Marketing Analysis of Oakley I
For my strategic sports marketing project, I decided to report on the sports marketing activities of a particular corporation. I specifically wanted to report on the marketing operations of a rather diverse company; one that offers more than one product line for more than one sport. Oakley, Inc. is a company that offers several different products for a wide range of sports. I will now briefly describe the company and its operations, as well as its primary sports marketing goals and objectives.
Oakley, Inc. is a Washington corporation formed in March 1994 to succeed to the assets and liabilities of Oakley, Inc., a California corporation, which commenced operations in 1977 and began to sell sunglasses in 1984 (Scott, 1998). The company is an innovation-driven designer, manufacturer and distributor of consumer products, including high-performance eyewear, footwear, watches and athletic equipment. Oakleys principal strength is its ability to develop products which demonstrate superior performance and comfort through the combination of patented and other proprietary technology and unique styling. The company has focused on eyewear innovations for sports applications, and its products are worn by a variety of athletes, such as skiers, cyclists, runners, surfers, golfers, tennis and baseball players and motocross riders. In addition, the companys products, which are currently sold in over 70 countries worldwide, have become increasingly popular with fashion-oriented consumers in the larger nonsports, or recreational, segment of the sunglass market. Oakleys products currently include sunglasses (e.g., Frogskins, M Frames, Zeros, Wires, Jackets, X Metal, Fives, and Topcoat), goggles, face shields for use with sports helmets, sunglass accessories, gear bags and a limited range of athletic footwear, technical apparel and premium timepieces (Scott, 1998).
With focus on consumers for the next generation, the company has established itself as a legitimate world brand with unique expertise in product design, performance and production.
Product Design & Development
State-of-the-art technology allows Oakley to shorten dramatically its product development cycle. Stereolithographic computer modeling is combined with CAD/CAM liquid laser prototyping to create fully detailed, wearable prototypes of eyewear and footwear (Oakley.com, 1999). Rapid iteration of working models allows for extensive testing and perfecting of product design before introduction to the public. After the development stage is complete, the final sculpture can be used directly in preparation of production tooling. Utilizing these processes, the company is capable of introducing a new product line within four months of initial concept.
Oakley has obtained hundreds of patents worldwide to protects its proprietary manufacturing methods and product features. Among the companys most important patents are those which guard its achievements in torodial single-lens geometry and the associated manufacturing techniques, dual-spherical lens technology and the associated optical advances, and innovations in frame design and functionality (Oakley.com, 1999). The proprietary technologies employed in lens cutting, etching, and coating, as well as the companys significant investments in specialized equipment, are matched with exclusive formulations of production materials to produce the superior optical quality, safety and performance of Oakley eyewear (Mayes, 1998).
Oakleys historical success is attributable to its introduction of products that represent improvements in performance and style over goods available on the market. To that end, the company strives to develop methods of production that provide greater precision and less cost than its competition.
Establishing itself as a global brand, Oakley has diversified beyond the eyewear market. The utilization of advanced technologies in fabrics and fabrication has placed Oakley at the forefront of innovation in the design and production of apparel. In addition to clothing, Oakley has also entered the performance footwear market. The initial footwear release was marked by a reinvention of current styles and sciences.
The company continues to expand the limits of todays technologies, most recently by introducing wristwatches that merge critical innovations in gearing, bearings and microcircuitry from around the world (Oakley.com, 1999). The company intends to introduce other product line extensions and new product lines in the future, in order to attract additional consumers to the brand. This type of diversity is part of the reason why Oakley has been so successful.
Sales & Marketing
The primary functions of Oakleys sales force are to sell to each retailer the appropriate mix and quantity of Oakley products, ensure that products are displayed effectively and educate retailers about the quality and features of Oakley products and Oakleys sales and marketing philosophies. The company believes that its relationships with its customers, effective marketing and superior customer service are critical elements of their success (Walker, 1999).
While Oakley uses traditional marketing methods in some instances, the company attributes much of its success to the use of less conventional methods, including sports marketing, targeted product allocation, advertorials and in-store display aids (Oakley.com, 1999). Oakley has used sports marketing extensively to achieve consistent, authentic exposure that equates into strong brand recognition on a global level. Oakley utilizes the exposure generated by its athletes as an editorial endorsement of Oakleys eyewear rather than a commercial endorsement.
The sports marketing division consists of 25 sports marketing experts domestically, with an additional 20 managers positioned in direct offices and with distributors internationally. These experts specialize in each market segment and niche to negotiate contracts with athletes, identify and develop relationships with undiscovered talent, coordinate exposure with the media, educate and train these Oakley ambassadors about Oakley products and support them at all events and public forums where they wear Oakley products (Ryan, 1999).
Oakleys sports marketing staff is diverse enough to understand and effectively market all sports, regardless of the sports image and special equipment needs. Oakley earns the respect of its athletes even in the most core of sports such as surf and snowboard, yet continues to expand successfully into more traditional sports such as golf, tennis and baseball.
Advertising & Promotion
Oakley retains significant control over its promotional programs and is able to deliver a consistent, well-recognized advertising message at substantial cost savings compared to complete reliance on outside agencies (Zimmerman, 1997). Localized strategies of marketing and distribution are managed by direct operations in Europe, South Africa, Mexico, Japan, and Canada. In other parts of the world, the integrity of the brand is safeguarded by carefully selected distributors who present Oakley products to their markets with local expertise (Oakley.com).
Oakleys primary method of enhancing brand recognition is sports marketing, which places the Oakley brand before consumers through the endorsements of influential athletes and other personalities, some of whom have formal arrangements with the company. Some of these athletes include Michael Jordan, Mark McGwire, Dennis Rodman, and David Duval. The effectiveness of this promotional strategy is believed to outweigh that of direct advertising, which often lacks the impact and recognition of athletic endorsement. The company believes that direct advertising can be useful, but only in situations that do not lead to competition with editorial coverage (Woodson, 1998).
The second level of marketing is advertising. Products are promoted through print media, outdoor media, in-store visual displays, and other point-of-purchase materials. Promotion includes packaging, mailers, catalogs, billboards, the Internet and other media. Oakley considers many factors in evaluating the effectiveness of these marketing opportunities. In addition to cost effectiveness, analytical criteria include the ability to engage new market opportunities, build image, enhance the statute of the brand and reinforce the identity of the brand (Woodson, 1998). During the past year, the company has expanded its direct marketing efforts by utilizing its cutting-edge Internet site and direct mail campaigns to more closely connect with the consumer.
Oakley also maintains an intriguing and instructive presence on the Internet. Oakley has made an extensive effort to continually enhance its virtual domain site enriching dynamic visuals with engaging text (Ryan, 1999). The companys diverse Internet offerings include: O StoreSM, a secure location for Internet commerce where customers can make purchases and track their order; and receive the latest information on Oakley athletes, technologies and new inventions.
Beyond its own Internet site, Oakley utilizes alternative Internet sites, such as Yahoo, for promotion, and has purchased keywords such as sunglasses, optics, Oakley and others (Oakley.com, 1999). When a customer visits the Yahoo site and searches with one of these keywords, an Oakley banner is displayed at the top of the page, and a double click will take them to Oakleys home page.
The emphasis placed on Internet promotion and commerce, combined with efforts in attaining editorial coverage through the use of professional athletes, as well as more immediate contact with the consumer through direct marketing, reflect the forward-thinking nature of the companys advertising and promotion strategies (Scott, 1998).
During 1998, net sales to the companys ten largest customers, which included five international distributors, accounted for approximately 35.7% of the companys total net assets (Oakley.com, 1999). Net sales to one customer, Sunglass Hut, the largest sunglass specialty retailer in the world, accounted for approximately 26.0% of the companys 1998 net sales. Such sales do not include those sales to Sunglass Hut locations outside the U.S. that are made by the companys independent international distributors. At December 31, 1998, Oakley independent distributors serviced approximately 138 of the 1,768 Sunglass Hut locations worldwide.
While Oakley does not have any minimum purchase agreements with Sunglass Hut, the Company believes that it maintains a good relationship with Sunglass Hut. In early 1994, Oakley entered into an exclusive licensing agreement with Sunglass Hut to sell Oakley products through mail order catalogs, and in 1998, two Oakley mail order catalogs were produced with Sunglass Hut (Sunglass Hut, 1999).
Oakley is the leading designer, manufacturer and distributor of eyewear in the sports segment of the nonprescription eyewear market. Within this segment, the company competes with mostly smaller sunglass and goggle companies in various niches of the sports market and a limited number of larger competitors, some of whom have greater financial and other resources than Oakley (Woodson, 1998). Some of these niche markets are susceptible to rapid changes in consumer preferences which could affect acceptance of Oakleys products. Oakley believes that the heavy protection of its intellectual property rights has limited the ability of others to compete in this segment. Oakley believes that it is the established leader in this segment of the market, although several companies including Baush & Lomb, Luxottica, Bolle and other companies compete for Oakleys shelf space.
Oakley also competes in the broader nonsports, or recreational, segment of the sunglass market, which is fragmented and highly competitive (Ryan, 1999). The major competitive factors include fashion trends, brand recognition, marketing strategies, distribution channels and the number and range of products offered. The same companies mentioned above also compete in this market.
Oakley differs from many of its competitors in that its competitors generally only import or repackage eyewear products. Few sunglass companies design, manufacture and assemble their own creations as many companies tend to imitate successful sunglass models (Oakley.com, 1999). In order to retain its market share, the company must continue to be competitive in quality and performance, technology, distribution, style, brand image, and customer service.
Within the athletic footwear and sports apparel market, Oakley competes with large, established brands such as Nike, Adidas, Reebok, and Fila, which have greater financial resources than Oakley. In addition to these companies, Oakley also competes with smaller brands, such as Airwalk, Timberland, and Vans.
The upper-middle and luxury segments of the watch market are dominated by established Swiss brands, including Rolex, Breitling, Gucci, Omega, TAG-Heuer, and Movado (Oakley.com, 1999).
Evaluation & Recommendations
In evaluating Oakleys sports marketing program, I would give the company a nine out of ten. It is obvious that their marketing strategy has worked wonders for their eyewear, and it has yet to be seen whether or not their strategy for the footwear and watches will prove to be as successful. Oakleys marketing strategy has helped them achieve a sustainable competitive advantage over their competitors. I think the idea of athlete endorsement has been a large contributor to their success. Keep in mind that Oakley has succeeded despite their lack of television commercials, and very limited print ads.
Some recommendations that I can offer is to try and concentrate their efforts onto their footwear division. Many people are suggesting that Oakleys expansion into the athletic shoe market is doomed to be unsuccessful. However, with their continued success in the eyewear market, Oakley has proved that they have a good idea of how to sell their products. I would suggest trying to get a high profile athlete, such as Michael Jordan, to endorse the shoes. Strive to gain the customers attention and awareness of the footwear. The more a customer sees the shoes on TV and being worn by high profile athletes, the more likely they are to purchase the shoes.
In conclusion, I believe that Oakley has a strong grasp on the market and it is in large part because of their marketing strategy. It seems that everywhere one looks, they will see several people with Oakley sunglasses around their eyes. Because of Oakeys well trained marketers they are able to succeed in how to properly promote and advertise their products. Oakley has a well rounded mix of ways to get theirs products out into the consumers minds. As we head into the next millennium, I believe that Oakley will find even more unique and effective ways to market their innovative products.