March 31

2011

Harrington Collection, Case Brief
Rachel Blais

Strategic Marketing Management

70%. and it is considering doing this by creating a new active-wear clothing line to follow the latest rising trends. Harrington could take advantage of this trend by introducing active-wear to the fifty stores carrying its Vigor line of clothing.Key Issue: At what price should Harrington introduce the new Vigor active-wearline? Harrington Collection has faced declining sales from 2005 to 2007. Harrington needs to determine whether or not these are the optimal prices that will achieve higher profits for the new Vigor line. The 2009 total projected number of active-wear units is expected to be 15 million units. feel. Department stores have already begun to sell active. 98% do not believe that a slightly cheaper active-wear line would cause the brand to be perceived as cheap. and $80 for a pair of pants. 95% of the customers were happy with the overall look.000 units(Refer to 2009 Vigor active-wear market share with proposed pricesin Appendix). Of the customers who typically purchase items in the ³better´ category with pricepoints between $100-200.9 million in wholesale revenue and over $6. It can take this opportunity to boost its sales by following the active-wear trend. Those who shop at Vigor are typically trend-setters who seek fashionable yet comfortable clothing.3 million in profits before tax with a profit margin of 15. The clothing company is currently looking for ways re-strategize and boost its revenues. it should sell approximately 420. 1 .wear at double the turnover rate that Harrington collection has been turning over. And even though it was agreed that the durability was below Harrington standards. Introduce Vigor active-wear at 20% higher prices than proposed prices Criteria Quantitative Criteria: y High profit margins y Sales potential y Market share potential Qualitative Criteria: y Customer satisfaction y Brand perception Alternative 1: Introduce Vigor active-wear at proposed prices Because the number of women¶s active-wear units is expected to double by 2009. $40 for a tee-shirt. Introduce Vigor active-wear at proposed prices 2. 6 million are expected to come from the relevant market of the ³better´ classification of active-wear (Please see 2009 projected number of active-wear unitsin Appendix). Assuming Vigor can maintain 7% market share in its active-wear line. Of these units. and durability of the new active-wear. The proposed retail prices for pieces in the active wear line are $100 for a hoodie. Alternatives 1. This translates into $39.

Harrington can cash in on higher contribution per unit with $65. if active-wear prices were introduced at a 20% higher price that the original price suggestions. yet comfortable. and a pair of pants will be $96. Therefore. a tee-shirt will cost $48. By selling active-wear at 20% higher prices than the current proposed prices. Harrington will generate profits of $9. active-wear markdowns are not as significant as they are for other product lines. consumers will be less sensitive to a 20% price hike than would those shopping within the ³budget´ to ³moderate´ classifications that are more price-conscious. Vigor will be able to maintain most of its market share. It is proposed that Vigor would be able retain no less than 6% market share if prices were introduced at 20% higher levels.06%. professional women seeking edgy. Customers are satisfied with the look and feel of the active-wear designs. At these higher prices.464. if Harrington needed to place some of the items on sale.400 before tax and a profit margin of 23.000 in wholesale revenue with $114 per unit sold. Therefore. Furthermore.71 and lower total variable costs because it will be producing less.040. These prices will not affect most consumers who shop with Vigor because they already have a higher willingness to pay than the items that are being offered for under $100. fashions Objectives Boost sales with addition of new active-wear line Tap into new active-wear market Overall Strategy Product-development strategy y Introducing new product line to existing market 2 . These consumers already associate the brand with item prices between $150 and $500 and perceive Vigor as being of good quality.Alternative 2:Raise suggested prices by 20% Because Vigor is a moderately expensive brand. With a 6% ³better´ active-wear market share. it could easily sell the items at a 20% discount at the same prices as the original price suggestions while still covering costs and making profit. Recommendations: Alternative 2 Target Market Trend-setters age 25-50 Active. Vigor would sell 360. and are willing to pay more for fashionable activewear pieces.000 active-wear units (refer to 2009 Vigor active-wear market share with 20% higher prices in Appendix). This would produce $41. a hoodie at retail will cost $120. At 20% higher prices.

Harrington could also evaluate consumer brand perception of the Vigor active-wear and overall customer satisfaction by distributing surveys to customers. and fashion-forward active-wear Price y Objective: Uphold market share between 6%-7% while maximizing profits y Strategy: Price-skimming strategy (within ³better´ classification) y Tactic: Price active-wear higher than market for ³better´ classification (³better´ active-wear priced just below $100) o $120 Hoodie o $48 Tee-shirt o $96 Pants Promotion y Objective: Increase awareness of Vigor active-wear product line y Strategy: Push and pull promotion strategy y Tactic: National advertising campaigns and sales staff Channel y Objective: Use existing channels that Harrington currently uses for its Vigor product line to sell active-wear y Strategy: Indirect channel strategy y Tactic: Sell new Vigor active-wear at each of the 50 Vigor store locations Budget The new budget to add the new Vigor active-wear line will feature annual depreciated start-up and launch costs of $2. Alternative 2: Raise Suggested Prices 20% Product y Objective: Introduce new fashionable active-wear line to Vigor division y Strategy: Product differentiation strategy y Tactic: Good quality. Harrington may consider introducing active-wear lines to one or more of their other brand divisions.5 milllion. If the new active-wear line proves to be successful. and variable costs of $17. It will determine the overall performance of the new active-wear line by determining whether or not it is meeting its profit margins and maintaining its overall share between 6 and 7% in the market.000 units).Marketing Mix.54 million per year. Evaluate and Control Harrington will evaluate the active-wear line on a quarterly basis each year. ongoing fixed annual operating costs of $11. 3 .54 million (with 360. comfortable.

600-289.Appendix 2009 projected number of active-wear units: 7.56% MARKET SHARE 4 .000 UNITS Percent Change in breakeven units (213.000 UNITS Market Share needed to sell at 20% higher price point: 213.666 units/ 6million units relevant active-wear market= 3.31% fewer breakeven units to sell at 20% higher price point 2009 Vigor active-wear market share with 20% higher prices 6 million units * 6% Vigor market share= 360.5 million units (sold in 2007) * 2 (double by 2009)= 15 MILLION UNITS 15 million units* 40% ³better´ market share= 6 MILLION UNITS 2009 Vigor active-wear market share with proposed prices 6 million units * 7% Vigor market share= 420.879)/289.879= 26.

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