Levis Strauss

3.         Background of LEVI STRAUSS & CO.

Levi Strauss & Co. (LS&CO.) is a leading casual-wear apparel company internationally renowned in the denim jeans and casual pants markets. The company is privately owned and has a few Strategic Business Units (SBUs) under its ownership including: Levi’s, Dockers and Levi Strauss Signature.

3.1       Company Mission & Vision

The mission statement of Levi Strauss & Co:

“To sustain responsible commercial success as a global marketing company of branded apparel. (Levi will) balance goals of superior profitability… and superior products and services. They will conduct their business ethically and demonstrate leadership in satisfying their responsibilities to their communities and to the society.”

Levi Strauss & Co.'s overall business philosophy is to have sustainable long-term growth by balancing the financial interests of its shareholders and its corporate responsibility to society; to create value for all its stakeholders: owners, employees, customers and society alike. The company achieves this through its emphasis on its 4 core values of  “Integrity, Empathy, Originality & Courage” with the ultimate vision to become the company whose products “define quality, style and function” such that “people love [Levi’s] clothes and trust [the] company”.

4.         Situational Analysis

Levi Strauss Asia Pacific Division Pte Ltd (Singapore) is a wholly-owned division of Levi Strauss & Co. It takes charge of subsidiary businesses, licensees and affiliates of the Levi’s brand throughout the Asia Pacific and Middle-East region. The Singapore Asia Pacific Division HQ also serves as its global sourcing Head Quarters.

4.1       Market Overview & Current International and Local Situational Problem

Net sales for Levi Strauss & Co. and Subsidiaries for the fiscal year ending 2009 declined by 6.5% (US$280,221) from 2008 (Levi’s Annual Report 2009). This follows a long-standing trend in declining worldwide revenues from $7.1 billion in 1996 to $4.25 billion in 2001 (Lee 2009).

Levi Strauss & Co. has been unsuccessful in its attempt to reposition itself from its current image to a more individualistic image with “street cred” in both local and international markets.

Youths today perceive and associate the Levi's style with mainstream establishment and prefer the market offerings of Levi’s more stylish competitors. Levi's share of the youth market between 1996 and 2000 fell from 21% to 10.9% with Levi’s 501 sales in continuous decline. (Bartle Bogle Hegarty 2003) A recent sampling survey we conducted of approximately 73 Singaporeans, the majority consisting of young adults between 19-35, showed that 21.9% were ambivalent towards Levi’s jeans’ trendiness scoring it a 5-7 on the trendiness scale (Figure 1, See Appendix A: Qn 5).

Figure 1         Respondents' opinions on stylishness of a pair of Levi's jeans

4.2       Market Structure

Levi's jeans operate in a monopolistic competitive market structure in Singapore, where there exists a large number of competing firms with distinct market offerings. Low barriers of entry into the market, given the low set-up and operational costs for manufacturing /retailing jeans, have resulted in a proliferation of competitors in the jeans industry.

4.3       Market Size

The overall Singapore population is approximately 3.73 million (Singapore Department of Statistics) , where an estimated 1.99 million are economically active (Ministry of Trade and Industry 2009). Of the entire Singapore population, 21.6% (approximately 1.0761 million) are aged between 15-34 years old, within which our target market demographic lies (Figure 2). (http://www.singstat.gov.sg/stats/themes/people/popinbrief2009.pdf)

Also, non-economically active Generation Y youths have considerable purchasing power. As trendsetters they wield substantial influence on family purchase decisions (Himelstein 1997).

The potential market in Singapore can thus be estimated to be around 3.32 million, excluding young toddlers age 0-4 years and elderly above 70 years old.

Figure 2         Singapore Residents Population by Age Range

4.4       Market Growth Potential

The men's jeans market in Singapore is projected to grow at a moderate rate, with projected sales demand of US$96.38 million in 2010. Although most mature markets such as the Americas and Europe are experiencing slow growth, the relatively untapped Singapore market, like the rest of the Asia Pacific jeans market, is still in a growth phase. Hence, Levi’s 501s might be able to enjoy a steady 5.5% growth in sales revenue during the 2009-2011 period (Figure 3) (Parker 2005).

Figure 3         Singapore Men’s Jeans Market Growth Forecast

The overall jeans market in the Asia Pacific region however, follows the US market, with a decreasing growth rate. Fashion trends have shifted away from casual wear towards military and street urban wear, especially for the youth and young adult markets in Singapore. Jeans are therefore being increasingly substituted by commando and street-wear pants.

However, Levi’s jeans product-line is still an industry leader in Singapore with relatively high market share of 80% (Lim 2007).  As seen in the following Boston Consulting Group (BCG) growth-share matrix (Figure 4), Levi’s jeans can be considered a cash cow for the company requiring little investment to hold its current market share. However, given the intense competitive climate and market saturation in the jeans industry, market share of Levi’s could erode further if there are no significant investments towards continuous jeans innovation. Our goal thus is to prevent Levi’s jeans from becoming a dog and maintain its current position or even bring it to STAR position.

STAR	QUESTION MARK
CASH COW	DOG

Low

	Relative Market Share

High

Figure 4         Levi Strauss & Co.’s Growth-Share Matrix for the Levi’s SBU

4.5       Internal Resources of Company

Production of Levi’s jeans are mostly subcontracted out to factories located in low-cost developing countries like China where abundant labour and low wages allows Levi’s to be price competitive. (Ministry of Trade and Industry 2009)

One of the major concerns as a result of the outsourcing of Levi Strauss & Co.’s manufacturing process is the inability to directly control the workplace practices of these subcontracted factories.  If these subsidiaries have sweatshop-like conditions, it could raise the ire of activist groups and labour unions, not to mention legal repercussions (Griffin 2009). For instance, the case of Tan Holdings Corporation, a subsidiary who had an abusive work environment, tarnished Levi’s reputation as an upright and ethical company (Coleman 2005).

We suggest that Levis not only adopt an external outlook concerning its partners, suppliers and consumers but also internally with regards to its marketing efforts. For a successful marketing campaign, change must come from within and outside. Levis should engage in Internal Marketing in this area in its bid to rebrand itself.

Levi Strauss & Co. will implement and enforce stringent worker rights protection policies throughout its dealings within its supply-chain network. By safeguarding employee welfare and rights, the company ensures employees are well taken care of. Employee benefits provided include flexible work hours, career advancement programs and medical benefits coverage. In addition, Levi’s can also partner with and empower employees with the ability to participate in decision-making, giving them a sense of recognition and vested interest in the company. These measures makes workers highly productive, motivated and satisfied with their careers, resulting in greater customer value and satisfied repeat customers.

Such initiatives will portray the company as socially progressive, reflecting favourably on Levi’s brand image. This creates a competitive advantage for Levi’s in both consumer and labour markets by appealing to ethics-conscious consumers and potential employees.

4.6       Macro-Environment Trends

There are several macro-environmental trends affecting the designer jeans market.

Demographic

Singles are increasingly marrying at a later stage in life when they are more financially stable, and are having smaller families. Therefore, the influence of their children on the buying behaviours of the family unit will become greater (Wang et al. 2007). This is commonly known as the ‘six pocket syndrome’ where their children have become accustomed to instant gratification. Levi’s can maximize sales by targetting these youth and young-adult consumers who are more willing to spend (Sowa 2010)..

Economic

Since Levi’s jeans is usually perceived as a luxury rather than a necessity, the recent 2008 global recession caused a drop in sales and profit levels as a result of the lower purchasing power and cuts in disposable income of households. Consumers became price sensitive, reducing expenditure on high-priced Levi’s jeans and switching over to inferior substitutes from competing denim jeans brands or other types of pants (Fashion United 2009)..

Natural

The growing traction and visibility of green movements has meant that companies nowadays have to be proactive in assuming corporate social responsibility (CSR) by conducting their businesses in an environmentally sustainable manner. Consumers are becoming more environmentally aware as a result of these campaigns and are demanding the choice of more environmentally-friendly market offerings. We recommend that Levi’s adopt environmentally-friendly practices and processes in producing and marketing their jeans or risk negative publicity from NGOs (Levi Strauss & Co. 2010).

Technological

Advances in the Internet have brought about the advent of fresh promotional opportunities on the internet. The popularity of online social networking platforms allows for a wider audience reach for advertisements and act as a public relations channel for direct communication with customers (Scribd 2010).

Political/Legal

The presence of counterfeit Levi’s products has been prevalent for years and will continue to pose a constant threat to the company’s reputation.

4.7       Competitor’s SWOT Analysis

Lee Cooper

Strengths: Lee Cooper was established in London in the year 1980. It is among the highest selling non-American jeans brands in the world. It sources its denim locally as well as from other locations such as the USA, Hong Kong and Japan.

Weaknesses: The company has not engaged in many advertising activities in recent years and is gradually losing popularity as other major brands such as Levi’s are surging ahead.

Opportunities: As younger generations are becoming more affluent, Lee Cooper can try to develop this abundant market segment and publicize itself, sparking a renewed interest by youth in this brand.

Threats: Readily available in the market are other major brands such as Levi’s and Diesel competing for the same market share - Youths. To worsen their case, a rival brand, Lee exists, selling very low priced jeans. Consumers may get confused as to whether Lee and Lee Cooper are associated and wonder why the prices of the jeans of both companies show such disparity, and whether it is truly worth it to buy the Lee Cooper brand.

Diesel

Strengths: “Diesel jams together fantasy, kitsch, sex and humor to create its very own pop universe” (quote source). The company treats its employees like family, resulting in more motivated people who carry out their responsibilities efficiently. They do not believe in marketing research but take their direction from gut feeling and intuition. Working on instinct has resulted in success for them so far. They possess a strong advertising edge, having successfully captured the public’s attention with smart, eye-catching advertisements. An example would be their Black Gold campaign.

Weaknesses: An overreliance on intuition might not always prove correct. In an environment dominated by many other large brands that combine the workings of market research, advertising and marketing. Diesel might lose out in the long run if they continue to rely on instinct rather than market research or a combination of both.

Opportunities: Diesel can consider the possibility of tapping into the lower-income groups of people by reducing their prices. This can be made possible by releasing another line that might be more mass produced, using more cost efficient lower end material and less complicated designs.

Threats: There is much competition available along the same product line with other ‘famous and popular’ international brands such as Levis and Lee Cooper. Furthermore, other strong Luxury Image brands such as Calvin Klein, Louis Vuitton and Armani Exchange exist within the jeans market, targeting the exact luxury market segments. Diesel faces much competition on both its traditional jeans line as well as casual luxury line “Black Gold. Significant resources have been spent on marketing plans to help boost the branding of Diesel, but few have actually worked.

4.8       SWOT Analysis

Strengths

Strong brand image

Levis is a leading and recognized brand in the Apparel Industry (Cocoran 2001). As a result, there is significant customer loyalty to the brand. This strong brand image enables Levis to command a premium pricing for its products where other brands cannot and can easily allow it to expand into new lines; for example T-shirts, jackets and shoes (123 Helpme 2010).

Environmental Conscious

Levi’s has sourced organically-grown and treated cotton as part of its membership in the Better Cotton Initiative (BCI) to minimize their product life-cycle environmental footprint since 1991.

Being an environmentally-friendly company may allow Levi’s to distinguish itself from the vast number of competitors in the market, enabling it to capture market share especially that of environmentally conscious consumers and boost the company’s revenues (Levi Strauss & Co. 2008).

Weaknesses

Dependence on Aging Customer Base

The enduring brand loyalty created amongst the youths of the 60s has ironically compromised its brand personality as a symbol of self-expression and rebelliousness with its former core customers - later-year baby boomers and Generation X - nearing or entering middle-age life stages. Levi’s advertisements have become formulaic and staid. Levi’s 501s comprise 50% of all Levi’s product sales but has seen little modification to update the product line, contributing to deteriorating brand image.

Opportunities

Online advertising and sales

Online marketing tools are influential in the buyer decision process so Levi’s can harness the power of word-of-mouth from loyal consumers through social networking sites like Twitter and Facebook. In addition, the company also operates websites devoted to the Levi's brand as marketing vehicles to enhance consumer understanding of its jeans. A positive outlook in the online and catalogue retail market would boost the company's revenues (Scribd 2010).

Threats

Proliferation of Competitors

The market in which Levi’s jeans operate is in the casual-wear denim jeans industry. Other companies with similar mid-range positioning in the same market include Lee Cooper and Wrangler. Globally, Levi’s is facing intense indirect competition from large retail departmental stores like Carrefour, J.C. Penny and Sears who are leveraging on economies of scale with their substantial value-chain networks to produce house-brand jeans that target the value-conscious market; as well as the higher-end designer jeans sold by private-label jeans boutiques (JNCO, DSquared and True Religion) and branded fashion apparel companies such as Calvin Klein, Tommy Hilfiger, Ralph Lauren etc. who are diversifying into the jeans market. These market offerings easily substitute Levi’s jeans as they cater well to the specific needs of niche segments, eroding Levi’s market dominance. (Muench 2009)

5.         Marketing Proposal Objectives

Levi’s faces much competition and the danger of becoming obsolete in the current fickle consumer climate. Our marketing objectives would thus be to:

1)    Gain greater market share and brand equity within our target market.

2)    A re-defined brand positioning

3)    Higher gross sales and net profit figures

Holding the Levi’s brand as a product of the company itself, we will attempt to roll out a series of concerted marketing strategies to refresh and breathe life back into the aging brand. The Levis Brand is the product of focus for our project. We would achieve this with an updated re-launch of Levi’s Original 501 and Boyfriend 501 jeans to spearhead the campaign.

5.1       Segmentation

Demographic	Teens	Young Adults	Adults	Middle-Aged
Age	12-18 Years Old	19-25 Years Old	25-35 Years Old	36-49 Years Old
Occupation	Students, might take up holiday or part time jobs.	Males are mostly students or in national service, with females hitting the working sector at 21 years old. Some students hold part time jobs.	Almost all have full time jobs in various professions.	Almost all have full time jobs in various professions.
Income	Little income. Reliant on parent’s for support. There is a large demographic of teens from the affluent middle class whose parents provide generous allowances.	A mix of reliance on parent’s support as well as a moderate amount of financial independence.	Completely unsupported by parents, earning full wages.	Completely independent, earning full wages.
Psychographic	Teens	Young Adults	Adults	Middle Agers
Personality	Gregarious, Need for Social Acceptance. In a self- exploratory phase - Prone to compulsive decision making due to their need for instant gratification.	Adventurous, Individualistic and Rebellious.	Independent, Ambitious, Career and Status Driven.	Mellowed, Matured and Reliable.
Lifestyle	Very active and energetic. Most teens are fashion savvy and are mostly swinging pleasure-seekers. Tend to value self-expression. Entertainment and technology constitute a big part of their lives.	Fairly active and energetic. Many of their activities are centered around getting established career and social-wise. Mostly idealistic, are entering the phase in their lives where they are becoming more politically and socially aware.	Much of their time revolves around their professions and related networking. Are materialistic and achievement-oriented. They have refined tastes, desiring to project a successful and professional image.	Are established in their careers and social circles. Have greater flexibility to pursue leisure activities or hobbies. Possess a laidback family-oriented approach to life.
Attitudes	Are highly susceptible to peer pressure. Are mostly self-centered.	Extremely fashion and brand conscious, but are also a discerning market, able to pay attention to taste as well as quality.	Extravagant, will splurge readily to upkeep their well-heeled image.	Financially wise and selfless, will spend mostly on family. Leans towards practicality and relies heavily on life experiences.
Behavioral	Teens	Young Adults	Adults	Middle Agers
Benefits Sought	Image and Status, Establish Personal Self-Concept  and Identity	Image and Status, Enhance Self-Concept and Identity	Image and Status, Durability, Quality	Durability, Comfort, Quality
Usage	To impress friends and peers, usually worn on outings. High Usage by Males, Moderate Usage by Females *(Based on Survey Results)	As a status symbol, owning a piece from a famous brand. Or for everyday wardrobe convenience. High Usage by males low usage by females *(Based on Survey Results)	To feel younger and trendy, worn during casual settings. Moderate Usage by both males and females*(Based on Survey Results)	For convenience, worn when doing rough work. Moderate Usages by males, Low Usage by females (Based on Survey Results)
Loyalty status	Low Brand Loyalty, Fickle, Will not hesitate to jump to another more “cool” or “fashionable” brand	Moderate, but are open to brand experimentation especially if alternatives offer more or same benefits for lower price	Moderate – High, Has a higher inertia to change	Will stick to tried and tested brands, higher brand loyalty but also higher price discrimination
Influences	Magazines (e.g. Teenage, Seventeen magazine), Television advertisements, Mass Media, Social Media and Platform Peers	Mass Media, Magazines (e.g. Her World, Men’s Health, New Man) Peers, Social Media Reviews, Consumer Advocates and Opinion Leaders	Mass Media, Peers, Consumer Advocates	Practical Evaluation from Information Sources, Advertising, Word of Mouth

From the above market segmentation table, the age range of Levi’s customers is presumed to be between 13 and 49 years of age.

Demographics has been further segmented into 4 defined categories; Teens, Young Adults, Adults and Middle Aged. Differentiated marketing is currently practised by Levi’s in order to capture a wider customer base and larger net profits, as well as maximize production capacity. Levi’s strongly believes in targeting this mixed array of market segments due to their accessibility, willingness and ability to spend.

When it comes to portraying and selling the Levi’s brand to these segments, aspects like customer preference and personality must be considered. An effective branding and marketing strategy does not lie in typical product pushing but in creating and selling a lifestyle that caters to customers’ personalities and attitudes, thus convincing them into buying into the “Levi’s Lifestyle”.

In an era saturated with marketing messages from both digital and traditional media, crafting an effective marketing strategy that slices through the selective filters of Levi’s target audience is particularly challenging. Influences must be considered, from fashion-forward opinion leaders to mediums such as social networking platforms and magazines.

5.2       Buyer Behaviour

The basic benefits derived from Levi’s jeans do not vary noticeably from jeans manufactured by other brands. Moreover, the quality of the denim fabric produced is becoming increasingly similar across brands due to advances in production technology. The only real differentiation would be the design fit and the brand image associated with the jeans. As such, consumers would generally practice dissonance-reducing behavior, where contemplation on purchasing Levi’s jeans is relatively short. This is because while the price of a pair of Levi’s jeans is high, warranting considerable customer involvement in the purchase decision, there are negligible perceived differences between alternative jeans offerings.

Since much of the final purchase decision is based on the image projected by the jeans, customers might suffer from some cognitive dissonance when they compare the Levi’s jeans they bought to cheaper competing brands and realize that the design and benefits gained from alternative brands are relatively similar to Levi’s or even better than Levi’s. There is the danger that customers might perceive the benefits offered by Levi’s jeans as unjustifiable for its high premium price.

This might be especially relevant to the middle-aged segment as comfort and durability feature highly on their considerations when purchasing jeans. They are not particular about brand status and are more concerned with practical attributes and whether it is “value for money”. Middle-aged consumers might be inclined to purchase cheaper jeans from rival brands or even imitations.

On the other hand, a large portion of the market consists of teens and young adults. These individuals are exposed to myriad media sources and form the most impressionable market segments, hence they are more likely to be influenced by and place a higher value on the impression projected by a jeans’ brand. Consequently, they will suffer the least cognitive dissonance because branding matters to them. While they are entirely dependent on their parents’ for allowance, Levi’s jeans’ price-range is not expensive to the extent that it requires parental consent to purchase.

5.3       Target Market

The main thrust of our marketing efforts targets image-conscious, middle-high income Singaporean Youths and Young Adults who value self-expression and individuality.

It is the Youths and Young Adult consumers that have been identified through research as most willing to spend on clothes and easily influenced by brand image and emotional appeal. Although Levi’s is not effectively positioned to have a competitive advantage in serving this demographic, it is in the company’s long-run interests to establish substantial customer loyalty and preference within this segment, given the future affluence and attractive potential of the Youths and Young Adults market. The current older customer base’s shifting tastes to more mature apparel is another reason to appeal to this demographic so that market share can be maintained.

Our target market focus however, will be further narrowed on a personality and lifestyle basis. Lifestyle is a person’s whole pattern of interacting with the world (Kotler et al 2009). According to the VALS™ Framework (Figure 5), our target lifestyle class is Experiencers, whose primary motivation is self-expression and have high resources. This gels with Levi’s individualistic and rebellious brand image with earlier generations. To resonate with the desire for freedom, independence and expressiveness in certain segments of the Youth and Young Adults demographic as well as to capitalize on their search for self concept and identity, we will take an overall Lifestyle Branding approach.

           

 

Figure 5 – VALS™ Framework (Forlani 2009)

5.4       Positioning

A product’s position is the complex set of perceptions, impressions, and feelings that consumers have for the product compared with competing products (Kotler et al 2009). The current positioning of Levi’s jeans (Figure 6) indicates that the brand is perceived as having high quality and status while being mainstream. The large size of the circle representing Levi’s shows its high relative market share in Singapore. Although Levi’s has strong brand recognition which is a good differentiation point, this is a disadvantage in our target market which prefers their brands to be undiscovered.

Figure 6 – Current Perceptual Positioning Map for the Singapore Jeans Market

Levi’s jeans current positioning is mainly due to its focus on product attribute differentiation, touting the jeans it produces as durable and comfortable and its design as the original American version.

However, this positioning strategy is becoming less effective with improvements in technology rendering jeans designs and denim quality easy to replicate. Product features and benefits of jeans are becoming similar amongst brands, with fewer innovations to differentiate between and provide a competitive advantage to Levi’s. In contrast, Levi’s competitors like Diesel and True Religion are perceived as delivering moderately-high quality jeans with urban street designs (Figure 6).

Thus, we will pursue a Lifestyle Branding approach that would reposition the Levi’s brand personality as rebellious, laid-back and hip. Our new image differentiation strategy would convey the Levi’s experience to customers to feel empowered as an individual in their ability to express themselves. This would be achieved at every customer contact point; giving Levi’s an edge even if competing offers from other brands seem the same. To support this, we will train our sales personnel and employees competently and ensure everyone within the organization believes in the revamped Levi’s lifestyle. The planned positioning of Levi’s jeans would thus change to one that has high perceived quality, yet possessing “street cred” appeal (Figure 7).

Figure 7 – Planned Perceptual Positioning Map for the Singapore Jeans Market

Levi’s will also be able to leverage on its current CSR efforts in using organically-farmed cotton in its jeans, to promote itself as environmentally conscious and socially responsible. With the green movement’s strengthening influence on young consumers who are becoming more environmentally aware, this would be a distinctive and attractive benefit for Levi’s to promote.

Our value proposition aim for Levi’s jeans would therefore be “More for the Same”, offering a mix of quality, edgy style, comfort and environmental benefits for similar prices as competitors (Figure 8).

More                    The Same                     Less   More     More for More	Price   More for the Same	More for Less
The Same		The Same for Less
Less		Less for much Less

Figure 8 – Value Proposition Table

6.         Strategic Marketing Mix

6.1       Price

Levi’s jeans’ positioning emphasizes on using non-price factors of the marketing mix to differentiate our offer such that it justifies our high prices. Thus, our pricing policies has to synergize with our overall re-branding strategy. The goal here would be the revitalization of the brand in itself, giving consumers greater confidence and renewed interest in the brand. As a whole, the repositioning of the brand’s image is a far better reward than any short-term profits that might be gained from the release of a current or new line. Our customer-oriented pricing will appeal to the masses yet retain Levi’s individualistic image.

It is important to note that while we might incorporate promotions and discounts for the re-launch of the 501-model jeans, it is imperative that we do not devalue the image of the Levi’s brand.

Our survey which consists mostly our target demographics, indicates that the majority (44%) surveyed have a preferred price range of $50 - $100 for a branded pair of jeans, with a comparable 38% preferring $100 - $200.

To practice value-based pricing, we will set the target price of basic 501 jeans at around SGD $69.90 – SGD $99.90 in accordance with consumers’ perceptions about the value of 501 jeans’. The 0.99 psychological pricing strategy will induce some customers to subconsciously view the price as cheaper and in a lower price range than it actually is. This pricing will be price competitive against other brands such as Lee Cooper and A/X.

For limited release and collaboration pieces, prices will be set between SGD $119.90 – SGD $169.90. It is not ideal to give frequent promotional pricing for these pieces as a general air of exclusivity must be maintained. At the most, VIP privilege-card members will get access to 10 - 15% discount 2-3 months after the initial release.

Using organically-farmed cotton in the production of Levi’s jeans increases our material costs. Realistically speaking, the price of jeans cannot be too low as cost inputs are marginally more expensive than before. Estimates by our production department put the cost price of a pair of basic Levi’s jeans at SGD $30.00 whereas the premium jeans is at SGD $42.00. All these include upstream and downstream costs.

However, it would be ideal for a reasonable profit to be made as the new marketing campaign - that encompasses a media and advertising blitz- would require greater monetary resources.

To attract consumers with lower budgets, sales of up to 25% off will be offered on all basic 501 jeans 2-3 months after the initial release and periodically offered when demand is low.

6.2       Product

In order for Levi’s to deliver superior customer value, it has to manage the overall customer experience in using its market offering on three levels: core benefit, actual product and augmented product (Figure 9). At the most fundamental level, consumers buy products because of ‘what it [does] for them’ (Kotler et al 2009). This is no exception for Levi’s jeans, whose core benefit is its wearability and versatility in style.

Quality

Customer Information Support

Capabilities

Features

Packaging

Design / Style

After-Sales Service

Warranty

Delivery & Credit

Personnel

Figure 9 – Three Levels of Products

Our actual product promoted would be the Levi’s Original 501 button-fly jeans (for men) and Boyfriend 501 jeans (for women), both having the same authentic five-pocket styling and straight-leg cut. The streamlined design shapes and lifts, providing the perfect fit for any body type. A 2 inch straight-leg opening would be included in the updated design, so that it matches all types of footwear. As design is ranked as the second most important factor (21.4%) that youths look for in jeans (See Appendix : Qn 4), we will address this critical factor by extending the 501 product-line depth by increasing the number of available versions. These will come in a variety of denim finishes, colors and embellishments such as stitches, rhinestones or holes; to suit different tastes and preferences. There will also be collaborations with renowned Japanese designers and graphic artists to create premium 501 jeans versions to add prestige to the 501 line.

501 jeans are hand-treated and washed down to give a soft and comfortable feel.  With organic cotton used in the production of the 501 denim, performance quality of comfort and durability is consistently ensured compared to other jeans.  As reflected in our survey (See Appendix : Qn 4), most respondents - amounting to 40.6% - are seeking comfort in a pair of jeans.  Therefore, the desired feature of comfort will differentiate Levi’s jeans in the jeans market.

Distinctive Levi’s elements that identify all authentic Levi’s jeans will be present for 501 as pseudo-packaging (packaging that distinguishes originals from fakes). These include:

1)    The Two Horse® brand leather patch, a symbol of the pants strength. The leather patch is paper-thin and the brand is printed intricately.

2)    Red tab label on the right back-pocket, with the Levi’s® name hand-stitched in white letters.

3)    “Arcuate” – the double arched back-pocket stitching that creates a perky illusion for the posterior.

4)    Steel rivets and zippers plated with LS&CO identification. Patented rivet design at stress points on jeans.

Fake	Real

 

Augmented Product

Jeans, as a shopping product is purchased infrequently and requires much effort on the part of consumers in gathering information for comparisons between brands on price, quality and style. Levi’s sales personnel will undergo fashion training in preparation of providing value-added services such as providing appropriate styling advice to customers, base on their preferences and profiles. This enforces the idea that everyone has their own expressive individuality. Furthermore, front-line personnel will be empowered with the authority to address customer problems and enquiries.

Many competing jeans brands are unable to sustain customer interest as they do not collect feedback on customer opinions on product or service quality.  With customer satisfaction in mind, we will emphasize on before-and-after sales service like free alteration of jeans tailor-made for a perfect fit, and which leaves no awkward noticeable evidence of having been altered.

An interactive website providing fashion tips and advice separate from the official Levi’s website will be set up for customer support. Levi’s would gain an indirect edge in convincing customers of its product superiority. The website will also have a 3-D virtual-reality software that allows customers to mix-and-match various clothing apparel with Levi’s jeans to plan their own personalised styles. The official website will still display the various styles of our new 501 jeans line; however the focus is different from the interactive website which aims to be more of an impartial fashion information dispenser.

6.3       Promotion

Levi’s will utilize a myriad platform of media ranging from conventional media like television and radio, to celebrity endorsements and opinion leaders such as blog personalities.

Our main marketing strategy is to portray Levi’s as an edgy, cool yet reliable brand, a brand that is not overtly expensive but one that everyone should aspire to. “Live Levi’s” will be the main tagline and slogan for the entire re-branding campaign. Our main advertisement campaign draws influences from other brands like Adidas, Heineken and Dove; whereby everyday people wearing Levi’s jeans are featured as high-achievers with outstanding identities.

Subtle campaigns like comparative advertisements depicting the flaws of our competitors against the strengths of our jeans which are green, affordable and trendy will also accompany our main advertisements. An example would be Diesel’s new line “Black Gold”. Taking potshots at it, our advertisement would depict a model drenched in diesel with a tagline that conveys the message that their jeans are not environmentally-friendly and makes the wearer look awful (Picture 1).

Picture 1 – Levi’s Comparative Advertisement against Diesel

Another tongue-in-cheek comparative advertisement featuring Bruce Lee poking fun at Lee Cooper jeans - at how their jeans lack style and are passé akin to Bruce Lee’s fashion sense (Picture 4).

Picture 2 – Levi’s Comparative Advertisement against Lee Cooper

Statistics and research on lifestyle influences for traditional media show that 15% of our target market are strongly influenced by television, while 18% are influenced by magazines. Other strong influences include newspapers (3%), peers (21%) and family (11%) (See Appendix A: Qn 8).

Hence, Levi’s will buy prime-time advertisement spots on local television in Singapore on Channels 5, 8 and U.  We will also engage in sponsorship of youth-orientated programs such as “Singapore Idol”.

A radio jingle of the tagline “Live Levi’s” will be developed and popular stations such as 98.7 Only the Hits, Class 95 and Yes 93.3 will be chosen as “official media partners”. Levi’s will take out radio ads with the said stations and also host contests like “Name That Song” pertaining to Levi’s Trivia or questions on current pop culture music. Prizes would include SGD $150 vouchers and Levi’s basic 501 jeans.

Levi’s will also take out billboard advertisements at strategic locations across Singapore, particularly locations like bus stops and MRT stations near university campuses and the Central Business District.

Famous blog personalities / opinion leaders will be invited to give their valued reviews of the updated re-launch of Levi’s 501 jeans. Samples of new Levi’s premium version jeans will also be sent to selected celebrities to encourage the wearing of our brand in public and at events.

Levi’s will also launch a viral video campaign on video-sharing websites like YouTube, contrasting the differences between real Levi’s jeans and fakes, from quality to cutting, and durability to design. It will be dubbed the L^3 campaign. “Live Legitly – Levi’s”.

Levi’s will use a combination of techniques, by taking a holistic approach of building up effective screen-advertising time, from superbowl marketing techniques, viral and billboard ads to teasers to pique public interest.

Levi’s will hold exclusive previews for VIP members of its latest releases, and also provide updates on changes the brand is undertaking. Levi’s will also invite various representatives from the Media to partake in the process of its rebranding phases.

Midway through the marketing blitz, Levi’s will host a runway show for its own “fashion week“, detailing its latest designs. Levi’s will seek out famous fashion stylists and personalities like David Boey and seek to partner them for this event. Celebrities, media as well as selected VIP guests will be invited to attend.

The media and marketing blitz on the re-branding and launch of 501 jeans should cover a span of 8 months.

6.4       Place

Levi Strauss & Co.’s supply-chain network is vertically integrated; it owns subsidiary businesses along almost all nodes of its supply-chain. The exception would be cotton production, transportation and distribution of jeans to final buyers (Figure 10). Such streamlined integration, owing to Levi’s strong brand presence in the jeans market and subsequent dominance within its vertical marketing system (VMS), makes supply-chain management efficient.

Levi’s primary upstream partners are the cotton farmers who supply cotton, the main raw material used in the production of all Levi’s jeans.

Figure 10       Levi Strauss & Co.’s Supply-Chain Network

Downstream partners would be the distribution networks of Levi Strauss & Co that bridge the time, place and possession gaps that separate Levi’s jeans from consumers (Kotler et al 2009). Levi’s will practice multichannel distribution systems by utilizing a mix of marketing channels to reach our target consumers for the re-launch of the Original and boyfriend 501 jeans (Figure 11).

Figure 11       Levi Strauss & Co.’s Multichannel Distribution System

While Levi’s will place the 501-model jeans at all its company-operated stores as well as its franchised outlets (Picture 3), the jeans will also be carried at selected large departmental retailers like Takashimaya and Tangs, which attract moderately-high human-traffic volume owing to their location at Orchard Road– the heart of Singapore’s shopping district. The distribution clout and location convenience of these retailers provide considerable reach. Furthermore they stock a wide array of complementary apparel that could induce shoppers to purchase Levi’s jeans. Given closer relationships with these selected retail partners, there is greater propensity for increased sales.

Picture 3        Levi’s company-operated Stores and Franchised outlets

However, some larger retailers wield considerable bargaining power, which could generate vertical conflict. Levi’s could be forced to enter unfavourable agreements to avoid upsetting distributor relations and incuring negative trade repercussions. For example, shelf-space and greater presence in retailer shops have to be paid for. Due to their immense operations, retailers could enter the jeans market with their own in-house brand offerings, posing serious competition to Levi’s.

Levis will also do tie-ups with high-quality jeans specialty stores like “Actually Actually…” to carry its limited-edition premium 501 collaboration pieces. Selling our jeans at these trendier underground venues will gain Levi’s more fashion “street-cred”.

To provide support for our retail partners, there will be no direct selling to final consumers via the Levi’s website. Instead it will refer potential customers to our reseller’s websites or our list of stores. Moreover, LS&CO does not possess sufficient resources or logistics capacity to manage direct selling effectively.

To manage our supply-chain efficiently, the following logistics system has been constructed to yield cost-savings that can be passed on to customers.

Warehousing and transportation will be outsourced to third-party logistics (3PL) providers who will be in-charge of managing the storage warehouses and automated distribution centers that fill re-stock orders for Levi’s outlets and retailers. Trucks will be the main transportation mode used as it is appropriate for transporting high-value merchandise within Singapore for short hauls island-wide.

Re-order logistics will be aided by the RFID (Radio Frequency Identification Distribution) “smart-tag” technology system that LS&CO already has in place (Picture 4). The “smart-shelves” that accompany the “smart-tag” tracking device embedded in Levi’s jeans will monitor inventory levels and feed automatic orders to Levi’s warehouses when stocks are low, allowing for continuous inventory replenishment.

Picture 4        RFID (Radio Frequency Identification Distribution) tag

6.5       Budget/Costs

Production Budget

The Production Budget (refer to Appendix B) shows the funds that are allocated for the various expected expenses monthly.  To derive the final budget amount, the costs of production per unit and quantity produced for both the basic jeans and premium jeans have to be looked into. 

The cost of production per unit is estimated by our production department.

The quantity of products produced is estimated based on previous year production and forecasting the sales for the next 12 months.

 

Promotion Budget

The Promotion Budget (refer to Appendix C) shows the funds that are allocated for the various expected promotions.  The funds allocated for Newspaper and Bus Advertisements are based on information found online.

Marketing Research Expenses Estimate

The Marketing Research Expenses incurred are allocated from part of the Company’s yearly Budget set aside yearly for Marketing Research purposes.  Besides expenses for the development of the marketing plan, which are already incurred, marketing research expenses that will be incurred for the evaluation survey results has to be taken into account in the Estimate (refer to Appendix D).

Cost Budget

The Cost Budget (refer to Appendix E) is essentially a summary of the Production, Promotion Budgets and Marketing Research Expenses. The costs from the budgets and estimates are either classified into Fixed Costs or Variable Costs, based on the nature in which they are incurred.

FORECASTS

Sales Forecast

The Sales Forecast (refer to Appendix F) shows the monthly amount of sales in dollars that are expected throughout the period. To derive the final forecasted amount, several considerations like the Selling Price of each product unit, the forecasted sales figures for the jeans, have to be looked into.

To be on the conservative side, it is assumed that only 80% out of the total available quantity of both basic and premium jeans will be sold.

Cost Forecast

The Cost Forecast (refer to Appendix G) shows the monthly amount of costs in dollars that are expected throughout the period.  It is a monthly computation of the various fixed and variable costs that are in the Cost Budget (refer to Appendix E). 

Profit Forecast

The Profit Forecast (refer to Appendix H) shows the monthly profit or loss in dollars that are expected throughout the period.  The figures are derived from the sales figures (refer to Appendix F) after deduction of the cost figures (refer to Appendix G).

The initial months will present a loss due to the costs incurred mainly from promotional expenses. The figures will start to move towards the profit end when product sales pick up subsequently.

 

BREAK-EVEN ANALYSIS

The selling price of a basic Levi’s Jeans is $80. However, the selling price of a premium Levi’s Jeans is $135.  The difference in selling price makes it unfeasible to calculate the break-even in sales based on the number of units sold.  Hence, the better approach would be to calculate the break-even in sales dollars instead.

To calculate break-even, we will need to know the total fixed costs, total variable costs and sales revenue incurred in the period.  These figures can be extracted from the Cost Budget (refer to Appendix E) and Sales Forecast in Dollars (refer to Appendix F).  With the figures applied, a break-even in sales dollars of $257 420 is calculated, as illustrated by the Break-Even Chart (refer to Appendix I). 

7.         Action Plan

2010	Actions	Department Involved
May	-  Conduct intensive market research on fashion and cultural trends - Purchase in-depth jeans market information and census from data research providers	Marketing
	- Preparations for modifications to the updated 501 Levi’s jeans product and premium version tie-ups to be made with celebrity “fashion designers” from Japan	Product Development Team (R&D)
June (1st week)	- Creation and launch of the new Levi’s Interactive website	Information Technology (IT)
(2nd – 4th week)	-  Begin viral marketing campaign utilizing “Superbowl Marketing” & “Air of Mystery” concepts on prime-time television, billboards & magazines - Blitz on social media platforms such as Youtube, Twitter and Facebook	Marketing
(4th week)	- Re-launch of the 501 and Boyfriend 501 jeans - Exclusive previews for VIP card members - Possible price reduction as a promotional tool for the basic Levi’s 501 jeans.	Marketing Production Logistics
June (4th week) July (continuous throughout the year)	- Launch of main advertisement campaign “Live Levi’s” and comparative ads on all communication mediums	Marketing
(1st week)	- Assessment of brand awareness - Conduct immediate consumer response feedback on their recognition of advertisements and recall of the content
	- Invitations to famous celebrities and opinion leaders to review the updated re-launch of the Levi’s 501 jeans.
(2nd week)	- Celebrity endorsement of Levi’s premium version jeans	Marketing
(3rd – 4th week)	- Viral video campaign launched on video-sharing websites like Youtube, contrasts the real from the fake.	Marketing
August	- Promotional price offer on the premium Levi’s 501 jeans some time after the launch.	Marketing
End of Year June 2011	- Tabulation of sales reports from designated retail outlets on the sales ofperformaperformance of the basic and premium 501 products.	Marketing and Accounts
	- Tabulation of all customer surveys conducted and evaluate the brand positioning created.
	- Year-End General Meeting to determine if everything is on track and implement corrective measure as required

8.         Control and Evaluation

Performance Measurement

Performance indicators such as sales figures, net profit and market share will be gathered from market research and surveys which will assist us in evaluating and implementing corrective measures.

Performance Evaluation

If reports show variances between budgeted and actual performance, then management will have to discover the cause for the disparity. To ensure that control activities are enforced efficiently, reports have to be submitted by marketing management at regular intervals to determine the response and brand awareness of customers, preferably every month throughout the entire year of implementation.

A yearly statistical report conducted by external auditors showing the overall performance analysis should be handed to management at the end of the financial year so that Levi’s can take necessary precautions and address the problem before the new financial year starts.

Take Corrective Measures

Contingency plans must be constructed in advance to remedy the situations whenever there are cases of poor judgments or unpredicted outcomes. For corrective measures to be  efficiently enforced, we have to implement them at the right time to keep the losses as low as possible.

The overall performance and implementation will be closely monitored together with our original marketing plan. We cannot afford to rely entirely on the original marketing plan as international trade inevitably will face the effects of the business cycle.  We need to be able to foresee and forecast these possible setbacks.