TOMS Marketing Strategy by Mark McHugh

June 10, 2013

TOMS CUSTOMIZABLE SHOES

Index Executive Summary Objective Background Recommendation Next Steps

Situation Assessment and Analysis

Background

SWOT Analysis Strengths Weaknesses Opportunities Threats

Environmental Scanning Demographics Economics Social & Cultural Natural Environment Technological Political & Legal

Market Summary

Market Research Survey Focus Group Observational Research

Target Market Demographic Geographic Psychographic Behavioral

Forecasting Demand

The Demographics of Shoes

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

Building Brand Loyalty

Pricing Strategy and Marketing Channels

Consumer Pricing Strategy

Marketing Channels Communication Channels Distribution Channels Service Channels

Retail/Wholesale Strategy

Product Differentiation

Advertising Strategy Social Media Campaign Website Content

Advertising Budget

Works Cited

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

Executive Summary Objective This marketing plan is to recommend the creation of a new product line extension for the TOMS shoe

company. The new product will be a line of customizable shoes marketed toward current TOMS consumers so they can wear a shoe that truly mirrors their own unique style. Background TOMS is a for-‐profit company based in Santa Monica California. The company was founded in 2006 by Blake Mycoskie and is noted for the nonprofit subsidiary it runs, Friend of Toms. The company designs and sells a varied line of canvas shoes with a focus on sustainable and renewable materials. Through its charity TOMS operates on a “One for One” model in which it directly donates a pair of shoes forever pair sold to impoverished populations. Recommendation In order to increase brand awareness through expanding customer loyalty TOMS should introduce a line of customizable shoes to cater towards a consumer base that is already attracted to the product in part because it mirrors their morals and values. This product line extension will begin with the same style as their Classics style shoes and allow the consumer to pick from a wide range of current TOMS fabrics and materials to construct each piece of paneling that makes up the shoe. We estimate that by leveraging the suppliers, manufacturers, and distributers already in place TOMS could increase the loyalty of their consumer base and use that loyalty to capitalize on further word of mouth advertising, increasing overall sales for the company. Next Steps We will use the existing infrastructure the company has in place while expanding the website to allow consumers to design and purchase their customizable shoes. The pre-‐launch marketing process would run through the summer with an early fall launch date for the customizable shoe product with the goal of making a strong push for the holiday season.

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

Situation Assessment and Analysis Background Blake Mycoskie founded TOMS in 2006. His inspiration for the company came to him during a trip abroad to Argentina where he witnessed extreme poverty and poor health conditions, as well as hardships faced by children growing up and walking without shoes. It was then that he recognized the traditional Argentine alpargata shoe as a simple, yet revolutionary, solution. He quickly set out to reinvent the alpargata for the United States market with a simple goal; to show how together we can create a better tomorrow by taking compassionate action today. Blake wanted to create a for-‐profit business that was sustainable and not reliant on donations. Because of his dedication in creating this organization, TOMS has given over two million pairs of new shoes to children in need, since the company began in 2006. Blake’s vision soon turned into the simple business idea that provided the powerful foundation for TOMS. During its first year in business, TOMS sold 10,000 pairs of shoes. Blake returned to Argentina later that year with family and friends and gave back to the children who had first inspired him. Thanks to supporters, TOMS gave the one-‐millionth pair of new shoes to a child in need in September 2010. TOMS now gives in over 50 countries and works with charitable partners in the field who incorporate shoes into their health, education, hygiene, and community development programs. TOMS’ giving partners are made up of NGOs, charities, and non-‐profits already established and working in the countries in which TOMS gives. Their expertise guides TOMS to give new shoes responsibly, making sure there aren’t adverse socioeconomic effects, and to ensure that sustainable giving is possible.

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

SWOT Analysis Strengths •

TOMS Shoes is an established brand.

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Variety of styles, colors, and designs.

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Prices are not overly expensive.

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Creator of the one-‐for-‐one movement.

Weaknesses •

Still a developing company.

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Does not spend a lot of money on marketing.

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Manufacturing in foreign countries creates higher distribution costs.

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Only uses social media and word of mouth advertising.

Opportunities •

Cause marketing is growing larger than ever.

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“One for One” model can be applied to many different products.

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Green and sustainable business practices are becoming more popular amongst consumers.

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Can always design and produce new styles of shoes.

Threats •

Competitors are also established brands with a larger consumer base.

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The shoe market is very large with many shoe companies to share the market with.

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More companies are beginning to become for-‐a-‐cause oriented.

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Competitors in the market for green products are growing.

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

Environmental Scanning TOMS style canvas shoes are a nationwide style trend. They can be seen on men and women both in pop culture magazines and on the street. When approaching this project we looked at the impact of each of the six environmental forces. Demographics With our focus being new product line of customizable TOMS shoes, we know the easiest market to penetrate first will be the existing TOMS customers. Examining the demographics of TOMS’ 1.9 million Facebook followers shows us that the majority of TOMS followers are females between the ages of twenty and thirty located in metropolitan areas such as San Francisco, Los Angeles, Dallas, New York, and Boston. By focusing on these particular locations and demographics we can have the highest probability of reaching those consumers who are already familiar with and active customers of the TOMS brand. Economics The TOMS customizable shoes will enjoy the pricing power of being an authentic TOMS product. TOMS shoes are already priced above the competition and are able to do so because of their social cache as a first to market product along with their charitable “One for One” platform. The price points of the customizable options will be able to command a premium to the standard styles because of these factors. Social & Cultural The TOMS brand enjoys a favored social standing because of its foundation as a for-‐profit charitable venture. TOMS founder Blake Mycoskie has done a wonderful job so far of focusing on this aspect and spreading the word through platforms ranging from the Global Leadership Summit to Ellen, the popular afternoon talk show. Natural Environment As part of their focus on corporate responsibility TOMS utilizes sustainable and vegan materials in their shoes and constructs their boxes out of 80% recycled materials. They are also working to incorporate environmentally friendly practices into the construction and operation of their flagship store in Southern California.

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June 10, 2013

TOMS CUSTOMIZABLE SHOES

Technological The driving force of the new customizable product line will be technology based. Just as our targeted consumer demographics are very tech savvy so will be the offering. TOMS will employ social media based advertising platforms as will be relying on their website for the design and purchase functions of the individual products. Political & Legal

Aside from ensuring that all company practices and operations comply with any and all legal standards the TOMS customizable shoe line is not expect to face any issues within this realm. The one point of focus is making sure the charitable and activist message of the company is able to stay true to its roots while doing its best not to alienate any specific political party or political viewpoint.

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

Market Summary The canvas shoe market has seen an influx of competitors as popularity in the alpargata style recently rose again. Along with TOMS the main direct competitors are Bobs by Sketchers, Keds, Sperry, and Converse. There are also notable players in the customizable shoe market such as Nike and Vans. The most direct competitor is the Bobs by Sketchers brand. Not only are the styles nearly identical between the two companies the Bobs by Sketchers brand also chose to copy the TOMS one for one charity model by pledging a pair of shoes donated for every pair sold. Both brands are available nationally and compete with each other in nearly every market. Using social media followings and keyword searches we can estimate and rank the overall popularity of

TOMS and each of its competitors:

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TOMS CUSTOMIZABLE SHOES

Market Research Survey A 26 question survey was created on Survey Monkey asking participants various questions regarding his or her shoe purchasing habits, the level of awareness of the TOMS brand, as well as their thoughts and opinions about both the brand and the shoe style. The survey inquired about consumer desire for customization. This survey was sent out to men and women between the ages of 18 -‐ 30 through social media platforms, such as Facebook and Twitter. This survey was available for about three months, and reached a total of 95 participants. Key Findings: •

More than half of the participants were aware of the brand, but have not purchased TOMS.

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Public relations and word-‐of-‐mouth are the top two ways that TOMS is currently reaching the target market

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TOMS “One for One” movement has an influence on 58% of the participants purchasing decisions.

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Participants felt that the customizable option would help TOMS business and would be a great way for consumers to show their personalities.

Focus Group A focus group will be held with those in the target market age range of 18-‐30, male and female, some who have purchased the product and some who have not. These men and women will be asked a variety of questions about TOMS, including current brand perceptions and overall opinions about the shoe and the future customizable option. Key Questions: •

Which aspects of the shoe are important to be able to customize, which aspects add no value when there is a choice for customization?

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What is the preferred interface for designing and purchasing the shoes? Focus group members will test and give input on several different website ordering platforms.

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How can TOMS capitalize on the brand equity created through the customizable shoe line and encourage consumers to spread the word and be a source of word-‐of-‐mouth advertising for the

Malvey, McHugh, Trombly

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TOMS CUSTOMIZABLE SHOES

company? Observational Research There are not currently any TOMS retail stores; however, there are many specialty boutiques and retail stores that carry TOMS. Stores that are considered high -‐end with a unique feel that cater to the desired target market were the territories of observation.

Key Findings: •

Customers barely or did not interact well with the product.

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There was no dedicated point of sale for TOMS Shoes.

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Shoes were dispersed throughout the store in between different clothing items, all on different tables.

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

Target Market TOMS Shoes focuses on providing comfortable and stylish shoes for both men and women at a premium price. Many people around the world mutually enjoy helping others in need, which is why TOMS mission is so successful. Below is the breakdown of TOMS market segmentation. Demographic TOMS focuses on offering their shoes to people of all ages, but TOMS has become most popular with females in their twenties and thirties. Many of these young adults are in college and have previously exhibited that they have disposable income. Geographic The majority of TOMS consumers are located in metropolitan areas, particularly San Francisco, Boston, Los Angeles, New York City and Dallas. TOMS also serves consumers in 30 countries around the world. If we include giving their shoes to people in need, the lists of countries that TOMS interacts with would be even larger. Psychographic TOMS shoe products focus on marketing to high-‐resourced consumers who are Innovators and Thinkers

and low-‐resourced consumers who are Strivers. Innovators are the “take-‐charge” people that enjoy niche-‐oriented products. Thinkers are mature people who look for durability, value and functionality within products. Strivers are the fashionable people that are always looking for the new trend and style. With more and more celebrities becoming involved with the TOMS cause, TOMS Shoes are becoming more fashionable. Young adults will buy TOMS Shoes because they noticed that celebrities they admire wear them as well. As fashion trends increase, so will demand. Behavioral Everyone has a need for shoes to wear to work, school, or even to the store. TOMS tries to attract those consumers by empowering them by showing how they can be helping someone else in the world that needs shoes. Instead of buying a pair of $100 Nikes, consumers can buy a pair of $54 Classics and also have the satisfaction of providing someone in need with a new pair of shoes. TOMS is striving to meet the needs of the consumer while also working to raise awareness in the consumer’s mind on how they can help others while also meeting their personal needs.

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

Forecasting Demand Demand for TOMS Shoes has increased over the years due to more and more people joining the cause to provide someone with a new pair of shoes. With TOMS, it is often the act of giving that drives demand, not solely the actual shoe itself. The shoes are stylish, comfortable, and affordable, but other than set colors and patterned materials, consumers don’t really have a say in the design of the shoes. We believe there is a strong desire to customize your shoe with different patterns, materials, or colors. This is where allowing consumers to customize their own shoes could help drive demand. Demand for customization is steadily increasing with apparel and footwear companies around the world. For example, Nike and Adidas allow you to customize your shoes to your own specifications. By allowing consumers to customize their own shoes, TOMS would open up possibilities to bring in new target markets and increase demand for their shoes. With an increase in demand for their shoes, TOMS will be able to give more pairs of shoes to those in need.

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

The Demographics of Shoes Further analyzing the followers of the main Facebook pages of various TOMS competitors we can pinpoint the similarities and differences between followers and consumers of various products. An in depth look at Sperry, who is the closest price point and status competitor, and Vans, which currently offered the most similar customizable shoe option, highlights some of the similarities and differences between the consumer bases. One thing quickly apparent is the skew of TOMS followers to the female gender while the rest of the competitors enjoy a more balanced following.

Building Brand Loyalty Creating loyal customers is at the heart of every business. The only value your company will ever create is the value that comes from customers— the ones you have now and the ones you will have in the future. Businesses succeed by getting, keeping, and growing customers. Customers are the only reason you build factories, hire employees, schedule meetings, or engage in any business activity. Without customers, you don’t have a business. Loyalty can be defined as, “a deeply held commitment to rebuy or re-‐patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.” We plan to position TOMS to be the most convenient and stylish way to wear a shoe. This position will make us the leaders of our demographic. When it comes to brand loyalty, TOMS shoes is a hundred percent dedicated. TOMS understands that without their consumers, there wouldn’t be an organization. To show consumers just how much TOMS appreciates their business, they will build brand loyalty by introducing a customizable shoe program. Consumers will have the opportunity to express their creativity and style by creating their ideal pair of

Malvey, McHugh, Trombly

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TOMS CUSTOMIZABLE SHOES

shoes. TOMS will provide satisfaction to the consumer by using high quality and sustainable materials to create this personalized style experience while promoting the “One for One” charity structure. Consumers will be able to choose from various colors, patterns, and materials to create the shoe. Up scaling the presentation of this product will develop customer loyalty. A social media campaign will be created and fostered around the individual consumers personalized shoes and stories.

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

Pricing Strategy and Marketing Channels Consumer Pricing Strategy While the standard women’s shoe product for Bobs by Sketchers comes in at the $35-‐$45 price range the TOMS products are significantly more expensive reaching the $80-‐$95 price range. This higher price point is more in line with the Sperry line of shoes, which produces styles, based more on the classic boat shoe and lacks the charitable focus. Looking at the customizable shoe market Vans has the most similar product in a customizable canvas slip on style that sells for $65. The Vans customization options and website usage will serve as a model and benchmark for our own offering. Due to the fact that the TOMS customizable shoe offering will bring together a top end style reputation, a charitable focus, and a customization option it will be difficult for a consumer to directly compare the product and price point to any other single competitor. This will give TOMS more flexibility in setting, raising, or lowering the price point as needed. The customizable shoe option will be priced in line to slightly above the Vans option in the $65 to $70 range.

Marketing Channels TOMS Shoes will use each of the three marketing channels to communicate their product, distribute their product, and serve their product. Communication Channels Due to the fact that TOMS does not have a strong marketing budget, TOMS communication channels are limited. TOMS will use social media as their primary channel for communicating with their consumers and fans. TOMS has a Facebook, Twitter, and Pinterest account, as well as their blog that can be found on their website. Their website will be there other main source of communication. These sources of communication will be great for keeping followers updated on how they can customize their own shoes. Distribution Channels In order to distribute a customized pair of shoes, the process starts by having the consumer create their pair online through the TOMS Official Website. Once the consumer submits their order, the order is sent

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TOMS CUSTOMIZABLE SHOES

to China, Argentina, or Ethiopia to be manufactured. TOMS shoes are all produced in these three countries. Whichever country is closest to the consumer will produce the custom shoes to your specification in order to decrease the cost of transportation. When your custom pair is manufactured, another pair, which is exactly the same as yours will be sent to a Giving Partner of TOMS to give to someone in need. Though customizing your own pair of shoes may be more expensive, but you will be providing someone with a personalized gift that you created. Service Channels Most of TOMS shoes are transported by ship to the United States, where they are then shipped through a mailing company such as Fed Ex, UPS, etc. The consumer has two options of receiving their custom pair of shoes. They can either send them to a local retail store that carries TOMS shoes, or they can have them shipped directly to their residence. The ship to store option will be available at a moderate discount to the ship to home option.

Retail/Wholesale Strategy Retailing includes all the activities in selling goods or services directly to final consumers for personal, nonbusiness use. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. In the retail aspect, we feel that TOMS is entering the market with a reasonable price for this new customizable shoe. This product will arrive in a shoebox made of 80% recycled materials. This will be an extremely valuable factor for those that are environmentally conscious. The customizable shoe brand extension will utilize TOMS existing infrastructure in regards to manufacturing and shipping. Consumers will interact with the company and the customizable shoe platform exclusively through the TOMS website.

Product Differentiation To be branded, products must be differentiated. Today, design has become an increasingly important means of differentiation. For product differentiation, TOMS will be focusing on the customization aspect. Marketers can differentiate products by customizing them, which is exactly what TOMS will be doing. TOMS will focus on a customizable shoe program. Consumers will be able to choose their styles, the materials that will

Malvey, McHugh, Trombly

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TOMS CUSTOMIZABLE SHOES

be used, and the aspects of the shoes that can be customized (including stitching and paneling). As companies have grown proficient at gathering information about individual customers and business partners (suppliers, distributors, retailers), and as their factories are being designed more flexibly, they have increased their ability to individualize market offerings, messages, and media. TOMS has the ability to become a leader in this due to the natural design and manufacturing process of their shoes. Mass customization is the ability of a company to meet each customer’s requirements; the ability to prepare on a mass basis individually designed products, services, programs, and communications. Customers must know how to express their personal product preferences, however, or be given assistance to best customize a product. By allowing customers to design their own shoes, TOMS feels that they are meeting the mass customization requirement. Toms will provide opportunities to assist their customers online if needed as well. They will have the opportunity to communicate with a customer service representative. On the website, a customer service tab is present. Questions about ordering, returns, shipping methods, products & sizing, official TOMS retailers, contact information, and getting involved are displayed for those that need help. Performance quality is the level at which the product’s primary characteristics operate. Quality is increasingly important for differentiation as companies adopt a value model and provide higher quality for less money. Firms should design a performance level appropriate to the target market and competition, however, not necessarily the highest level possible. They must also manage performance quality through time. Continuously improving the product can produce high returns and market share; failing to do so can have negative consequences. TOMS performance quality will be designed around the target market and competition. TOMS will examine the price points involved in offering a customizable option and the likely consumer reaction to those price points. Materials used to make shoes will need to be sustainable and affordable at the same time.

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

Advertising Strategy The advertising strategy for the new customization option will be focused around the campaign, “Your creation. Your contribution.” The idea is, when you build your custom pair of TOMS, an identical pair will be manufactured and given to someone around the world who needs shoes. We want the consumer to feel like they are building a custom pair of shoes; not only for themselves, but also to provide someone in need with a gift of shoes they designed themselves. As stated before, TOMS focuses on spending as little money on marketing as possible, which is why this campaign will solely use social media and the TOMS website for means of marketing. The strategy will be split into three stages for each campaign; Pre-‐Launch, Launch, and Post-‐Launch. Social Media Campaign The “Pre-‐Launch” stage will give TOMS followers the timeline and news of when they will be able to customize their own pair of shoes. We want consumers to know how to customize their shoes before we launch, that way we can eliminate problems and confusion when we do launch. Videos that have tutorials, what they can customize, and how they will be contributing to the cause, will be uploaded to TOMS social media pages. Then comes the “Launch” stage, where we will go live on the TOMS website and consumers can begin designing their custom shoes. We will begin by having contests to see who builds the most creative shoe. Winners will receive anything from gift cards, to a free pair of Classics, etc. Constant updating and social media posts will be important to spread the word of the new feature. Lastly, the “Post-‐Launch” stage, where we will continue to post and try to drive more traffic and consumers to build their own custom pair of TOMS. We will make the contests larger to include sweepstakes. The sweepstakes will include an all-‐expense paid trip to join on TOMS next delivery of shoes to people in need. The country will be decided based on the need for shoes. We will also give coupons and discounts out via Facebook Offers to attract people to build their custom pair and increase the number of shoes to give to people in need. Website Content Since the website is the only way consumers can create their custom pair of TOMS, it will be important to use the website to marketing the feature. The “Pre-‐Launch” stage will consist of spreading the awareness of the feature to current consumers and

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TOMS CUSTOMIZABLE SHOES

also prospective ones. We plan on adding a time ticker to the website to countdown the time till the launch of the new feature. It will constantly remind consumers of the feature and when they will be able to use it. We will take a similar path as we did on social media where we will post videos and updates on what you can do with the feature, tutorials on how to use the feature, and how they will be contributing to the cause. We plan on having the slogan, “Your creation. Your contribution,” to the page in order to remind people of the campaign and what the mission is by adding this feature. When TOMS launches the feature, consumers will click on the “Customize” tab on their website and will be brought to a page where they can begin customizing their shoes. The first step will be to select the model; at launch only the Classics style will be available. Then, they will select the type of material for certain parts of the shoe. Lastly, they will select colors or patterns for other parts of the shoe. The website will contain links to the contests being offered on the social media pages, so consumers can quickly enter the contests and submit their shoes. The “Post-‐Launch” stage will include videos explaining the campaign and the power of creating a pair of shoes that another person in the world will share with you. We want the consumer to feel the personalization of the exchange with someone they will be helping by creating and designing their own shoes. We will also have links to the discounts on Facebook Offers and to the sweepstakes. The goal is to increase followers and engagement on social media and drive traffic and sales through the website.

Advertising Budget Keeping with tradition of minimizing expenses for advertising in favor of focusing on the product and charity aspects of TOMS we will be working to minimize all costs associated with this new product line and associated marketing campaign. We expect to spend $3,000 to $5,000 to fund the social media reach out campaigns directly associated with the customizable shoe product. The expansion of the website to include the advertising portion as well as the increased functionality and maintenance for the design and purchasing function is expected to be between $15,000 and $20,000. Finally we plan to budget an additional $5,000 to fund the sweepstakes experience to join on a TOMS charitable shoe drop.

Malvey, McHugh, Trombly

June 10, 2013

TOMS CUSTOMIZABLE SHOES

Works Cited: Kolter P and Keller KL. Marketing Management (2012). Prentice Hall; Boston TOMS Shoes & Eyewear Official Store http://www.toms.com/ http://pro.likester.com/pages/heatmap.aspx?itemid=8416861761 http://pro.likester.com/pages/AffinityChart.aspx?ItemID=8416861761 Vans Custom Shoes http://shop.vans.com/catalog/Vans/en_US/category/custom-‐shoes.html#/selectGenderAndSize Amazon.com: sperry shoes http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-‐alias%3Daps&field-‐ keywords=sperry+shoes&rh=i%3Aaps%2Ck%3Asperry+shoes Amazon.com: bobs shoes http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-‐alias%3Daps&field-‐keywords=bobs+shoes Amazon.com: toms shoes http://www.amazon.com/s/ref=nb_sb_noss_2?url=search-‐alias%3Daps&field-‐ keywords=toms+shoes&rh=i%3Aaps%2Ck%3Atoms+shoes

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