Eddie Bauer, Inc: One Brand, One Voice, One Customer Essay Example

we can increase operating profits without incurring additional expenses for promotion and advertising.

The top priority for a market follower is to increase profitability. This will enable us to expand our product offerings for our target segment, improve the infrastructure for I-media, and establish an effective inventory management system. By achieving higher profitability, we can gain a larger market share and significantly boost sales. Ultimately, this could elevate us to the status of a market challenger (Exhibit 2).

The quantifiable measure is derived from Eddie Bauer Inc.'s business portfolio grid, which helps determine the appropriate amounts to increase operating profits (Exhibit 3). The grid highlights the catalog channel as the least profitable (the Dog of Eddie Bauer's portfolio), indicating a focus on improving profits in this channel. It is planned to increase the catalog operating profits from 4% to 15%, resulting in a 5.5% annual increase. The iMedia and retail channels, on the other hand, are referred to as the Question Mark and Cash Cow respectively. The goal is to gradually turn them into "Stars." Despite the potential cost savings of $75 million by discontinuing the catalog channel, it is necessary to continue with catalog operations due to its significance in the marketing strategy and to preserve Eddie Bauer's heritage. The iMedia and retail channels will experience a moderate 3% increase in operating profits each year. In retail stores, achieving a 6% increase in operating profit margin is feasible, considering that our competitors Gap and Abercrombie & Fitch have operating profits above 20%.

Why is a two-year time frame chosen?

A two-year time frame is sufficient for cost reduction, gradual price increases, and market analysis to evaluate

customer perception of separated channel synergy. A shorter time frame would not provide enough data to determine if the separation of synergy is harming the company. Additionally, in a fast-paced and competitive market, it is important for us to respond promptly.

Alternative Goals

1. An alternative goal could be to enhance overall market share. Despite being a market follower that aims to sustain market share, Eddie Bauer currently holds a market share of merely 1.5%, which is insufficient to pursue a growth in market share. Additionally, this metric fails to effectively showcase the performance of individual channels. The pursuit of increased market share would necessitate expensive and intensive advertising and promotion efforts, which would further diminish profits.

2. Another option is to focus on increasing revenue. However, this may not be the most suitable goal at present as revenue alone does not measure the profits generated. For instance, in 1998, profits decreased by over 5% despite having a significantly high revenue of $2 billion. Moreover, aiming to increase revenue will require significant investments in promotion and advertising, consequently reducing profits even further. This external influence on consumer behavior will also take longer to achieve a return on investment.

SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)

Strengths:
- Diversification: The company offers an extensive array of products, including men and women's clothes (casual and office wear), furniture and furnishings, eyewear, bicycles, and vehicles.
- Website sales growth: The company's website has shown triple-digit sales growth.
- Channel synergy: The company has improved customer perception through synergy in its channels, including a favorable return policy.
- Product-oriented structure: The company's organizational structure is focused on its products.
- Quality and timeless products: The

company's products attract consumers who are not price sensitive.
- Target market: The company has captured a 5% market share of the clothing industry by targeting affluent, educated, married, active individuals in their 40s.
- Brand recognition: The company has established brand recognition among its existing target market.
- Multiple channels: The company's brand accessibility has increased with its presence across multiple channels.
- Catalog marketing: The company primarily relies on its catalog as a marketing tool, with one-third of prospects and two-thirds of existing customers.

Weaknesses:
- Too many target segments: The company may be spreading itself thin by attempting to reach too many target segments.
- Sales decline: The company has experienced a 5% decline in sales.

Opportunities: (not mentioned in the provided text)
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Threats: (not mentioned in the provided text)
-Most executives are skilled in catalog development, but the catalog has not been successful due to the integration of channels. Retail stores frequently experience stock outs, in contrast to competitors. Advertising expenditures are limited compared to competitors, and the same promotion tools are used across all channels. The integrated return policy is damaging retail store sales. The catalog's performance is poor, with a high return rate of merchandise and only one-fourth of revenue generated from the catalog. In terms of target group positioning, the company ranks sixth in casual compared to competitors, and fourth in catalogs. There is a limited selection of products in retail stores, with 50% of women's products and 30% of men's products unavailable compared to the catalog. The company's Northwestern heritage is difficult to sell in other regions. Brand recognition is low among buyers under 35, who are unfamiliar with the company's

heritage.

There are opportunities to capitalize on the increase in internet usage and popularity for shopping. The target segment, which is the quality/timeless segment, accounts for 19% of all adult clothing buyers and 28% of clothing expenditures ($39 billion). By implementing the right tactics, the company could attract "other" groups and increase its market share.

The major competitors include The Gap and Abercrombie & Fitch in the retail sector, and Victoria's Secret (which does not integrate retail and catalog channels) and L.L. Bean in the catalog sector. Victoria's Secret generates 31% of its revenue from catalogs.Lands' End faces several challenges that hinder its success and growth. Firstly, the company encounters heavy competition in advertising from its rivals. Moreover, there are barriers in the form of limitations with internet capabilities and dial-up speed connections that restrict its online presence. Additionally, Lands' End struggles with attracting top executive talent as it competes with industry giants like Amazon and Microsoft.

However, the most significant impediment for Lands' End lies in the excessive synergy in its distribution channels. The company's attempt to develop synergies between three different channels - retail, catalog, and iMedia - has resulted in dilution of resources and focus. This, in turn, leads to conflicts within these channels, hindering the company's overall performance.

Impediment Defense

Conflicts in the synergy between the channels occur on multiple levels. For instance, retail stores cannot sell the entire range of products available in catalogs, resulting in customers leaving the stores empty-handed. Additionally, there is a pressing need to enhance synergy between the channels due to the existing low inventory turnover. Eddie Bauer only has an inventory turnover ratio of 1.0, while The Gap and

Abercrombie & Fitch have ratios of 5.0 and 9.5 respectively (Exhibit 2). This low turnover ratio negatively impacts the company's cash flow and operating profits. Implementing more efficient inventory processes will effectively reduce costs by avoiding excessive stocking in different channels. Once this ratio improves, operating profits will also improve.

Despite the steady gross margins of 50%, the operating costs of each channel significantly reduced overall operating profits. Correcting the distribution will lead to improved operating profits. Currently, Selling, General and Administrative (SG;A) costs make up 37.3% of Eddie Bauer's overall sales revenue, compared to The Gap, Abercrombie & Fitch, and Lands' End at 26.5%, 21.7%, and 39.7% respectively (Exhibit 2).

The current combination of the iMedia and catalog channels in terms of sharing call centers is causing conflict. This conflict arises from the possibility of customers becoming confused about the product and price when comparing the catalog and iMedia. As a result, this could negatively impact customer service quality and sales performance.

When assessing competition, it is evident that there is a successful division between channels. Take Victoria Secret for instance, they have distinct retail and catalog channels that only collaborate with the design teams. As a result, Victoria Secret Catalog generates 31% of the overall revenue, but returns are minimal. On the other hand, the combination of Eddie Bauer's catalog and retail negatively impacts in-store sales, as 25% of all catalog purchases are returned.

The lack of synergy among channels is a significant obstacle as it restricts pricing and hinders flexibility in different regions, negatively impacting operating profits from sales. Additionally, this lack of synergy limits the range of products that can be offered. An

example of a current practice that demonstrates the positive effects of this lack of synergy is the non-uniform timing of product releases in catalogs before other channels. This tactic enables the measurement of demand and consequently maximizes pricing potential.

Recruiting executives becomes more complex due to the presence of multiple channels and a focus on synergy. This results in higher operational costs and a potential decline in employee expertise as they are required to integrate channels. The dissatisfaction and frustration arise from having employees with catalog experience working in retail, and vice versa. Eddie Bauer faced significant challenges in recruiting for Imedia, given the intense competition from companies like Amazon and Microsoft. Furthermore, the lack of a high share price or the possibility of an IPO often caused Eddie Bauer to lose out on e-commerce talent to other bidders. The evidence indicating this is the catalog channel's 4% operating profit, despite having several executives skilled in catalog development.

Alternative Impediments

1. A potential obstacle could be the lack of brand awareness about the history of Eddie Bauer among younger potential customers. It could be advantageous to broaden the perception of the company beyond just outerwear. Moreover, there is currently insufficient funding to generate brand awareness in comparison to competitors. Nevertheless, this issue is not a significant impediment since Eddie Bauer's advertising expenses are lower than those of its competitors, and marketing efforts primarily concentrate on catalog distribution. Roughly one-third of catalogs are sent to prospective customers.

2. Eddie Bauer faces another obstacle in its management of the products it offers to consumers. Despite its reputation for catering to a masculine audience, 70% of the goods sold in its

catalogs are geared towards women. Interestingly, 70% of retail customers are women, and 45% of these sales are for women's products. However, this disparity does not significantly hinder sales; in fact, the masculine image contributes to maintaining certain aspects of the company's heritage and enhances brand differentiation. Additionally, this image is advantageous for overall profitability as women are attracted to the store to make purchases for their male counterparts and appreciate the convenience and timeless quality of the women's products available.

Solution

The solution to our synergy challenge between channels is to modify the current synergy. As we are in the maturity stage of the product life cycle, our marketing strategy needs to align with this stage. Our main focus will be on building a strong distribution network by emphasizing the separation of synergy between the retail, catalog, and iMedia channels. By implementing this strong building strategy, we aim to maximize sales by diversifying our product line to include more women's products. Our pricing will remain premium, allowing us to stay ahead of competitors. Additionally, our promotion activities will aim to foster brand loyalty and our advertising will highlight the quality and timelessness of our brand. Furthermore, once we shift our competitive strategy to that of a market challenger, we will also strive to encourage brand switching.

Our target market consists of married men and women in their 40s who lead active lifestyles and previously had young children who no longer live at home. They fall into the quality/timeless segment. Existing customers make up 65% of our target group, while the remaining 35% are new customers.

Solution Defense Product: The retail stores will continue to prioritize their masculine

image, as it does not negatively impact sales. However, to meet the demand of women, a larger number of SKU's will be created specifically for them. To decrease inventory carrying costs in retail, we will offer a narrower product line while maintaining the full range in the catalog and iMedia channels (including styles and sizes). This strategy will enhance operating profits in the retail channel. Carrying the full range in the catalog and iMedia channels will have minimal cost impact, only increasing printing expenses for the catalog and no extra costs for the iMedia channel. Our focus will remain on the quality/timeless segment by offering classic styles, designs, colors, and clothes that deliver quality, value for money, and comfort.

Place

In order to avoid retail stores bearing the cost of returns made through catalogs, there will be a separation of synergies. Retail stores will no longer accept returns for purchases made via catalogs. Additionally, integrating an automated inventory management system for all three channels will lead to improved operating profits. This integration will streamline operations and reduce stock outs across all three channels. Furthermore, by decreasing the cost of carrying inventory, the operating profits of all three channels will increase.

Although we have made modifications to enhance synergy, we have decided not to completely eliminate it in order to maintain the external appearance of our brand mantra, "One Brand, One Voice, One Customer." Within retail stores, the catalog order desk will have a dedicated phone line connecting customers to a representative who will create customer profiles, noting preferences and providing a personalized ordering experience. This involves explaining product details and assisting with style-item matching, colors, and sizes. Additionally,

this tailored experience will focus on facilitating convenient returns outside of retail stores, such as through company-sponsored return shipping, which will be negotiated at discounted rates with preferred shipping vendors. By directly catering to our target market, this personalized experience will enhance our brand equity and positioning compared to competitors. While we are ensuring synergy for the customer, internally we are disrupting synergy in certain areas.

Price

In order to increase operating profits in all channels, particularly in catalog and iMedia, the prices of specialty products and sizes will be gradually and moderately raised. Our target market consumer is not sensitive to small price variations in high-quality products. The cost of goods sold to net sales ratio is 52.5%, which is lower than that of competitors GAP ; Abercrombie ; Fitch, who have ratios of 58.7% and 57.8% respectively. Therefore, having a consistent pricing strategy across channels is inhibiting operating profits. For instance, different pricing policies should be implemented for different regions. Regional managers responsible for each channel will determine the prices of the products within a shared pricing framework.

The costs of extra training for customer service reps can be balanced out by implementing a fee for calls to the call center outside of peak times. However, during the holiday season, we will not charge these fees in order to maximize sales conversions. These charges will also incentivize customers to switch to iMedia ordering. The catalog channel will maintain its high operating profit by implementing an automated inventory management system to reduce costs. Additionally, offering a personalized experience to customers through sales representatives can lead to increased sales and, consequently, higher operating profits for the catalog channel.

People

In

order to optimize operating profits, the process of executive recruitment should be tailored based on different channels. This approach would entail implementing distinct recruiting policies for each channel in terms of compensation and responsibilities. Special efforts should be made to attract executives who possess the talent to develop their respective channels. To effectively compete with Amazon and Microsoft in attracting skilled employees, potential executives should be offered higher compensation and benefits, including employee discounts, gift vouchers, and ESOPs.

Promotion

For maintaining consistency in how customers perceive us externally, we will persist in employing the brand mantra "One Brand, One Voice, One Customer." This approach encompasses an integrated marketing communications strategy. As an illustration, customers can utilize the iMedia channel to conveniently verify stock availability both online and in-store. Moreover, they can receive immediate assistance from a customer service representative via chat to assist them in personalizing styles, designing, and tailoring sizes based on their preferences. This exemplifies the concept of one-to-one marketing.

Our promotional strategy will involve a push and pull approach. The push strategy will utilize the sales force in retail stores, an interactive iMedia with personalized product suggestions, and a customized catalog call center experience that actively promotes the product to customers. The promotional tools we will employ include coupons for retail, cash refunds with minimum purchases for the catalog and iMedia, advertising specialties like articles imprinted with Eddie Bauer's name given as gifts to build customer loyalty across all channels, patronage rewards such as loyalty points across all channels, and point of purchase demonstrations at retail locations, such as fashion shows. These examples showcase our use of a pull strategy. Additionally, through relationship marketing, we

will offer more personalized brand experiences to establish stronger consumer connections.

Advertisements

We will focus on highlighting the quality and timeless aspect of our brand to differentiate ourselves from others. While we will keep advertising costs low across all channels to maintain low operating costs, we will maintain synergy in our advertising efforts. Our emphasis will be on showcasing the classic design, styles, and colors of our products.

Print advertisement: With the cost savings from reducing catalog production, we will allocate more funds towards print advertising. Our strategy involves focused advertising in renowned outdoor clothing magazines as well as women's magazines, as they represent the majority of our retail customers. In addition to expanding our customer base through broader advertising channels compared to catalogs, our print ads will prominently showcase eddiebauer.com to drive traffic to our website.

By creating an Eddie Bauer email list, we ensure that our customers are the first to receive updates on the latest styles, sales, and promotions at our website and stores. This, in turn, will motivate them to visit our website.

Website traffic and brand awareness will be increased through online banner advertising. The strategy involves advertising on popular portals like Google, MSN, and Yahoo. For search engine queries related to clothing and shopping, we will pay for high placements. In addition, we will place targeted ads on websites that are likely to be visited by Eddie Bauer customers. These websites could include those related to outdoors, nature, and shopping. An advantage of online ads is the ability to track click rates, enabling us to modify our banner ad campaign based on feedback. Our ability to fund this initiative is supported by reduced expenditure

on catalogs and cost-cutting measures in retail stores.