Patagonia

Brand Audit Report MKTG 421-001 December 15, 2011

Matthew Charles, Gavin Filarsky, Janelle Gatsche, Dianna Loevner, Kelsey Yonce

INTRODUCTION Patagonia, an outdoor retailer and leader in the green apparel market, is devoted to achieving philanthropic success: being profitable, as well as environmentally and socially responsible in its business practices. Patagonia sells apparel and equipment for mountain and rock climbing, surfing, paddling, fishing, running, and other outdoor sports, while making sure that all their manufactured products meet the needs of their customers, and the environment. Patagonia has used its environmental accomplishments to differentiate itself in the marketplace and in doing so, has received great brand recognition within the apparel industry and amongst consumers. This brand audits intent is to examine the brands current position in the industry as compared to its competitors and the examination of its effectiveness. We composed a survey that was distributed to the public. Questions on the survey had to do with brand awareness, brand image, and brand equity. From our results, we determined that Patagonia plays a role in consumer perception as a high-quality brand, though it is not as popular among our surveyed audience as other outdoor sportswear brands.

I.

HISTORY In 1957, founder Yvon Chouinard took tools from a junkyard and taught himself

blacksmith techniques to forge his own mountaineering equipment (Koerner, 2005). Creating three inch metal strips Chouinard would sell them for $1.50 each out of his car (Rarick, 2008). Because Chouinard suffered from a failed marriage, he eventually turned his hobby of forging metal for climbing equipment into a business (Koerner, 2005). Chouinard would then start his own clothing line with apparel that could withstand the rigors of rock climbing. Later he would

branch out, allowing his company to start selling fleece jackets for cold weather climate, what Patagonia is most known for today. The name of Patagonia stemmed from the visual people got when hearing the word "romantic visions of glaciers tumbling into fjords, jagged windswept peaks, gauchos and condors," it is also a name that can be pronounced the same in every language (Patagonias History). The origin of the company name comes from Patagonia which is one quarter the size of Argentina. Author of Let My People Go Surfing: The Education of a Reluctant Businessman, Chouinard discusses his company and the philosophies that guide it. Chouinard never wanted to be a businessman, which can be understood in the way that his company is not sold on the market like Nike or North Face products. Patagonias manufacturing utilizes superior materials and conscious production. In 1996, organic cotton was implemented in all of the stock along with paints that contain low amounts of organic compounds to prevent health problems. All manufacturing practices at Patagonia are the best in conserving energy and being aware of the environment. Patagonia even uses all of the left over fleece scraps used in the adult apparel is recycled to create patchwork clothing for children called the Seedlings line. According to Patagonia.com, Patagonia, Incs mission is to Build the best product, do no unnecessary harm, [and] use business to inspire and implement solutions to the environmental crisis that is still as strong as it was when Patagonia was founded by Yvon Chouinard nearly 40-years ago. Patagonia continues to have values that reflect those of a business started by a group of climbers and surfers including the minimalist style they promote. The approach taken by Patagonia, Inc. toward product design highlights simplicity and utility; they take pride in donating time, services and a portion of their sales to many grassroots and environmental groups across the globe who are working to help protect the environment. That same risk, soul and reflection, is found in all of the Patagonia products. Examples are reflected in the clothing production methods utilized by the company as well as the vehicles chosen to market them. Patagonias award-winning catalogs are always printed on recycled

materials and feature environmental articles and images of materials that were recycled to be used in featured clothing lines. Marketing channels that are not environmentally conscious such as billboard advertisements are not utilized by the brand. Patagonias distribution partners, such as REI, must also have these same goals and values; acceptable partners are limited. The cost of Patagonia products remains higher than most of their competition due to the lengths the brand goes to market itself. Their passion is lucid in the companys pursuit of green manufacturing practices and their praised customer service justifies their actions, and helps them build an extremely loyal customer base. Products produced by Patagonia last longer than competitors do, and can be returned for repair or replacement in perpetuity, without any questions asked.

II. Logo

BRAND

The Patagonia logo is the skyline of Cerro Fitzroy looking west in Patagonia, Argentina. Cerro Fitzroy is a mountain located near El Chaltn village in the Southern Patagonian Ice Field in Patagonia, on the border between Argentina and Chile. The mountain was climbed for the first time in 1952 by French alpinists Lionel Terray and Guido Magnone. It continues to be the most technically challenging mountains on Earth for mountaineers. Since Chouinard built his company with the small metal mountain climbing pieces he made, it makes sense that he would have a special connection to mountain climbing to make the logo a mountain with a beautiful skyline.

Branding Patagonias brand is very strong to say the least. Their logo encompasses the brands full identity, a skyline of a mountaintop looking off into a distance, simple just like the companies brand image. Patagonias image is close to nature in every way. The brand allows consumers to

make a deeper connection with nature because of the philosophy that Patagonia is selling. The issue of climate change has been around for quite some time. As a result, recent years have shown concern for the environment to be in style. Many celebrities, politicians, and companies have been outspoken about the harm that we are causing to the environment (Rarick, 2008). These types of consumers are environmentally friendly, highly active, self-reliant individuals that share the same lifestyle as the brand. Furthermore, the brand makes an effort to choose products that are less harmful to the environment. This then has had a positive affect on the image and the emotional connection Patagonia has on the consumer, while at the same time, reducing its carbon footprint and subsequently asking other competitors to follow their lead. Patagonias apparel is constructed for people who enjoy the outdoors. Detailed in their online biography, the brand explains that they enjoy silent, human-powered sports done in nature, where the reward involves no audience and no prize other than hard-won grace. These entail risk, require soul, and invite reflection. They bring us closer to the natural world and to ourselves. The brand equity of Patagonia has evolved from a small company, into a large environmentally friendly company. Their values are reflected through the minimalist style their brand promotes. Patagonia wants to save the environment while encouraging customers to wear recycled polyester; their fleece jackets are made in part from plastic soda bottles.The company focuses on making the best products possible, by using natures resources and actively participating to reduce the overall harm to the ecosystem. Patagonia was awarded the Gold level of certification in Leadership in Energy and Environmental Design (Rarick, 2008). Moreover, this vision has brought great brand loyalty to the brand and the products of Patagonia. An individual who buys products from Patagonia desires innovation, resilience, and quality. In addition, the company encourages their employees to take initiative on environmental issues by providing a work leave program for activism. The work leave program allows employees to take a leave of absence with pay, to fulfill environmental activity of their choice.

This program promotes engaging in sustainable issues, and in turn, creating employee loyalty to the company. Even though the green approach is working for some consumers, many feel that it is not a big enough selling point for consumers. Some consumer segments do not appreciate Patagonias green initiatives, and are not connecting with the overall vision of the brand. Based on our survey results, Patagonia was not the most known outdoor brand, and many people did not see themselves buying Patagonias products in the future. Therefore, their brand image and loyalty is successful for their current consumers (who are very loyal); however, Patagonia has a difficult time connecting with new consumer groups.

Brand Awareness Patagonias brand awareness and standing are both exceptional, especially for its size. The company is known for creating high-quality outdoor apparel and equipment. Patagonias success stems from the great innovation they provide for the enthusiasts that frequent their brand. Patagonia is constantly reviving their merchandise to ensure it is durable. In the likelihood that something were to get damaged, there is a lifetime warranty on many items. In addition to the product itself, Patagonia has a mission. They are an authentic green company, meaning that they have initiatives of saving and improving the environment and a healthy lifestyle. In fact, they produce most of their products from recycled materials and they give 1 percent of their sales to the planet. The customer service and dedication of their employees is something that has been admired. Everyone apart of the Patagonia family is not just a staff member, but whole heartedly invested in the company and their mission to save the environment. Further, they seek to provide superior customer service and knowledge about their inventory.

Social Responsibility

Most people want to do good things, but dont. At Patagonia, its an essential part of your life, said Yvon Chouinard, founder of Patagonia. Patagonias philosophy is to help preserve the environment while creating the most premium outdoor apparel. Patagonia aims to produce high-quality products while doing the least possible harm to the environment. The company has 39 stores in seven countries. They offer an on-site day-care center at its headquarters and full medical benefits to all employees including part time workers. Patagonia social responsibility efforts are huge. Patagonias slogan is live simply, because they believe that if you dont need it, then dont buy it, save the environment. 1. Bluesign Standard: This company audits Patagonias resource consumption and chemicals used in production (patagonia.com/us.environmentalism). 2. 1% For The Planet: Gives 1% of their sales to the preservation and restoration of the natural environment (patagonia.com/us.environmentalism). 3. Conservation Alliance: An alliance to encourage other companies in the industry to donate money to environmental organizations (patagonia.com/us.environmentalism). 4. Common Threads Initiative: To keep their clothing out of landfills. Reduce, Repair, Reuse, and Recycle, (patagonia.com/us.environmentalism). These are the main environmental efforts that Patagonia supports and promotes in their stores, print ads, and online.

Distribution Patagonias main method of distribution is through its Patagonia store locations. It has more than 50 retail stores in the US, Europe, and Asia (Hoovers.com). Patagonia also sells it products at sister companies; Lotus Designs, Water Girl, and Great Pacific Iron Works. In 1964, they were only selling their products through the mail and specialty shops. The company has come a long way in the way they distribute their products. The company has come a long way in the way they distribute their products.

Promotion Patagonia started off as a very small company in California with little followers. Now, the company has blossomed into a popular environmentally friendly brand. Patagonia mainly uses its current consumers to promote their products by talking about the brand and using the products. Additionally, the companys social responsibility has been another big aspect of promoting their brand and helping the environment. Their effort towards sustainability and conservation is very prominent. For instance, they currently have a video about their common threads initiative. This video promotes sustainable living by reducing overall consumption and giving our resources some rest. Finally, their print ads can also be found in outdoor and health magazines.

Product Patagonia separates their products into several categories: backpacking, biking, fishing, hiking, ice climbing, travel, yoga, skiing, snowboarding, running, and paddling. They also just recently added a surfing line for their consumers. All of these products are offered to babies, children, women, and men. Patagonia has a life time guarantee on all products.

Price In order for Patagonia to maintain their quality, they have premium pricing on all of their products. A typical price for a Patagonia t-shirt would be approximately thirty to forty dollars, in comparison to the North Face, Patagonia has about an ten dollar premium price for their t-shirts. Patagonia products cost more than the average because of their commitment to quality. With that said Patagonia has a lifetime policy on all of their products. Patagonia states, if you are not satisfied with one of our products at the time you receive it, or if one of our products does not perform to your satisfaction, you may return it to us for repair, replacement, or refund

(Patagonia.com). Therefore, people are willing to pay a premium price because the customer service for all products is exceptional.

III.

CUSTOMER-BASED BRAND EQUITY METHODOLOGY In order to measure the brand awareness, brand image and brand equity of Patagonia,

our group produced a survey in relation to brand and the respondents demographics. Since Patagonia is a global brand with a broad target market, we chose to let people of all demographics to take the survey. A total of 52 people completed the first survey on SurveyMonkey as well as 156 respondents for the second survey on Facebook; results are reported below.

Demographics The survey demographics are mostly middle class but include many from the upper class. Questions were asked to capture the demographic and economic status of respondents. A large number of respondents were middle class (58%) while 40% were upper class consumers. Around 70% of those who took the survey are ages 16-21, which means that the class designation stems from their families class rank. In terms of gender, a majority of females, 73% took the survey.

Brand Purchase When asked on a scale that went from Disagree to Agree, 36% of consumers said that they would not be willing to buy Patagonia in the next twelve months. Around 42% of the fifty people agreed that Patagonia was an upper class brand. Since the majority of those who took the survey were middle and upper class it would make sense for them to realize the high price of the product. Interestingly enough, 33% of those who took the

survey wore their sport outerwear jacket to school or work, while the other 27% didnt own a product like that. This therefore supports our recommendation of reaching customers that would wear Patagonia apparel for every day uses instead of rock climbing.

Brand Awareness Brand awareness is identified as how easy it is to identify a brand in ones memory. Both Appendix 1 and 2 demonstrate the results of the consumer awareness of the Patagonia brand. Although results were mixed there was a clear distinction between those who knew about Patagonia and those who had never heard of the brand before. Question four asked how respondents heard about Patagonia, 44% heard from a friend, 25% had never heard of it, 23% know about Patagonia from their store, and 8% heard about Patagonia from shopping online. When asked if there were additional comments, many said that they had never heard of the brand before. A separate survey was also conducted on Facebook in which we tested brand awareness using Patagonias logo. Those who were to Attend our survey knew about Patagonia, those who put Maybe have heard of the name but are not customers, those who Declined have never head of Patagonia. Results matched up to the survey in that 51% attended, 5% said maybe and 44% declined.

Brand Image Brand image deals with the consumers awareness of the brand and looks to find favorable and unique brand associations. The key in brand image research is to identify and develop the most powerful images and reinforce them through brand communications. Brand image deals with the feelings and images associated with a brand as powerful purchase influences though brand recognition, recall and brand identity. It is based on the proposition that consumers buy not only a product but also the image associations of the product. In order to understand the respondents functional image of the brand we presented

statements in questions five through eight such as, Patagonia is a quality brand with a rating scale from strongly agree to strongly disagree. When asked if Patagonia was honest, daring, imaginative and reliable the results stayed in the middle of the scale resulting in just agree or average which is slightly below agree. About 74% said it was honest, 71% said it was daring, 80% said the brand was imaginable, and an impressive 97% said Patagonia was reliable. These are all good qualities and it was reassuring to see more than half the respondents associate the brand with the words.

Emotional Evaluation Customer service seems to be on target as 66% agree that it has met their standards. This rings true because their customer service is top notch and plenty of people are in the store to help with any questions or concerns. When asked what image the consumer associated the brand with, 65% said outdoor athletics, which is the strongest image the brand tries to promote. Those who took our survey said that the appeal was average, which means there is room for improvement while they said the quality was high.

Attachment We asked an open ended question in which we were able to gauge the connection

between those who took the survey and the brand. The first question in part 2 of the survey asked about what they though about Patagonia. Like the rest of the survey, results were mixed. Those who knew and bought Patagonia clothing had a close relationship with the brand and what it stood for in terms of going green and being sustainable. Those who did not know what Patagonia was could care less about the brand.

IV.

BRAND VALUATION

We used the Premium Earnings Methods to estimate the value of the Patagonia Brand. Since the company is private, finding financial data was extremely difficult. Additionally, the Premium Pricing Method could not be used, because no generic brands currently operate in the outdoor retail market. A Statement of Operations document from 2004-2008 was used to find a majority of the data that was required to calculate the brand value. We determined that the value of the Patagonia brand is $220,032,294. While numbers for the Brand Contribution Index and the Brand Premium had to be approximated, we believe the calculated brand value is accurate. Compared to top brands, Patagonias brand value is somewhat low. This was expected however, as the size of the company roughly correlates to the value of the brand. Patagonia is a relatively small company, and their target market is rather exclusive. To many, the Patagonia brand is a stamp of approval. Patagonia is not a status brand; the brand serves as a guarantee to its customers that the products they are buying take as little from the environment as possible, and give as much as they can back.

V.

RECOMMENDATIONS

Recommendation 1: Performance-Patagonia Partnership with Whole Foods Patagonia prides itself so greatly with using only organic and natural materials. While being an outerwear company, it is only logical to matriculate into the food industry because one needs to eat the proper nutrients to sustain in a rigorous environment. We thought that it would be a great idea to get together with the Whole Foods Market to launch an energy bar line featuring only the finest ingredients on earth. Whole Foods Market is a foods supermarket chain, which emphasizes natural and organic products. The company has been ranked among the most socially responsible businesses and was ranked third on the U.S. Environmental Protection Agencys list of Green

Power Partners. Whole Foods Market only sells products that meet its self-created quality standards for being natural, which the store defines as minimally processed foods that are free of hydrogenated fats as well as artificial flavors, colors, sweeteners, preservatives and many others. This philosophy would be the basis for the energy bar collaboration with Patagonia. Our recommendation is to create a line of energy bars co-branded under both the Patagonia and Whole Foods Market names. Since both companies are well known for their dedication and devotion to preserving the environment we felt it would be in both of their favors to implement such a line. The energy bars would be featured in both stores exclusively. They would all feature raw, natural ingredients, providing satisfying nourishment. The packaging would be from recycled materials. Part of the proceeds would go toward a related organization for bettering foods across the world.

Recommendation 2: Increase Brand Equity - Everyday Use We believe that Patagonia needs to increase its brand equity. Even though Patagonias current brand equity is high among Eco-friendly consumers, Patagonia struggles to obtain brand loyalty to non-environmental consumers because they do not promote their products as an outdoor fashion brand. Through research and our own personal survey, we have learned that average person does not own or plan on buying a Patagonia product. We discovered that respondents were most familiar with The North Face because they use their products as a fashion brand, while Patagonia does not. Over 60% of people categorize Patagonia as an outdoor athletics brand. In a survey question, respondents would wear Patagonia and like brands to school or work, therefore, Patagonia is missing a demand in the market for young consumers. 35.9% of people said that they would not buy from Patagonia within the next twelve months. Therefore, Patagonia needs to promote their products as a fashionable brand in addition to their original brand image. We would suggest that they start by promoting a few of

their products to younger consumers as everyday wear. Then by word of mouth, other people will hear and see that their friends are wearing Patagonia and brand equity will grow.

Recommendation 3: Increase Brand Value - Common Thread Initiative Only 27% of respondents in our survey said that they saw Patagonia as being environmentally friendly. To increase the Brand Value we believe that Patagonia should increase the awareness of the Common Thread Initiative. Patagonia partnered with eBay to create a campaign that encourages its customers to decrease their environmental footprint. They do this by promoting the a recycling system to where you can return old and used Patagonia clothing in exchange for cash for new Patagonia gear. Patagonia uses these old recycled clothing and refurbish it to put in to their new products. We believe this is a great way to prove to their consumers that they are very loyal to their consumers and fully believe in their brand. Also in this campaign they promote their brand with the phrase buy less, buy quality. This I believe is a great attraction for new consumers as well as frequent consumers to continue to buy a brand worth the money. This marketing campaign however needs more awareness. We believe that to increase the value we have to increase the awareness which we believe will lead to more sales. With an increase in product value we will get an increase in brand value. As our recommendation for brand equity stated, most consumers are still buying The North Face products. We need to promote this Initiative to entice people to switch to a more valuable and durable brand, Patagonia.

CONCLUSION How you climb a mountain is more important than reaching the top. (Chouinard) Patagonias accomplishments as a company and as a brand are successful. They are highly devoted to being environmentally friendly inside the company and out. And with this

devotion comes loyal customers, who desire to wear a product that is made from recycled materials; and produced by a company that genuinely cares about their customers, and the world they live in. Staying true to their core values over the years has helped Patagonia create a company worth working for, and fighting for. Even though the company is not a clear front runner in the consumer market, Patagonia has definitely made an impact, not only on the market, but on the environment as well.

Appendix Appendix I Part 1

Part 2

Appendix II FACEBOOK SURVEY: Do you RECOGNIZE this BRAND?

Attend: If you recognize and know what this brand is Maybe: If you recognize the logo but dont know what the brand is for Decline: If you do not recognize this brand RESULTS Attend: 79 Maybe: 8 Decline: 69

Appendix III

Reference Koerner, B. I. (2005). Outdoor market. The Washington Monthly, 37(10), 59-59-60. "Patagonia's History - A Company Created by Climber Yvon Chouinard and his commitment to the

Environment (catalog paper, organic and recycled fabrics )." Patagonia Outdoor Clothing, Apparel and Gear for Climbing, Hiking, Surfing, Running, Travel. N.p., n.d. Web. 13 Nov. 2011. <http://www.patagonia.com/us/patagonia.go?assetid=3351>.

Rarick, C. A., & Feldman, L. S. (2008). Patagonia: Climbing to New Highs with a Smaller Carbon Footprint. United States, Cullowhee: The DreamCatchers Group, LLC. Patagonia. (2011).