11.4 Lululemon Marketing Strategy and Plan

Having taken an entire course and developed your own global marketing plan, you’re well on your way to being an expert student of marketing. While the experience of developing and presenting a marketing plan for a class may seem far removed from the “real thing,” rest assured that the key elements, structure, and basic layout of your plan aren’t contrived at all. Below is an example of a real marketing plan so you can see what one looks like for Lululemon.

Introduction and Executive Summary

This report proposes a marketing strategy and plan for Lululemon Athletica,  focusing on their Wunder Under product line. In summary, this report concludes that Lululemon should undertake several initiatives to strengthen its position in the market. This report includes a situation analysis, a look at Lululemon’s strategy, tactics, implementation, and financials.

Lululemon Overview, Vision, Mission, and Plan Scope

Lululemon sells yoga and exercise apparel and they have found success in marketing a lifestyle rather than a product. Lululemon’s mission statement is “to elevate the world from mediocrity to greatness.” The mission statement comprises of these components: improving lives, improving health, and exceeding expectations. Lululemon is passionate when it comes to initiating long-lasting changes in everyone that uses their products. Lululemon’s vision statement is “to be the experimental brand that ignites a community of people living the sweat life through sweat, grow and connect.” The statement consists of the following components: exceptional brand, ignite communities through sweat, and create connections. Lululemon prioritizes quality over quantity to provide value to their customers (Mission Statement Academy, 2019).

The scope of this plan includes a look at Wunder Under, a legging product line. Wunder Unders are leggings that are meant to make you feel empowered while having a snug waistline, lots of support and they offer them in many lengths (Lululemon Athletica, 2020). They sell their products in 440 company- owned stores in 15 countries. They also sell online and via mobile apps where they offer many products and services (Dun & Bradstreet, 2019). Most of their stores operate in North America. Lululemon is focused on international expansion, especially in the Asia-Pacific region. They are hoping to introduce Wunder Unders into the Chinese Market.

Lululemon Goals, Strategies and Budget

Lululemon has many goals they hope to achieve. These include:

• Identify retail locations to open new stores and attract new customers.
• Provide customers with new products.
• Sustain their brand image.
• Achieve growth and maintain cash flow.
• Increase sales of current stores.
• Operate efficiently in all departments.
• Keep their dedicated and experienced staff (Ghani, 2015)

Lululemon’s strategy allows them to become one of the major players in athletic apparel. To achieve its goals, Lululemon uses three main strategies.

1. Innovation forever- they have a very active Research and Development department and are always looking to get new and improved products to their customers.
2. Interactive digital marketing- they portray their brand as essential for athletic teams, fitness facilities and yoga studios.
3. Expanding the market by launching new product lines in different regions – while Lululemon has been very successful in North America, they hope to expand their marketing to China (Business Strategy Hub, 2019).

Lululemon had a total revenue of $3.29 billion in 2018. Of that, 65% of it came from their own stores. Lululemon’s sales have jumped with the rising popularity of yoga and their improved brand awareness. They have almost doubled from $1.8 billion in 2014 to $3.3 billion in 2018 and net income has had a similar outcome (Dun & Bradstreet, 2019).

Strategic Analysis

The following selection describes the market, the competition, a SWOT analysis of Lululemon, Lululemon’s’ customers, as well as its products and services.

Lululemon Market Analysis

Lululemon’s leggings operate in the technical athletic wear market made up of women ages 20-40 across the world. Currently, 70% of Lululemon’s sales revenue comes from the USA, 15% comes from Canada and Australia, and the rest are dispersed between European and Asia-Pacific countries(Dun & Bradstreet, 2019). Out of its 440 stores worldwide, 235 locations are in the USA alone, 64 in Canada and only 22 stores operate in China (Dun & Bradstreet, 2019). The rest are in Europe and other Asian-Pacific counties. We estimate the total addressable market to be worth $197.35 billion in revenue worldwide. We further estimate the market penetration to be 59.8%. We further estimate that Lululemon’s market share is 2.7%.

We further defined the market for the following categories

1. Qualified customers not buying anything. China is an untapped market for Lululemon, and it currently makes up less than a percent of their total revenue. This number reflects the potential revenue in this market based on the average amount spent / year by Lululemon consumers ($200) multiplied by 25% of the Chinese population (348 250 000) which is $69.65 billion in sales revenue.
2. Lululemon’s current customer base $3.2 billion in sale revenue.
3. Customers buying from Lululemon and all competitors $118 billion in sales revenue.
4. Customers buying exclusively from direct competitors Adidas, NIKE and Under Armour $6.5 billion in sales revenue.

Lululemon Product Service Analysis

Lululemon Marketing Strategy

Based on our analysis to date, we propose that a great opportunity for Lululemon to increase sales in China is to target women in their 20s who are becoming more health-conscious and fit. These women would be part of the upper class with a higher household income, valuing quality and fashion. Lululemon can achieve this opportunity by adapting its product to the market, expanding its retail stores and growing its e-commerce platforms through engaging and information digital and mobile marketing strategies.

We have created the following value proposition based on our strategy:

Lululemon provides quality, performance leggings to successful, health-conscious women by offering personalized brand engagement and an omni channel retail experience to showcase the technical performance of the Wunder Under legging.

Tactical Analysis

This section proposes more specific recommendations for Wunder Under marketing programs, pricing approach, promotion and channel design. Lululemon Product and Service. The following are the changes and improvements in Lululemon products and services proposed to address gaps and opportunities relative to their competition. Currently Lululemon tends to be neutral in their colour choices and they are tailored towards yoga. Lululemon currently offers complimentary hemming on tops and pants in store, returns done in person or by mail and within 30 days of the purchase date, and a contact section on their website with a list of accounts to reach out to through WeChat and Weibo (Lululemon Athletica, 2020).

New Colours and Loud Prints

To make Lululemon leggings work in the Chinese market, they should make them less muted, using more bright, playful colours. Lululemon should go with colourful and all-purpose leggings. Lululemon should launch a new product line to include bright coloured leggings. Including highlighter type colours that are very eye-catching and that will stand out. There will be multiple colours to pick from including neon pink, yellow, blue and lime green.

Create a Line with a Bigger Logo

When researching culture in China, it is stated they big logos are a sign of status and luxury (Pan, 2018). Lululemon should think about having a bigger logo on their leggings so that their brand becomes more known. Lululemon should create a new product line with bigger logos on leggings. They will create a legging that grabs attention and makes a strong first impression. Logos are the foundation of brand identity and it will make Lululemon more memorable while separating them from their competition.

All-purpose Leggings

In China, it seems to be becoming more popular to wear sportswear as an extension of casualwear in fashion (Rapp, 2018). Lululemon should have more leggings tailored to more sports while also focusing on the casual side of their leggings. Lululemon should design leggings to give customers more choice and enhance their workouts with leggings made for specific activities but also focusing on their comfort, casualness and stretch. They will make sure the waistband is high enough for coverage but not so high that it makes it restricts movement during sports or casual activities.

Create Chinese Lululemon App and Social Media

Lululemon should make a Chinese version of the Lululemon App. They should use their website and WeChat to encourage customers to visit their brand-owned apps, where they can get information on products, events and exclusive content including coaching tips and personalized services for Chinese members. Going more digital is a strategy that will help Lululemon do better in Chinese market. Focusing on digital platforms, Lululemon would be able to create different communities and provide various online services and offline experiences.

Women’s Only Stores

Another idea is to open a women’s only store. In this store, they could put on events that are designed to inspire active women. Lululemon would be able to build a more cohesive female community in China (Allison, 2020). There are major gaps in Lululemon’s offered products and services compared to their competition. Lululemon should expand their services online to grow their e-commerce sales in China. Features rated high by Chinese consumers are colourful, eye catchy designs and luxury brand items. Lululemon should work with their designers to incorporate those features in their clothing lines. Lululemon should give their customers a full experience by creating content on platforms exclusive to China (Boyd, 2020).

Lululemon’s Wunder Under leggings pricing strategy is a customer-value based strategy to help grow the companies brand image and luxury status in the market. Lululemon sells all functional garments at a high consistent price point because of their quality and exclusivity. Chinese consumers have a perception that high-quality products are found at a higher price point. To attract more Chinese consumers to their product, Lululemon has inflated its already high price. The high price is further justified by the larger amount of shipping cost and tax to run a business in China. Lululemon is paying a higher rate of tax in China to participate in e-commerce operations. They are also taxes on importing raw materials thought out the world to create their luxurious fabric. These factors justify the high price point in the Chinese market (Thangavelu, 2018).

Lululemon uses a strict pricing strategy to create pricing awareness and maintain their luxury status using the following tactics. Regular price Wunder Unders, which consists of four core colours retail for ¥750, ¥850 and ¥980, which is slightly more inflated than the North American pricing. They are sold year-round at this price point (Tmall, 2020). Seasonal Wunder Under colours retail at regular price for 2 seasons and then enter a discounted rate of ¥ 450-¥ 650 or 20%-30% off. These discounts keep the market happy, knowing it is possible to get a deal, while the company still maintains high profit margins.

This pricing strategy is consistent across all Lululemon stores globally. Pricing is communicated consistently across online platforms and in retail stores. Customers are educated on the product quality first before the price is revealed (Policella, 2019).

Although Lululemon doesn’t typically participate in large discount events, they have adapted to the Chinese culture by participating in International Singles day, a sale event that occurs every year, on November 11. During the sale, Lululemon has incorporated lottery pricing and dollars off purchases over certain purchase value. This is a valuable sale to participate in because it is the largest spending day in China, and it’s a good opportunity to engage new customers who may be skeptical of the regular price point. The discount rate will not drop any further than the regular discount rate of 20%-30% off regular price items to maintain luxury status while still being perceived as a deal (Who Knows China, 2020).

The following is the proposed promotion plan for our target audience including the promotional tools to be used and the key messages to be delivered. We will be applying integrated marketing communication using a mix of digital and traditional channels to communicate with our customers. Our communication channel will focus on leveraging social media platforms to create an online brand community, customer engagement and product awareness online to ultimately drive traffic into our stores for customers to experience the product quality and the brand lifestyle.

Social Media & Direct Mobile Marketing

We will use social media channels such as WeChat and Weibo to create an online community for young yoga enthusiasts. We will also use these channels to advertise our events and generate brand excitement at a national and local level. WeChat and Weibo will also be used as a platform to connect with the brand with any customer service issues, which has already been established.

WeChat has 1 Billion active users as of 2019, and Weibo has 500 Million active users. 70%-85% of users on each of these platforms are in their twenties, and 49.8% of them are female (Verot, 2017). To further our reach with user-generated video content to showcase our product on real people we will create yoga challenges on short video platforms DouYin. We will also be creating short video ads to release through these platforms once a week. The purpose of these ads will be to promote new products like the Wunder Unders, issue yoga challenges, and advertise our local and large-scale events. Direct mobile marketing has been described an engaging and enjoyable by the Gen Z and Gen Y and they are likely to subscribe to push notifications to get the latest information on their favourite brands (Lee, 2017).

Community Events

In the last month of each quarter we will host major gatherings in each major city to give our brand community a chance to get together and socialize, and of course a large group yoga practice. These events will be covered through social media channels as well. Lululemon has hosted large scale events like this in the past such as The Forbidden City Yoga Session is 2017, and the “Unroll Your Mat!” in 2016 To launch the new line of yoga mats (Rapp, 2017) These types of events have been successful in starting the lifestyle community, and by hosting them more frequently we hope to continue building those relationships with customers by engaging them in our lifestyle experience surrounded by their community.

Sales Promotions

In China, November 11 is International Singles Day Shopping Festival. On this day we will hold a nation- wide event in-store, on our website and on Tmall to make the sale accessible. This is the largest spending day in China, bringing in nearly $38 billion in one day in 2019. This event, mostly celebrated by young people of major cities like Beijing, Shanghai and Guangzhou, is celebrated with a lot of festivities (Marketing to China, 2017). This will be the largest discount sale of the year for Lululemon in China. Previously, the discount has been determined by lottery 25%-30% off, with every customer receiving a deal no matter what.

Lululemon Distribution Plan

Direct distribution will be through showroom stores, and we will also distribute our product indirectly through Tmall, an e-commerce selling and distribution agent. Tmall shortens the distribution chain and works as an agent. When distributing Wunder Under leggings, Lululemon would sell the product to Tmall and Tmall would then sell the product directly to the consumer, which eliminates intermediaries and makes the distribution process more efficient and effective.

Another way that Tmall helps the distribution chain is by using a B2D structure (Export China, 2018). This means that Tmall assists in helping brands and companies connect with local Chinese distributors. This process advertises brands in the current market, and allows them to choose their distributor straight from the Tmall app. Tmall is a great asset for Lululemon to continue its relationship with because it allows for direct business to consumer selling, but they also allow for business to distributor selling. Another way we plan on expanding our distribution is by opening more stores. This will be done by adding around 20 new stores to China this year. We plan on opening most of the stores in areas with a higher population, with a younger demographic.

Implementation Plan

Product and Service Adaptations

Product and service success will be evaluated throughout the year as we continue to engage the market, look at trends in design and sell through, and review product feedback to create the right product for the market. We will do this by creating two teams:

• Product Adaptation Team – The team will consist of representatives from market analysis, finance, sales and design departments. They will meet at the end of each product season to evaluate the strengths and weaknesses of a seasonal product with a focus on logos, colours and sizing. Based on their evaluation they will come up with a plan to improve next year’s product and tailor it to our target market.
• Service Adaptations Team – The team will consist of representatives from market analysis, digital marketing, customer service, retail operations, e-commerce and distribution departments. They will evaluate the strengths and weaknesses in our services offered instore and online. They will meet quarterly and submit evaluations and suggestions to improve servicing our market.

Pricing Implementation

• Maintain Prices
• Prices will be determined for each season 1 month before the product goes live online and instore. Finance and marketing will determine these prices to maximize the pricing strategy.
• Follow Discounted Pattern
• Representatives from Finance, Marketing and Sales will work together monthly to determine which product should be discounted and when the discount will roll out on a seasonal basis. Sale prices will not exceed 20%-30% off regular price.
• Special Projects Team: International Singles Day – Representatives from Marketing, Finance, Community Events, Digital Marketing, E-commerce, Distribution, Allocation and Retail Operations will dedicate Q1, Q2, planning the logistics for International singles day. They will be responsible for creating the discount structure, an allocation plan for retail stores as well as e-commerce platforms and distributors and an advertising campaign.

Promotional Implementation

The company needs to establish a social media presence on WeChat, Weibo and DouYin to create online community engagement and brand awareness to create a seamless omnichannel retail experience and two-way communication.

• Grow the Social Media Team and Create Accounts.
• Expand the social media team and divide them into National and Local levels for each major city. They will be responsible for content creation on all platforms, liaising with marketing, advertising, store manager, community events team to create consistent two-way communications. Platform Names will include: LululemonChina, LululemonShanghai, LuluLemonHangzhou, LululemonGuangzhou, LululemonChengdu, LululemonShenzhen and LululemonBeijing to target specific communities. Social Media Initiatives will be ongoing throughout the year on a consistent schedule established by the marketing and advertising departments.
• Grow the Community Events Team.
• Expand the Community events team to tailor events to urban areas such as Shanghai, Hangzhou, Guangzhou, Chengdu, Shenzhen and Beijing. The community event team will be responsible for coordinating and planning all events in their designated district and liaising with local store managers, head office and the social media team. They will also need to become product experts to create their events which will feature specific products like the Wunder Under legging.
• Invest in Mobile Marketing.

The most effective way to reach our target market is by Mobile Marketing campaigns. Marketing, Advertising, Finance and the Social Media teams will be responsible for overseeing these initiatives. The marketing and finance departments will be responsible for defining the effectiveness of our mobile marketing initiatives, while advertising, social media will create the content and execute the planned schedule.

Distribution Implementation

• Showroom Expansion – A New Store Opening team, which will operate under retail ops will consist of real estate, facilities, visual, and IT will be created for each major city Shanghai, Hangzhou, Guangzhou, Chengdu, Shenzhen and Beijing. We will be opening 20 new stores, 15 regular and 5 Women-only to grow interest in leggings. The goal is to open five stores per quarter.
• E-Commerce Partnerships – B2B partnerships will be responsible for finding another e-commerce platform to get out product on by the end of the year. They will also continue working with their current partner, Tmall to find more distribution partners to get our products to our consumers quickly and efficiently.

Budget and Forecast

After looking at Lululemon’s 2018 financials we realized they had spent $1.1 billion on their selling, general and administrative expenses, which was a 23% increase from their spending in the previous year (Lululemon Athletica, 2018).  We then estimated that their spending for 2019 would increase by 25%, and further determined that their spending in 2020 would be up 30% for a total budget of $1.79 billion for our implementation strategy. This budget was then allocated to, opening and operating new stores, digital marketing, product adaptation and community events. After estimating each department’s spending, we determined that opening and operating new stores would receive 50% of the budget, giving the department $895 million. Digital marketing received a total budget of $447.5 million, product adaption received a total budget of $268.5 million. We then had 10% of the budget left over which we dedicated to community events, giving them a budget of $179 million.

Since China is the second-largest activewear market in the world it is a great opportunity for Lululemon to increase its revenues (Swartz, 2020). Based on our research we discovered that in 2019 Lululemon had doubled their amount of sales out of the North America region, making that share would 12% of its total sales. We believe that if Lululemon opens more retail stores in China and expands its e-commerce market that it could see an increase of 24% of total sales being from outside of the North American region.

Case: Lululemon’s Marketing Strategy in Hong Kong

Lululemon’s marketing plan has achieved success in Hong Kong. Over the past two years, all my friends have become aware of this brand due to its effective promotional strategies and digital marketing efforts. During the pandemic, when they could not visit gyms, many developed habits of doing yoga at home and sometimes felt lost and insecure about the intense situation.

Meanwhile, Lululemon was promoting the ideas of self-care and well-being, encouraging people to relax by doing yoga at home. Their success in building brand awareness can be attributed to the promotion on social media, holding community campaigns, connecting local athletes and yoga instructors, and even cooperating with other organizations that care about mental health and healing. My friends recognized that Lululemon matched the prevailing trend of yoga, so they followed the brand’s social media account and participated in outdoor yoga events. They have now become loyal customers of their yoga leggings. Lululemon is growing at the right time because there was a growth in health and fitness concerns during the pandemic, whether physical or mental. They build a sense of belonging to a community more than only offering and selling products (Danziger, 2019). Now, it has become the top of the favourite brand of yoga leggings among all my Hong Kong friends.

Zheng Zeng, October 2022

Introduction to Marketing II (MKTG 2005) 15.5 Putting It Together: Marketing Plan by NSCC and Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

Credits

Lululemon Marketing Strategy and Plan written by Taylor Rawding, Jantien Sneyd, Tiffani Hamilton, Saroja Venkatesha, Jodie Holman and Zoe Ciarrocco as an assignment.