fitability. the market- ating extra m or even rated mar- success in coopera- o-develop nd excite uct solu- a strong ponsible rs at all CASE STUDY 8.1 New Products for a New Business L illy had been working in public relations for several years. She worked for a firm that specialized in the image building of new businesses. Her accounts were primarily hip restaurants with owners who wanted to attract the city's most chic and savvy clientele. Her job, in essence, was to position these new restaurants as stylish, "happening" places for after-work gatherings, business meetings, celebrations, and so on, while also promoting the featured cuisine and bringing in celebrities who were in town. Naturally, this required many late nights, an expen- sive wardrobe, a lot of smiling, and more eating than should have the opportunity to do. anyone Lilly enjoyed the prestige and excitement, but she had a secret desire to start her own business. She loved fashion, accessories, and all things sleek and modern. She had always dreamed of opening a boutique where she could be her own boss, interact meaningfully with customers, use her creativity and connections to build something for herself, and do something she loved-pro- viding women with the means to look and feel great at reasonable prices. But liking fashion and knowing enough about it to actually develop a business are two different things. Lilly signed up for a two-year program in fashion mer- chandising at a local college, which she completed while maintaining her public relations activities. Yes, she was often exhausted but highly motivated. Her brothers, one an accountant and one an attorney, were not only impressed by how much money she'd managed to save during her years as a publicist, but at her determination as well, so they agreed to help her secure the money she would need to start and maintain her business until it took off. It looked like everything was falling into place for Lilly. She'd even chosen a location. Could her dream actually be coming true? QUESTIONS 1. Do you think Lilly is ready to open her boutique? Discuss the bundle of benefits that the customer expects. Identify the product essence, real product, and expanded benefit bundle. 2. What kinds of new product variations might she consider in order to differentiate her boutique from others? 3. Considering Lilly's experience and connections resulting from her years as a publicist, the financial support she has in place, and the current zeitgeist, do you think she would do best carrying shopping products, specialty products, or a combination of both? Why? 4. Looking at the rate of adoption process, address the five steps that a customer might experience as she becomes a repeat customer of Lilly's boutique. 259 CASE STUDY 9.1 Forever 21-Really Fast Fashion hat teen fashion fan doesn't love owning the latest W trendy look, particularly at a budget price? Fashion-centered shoppers thrill to the hunt for exciting, new, and-for many teens-inexpensive fashion looks. One of several fast-fashion organizations trend on the where consumers can locate just about every scene is Forever 21. Teen shoppers worldwide have access to vast offerings of trendy and inexpensive original and designer knockoff apparel and accessories. An integrated marketing organization, Forever 21 claims some 477 stores worldwide plus a Web site, employs 35,000 workers, and nets $3 billion dollars annually. In the United States, the company's New York stores include Fifth Avenue and also Times Square. Throughout the country, including California and Las Vegas, and many places in between, Forever 21 stores occupy former Saks, Sears, Mervyns, and other retail locations. Overseas, London's fashion- able Oxford Street and Tokyo's Shibuya shopping area are major shopping venues; company plans include opening 75 additional stores in five countries. Headed by one family, Do Won Chang, his wife, Jin Sook, and their two daughters, Forever 21 grew out of the hard work of the Korean immigrant parents in Los Angeles to build a manufacturing, distribution, and retail network for inexpensive teenage fashions. Mrs. Chang is in charge of obtaining the merchandise, and Mr. Chang handles the other aspects of the business. Daughter Linda runs the marketing department, and her sister, Esther, is in charge of visual merchandising. A star feature of the company's success is Mrs. Chang's ability to both recognize the latest trends and also negotiate the most favorable prices. She buys goods in relatively small quantities. That way, customers learn to buy when they first see an item because next time it will be gone. An advantage for the company: if a certain look doesn't sell, the loss is minor. Much of the success of Forever 21 stems from Mrs. Chang's expertise in rec- ognizing trends early and the company's agility in swiftly putting them on the market and moving them out. The rapid turnover of merchandise combined with low prices is the key to Forever 21's rapid growth to date. action, the company Anthropologie, and others. When threatened with legal team that produces original looks in-house. the settlement as a business cost. (Although U.S.c tends to settle out of court, counting laws currently do not protect designs, the fashion industry is seeking a change in these provisions). Knockoffs are not the company's only business; Forever 21 does have a design Another challenge the company has encountered is the accusation of unfair wages and working conditions. For example, a while back, workers in Los Angeles facto ries contracting with Forever 21 brought a lawsuit against the company. It was settled in their favor. Other lawsuits, claiming similar violations, typically are settled out of court From such incidents, Forever 21 created a vendor compl ance program requiring the manufacturers they are working with to follow applicable labor laws, and investigating promptly any situations that surface. Currently, about 10 percent of the company's production takes place in the United States, usually items that call for a short lead time. Here, manufacturer compliance can be ascertained fairly easily. As Forever 21 production expands overseas to China, Pakistan, Vietnam, and other countries where costs, wages, and working conditions are less regulated, the question of monitoring and maintaining vendor compliance is cloudier. Featuring the right product is essential. Forever 21 has been known to copy current looks of well-known design organizations such as Diane von Furstenberg, Anna Sui, 300 barter break-even analysis cash discount Consumer Goods Pri cost-plus pricing demand demand curve elasticity of deman Federal Trade Con fixed costs gray market good markup markup pricing penetration prici price profit quantity discou Robinson-Patm seasonal disco Sherman Antit skimming pric supply total costs trade discour variable cost copyright Nevertheless, Forever 21 is developing a viable target audience and appeals to it through a marketing mix focused on product appeal, price, presentation, and accessibility. Sources: Susan Berfield, "Forever 21's Fast (and Loose) Fashion Empire, Bloomberg Business Week, January 20, 2011, http://www.businessweek.com/ magazine/content/11_05/b4213090559511.htm (accessed March 8, 2012); Forever 21 Web site, HYPERLINK "http://www.forever21.com" www.forever21.com (accessed February 12, 2011). it, and why did you select it? PART III: FOCUSING MARKETING MIX ELEMENTS ON THE FASHION CONSUMER KEY TERMS QUESTIONS 1. If you were consulting with the Changs on selecting the most useful pricing objectives for the company, which objectives would you recommend? Why? 2. Which aspects of the external marketing environment have an effect on the way Forever 21 prices its merchandise? Explain. 3. From the pricing decisions given in the chapter, select two or three that you believe are in effect at Forever 21 right now. Do you see another pricing technique the company might also use? If so, what is REVIEW C 1. What is m is price in markete-