Introduction
The purpose of this report is to discuss Under Armour’s current marketing plan, their positioning in the sporting apparel market, and several ways to improve their market share. After analyzing a multitude of sources such as official reports, blogs and many other reliable resources, this report contains key information about Under Armour as a company. In addition, we will be analyzing the external forces affecting Under Armour as well as consumers’ buying behavior and the various strategies used in the marketing mix. A SWOT analysis of Under Armour was also performed, identifying the strengths, weaknesses, opportunities, and threats facing the company. We will discuss how Under Armour wants to grow, for instance, by expanding his business to China and other emerging countries, by becoming a technology company or even going through a reorganization process at the head of the company. This report will delve into all of these topics in much more depth.
2. Company description
Under Armour was founded in 1996 by former captain of the University of Maryland’s football team, Kevin Plank. Plank started the company all by himself on the back of a truck in Baltimore, MD where the global headquarters are currently located. At first, Under Armour was strictly an apparel company but their offer now includes footwear and accessories for men, women and youth. Under Armour takes care of developing, manufacturing, marketing and distributing their own products. The company operates on four geographical segments: North America, Europe, Asia and Latin America. The ideology behind the brand’s founding was to promote innovative performance gear to help athletes perform their best.
The company is heavily investing in technology to connect apparel and fitness through wearables. Under Armour sells in many ways either through its own retail and outlet stores, online, and in more than 20,000 retail stores around the world. They should also learn how to give company swag and corporate gifts effectively to develop their business model and grow more aggressively.
Under Armour’s culture of continuous improvement and innovation strategy is bearing fruit. In this marketing plan, we will outline how the company can change their distribution strategy and accelerate a global expansion to reach 80% of its sales outside of the United States.
3. Strategy focus and plan
Mission
Under Armour’s mission is in their headline “To Make All Athletes Better Through Passion, Design And The Relentless Pursuit Of Innovation”. Led by Kevin Plank, the company seeks to pursue the development of shirts for athletes that would remain drier and lighter even after intensive physical activity. Under Armour’s strives to “empower athletes everywhere” with innovative fabric and designs that enhance athlete’s performances. By developing a new category of sporting apparel, the brand’s mission is to deliver a universal guarantee of performance, with a superior product compared to its competitors. UA also wants to deliver unparalleled service to its customers and build a relationship of trust with the end-consumer.
Goals
Below are the goals Under Armour seeks to achieve in the next three years:
Non-Financial
- Building a fitness community. Under Armour already boasts a fitness community of over 200 million users and plans on expanding it by acquiring sports-focused tech brands such as MapMyFitness, MyFitnessPal, Endomondo and one in four Americans now uses one of its fitness apps.
- Adopting a ‘patient ‘sponsorship strategy. Part of UA’s strategy has been signing up athletes before they hit superstardom. This ‘more patient’ strategy has been very rewarding for the brand.
- Take a localized approach while expanding to the world. While very successful in the US, Under Armour seeks to increase sales by sponsoring local teams around the world and adapting their communication to every demographics.
Financial
- Reach $7.5 billion in annual sales by 2018. That’s a 64% increase from last year’s revenue of $4.83 billion. By 2020, the company’s CEO Kevin Plank projects $10 billion in annual sales.
- 20% revenue growth in 2018
- 25% earnings per share growth after 2018.
Core Competencies
Under Armour’s competitive competencies include the very high quality of their T-shirt which can hardly be compared with anything on the public market. By producing these high-performance products always lighter, dryer and more comfortable, the company enhanced on the global market built a strong image. Another strength is they cover a wide range of the market from youth to professional head to toe apparel which includes apparel, footwear, accessories for Men, Women and Youth.
Also, the strong, unique product branding starting with their logo has contributed to the company’s enhancement and success over the years. Since 1996, Plank has followed a culture of continuous innovation by staying ahead of its competitors in the athletic apparel industry.
4. Situation Analysis
In this section, we will be analyzing the strengths, weaknesses, opportunities and threats of Under Armour. Following the brief overview, we will be looking at each SWOT elements in much more details.
SWOT Analysis
Strengths: Under Armour’s strengths allows them to be an athletic apparel leader. The company’s strengths are, but not limited to ecommerce, brand equity, innovative culture and its strong customer loyalty. As a highly respected company, Under Armour has built a loyal customer base who become repeat customers and even fans of the brand, deciding to exclusively buy from Under Armour from then on. Another major of UA’s strength is their company culture. For examples, employees are encouraged to work out at the office every day and the headquarters include some facilities such as two basketball courts and a gym. This is a way for the company to attract smart talents to work at UA. Finally, another strength is that they sell the highest quality sports clothing out there. This has helped the brand image tremendously on the public side. One of their biggest competitors, Nike Inc, is often slandered of using sweatshops where Under Armour has been able to avoid bad press for the most part. For instance, the company has written a Code of Ethics where they require all of their manufacturers to adhere to a code of conduct regarding quality and working conditions as well as other social concerns.
Another of the companies’s biggest strengths is that they are still in their growth phase which gives them huge scope to grow. When putting together all of UA’s strengths, it is easy to see how they’ve grown so fast over the past 21 years.
Weaknesses: Unfortunately, no company is perfect and knows no weaknesses. Under Armour has many weaknesses to such as a limited product range, lack of customization and their high prices. Also, they have a very weak presence out of the United States where a majority of its sales happen. A substantial part of their sales comes from e-commerce but their website is missing a section for customization. They have the internal capacity to build and follow a customization category. Another of the company’s weaknesses is the lack of women following although they have been working hard at making up time. For example, Under Armour now sponsors dancer Misty Copeland. Through this sponsorship, and by focusing on women’s apparel, CEO Kevin Plank mentioned “Women’s has the potential to be larger than men’s”.
Also, the current lack of diversification of their products for mens and womens has hindered the company from stealing some precious market shares from Nike and Lululemon.
Opportunities: Although the company was doing very well until recently, Under Armour is faced with a multitude of opportunities that, if taken advantage of, could lead to a substantial growth in their sales. As we touched on earlier, one of UA’s major opportunities is to expand into other countries. Right now, over 95% of their sales happen in the US.
Another big opportunity is the fact that people exercise much more nowadays, with media promoting healthier lifestyles. With more people exercising regularly, UA’s target market has grown and will continue to grow as long as the trend exists.
Threats: On the road to success, they are many threats UA is facing along its way, especially from external forces. For example, one of Under Armour’s biggest strengths for many years has been their lightweight material, which is moisture wicking and keeps the athlete cool during workouts or warm in cold temperatures. The problem is Nike’s DriFit line of products has done a great job at imitating UA’s star material and the final consumer won’t see the difference. Another threat is Under Armour items are not all that cheap, which means any negative fluctuation in the US economy could affect sales considerably. Another US recession and the implication for the company would be huge since their products are not a necessity.
Industry Analysis
The global sports apparel market is expected to generate revenue of $188 billion by 2020 according to Allied Market Research. The major factors driving the growth of the sports apparel market will be the growing health awareness, the increasing disposable income and a surge in female participation in sports.
The market is categorized in three distinct markets such as apparel for men, women and kids. Unsurprisingly, the men segment is dominating the sports apparel market counting for 52% of the total revenue.
Here are some key Findings of the market:
- Due to increasing disposable income, the changing lifestyle and the growing health awareness among consumers (as mentioned above), the sports apparel market is expected to grow significantly between now and 2020.
- The highest revenue-generating segment is the men’s sports apparel which accounts for 52% of the global revenue.
- Asia, and especially China, would emerge as the largest sports apparel market by 2018
The key growth strategies established by the key players in the sports apparel market include product launches, acquisition and partnerships to increase their market shaer and expand their customer base. The biggest players in the market, apart from Under Armour and Nike are Adidas, Puma, Columbia and Lululemon.
Competitor Analysis
Under Armour’s top three competitors are Nike, Columbia, Sportswear and Adidas. The number one competitor of Under Armour is Nike Inc., the world’s number one athletic shoe and apparel company.
Their second largest competitor is Columbia, which is known for their superior outdoor wear that can be worn for a variety of activities, which makes it unique from the competitors.
Another of Under Armour’s top competitor is Adidas, which also has sold sports shoes and apparel to a broad customer selection since 1924. Recently, Under Armour sales have overtaken Adidas in the US which ranks UA the second athletic apparel company in the United States after Nike.
Finally, the sports apparel competition is imperfect because the biggest players in this market sell very different products from one another and hence are not perfect substitutes. For instance, Under Armour focuses primarily on performance gear while Nike covers a wide range of styles from Workout Gear to Athleisure.
Company Analysis
Under Armour is an athletic clothing and footwear company that was founded in 1996 in Baltimore, Maryland by Kevin Plank. Since its emergence on the scene, Under Armour has made great strides in expanding both its own business and its market share. Under Armour is a publicly traded company that is traded on the New York Stock Exchange under the ticker symbol “UA”.
Under Armour’s greatest strength are its sponsorships with the greatest athletes out there such as Steph Curry and Jordan Spieth. If the company manages to multiply endorsements from high-level athletes and finally expand their reach to emerging companies they should continue to see a steady increase in their sales.
The company has its weaknesses, for instance, the way the items are overpriced does not play in their favour. Even though the company boasts 26 quarters with a 20% growth, the company is still in its maturing stage and the end consumer is often reluctant to pay 10–15% more on a pair of Under Armour shoes compared to a Nike or Adidas pair.
The main threat to Under Armour is competitors that have been around longer than them, that have already tapped these markets and therefore have a strong hold on them.
Customer Analysis
Under Armour is made by athletes for athletes. They supply sportswear to the everyday athlete the same way they would to a high-level professional. And this is what UA customers expect, an unparalleled level of quality and service.
This segment of customer, often very loyal to the brand is looking for UA’s high quality material and crafting, they want to stay dry and comfortable while exercising and boast they favorite sportswear at the gym. The average UA customer is ready to pay the price for an item that will last long, will satisfy their day-to-day workout requirements and will never go out of date. As long as the brand manages to build more of these loyal customers who do not watch the price tag, the company should continue to rise.
Customer Characteristics
Demographically, the average Under Armour customer is in the 18–35 years-old range, who enjoys working out and/or practising a sport every day. Usually very exigent, they expect a lot out of their UA gear and will continue to pay the price for quality sportswear since that’s what they love: sweating while looking and feeling good.
5. Market-product focus
This section will layout the marketing and product objectives for Under Armour in the next five years. We will discuss the target markets, the points of difference and the positioning of the brand.
Marketing and Product objectives
Under Armour, Inc.’s primary business consists of the development, marketing, and distribution of branded performance apparel, footwear, and accessories for all age groups, and for men, women, and children.
The firm’s moisture-wicking technology provides a performance alternative to traditional products. Under Armour customers are athletes for the most part. UA products are also targeted at the sportswear market and persons with active lifestyles.
Product opportunity
Of the $7.5 billion in annual sales projected in 2018, about two-thirds or $5 billion would come from apparel, the company’s traditional stronghold, while footwear sales are projected at $1.7 billion. While apparel sales would more than double over four years, footwear revenues would quadruple.
Category upside
According to Henry Stafford, chief merchandising officer at UA, the company has a double-digit share of the market in only one of its eight categories: men’s training. So the opportunity to innovate and grow is immense. The company sees a $2 billion opportunity in training and $1 billion in basketball.
Sportswear launch
Under Armour has also launched a new category, sportswear, in mid-2016. UA’s two biggest rivals derived ~$12.5 billion in sales from the $50 billion global sportswear industry, or 25% of the total. Nike derived ~25% of its sales from sportswear over the past three years. In fiscal 2016, the category clocked sales of $6.6 billion. Adidas has several sportswear lines, including Adidas Originals and Neo, which includes a collection by Selena Gomez. Sales for Adidas Originals and Neo rose 37% and 43%, respectively, year-over-year in 4Q15.
Target Markets
Initially Under Armour was targeting younger athletes, more so at the collegiate level. However, as their company has grown they have expanded their target market to include men, women and children of all ages. Due to the fact that their products happen to be more expensive than some competitors, they target consumers who are more financially stable and have higher incomes. This becomes apparent when looking at the distribution of their stores. More often than not, Under Armour sells their products to wholesalers who are in financial stable, if not well off, areas. Under Armour feels that they target their consumers best by using a selective distribution strategy, this is used for products that are not in every retail store, but there are some within a geographical area. Under Armour uses stores like Dick’s to distribute their product because they know that people will only be shopping in these stores to find sporting goods and sports apparel. Under Armour, who only sells sports related products, only needs retail stores like these to reach their targeted markets.
Points of difference
Under Armour’s biggest point-of-difference, and what really sets the brand apart from its competitors, is its dedication to being innovative. Kevin Plank, Under Armour’s CEO, started this dedication by innovating a way for athletes to stay cool and dry with the original UA compression shirt (Product Innovation). Today the company has made innovation not only a goal but also a way of life. In fact, UA headquarters has an innovation lab “which requires a special key fob and a vascular scan for entry” (Sanneh, 2014). In this lab some of the newest technology in the athletic world is being developed. One of these new inventions was “ColdGear Infrared, an insulation system meant to provide warmth without bulk.“ (Sanneh, 2014).
Positioning
Under Armour’s full-court press has propelled the athletic-wear brand past Adidas in the U.S. and put Nike squarely in its sights on the world stage, according to analysts at Morgan Stanley. Shares for the company may be trading down at present with the news that its COO and CFO Brad Dickerson will be stepping down, but it is expected to touch $20 billion in revenue by 2025. The Baltimore-based company is also growing at a pace faster than both Nike and Adidas — the two biggest sportswear companies in the world — and will become the third-biggest global sportswear brand in the next decade. Under Armour has not only been a frontrunner of the so-called athleisure trend but has also succeeded building a passionate online community around itself through its investments in technology and integrated fitness apps. Its strong brand messaging through campaigns like “I will what I want” has also touched a chord.
6. Marketing Program
This section will discuss how Under Armour hopes to become the leader of athletic sportswear and especially footwear by 2020. By focusing on technology, revising their pricing strategy, investing in new sponsorships and expanding their business to China, the company should hit their goal hard if everything went as expected.
Unfortunately, things rarely go as expected and recently, the company has suffered a major drawback. UA’s CEO Kevin Plank publicly endorsed president Trump in an interview for CNBC’s “Fast Money Halftime Report” saying the new president was a “real asset for the country. This has created a lot of controversy online and Plank feld obliged to answer the criticism in an open letter. It appears this endorsement has produced a lot of scars in some loyal UA customers which will be hard to heal.
Through this little interlude, I want to demonstrate how tough it is to keep a strong brand image on every front in this digital world. News, tweets, information goes so fast the end consumer can easily get confused or influenced, something that would have not happened 50 years ago.
Although Under Armour is trying its best to uphold their reputation as a leader in the performance apparel market, a negative external factor could easily make their reputation tumble down.
Product Strategy
Companies are constantly looking for ways to improve their product and marketing. One of the major threats is product differentiation. Under Armour needs to diversify their offer to expand their reach to new sports. One of the main driver will be technology and connected apparel. Under Armour is becoming a leader in the connected apparel market and that’s what they should be focusing on mainly.
New technology acquisition will be the driver for growth, especially in the 18–24 years old segment. By building the biggest health community in the world, UA projects technology will represent ⅓ of their revenue by 2020.
Price Strategy
Apparel is still Under Armour’s core category. The company owes its origins to its trademark moisture-wicking technology used in sportswear. Now, Under Armour is looking to push products over a wide array of price points. This gives the company better leverage to amp the selling prices in innovative apparel products. This would include the ColdGear, Infrared, Storm and Charged Cotton lines. Then, to satisfy customers seeking value, the company launched the MagZip line in 2016. This has proven to be very beneficial at gaining some market shares from Nike & Adidas.
All things considered, UA items are overpriced compared to their direct competitors equivalents, Nike and Adidas. The difference is, if UA maintains their quality standards and continues to innovate, they will create a strong and loyal customer base that will pay the price for quality.
Promotion Strategy
As an increasing number of users spend more time on their mobile devices, especially on apps, Under Armour is looking to improve its mobile shopping experience. The company believes this will be a key growth driver in the long term. For instance, it recently introduced a new UA shop app which allows shopper to navigate for its products through its “Connected Fitness” platform. The company is also using data to refine and recommend products based on the customer’s activities and expects this to increase the transaction size and volumes on its shopping app. The company’s new line of “Under Armour Sportswear” is being developed for the mobile native customer and is predominantly a direct-to-consumer offering. With over 175 million registered users, the company’s “Connected Fitness” platform continues to grow rapidly at a rate of 100 000 new users/day! UA is certain online and mobile commerce initiatives will be a key driver for revenue and long-term growth.
Another promotion strategy is to partner with the big retailers out there. Their recent partnership with Kohls will bring its products to the latter’s stores starting 2017. Kohl is a top retailer of active wear with a large and loyal consumer base of women shoppers and Under Armour will get access to these consumers via the recent partnership. The company strives to reach consumers where they “expect” to find its products and deciding the right distribution channel will be critical for its growth in future. Their existing partnerships with departmental stores such as Macy’s and Foot Locker has proven to be very beneficial. UA believes a strategic expansion of its retail partnerships will ensure wider product availability and expand its consumer base in the long term.
Place Strategy
China is starting to be a revenue driver for Under Armour and the company expects this region to continue to drive growth. The company expects China to be a billion dollar opportunity for its brand as the Chinese market grows due to regulatory initiatives. A blueprint was recently unveiled by the Chinese cabinet which plans to grow the domestic sports industry to 5 trillion yuan by 2025 with ramped up sports facilities and looser industry regulation. UA believes this will be a key revenue driver in the future, given that the company already has already started building a strong presence in the country.
7. Final Data and Projections
Past sales revenue
Here is a snapshot of Under Armour’s revenue in the last 3 years. We can see a steady growth from year to year almost hitting the $5B threshold in 2016.
Five-Year Projections
At its last bi-annual Investor Day meeting, Under Armour set a 2018 net revenues target of $7.5 billion, easily double its 2014 net revenue ($3.1B). In doing so, the company ramped up its impressive growth rate target from 22 percent to 25 percent
Figure A: Under Armour’s Sales projections
8. Organization
Under Armour follows a simple organizational structure with CEO, Kevin Plank at the top of the pyramid. While Mr. Plank is the face of the company, the Board of Directors are responsible for much of the decision-making for UA. The Board is evaluated annually by a committee to ensure that they are doing the best job for the company. A “Lead Director” is in charge of holding Board meetings and is elected by vote of non-management Directors. Directors of the Board have free access to management and information and the company tries to keep its lines of communication throughout the entire company as open as possible. With 13’900 employees, it is clear the whole chart could not be displayed, I rather chose to show the Board of Directors which gives an idea of the different departments in the company.
Figure B: Under Armour’s administration:
9. Implementation Plan
Using all of the information gathered, five recommendations have been developed that would help Under Armour uphold its successes in the sports apparel market. My top five recommendations are for them to begin a line of products that can be easily personalized, sponsor more prominent athletes, expand their overseas presence, develop a partnership with a technology company & make new acquisitions, and open more factory stores throughout the US and all over the world.
In such a complex and fast moving market, I suggest UA should start by focusing on the technology side and building their Fitness community. I suggest this would be done by partnering with a big, independent technology company in the Baltimore/Washington area. The focus will be on optimizing & advertising their current apps, acquire new health application getting traction or building the next myFitnessPal. The idea is to strengthen the fitness community that has proven itself being a real asset and a sales driver for the company.
The second step for the company is to expand their sales to emerging countries and especially China. While Under Armour is currently struggling in the US, they should look into expanding their sales in Asia and especially China which could potentially represent $1B in sales within the first year. Of course, the company will still need to take very good care of its US customers while trying to heal the scars left by the recent endorsement of Trump by UA’s CEO Kevin Plank.
Then, my next step would involve diversifying their offer. So far, UA’s product are mainly conceived for performance and they tend to neglect the emerging markets such as ‘athleisure apparel’. By diversifying products, Under Armour will be able to gain some market shares over its direct competitors such as Nike and Adidas.
Finally, the last step in implementing this plan would be to open more “Brand Houses” throughout the US. I strongly suggest developing DTC (Direct-To-Consumer) sales as they now represent 31% of total sales when they used to be 12% back in 2013. I think there is a lot of potential by selling straight to the consumer as this can also strengthen the public brand image.