Converse Inc. Situational Analysis

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Table of Contents Company Analysis ……………………………………………………………………………………………………………………………….. 3-­‐6

Consumer Analysis………………………………………………………………………………………………………………………….……. 6-­‐7

Product Analysis……………………………………………………………………………………………………………………..……………. 7-­‐9 Competitive Analysis……………………………………………………………………………………………………………………………. 9-­‐14 Market Analysis……………………………………………………………………………………………………………………………………. 14-­‐15 Other Considerations (Past and Present Communications)…………………………………………………………………… 15-­‐17 SWOT………………………………………………………………………………………………………………………………………………….… 18-­‐19 Primary Research Considerations………………………………………………………………………………………………………….. 19 Work Cited and Appendix……………………………………………………………………………………………………………………… 20-­‐29

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Company Analysis Company Mission and Philosophy Converse sneakers were originally created as a basketball shoe, and the Chuck Taylor All Star is now an iconic part of the fashion industry and American culture. The Converse brand has evolved from a focus on function to a brand of symbolism. The company stands for optimistic rebellion, independence and originality (3). The brand has established itself as “America’s Original Sports Company” and speaks to those who enjoy expressing individuality through their footwear and apparel (4). History In 1908 a small company in Malden, Massachusetts known as Marquis Mills invested $250,000 into a rubber company and the name “Converse” Rubber was born. With only fifteen initial employees the company saw its first big success in 1917 with the production of their iconic All Star Basketball shoe. This shoe would carry the Converse company through years of financial troubles and takeovers and eventually make it into one of the most recognizable, popular brands of today (1). Converse is best known for the first sports endorsed product through basketball player Chuck Taylor. Taylor joined the company in 1921 and made the All Stars famous. However, shortly after this Converse fell into its first financial woes and filed for bankruptcy in 1929. Hodgman Rubber acquired Converse initially, but after diminishing profits the Stone Family began its long period of ownership. During World War II production shifted to supplying the U.S. military with protective footwear, parkas and other equipment. After the war Converse expanded and acquired Taylor Rubber Co. (1961) and Hodgman line of sporting goods (1964). Converse passed hands yet again this time to Eltra in 1972. This was the first of many buyouts for the Converse brand who is now currently owned by Nike. For more details of the numerous bankruptcies and changes in ownership see the detailed timeline below (2). Currently Converse is owned by NIKE. NIKE purchased Converse for $305 million in 2003 after closing many US facilities. Within the last five years Converse has released its first ever apparel line in conjunction with new sneakers. Converse also became involved with the (Product) Red campaign in an effort to join the popular conscious consumer trend. In 2008 Converse celebrated its 100 anniversary and its standing as not only a brand of sneakers but also representing an identity of Americans who view Converse as part of their personality and image (1). Last year (2009) Converse saw a 26% sales increase from 2008 with an overall net income of $18.6 million. (1)

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Timeline: 1908: Capital investment of $250,000 by Marquis Mills Converse establishes Converse Rubber Co. in Malden, Massachusetts with 15 employees. 1918: Production reaches 15,000 pairs daily of heavy shoes, 20,000 when tennis shoe run was large, canvas shoes production doubles. 1921: Chuck Taylor joins Converse with idea for all star improvement. 1929: Converse Rubber Co. falls into bankruptcy. Mitchell B. Kaufman takes over. 1933: Converse purchased by the Stone family, beginning of 39 year period of family ownership and market leadership. 1942: Production shifts for the war effort (Chuck Taylor All Star sneakers for basic training) 1962: Converse develops a low-­‐cut version of the All Star sneaker, shoe of choice of pro players and those looking for a laid back lifestyle. 1972: Stone family dynasty ends its reign and Eltra Corporation purchases Converse. 1974: Launch of “One Star” a low cut performance shoe later adopted by surfers and skaters as a retro, alternative lifestyle look. 1979: Allied Corporation purchases Converse. 1982: Group led by Richard B. Loynd, president of Allied’s Eltra Corporation and John P. O’Neil, Converse president buy Converse from Allied for approximately $100 million. 1983: Converse stock became available on the NASDAQ exchange. 1984: Contracts for manufacturing, distribution and sales of Converse footwear in Japan. International expansion becomes a focus. 1986: Converse acquired by Interco Inc. Within three years Interco files for bankruptcy.

1995: Converse named official shoe of NBA. 2001: Converse files for bankruptcy. William Simon and Marsden Cason purchased all rights to the Converse brand name. 2003: Converse is acquired by Nike, Inc. 2006: Converse Joins (Product) Red, becoming part of the consciousness consumerism movement. 2008: Celebrates 100 Anniversary (2). Organizational Chart CEO-­‐ Mr. Michael Spillane Chief Marketing Officer-­‐ Mr. Geoff Cottrill th

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VP and Global Creative Director-­‐ Mr. Paul Tew VP Apparel-­‐ Mr. Chris Manley Director Marketing UK-­‐ Ms. Cheryl Calegari Director Creative Services-­‐ Mr. Jeff C. Steep Entertainment Marketing-­‐ Mr. Jason Thome Media Relations-­‐ Mr. Keith Gulla (1). Product Offerings As stated above Converse primarily manufactures athletic footwear for men and women. Consumers can purchase sneakers online or at other retailers such as Journeys, Foot Locker, Champs Sports and many other sporting good stores. In an effort to expand their brand Converse released an apparel line to be sold in Target stores around the country. To this day Converse keeps its focus on their footwear lines and has implemented new ideas to keep its products cutting edge and on the top of the consumer wish list. Recent Additions to the Converse line Fall 2009 Music Focused Collaborations: The fall 2009 collection has a new twist and is inspired by albums and concert graphics from the popular band ACDC. The Chuck Taylor All Star is the main focus and comes in a monochromatic black version in reference to the “Back in Black” album. They are also available in different colors and band prints for the MSRP of fifty dollars. In addition, Converse brought Metallica on board to take the music themes even further. Again All Star high tops display band graphics and are available for MSRP of fifty dollars for those wishing to own an extremely unique pair of sneakers. Converse felt these two bands represented their brand image of rebellion, individuality and independence. Fall 2009 Premium Collections: In addition to the music line, Converse also introduced Premium Collections with new silhouettes and details all designed to reflect their message of standing out and originality. New collaborations with Woolrich (outdoor clothing company) led to a new series of shoes with fresh patterns and fabrics. Also, the new Jack Purcell footwear line brought the (Product) Red campaign back into focus with their first African canvas shoe. Lastly, John Varvatos Chuck Taylor All Star Bosey and the Chuck Taylor All Star Outsider boots were inspired by Converse’s origin as a rubber manufacturer. Design Your Own: Now more than ever it is possible for a consumer to not only own a one of a kind sneaker, but to also design a pair themselves. Converse now gives everyday people the control and freedom of creativity to build their own custom pair of shoes (4). Note: Parent company Nike also offers this online feature.

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Interpretation and Insights Converse has a very unique history resulting from multiple changes in ownership, changing production due to the war effort and being the first athletic footwear brand to take advantage of sports endorsements. Despite the changing environment and cultural influences, Converse has managed to keep their core values of optimistic rebellion, independence and originality. Converse recognizes that their consumers respond to these ideals and have tailored their products to meet them. The new online interactive shoe designs, musical collaborations and conscious consumer motives are all examples of efforts to stay current with societal trends and remain a top competitor for athletic footwear.

Consumer Analysis Target Demographic Profile Converse has been able to become a pioneer in building a relationship between the consumer and the company by designing it’s product for people of all ages and gender. Based on the information from Simmons Choice 3 from the year 2006, Converse consumers were split in three distinct ages: 18-­‐24, 25-­‐34, and 35-­‐49 both genders male and female (3). In the first target age group, 51% of Converse consumers are males, compared to the 49% consumers that are females. This information varies from the age groups of 25-­‐34 and 35-­‐49 where females take over 51% of the consumers why buy Converse most often.

The information provided by Simmons Choice 3 about brand loyalty suggested that 12% of the age group 18-­‐24 is “Below Average”, 13% “Average”, and 9.55% are “Above Average” regarding brand loyalty to Converse Shoes (4). From the target age group of 25-­‐34, 20% are “Below Average”, 19% “Average” and 13% are “Above Average” regarding brand loyalty to Converse Shoes. And the last target group from the ages 35-­‐49, 29% is “Below Average” as well as “Average” and 30% is “Above Average” regarding brand loyalty to Converse Shoes. Based on the information of 2009 from Quantcast Profile Audience (2), females were the predominant group by more than 10%. Converse also experienced an increase in sales based on different ethnic groups such as African American, Asian and Hispanic.

Psychographics-­‐Consumer Profile The American audience is the strongest consumer of this product. The Quantcast Profile Audience chart shows a projection from last year’s sales, revealing the consumers behavior in the last 5 months of the year 2009 (2). It is evident that there were high sales in the month of August. The sales began to drop by the end of the month, and slowly rose again around November due to the Holidays.

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Interpretations and Insights Converse is a company that has revolutionized the sport shoe into one that represents a lifestyle. It has created brand loyalty among consumers by offering top-­‐quality, low cost and unique products that identify with the user. The target audience ranges from all ages, and the brand appeals to all audiences, from school kids to fashion designers. This shoe symbolizes a rebellious era of trend-­‐setters who began as basketball fans and transcended to Rock and Roll (1). It personifies a lifestyle of freedom and revolution for its consumers who express their attitudes through clothing. Converse has been innovative in the idea of choosing the right shoe to fit its users by giving its fans the opportunity to make their own design. This new campaign has increased the product’s sales and has perfected the brand’s image into a trendsetting company. Based on the demographic information from Simmons Choice 3 and Quantcast Profile Audience, Converse’s best consumers are females from the ages of 25 to 34 who seek uniqueness in their choice of shoes. Converse consumers are rebellious youngsters who like high quality and low cost products. Converse shoes are a style that represents a personality. With their new "custom made" process, customers have the opportunity to create their own style of shoe and truly represent themselves through the brand.

Product Analysis

“Celebrate” and “Provoke”, are words that CMO Geoff Cottrill used to describe the advertising strategy . He states that the “whole mission is to inspire originality and be an advocate and catalyst for creativity”. But how can a shoe with the same look create originality and creativity? (4) “Buy. Make. Play” (1), three words that are plastered on the home page of the Converse site. Buy Converse, Make your own, or Play around with the Converse experience. Jack Purcell, Chucks, All Stars, Converse, Chuckies, Chuckie T’s or whatever name you may affectionately call them, Converse All Stars have seemed to transform from a popular basketball shoe in the early 1900’s to a brand, and now to a lifestyle. Through mass popularity to bankruptcy, Converse has stood the test of time, staying true to the brand and the design of the original shoe. Converse tries it’s best to stay so true to the brand that even on its site it gives a timeline of production, and the monumental events throughout the century. Product History Marquis Mills Converse, a respectable manager at a footwear manufacturing firm, opened the Converse Rubber Shoe Company) in Malden, Massachusetts in 1908. The company was a rubber shoe manufacturer, providing winterized rubber soled footwear for men, women, and children. By early 1910, Converse was producing $4,000 shoes daily, but it wasn't until 1915 that the company began manufacturing athletic shoes for tennis. In 1917 the Converse All-­‐Star basketball shoe was introduced. Then in 1921, a basketball player named Charles H. "Chuck"

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Taylor walked into Converse Inc complaining of sore feet, blisters, and aches and pains. Converse claimed that these other pains could have so much to do with the shoes he was wearing during and outside of his games. Converse decided that Mr. Taylor would work as a salesman and representative, promoting the shoes around the United States, and in 1923 his signature was added to the All Star patch located on the outside of the high top shoe. While so many people all over the world refer to the converse shoe as “Chucks” or “Chuck Taylors”, most people don’t know the significance of the name, or who Charles H. “Chuck” Taylor is. When the United States entered World War II in 1941, Converse shifted production to manufacturing footwear, apparel, boots, parkas, rubber protective suits, and ponchos for pilots and troops. World War II provided Converse with a singular opportunity. Appliances and products for servicemen overseas became a focus of Converse manufacturing. During the 1950’s and 60’s, there was the birth of Rock N’ Roll in which Converse had said “was in search of a uniform”. The high top converse allowed for rock n’ roll stars to pair the shoes with anything. Most commonly, they were worn with a leather jacket, blue jeans and t-­‐shirt. This was huge for Converse because for so long Converse had mostly been associated with athletes, giving them few tunnels of opportunity. Previously if consumers did not watch basketball or tennis, there was a larger chance of them not being interested in Converse, but rock n’ roll was so huge at the time that music seemed to be a great opportunity for Converse. In the 1970's, Converse purchased the trademark rights to Jack Purcell sneakers from B.F. Goodrich. Converse lost much of its share in the marketplace in the 1970s and onward, with new competitors, including Puma and Adidas, then Nike, who introduced radical new designs to the market. Since Converse had only one specific look, it was unable to keep up with the new designs that other shoe companies were able to produce. Converse found that they were no longer the official sneaker of the National Basketball Association. The loss of market share lead Converse to file for bankruptcy on January 22, 2001 and the last factory in the United States was closed. On July 9, 2003, the company accepted a $305 million purchase offer from rival Nike. Since then Converse has been back in full affect adhering to the product that they originally created: a distinct look wrapped around a complete lifestyle. Product Attributes The Physical It is evident that the Converse shoe has a distinct look. The Chuck Taylor All Star has remained virtually unchanged-­‐ -­‐and a best seller at that-­‐-­‐since it debuted in 1918. The shoe is made of a canvas material with a rubber sole, but unlike many other sneakers, the rubber sole comes from under the bottom of the shoe onto the side. The Converse All Star has had the same physical makeup since they were first introduced in 1918 (3). Few mainstream brands have managed to last as long as the All Stars. Not until the later years of the 20 century did Converse step away from the traditional black and white canvas shoe. Now Converse offers multiple colors of as well as prints (5). th

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Campaigns/Formulas Following the bankruptcy of Converse Inc., Converse was bought by Nike, and soon after Converse launched an ambitious ad campaign that expressed the brand by playing music and engaging in sports, arts and fashion. First, Converse made their online site and store much more interactive. With the advancement of computers and the Internet, Converse has been able to sell their shoes with the click of the mouse, and also allows consumers to create their own ideal shoe. Shoes can be designed with a plethora of colors, designs, and styles, and Converse even allows consumers to get their name printed across the heel. This strategy reflects the brand by allowing Converse to stay true to the original make and design, all the while competing with other sneakers with multiple looks. Converse took a different approach then it had years ago. Instead of recruiting pro athletes to be icons for the brand, Converse recruited entertainers such as Pharrell Williams, N.E.R.D., Santogold and Julian Casablancas (4). Now Converse was able to transform its previous demographic from the all American consumer and athlete, to a wider much broader demographic, everyone who listen to music. Converse teamed up with Apple’s Ipod and Youtube with extended versions of the television commercial (4). In these commercials Converse plays on interconnectedness through individuals while ties of nostalgia tug on their inner child. Visuals are modeled after paper-­‐doll chains, and connected by their sneakers. Instead of having an athlete take the Converse with them, and be an advocate for the brand, Converse now used musical celebrities to endorse the product by making them wear it, and associating the product as a way of life: music, while still evoking the old brand emotion. Interpretations and Insights Overall, Converse has managed to stick to its original format. Throughout Converses’ history, the brand has always managed to have someone in popular culture be an advocate of the brand, and somewhat catapult the business. Whether it’s Chuck Taylor, Jack Purcell, or Pharrell Williams, Converse has managed to stay true to the same look of the shoe, but has changed the way many consumers view them. Now consumers are able to customize their shoes, and get their sneakers in an array of colors. This is a great way for Converse to compete with other sneaker companies. Also the newer ad campaigns mixed with the original formula of Converse has allowed for a new and better twist to the shoe, playing on nostalgia.

Competitive Analysis Throughout the history of Converse, various marketing strategies and brand positioning have created multiple images associated with the brand, thus varying its primary competitors. Converse first experienced success with its creation of the All Star shoe, made famous by sponsor Chuck Taylor, which was primarily marketed towards the basketball segment of the sneaker market. This style is still prevalent today in the Converse line, however its

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image has shifted from strictly a sport shoe to one that expresses the individuality of its consumers. Converse’s competitors have followed a similar transfer from sport shoes based upon functionality to shoes appealing to fashion and style, while still maintaining the sport performance image and quality. Thus Converse’s primary competitors are Adidas, which competes mainly in the basketball market segment, Puma, which competes in both sport and lifestyle/image segments, and Vans, which competes primarily in the lifestyle/image segment. Adidas: Nike Inc.’s 2003 acquisition of the Converse brand was the catalyst for competition between Converse and Adidas in the basketball shoe market. Adidas is the #2 sporting goods maker worldwide with a market share of 13.8% which is just behind Nike, who possesses 16.4% of the market (1). This has prompted Adidas to rev up their marketing strategy in order to gain market share at Nike’s expense. Adidas recently acquired the Reebok brand in 2006 for 3.8 billion dollars in an attempt to shave some market share from Nike, particularly Nike’s Converse subsidiary (2).

They looked to achieve this by providing customers with more relevant products, strengthening the brand, improving their product design and innovation, and working towards achieving a market leader position internationally (3).

The Converse brand is sold in thirteen countries worldwide, and now that it is under the control of Nike, new resources have become available in order to widen this reach (4). Adidas has acknowledged this threat to their market share, and has reacted by boosting their marketing abroad, especially in Asia. According to Market Share Reporter, in 2007 Nike held an 11.1% share in the sports apparel market in China, while Adidas was just lingering behind at 9.8%. Adidas is making strides to take the lead, for instance the Adidas brand sponsored the Beijing Olympics in 2008, and recently opened their biggest store to date in Beijing which features unique Chinese inspired designs (2).

Adidas’s buyout of Reebok in 2006 was aimed at gaining market share in the basketball shoe segment at the expense of Nike, and particularly Converse. However this move has been speculated to have opposite effects, in that Adidas has been chipping away at Reebok’s 2.5 billion dollar basketball footwear market instead of Nike’s. With the purchase of Reebok, Adidas took over Reebok’s 400 million dollar deal with the National Basketball Association, which is scheduled to end in 2011. With this they have planned to create ten new NBA-­‐Adidas stores along with adding NBA products to 1,000 of its stores. These moves have increased Adidas’s basketball market share from 9.9% in 2006 to 11% in 2007.

However, Nike and their Converse subsidiary have also staged huge gains while Reebok lost share. John Horan, publisher of Sporting Goods Intelligence stated, “(Adidas) moved the needle a little big, but more at the expense of Reebok than anyone else” (5). This conclusion may require Adidas to rethink their marketing strategies and make a distinct decision regarding whether they will promote their newly acquired Reebok brand or completely dissolve it within the Adidas brand.

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Nike’s control over the Converse brand and its various designs gives Converse a competitive edge in the marketplace under Nike’s lead to provide customer relationship enhancement, superior and innovative product lines, and supply chain management (3). Thus the resources Nike provides will allow Converse to acquire new markets worldwide and compete directly with Adidas in the basketball shoe market. However, according to Simmons Choices 3, 30% of people who bought basketball shoes in the last twelve months on average purchase the Adidas brand most often, while only 14% of people who bought basketball shoes in the last twelve months buy the Converse brand most often, which proves that Converse must reevaluate their marketing strategy targeting the basketball shoe market in order to successfully compete directly with Adidas and eventually gain market share (Appendix 1).

Puma: The Puma brand was founded in 1948 when German brothers Rudi and Adi Dassler split their shared brand Gebrüder Dassler OHG into Adidas and Puma. Both brands have grown substantially since then and now directly compete against each other (6). In the 1990s, Puma focused primarily on mainstream sports, movies, and music, which is similar to Converse’s original marketing strategy. However, their image shifted dramatically when Antonio Bertone came to Puma in 1998 at age 21 and became the chief marketing officer for Puma’s new “Sport Lifestyle” division which soon became the heart of the brand. This strategy to move past their goal of competing directly with top sport shoe makers Nike and Adidas has resulted in Puma becoming the fourth largest athletic apparel company in the world with a 6% global market share (7).

Bertone had originally consulted for Converse but was rejected for a job because he was not “corporate enough”. However his innovative ideas were the catalyst Puma needed to move the brand into the fashion oriented market focused on originality, much like what Converse’s marketing strategy encompasses. Marshal Cohen, chief industry analyst at NPD group stated, “For Puma, it’s become more about style than function”, which was the exact goal of Bertone. This switch from sports to fashion has resulted in a 6.6% sales increase in 2008, which is the highest growth rate among all of Puma’s primary competitors (8).

In 2006, Puma entered a five year corporate development program with an objective to enter new market categories, invest in its brand, and reach further geographically. PPR, a French luxury goods company bought out 27% of Puma’s shares in 2007 and immediately promoted the goal of making Puma “best at blending fashion with athletics” (9). This program was immensely successful; as of 2008 Puma distributes its products to 130 countries worldwide and designs shoes for a vast variety of sports including soccer, tennis, motocross, sailing, golf, running, baseball, and basketball (6). These objectives have all aimed towards the primary goal of pushing Puma to become the largest “sport lifestyle” company in the world.

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Puma has flourished in the sport lifestyle shoe market and poses as a serious threat to Converse’s image of originality and independence. A segment of Puma.com, called the Archive, includes videos and images that symbolize the true essence of the Puma lifestyle, which is quoted as “style with significant substance”. The site features musicians and artists who tell stories related to their Puma experience, and explain the Puma brand as “something wild and free beyond performance” (10). The Converse brand is viewed as a lifestyle as much as a shoe company and Puma’s recent marketing launch to create experiences directly associated with their brand poses as a serious threat to Converse.

Vans: The core of the Vans brand is its fashionable image of extreme sports and youth rebellion, and has grown in popularity since its 1982 debut in the movie Fast Times at Ridgemont High. Vans produce shoes in a variety of categories including skateboarding, snowboarding, BMX, surfing, and casual wear, and each category has an iconic representation attached to it through Van’s sponsorship of athletes, musicians, and extreme sporting events. For instance, Vans sponsored the opening of ten indoor state parks and also owns the rights to 70% of the annual Warped Tour, which features various heavy metal and alternative rock bands who perform in forty North American cities each summer (11). By sponsoring these unique events, Vans is reaching their core audience directly and becoming part of their youth experience, which is essential for gaining brand loyalty.

Vans was the first to capitalize on the 1990’s skateboard craze, which gave the brand a huge boost into the extreme sports shoe market. This trend was just beginning to subside when in April of 2004 VF Corporation, the largest publically held apparel company in the world, bought out the Vans brand for 400 million dollars (11). Michael Patcher, an analyst at Wedbush Morgan Securites, stated, “VF is buying a tired brand that still has a strong niche position”, and the primary goal of VF Corp at the time of the buyout was to expand this niche to include new market categories (12). The Vans brand gave VF Corp their first major entry into the footwear business and VF Corp gave Vans the financial backing and brand expertise to move their core audience beyond 12-­‐24 year old males interested in action sports. Vans CEO Gary Schoenfeld proclaimed in 2004 at the time of the buyout, “VF means more resources available to us”, which would prove to be essential in allowing Vans to move into more market segments (12).

Just two years after Vans was acquired by VF Corp, the brand’s net worth rose from 340 million dollars in 2004 to 500 million dollars in 2006. This sharp increase in sales was primarily seen in the company’s ‘classics’ shoe, which rose from 15% of all sales in 2003 to 50% in 2006. With the help of VF Corp, the Vans brand experienced such an increase in sales due to the use of powerful branding, new innovative performance products, and sponsorship of athletes in action sports to boost awareness of the brand. Vans’ marketing strategy follows three A’s: authenticity, aspiration, and awareness, all of which have allowed Vans to acquire a strong niche in the lifestyle market with a classic product based around the “skateboarding as a culture” ideal, however not limited to just passionate

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skateboarders. Vans has become an expert in targeting their consumers in their own element, through bold graphics, custom shelving, and window displays in various local skates hops nationwide (13). The key to moving the brand past a mere skateboarder’s product has been the brands’ strong commitment to authenticity, which appeals to those who may not directly participate in the sport but still appreciate the genuineness of the brand and are thus attracted to their lifestyle products.

In 2008 Vans experienced a 15% sales increase due in part to their international expansion, particularly in the Chinese market, and also to the online community the brand has developed which includes videos of sponsors and personal stories from over 90,000 consumers (13). Vans hopes to increase its net worth to 1 billion dollars in 2013, which is a very ambitious and must include strong marketing strategies in the near future (11). Van’s ability to market directly to their core audience in places such as skate parks and musical performances allows the brand to become completely engulfed in the culture and experiences of its audiences, which has proved to be crucial to the success of the brand. Converse has taken similar steps to be known as an iconic cultural symbol instead of merely a shoe company, and may be able to learn from Vans’ strategies which have gained such strong brand loyalty among its consumers.

Interpretations and Insights Much of Converse’s marketing strategy relies on creating an image of independence, creativity, and rebellion through its consumers. Converse has experienced success with creating such a brand image, which is evident in the brand loyalty consumers feel towards it. For instance, according to Simmons Choices 3, 20% of people in the general population who buy the Converse brand most often rated their loyalty to brands above average. This percentage was the highest among those asked about brand loyalty in other samples of the population who buy Adidas, Puma, or Vans most often (Appendix 2).

The creation of brand loyalty is crucial for the future success of a brand, and Converse must continue its strategy of becoming one with the experiences of its consumers in order to further reinforce its consumers’ loyalty.

Company websites have become a fundamental characteristic of the company itself as well as a forum for new ideas and events that have further merged the gap between the brand and their target audience. Trendwating.com released an article in 2006 titled “Consumer-­‐Made”, which is a new online trend in which consumers become actively involved in voicing their creativity and opinions through a company’s website. This trend has seen enormous success; these online forums allow the company to tailor their products directly to consumer desires, and consumer involvement creates a strong connection to the brand. Converse and all three of its primary competitors offer consumer-­‐made divisions in their company websites, however Converse has especially succeeded in this program by offering the “Converse Gallery”, which features dozens of 24 second films created by Converse fans that express what Converse shoes mean to them. These videos are then broadcasted on converse.com and have a chance to be aired on the MTV cable network (14). Converse has been very successful in

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creating marketing strategies that are consumer oriented, in that the consumer initiates action with the brand and thus does not feel intruded upon. Further evidence of this success is seen in Appendix 3, which shows the amount of internet hits Converse’s and each of its competitors’ websites have received. Converse is leading for the majority of 2009, which proves the success of its marketing strategy, thus implying the brand should continue with strategies that promote direct consumer involvement.

Market Analysis

The United States footwear industry consists of roughly 100 manufactures and 1,500 wholesalers, with total revenue of about $25 billion (1). Reflecting the current economic downturn in the US economy, US apparel and footwear imports in 2008 experienced their worse decline since the months after September 11 , 2001(2). Retail sales are down 4.0 percent from 2008 according to United States Census Bureau. (2) The popularity of American brands in the international market is steadily growing. Big companies such as NIKE receive almost 50% of their revenue from international sales. According to Hoovers, even in this economic struggle Converse still has seen an increase in sales of 26% due to its consumer demand in the United Stated and internationally (1).

According to Simmons, people on the pacific side of the United States purchase far more Converse than other sections of the country. This is the target region in which brands need to market because that region has a tremendous amount of potential buyers for Converse in comparison to other regions. Even though Converse sells most of their products in the pacific region, where it is second in the area to the Vans brand, there is still room for growth. Converse sales are a lot lower in the southern and eastern parts of the United States.

Interpretations and Insights Due to the fairly flat market in shoe sales, companies must rely on marketing and advertising. Converse shoes have proven themselves in this struggling market through creative advertising that has truly captured their consumer’s personalities. Converse must keep up with this strategy, and with the demand for shoes driven by fashion Converse’s image has given them the ability to market and design attractive personal shoes. With American shoes increasing in foreign markets, Converse must hold on to their share of the international market through advertising. While others are failing in this market, Converse is prevailing.

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Past and Present Communications

CONVERSE ADVERTISING TIMELINE

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1921: Charles “Chuck” Taylor enters Converse and becomes what could be called America’s first player-­‐endorser. (5)

1930s: Creating the first-­‐ever signature basketball shoe, Chuck Taylor’s signature is added to the All Star ankle patch. (5) 1935: Jack Purcell, Badminton champ designs his innovative and sturdy signature court shoe. (5)

1984: LA Olympics Converse is official footwear sponsor. Wearing Converse the U.S. Men’s basketball team wins gold. (5) 1986: Converse launches the “Choose Your Weapon” campaign featuring two of the game’s biggest rivals Larry Bird and Magic Johnson (5). 1991: Converse launches “Grandmama” campaign, featuring Larry Johnson dressed as Grandmama (5). (Right Photo from Icdnturner.com) 1994: The seventh “Grandmama” commercial “Welcome to 3-­‐Point Land” premiers at Super Bowl XXVIII. (5) 2001: Series of print ads only released in Japan, directed by Yoichi Komatsu. (7)(Below) 2003: Converse signs basketball legend John Isaacs, the last surviving member of the New York Rens. (5)

2003: Converse signs Dwayne Wade, Kirk Hinrich and Jameer Nelson. (5) Also in that year, a series of print ad’s released in Japan directed by Toru Fujii. (7) (Right)

2004: Converse launches Brand Democracy campaign. Converse allowed fans to create their own ads; anyone with a camera could submit a 60 second film. 30 ads were shown on TV. (6)

2005: Converse launches apparel line in combination with John Varvatos and the Dwayne Wade signature line. (5) 2006: Converse joins (PRODUCT) RED™, becoming part of the consciousness consumerism movement. Series of TV ads released, “spinning ball”, “faith” and “cooking”, ads all featuring Dwayne Wade. (7)

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2007: Converse releases a series of Mask print ads and Shoe People ads where people are actually wearing Converse shoes as clothes: only released in Poland. (7) (Bottom of previous page)

2008: “Connectivity.” This new campaign features legendary icons from the worlds of music, art, sports and fashion. Campaign Launches in Over 75 Countries Across EMEA, Asia Pacific and the Americas and Features James Dean, Sid Vicious, Hunter S. Thompson, Dwayne Wade, Billie Joe Armstrong, Common, M.I.A. and many more.(2)(Right Photo from Popculterpost.com) 2008: Music collaboration with Pharrell Williams, N.E.R.D., Santogold and Julian Casablancas. The track, My Drive Thru, was released to fans through digital download at converse.com and a corresponding music video that was launched with a myspace.com online premiere followed by a broadcast premiere on MTV. (4) 2008: Converse launches 1Hund(Red) a special artist series with proceeds going to the Global Fund. A yearlong launch of shoes designed by notable artists, including Auckland-­‐ based illustrator, Dennis Juan Ma. (3)(Left)

2009: Mutant Campaign launched featuring fantasy based characters that really catch your attention and show the customization of converse shoes. (8)(Right)

Interpretations and Insights

Converse has stepped away from exclusively marketing as a sports shoe, and instead of being endorsed by just athletes, their advertising has expanded to reach their other consumer. They have positioned themselves to appeal to both consumer’s sports player and the free spirit rocker. Converse’s new creative ads have proven themselves in a tough market, with the help from international sales. These creative ads have really spoken to the new consumer by showing how they can express themselves through their shoes. Converse also hit gold with the strategy of letting consumers create ads; this allowed fans to really express what Converse meant to them. Not only did this create more of a fan base, but it also saved Converse a substantial amount of money. Instead of spending 300,000 plus for a 30 sec spot, they paid the top commercials 10,000 a piece. Converse’s marketing staff

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has the right idea; they truly caught the consumer’s personality in a creative way and the consumers are speaking back by making commercials or by just buying the shoes they love.

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SWOT Analysis Strengths Overall Converse’s biggest strength is having a strong brand identity and attracting consumers who not only wear their sneakers for functional reasons but also as a means of expression. Consumer loyalty is high with Converse sneakers because it represents a lifestyle and stereotype of people often seen as “rocker” or “unique”. Converse has managed to become an icon that that is easily recognizable and often even imitated. Their ability to incorporate the latest cultural trends and still maintain their original appeals has allowed them to grow as a company and as a cultural image. Now more than ever Converse has access to more resources and technology which will be used to build upon an already very successful brand. Weaknesses Converse is widely known for having a distinct look and a distinct brand identity. The Chuck Taylor All Star has not changed in any form other than the array of colors that it comes in. For so long the consumers of Converse have been stereotyped. Over the years people who wear converse are either grunge, punk, unique or “too cool”, leaving out other people who do not fall into any of those categories. Having a strong brand identity is usually very beneficial for a company. Most often companies feel that by having a strong brand identity, they will always be able to sell to consumers. Unfortunately, this may mean that they will be only able to appeal to a certain demographic. By appealing to a more narrow demographic, Converse may not be able to sell products to their full potential, allowing for a big gap in the market share with its competitors. Opportunities While other shoe companies are struggling to turn a profit, Converse is increasing sales. They need to take advantage of this opportunity while other companies are low; they have to position themselves as a prominent and dominant shoe company. Converse has to keep coming out with creative ads and really speak to their consumer, if they fray from that strategy it could turn for the worse. With the popularity of American brands in international markets increasing, Converse should keep creating more creative shoe ideas and must hold on to their image overseas by continuing their unique advertising efforts to stay in the market. Converse has already taken advantage of the online sales with their new “design your own shoe” campaign, but they must make consumers aware of the capabilities this site holds in really displaying their creative possibilities. Converse has come out with an apparel line but should make the clothing line better known by creating some sort of ad campaign that focuses on the clothing line and by designing more clothes for both men and women.

Threats

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The Converse brand experiences various threats related to its competitors and their marketing strategies. For instance, Converse’s primary competitor in the basketball shoe market, Adidas, recently acquired the Reebok brand and a massive deal with the NBA along with it. This move poses as a serious threat to the iconic All Star shoe in the Converse line, in that Reebok’s partnership with the NBA now has all of the financial support and resources associated with the Adidas brand. In the sport lifestyle division, Converse largely is threatened by the Puma and Vans brands. Puma’s marketing strategy has recently become very similar to that of Converse, and includes such aspects as online communities to gain consumer involvement and promote brand loyalty. Vans has always been a representation of their target audience, and has reached the core of their consumers’ experiences through action sports and musical event sponsorships. Now under the control of VF Corp, Vans has more resources to produce strong marketing campaigns. Both of these brands have implemented strategies that build strong brand loyalty, which threatens Converses’ ability to gain market share at their expense.

Primary Research Considerations To further make strategic recommendations and gather more information, primary sources would become a focus of research. One of the most useful sources is the Zmet Association with the use of imagery associations between the brand and the consumer. Another useful primary source of information is surveys. With this method, specific questions are directed towards the consumers or potential consumers in order to discover what their opinion is about the specific brand, in this case Converse shoes. The series of questions are asked with the purpose to engage into the consumer’s mind and predict their behavior. Lastly focus groups would be beneficial in further understanding the intrinsic motives of why people buy Converse shoes. If a brand has a strong identity and understands why their consumers continue to show loyalty, they can further expand and discover new innovative ways to attract different people and increase their profits.

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Work Cited

Company Analysis 1. 2. 3. 4. Consumer Analysis 1. "Converse ." Converse Shoes. 2009. Converse Corporation, Web. 22 Feb 2010. http://www.converse.com/About/ "Quancast Audience Profile." Quanstcast. 2010. Quantcast Corporation, Web. 22 Feb 2010. 8. "Mutants." Coloribus. Web. 20 Feb 2010. .

Past and Present Communication

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Appendix Consumer Analysis Appendix Consumer Analysis, Demographics and Psychographics I. II. III. IV. Quancast Audience Profile: Monthly Graph Quancats Audience Profile: Index of yr. 2009 Simmons Choice 3-­‐ Gender Based Simmons Choice 3-­‐ Loyalty Based

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Based on Gender Total Sample elements Total Sample

AGE: 18 -­‐ 24

AGE: 25 -­‐ 34

AGE: 35 -­‐ 49

(000) Vertical Index Base (000) Vertical Index Base (000) Vertical Index Base (000) Vertical Index Base

212,488

100%

100%

100

100%

24,115

11%

100%

100

11%

36,350

17%

100%

100

17%

62,037

29%

100%

100

29%

MALE 102,474

100%

48%

100

48%

12,179

12%

51%

105

5.73%

17,756

17%

49%

101

8.36%

30,618

30%

49%

102

14%

FEMALE 110,014 100% 52% 100 52% 11,936 11% 49% 96 5.62% 18,594 17% 51% 99 8.75% 31,419 29% 51% 98 15%

Horizontal

Horizontal

Horizontal

Horizontal

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Based on Loyalty (JAN 06 -­‐ OCT 06) Copyright SMRB 2007 Total Sample Total Sample

AGE: 18 -­‐ 24

AGE: 25 -­‐ 34

AGE: 35 -­‐ 49

elements Sample (000) Vertical Horizontal Index Base Sample (000) Vertical Horizontal Index Base Sample (000) Vertical Horizontal Index Base Sample (000) Vertical Horizontal Index Base

213,768

100%

100%

100

100%

2,335

23,954

11%

100%

100

11%

3,518

36,732

17%

100%

100

17%

7,142

61,273

29%

100%

100

29%

BELOW 3,770 34,099 100% 16% 100 16% 389 3,969 12% 17% 104 1.86% 584 6,864 20% 19% 117 3.21% 1,179 9,902 29% 16% 101 4.63%

AVERAGE 7,339 65,083 100% 30% 100 30% 810 8,380 13% 35% 115 3.92% 1,206 12,307 19% 34% 110 5.76% 2,188 19,109 29% 31% 102 8.94%

ABOVE 4,085 34,156 100% 16% 100 16% 368 3,263 9.55% 14% 85 1.53% 495 4,460 13% 12% 76 2.09% 1,177 10,237 30% 17% 105 4.79%

24,467

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Competitive Analysis Appendix Appendix 1

Total Sample of sneakers/athletic shoes bought in last 12 mo. NCS/NHCS: FALL 2006 ADULT FULL YEAR (JAN 06 -­‐ OCT 06) Copyright SMRB 2007

Total Sample

BASKETBALL

CASUAL SNEAKERS

OTHER

elements Sample (000) Vertical Horizontal Index Base Sample (000) Vertical Horizontal Index Base Sample (000) Vertical Horizontal Index Base Sample (000) Vertical Horizontal Index Base

24,467

213,768

100%

100%

100

100%

1,322

13,715

6.42%

100%

100

6.42%

6,308

53,311

25%

100%

100

25%

2,834

22,728

11%

100%

100

11%

ADIDAS 2,559 18,649 100% 8.72% 100 8.72% 424 4,053 22% 30% 339 1.90% 1,317 9,235 50% 17% 199 4.32% 621 4,153 22% 18% 209 1.94% CONVERSE 870

6,560

100%

3.07%

100

3.07%

229

1,933

29%

14%

459

0.90%

569

4,274

65%

8.02%

261

2.00%

234

1,948

30%

8.57%

279

0.91%

PUMA

796

4,883

100%

2.28%

100

2.28%

153

1,436

29%

10%

458

0.67%

499

3,439

70%

6.45%

282

1.61%

238

1,556

32%

6.85%

300

0.73%

VANS 556 4,105 100% 1.92% 100 1.92% 104 747 18% 5.45% 284 0.35% 357 2,814 69% 5.28% 275 1.32% 201 1,581 39% 6.96% 362 0.74%

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Appendix 2 BRANDLOYALTY

NCS/NHCS: FALL 2006 ADULT FULL YEAR (JAN 06 -­‐ OCT 06) Copyright SMRB 2007

Total Sample

BELOW AVERAGE

AVERAGE

ABOVE AVERAGE

870

6,560

100%

3.07%

100

3.07%

123

1,073

16%

3.15%

103

0.50%

259

1,878

29%

2.89%

94

0.88%

173

1,311

20%

3.84%

125

0.61%

ADIDAS 2,559 18,649 100% 8.72% 100 8.72% 411 3,011 16% 8.83% 101 1.41% 808 5,831 31% 8.96% 103 2.73% 449 3,154 17% 9.23% 106 1.48% 213,768 100% 100% 100 100% 3,770 34,099 16% 100% 100 16% 7,339 65,083 30% 100% 100 30% 4,085 34,156 16% 100% 100 16%

VANS

796 556 4,105 100% 1.92% 100 1.92% 102 780 19% 2.29% 119 0.36% 153 1,290 31% 1.98% 103 0.60% 99 710 17% 2.08% 108 0.33%

24,467 CONVERSE

PUMA

elements Sample (000) Vertical Horizontal Index Base Sample (000) Vertical Horizontal Index Base Sample (000) Vertical Horizontal Index Base Sample (000) Vertical Horizontal Index Base

4,883

100%

2.28%

100

2.28%

105

662

14%

1.94%

85

0.31%

270

1,685

35%

2.59%

113

0.79%

135

788

16%

2.31%

101

0.37%

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Appendix 3

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Market Analysis Appendix Simmons 1

NCS/NHCS: FALL 2006 ADULT FULL YEAR (JAN 06 -­‐ OCT 06) Copyright SMRB 2007

SOUTH

PACIFIC

Total Sample

4,827 42,132 100 3,363 32,327 100 309 2,494 193 2,540 27,065 100 111 600 60 218 1,236 128 4,011 26,618 100 50 455 55 92 430 58 655 4,512 123 3,856 41,758 100 167 851 104 24 299 48 354 2,751 98 288 1,887 233 7,867 68,376 100 68 771 60 110 491 81 178 1,942 82 57 398 64 5,870 43,868 100 235 1,623 77 125 870 91 465 2,390 103 31 360 69

24,467 213,768 100 165 1,389 103 235 1,361 87 337 2,958 81 58 373 73

CONVERSE 870 6,560 100 227 1,556 155 802 5,348 90 37 476 59

PUMA 796 4,883 100 570 4,096 107 95 849 65

ADIDAS 2,559 18,649 100 85 611 73

VANS 556 4,105 100

NORTHEAST

SOUTH EAST

SOUTH WEST

EAST CENTRAL

WEST CENTRAL

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