Casestudy of Puma Essay Sample
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Casestudy of Puma Essay Sample
Introduction to Puma
Puma is one of the world’s leading Sport lifestyle companies. As an organisation it designs and produces sports equipment, footwear, apparel and accessories. Puma distributes its products to “120 countries, employs more than 11,000 people worldwide and has headquarters in Herzogenaurach in Germany, Boston, London and Hong Kong” (about.puma.com 2012). Puma as an organisation was founded in 1948 by a German man called Rudolf Dassler, who split from his brothers company which went on be known as Adidas after originally starting out as “Gebrüder Dassler Schuhfabrik”. The Puma group owns the brands Puma, Cobra golf and Tretorn, this allows the organisation to branch into different markets and compete for market share in different industries. Marketing Orientation
‘I make what I can sell’ (Adcock et al, 2001). This is the philosophy the orientation takes, following the organisations market research. Marketing orientation takes into consideration the customers and their competitors. The organisations look into several factors such as: * Identify the customer’s needs and wants, through market research * Develop their products to meet the needs, through product development * Decide on the price for the customers
* Distribution, looking at the right time to launch the product into the market * Informing and persuading the customers to buy the product, through promotion
Companies who are product orientated focus on pushing the sales of the products they sell the most. ‘It often involves manufacturing products in large quantities in order to minimise the costs of production.’ (Adcock et al, 2001). Problems exist in this orientation, such as although the initial sales may be very high due to a successful product but are more likely to decrease quickly. Another disadvantage is the unsatisfied customers are hard to please as the products are the same for the company. Companies who adopt product orientation often find themselves switching towards sales orientation when their product sales are declining as they introduce mass advertising and sales campaigns. Sales Orientation
‘Sales orientation dictates that a business must aggressively promote its products.’ (Adcock et al, 2001). The company is looking to promote an already existing product, it is up to the employees to find potential customers for the product and they will be targeting through promotion. Even though the customers are being targeted the product still does not meet the customers needs and wants therefore differing from customer orientated marketing. The main disadvantage of the orientation is the fact that customers needs and wants are not considered so if customers don’t like to the product sales will be very limited. Puma Orientation
Puma have adopted the marketing orientation, identifying their customers need and wants. Puma show that they use this orientation to great effect as they created the ‘Sports lifestyle segment’ in the market. This segment combined the technology of sports clothes but incorporated into fashionable clothes to wear on all occasions. ‘PUMA was not only able to strengthen its positioning as a sport lifestyle brand, but created a whole new market by establishing the segment sport lifestyle.’ (Neuber, 2011). Puma has been very successful in meeting the needs and wants of their professional clients. They have strong partnerships with athletes such as Usain Bolt, Michael Schumacher and Yaya Toure and sponsor many national football teams. When Michael Schumacher won his seven world championships Puma were the provider of his shoes and now are the largest provider of racing car shoes, showing that their products have met the needs of the users and their market share has grown.
The partnership with Ferrari and Michael Schumacher led to the company launching fashion products in the ‘Sport Lifestyle’ segment like trainers, caps and sunglasses. In the world of football Puma has had success in their products, they launched the first football boots with screw in studs in 1952, meeting the player’s needs of better quality boots and revolutionising football. Puma has strong influence in the African market sponsoring 13 football federations; here they opened many of their innovative products. Firstly they created the sleeveless jersey in 2002 to help keep the Cameroon players cool as they are playing in one of the hottest continents in the world. Secondly they created the one piece kit the first ever of its kind the Cameroon team wore this for the 2004 African cup of nations. It was greeted with controversy however this was good for Puma as it brought them brand awareness. Puma continue to work closely with their clients in terms of meeting their needs with high quality products. Usain Bolt is another example ‘The Jamaican sprinter needed a versatile shoe that provided support for power, as well as firmness to hold his foot in place around the turn.’ (Neuber, 2011).
From Bolt’s needs they developed the Theseus II running shoe and he went on to break the 100m and 200m records at the 2008 Olympics. Again in 2009 the Puma team developed the shoe by looking at Bolts stride and foot form and altered the spikes to suit his style. To overcome the competitors in the market Puma try to create their products with a sense of fashion, they will use unique colours, different materials and create new clothing types. Nike and Adidas are their main competitors in the sport segment, to compete with them Puma use Athlete endorsement and exclusive styles that only their products have. However in the Sport lifestyle segment Puma has other competitors like Prada Sport and Lacoste.
These competitors are already renowned in the world of fashion so Puma have to compete with them in products such as eyewear and clothes. Pricing is one way Puma compete often their products will be cheaper than competitors however still high quality or they are more appealing with endorsement like Bolt or Ferrari. To summarise the market orientation Puma use works effectively for them to gain affiliation with professional athletes, with a record of producing what they need to gain success. They distribute their products to over 130 countries around the world. To maintain being competitive they have utilised the Sport lifestyle segment to their advantage by focusing on it. Pumas products are often cheaper than their competitors. The competitive advantage/disadvantage of puma.
Puma has many competitive advantages ranging from the its marketing strategies which have seen it become the most popular brand in certain areas, but also the sponsorship deals that it has, which has gone on to increase the exposure of the brand around the world. In the world of athletics, if not the Olympics, the most recognisable face has to be Usain Bolt. For the London 2012 Olympics he was seen as the poster boy, with the worlds media focused on the 100 metre final which was watched by a record 2billion people, with 2billion also watching Pumas products being shown on display. This is one of the reasons Usain Bolt holds the most lucrative contract in Puma history reported to be worth £12.5million per year with him endorsing both sportswear clothing for Puma as well as his own line of Running Shoes. The main aim for Puma hiring Usain Bolt was to use his reputation around the world and his media exposure to attract people to the brand, and to grow their own brand around him.
His exposure would see sales in areas that he promotes grow and exceed that of its rivals, Nike for example, which don’t have a athlete to compete with Usain Bolt. Another advantage that Pumas holds is that it was the first major sports brand to target new and emerging markets and establish itself as a key player in the markets. These markets were mostly in the Middle East and Africa, with the market share being mostly because of the national teams that they provide shirts for. Compared to other manufactures Puma sponsor the most successful national teams, which include Ivory Coast, Ghana, Togo and the Cameroon, with Puma dominating the market. The competitive advantage that this provides then is that with Puma sponsoring the major teams and the most popular, the other major competitors do not have a chance to have the same influence on the market. Also with sales of replica national football shirts being the highest source of revenue for football on the continent Puma are able to dominant and have the largest percentage of total revenue from football merchandise than any other competitor.
Before the last ten years Puma was seen as just a normal sports performance company, and as a result was starting to decline as they couldn’t compete with the two major players in the market Nike and Adidas, with Puma being eight times smaller than Adidas by the last 1990’s. As a result of this and the risk of the company collapsing, Puma began to distinguish itself as a company that focused on the Sports fashion than that of Sports Performance. This proved to be a successful turnaround for the company as after ten years since changing their company focus, they have continued to grow and now are only three times smaller than Adidas, a major success for the company. The change involved Puma moving away from just the side of sports to moving into other new markets such as music and fashion, which also saw the company diverse itself into new markets, but at the same time separate itself out in the market from being just another sports performance company, creating a competitive advantage of being a company that offers something different. A major disadvantage of Puma is there advertising and sponsorship is not on the same scale as that of Adidas and Nike.
The two major giants in the market pride themselves of being able to attract major sports for each individual sport, with Puma not being as competitive in doing this. A example is that Adidas run a football boot campaign around the world player of the year, with Lionel Messi being the face of both TV adverts and Poster boards to create this strong relation with Messi and the boot in question. Similarly Nike have hired Cristiano Ronaldo as the face of their football campaign and again have created a whole marketing campaign around them both. Furthermore, even though the individual players may not be involved in marketing campaigns both Adidas and Nike also have many individual boot deals with world recognisable footballers, with Puma only focusing on a much smaller minority of players to have boot deals with the most recognisable Cesc Fabregas and Sergio Aguero.
As a result this creates a major disadvantage for Puma because fan want to wear the boots that their idols wear and as a result of this Adidas and Nike have become the two major dominants of the market with Puma struggling to catch-up, with boot sales not as strong as the major two brands and as a result are seen as the second tier of competitors in the market with other brands like Umbro. Another competitive disadvantage of Puma is that they are not involved in as many sports as Adidas and Nike. Example is that Puma sponsor either a club or a athlete in fourteen different sports, which is considerable lower than Adidas who have sponsorship deals within 30 different sports. This is one of the reasons that Puma is not as much of a recognisable brand as Adidas or Nike, with Puma being not very known in America because of the lack of involvement in American Sports, which is a major market segment for sport. This is also one of the main reasons that Puma doesn’t have the same revenue figures close to Adidas and Nike because of the lack of diversification into the amount of sports.
StrengthsThe financial position of Puma.More diversified than it’s competition.Puma’s brand image stands for quality, the latest technology and prestige.Longer established than its competition and has been able to create a favorable brand image. Marketing Driven. Globally recognised.Strong popularity in Africa compared to other brandsCelebrity endorsements e.g. Usain Bolt and Cesc FabregasFashionable in Youth Culture.The Success of the Italian National Team.Fastest Growth in Sales and Profits from Hip Hop and Skateboarding from 1988 and 2003.| WeaknessesNot as much advertisements as their competition. Income is heavily dependent upon its share within the footwear market.Retail sector is price sensitive.Focus is too narrow.Lack awareness amongst potential customers.
Not diversed in as many sports as major competitorsSlow updates of ProductsStock levels| OpportunitiesEstablishing themselves in the middle-east before Nike and Adidas.Product Development.Market Segment is poised for rapid growth.Potential to diversify into related market segments.Strong Global Brand Recognition.Global events can be utillised.Contracts with Italian Football Association untill after the 2014 Brazil World Cup.Sponsor all of the major African Nations football teams.| ThreatsEconomic slowdown could reduce demand of their goods.The Market is price sensitive.The standard of entering into the Sports Industry.The Competition that Puma face.The exchange rate – worldwide sales.| Marketing Mix
The traditional marketing mix represents the strategic combination of four primary elements represented by the four Ps (Chadwick 2007: 38). These four Ps are known as Product, Place, Price and Promotion. An organisation aims to reach a point where an appropriate combination of the four elements is reached so that its marketing strategy can be at its most effective. The marketing mix is essentially the very foundation of marketing, upon which the strong fundamentals and principles of marketing as a subject are formulated. Product:
Puma offers a wide range of products that centre on their theme of Sport lifestyle. Puma’s aim for their products is to include Innovation, which “has been constant throughout their history” (about.puma.com), a forged unique look and aesthetic identity. Their desired result is that Puma create innovative products that reflect top performance combined with distinctive and unique Puma signature design. Pumas brand message is that they are a sport lifestyle company and they want their product range to reflect that. The sport lifestyle message essentially means Puma have fused influences from sport, lifestyle and fashion and incorporated them into their product range. This is represented by a wide range of products that cover everything from sporting equipment to high end fashion garments. The aim of this is to encourage potential customers to buy into the brand who are not essentially big sport lovers or fans. It also encourages consumers to buy and wear Puma products when they are not playing sport, for example a Puma leather jacket could be worn casually.
Another example of this, is black shoes that are sold by Puma could be used for business use. This market penetration strategy into lifestyle and fashion markets is an advantage for Puma as it allows them to attract and build upon their customer base. Product quality and range is also a further strength for Puma. The company has built up a wide range of well-known and prestigious brands, for example, the ground floor of most Puma retail outlet stores sell wellknown brands of perfume such as YSL and Gucci. This emphasises the level of quality of Puma products and raises customer perception of the brand to consumers who enter the store. By selling goods from other brands, it can create an association between the two brands. When Puma design their products they aim to bring “Joy” to its consumers. They believe this “Joy” is what will differentiate its products from its competitors, as they don’t believe that they carry the same product appeal.
When Puma come to the design the designing stage of a certain product, “the first question that is asked is, where is the Joy?” (about.puma.com 2012) .This allows them to make sure that every product carry’s the Puma brand message and solidifies their fined tuned market position of “Joy”. Having such a fined tuned market position of their products is an advantage of their market strategy as it allows all of their products to be designed and produced at high quality standard. As a company, Puma offers an excellent range of Sporting products that the majority of athlete’s and customers can use and benefit from when either playing sport or just lifestyle use. One disadvantage of their product range is that they don’t offer a huge amount of top of the range products designed for elite performers and athletes. This is a disadvantage because if for instance there is a potential customer who competes at a decent standard (county level for example)who is looking to buy a piece of equipment in the Football boot market then they are unlikely to choose Puma over other slightly bigger brands who have a broader range of top level equipment. Price:
Out of the four P’s of the Marketing Mix, Price is perhaps the most important to a successful marketing mix for Puma. Price is unique to the other elements as it is the only component that generates revenue for the company. All the other mixes are costs to the organisation, whereas price will recover costs and create profits. Price is essentially the process of determining what an organisation will acquire in exchange for its goods and services. When considering Price, Puma will have to consider some of the roles and perceptions of Price. For example Price is the value that is placed on a product and that price is the common currency of value to both seller and customer. Furthermore they will have to consider that Buyers may have different perceptions on price compared to the company itself. The critical point for Puma when it comes to discussing Price is, Puma is not the most reasonably priced place to shop, their prices have to be kept with their branding strategy.
They aim to sell high quality products and charge accordingly. They can afford to do this because their target market is that of the middle-upper classes, which can afford to pay for high quality goods and fashionable brands. Charging for products accordingly to quality is a positive for Puma as it will encourage customer loyalty. Due to the Chinese New Year, Puma provide 20% off to their regular customers that purchase their products. They also provide discount on high unit purchases. If a customer has purchased 4 products in the span of one year, on the 5th purchase, a 50-60% discount is applied. This discount scheme attracts repeat custom and will grow the customer attention towards the brand in which they might switch from buying a competitors product. Which in turn, can benefit Puma. When Puma price there products they often use the strategy of Premium Pricing. This pricing strategy involves using a high price where there is uniqueness about a certain product. It is often used when a competitive advantage exists within the industry.
This strategy is also linked with Market skimming, where higher prices are set to new products to initially skim the market, attracting the least price sensitive segment. Linking these two pricing strategies allows Puma to benefit as it is“used to maximize profit in areas where customers are happy to pay more” (smallbusiness.chron.com 2012) A negative of Pumas Pricing strategy is that of because there often high price strategy some potential customers may not see that price equals value, and decide to buy into the market in other brands. This is an obvious negative for Puma as they will lose out on valuable revenue as customers look to take their money elsewhere. A recommendation for Puma to fix this is to include more of a promotional pricing strategy for a lot of its products. This kind of approach includes actions such as 25% of for example or even BOGOF (buy one get one free).
This strategy would hopefully attract customers to the brand and increase Puma’s market share. Puma’s pricing positioning of products can be seen as a weakness of its strategy, for instance, if spending and general activity in the economy is on a downturn, Puma can’t reduce its price. Similarly, Puma can’t reduce its prices in the form of sales promotions to compete with competitors as easily as other organisations can. The reason for this is that low prices and low sales promotions would not be consistent with Puma’s brand imagetherefore;it would have a negative effect for the company. Place:
Puma sell their goods in retail outlets, online and are now providing information on their latest promotions and products through the use of mobile phones to potential customers, through the use of an app or a mobile online store. This will make Puma’s products easy to access and will attract more customers as people may not have the time to visit retail store’s so they can use the mobile site/app to view the products and can find out whether the product can be purchased online. Having products accessible to potential customers via a mobile phone or other mobile devices will ensure that Puma are able to reach the world whether they have internet access through the use of computers or not. They have opened retail outlets in shopping malls which attain constant foot traffic. With plenty of people visiting the shopping malls in which Puma have opened retail outlets inside, it could bring potential customers in.
This is positive for Puma as they’re may not be another sports retailer inside of the shopping mall so this will give them an advantage over their competitors, as consumers will be able to purchase goods there and then without having to shop online for competitors products. If competitors already have a retail outlet within the shopping mall, the Puma outlets will give them some competition. Puma have a large popularity in Africa. The brand sponsors many of the major African Nations football teams and use Usain Bolt to spearhead many of the brands advertisements, giving the brand an association with the athlete and the teams that it sponsors in Africa. With the famous athlete being endorsed by Puma, it brings a lot of interest from Africans as well as Usain Bolt fans from all over the world, who will follow the product lines of Puma. The 100m race in the 2012 London Olympics was viewed by more than 2 billion people to see Usain Bolt, who was wearing Puma products.
Promoting Puma as a brand is done in various ways.
Since they are already a reputable brand within the market, the company’s finances are not a problem. So in order to create a strong brand image, Puma endorse top celebrities and sportsman to promote their strategies. Usain Bolt, Oscar De La Hoya, Mario Gomez, Mario Reus, Cesc Fabregas, Samuel Eto’o, Michael Carrick, Sergio Aguero and pro-golfer Rickie Fowler are currently the top sportsmen to be endorsed by the brand. This will help create a stronger image on the minds of the consumers that can be made through advertisements broadcasted on TV and even placed within relevent magazines. By using reputable sportsmen, fans of these people will then purchase Puma products because of their heroes endorsing the brand. It will also benefit as the brand will be recognised and assosiated with the sportsmen shown in its advertisements. Puma sponsors numerous events, teams and competitions as well as the players it endorses.
Puma sponsors competitions and teams in many sports such as Boxing, Cricket, Fencing, Football, Gaelic Sports, Golf, Rugby, Sailing, Tennis, Track and Field and Motorsport. It sponsors many notable teams such as St Helens (Rugby League), Williams (F1), Mercedes AMG (F1), Scuderria Ferrari (F1) Newcastle Utd (Football), Borussia Dortmund (Football) and Feyenoord (Football). Sponsoring many sports can benefit Puma as fans from these sports will recognise the brand and may purchase sportswear for participating in these sports. Sponsoring reputable teams will give Puma an association with the teams it sponsors and fans will buy Puma products due to this association as well as their teams merchandise.
Puma also sponsor inter school’s, college’s and corporate tournaments to gain good publicity and it can indirectly effect the positive attitude towards the brand. Packaging is also vital factor in the promotion of Puma. The packaging used can be a vital part of the product which can make it more versatile. Packaging can influence a customers attitude towards a product and can effect the purchasing decision of the good. Puma place logo’s of the competitions, teams and events that they sponsor strategically on the packaging of the goods they sell. When they sell a football boot, it comes in a boot bag with a logo of one of the football teams that they sponsor. By doing this, potential customers views on products can be influenced and the product might be purchased. This could lead to the customers views on the brand as a whole changing and could lead to repeat custom. This could give Puma additional profits which could be used to expand further.
Chron.com (2012) What is premium pricing strategy available from <http://smallbusiness.chron.com/premium-pricing-strategy-1107.html>
Puma (2012) Puma our brand Strategy [online] available from <http://about.puma.com/category/company/strategy/brand-strat/>
Puma (2012) Puma at a glance [online] available from <http://about.puma.com/category/company/glance/ > Ciria Udlap (2005) Significance of Brand Extensions in Building and Managing Brand Equity at the Example of Puma and Puma Fragrances in the German Market [online] available from <http://catarina.udlap.mx/u_dl_a/tales/documentos/bad/gartner_ak/capitulo2.pdf>
Beech, J. And Chadwick, S. (2007) The Marketing of Sport. 1st edn. Harlow: Pearson education Marketing Principles and Practice
Written By: Adcock, Dennis; Halborg, Al; Ross, Caroline