CLASSIC KNITWEAR AND GUARDIAN: A PERFECT FIT?MARKETING ASSIGNMENT 1

Group no: 8 Section: F

Meghwant ThakurHarish RavikanthStephen StanleySameeksha SharmaShah AakashMohammad ShameemVarun Lakra

Porter’s Five forces Model

Rivalry among existing competitors (Low)

In the private label non fashion knitwear market, the branded line of insect repellant clothing has limited competition (some insect repellant apparel which could handle only 25 washings as compared to 70 washings of Guardian’s technology was already successfully selling in small niche markets)

Bargaining power of buyers (Low)

Since the product is the unique and superior, targeted buyers have limited bargaining power

Bargaining power of suppliers (High)

Since Guardian can terminate the licensing agreement on its sole judgment, they can always renegotiate the royalty terms. On the other hand, the fabric suppliers may have limited bargaining power.

Threat of new entrants (Low)

The technology used is patented so barriers to entry are high.

Threats of substitute products (High)

People may not be willing to pay such a high price just to buy a product with higher longevity (75 washes instead of 25). People may find it economical to buy insect repellants and shirts separately.

Ansoff Matrix

Existing Product New ProductExisting Markets Market Penetration Product DevelopmentNew Markets Market Development DiversificationThe company is going to launch a new product (Insect repellant clothing) first in a new market (outdoor enthusiast) so it will diversify. Later it plans to launch the same product in the existing markets (wholesale clients)-Product development. Diversification may be justified subject to breakeven analysis and demand forecasts.

Strengths1. Patented technology.2. High level of awareness for

Guardian brand.3. Convenience of not having to carry

traditional repellents

Weaknesses1. High price2. Unproved technology3. Small target customer segment

Opportunities

Existing wholesale clients-Potential Market opportunity.

Threats1. Change of EPA norms.2. Guardian may terminate the licensing

agreement on its own discretion.3. Competitors may buy the licensing

rights to the inferior technology (25 washings).

Viewpoint of trade (channels)

1. Wholesalers comprise about 75% of Classic’s present revenue and 25% from retail channels (private label merchandise).

2. The traders will receive a complimentary display unit on order of up and above 12 dozen shirts.

The new guardian shirts that are produced do not contain the manufacturer, Classic Knitwear’s name according to the potential alliance, rather, only the name “GUARDIAN” as the brand. As the Classic Knitwear was the 2nd player in the sector with a market share of 16.5%, the name Guardian might not be the attention grabber. Also the wholesalers might have a dilemma of the product not being sold to its potential extent that the company forecasted as the brand guardian was famous for its insect repellents and lotions, but, not high priced shirts. This new product associating the brand guardian might not be accepted by the customers due to it’s presence in the insect repellent market.

Viewpoint of Customers

According to the survey 185 on 1000 have filled the survey and majority have posted a positive response to the product. Among these 185 men, 38% have replied that they would definitely buy the product, 44% probably would buy, 13% might or might not buy, 3% probably would not buy, 2% definitely would not buy.

1. As the brand guardian is associated only with insect repellent and lotions, customers might hesitate in buying.

2. The T-Shirt will have Guardian printed in the same fashion as on the insect repellents.3. Looking from the other side the customers who find it inconvenient towards the

traditional way of applying the insect repellents and lotions might buy the product.

4P’s analysis of the new product marketing:

Product:

Classic Knitwear has signed a licensing partnership with Guardian to collaborate and develop knitwear treated with insect repellents using the opportunity to increase its gross margin. Classic knitwear used the current circumstances that were present of insect-borne illness such as Lyme disease and the West-Nile virus to develop this new product. It is planning to introduce 4 styles of shirts namely Men’s Short-Sleeve Tee, Long-Sleeve Tee, Men’s Polo and Men’s Fleece. All the four shirts are of equal quality, though Classic has more experience in T shirts, it feels that all the four styles will have demand.

Price:

DescriptionMen's Short-

Sleeve TeeLong-Sleeve

Tee Men's Polo Men's Fleece

Single DozenSingl

e DozenSingl

e DozenSingl

e Dozen

Retail Price$24.9

9$299.8

8$29.9

9$359.8

8$34.9

9$419.8

8$39.9

9$479.8

8Manufacturers Selling Price

$13.74

$164.93

$16.19

$197.93

$19.24

$230.93

$21.99

$263.93

The prices planned for the four styles of shirts are shown in the above table These shirts are priced at par with branded shirts of big companies. Trade margins of

45% are assumed

Promotion:

1. Branded cardboard display of the Guardian shirts will feature activity based imagery. It is one means of attracting the customers to buy the product for those who are serious about buying and also the customers who don’t intend to buy the product and make them vulnerable to buy the product. The company is planning to arrange 10,000 displays costing $100 per display in the next 2 years.

2. The brand is launched with the claim “long lasting protection” backed up by a one year money-back guarantee. This activity would create trust in the market for the product.

3. They are aiming to promote the product to the target market with the use of social media such as print and television advertisements. The advertising cost is 1.2 million which would garner a 25% unaided awareness of the guardian product among 100 million men (target market) in 2 years.

4. 5% off-invoice trade promotion allowance to retailers is recommended to setup the displays.

5. Advertising allowance of 10% is proposed by the company and expected that 20% retailers placing the order would quality for it.

6. Miller insisted to hire 3 sales representatives for looking over 3 geographical locations.

Place:

1. They want to position the product alongside the already existing big brands like James Brands and Flower Knit.

2. The product was planned to be distributed through major sporting good and apparel shops like Bass Pro Shops, L.L Bean, Orvis and REI (new exclusive outlet for Classic), general merchandise chains and discount chains.

3. Among the 10,000 displays planned by Classic, 50% (5000) would be in discount stores, 25% (2500) in general merchandise stores and 25% (2500) in sporting goods and apparel stores.

Evaluation of Licensing Agreement

1. “From Jan 2008 Classic knitwear will pay a royalty to Guardian of 5% of net sales of Guardian shirts” – Instead of net sales, they should have negotiated for net profit.

2. “Classic Guardian shirts are required to meet a series of steadily rising annual net sales targets over the first four years of the agreement. The sales target for year four must also be met in each subsequent year” – Demand is unpredictable, so clearly Guardian has the upper hand ( they may tie up with some competitor by breaking the agreement based on this clause)

3. “Guardian trade mark may be displayed on Classic’s private label shirts, as long as the apparel meets established quality standards”. EPA regulation may change in the license period.

4. “All advertising and promotional materials require written approval from Guardian prior to publication or use” – Likely to create bottlenecks in the marketing program

5. “Guardian may terminate this agreement during 2007 if in Guardian’s sole judgment sales of Guardian shirts are adversely affecting sales of Guardian’s existing insect repellent products” – Marketing investment will not be recoverable; thus Classic knitwear is at the mercy of Guardian.

Particulars 2007 2008 Contribution per unit:

Fixed Costs Manufacturer's Selling Price 17.87

17.87

Licence Fees 100,000 - Less: 5% off invoice trade

0.89

0.89

Salary of new Sales ExecutivesLess: 2% advertising allowance

0.36

0.36

(85000*3) 255,000

255,000

Less: 5% of royalty as licence fees

0.89

Display boards (1,000,000 for two years) - (10000*100)

500,000

500,000 Net Selling price

16.62

15.73

Marketing Investments (3,000,000 for two years)

1,500,000 1,500,000 Cost of goods sold

10.82

10.82

Total 2,355,000 2,255,000 Contribution per unit

5.80

4.91

Break even volume

= Fixed Costs / Contribution 406,097

459,679

Total for two years 865,776

Particulars 2007 and 2008

Target customer base 100 million

Awareness set in two years (12.5%) 12.5 million

Customers with confirmed interest (based on consumer.com market research data) = 18.5% of 12.5 million

2,312,500

Definitely would buy (38%)

878,750

Based on previous experience, actual buyers are 60%

527,250

The breakeven sales will not be achieved in the worst case scenario (definitely buy 38%). And the gross margin at this level will be 18.09%.

In case of the best case scenario (44%+38%) breakeven sales will be achieved, but the gross margin will be 18.20% only which is less than the company’s target of 20%.