Introduction
The purpose of the present report is to analyze the marketing strategy of Converse USA, a footwear company, and provide recommendations for improving its marketing strategy. First, a brief overview of the company is provided to gain an understanding of the internal context of the marketing strategy. Second, a statement of a current marketing issue is provided. Third, the current marketing strategy is described using the marketing mix (7Ps) analysis. Fourth, SWOT, PESTLE, and marketing capabilities analyses are included to assess the current marketing strategy against strengths, weaknesses, opportunities, and threats of the company. Fifth, the findings of the analysis are summarized to outline the central problems. Finally, recommendations are provided to address these problems.
Company Overview
Converse Inc. operates as a designer, marketer, and distributor of casual athletic footwear and apparel. The company is famous for its sneakers, such as Chuck Tailor All Star, Chuck 70, One Star, and Jack Purcell. The company has a rich history starting in the early 1900s. The company was established as a subsidiary of Converse Rubber company in 1908 (Cengage, n.d.). Since Great Depression, the Converse has been repurchased by different companies several times. It emerged as an independent public company in 1994 and filed for bankruptcy in 2001 due to a drastic drop in sales.
In 2003, the company was acquired by Nike for $315 million (Trefis Team, 2019). This purchase formed a very strong alliance, as Converse was able to use Nike’s resources to improve its performance (see Figure 1 for the Logos of the companies). Between 2003 and 2019, the company’s revenues rose from $200 million to $2 billion, and the profit margin grew to 5.5%, which is 2% higher than Nike’s profit margin (Trefis Team, 2019). Even though the company is currently owned by Nike, it continues to exist as a separate recognizable brand of Chuck Taylor All Star with a rich heritage, iconic silhouette, and unique style.
Problem Statement
Converse is an easily recognizable brand in the US due to its well-known products. In the 2000s, Nike’s marketing team utilized the heritage of the brand to revive the company and make it a footwear giant. The marketing team utilized the new trends in clothing due to the rise of pop culture and skateboarders, which created a new marketing niche for the company (Urban Industry, 2016). Converse became known for its numerous collaborations with other brands, including Fear of God, Midnight Studios, Maison Margiela, Ambush, JW Anderson, Golf Le Fleur, and Comme Des Garçons Play (Rucker, 2021). The company’s marketing campaign focused on outdoor and in-store promotions and advertisements (Joseph, 2020). While the marketing strategy adopted in the 2000s remained adequate for more than a decade, recent changes in the outside environment call for significant changes in the marketing campaign utilized by the company.
The pandemic had a drastic effect on the majority of industries in the US and abroad. The footwear industry also experienced a significant decline during the first months of the pandemic, when shoe sales in the US dropped from $4 billion in December 2019 to $462 million in April 2020 (Statista, 2021). Even though the industry experienced a rebound to $3.7 billion in March 2021, the footwear industry was reshaped entirely (see Figure 2 for detailed sales statistics).
Old marketing methods based on in-store promotions and exhibits no longer work, as people are forced to limit their movement due to the pandemic (Joseph, 2020). Even though Converse tried to make adjustments by moving to online promotion and significant discounts to stay competitive during the days of the most significant drop in sales, the new marketing strategy lacked a common idea behind the campaign. At the same time, after the first waves of the pandemic, the environment became favorable to casual shoes, which was not acknowledged in Converse’s new marketing strategy (Zumbach, 2020).
In summary, the analysis revealed that a significant change in the marketing strategy is needed for Converse to take advantage of the current situation with the pandemic. The marketing strategy utilized until 2020 is no longer consistent with the external environment. A holistic approach to the marketing strategy is required to form the new image of the company and send a new message to the customers. This message should be coherent with the changes the pandemic brought to the world. Additionally, the marketing strategy needs to utilize the strengths and opportunities while addressing weaknesses and threats.
Marketing Strategy Overview
Marketing Mix
One of the most useful instruments for familiarizing with the marketing strategy is to utilize the marketing mix approach. There are several variants of the marketing mix analysis depending on the number of included components. The present paper uses the 7P approach, which discusses the product, price, place, promotion, people, process, and physical evidence. Table 1 below provides a brief overview of the marketing strategy using the 7P method.
Table 1. Converse’s marketing mix
Marketing Strategy Highlights
There are several aspects of the marketing mix that deserve special attention. First, as it was mentioned in previous sections of the present report, the Converse is famous for its collaborations (see Figure 3 for additional examples). These collaborations serve as a source of promotion and product line diversification to address the needs of customers from multiple segments. This is a unique feature of Converse that allows it to have positive public relations and high profit margins.
Second, Converse’s promotion strategy is a wonderful example of using music to advertise products. Converse views musicians not as customers but as media and utilizes collaborations with super artists, like Pharrell Williams, Julian Casablancas, the Gorillaz, and James Murphy (Sound Identity, n.d.). The company also launched a project called “Rubber Tracks,” which allowed independent musicians to try and record tracks with professional producers using the best equipment (Sound Identity, n.d.). This project was used as a powerful promotion tool.
Finally, it is crucial to mention that the company is not present on multiple online retail platforms, such as Amazon and eBay. While Converse sells its products using its online store, customers do not have the opportunity to form the store using other online platforms. Online marketing is also in the developing stage, which is crucial during the period of the pandemic when a large portion of sales moved from offline to online stores.
Marketing Strategy Analysis
An adequate marketing company needs to utilize the strengths and opportunities of a company, addressing threats and weaknesses. In other words, a reliable marketing strategy is adaptive to the external and internal environment in which a company operates. Therefore, it is crucial to analyze both internal and external environments before analyzing the marketing strategy.
PESTLE Analysis
PESTLE analysis helps to evaluate the external environment in which a firm operates by assessing political, economic, social, technological, legal, and environmental aspects.
Political Factors
The political environment in which Converse operates has both favorable and unfavorable aspects. The US internal policy allows the company to develop rapidly due to legislations that favor the development of large corporations (Brand Minds, 2021). The country has low interest rates on loans as a result of the measures to address the pandemic, which lowers the cost of capital. This implies that the environment is favorable for long-term development, as Converse can use debt to finance innovation.
At the same time, Converse is sensitive to international conflicts due to having an international supply chain (Nike, 2021). A significant part of the company’s manufacturing assets is in China, which implies that the US-China trade war that started in 2019 may have a tremendous impact on the company (Brand Minds, 2021). This conflict can cause significant disruptions to the supply chain. Converse needs to diversify its supply chain to avoid such disruptions.
Economic Factors
The current economic environment is viewed as unfavorable, as the world economy faces one of the greatest economic recesses of the century (Nike, 2021). The purchasing ability of the customers in the US has decreased significantly due to the COVID-19 pandemic and associated measures to control the spread of the disease. At the same time, the rebound from the recession may be viewed as a positive tendency that may help to stabilize the economic situation in the US.
Social Factors
The social environment is currently favorable for Converse due to increased interest in casual footwear and apparel. Since many people moved from offices to working at home, suits, uncomfortable shoes, and boots are gradually replaced with crocks and sneakers (Zumbach, 2020). The pandemic has brought a trend for casual clothing, as people no longer go to official meetings or parties (Zumbach, 2020). The trend is expected to be long-lasting, as many people have discovered the beauty of the new lifestyle. Therefore, Converse can take advantage of the trend by promoting its products to new segments of customers.
It is also crucial to notice the trend to decentralization which is called the “donut effect.” Since many people no longer need to go to work, they tend to move further away from city centers, where the estate is cheaper (Levanon, 2021). As a result, Converse’s retail shops situated in city centers may experience a significant decline in revenues.
Another crucial social factor that is worth noticing is the increased demand for online purchases. The pandemic made the majority of firms move online and helped to develop delivery services. This opportunity can be used by the company to increase its sales.
Technological Factors
The development of social media has had a positive impact on Converse’s ability to communicate with customers and advertise its products. The central benefit of social media is that it helped to create a community united by the common vision of promoting freedom of expression through individuals and their movements (Converse, n.d.).
Another positive technological factor affecting Converse is receiving access to Nike’s technology after the acquisition. Nike Sport Research Lab gave birth to several innovative technologies, among which the most prominent are the Nike Flywire support system, Lunarlite foam cushioning, and Hyperdunk basketball shoe (Brand Minds, 2021). After receiving access to such technology, Converse was able to improve the comfortability of its shoes.
Legal Factors
There are no significant legal factors that affect Converse’s ability to develop in the nearest future. However, several legal factors that affect Nike should be mentioned, as it is the parent company for Converse. Nike has had several legal problems due to manipulations with taxes (Brand Minds, 2021). Additionally, Nike was also sued for fraudulent activities, such as making fake discounts (Brand Minds, 2021). This may have a negative impact on Converse as a subsidiary of Nike.
Environmental Factors
Environmental issues are of growing concern for the public and governments around the globe. Both customers and international policies force Converse to reduce its carbon footprint and reduce waste. Converse demonstrates its commitment to environmental sustainability. In particular, the company has pledged to switch to renewable energy only by 2025 (Nike, 2021). Additionally, Converse committed to getting rid of single-use plastic in the packaging of its products. Getting rid of single-use plastic is crucial during the time of the pandemic, as many people turned to internet purchases, which negatively affects the environmental situation due to increased carbon dioxide emissions and wrapping plastic associated with delivery services. Therefore, environmental factors are favorable for Converse, and the company may use its social responsibility policy as a part of the marketing campaign.
Marketing Capabilities
This section focuses on Converse’s marketing capabilities, which include adaptive, absorptive, and innovative capabilities.
- Adaptive Capabilities. Converse has a very close connection to its customers, which allows it to sense the changes in the moods and adapt accordingly (Converse, n.d.). The company also adapts its pricing policy depending on the price of the competitors (Bhasin, 2019). Converse adapts to the economic situation by giving discounts to different groups of products to stay competitive and make a profit (Bhasin, 2019). However, it should be mentioned that Converse has been unable to adapt its promotion to the pandemic.
- Absorptive Capabilities. Converse values its customers and provides top-quality services to address all their needs (Brand Minds, 2021). At the same time, the company understands the growing environmental concern, which made it pledge to reduce waste and emissions (Nike, 2021).
- Innovative Capabilities. The company is among the leaders among the competitors in terms of innovative capabilities. There are two sources of innovative capabilities for the company, including access to Nike’s technology and numerous collaborations with other brands. Access to Nike’s technology allows the company to improve the comfortability of its shoes. At the same time, numerous collaborations help the company to be creative with the designs of its products. Converse has a culture of innovation and uses diversity as the driver for innovation (Converse, n.d.).
SWOT Analysis
SWOT analysis is a powerful instrument that analyzes both external and internal environments to understand the strengths, weaknesses, opportunities, and threats. The analysis helps to understand if the current marketing strategy utilizes the company’s strengths and opportunities and addresses weaknesses and threats. This section provides a comprehensive summary of the PESTLE, marketing mix, and marketing capabilities analysis. SWOT analysis is provided in Table 2 below.
Table 2. Converse SWOT Analysis
It is crucial to notice that the SWOT analysis provided above does not include trends for online purchases, as it can be treated as both an opportunity and a threat. On the one hand, the growing demand for online purchases is an opportunity for Converse, as it can use its social media as a distribution channel. Moreover, since the company aims at using no single-use plastic, it can promote its delivery services to be environmental-friendly. At the same time, the company is not present on the major online marketplaces, such as Amazon and eBay, which may be a vulnerability. The problem is that people used to purchases on these platforms are forced to buy the products from resellers, which do not always sell authentic products. The presence of the company on these platforms can increase sales of the company by utilizing the trend for online purchases.
Narrative Analysis
The history of Converse is a story of an astounding success achieved through combining brand recognition, continuous innovation, customer centricity, and tailored promotion. After suffering from losses in the 1990s, after being acquired by Nike, Converse made a grand comeback to the position stronger than its parent company. Converse preserved its crucial strengths, addressed its weaknesses, and grasped the opportunities of the early 2000s, which helped the company to have high-profit margins, outstanding customer loyalty, and a world-famous brand image.
The core of Converse’s success is understanding its customers. Converse gives its customers freedom to express themselves and revolt against mainstream values. Nike’s marketing team was able to recognize the opportunity of designing and selling products for emerging groups of skateboarders, artists, teenagers, basketball players, which helped the company to find a new niche during the difficult times. Additionally, Converse used artists as media, which was an innovative form of promotion that helped the company to achieve high brand recognition. The company’s marketing strategy was well-tailored, as it was tailored to utilize the company’s capabilities to meet the needs of customers at the right price.
The COVID-19 pandemic changed the rules, which now requires the company to adapt to the new outside environment. At the beginning of the pandemic, Converse realized that the majority of the activities had to move online, as all the stores were closed due to lockdown (Joseph, 2020). Converse relied on its social listening tools to understand what the customers wanted to meet their needs (Joseph, 2020). In other words, the company used its strength of close connection to the customers and the latest technology to revise its marketing strategy.
During the first days of the pandemic, the company launched the #CreateAtHome hashtag that encouraged customers to create new designs of Converse shoes and share them online (Joseph, 2020). This promotion utilized the opportunity of increased online activity and emerging technology. Converse had significant experience of collaborating with numerous brands, and it decided to collaborate with its customers to preserve interest in the brand.
The adaptation of marketing to the pandemic and economic rebound helped the company to return to stable sales, which allowed the company to stay profitable (Nike, 2021). However, it appears that Converse did not use the opportunities to their fullest. In particular, the company’s promotion did not use the fact that people are more interested in casual clothing, as they no longer need to go to work. The idea that casual clothing becomes new office clothing was not introduced in the company’s promotion campaign, which may have led to lost opportunities.
Converse has not addressed one of its major weaknesses, which is its inadequate online presence. During the early days of the pandemic, the company made a great emphasis on online promotion and sales. Social media channels helped to generate online activity, and Converse even opened a TikTok channel (Joseph, 2020). However, as the stores reopened, a large part of the promotion was moved to outdoor and in-store advertisements, which was a questionable move due to the uncertainty about the future waves of the pandemic. Moreover, Converse did not open its official stores on Amazon and eBay, which may have limited the success of the marketing campaign.
Lessons Learned
The analysis demonstrated that there are several flaws of Converse’s marketing strategy that should be addressed. First, Converse failed to introduce a new message to the marketing campaign based on the changed reality due to the pandemic. The primary strength of the company that made Converse one of the most successful sneaker brands is the company’s ability to send a unique message to different segments of customers. The new technology of contextual advertisements and online analytics helped every customer to feel unique, which is the core of Converse’s customer-centric strategy. However, the company failed to target ex-office workers that moved to home offices.
Second, Converse preserved its reliance on in-store and outdoor advertisement regardless of the new reality associated with the pandemic. While the company moved the majority of its activity online at the beginning of the pandemic, it failed to follow through with enough online activity. The “donut effect,” which encouraged many people to move from city centers to suburbs, is expected to lead to a decreased number of customers visiting offline stores. According to Nike (2021), the company did not decrease the number of offline stores, which may be a source of additional expense if the number of visitors decreases. This may be a significant vulnerability of the company’s marketing strategy in the future.
Finally, Converse did not take full advantage of the increased demand for online purchases. Even though Converse’s official website is convenient for buying the company’s products, some customers may prefer using online marketplaces, such as Amazon and eBay. People can still purchase Converse’s products from these platforms from resellers. There is an increased danger that sellers on these marketplaces may sell replicas of Converse’s products, which may lead to decreased satisfaction of the customers and reduced revenues.
It should be noticed, however, that the problems mentioned above have been considered by Converse’s marketing team. After the company was purchased by Nike, it received access to the marketing specialists in the world of footwear. Converse’s marketing team managed to increase the revenues of the company from $200 million to $2 billion in less than 20 years, which is an unprecedented success (Trefis Team, 2019). This marketing team may have unknown reasons for returning to in-store marketing, absence of official stores on Amazon and eBay, and failure to address the new niche of ex-office workers. Therefore, a careful assessment of these opportunities that utilize primary data is needed.
Marketing analysis also revealed one of the crucial features of Converse’s marketing strategy that should be emphasized. In the late 1900s, the company realized a link between the music world and the footwear industry (Sound Identity, n.d.). Starting from early collaborations with Sex Pistols, Ramones, and Kurt Cobain, Converse’s marketing team started to utilize this link to promote the company’s products (Sound Identity, n.d.). Today, Converse continues to use the music world as media, which is a unique feature of the company’s marketing campaign. Other footwear companies benefited from partnering with sports stars, and only Converse used music to gain a deep connection between brand lovers and music fans.
Recommendations
The present section provides several recommendations that can be given to the company to maintain the high performance of its marketing strategy.
- Focus on the customer. The company was found to be one of the leaders in terms of customer-centricity. The converse is recommended to make all the customers feel unique and special. The latest technology tools can be used to achieve customer-centricity, including personalized, contextual ads, the ability to make a unique design for footwear, and multiple collaborations with other brands. Customers should be given the opportunity to purchase limited editions of Converse’s footwear and apparel to emphasize their individuality.
- Address the new niche. The company’s put increased focus on marketing its products to specific groups of customers, including skateboarders, artists, teenagers, basketball players. While this strategy has historically been beneficial for the company due to the rise of pop culture, the pandemic created a new layer of potential customers interested in casual footwear and apparel. This customer segment is ex-office workers that no longer need to go to the office, as they moved to remote work.
- Put increased emphasis on online promotion. Even though the company has been successful with promoting its products using in-store and outdoor advertisements, the COVID-19 pandemic moved the majority of customers to online stores. Therefore, it is crucial that Converse moves its advertisements to online platforms to take advantage of the trend. The “donut effect” made the customers move away from city centers, and Converse needs to reach these customers through online promotions. Additionally, the online advertisement can be targeted, which is congruent with the company’s idea of customer centricity.
- Open official stores on Amazon, eBay, and other online marketplaces. Many customers prefer to shop on online marketplaces to have all their orders in one place instead of having different accounts in numerous online stores. Converse needs to acknowledge this need and allow its customers to select the most convenient purchasing platform for them. This would be coherent with the customer-centric values of the company. Additionally, such an endeavor can increase the company’s sales.
- Maintain the focus on promotion through music. The analysis demonstrated that the company’s view of music artist as media created a powerful promotion tool that ensured recognition of the brand. Thus, the company needs to ensure that this strategy is preserved in the future despite the changes in the outside environment. Promotion through music increased the number of fans of Converse considerably and there is no evidence that the trend will change in the future.
- Conduct relevant marketing research to maximize the probability of the positive outcomes of changes. While the recommendations provided in the present report appear relevant, they are based only on secondary data. The available data concerning the performance of the company in terms of marketing is scarce, as it is a commercial secret. Therefore, full-scale research needs to be conducted before implementing any of the changes provided above. If the analysis of primary data confirms the results of the present research, the recommendations can be implemented.
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