Classic Ltd.-

Marketing Management

Classic Knitwear and Guardian- A perfect fit Requirements: 1. Evaluate the product-company fit. 2. Evaluate the product-market fit. 3.Will consumers and the trade respond to the Guardian marketing program? 4What other problems do you see in the proposed Guardian marketing program? 5.What are the advantages and disadvantages of the licensing agreement?

1. Evaluate the product-company fit I think this agreement is beneficial for the two companies. The summary of the licensing agreement presented in the case does not give us the full information, so some points are vague. The agreement states that Guardian can terminate the agreement at any time if sales of Classic‟s material detract from Guardian‟s sales. This puts Classic in a precarious situation. Classic‟s products could become very popular and Guardian could essentially cancel the agreement, stopping sales which would dramatically impact Classici‟s bottom line. The company had a moderate cost advantage over other US producers due to high-volume, low SKU production runs. The addition of the new product meant addition of 16 SKUs. This new product might lead to some inefficiency in its present system. Guardian brand had high level of awareness and it had patented insect-repellant clothing technology. The product had a good market potential due to its innovativeness. This advantage can be leveraged by the production efficiency of the company to achieve a sustainable competitive advantage. As a conclusion, I can say that they should proceed with the introduction of these products.

2. Evaluate the product-market fit Product-market fit means being in a good market with a product that can satisfy that market. The best team with the best product will fail if the market is not there. Creating the best product is not necessarily as critical to achieving product/market fit as creating the minimum viable product that satisfies a problem/need that exists and is worth solving. 1

In my opinion, I believe that the new line of insect repellent shirts that Classic Knitwear is developing has a good product/company fit because they have almost all the requirements that I mentioned above, and those they do not have (eg. Financial), they are looking the way to solve it (eg. partnership). It is also an opportunity to differentiate its products and it has. They possess the necessary marketing channels to sell this product, but in my opinion they should also open new channels (specialized shops in outdoor clothing). It always has a good product/market fit because they are satisfying a customer need (survey results).

3.Will consumers and the trade respond to the Guardian marketing program? Regarding the trade reaction: presently, the retailers were provided with 50% margin on branded knitwear and 40% margin on private-label knitwear. The new product would provide the trade a 45% margin. My opinion is that displays would occupy a large amount of retailers space and also the retailer margin is on lesser side offered by other brands. This would not encourage the retailers to stock the product. But the provision of trade promotion and advertising allowance might induce them to stock the product. The company would make the Guardian shirts available to its existing wholesale clients for distribution to interested screen painter in a later period as it has currently decided to brand the product as “Guardian Apparel”. Given the fact that the company has no experience in selling to these retail channels, i think that it has to spend considerable resources to develop the channel. Regarding the consumer reaction: based on the consumer research, 18.5% of the thousand respondents were interested in the product. Based on past market research experience, 60% of the respondents who indicated they would definitely try (38%) would do so (22.8 %) within the two-year introduction period. The company also predicted that at least 50% (11.4%) would buy an additional shirt the following year. 4.What other problems do you see in the proposed Guardian marketing program? They are launching the product in the sole brand name of „Guardian Apparel‟, and have decided not to include the name „Classic Knitwear‟ The launch is scheduled in January 07, which might not be the perfect time to launch this product as its sales are supposed to be seasonal, it would be better to launch at the end of winter so that the sales pick up instantly The number of SKUs is 16 which include 4 designs in 4 different colors. As the 2

product is specifically meant for outing, the number of SKUs can be reduced by using only the two most popular colors. Retail prices are comparable to other national brands which is an apt decision to provide sufficient trade margin as the pricing is not supposed to hinder the sales The market research is not extensive and should not be relied upon fully for making important decisions Initial distribution is planned through major sporting goods and apparel chains which would support the establishment of the brand in the introductory phase. The 3 No. of sales reps to focus on this sector might not be sufficient for the whole country. 5.What are the advantages and disadvantages of the licensing agreement? This agreement forced Classic to meet series of steadily rising annual net sales target over the first four years and target for 4th year must be met in each subsequent year. If it failed to meet the requirements then the license would be cancelled and void. There are loopholes in the branding of the product. Only Guardian logo is being used on the product. It may create problems for Classic if there is any conflict between companies over agreement in future. With this agreement a short term benefit can be visualized as the determined marketing investment has been reduced to $3 million from initial expectation of $8- $10 million. As the brand value of guardian will increase by its promotion they should also bear some part of marketing expense.

LBUS, Faculty of Economic Sciences Lucaciu Alexandra Master in Business Administration, C I, 1st Year

3