CASE ANALYSIS OF MAVI
Presented by: Team 04
Table of Contents EXECUTIVE SUMMARY ................................................................................................................................. 2 INTRODUCTION ............................................................................................................................................ 3 JOURNEY OF MAVI FROM A LOCAL DENIM BRAND TO GLOBAL BRAND: .................................................. 3 PROBLEM IDENTIFICATION IDENTIFICATION – DECISION RELATED TO GROWTH ................................................................. 5 THE THREE QUESTIONS: ............................................................................................................................... 5 Option A:....................................................................................................................................................... 5 Option B: ....................................................................................................................................................... 6 Option C: ....................................................................................................................................................... 6 MARKETING MIX OF MAVI (4Ps) .................................................................................................................. 7 SWOT ANALYSIS ........................................................................................................................................... 8 ANSOFF MATRIX ......................................................................................................................................... 10 BRAND KEY ................................................................................................................................................. 10 BRAND RESONANCE MODEL ...................................................................................................................... 12 ANALYSING THE STRATEGIC GROWTH OPTIONS: ..................................................................................... 13 RECOMMENDATIONS & SUGGESTIONS: ................................................................................................... 18
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The case highlights how a homegrown denim jeans brand with strong core values of quality and innovations grew into a lifestyle brand and expanded its operations on an international scale. The problem was to choose and adapt a growth strategy among the available strategies of expansion so as to increase the brand value. The potential growth of the jeans and denim industry across the globe was around 12.5% in terms of unit sale. With favorable market conditions and the customer preference moving towards high quality of jeans and apparels. Mavi has a unique brand proposition value with its core strength of producing high quality perfect fit jeans at a reasonable price.
Thus the idea was to expand globally and leave the foot prints in international regions like U.S, Canada, Russia, Australia and Europe. The Expansion was recommended to be done within turkey through retail expansion and branding while for regions other than turkey multi-channel is preferred with sheer marketing efforts of global Ad-campaigns through celebrity endorsements endorsements and creating the buzz around the social media to engage the brand with the potential customers.
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Incorporated in 1991, the founders Sait Akarlilar, Elif, Ersin launched own retail brand of denim name as Mavi Jeans (Mavi means blue in Turkish). Over the years Mavi has evolved into i nto an international apparel brand, becoming synonymous with superior quality, fabric innovations and the perfect fit.
Events 1984
1991 1996
Erak Giyim a low-cost denim manufacturing company in Istanbul Producing high quality denim products for global premium denim brands. Founded by Sait Akarlilar, Elif, Ersin, Seyhan’s father Birth of a own retail brand in Turkey with Brand name as Mavi Jeans (Mavi means blue in Turkish) Nurtured by Sait. Market leader in turkey within a short span of 5 yrs. Marketing campaign focussed the brand message through political and cultural issue.
Vision
To establish brand as a global denim expert.
1998
Ersin moved to US and established wholesale office channels in US, Canada, Germany Collaboration with Jeans guru Adraiano Goldschmied
Strategy
2000-2003
2004
Making perfect Fit
Brand was sold in 186 stores in turkey Time to shift the marketing strategy from turkey focused to fashion focused Introduction of Mavi-terrain concept inspired by Mediterranean culture. (Warmth, Comfort and fashion) Positioning as glocal brand. Time magazine recognized Mavi as first Turkish brand to become international. Flagship stores in Newyork, Vancouver, Berlin, Frankfurt Istanbul announced as the European cultural capital Turkish designers to create Istanbul T-shirts to be sold along Mavi jeans globally. 3
2007-2009
2012 2013
Kartus loyalty card program was launched in 2007 Positive economic indicators, Increase in disposable income and several other growth factors lead to opportunity of more shops and marketing , Which in turn raised the need for solid retail metrics. Collaboration with Turkven in 2008 First Celebrity endorsement Andriana lima a supermodel became the face of the brand Denim Kitchen concept was released. E commerce launch Mavi gold premium collection
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In late December 2015, Mavi’s CEO Cuneyt Yavuz and global brand director Elif Akarliar were finalizing the growth strategy for next 3 years. Brief about Mavi’s performance in 2015:
No. of units sold – 7 million pair of jeans
CAGR – 30%
No. of retail stores in Turkey & Worldwide – 387
POS – 5000.
The Board identified three possible strategies that can be implemented to determine the company’s short-term growth trajectory trajectory as well as shape the longer-term value of the Mavi as a brand.
Whether invest in growth domestically or internationally? Was the Mavi equipped to move from local to global?
Considering the price position & expansion of product line?
Finding the best value proposition which offers most future promise? FUNCTIONAL? A LIFESTYLE? OR A CELEBRITY ENDORSED BRAND?
Whether invest in growth domestically or internationally? Was the Mavi equipped to move from local to global? The company was a market leader in Turkey with 22.8% of market share in denim and held a strong brand recall among the Turkish customers. Mavi as a brand needed to establish in other 5
markets other than Turkey since they already made a significant dent in the local market. However, the brand enjoyed early success whenever it was established in non-domestic markets. The major question that management was dealing that was Mavi as brand ready to move from local to global?
Considering the price position & expansion of product line? The company was considering in expanding its price position and also its product line. Mavi as a denim brand was between between two extreme price segment - “A mass-tige position” a position between mass segment which were cheap, fast fashioned for mass market and premium priced segment for upscale audience. The management faced two two situations if they considered changing the prices but feared jeopardizing the current base of the t he segment: Increase in Price
Decrease in Price
Increase the margins
Increase in Volume growth
Finding the best value proposition which offers most future promise? FUNCTIONAL? A LIFESTYLE? OR A CELEBRITY ENDORSED BRAND? During the years Mavi was fluctuating between a functional a lifestyle or a celebrity endorsed brand value proposition. 1. Functional Value Proposition – Promised “The Perfect Fit” reflecting that denim was firmly rooted in denim 2. Lifestyle Value Proposition - Promised access to Mavi -terranean lifestyle opening up new product category 3. Celebrity endorsed Value Proposition – The brand was endorsed by hottest stars of Turkey which served as influencers in purchasing the product.
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PRODUCT
Mavi Jeans: Expertise in denim jeans Mavi: Denim centric lifestyle brand (Jeans, Tops, accessories and outwear) PRICE
Mass-tige segment: Price points higher than other fast-fashion brands (89-129 price TL) Premium segment: Serving high quality jeans at price points less than other upper and premium segment brands like US polo assn., Levi’s, Gap. (129-149 price TL) PLACE:
Own Retail store
Wholesale distribution through other retailers
Merchandise
Online
PROMOTION:
Celebrity Endorsements
Seasonal Campaigns through both ATL and BTL B TL channels
Magazines and Publications P ublications
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Weakness:
Strengths:
No substantial international market coverage for Mavi as brand No exclusive retail outlets in international markets since sales happens through wholesale distribution. Strong association as Turkish Brand
Leading denim brand in the Turkey with 22.8% market share. Strong positioning of the brand as “The Perfect Fit”. Strong retail & wholesale presence. Strong relationship with some hottest celebs to appeal the target segment
Opportunities:
Threats:
6th largest apparel exporter in the world 50% are youthful population leading to big domestic market. 12% CAGR for the branded jeans market between 2011-2015 Untapped international markets
Pressure on profitability from local fast fashion brands. Harsh competition from already brands like Zara, H&M etc. Heavily saturated category
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The threat of new entrants: HIGH
The bargaining power of suppliers:
Existing rivalry: HIGH
The bargaining power of customers: HIGH
Threat of substitution: MEDIUM
The threat of new entrants: HIGH
It has become increasingly easy for new companies to enter the Jeans market. Manufacturing M anufacturing of Jeans does not require high expertise as it’s a fairly simple product. Today, companies can choose to sell their product exclusively online and save up on capital. The bargaining power of customers: HIGH
Jeans being a standardised product with little or no differentiation between brands, customers have innumerable number of options. The bargaining power of suppliers: MEDIUM
The suppliers do not have control over the price of the raw materials, therefore, fluctuations in the cost of cotton will have an impact on their production cost. Due to the simplicity of the product there is an increasing number of suppliers who are willing to provide the same service.
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Threat of substitution: MEDIUM
Though denim jeans still enjoy an important position in clothing; the growth of y oga pants, jeggings, and treggings treggings definitely threatens this position. Industry rivalry: HIGH
The existing market is already saturated with a huge number of players. The customers do not have strong loyalty towards the brands, considering that product differentiation is very weak.
Market Penetration:
Product Development:
[current market, current product]
[current market, new product] Expanding their product line by adding complimentary products to shift from a jeans brand to a lifestyle lifestyle brand.
Market Development:
Diversification:
[new market, current product]
[new market, new product]
Introducing their designs with the new
Expanded into the US with their product
Mavi-terranean ad campaign, which
Molly, which was sexy and fashionable.
emphasizes the glocal aspect of the brand.
Root Strengths:
Competitive Environment:
Fast Moving Jeans with low quality & price serving mass market marke t
Premium category brands like GAP, Guess, Levis which are well established and provide quality apparels at high price
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Target:
Insights: No exclusive retail outlets in international market.
Discriminators / USP: Mavi Jeans caters to the need of o f the consumers by providing the perfect fit to the body structure considering the market and also helps to provide affordable premium quality jeans, calling themselves as “Mass-tige Segment”
Reasons to believe:
Homegrown brand Introduced the Mavi-terreian concept
Jeans that provide perfect fit.
Emphasis on high quality & comfort c omfort
Trendy & Fashionable
Values & Personality:
Energetic
Self-confident
Socially Engaged
Trendy & Stylish
Sporty 11
Classic
Benefits:
Perfect Fit
Value for money
Essence: “Jean for every body” “An apparel brand with strong denim roots”
Salience Turkish Brand Top of the mind – Brand Awareness 55%
22.8% market share
Performance Premium Jeans at Middle Range Price
Imagery Target 20-35 age group Men and Women Emotional, Home-grown Authentic Brand.
Feelings Affordable
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Strong Denim products Superior quality with Perfect fit.
Confident, socially engaged Strong peer connection
Judgement Perfect fit Mavi-terranean lifestyle- Comfort, warmth and passion.
Resonance Kartus loyalty program- 4.9 m subscribed individuals for this program 85% sales through this channel. Medium level loyal Denim Community
OPTION A – WHETHER TO GROW DOMESTICALLY OR INTERNATIONALLY?
Jeans Sales ($ Billion) 60
25.00% 21.80%
50
20.00% 18.20%
40 15.00% 11.80%
30 11%
10.00% 20
9.10%
10.00%
7.80% 6.40%
8.30%
5%
10
5.00%
3.70% 2.10%
0
0.00% Global
North America 2007
Europe
Asia
2014
Growth
South America
ROW
Forecast
The Asian market shows most promising growth rate by 2020 – 21.80% from 2014-2020.
This shows that there is a large untapped market for the MAVI as a retail brand to expand.
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The company can consider moving to the Gulf area since the consumer behavioral pattern will be similar to that of domestic market.
The company can also leverage the MAVI denim brand for its expanded retail focus in the “Jeans established market”.
The company still continue to maintain its position as premium segment as it did for its denim when it ventured internationally.
However, if the company which mostly operates in the domestic market with the MAVI Retail brand has to compete with the fast fashion brands like LC Waikiki, Defacto etc. which enjoys a considerable higher market share in the Turkish Market.
The company still enjoys a considerable position in the market and since 50% of population represents youth which shows the potential untapped customers within the domestic market.
The company already engages in the celebrity endorsement that features some hottest stars of Turkey to communicate the product and this also appeals the target segment. The company can continue to increase the sales using the same.
OPTION B: CONSIDERING THE PRICE POSITION & EXPANSION OF PRODUCT LINE? 1. Focus on Premium market or the Fast Fashion market.
This would require a Significant shift and investment from Mavi. Mainly because they are shifting from their regular market and catering to a whole focused target group. If Premium market is their focus, it would be a relatively more relevant market for Mavi, as they generally operate in the Mid-Upper-Premium bracket (as per the Jeans Price index in Turkey). This market would provide significant margins, and hence more profitability to their products, the only downside being the lesser sales volumes. Mavi would be relatively more comfortable in this bracket. They would face strong competition from Jack & Jones, USPA, Levi’s and GAP as these generally operate in the premium segments. Mavi’s products have a strong presence in the Upper market, making the shift to premium market much more easy and relatable to the brand. There is less chance of customers shifting to other brands, as they generally tend to re-purchase from the same brands. 14
On the other hand, if they shift focus to the Fast Fashion, they would be greeted by a mass market thereby translating to larger sales volumes. Their profitability might not be affected much, as the margins would be much lesser than what they already enjoy in the UpperPremium markets. This market has larger appeal and even larger competition, making the switching costs less – hence there are chances of customers not being loyal and shifting to other brands in the same bracket. There are high chances of Mavi losing its brand image in the name of market expansion. The better suggestion among the two would be for Mavi to take the premium market and work towards building a premium image.
2. Use Sub-Branding as a strategy
If Mavi chooses to create sub brands within the Mavi name, they can use differential prices and target different markets too. With regards to this, Mavi has two options – either to create a fast fashion sub brand or to go for a premium sub brand. There are attributes that are common to choosing both – advertising, marketing, distribution and sales channels would need to be put in place, which would require significant expenditure. As far as sales is concerned, Mavi would have to decide if these brands need to be sold in separate stores to clearly demarcate themselves or if they need can be sold within Mavi stores in different sections. They also needed to decide if the sub-brand would choose only jeans or a host of other products. Mainly, the below factors would drive up the cost of creating a sub-brand:
A new brand needs ne eds significant marketing and advertising efforts.
Mavi is generally associated with the premium segment, so creating a brand separate for premium apparels would weaken the Mavi brand.
On the other hand, a sub-brand for the mass market would be more appealing, as there would be a lot of buyers who would be ready r eady to buy a Mavi at a significantly lower rate –
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but these need to be sold separately, either through separate stores or through designated floor areas within the existing shop floors.
If the mass market sub-brand gained popularity, it might kill the parent brand, and people would associate Mavi to the lower price segment. They could eventually lose the premium segment buyers due to issues in brand image.
However, Mavi was trying to penetrate into the international markets – They could use the sub-branding practices in these new markets and clearly distinguish their products as they are new in this territory. Since the sub-brands would be catering to different categories of consumers, there would be clear demarcation and hence no brand name loss on Mavi.
A bad show by either of these two brands could mean trouble for the parent brand – Mavi. Negative associations/experiences with the sub-brands could directly affect the Mavi brand and create hindrances to their expansions.
Hence the suggestion for Mavi would be to take up the sub-branding practices to the new markets markets they are trying to penetrate to. Fast fashion brands would attract greater sales with their price points, and premium brands would stay true to Mavi’s actual target market.
3. Create brands separate from the Mavi brand.
This is similar to the previous approach, just that the brands would no longer be associated with the Mavi brand. There are two sides to this approach:
The new brand would have to create a market of its own, with no ‘Mavi’ brand backing. Since the sub-brand is out of the Mavi brand, they would have to clearly segment and target and position their products to attract the right consumers. Significant investment in marketing and distribution d istribution is inevitable.
Since they are created ‘out’ of the Mavi brand, any damage to their reputation would not create an issue for Mavi, unlike the previous ‘sub-branding’ approach. The sub-branding approach has the potential to create issues for the parent brand as they are directly positioned under the Mavi brand. If the brand does not come under Mavi, and is
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marketing separate, there are no issues of brand image loss for Mavi, even if these brands do not do well. Mavi can always withdraw these sub-brands in case they are not doing well and create strategies to improve the market appeal.
OPTION C: MAVI’S VALUE PROPOSITION Mavi’s brand positioning had varied over years. A.) Functional: Perfect fit- promised customers a functional advantage over competitors. B.) Lifestyle: Mavi-terranean, which conveyed a Mediterranean feeling warmth, comfort and passion. - Mavi built an emotional connection with its customers by emphasizing its roots, the commonalities and by embracing a wide audience. This allowed Mavi to reach young and old, mass and premium alike as well as the sporty, the classic, and the trendy. C.) Celebrity Endorsement: Identity based differentiation through celebrity. Value proposition strategies to be used while deciding if the company decide to focus on: •
Going international
•
Staying domestic
•
Upmarket
•
Down-market
A. International Identity based differentiation + functional point of difference
Celebrity endorsement, probably an international celebrity would give them an identity through which they can depict an image of being a Global brand. Also with identity based differentiation they would require strong support of functional advantages over competitive products. B. Domestic
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Emotional/symbolic point of difference
Mavi built an emotional connection with its customers by emphasizing its roots, the commonalities and by embracing a wide audience. This allowed Mavi to reach young and old, mass and premium alike as well as the sporty, the classic, and the trendy. The brand has still room for it to build on it. C. Upmarket Identity based differentiation
To move into premium space to see if they could gain traction with higher end consumers, they would require such identity which gives out a message of being high class. The premium market would focus much on their image and identity rather the price. D. Down-market Functional point of difference + Lifestyle (Emotional/symbolic point of difference)
Extending Mavi down market into the fast fashion space would require functional advantage like as Perfect fit with Emotional bonding.
:
On analyzing the above three strategic options for expansion of the company and the brand further, Mavi should expand its territory on a global phase keeping an eye on the upmarket. The brand essence of perfect fit and superior quality jeans should be carried through out. The brand reputation as leader in denim market will give them an extra edge to evolve as a lifestyle brand which delivers high quality apparels with fabric innovations.
For the homeland consumers(Turkey) : The company should continue its position as a brand for upper-core and premium section of jeans market. A market survey on brand perception says that Mavi is the number one jeans brand with top of the mind awareness 18
of 53%, which shows the presence and connect of the brand in the local market. The retail expansion can be done in turkey and regions with similar demographic and psychographic psychographic appeal.
For International expansion the company should focus more on online business through its own and various other E-commerce sites. Global ad-campaigns through celebrity endorsement who have similar brand identity will help to increase the brand awareness globally should be done. Once the brand gains popularity then it should go for retail expansion using Brick and mortar stores. The presence over multi channels will help to target the customers in an efficient way.
The strategy to rely on data of customer preference and purchase patterns can be emphasized with the presence of online stores which in turn will help to understand and serve the customers in a better way.
The brand can use the different nomenclature like Mavi along with a suffix to segment different categories in a precise way and still hold the primary brand tag.
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