Founded by William Riley in 1906 as the New Balance Arch Company, in Belmont, MA, New Balance manufactured arch supports and orthopedic shoes. During the fifties and sixties, athletes turned to the company for customized running shoes due to New Balance's unique expertise in handcrafting specialized footwear. Paul Kidd bought the company in 1956 and increased the shoe-making sector as demand grew. Production of running shoes soon became the company's primary source of business. The New Balance "Trackster", one of the first running shoes made, grew very popular not only because of its technical innovation, but because it was available in a wide range of widths. In 1972, New Balance was purchased by current Chairman and CEO, James (Jim) S. Davis. Four years later, the New Balance 320 running shoe was rated number one on the market, which launched the company into worldwide prominence. Since then, New Balance has diversified into making a complete range of athletic shoes for a variety of athletic activities.
Throughout the years New Balance has maintained the same principles it was founded upon: extensive width sizing, a commitment to domestic manufacturing, and leadership in technological innovation. The company's mission is to demonstrate responsible leadership, build a global brand that athletes are proud to wear, associates are proud to create and communities are proud to host. Community outreach has long been a part the culture of the company and has grown over the years to include corporate charitable giving, in-kind donations, associate volunteerism, corporate match, Dollars for Doers and personal volunteer time benefits for its associates — all recognizing the symbiotic relationship that exists between a company's place of business and the place where it does business.
The new balance group endeavor to be the global brand in the footwear and apparel industries that make people be proud to wear and produce products which are equipped with the mixture of function and fashion.
• We are creative and innovative who assist athletes to achieve high performance and to set new records with every product we operate.
• We are consumer oriented that strive to improve the quality, fashion, and function to meet the consumer needs and expectations in order to lead consumers living in a healthier and active conditions.
• We are operating our business globally which is undertaking corporate social responsibility to give back to the public for struggling children's health.
• We are dedicated to enhancing our positive brand image to occupy strong positions in the footwear and apparel industries.
The focus now is on its athletic business. New Balance has an aim of becoming a top three athletic brand by 2020 but it is often seen more as a lifestyle brand
I. Situational Analysis (SWOT Analysis)
New Balance Athletic Shoe is primarily a footwear manufacturer; the company also manufacturers and sells other athletic products such as apparel and related accessories. New Balance has won several awards for its technologically innovative products. The company's consistent focus on research and development has enabled it to remain competitive and maintain market share. However, a prolonged economic recession will reduce the demand for the company's products and affect its sales.
While many well-known sneaker brands like Nike and Adidas manufacture overseas, athletic brand New Balance continues to make sneakers in the United States. This year they expect to make more than 4 million pairs at their five factories in Massachusetts and Maine. New Balance aims to compete in the $55 billion-dollar sneaker market. One key to New Balance's success is offering something that can't be done as quickly overseas: customization. "The fact that a consumer can go online and order a pair of custom shoes that's delivered the next day, our competition can't touch us in that space," said Brendan Melly, the director of U.S. operations for New Balance.
A. Internal Strengths and Weaknesses
• New Balance still have a significant proportion of its manufacturing based in the USA and the UK. This can portray a higher quality of production to its target market due to being made in countries where most of the remaining production is based around quality enhancement. President and CEO Rob DeMartini stated this “supports the jobs of our 1,200 manufacturing associates and we also positively impact 38 domestic suppliers and their more than 5,000 employees” continuing to state they have an “average tenure of 8.4 years, twice the 2010 U.S. factory average” (New balance Responsible leadership report, 2012). This allows for New Balance to charge a higher price as the public are aware of their quality, this increases profit margins allowing more flexibility when diversifying their products. This is supported by the CEO as he states “The innovation of our teams, combined with our values, is the reason we have grown” (New balance Responsible leadership report, 2012). Also having good relationships with their domestic supplier and their employees shown by the average tenure suggests a lower labour turnover, this will reduce cost. They also have a strong marketing structure as they have endorsements with professional sportsmen. This is key in persuading children to want the products, thus causing the parents to buy them. Also their Responsible leadership report (2012) shows that they are working in an environmentally friendly way using recycle shoes for packaging. This will give them a strong public image.
• New Balance has grown to be one of the largest athletic footwear and apparel companies in the world. The company has expanded internationally, with products in more than 120 countries. The company has wholly-owned subsidiaries in the UK, France, Germany, Sweden, Hong Kong, Singapore, Australia, New Zealand, Mexico, Canada, Japan, Brazil and South Africa. The company also has a number of licensees, joint ventures, and distributors worldwide. A wide geographic presence enhances its reach and enables it to tap opportunities in various markets.
1. New Balance shoes come in various sizes and length for different choices with customization
2. New Balance has many other sub brands dedicated for other sports or other purposes.
3. The company has been a part of several philanthropic efforts since past many years
4. The company claims their shoe boxes are made of recycled paer and they use environment friendly procedures while making products
5. New balance has sponsored teams and players in the Olympics, cricket, Australian Football League and NBA
6. The company has a century of expertise in the industry
7. Strong brand presence and marketing through online ads, ecommerce platforms, etc.
8. More than 5000+ people are employed with New Balance
• The counter against maintaining manufacturing in the US and the UK is this will mean that they will not benefit from the cheaper cost of production brought about in the likes of India and China due to low average total cost of raw materials and also a low living cost meaning less money spent of wages. This is supported by Evans, M and Toolan, J in Forbes (2014) who stated “If your competitors successfully outsource manufacturing in China, they can offer prices to your customers that are 30 percent to 50 percent less than they are currently paying”. They also be limited presence in emerging markets. Thirdly, New Balance's strength of having an environmentally friendly image and a strong corporate-social-responsibility (CSR) front can also be a weakness as the desires of a CSR counter profitability targets which may be one of the reasons that the Company is privately owned as these profit target is the main priority of a shareholder. This is supported by Keilmas, M. (2016) who stated “The responsibility of executives to shareholders is to maximize profits” and that “CSR directly opposes this”.
• New Balance has developed an “Endorsed by no one” philosophy. The company does not undertake celebrity endorsements like its competitors Nike, Adidas and Reebok. Its brand building initiatives are disadvantaged resulting in limited brand awareness, limiting its ability to compete effectively with other well-established brands.
1. New Balance has limited market share growth because of global competitors
2. Limited presence and marketing in emerging economies
3. New Balance still has not too many stores, from the point of view of the number of stores.
B. External Opportunities and Threats
• New Balance still has not too many stores, from the point of view of the number of stores. There are no stores in some areas, which are a potential market. From 2014, the international sport brand Nike, Adidas or the domestic brand have not have very good sales, even they have closed several stores. It is a rare opportunity for New Balance.
• New Balance are currently operating in the men and women shoes for running, cross-training, basketball, tennis, hiking, and golf markets. The opportunities for expansion lie within product or market diversification. We are witnessing their current attempts at product diversification with their new Eco friendly hiking boot which is aiming to hit the target market of all hikers who have a strong love for nature as this has a unique selling point of the shoe being in the majority made of recycled material.
• New Balance has a strong presence in ecommerce through its website, www.nbwebexpress.com. Customers can purchase all varieties of footwear and apparel online and also through its mail order dealers. According to the Census Bureau of the Department of Commerce, the US retail e-commerce sales for the first quarter of 2009 was $31.7 billion, an increase of 0.7% from the fourth quarter of 2008.This is an encouraging sign in the current economic turmoil when overall retail sales are going down, quarter after quarter. Therefore, the growing online retail spending will improve New Balance's sales and also provide a cost-efficient means of building brand awareness as well as testing market acceptance of new products and brands
• According to the store owner, New Balance sales have grown more at Naperville Running Co. in 2015 than any other performance brand - and it has the retailer's best-selling shoe of the year, the 860v6. Hartner said the company's new push could help shake an image he believes has followed it for years - that its products are strictly worn by an older, non-athletic demographic. “In running specialty retail, there are a lot of people who still pigeonhole them,” he said. But DeMartini and his team are determined to prove that New Balance is a forward-looking brand that is focused on technology. It's latest innovation, were unveiled in November, uses 3D Systems' newly developed elastomeric powder, DuraForm Flex TPU.
• New Balance is very well-known brand in US and can leverage that to grow worldwide
• The company can diversify into making sports gear
• High brand saliency and the positive affirmation from consumers has influenced demand in domestic market and the neighboring countries
• Aggressive marketing and online presence can boost the business of New Balance
• Competition is intense in the footwear industry. Some of New Balance's competitors such as NIKE, Footlocker, Reebok International and Shoe Carnival have greater financial, marketing and technological resources than that of the company. Additionally, the industry has been impacted by retailers aggressively competing on the basis of price. As such, there has been competitive pressure on the company to keep its selling prices low. If New Balance is unable to respond effectively to the price pressures, its business and results of operations may be adversely affected. Increased minimum wages in the US In recent times, tight labor markets, increased overtime, government-mandated increases in minimum wages and a higher proportion of full-time employees have resulted in an increase in labor costs, which could materially impact the company's operating margins. As per the US Department of Labor, the federal minimum wage rate in the US rose for the third year in a row to reach $7.25 an hour in July 2009 from an earlier wage rate of $6.55 per hour in July 2008 and $5.85 in July 2007. Rising labor costs will increase overall costs and affect New Balance's profits.
• Intellectual property protection is not enough, piracy and counterfeit still exists serious. In the Chinese market has so many counterfeit New Balance shoes. It will influence the sales of the New Balance products and destroy the impression of the New Balance. Maybe someone buys a fake New Balance shoe and the quality is bad. He will think New Balance is not comfortable; he will give up buying the New Balance anymore.
• Because of the foreign exchange fluctuation, the New Balance has certain financial risks. By the sales impact of the experience, sales agents emphasize too much on footwear products, especially popular retro footwear sales. Each quarter orders concentrates on the retro footwear, and running shoes New Balance representatives of such major brand connotation of product orders insufficient, leading New Balance running shoes image is not fully present.
• Little to no market share in athletic market
• Less capital thank Nike and Adidas
• Trying to break in an established market
Take an already familiar brand and show it is still more than useful. While giving essential, yet comfortable athletic wear this is cheaper than most companies while still maintaining the quality for customer satisfaction. To provide customers with a shoe that is both affordable, fashionable, and most importantly comfortable. Every customer should feel like they got a “BANG FOR THEIR BUCK” after purchasing any of our products. New Balance Athletics Inc. provides a variety of shoes and apparel that can appeal to people of all ages and socioeconomic classes. With a host of different colors and combinations, this product should feel like a must have in everyone's closet. We want to reach the younger generation, captivating them with the different styles that the shoe offers.
New Balance has the available capital to target sports enthusiasts; by focusing on this the specific sport's niche, New Balance avoids wasting capital on integrated marketing communication that will otherwise be directed towards non-professional athletes. New Balance is already an established brand, allowing it to focus its marketing efforts solely on its high-performance shoes rather than to focus on establishing an entirely new brand and launching a new product.
New Balance stage of brand marketing strategy is to spread and establish high- quality international sports brand image, develop and adapt the localization experience. Not only to allow more runners wearing “presidential running shoes”, but also to satisfy the normal customers comfort and fashion needs.
IV Marketing Strategy
A. Target Marketing
Two of the leading product competitors in the athletic shoe department is Nike and New Balance. As both are prominent and have products that prompt competitiveness, the athletic shoe remains one of the most immensely colossal products for both companies. Looking further into the target market and the segmentation of Nike products in comparison to those of New Balance, identifying the difference in the market of each product is indispensable. Some would verbally express that Nike holds the leading edge over every athletic shoe, but some consumers would prefer a New Balance shoe. The question of comfort over style is still a factor for the target markets of each product.
• Each segment of our market is already large enough to maintain the individuality and uniqueness that the company has already built and established for itself. Thus, leaves more room to focus on maintaining the mix.
• New Balance is positioning itself with many different sports products. Tending to be more expensive than similar companies to it, New Balance is finding its way to provide products to customers that are unique in their way of making and in the material it uses to produce them. New Balances are mainly used by people who are not professional athletes but like to stay active. Its shoes are needed and preferred to many other similar brands within the upper-class population. New Balance's shoes are sought by people whose main requirement when it comes to choosing shoes is a comfort. One of their biggest and most loyal clients was Steve Jobs.
• For many years New Balance has been seen as a lifestyle brand. New Balance's main target market is upper-class level population and people who are willing to pay high prices. The company has been doing really well for many years but recently they needed to shift their target market. The reason why is that the majority of their clients were aging and the company was not growing as fast as planned. New Balance is in the process of making a shift from targeting adults and baby boomers to targeting teenagers and millennials. They are seeking to get teenagers who are interested in designer's shoes and fashion.
• The potential things that could make a customer not want to buy the product is the image of it being outdated or not “in-style”. Customers also, wonder about the quality of the shoes and clothes offered and will it last in reference to time.
• In a slide share of the New Balance brand (2012), the segmentation focuses on young ones that want the shoe for fashion purposes and athletes that genuinely want the shoe for sport. Furthermore, New Balance is targeted at men and women in their 20's and 30's, as well as those looking for a running and tennis shoe. Another factor in the New Balance brand is that its factory is in the United States. Finally, based on the current market, while Nike leads its competitors, New Balance is third with a market growth pegged at 5% annually.
• Just like Nike, New Balance could benefit from taking on a promotable figure within a sport. As hockey is a sport that boosts significant foot and ankle injuries, stability in their shoes after skating is necessary. An article within Podiatry Today (2002) reveals that “professional players between sustain injuries at a rate of one per every seven hours of play” (Caselli, M; Gagne, A.; Kaplan, E., 2002, para. 1). Therefore, the need for supportive shoes is high in the average hockey player. New Balance can feed off of the statistics of hockey players and partner with a professional player to promote their brand. The potential for the brand to have the same outcome as Nike did with Michael Jordan's partnership with them is significant.
• New Balance slogan could become “The Comfort Promise”. Developing a catchy slogan provides a solid base for marketing managers to move forward with their efforts in capturing a target market and watching sales soar. With this being said, a symbol would benefit the New Balance brand. As Nike has “the swoosh”, New Balance should think about developing a symbol that allows their product to stand out.
• While other companies have held the market in athletic shoes with their strategies and target markets, New Balance had initially developed a product that placed aim toward comfort over style. As a latecomer to the market in 2007, the brand of New Balance took to social media for marketing. First creating a MySpace page, and later expanding to Facebook, Twitter, YouTube, Instagram, and Pintrest has proven to be effective for the New Balance product. In addition, New Balance developed the brand's motto “Let's Make Excellence Happen”. According to the article The Evolution of the New Balance Strategy (Abramovich, G, 2013), this motto is aimed to inspire and motivate athletes to achieve their goals. Although social media is a platform, other avenues for the New Balance product has been regarding orthotics and the podiatrist information regarding the product.
B. Marketing Mix
New Balance is a leading sports apparel and accessories company based out of USA. In the beginning, the products they offered were solely focused on orthopedics and support. Since that time, the organization has manufactured products for a wide array of different sports and activities. In the mid-1990s, New Balance expanded their manufacturing and produced several types of footwear for running, walking, cross-training, tennis, basketball, and hiking. Since 2004, the company has expanded even further and now produces shoes for lacrosse, baseball, and soccer. Based out of Boston, the company over the years has diversified in a wide product offering in its marketing mix. Some of the main products offered by New Balance are:
ϖ SHOES - All Shoes, Running, Lifestyle, Training, Walking, Baseball, Skateboarding, Hiking & Trail, Boots, Soccer, Tennis, Golf, Lacrosse, Work Shoes, Basketball, Sandals, Recently Reduced Shoes
ϖ CLOTHING - All Clothing, Jackets & Hoodies, Long Sleeve Shirts, Pants, Short Sleeve & Sleeveless Shirts, Shorts, Socks, Accessories and Gear, Recently Reduced Clothing
• New Balance will focus on providing for running to the traditional theme of sports and leisure footwear and apparel for the domestic market, specialized functions running shoes and clothing, to retain the current market development of better kids shoes, small-scale classification of products to try other sports, such as outdoors and training function shoes and clothing, continue to seek the possibility of other sports classification market entry.
• The potential customers in a key target segment, tend to concern less with pricing of the running shoes. The performance, quality, features, comfortableness, and appearance of the shoes are even more attractive to them. Therefore, product differentiation strategy will be a good approach for New Balance to deliver to customers. As it is well-known for its high quality of the athletic shoes, it is best to have own brand name for a new sports footwear. Hence, a new product that is introduced with more features and better appearance will do better.
• Because United States has a huge market acceptance of differences and the different sports categories, New Balance product categories constitute only three categories, namely: motor function series, sports fashion series, and kids series.
• All the products of New Balance are available for all age groups and for both men and women.
According to John Withee, New Balance heavily focuses on supporting the smaller type of service-oriented customer like smaller retailers, and family footwear shops. Its largest retail customer was Foot Locker. The division of retailers into two groups – key accounts and specialty dealers is the systematic way to control its sales and distribution. Furthermore, those two groups are divided into six strategic accounts and 49 other key accounts (key accounts) and three major channels (specialty retailers).
They have given importance to fortifying relationships with both small and large retailers. New Balance does not have in-house accounts but relies heavily on independent agents when it comes to a sales force. They are motivated by the commission they get and give their best. Consequently, they are loyal and stick to the organization for years.
• New Balance has more than 200 stores worldwide. For many years New Balance has been mainly focus on distributing its products through physical distribution. With more than 5,000 employees the company has been doing really well getting their products distributed to people. The brand has been trying to locate their store mainly in bigger cities, or busy locations which attract a lot of human traffic. Locations such as shopping centers, outlets, crowded streets in downtown areas, etc. Because the company was not growing as fast as they have planned, New Balance to not depend mainly on physical stores distribution but to focus on online retailing.
• The reason for that is the fact that their main customers started to become less and less likely to travel to their stores to buy their product. They would rather just order other competitor's products online. This is New Balance had to come up with a new strategy, and the company had to become more automated. Today, New Balance is live on Warehouse Management, Slotting Optimization, Supply Chain Intelligence and RFID in two sites. The solution is integrated with Dematic conveyor systems, Mantissa for tilt tray sorting, Quantronix CubiScan and Fox 4 print and apply. Our host system does a pre-allocation, so no orders drop to Warehouse Management unless there's inventory in the facility.
• When orders come in, Warehouse Management allocation is completed. The company is striving to have 100% inventory to meet orders and don't get orders unless the system thinks they have it. They look at slotting weekly to make sure new products coming in have a home and are much more efficient moving out dead or slow items. New Balance receives orders throughout the day and used an automated process for outbound sortation. All product is picked from reserve or active. 75% gets inducted into a unit or tray sorter. Shoe boxes are dynamically assigned to the different lanes. Warehouse Management feeds this information to a sorter. From there, all outbound shipping cartons go through a print and apply system
The products from New Balance are advertised as technologically superior to the competitors and highly appreciated by the athletes and professionals alike. They feature sports celebrities like Boris Berian, 2016 National Champion, in the #MyFutureSelf ad campaign. The horizontal stripes in the “N” of New Balance logo gives a sense of motion and speed which the brand represents. The bright red color gives the logo a sporty feel. They also have a similar Ad featuring Joe Root, the captain of the English Test Cricket Team, where he is seen wearing New Balance shoes and practicing his sport. The Ad has a motivating feel and encourages to push one's limit and not be satisfied with one's achievement.
• New Balance pride themselves as Made in USA as most of their products are manufactured in USA. It also adds a sense of patriotic feeling and adds to its popularity in US. They also engage in various environmental and social causes from time to time which bring good will to the brand. They try to manufacture with zero waste and assess the life cycle impact of their products on the environment. They have a special team that review all chemicals that they use to manufacture their shoes. They have a supplier standards manual and follow them diligently with all their people they work with. The New Balance Foundation was established by the chairman and vice chairman of the company back in 1981. They work to build stronger and healthier communities and try to make kids healthier and prevent obesity. They also provide special discounts to students like 10% discount offers etc. Hence this completes the marketing mix of New Balance.
• As a traditional sports brand, New Balance attaches great importance to sports marketing activities. Sports marketing is a method that sports enthusiast as the target customer groups through the organization of sports events, sponsorship and naming, etc. to promote sales. It can attract sports fans attention to the tournament that will be held, at the same time, it can broadcast the corporate brand and increase the brand awareness and favorability, thus achieving the effect that sell the products and enhance their reputation.
• To increase attractiveness, NB will arrange vast promotional activities around the market and can held festivals to highlight the product's features. To match customers' emotion with this product's image, NB will customize its marketing activities to suit this requirement. NB will maintain some level of social and environmental involvements that are associated with this product. In this way it will have useful tools to deal with ever increasing ethical issues in commerce.
Price positioning is an important factor in the success of marketing strategy. For the the regular customer who pays more attention to the quality and price, the price can influence the purchasing behavior directly. At first, the product price should get agreement of the potential customers. Secondly, the value of product should be same as the price of same type product. The third is that after determining the selling prices, profit margin should be resembled with operating same type's product proprietor.
New Balance manufacture their products inside USA as well as UK whereas most of their competitors manufacture their products outside the US and UK and sell them in American or European markets. As a result, New Balance incur a higher manufacturing cost and hence charge higher price than competitors. Thus the main pricing strategy in its marketing mix is premium but to compete, it also balances its prices so as to match the product's high quality. But they provide value to the customers by maintaining the product quality at an optimal level and differentiating their products by introducing innovative features like soft gel inserts in the bottom layer of the shoes for ultra-smoothness, proving the customers with more number of SKUs to fit very narrow as well as wide feet of different sizes etc.
• The pricing strategy for New Balance has stayed relatively consistent over the years. The focus of the company is to produce mid-level priced equipment that the average consumer can afford; however, in the late 1980s, they were forced to sell below their usual price in order to counter the negative effects of low demand. This crisis was short-lived, and New Balance was able to return to normal pricing within a few years.
• The price of New Balance high-end imports footwear products is between $49.99 and $349.99, and it will be accounted for 8 % of the annual number of footwear. The intermediate layer of professional running functional shoes priced between $79.99 to $599.99 is about 19 % of the total number of products.
• New Balance clothing is lacking of market competitiveness. Currently, price positioning strategy pays attention to how to have advantages when compared with the same material and clothing styles such as Puma. The summer clothing price is about $15.99-$49.99, and spring and autumn price is between $49.99-$149.99, while the winter clothing price is between $145.99 - $415.99.
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