attractive as traditional clothing and will generate excitement about Levi’s dedication to supplying consumers with responsible products.

PLAN OF ACTION

PLAN OF ACTION 35MARKETING AUDIT

ACTION PLAN

SUMMARYBy way of summary, we found that Levi’s is struggling to differentiate itself in a heavily saturated market that is particularly susceptible to both competitive products. There are many denim providers competing with one another across all segments of the market; from premium denim suppliers to fast fashion providers there is heavy competition for market share. Additionally, the social trend toward athleisure is threatening the entire denim industry as companies like Lululemon and other sportswear companies have flooded the market with competitive products to jeans. These factors create a difficult external environment for Levi’s as they work to raise switching costs within the apparel industry.

Also, Millennial consumers having made their preference for environmentally-conscious products and processes well known, have compelled the market to adopt greener marketing strategies. This creates a challenge and an opportunity for Levi’s, considering the negative environmental stigma attached to the water-intensive process of converting cotton fibers to wearable denim products. In order to pass the environmentally-friendly test, Levi’s will have to make alterations to their existing manufacturing processes, marketing efforts, and staple product lines.

Accordingly, we see opportunity to improve Levi’s present product offerings and manufacturing processes in order differentiate the company from existing competitors. This relates to pursuing greener processes and marketing strategies in addition to introducing a denim recycling plan to reduce textile waste and benefit those in need. This green initiative will entail incentivizing consumers to return used denim to Levi’s in order to be recycled for re-use. Recycling denim into new clothing will both create an opportunity for resale

as well as allowing the donation of clothing and other denim products to those in need around the globe. These green initiatives are to be implemented out of a genuine desire to be socially responsible as well as in an effort to advantageously position the company in a manner that appeals to Millennials. We also advise that there is market share to be gained by diversifying their product offering to include a line of synthetic based athleisure. This will also be introduced as a part of our green initiative to decrease water consumption. Synthetic fibers are a great alternative to the more water-intensive cotton, and will be pitched as Levi’s making big efforts to reduce their carbon footprint and evolving to give customers what they want.

Our final recommendation relates to certain innovations regarding the consumer experience and reward programs for customer loyalty. This is to be achieved in the form of a subscription model that allows members to receive new product lines on a monthly or seasonal basis for a set monthly price. We estimate that this will increase customer participation, improve customer loyalty, and decrease the possibility that our customers are shopping multiple competitors’ product lines before settling on a product.

IMPROVED MARKET POSITION

MISSION STATEMENT

“To sustain responsible commercial success as a global marketing company of authentic branded apparel. We must focus our resources on customer satisfaction, profitable innovation, and environmental welfare. Our business will be ethical and honest with any who wishes to do business with us. Our employees will be examples of ethical leadership in both business and community. We will continue forward holding fast to our core values of authenticity, sustainability, quality, global community and Integrity.”

PLAN OF ACTION

PLAN OF ACTION36 MARKETING AUDIT

STRATEGY

MAJOR OBJECTIVESLevi’s Collection club - Pay a monthly, quarterly, seasonal, or yearly subscription fee and have a complete outfit sent directly to your house based on how often you’re paying. This will create switching costs to keep customers from buying elsewhere, and give them the excitement of having a new outfit show up.

In order to keep returns low on the outfits we send, Levi’s needs to license “True Jean” technology to allow them to know which style of jeans will fit their customers the best.

Use old jeans, sent in by customers, and recycling them into a new clothing line that runs concurrent with their waterless clothing line or converting unsalvageable jeans into denim blankets to be sent to third world countries. When you no longer want your jeans you can send them back for a coupon on your next purchase, or discount on your Levi’s Club subscription and Levi’s will either recycle them into jeans they can re-sell alongside their waterless clothing line, or make them into blankets and donate them to charities around the world. These events would be shown on social media campaigns as an opportunity for Levi’s customers to see how their donations are positively affecting people around the world and making a difference. This will further set Levi’s apart as an authentic brand who cares more about the environment and those around them than their competitors.

SWOT ANALYSIS

OPPORTUNITIES -Companies like “Trunk Club” are becoming very big right now and having a similar option for Levis’ customers will create switching costs and bring added excitement to their brand.

STRENGTHSOne of Levi’s biggest strengths is their brand recognition and authenticity. Levi’s is already stepping forward as being environmentally conscious and using less water to create their jeans. They are also saying they’re better for the environment because you can wash them less than normal jeans. Levi’s can continue to build on this “giving back” attitude by having their customers send in their old jeans in return for a coupon on their next purchase, and use the material to be recycled for the Levi’s Lives On clothing line, or to make denim blankets which will be donated charities and third world countries.

WEAKNESSESA big weakness for Levi’s is they don’t appeal to women. This is a big deal, especially with athleisure taking over so much of the women’s apparel industry. Introducing the recycled product line, and the giving back to developing countries will satisfy women’s interests and get them excited about being apart of Levi’s bigger picture.

THREATSThe Levi’s test drive promotion will allow customers to experience Levi’s jeans out of the dressing room and in real life situations for 3-4 days. This will change transform the brand as many consumers equate denim jeans with discomfort and restriction.

STRATEGY SCOPEOur target customer for the new strategy is primarily women. However, the Collection club is targeted at men who don’t really care about the shopping experience and are mostly concerned with the new clothes.

PLAN OF ACTION 37MARKETING AUDIT

The scope will allow us to capture a lot of the market share that we are losing to competition such as athleisure. By getting Levis’ products into the hands of more people it will allow them to see how comfortable their clothes really are. It will allow Levi’s to continue to capitalize on their strengths of brand awareness and quality clothing. One major opportunity in the apparel market is creating switching costs. Levi’s can capitalize on this opportunity by implementing their subscription collection service.

COMPETITIVE ADVANTAGE TO BE ACHIEVEDThe main competitive advantage we will create it switching costs. Levis’ biggest competitors don’t have any switching costs. The subscription based model will create the most loyal customer base in the apparel industry. Our collection/subscription plan coupled with our custom fitted clothes will create value for the consumer because they will be able to find perfect fitting clothes without the stress of searching through stores. It will also allow them to no longer waste time shopping and remain fashionable with all the new trends and styles.

ACTION PLAN

NECESSARY STEPS • License out “True Jean” technology• Hire a stylist, or team, to assemble stylish wardrobes

for subscription customers• Create new ad campaigns to reposition brand as a

comfortable/casual clothing line that cares about the environment

IMPACT ON MARKETING MIXPrice: Avoid price wars and maintain prices similar to competitorsProduct: Rejuvenate Levi’s by repositioning them to appear as new casual, comfortable clothesPromotion: Reinforce Levi’s brand image as an environmentally friendly company who adapts to new trends and give their customers what they want.Place: Look to sell brand in more of own stores to avoid distribution costs and costs to pay other retailers

NEW MARKET MIX & TARGET MARKET SEGMENTSOur new marketing mix will appeal to our target market because it focusses on segments that will provide Levi’s with a competitive advantage and continue to grow into new markets. The new vision shifts from their traditional focus that ignored new trends and didn’t give customers what they wanted in comfortable, casual clothes.

PRODUCT STRATEGY AND PROGRAMS 41MARKETING AUDIT

PROMOTION AND SOCIAL MEDIA STRATEGY

CURRENT SOCIAL MEDIA PROFILELevi’s started promoting sustainability and being environmentally conscious in 1994. Since that point in time Levi’s has adopted the mantra, “profits with principles.” Historically, Levi’s lays claim to being the original provider of denim products in the apparel industry, and as such, their dedication to promoting environmental initiatives carries weight. Levi’s Vice President of Sustainability Michael Kobori says “We’ve just had this long history and tradition of doing the right thing.”

Levi’s presently has excellent communication with their customers using all social media channels, magazine advertisements, and TV commercials. It should be mentioned that their present communication with consumers is predominantly for advertising reasons. With the capital that Levi’s wields, they are able to reach consumers through all traditional marketing methods; however, the message that is communicated is overwhelmingly a sales pitch designed solely to push their products.

Levi’s is presently operating under the slogan, “Live in Levi’s.” This emphasizes Levi’s efforts to position their products as everyday casual wear. This also creates an opportunity to build on the idea of being actively engaged while wearing Levi’s products.

Also, Levi’s has relatively recently rolled out a waterless initiative. This initiative is an effort to reduce the waste of water and other natural resources. This initiative has been timely for Levi’s considering the critics that have vocally denounced the overconsumption of water that accompanies mass producing textiles. Their CEO has earned the nickname, “the guy with dirty jeans” because he says he promotes that a pair of Levi’s need

only be washed once per ten wears.

Additionally, it is important to note that Levi’s waterless campaign has encouraged their target market, Millennials, to participate in their environmental initiatives. This has given Millennials a cause to rally around while simultaneously encouraging greater brand loyalty to the company. Having aligned their marketing strategy and product offering with consumer demand in this regard has been a valuable part of their present strategy.

SOCIAL MEDIA STRATEGY

Levi’s has excellent communication with their customers. Live chat capabilities on their website make it easy to get quick answers about their products without waiting on hold, as is likely on a phone call. This gives customers fast access to customer service and gives them a sense of being “always on.” They have over 40K subscribers on YouTube, 932K on Instagram, 754K followers on Twitter, and 21.9M likes on Facebook. Levi’s is using these channels primarily for advertising their products, sales, and sharing what they’re doing as a company for the community.

DIAGNOSTIC PROMOTIONAL MIX PROFILELevi’s is doing a good job trying to cater their products more towards women, and being more comfortable. They are trying to transition their brand image to fit into the new trend of casual comfort. They are using celebrities to tell stories about how they “Live in Levi’s”.

This approach is really good to capture the women’s market, however they don’t focus on their environmentally sustainable approach. They’re missing out on capturing some of the millennial market who cares about and supports companies that care about the environment. They need to start implementing this into their advertisements.


PRODUCT STRATEGY AND PROGRAMS42 MARKETING AUDIT

DIAGNOSTIC SOCIAL MEDIA PROFILELevi’s does a good job of keeping their customers in the loop on sales and new product launches. You will come across the occasional message of something they did in the community, but they are few and far in-between. Using these channels purely for advertising is the most common approach for competitors in this space. Almost all of Levi’s competitors are on social media channels, but none of them are doing anything different - they’re all simply advertising.

These channels need to be used not only to tell the brand’s story but also their customers’ stories in connection with Levi’s. Levi’s can use their social media outlets to promote their green initiatives. Their website can be used for more than to advertise sales and new product launches. People viewing Levi’s on social media need to see what the company is doing to give back. They need to see how the company is being responsible. Levi’s can use this to create greater brand loyalty.

Additionally, we estimate that giving their consumers a media outlet to tell their own individual stories in connection to Levi’s products will help to build a community of activists rallying under the Levi’s flag. Being bombarded with ads isn’t going to take a traditional customer and transition them into a community member that advocates both for the company and its causes. This customer transformation will be obtained by enabling their consumers to share their own pictures, stories, and videos relating to what they have accomplished in their Levi’s.This takes Levi’s present slogan, “Live in Levi’s,” and promotes it on a whole other level.

PROMOTION AND SOCIAL MEDIA RECOMMENDATIONSWe recommend that Levi’s promote their waterless campaign more heavily through all media outlets. We

also suggest that they couple this effort with a campaign to release a new line of synthetic products as another facet of their waterless efforts. Synthetic materials use much less water than their cotton counterpart. This will create an opportunity to capitalize on the current trend toward synthetic athleisure lines while simultaneously selling the idea as a waterless initiative. This is a strategic move to appeal to Millennial women, which are the greatest participants in the athleisure movement. Encouraging Millennial women to share what they are doing and accomplishing athletically in Levi’s athleisure products will help publicize the new clothing line while fostering a community that is active and proud of their environmentally friendly clothing.

Levi’s also needs to emphasize their new Levi’s Live On recycling program. Through the Levi’s Live On initiative, donated clothing in good condition will be re-donated to developing countries; clothing in poor condition will be recycled and resold at a price point that is competitive to fast fashion. The Levi’s Live On products will serve as the company’s competitive alternative to fast fashion offerings. We recommend publicizing this campaign through all social media outlets, again encouraging Levi’s consumers to become involved by donating old denim for a good cause. This gives Millennials in particular an opportunity to dedicate themselves to a socially justifiable mission while all the while supplying Levi’s with free material that can be donated or resold for a profit.

Another initiative to propel the Levi’s Live On campaign is the Levi’s Club. Levi’s Club is a subscription based model that allows participating members to pay a set

PRODUCT STRATEGY AND PROGRAMS 43MARKETING AUDIT

monthly expense to receive personalized seasonal collections. The idea is to increase switching costs by taking the shopping out of purchasing clothes. The more automated the purchasing process becomes the less likely it will be that we’ll lose customers to shopping around. We also propose using the Club as a springboard for our waterless and recycled clothing lines. All of the products distributed to Club members will be environmentally friendly clothing; this will become a staple component of the Club.

PRICE Generally, price should remain the same to reflect the timeless quality of Levi Strauss & Co. However, our Levi’s Live On products will be subject to price reductions in order to position them to compete with fast fashion suppliers. Additional incentives will be give to denim donors in the form of discounts on Levi’s Club subscription fees in order to promote donations as well as Club membership.

DISTRIBUTIONLevi’s will need to develop distribution channels for donated clothing to reach destination countries. Levi’s will also need to revitalize their shipping department in order to meet the demand that will be created through the Levi’s Club seasonal shipments.

PRODUCTNew product line “Levi’s Live On” will be developed and produced exclusively from recycled denim.

PROMOTION SUMMARYOur key promotion/social media recommendations are to shift the focus of social media more to tell the story of the brand instead of using it solely as advertising; enable consumers to share their own stories and contributions in order to foster a community of active participants; and to introduce their new Levi’s Live On recycling program.

These recommendations support other marketing mix variables by fulfilling strategies a company in a mature industry needs. The recycling movement will be used as a market expansion strategy to show that Levi’s will be used for more than being worn and then thrown out. Our subscription model for wardrobe delivery will create switching costs for our customers, which is something that is non-existent in the apparel industry.

WORKS CITED 47MARKETING AUDIT

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[2] Hispanic Millennials: How They Decide to Buy Clothes. (n.d.). Retrieved September 27, 2015, from http://blog.viacom.com/2012/09/hispanic-millennials-how-they-decide-to-buy-clothes/

[3] (n.d.). Retrieved September 27, 2015, from http://boomagers.com/Boom_WWD_2014_08_2.pdf

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