Harvard Case - How a Startup Is Putting the Running Shoe Industry Back On Track
"How a Startup Is Putting the Running Shoe Industry Back On Track" Harvard business case study is written by Rico Baldegger, Marco Biscaro. It deals with the challenges in the field of Marketing. The case study is 29 page(s) long and it was first published on : Mar 1, 2022
At Fern Fort University, we recommend that Newton Running leverage its innovative product design and focus on niche market segmentation to achieve sustainable growth. This strategy involves: 1) Strengthening brand positioning through targeted marketing campaigns and digital marketing initiatives, 2) Expanding distribution channels to reach new customer segments, 3) Developing a robust product roadmap with innovative features catering to specific runner needs, and 4) Implementing a customer-centric approach to foster brand loyalty and advocacy.
2. Background
Newton Running, a startup founded in 2007, entered the highly competitive running shoe market with a unique selling proposition: proprietary 'Action/Reaction' technology designed to enhance running efficiency and reduce injury risk. Despite initial success, Newton faced challenges in scaling its business and competing with established giants like Nike and Adidas. The case study highlights the company's struggle to balance innovation with profitability, while navigating the evolving landscape of consumer behavior and technological advancements in the running shoe industry.
The main protagonists of the case study are:
- Mark Allison: Founder and CEO of Newton Running, a passionate runner and innovator driven to create a better running experience.
- Newton Running team: A dedicated group of employees committed to developing and marketing innovative running shoes.
- Running enthusiasts: The target market for Newton Running, seeking high-performance footwear that enhances their running experience and minimizes injury risk.
3. Analysis of the Case Study
To analyze the case, we utilize the SWOT framework to identify Newton Running's strengths, weaknesses, opportunities, and threats:
Strengths:
- Innovative product design: Newton Running's 'Action/Reaction' technology provides a unique selling proposition, attracting runners seeking performance and injury prevention.
- Strong brand reputation: Newton Running has built a loyal following among runners seeking premium, innovative footwear.
- Focus on niche market: Targeting specific runner segments allows for effective marketing and product development strategies.
Weaknesses:
- Limited distribution channels: Newton Running's product availability is restricted, hindering market reach and sales potential.
- High pricing: Premium pricing strategy may limit accessibility to a wider customer base.
- Lack of marketing resources: Limited marketing budget restricts the company's ability to reach a broader audience and build brand awareness.
Opportunities:
- Growing running market: The global running market is expanding, offering significant growth potential for Newton Running.
- Increased focus on health and wellness: Consumers are increasingly prioritizing health and fitness, creating a favorable environment for running shoe brands.
- Digital marketing opportunities: Utilizing social media, content marketing, and online advertising can effectively reach target audiences and build brand awareness.
Threats:
- Intense competition: Established giants like Nike and Adidas dominate the market, posing a significant challenge to Newton Running's growth.
- Changing consumer preferences: Shifting trends in running footwear, influenced by technology and design, could impact Newton Running's product positioning.
- Economic fluctuations: Economic downturns can negatively impact consumer spending on discretionary items like running shoes.
4. Recommendations
To address the challenges and capitalize on opportunities, Newton Running should implement the following recommendations:
1. Strengthen Brand Positioning:
- Refine brand messaging: Develop a clear and compelling brand message that highlights the unique benefits of Newton Running's 'Action/Reaction' technology and resonates with target audiences.
- Target specific runner segments: Utilize market segmentation strategies to identify and target specific runner groups, such as experienced runners, marathon runners, or injury-prone individuals.
- Develop a strong brand identity: Create a consistent and recognizable brand identity across all marketing channels, including logo, colors, typography, and imagery.
- Leverage storytelling: Share compelling stories about Newton Running's history, innovation, and customer experiences to build emotional connections with target audiences.
2. Expand Distribution Channels:
- Partner with specialty running stores: Establish partnerships with reputable running stores to increase product availability and reach a wider customer base.
- Explore online retailers: Expand online presence through partnerships with major e-commerce platforms like Amazon and specialized running websites.
- Develop a direct-to-consumer strategy: Establish an online store and consider opening physical stores to control distribution and build customer relationships.
3. Develop a Robust Product Roadmap:
- Introduce new product lines: Expand product offerings to cater to different runner needs and preferences, including specific shoe models for different running styles, distances, and terrain.
- Incorporate technological advancements: Integrate innovative technologies like AI-powered customization, biomechanical analysis, and performance tracking into product design and development.
- Focus on sustainability: Implement sustainable manufacturing practices and use eco-friendly materials to appeal to environmentally conscious consumers.
4. Implement a Customer-Centric Approach:
- Enhance customer experience: Provide exceptional customer service through multiple channels, including online support, phone assistance, and in-store interactions.
- Build a strong online community: Create a vibrant online community where runners can share experiences, connect with each other, and provide feedback on Newton Running products.
- Develop customer loyalty programs: Implement rewards programs and exclusive offers to incentivize repeat purchases and foster customer loyalty.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with Newton Running's core competency in innovative product design and its mission to enhance running performance and reduce injury risk.
- External customers and internal clients: The recommendations address the needs of external customers, including runners seeking high-performance footwear, and internal clients, such as the Newton Running team seeking to grow the business.
- Competitors: The recommendations consider the competitive landscape and aim to differentiate Newton Running from established competitors by focusing on niche market segmentation and innovative product development.
- Attractiveness ' quantitative measures if applicable: The recommendations are expected to improve sales, profitability, and market share, although specific quantitative measures are not provided in the case study.
6. Conclusion
By implementing these recommendations, Newton Running can strengthen its brand positioning, expand its reach, and solidify its position as a leading innovator in the running shoe industry. By focusing on niche market segmentation, leveraging digital marketing, and developing a robust product roadmap, Newton Running can achieve sustainable growth and compete effectively with established giants in the market.
7. Discussion
Other alternatives not selected:
- Mass market strategy: Targeting a broader customer base with a lower price point could increase market share but dilute brand positioning and potentially compromise product quality.
- Merging with a larger company: This option could provide access to resources and distribution channels but could compromise Newton Running's independence and innovation.
Risks and key assumptions:
- Market acceptance of new products: The success of Newton Running's product roadmap depends on the market's acceptance of new features and technologies.
- Competition from established brands: Established brands could introduce similar products or adopt innovative technologies, posing a significant challenge to Newton Running's market share.
- Economic downturn: A decline in consumer spending could negatively impact sales and profitability.
8. Next Steps
To implement these recommendations, Newton Running should:
- Develop a detailed marketing plan: Outline specific marketing campaigns, target audiences, budget allocation, and performance metrics.
- Establish partnerships with key retailers: Secure agreements with specialty running stores and online retailers to expand distribution channels.
- Allocate resources for product development: Invest in research and development to create new product lines and incorporate innovative technologies.
- Implement a customer relationship management (CRM) system: Track customer interactions, preferences, and feedback to enhance customer experience and loyalty.
By taking these steps, Newton Running can position itself for sustainable growth and success in the competitive running shoe industry.
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Case Description
On is a Swiss SME founded in 2010 in Zurich, Switzerland, by three friends - Caspar Coppetti, David Allemann, and former pro athlete Olivier Bernhard. The startup invented an award-winning running shoe with an outsole that absorbs vertical and horizontal shocks, allowing for both a soft landing and an explosive take-off. Although On was launched as a premium brand for serious runners, it gained a dedicated following among nurses, casual walkers, and trendsetters. The business quickly expanded to the U.S. and Japan, the world's largest running shoe markets, growing from a startup with three founders to an international company that innovated constantly and brought new products to market. To support its growth, it had to recruit the right people, team up with the right partners, formulate the right strategy, and bring the right stakeholders and ambassadors on board. At the end of 2019, On had 500 employees, and its international headquarters and R&D were located in Zurich. In comparison, Nike had over 76,700 employees and Adidas some 57,000. By April 2021, On had increased its staff to 764 and aimed to have 1,000 employees by year-end. But how had this exponential growth affected On's corporate culture, and how could On stabilize its business model and ensure its sustainability in the face of intense competition?
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