STP PROFILING FOR LEVI’S 501CT JEANS IN INDIA Guide: Prof. Ashis Mishra
Group 7, Section-F Team Members: Anjani Kumar (1511379) Grishma Valliyod Kumar (1511395) Sanket Kale (1511398) Mohammad Kashif (1511410) Shikhar Sethi (1511434)
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Date: 11 August 2015
CONTENTS 1.
INTRODUCTION.............................................................................................................................................................. 1
2.
OUR PRODUCT- LEVI’S 501CT JEANS. ................................................................................................................... 1
3.
PLAN FOR THE PROJECT ............................................................................................................................................ 1
4.
SEGMENTATION ............................................................................................................................................................ 2
5.
4.1.
GEOGRAPHIC SEGMENTATION ..................................................................................................... 2
4.2.
DEMOGRAPHIC SEGMENTATION .................................................................................................. 2
4.2.1.
GENDER ..................................................................................................................................... 2
4.2.2.
AGE ............................................................................................................................................ 3
4.2.3.
INCOME ..................................................................................................................................... 4
4.3.
PSYCHOGRAPHIC SEGMENTATION ............................................................................................... 4
4.4.
BEHAVIORAL SEGMENTATION ...................................................................................................... 5
4.4.1
ATTITUDE TOWARDS THE PRODUCT......................................................................................... 5
4.4.2
LOYALTY .................................................................................................................................... 5
4.4.3
BENEFITS ................................................................................................................................... 5
4.4.4
USER STATUS ............................................................................................................................. 5
TARGETING ...................................................................................................................................................................... 6 5.1 5.1.1
GO GETTERS .............................................................................................................................. 6
5.1.2
FOLLOWERS ............................................................................................................................... 7
5.1.3
RATIONALISTS ........................................................................................................................... 7
5.2
Porter’s 5 forces ............................................................................................................................ 8
5.2.1
Segment rivalry ......................................................................................................................... 8
5.2.2
New Entrants............................................................................................................................. 8
5.2.3
Substitute product .................................................................................................................... 8
5.2.4
Buyers buying power ................................................................................................................ 9
5.2.5
Supplier buying power .............................................................................................................. 9
5.3
6.
Segment Characteristics................................................................................................................ 6
TARGET SEGMENTS ....................................................................................................................... 9
5.3.1
Market Growth ......................................................................................................................... 9
5.3.2
Competitive Intensity ................................................................................................................ 9
5.3.3
Market ACCESS........................................................................................................................ 10
POSITIONING................................................................................................................................................................. 10 6.1. Product differentiation for Levi’s .................................................................................................... 10
6.2. Points of Parity 6.3.
Perceptual mapping .................................................................................................................... 11
6.4
Communicating POPs and PODs ................................................................................................. 12
7. REFERENCES ..................................................................................................................................................................... 14
1. INTRODUCTION In our last report, we gave an overview of the Apparel industry, the contribution of this industry to the overall economy of India and the company of interest- Levi Strauss India Pvt. Ltd. LS & Co are the oldest manufacturers of denim jeans in the world and after about 150 years of inception, they continue to be one of the most popular brands of all time. Now we would like to focus on the most popular product that LS&Co have in their product line - the Levi’s 501 CT Original Button Fly Jeans. Through this document we would like to understand where the 501 jeans stand in the consumer scenario. We would also like to study how LS&Co markets its product to make it relevant in the market. We shall take you through the various marketing procedures of segmentation, targeting and positioning .
2. OUR PRODUCT- LEVI’S 501CT JEANS Levi Strauss and Co originated in 1853 where Levi Strauss the founder manufactured rugged trousers that would be durable enough for m ine workers to wear in mines. Since zippers were unavailable back in that time, he had riveted buttons in the fly of the pant. Today the 501CT jeans are the most popular product in the Levi’s product line globally. The 501CT jeans is priced higher than the normal jeans. Over the years, the fit and feel of the 501 has changed to meet the needs of the consumers, but the basic features of the button fly and the classy rustic look of the 501CT remains the same even today. This authenticity makes the product a vintage piece for the brand conscious consumer. We have identified various aspects of the Levi’s 501CT jeans that resonates with a well-informed customer. These aspects are brand, comfort, style, fit, durability and value for money. The results of a short survey that we conducted show how brand-value is the USP of Levi Strauss & Co. And hence all further study goes in the lines of LS&Co marketing and selling brand-value.
3. PLAN FOR THE PROJECT In this document, we have analysed the marketing trends of the 501 and have attempted to fit the basic marketing principles into this product to understand the company’s approach to being a market success. We throw light on segmentation, targeting and positioning principles in detail and focus on how various factors influence consumers to buy or move away from a product.
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4. SEGMENTATION Through segmentation, we have divided the market into groups of customers with similar needs and wants. Segments have been arrived by looking at descriptive characteristics like geographic, demographic and psychographic segments and behavioural characteristics like occasions, benefits, etc.
4.1. GEOGRAPHIC SEGMENTATION Rural and Urban
Through geographic segmentation we differentiate the rural and urban regions of the Indian Market. Urban region constitutes to 31% and this is where our target market lies. Urban market is brand conscious and with retail outlets and a huge market space with numerous competitors, the balance tips towards the urban population. Advantages and shortcomings: Advantages are that the urban population is well exposed to style changes and brands. Additionally, Levi’s India has a wide network o f franchisee stores and retail outlets across urban India.
Shortcomings would be the small percentage of strivers in rural India who would be willing to purchase a Levi’s jean. The company would lose these customers. Shortcomings are also largely influenced by the large number of competitors and a tightly packed market place. With the numerous choices at hand, the customers have a very short attention span.
Urban, 37.7
Rural, 83.3
4.2. DEMOGRAPHIC SEGMENTATION 4.2.1. GENDER Men constitute to 52% of the population of India and women 48%. But the men’s segment contribute to about 85% of the total revenue for the denim apparel industry while [2] women’s segment contributes to about 9% .
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Levi’s 501CT has variants for both men and women with a visibly huge mar ket for men than women. It is also seen from the survey that Men who purchase a 501 jeans, do so for the brand value and the history associated with it. They do not view the 501 as a fad product and hence they will be more loyal towards the brand making theirs a reliable segment. Women on the other hand, generally tend to stay up with fashion which is constantly changing and hence the chances o f switching brands is high making this a volatile segment.. . The Men’s segment thus appears less volatile than the women’s segment . Limitations: Given the changing status of women in the society, this segment offers a large opportunity for Levi Strauss & Co to tap into. More focus on marketing strategies for women’s 501CT can induce gains for LS&Co.
Female, 8.86
Male, 9.43
4.2.2. AGE Segmentation based on the various age brackets is done to identify which segment of the population finds maximum utility of this product. 41% of the population belong to the age group of 25-54 years and 18.1% of the population belong to the age group of 15-25. From a data analysis of the survey it shows that these two age buckets include the segment of the consumers that are willing to buy this product . So combining the two buckets, it forms a whopping 58.1% of the urban population. Levi’s has made alterations to the existing 501CT product to introduce Levi’s 501 CT to adapt to changing trends and attract the younger generation. 65 years and over, 2 55-64 years, 2
0-14 years, 9 25-54 years, 13
15-24 years, 6
Male population age group distribution in Urban India (in crores) [3]
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4.2.3. INCOME We have chosen a slab of 5 lakhs for income segmentation. 5% of the urban population belong to the group with >5 LPA income group. From our survey it is seem that the consumers who spend over Rs.1000 per shopping trip, are the ones likely to purchase a Levi’s 501 jean. And since this product is a luxury product and carries a brand image, it can be ascertained that our target consumers belong to this group of 5% urban population with the purchasing capability. Limitations include the huge population size of 95% that we exclude from focus as belonging to the <5 LPA category. However, to cater to this segment, Levi’s may have to restructure operations to bring costs down and that may impact the brand image. Hence it is viable to ignore this section. Income >5 Lac, 0.57
Income < 5 Lac, 10.92
Income distribution of people belonging to 15-54 age group in Urban India (in crores)[4]
4.3.
PSYCHOGRAPHIC SEGMENTATION
Psychographic segmentation includes segmenting the consumer pool based on lifestyle and personality. The personalities of the consumers under this segment range from Experiencers (young, enthusiastic people who seek excitement) to thinkers (mature, satisfied and reflective people) and Innovators (successful and sophisticated “take-charge” people). To illustrate this, we have a few well-known personalities wearing Levi’s 501 jeans.
[5]
[6]
Fig.1 Steve Jobs in a LS 501
Fig.2 President Obama in a LS 5 01
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4.4.
BEHAVIORAL SEGMENTATION
Behavioural segmentation divides consumers into groups based on their knowledge of the product and experience which influences them to buy.
4.4.1 ATTITUDE TOWARDS THE PRODUCT From our survey we analysed the major reason that draws a buyer towards a Levi’s Jean and “Brand” image is the aspect that emerged a clear winner. Buyer attitude towards the product is Inclined towards owning the product for brand image .
4.4.2 LOYALTY Analysis from our survey shows that 66.66% of those owning a Levi’s Jean is willing to buy a Levi’s 501. Since Levi’s marketing strategy focuses on selling its brand image, the behavioural segmentation on the basis of brand loyalty is considered here.
4.4.3 BENEFITS Needs and wants of consumers vary from individual to individual. An apparel like a denim trouser can offer to its customer style, comfort, ruggedness, durability and brand appeal. Levi’s 501, with its marketing strategy focuses on customers that would prefer brand image with additional benefits of ruggedness, comfort, style and durability. Levi Strauss & Co modified the original fit and style of the 501 jeans to 501CT jeans to suit the Indian buyers – buyers who wanted to own a 501 jean with custom made fit for the Indian region.
4.4.4 USER STATUS User status talks about the various groups of consumers who fall under ex-users, potential users, non-users, first time users, etc. Segmentation by focusing on potential customers is most beneficial to a company as they have the most to gain from here. 23% of those surveyed did not own a Levi’s jean. Close to 71% of these people were willing to buy a Levi’s 501CT. This shows a significant market for potential buyers. Analysing the characteristics of these surveyed, we can establish who we can target.
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5. TARGETING High diversity in the Indian sub-continent consumers results in a complex segmentation problem. And the challenge continues when the firm has to target certain specific segments and deliver value to each segment. In this section, we will discuss one of the ways Levi’s Strauss India Ltd. chooses the target market for itself. Levi’s 501CT as a product is specifically targeted towards the urban population, i.e. Tier I, Tier II and Tier III cities and towns. The reason for this is two-fold. Firstly, the product is a premium denim product. Considering the disposable income capabilities of consumers in rural areas, it does not make sense to target the rural population segment. Secondly, the supply-chain cost incurred in reaching out to the innermost corners, do not justify reaching out to the rural areas. And in urban India, among different age groups, 15-54 years is the segment where people are more concerned about their looks and are likely to go out more often than not. With this in mind, we shall discuss the different Levi’s targeting strategy for reaching out to these segments. Through the survey conducted among the segmented market, three categories in the market become prominent for consideration - Go getters, Followers and Rationalists. The key differentiating parameters for these segments are affinity to Levi’s brand over others, brand, durability or value for money as factors to make the buying decision.
5.1
SEGMENT CHARACTERISTICS 5.1.1 GO GETTERS
Customers belonging to this segment have a high disposable income and are always looking for the next thing in fashion. The customers are highly brand driven and find value in products that are exclusive. As per our survey, 21% of all respondents belong to this category. Respondents from this category spend more than 2,000 per month on apparel shopping and would buy denim worth more than 2,000. Segment
% Pop
LowL
53%
MediumM
36%
HighH
11%
Source: Survey
Brand value is the most important factor for customers belonging to this category. On our survey, target respondents from the Go Getters category, rated Brand as the primary value proposition criteria, rated 10-15% higher than respondents from other segments. Value for money for the Go Getters segment is 15-20% higher than the followers segment. Also, a price hike of 10% would deter only 20% of this segment population from buying the Levi’s product as against 35% for other segments, which is 75% higher than the go getters segment. Amongst various competitors of Levi’s 80% of respondents picked Levi’s as their most preferred brand. In conclusion, the survey results suggest the segment consists of people who are experiencers, and are brand conscious for which they would spend more.
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5.1.2
FOLLOWERS
Customers from followers segment are set of people who either have a high disposable income (More than 2,000 per month on apparel, as per survey) but spend economically (less than 2,000 per purchase) on denim products, or customers who have lower disposable income for apparel but are aspirational of buying a brand product, making them spend more than usual. The Followers’ category consists of 36% of overall tar get population, as per the survey. The Followers’ segment customers are not very brand loyal, and would prefer switching to another brand, as and when the prices are hiked. 35% of the respondents would not buy their most preferred denim brand, if the price was hiked by 10%. About 50% respondents from this segment prefer Levi’s as against 30% preferring Lee and ~20% preferring Wrangler.
Segment
Replace on hike
Do not replace on hike
Rationalists
36%
64%
Followers
36%
64%
GoGetters
18%
82%
Source: Survey
As per Cotton Incorporated’s Lifestyle Monitor™ survey, with increasing discretionary income, 80% customers rate “Comfort” highest while making a purchasing decision for clothes and 81% would [7]. pay more for better quality clothes And this is evident from the survey conducted by us, where amongst brand, durability and value for money, brand is the highest rated value proposition attributed to comfort and quality assurances associated with the brands. Therefore, customers under the “Followers” category are ones that make an informed price sensitive decision, but are influenced by brand proposition, making them belong to the Achievers or Strivers category as per psychographic segmentation.
Segment
Brand Rating
Durability Rating
Value for Money Rating
LowL
3.85
4.02
3.34
MediumM
3.81
3.67
3.28
HighH
4.27
4.27
3.91
Source: Survey
5.1.3 RATIONALISTS Customers from the Rationalists segment are in search of value for money and durable products. They spend low (less than 2,000 per month on apparel, as per survey) and are not particularly looking for economical denim products (less than 2,000 per purchase). The Rationalists category comprises nearly half of the overall target portfolio, as per the survey.
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Segment Flying Machine
Rationalists
Followers
GoGetters
8%
0%
0%
Killer
11%
6%
0%
Lee
19%
28%
0%
Levis
43%
47%
82%
Wrangler
19%
19%
18%
Source: Survey
As Levi’s is a relatively higher price segment denim product, it scores relatively lower on the “Value for Money” proposition for this segment (3.3/5 as per survey). For such customers, brand is not the primary reason for buying a Levi’s product, but durability. 40% customers prefer Levis over Lee (~20%), Wrangler (~20%), Killer (~10%) and Flying Machine (~10%). Also, with more than 35% of Rationalists segment customers ready to shift to another brand, as the prices are hiked by 10%, suggest that the segment is not very loyal to brand but is price sensitive. Hence customers of this segment need to be targeted in a very different manner.
5.2
PORTER’S 5 FORCES
5.2.1 SEGMENT RIVALRY Levi’s is the market leader in the denim industry in India. The industry is fi lled with international players, such as Ralph Lauren, GAS & Diesel amongst other brands such as Levi’s, Lee, Wrangler, Flying Machine, Pepe Jeans etc. [8] The unbranded denim market contributes 60% to the overall industry. Levi’s being a premium brand competes in the 40% of this overall denim market. Within branded segment, several new brands have entered with a lower priced products to lure the Rationalist segment. Here again, the respective lower priced branded jeans are not direct rivals for Levi’s. [9] Levi’s has the strongest competition from the likes of Lee and Wrangler. From the survey, it is evident that amongst every 100 individuals, 50 prefer Levi’s followed by 20% each of Lee and Wrangler. With a similar pricing, Levi’s faces the competition with innovative products and brand value.
5.2.2 NEW ENTRANTS Entry into the denim market is not restricted, but the value proposition that Levi’s provides, i.e. brand, makes it challenging for a new player to fight against it. Therefore, for Levi’s this is not a concern area.
5.2.3 SUBSTITUTE PRODUCT As a market leader, Levi’s products can have several substitutes. Within the Levi’s product range, a customer may substitute a Levi’s 501CT for a lower range Levi’s product. Considering the market for pants, one may substitute a denim wear with cargos, chinos, formal pants etc. As per the survey conducted, majority (40%) of the target population would not substitute a denim jeans, but 50% of customers would replace the denim with cargos, chinos or formal wear. The remaining 10% preferred Khakhi or Courduroy over denim jeans.
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5.2.4 BUYERS BUYING POWER 60% of all consumers purchase clothes from large megastores, e.g. Lifestyle, Shoppers Stop etc. 25% buy from branded outlets and ~15% purchase clothes online. With such a high proportion of business routed through the large megastores, puts a lot of power in the hands of the megastores. But, the power balance may be balanced off by the fact that Levi’s is a market leader in denim products.
5.2.5 SUPPLIER BUYING POWER With the lack of information on this front, we are unable to provide any concrete results. But, with more than 150 suppliers of cotton for Levi’s jeans, suppliers may not have a strong power imbalance favouring them.
5. 3
TARGET SEGMENTS
From our understanding above, we will now step into assessing the attractiveness of each of these segments and hence help in deciding which of these should be targeted by Levi’s. The segmentation analysis, suggests the rural and female population is not amongst the target market for Levi’s 501CT product. With these cuts in mind, we will analyse the 3 segments identified on the basis of total apparel spend (proxy to disposable income) and spends on purchase of a pair of jeans.
Market Growth
Competitive Intensity
Market Access
Go getters
High
Low
High
Followers
High
Medium
High
Rationalists
Medium
High
Medium
5.3.1 MARKET GROWTH With a growing middle income, the followers category consumers are likely to have higher disposable income and hence must be targeted vigorously. On the other hand, Rationalist segment, with a large set of population, but are highly price sensitive and disloyal to a specific brand. Such customers should not be the focus group for Levi’s brand.
5.3.2
COMPETITIVE INTENSITY
Rationalists segment has a high degree of competition due to price sensitivity and presence of local unbranded players. Hence, it does not make sense for Levi’s to break into Rationalist s segment with the 501CT product.
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5.3.3 MARKET ACCESS Since all the 3 segments are urban based male population with more than average disposable income, market access, through branded outlets, megastores or online is not a challenge. Although creating a value proposition for each segment maybe a challenge.
6. POSITIONING Levi’s in selected segments of Go getters and Followers, has to face stiff competition from players like Wrangler, Lee, Killer, Spykar, United Colors of Benetton. Levi’s positions itself such that it creates a unique position in the minds of consumers regarding its brand image, durability, comfort through its advertisements, promotional campaigns etc.
6.1. PRODUCT DIFFERENTIAT ION FOR LEVI’S
Levis differentiates 501 from its competitors by highlighting the ‘Anti Fit’ property of jeans Due to the straight cut nature of 501 it gives it a ‘top block’. Since it is not cut to match body shape it has some added benefits such as Greater comfort, less wear on the seat and the ability to look good when worn two sizes too big [10] .
Another differentiating factor for Levi’s is durability of its jeans, which was amply captured by their original logo. A jeans being pulled by two horses and jeans not getting torn apart. The message was clear, Levi’s is durable and this message has been there USP from the inception of the company. Customers equate Levis with durability.
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Levis keeps on reinventing itself and is customer centric in its approach as such it paid attention to what its customer were doing after buying the jeans and introduced 501 CT to appeal to them. In words of Jonathan Cheung, SVP of Global Design “After Hemming, Tapering the leg of 501 is the most requested alteration in Levi’s stores and tailor shops around the wo rld, so we decided to do it for you, creating the 501 CT and the [11] perfect customer taper.”
6.2.
POINTS OF PARITY
Comfort, Value for money and Style statement are the points of parity for Levi’s with respect to other brands since most of the brands like Wrangler, Killer, UCB offer the similar features for their customers.
6.3.
PERCEPTUAL MAPPING
Levi’s positions itself as a high end, very durable jeans. Competitors like UCB position themselves in the similar segment while Killer positions itself as a low end and durable jeans. As can be seen from the mapping, Levi’s is in a position to reach out to segments of Go getters and Followers by using promotional campaigns which would appeal to the specific needs of these consumers.
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Brand Positioning
6. 4
COMMUNICATING POPS AND PODS
Akshay Kumar was hired as the brand ambassador for the 501 jeans in India. He was the face of “Unbutton” campaign in India. Billboards showcasing Akshay Kumar endorsing the jeans were spread all over the cities. Same were printed in fashion magazines also. Levis as part of promoting 501 brand, had sponsored one fashion show with Akshay Kumar as the Show Stopper.
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Current campaign – Live in Levis – This campaign was launched by Levi & Co. all across the world, with primary aim of engaging youth with the brand through social media. Big celebrities shared the story of their association with Levis on social media which started a trend of #LiveinLevis across all social media. This campaign helped Levi’s place themselves among young generation, as youth centric an d differentiated itself from competitors based on rich cultural history. Less
Levis CEO Chip Berg states that “not washing jeans helps jeans to last longer”.
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[12]
7. REFERENCES [1] http://censusindia.gov.in/2011-prov-results/paper2/data_files/india/Rural_Urban_2011.pdf [2] http://www.indiaretailing.com/7/1/83/12640/Denim-Market-in-India[3] http://www.indexmundi.com/india/demographics_profile.html [4] http://scroll.in/article/740011/everyone-in-india-thinks-they-are-middle-class-and-almost-no-oneactually-is [5] http://www.thewire.com/business/2011/11/booming-business-selling-steve-jobsswardrobe/44809/ [6] http://www.denimblog.com/2009/07/celebs-in-denim-president-obama-in-levi-501s/ [7] http://www.cottoninc.com/corporate/Market-Data/SupplyChainInsights/Global-Lifestyle-MonitorIndia/Global%202012%20India.pdf [8] http://archive.financialexpress.com/news/indian-denim-industry-it-s-all-in-the-jeans/1249449/2 [9] http://www.indiaretailing.com/7/1/83/12640/Denim-Market-in-India[10] http://supertalk.superfuture.com/index.php/topic/18387-explanation-of-anti-fit-jeansdenim/ [11] http://levi.in/501CT/
[12] http://www.businessinsider.in/Levis-CEO-Explains-Why-Jeans-Should-Never-Go-In-The-WashingMachine/articleshow/38435785.cms
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