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In 1979, Chipman-Union was a medium size company which primarily manufactured unbranded socks sold as private label merchandise. The market of socks in the U.S. was characterized by severe price competition and limitation of product differentiation. There were only two companies which manufactured branded socks, and companies except those two companies had 20% gross margins or below. To get higher gross margin, CU had to venture into new business – branded socks. They began to investigate the marketing program for the new product, and recognized that there were not only valuable possibilities, but also problems they would have to solve before launching the product.
In this case, first of all, the product will be evaluated focusing on the unique features of the new product introduced. Basically, it can be asked whether or not deodorizing socks appeal to consumers in the traditionally price competitive socks market in the U.S. Second, the market situation will be examined. There was already a company which manufactured deodorizing socks, and promoted deodorizing as a product characteristic. So, it is important to ask how to make effective price strategy, and attempt to know the unique aspects of competition in the market. Finally, as we know, what is the most important question they should ask is how to make consumers aware the “brand.” For Chipman-Union, brand awareness is one of the most important objectives they should achieve. To do this, communication strategy should be carefully examined.
Product Evaluation
Limitation of Product Differentiation
According to consumer research conducted by GFM, both consumers and retailers regarded socks as a product category, which was hard for companies to achieve product differentiation. In fact, most companies in this market like Chipman-Union manufactured unbranded socks for private label merchandise, because it was extremely hard to get consumers brand awareness, and to make them recognize the product features. As a result, there were only two companies which manufactured branded socks : Burlington and Interwoven.
Compared with those two competitors, Chipman-Union was not known well to consumers. To attract consumers attention to their products, first of all, physically prominent features of the product should be introduced. For them, it seemed impossible for CUs brand to compete with competitors established brands without unique product characteristics. For this purpose, deodorizing socks could be a reasonable physical feature for differentiating the product from other competitors products. In addition to this deodorizing feature, various types of socks should be developed. According to results of mall intercept tests, respondents had a tendency to prefer casual crew type of socks than other types. Accordingly, this casual crew type of socks associated with specific function, such as deodorizing function, would be appealing to consumers. In addition, because CUs deodorizing product was not the first one introduced in the market, brand awareness must be achieved to compete with competitors brands.
Brand Association between “Odor-Eaters” insoles and socks
“Odor-Eaters” was a brand established prior to CUs new product. A licensing agreement with Combe, Inc. provided Chipman-Union with a good opportunity which enabled them to launch their products without large amount of advertising and promotional expenditure. Originally, Combes “Odor-Eaters” was a brand of deodorizing shoe insoles. From consumers perspective, both shoe insoles and socks can be used for removing a bad smell. This meant that “Odor-Eaters” socks of Chipman-Union could be supported by brand awareness established by “Odor-Eaters” insoles. 50% or more of people in the U.S. knew the “Odor-Eaters” brand, and CUs executives projected that this would be very helpful for CUs new product. However, there were some problems which CU should solve before launching the product. Although Combes “Odor-Eaters” insoles had achieved a high degree of brand awareness, CUs executives should examine consumers attitudes toward the brand. In addition, they should investigate carefully the market situation of “Odor-Eaters” insoles, because consumers brand awareness are closely related to the degree of market competition. If they did not ask these questions about Combes brand, it would be difficult to assure that “Odor-Eaters” socks could be supported by “Odor-Eaters” insoles.
Market Evaluation
Trend
In 1979, there were 319 hosiery manufacturers, and industry was fragmented. Only two companies dominated branded hosiery industry, and others concentrated on unbranded hosiery. As a result, there were severe price competition focusing on retailers and general merchandising chains, and those companies paid relatively less attention to consumers buying power. While Burlington and Interwoven, which dominated branded hosiery market, had 40% and 50% gross margin respectively, the companies which manufactured unbranded socks had 20% or below gross margin. To get higher gross margin, the only choice remained to Chipman-Union was to approach directly to consumers and to turn their eyes to consumers buying trends or patterns. In 1970s, there was a specific trend that the share of tube socks increased dramatically to over 50%, and consumers became much more interested in specific type of socks for better fit and sports activities.
Price
One of the most prominent trends was that consumers paid willingly higher price for socks. Following chart shows the price trends in the casual/athletic segment of the market in 1970s:
As shown above Chart 1, sales of higher price products increased, while lower price products decreased dramatically. This reflects that consumers became less sensitive to price, and paid attention to products with specific function or shapes. That is, this means that a certain branded product which had specific shapes, colors, or function could be appealing to consumers. In particular, this kind of socks which had various features could be served as gifts. 50% of mens hosiery was sold in back-to-school and Christmas season.
Consistent with this trend, price of Odor-Eaters ranged from $1.79 to $2.49 a pair. According to the results of consumer