Ace my homework – Write my essay – Harvard Business School 9-589-027 Rev. November 8, 1989
Tammy Bunn Hiller prepared this case under the supervision of Professor John A. Quelch as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Certain nonpublic data have been disguised.
Copyright © 1988 by the President and Fellows of Ace my homework – Write my essay – Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Ace my homework – Write my essay – Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Ace my homework – Write my essay – Harvard Business School.
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Reebok International Ltd.
In June 1988, executives of Reebok International Ltd.’s Reebok Footwear Division (RFD) met to review the company’s U.S. marketing communications program for the second half of the year. In addition to category advertising to promote specific product lines such as aerobic shoes, Reebok’s vice president of advertising intended to pursue three multiproduct umbrella campaigns: television advertising during the 1988 Summer Olympics; television and print advertising with the tagline “Reeboks Let U.B.U.”; and print advertising to introduce Reebok’s new performance feature, the Energy Return System.
In addition, Reebok executives had to review their marketing communications plan for the Human Rights Now! world concert tour. On March 29, Joe LaBonté, Reebok’s president and chief operating officer, had announced that Reebok was joining Amnesty International (AI) in sponsoring this tour which would celebrate the fortieth anniversary of the United Nations’ Universal Declaration of Human Rights. However, debate continued within Reebok about the merits of this sponsorship, about how aggressively Reebok should publicize its association with the tour, and about how the proposed communications program for the tour related to RFD’s overall marketing communications plan.
Company Background and Strategy
Reebok’s antecedent, J.W. Foster and Sons, was founded in England in 1895 as a manufacturer of custom track shoes which were marketed by mail worldwide. The company was renamed Reebok in 1958. In 1979, Paul Fireman bought the North American distribution rights. In 1984 he and his backers, principally Pentland Industries plc, bought the parent company.
Fireman’s first imports into the United States were three styles of hand-stitched, high-priced running shoes. In 1982, convinced that interest in running would plateau and aerobics would become the next fitness craze, Fireman introduced the first aerobic/dance shoe, the Reebok Freestyle. The
Illustration by Jane Simon
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shoe was unique. It was made of garment leather. It was soft, supple, wrinkled at the toe, and comfortable to wear from day one. It was also more attractive than competitors’ athletic shoes. Furthermore, it was the first athletic shoe specifically targeted at women.
With the introduction of aerobic shoes, Reebok began a period of phenomenal growth. Between 1982 and 1987, net sales grew from $3.5 million to $1.4 billion, and net income grew from $200,000 to $165 million. Reebok ranked first among major U.S. companies in sales growth, earnings growth, and return on equity for the years 1983 through 1987. Fireman’s goal was to become a $2 billion multinational by 1990.
Reebok’s growth was accomplished through broadening of existing product lines, expansion into additional product categories and acquisitions. Exhibit 1 presents a chronology of Reebok’s new product line introductions and acquisitions. The company had five operating units: Reebok North America (which included RFD and the Reebok Apparel Division), Reebok International, Rockport, Avia, and Ellesse.
In 1987, RFD sold approximately 42.17 million pairs of shoes to its U.S. retailers. The shoes were sold to consumers for an average price of $43.00. RFD accounted for approximately 71% and 88% of Reebok’s 1987 sales and operating profit respectively. The division’s sales and estimated operating income for 1983 through 1987 are shown in Table A.
Table A RFD Sales and Estimated Operating Income ($ millions)
1983 1984 1985 1986 1987
Net sales $12.0 $ 64.0 $299.0 $841.0 $991.0
Cost of sales 6.8 37.9 171.0 475.0 562.0
Gross margin $ 5.2 $ 26.1 $128.0 $366.0 $429.0
SG&A expense 4.0 14.0 52.0 131.0 169.0
Operating income $ 1.2 $ 12.1 $ 76.0 $235.0 $260.0
In the 1980s, RFD diversified its product offerings dramatically. In 1979 the division sold three shoes. In 1988 it sold over 300 different shoes in ten product categories. Aerobic shoes accounted for 56% of the division’s sales in 1984. In 1987, they comprised only 29%.
The division sold its shoes direct to retailers through seventeen independent sales organizations. This sales force sold only Reebok brand products and was paid on a commission basis. A staff of field service and promotion representatives, employed by Reebok, supported the sales force by traveling the U.S. teaching retailers and consumers about the features and benefits of the division’s shoes. RFD followed a limited distribution strategy. Its shoes were sold only through specialty athletic retailers, sporting goods stores, and department stores. They were not sold in low-margin mass merchandiser or discount stores.
RFD, like other major athletic shoe companies, contracted out all of its manufacturing. The shoes were made in eight countries. Most of them, 71% in 1987, were produced in South Korea. The division’s large volume needs, combined with labor disruptions in South Korea, caused supply problems in 1987. In late 1987, RFD added sourcing capacity in Taiwan, China, Thailand, the Philippines, and Indonesia. It also contracted to take all of the production of H.S. Corporation, a large South Korean footwear manufacturer which produced approximately 30 million pairs of shoes annually.
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The Athletic Footwear Industry
Growth of the Industry
Between 1981 and 1987 the U.S. athletic footwear market more than doubled in size. Wholesale sales of branded athletic footwear neared $3.1 billion in 1987. Nonbranded footwear added another $.4 billion. Reebok held a 32.2% share of branded athletic footwear in 1987, up from 3.3% in 1984.
The industry’s dynamic growth began in the early 1980s with the running craze. The running shoe was a new product which did not replace existing lines. Compared to the sneakers of the 1970s, it was made of different materials, was more performance-oriented and was more expensive. It also became a fashion item as Americans embraced more casual, health-conscious lifestyles.
In 1983, running shoe sales declined dramatically as Americans turned to other forms of exercise. However, new categories such as aerobic and fitness shoes continued to drive industry growth. The success of the aerobic shoe prompted many companies to develop women’s shoes for traditionally male-dominated categories such as basketball. By 1987, walking shoes, targeted largely at older females, were the fastest growing line. Industry experts expected 8%–12% growth in the U.S. athletic footwear market in 1988.
In 1987, Reebok also held a 4.4% share of the $4.5 billion foreign-branded athletic shoe market. Development of foreign markets lagged three or four years behind the United States. In 1987, the aerobics boom was just taking off in Europe and the women’s athletic shoe market was largely untapped.
The Competition
Nike, in second place, had an 18.6% share, down from 31.3% in 1984. Founded in 1964, Nike rose to prominence in the late 1970s thanks to high-tech innovations in running shoes. In 1984, however, Nike ignored the aerobics trend, wrongly counting on its running shoes to sustain company growth. Its warehouses became overstocked with running shoe inventory which Nike had to sell off through discount stores. This action tarnished Nike’s reputation with the trade. From 1983 to 1985 its sales rose by only 9%. However, in 1985, the Air Jordan basketball shoe, named for Michael Jordan of the Chicago Bulls, generated sales of $100 million. In 1986, sales fell as quickly as they had risen when Jordan broke his foot early in the NBA season. That year Nike lost its number one U.S. market share position to Reebok.
In 1987 Nike closed excess plant capacity, slashed overhead, and spent $23 million to promote its new “Air” line with a “Revolution in Motion” ad campaign which featured the Beatles original recording of “Revolution.” It also took advantage of Reebok’s supply problems to revitalize its dealer relations.
Nike’s expressed goal was to recapture the number one spot from Reebok. For 1988, according to Advertising Age magazine, Nike was stepping up advertising spending by 36% to $34 million. Ten million of this budget would be spent on network television for its new “Just do it” campaign which would break in mid-August. In February 1988, Nike introduced a fashion-oriented nonathletic brand for women in an attempt to penetrate a market in which it was historically weak. The shoes, called IE, did not carry the Nike name.
Converse held an 8.1% share of the U.S. market in 1987, down from 11.2% in 1984. The Converse name was closely identified with canvas athletic shoes for children and teens, particularly
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for basketball. In 1988, the company introduced the Evolo line of leather athletic shoes featuring upscale Italian styling and aimed at a more fashion-conscious customer.
Adidas, the world’s largest athletic shoe company, had a 5.7% U.S. share and a 25% world share in 1987. Headquartered in West Germany, Adidas lost $30 million on its U.S. sales. Its 1988 U.S. advertising budget was estimated at only $3 million.
Avia, owned by Reebok, was the fifth largest competitor in the U.S. branded athletic shoe market. Avia emphasized design technology and targeted active athletic participants who valued performance and functionality over other product features. With 1987 sales of $157 million, its share was 4.9%, up from .4% in 1984. Avia’s 1988 ad budget of $20 million was double 1987 expenditures.
Industry experts grouped Avia with LA Gear (2.3% share) and Asics Tiger (2.2% share) as small companies with innovative products and the potential to become significant players in the market. Twenty-five other companies competed in the branded athletic shoe market. Each had found a niche for itself, but none had been able to expand beyond it.
Competition remained keen in 1988. First, higher leather costs, increased labor rates, and a weakened dollar had increased the cost of Far East production by 10% in 1987. Further cost hikes, which would put pressure on the margins of all competitors, were expected in 1988. Second, in order to reduce inventory markdowns, retailers were narrowing their selections to only four or five brands and one or two lines of a few other brands. Third, athletic shoe product life cycles appeared to be shortening. By 1988 the life of a new model averaged only about nine months.
Consumer Attitudes and Behavior
Paul Fireman credited Reebok’s success to an ability to stay close to the consumer. “Consumer preferences are constantly changing,” he contended, “and future progress is linked to our skill in understanding the messages sent from the marketplace so we can deliver the right products.”
Industry experts segmented athletic shoe consumers into serious athletes, weekend warriors who used their shoes for sports but were not zealous athletes, and casual wearers who used athletic shoes only for streetwear. The “pyramid of influence” model, traditionally used in marketing athletic shoes, posited that the serious athlete was a very small segment of the market but an important opinion leader for both weekend warriors and casual wearers. Casual wearers accounted for 80% of athletic shoe purchases, wanted both style and comfort, and were thought to choose shoes based on what they saw serious athletes wearing.
The pyramid model led athletic shoe marketers to emphasize technological and performance superiority in order to appeal to serious athletes. New shoes were first introduced in exclusive sports shops and expanded into wider distribution gradually.
The validity of the “pyramid of influence” model was questioned by some Reebok executives who believed that many consumers were not reached by advertising directed at the serious athlete. They pointed to results of a June 1986 survey which indicated that friends and relatives, not athletes, were the most important influence in athletic shoe users’ brand decisions. Exhibit 2 shows the sources of information which athletic shoe purchasers used to decide which brand to buy. In addition, in a world where new athletic shoe styles could be knocked off in three months, the executives questioned the appropriateness of new product introductions not directed at the mass market.
In the 1986 survey, consumers were asked how important various attributes were when deciding which athletic shoes to buy. Fifty-eight percent of respondents rated comfort extremely important, followed by support/stability (43%), design (36%), quality (35%), price (30%), fashion (20%), and leadership (12%).
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An October 1987 attitude and usage study indicated that 95% of athletic shoe owners were aware of Reebok shoes, up from 57% two years before. Ninety-eight percent of all teens, a segment that purchased over three pairs of athletic shoes per year, was aware of Reebok brand. Moreover, unaided awareness of Reebok had doubled over the past two years while that of Nike had dropped. Fifty-three percent of teenagers surveyed considered Reebok the “in” shoe compared to 38% for Nike. Reebok was also rated superior to its major competitors in both quality and comfort.
The brand had high penetration. Fifty-two percent of all people surveyed and 70% of the teens surveyed had ever owned Reebok shoes. Two years before, only 18% of people surveyed had ever owned Reebok shoes. Reebok’s current ownership was 45% of those surveyed, higher than for any other brand. In addition, Reebok shoes were currently worn in 61% of the households in which an athletic shoe was purchased in 1987. The owners claimed to be loyal as well. Two out of three of those who last purchased Reebok intended to make Reebok their next purchase, a repurchase rate higher than that for any competing brand. Finally, Reebok owners were significantly more likely to buy athletic shoes at regular price than were nonowners.
The results of the attitude and usage study were positive. However, a series of focus group interviews in October 1987 uncovered some disturbing qualitative information.1 In past focus groups, when participants were asked to describe Reebok shoes the most used adjectives were innovative, vivid, adventurous, experimental, special, vibrant, and new. However, the October 1987 focus group members used words such as comfortable, youthful, energy, fun, diverse, clean, leader, a standard, and middle class. Teens said they were still buying Reeboks, but the way they talked about them had changed. They used to brag about their Reeboks. Now some of them apologized for them. At the same time, participants insisted that Reebok was not a badge brand. In other words, wearing Reeboks did not brand one as a jock or a yuppie or any other “type.” “My Reeboks” meant something different to each person.
Sharon Cohen, vice president of Advertising and Public Relations for Reebok North America since 1984, concluded: “When Reebok was new, just being discovered, we had a cult-like following. We were fresh and exciting and had brought new dimensions to the athletic shoe industry—style and comfort. Today we are a mass appeal shoe and this requires new strategic thinking. Now that everyone is wearing Reeboks, our job and the job of our advertising is to keep our brand exciting.”
Marketing Communications
Before 1987
According to Cohen, Paul Fireman “always started with advertising. If he had only $100, he’d spend it on advertising.” In the early years of the company, he made his own media buys. He bought astutely, making ad hoc print media purchases at low rates to make the brand as visible as possible even though sales were modest.
By the early 1980s, RFD’s advertising program consisted of product-specific, sports-context print ads, heavy concentration in specialty periodicals targeted at serious athletes, lighter buys in related general-interest magazines, media-exposed use of the products by a select group of successful athlete endorsers, and a great emphasis on grassroots involvement.
1A focus group brings together six to ten individuals for an open-ended discussion led by a moderator.
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Reebok paid star athletes to wear the Reebok label and to participate in Reebok-sponsored promotions such as tennis clinics and autographing sessions. These athletes could also earn bonuses by winning specified tournaments/games/events and/or by winning specified honors within their sports. In addition, lesser athletes, primarily promising youngsters, received free shoes and clothing from Reebok but were paid nothing. By supporting their training efforts in this way, Reebok increased the likelihood of signing them to endorsement contracts if they excelled later.
RFD’s marketing of aerobic shoes exemplified its heavy grass roots involvement in the sports addressed by its products. The division published aerobics newsletters, sponsored seminars and clinics, funded research on injury prevention, and created the sport’s first certification program for instructors. It also offered aerobics instructors discounts on shoes and put Reebok shoes on the feet of many television aerobics instructors.
In addition, RFD communicated with its consumers through point-of-sale pieces and merchandising promotions in retail stores, outdoor advertising, radio, and, starting in 1986, television. RFD also advertised in trade publications and printed catalogues and sales brochures to help its salespeople better communicate with their dealers.
As RFD’s sales grew, so did its advertising, promotion, and public relations budgets. Combined, they grew from $2.7 million (4.2% of sales) in 1984 to $6.5 million (2.2% of sales) in 1985, $10 million (1.1% of sales) in 1986, and $30 million (3.0% of sales) in 1987.
In 1986, RFD began testing new approaches to advertising. It ran the advertisement shown in Exhibit 3 which featured a couple wearing Reebok shoes riding a motorcycle to brunch and was the first ad to feature an athletic shoe advertised outside of a sports context. It was followed by an 18- month long campaign with the theme “Because life is not a spectator sport.” Each print ad, an example of which is shown in Exhibit 4, emphasized the participant and the joy of the sport, not the shoe and its attributes. The ads used an unusual technique called prism color in which photographs were transformed into pastel acrylic paintings. They ran in a balanced mix of 40 general interest and specialty sport magazines.
The 1987 Program
Each year RFD developed a divisional marketing communications budget plus separate budgets for each category of sports shoe. Category managers were responsible for the decision making and management of their budgets while Cohen was responsible for managing the divisional budget. Cohen and the category managers all reported to Frank O’Connell, the president of Reebok North America. Exhibit 5 presents the division’s marketing organization in relation to the total corporation.
RFD’s 1987 divisional advertising budget is outlined in Exhibit 6. In 1987, RFD advertised via print, radio, and television directed both toward the trade and consumers. Trade advertising, illustrated in Exhibit 7, emphasized that “Reebok is performance.” Consumer advertising through July focused on the “Because life is not a spectator sport” campaign. In August, the division began a new multithemed campaign with differing television and print ads designed for each sport category. Depending on the sport, print ads addressed one or more of four themes: performance, new technology, “classic” styling, and fashion. Exhibits 8 through 11 show ads for four sport categories. Five television ads each sold a different sports shoe but all dramatically employed motion and featured “real people,” not high profile athletes. Radio was used to reinforce the television message.
The variety in RFD’s 1987 advertising effort was exemplified by contrasting the second-half advertising of shoes in two sports categories, tennis and basketball. Tennis shoe advertising was targeted at 18- to 49-year-old adults. The category manager’s $975,000 advertising budget was split nearly equally between television and magazines. Both the magazine and television copy evoked
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tennis tournaments. The TV ads were shown only during the U.S. Open. The print ads ran in nine tennis magazines such as Tennis and Racquet Quarterly and three general sports magazines such as Sports Illustrated.
Men’s basketball shoe advertising was targeted at 12- to 24-year-old males. Approximately $1.2 million was spent, 60% on television, 24% on print, and the rest on radio. Ads in all media showed amateur players in action on neighborhood playground basketball courts. Television ads ran on network prime time and late night and during sports events. Magazines used were Sports Illustrated, Boys’ Life, and High School Sports.
Women’s basketball shoe advertising was targeted at female teens. The $960,000 women’s basketball shoe budget, like that for tennis, was split evenly between television and print. Unlike tennis, however, the ads were fashion oriented and did not show shoes being used in sports contexts. The television ad ran on early-fringe, weekend, and late-fringe network TV and on the MTV (music television) cable channel. The print ads ran in seven general interest, fashion, and teen magazines such as People, Glamour, and Seventeen.
In addition to product-specific advertising, RFD sponsored a special insert in Rolling Stone magazine. The insert, titled “Artists of the Year 1967-1986,” featured five Reebok shoe ads. These ads were one-offs, i.e. they were used only once, in the Rolling Stone insert. Each ad featured someone giving a “Best performance in a pair of Reeboks” in a decidedly nonsports context. Exhibit 12 shows one of the ads.
Grass-roots promotions and athlete endorsements remained a large part of RFD’s communications program in 1987, costing approximately $18 million. Promotional events included sponsorships of tennis tournaments for juniors and celebrities, the Reebok Teaching Pro Classic for tennis professionals, the Reebok Professional Aerobics Instructor Alliance, and the Reebok Racing Club. Shoe endorsers included basketball players Dennis Johnson, Danny Ainge, and Brad Daugherty, marathoner Steve Jones, tennis players Hana Mandlikova and Miloslav Mecir, aerobics expert Denise Austin, and the members of the U.S. National Cycling Team.
The 1988 Program
Category advertising. The 1988 category budgets totaled approximately $22 million, $8 million of which was earmarked for category-specific print and television ads. The rest was allocated to athlete endorsements and grass-roots promotional events. The communications program for each category varied widely as exemplified by the allocation of the 1988 budgets for tennis and basketball shown in Exhibit 13.
Almost 75% of the tennis category expenditures in 1988 were allocated to athlete endorsements and local and national tournament sponsorship. The objective was to maintain Reebok tennis shoes’ credibility in the world of tennis. Reebok currently had a 40% share of the U.S. tennis shoe market and marketed the five best-selling tennis shoes in the world. Fewer than 10% of Reebok tennis shoes sold, however, were used on the tennis court; the rest were used for streetwear.
Tennis shoe print advertising in 1988 was geared toward casual usage. Thirty percent of the budget was allocated to hard-core performance-oriented ads. The rest was allocated to life- style/fashion-oriented ads, a departure from the strict performance orientation of the past.
Reebok basketball shoes, introduced in late 1985, were the best-selling basketball shoes in the U.S. The category’s 1988 television and radio ads featured people talking about the greatest basketball players they had ever seen, the “legends” of the old playgrounds. Print and outdoor ads showed “real” people engaged in playground basketball. Consumer promotions were of two types. First, a court painting program sponsored renovation of basketball courts in low income areas. Second, ten
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local basketball tournaments, such as the Gus Macker 3-on-3 tournament in Belding, Michigan, were sponsored. Players under contract to Reebok attended the events to heighten their impact.
“U.B.U.” umbrella advertising. Based on the 1987 consumer research, Frank O’Connell concluded that RFD needed a new umbrella campaign to rekindle the vitality of the Reebok name while ensuring its continuity as a mainstream brand. He charged Chiat/Day with developing advertising copy that was “on the edge, far out, with a unique look that would be new not only to footwear advertising, but to the whole advertising industry.” Chiat/Day recommended that the new campaign should stress freedom of expression and the individuality which one could achieve wearing a pair of Reeboks, but at the same time maintain the brand’s mass appeal.
The result was an off-beat campaign with the tagline “Reeboks let U.B.U.” The ads featured zany vignettes of people expressing their individual styles in their Reebok shoes: a three-legged man strutting in a baseball cap and raincoat, a girl dressed like a princess emerging from a subway exit wearing her crown and her Reeboks, a bevy of wood nymphs tiptoeing through a forest glade, a room full of pregnant women aerobic dancing, and a young couple rolling on the grass. Throughout the TV commercials, “U.B.U.” flashed on the screen in large, jagged, typewritten-style letters. In the final seconds of each ad, “Reeboks let U.B.U.” appeared across the screen. The ads would be targeted at 18- to 34-year-old adults, particularly women. They would be run on prime-time and late-night shows such as “The Wonder Years,” “Moonlighting,” “LA Law,” “Thirtysomething,” and “Late Night with David Letterman,” and on cable channels such as MTV, ESPN, and WTBS.
The proposed U.B.U. print campaign used a revolutionary new colorization process. A marriage of photography and illustration, its finished product resembled that of colorized videos. The print ads, like the TV ones, featured self-expression in Reebok shoes and used the same tag line. Exhibit 14 shows a sample print ad. The ads would run in fashion magazines such as Esquire and Glamour, entertainment magazines such as People, and life style/special-interest magazines such as Rolling Stone, Self, and New York Woman. Insertions would begin in August issues and run at least through December. In addition, ads would appear in July editions of five athletic shoe trade magazines.
Olympics advertising. RFD purchased $6 million worth of television advertising time during NBC’s coverage of the 1988 Summer Olympics which spanned the last two weeks of September. Although Reebok shoes were not “Official Products of the 1988 Summer Olympics,” this media purchase represented the largest concentrated spend level in the history of the athletic footwear industry and assured the Reebok brand exclusivity in athletic footwear advertising during NBC’s coverage of the Summer Games. The Olympics advertising was expected to excite Reebok brand dealers, many of whom believed that the principal way to sell athletic shoes was through ads associating them with sports.
After committing to the Summer Games’ media buy, copy had to be finalized for both the Olympics campaign and the umbrella campaign. The copy proposed by Chiat/Day for the Olympics ads featured “real” people wearing Reebok shoes frantically engaged in street or front-yard sports. Commercials began with the tagline “Summer Games, Bronx, New York” (or Baltimore, Maryland, etc.). At the end of each commercial, one person stopped his/her action and stated “And you thought all the excitement was in Seoul.”
ERS. Both the Olympics and U.B.U. ads would be targeted at style-conscious 18- to 34-year- old adults. In order to reach active sports participants, RFD also planned to run a performance-based print campaign featuring Reebok’s new Energy Return System (ERS). ERS shoes were designed to compete with Nike’s Air line in the $75-$90 per pair retail price range. Compressed air sandwiched in four brightly colored tubes visible through the sole of the shoe cushioned the foot when it hit the ground, captured some of the energy released and returned it to the foot for extra bounce. The proposed ERS ads would carry the slogan “The Revolution is Over” in response to Nike’s successful
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1987 “Revolution” campaign. Exhibit 15 shows a sample ad. The ads would run from June to December in sports magazines such as Runner’s World, Outside, and Sports Illustrated.
RFD’s divisional marketing communications budget would cover the $17 million combined cost of the U.B.U., Olympics, and ERS campaigns through the end of 1988. Exhibit 16 provides a breakdown of the proposed ad spending by campaign and media.
The Human Rights Now! Tour
While O’Connell, Cohen, and Chiat/Day were developing copy for RFD’s freedom of expression umbrella campaign, an opportunity arose to help finance a world concert tour conceived by AI. The objective of the tour, later named Human Rights Now! World Concert Tour, was to support AI’s worldwide effort to develop awareness of the human rights guaranteed in the United Nations Universal Declaration of Human Rights.
Chiat/Day brought the idea to Reebok and suggested that it help underwrite the tour in order to reach young people with a positive message about the company. Before proceeding, Joe LaBonté commissioned a telephone survey of 1,000 U.S. adults to determine their awareness of and attitude toward AI. Awareness was highest (60%) among people 18 to 34 years old. Almost half of this age group (49%) had a favorable attitude toward AI and only 7% had an unfavorable attitude. The rest were neutral or unaware.
Joe LaBonté decided to support the Human Rights Now! World Concert Tour because he believed in the tour’s cause and because it offered the opportunity to give something back to the young people who were responsible for the company’s success. After discussions with Paul Fireman, he committed Reebok as sole underwriter of the tour. He felt that the time it would take for AI to enlist several sponsors would likely delay the concert tour until 1989. In addition, being sole corporate sponsor would give Reebok a greater voice in tour promotion decisions than if the job were shared.
LaBonté announced Reebok’s underwriting of the tour at a press conference in Los Angeles, California, on March 29. At the same time, telegrams announcing the sponsorship were sent to all of Reebok’s retailers. Soon thereafter, letters explaining Reebok’s involvement with the tour and the Reebok Human Rights Award were mailed to all Reebok employees, U.S. Reebok sales agencies, and Reebok International Division distributors.
Once committed to the tour, LaBonté formed a task force of himself, Linda Lewi, vice president of Cone Communications, Reebok’s public relations agency, and Angel Martinez, vice president of business development, to handle the public relations and advertising surrounding Reebok’s involvement with the tour. Among their most important tasks was the management of relations between Reebok and AI.
AI was an apolitical organization with a worldwide grass-roots network that tried to ensure respect for human rights, the release of nonviolent prisoners of conscience, fair and prompt trials for all political prisoners, and an end to torture and executions. AI was funded by 700,000 members in 150 nations. It strove to be independent and impartial. The organization did not support or oppose any government or political system and accepted no financial contributions from governments. AI’s activities included letter-writing campaigns in which AI members sent letters, cards, and telegrams on behalf of individual prisoners to government officials; publicizing patterns of human rights abuses; and meetings with government representatives. Members also organized public awareness events such as vigils outside government embassies. Since its founding in 1961, AI had worked on behalf of more than 25,000 prisoners around the world. In 1987 over 150 of the prisoners of conscience “adopted” by groups in the United States were released.
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Human Rights Day, December 10, 1988, would mark the 40th anniversary of the Universal Declaration of Human Rights. Adopted by the General Assembly of the United Nations in 1948, the declaration, based on the twin pillars of freedom from want and freedom from fear, proclaimed fundamental and equal rights for “all peoples and nations.” On March 3, 1988, AI launched its most ambitious campaign ever. Titled Human Rights Now!, its goals were to mobilize public opinion and pressure governments to honor the declaration. In March, AI circulated copies of the declaration and petitions in support of it around the world. The combined petition would be presented to the United Nations on December 10.
In 1986, AI had sponsored an American rock music concert tour which brought AI 100,000 new members, most of whom were high school and college students. This success led AI to view music as an important vehicle to spread its message. Hence, the Human Rights Now! concert tour was conceived and scheduled to begin in September 1988. Although the venues and artists were not all finalized, AI hoped to include countries on five continents, including some with records of frequent human rights violations. Eighteen concerts were planned in 16 countries. Firm venues included Los Angeles, Philadelphia, London, and Brazil. Possibilities included Zimbabwe, USSR, India, Thailand, Yugoslavia, Japan, Argentina, Italy, Spain, France, Ivory Coast, Costa Rica, and Canada. The six-week tour would feature both international artists and national artists of each country in which the tour played. All artists would play for free. Sting, Peter Gabriel, Youssou N’Dour, and Tracy Chapman had committed to the whole tour. Bruce Springsteen was considering joining the tour. If he did so, he would headline the event.
AI estimated that the tour would cost $22 million to produce. It expected to raise $12 million via ticket sales and broadcast rights. This left a $10 million shortfall. Therefore, for the first time in its history, AI sought corporate assistance.
In an agreement signed on April 22, Reebok committed to provide $2 million seed money immediately and to finance the tour deficit to a maximum of $8 million. In addition, the nonprofit Reebok Foundation decided to fund up to $2 million.2 The tour deficit was defined as the tour receipts received by AI from all sources other than Reebok and charitable contributions to AI minus all tour expenses.
AI had to consult with Reebok on all tour matters but had the final decision on most aspects of the tour. Tour logo, name, and the design of tour merchandise required mutual approval. Reebok had certain rights to the tour name and logo as well as photographs of the artists and audio and visual material created by AI and Reebok during the tour. Reebok could participate in the negotiation of the sale of television, radio, theatrical, and home video rights for any tour concert. The company could also create its own advertising with respect to the tour and its purposes. In addition, Reebok had the exclusive right to manufacture all tour merchandise including clothing, posters, buttons, programs, videos, and books. The tour logo, advertising, promotional materials, and merchandise would all carry “Made possible by the Reebok Foundation” as a tagline. AI would be responsible for selling tour merchandise on the grounds of the concert on concert days. Reebok had the exclusive right to sell it through all other channels. Net profits from sale of tour merchandise were considered tour receipts. In the unlikely event that merchandise net profits exceeded the tour deficit, the balance would be donated to AI.
To further emphasize Reebok’s interest in human rights, the task force decided to establish the Reebok Human Rights Award which was independent of AI. The $100,000 annual award, to be funded through the Reebok Foundation, would be split between two young people under 30 years of
2The Reebok Foundation was a nonprofit organization set up in 1987 to seek out grant opportunities. In its first year, the Foundation awarded grants to 32 organizations in the fields of education, arts/culture, human/social services, health and religion.
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age, one male and one female. It would honor young people who, by circumstance or choice, acted against great odds to raise public awareness of and thereby help protect freedom of expression, or who suffered in their attempts to exercise their freedom of expression.
In early June, the task force met to finalize a marketing communications program for the tour. Lewi proposed the $5 million plan shown in Exhibit 17. This expense would be in addition to the cost of underwriting the tour. The plan consisted of pre-event, event, and post-event advertising, promotions, and public relations.
The proposed pre-event plan included the following: advertising the tour on national and spot radio, advertising on network and cable television stations via twenty public service announcements featuring celebrities talking about human rights abuses, advertising with spreads emphasizing a human rights theme in Rolling Stone, Spin, L.A. Style, Details, and Interview magazines and in the campus newspapers of the top 60 colleges and universities, speaking engagements by Reebok and AI executives before college leadership groups, interviews of AI executives and Human Rights Now! tour artists on “Good Morning America” and similar programs to explain about the tour and the award, periodic newsletters and information meetings for employees, sales agencies, and international distributors, and premiums such as T-shirts with the tour logo to be given to retail store clerks to stimulate their awareness and excitement about the tour. The radio and magazine ads would break on August 1, followed by the television ads in mid-August and the campus newspaper ads in early September.
Tentative plans for the event communications included the following: broadcasting at least one of the concerts via network TV or cable, interviews to be given by the artists, AI, and Reebok executives on “Good Morning America” and similar shows, a radio petition drive to affirm support for the Universal Declaration of Human Rights, promotions through bookstores and record stores offering free concert tickets and tour merchandise to winning consumers, employee and retailer sweepstakes with winners to be given free trips and tickets to concerts in Los Angeles or London, free tickets to be given to VIP customers in each country with a venue, hospitality suites set up at venues to entertain VIP customers, use of Reebok athletes to attend event parties and to give third party endorsements of Reebok’s underwriting of the tour, and inviting all RFD employees to a closed circuit viewing of one of the concerts.
The post-event plan included the following: stories released to leading newspapers, trade publications, and entertainment, life style, and business magazines describing the tour’s success and Reebok’s charitable contribution to that success, sale of a tour documentary video and book, use of video and book as retailer premiums, and the Reebok Human Rights Award ceremony.
The task force had to decide what changes, if any, to make to the proposed communications plan. Other Reebok executives were consulted prior to the meeting. Several sales managers questioned: “How will this sell shoes?” They wished to explore opportunities for promotional tie-ins at the point of sale and advocated running U.B.U. ads during the television broadcasts of the concerts. They believed that every opportunity to exploit Reebok’s association with the tour should be used to sell more shoes.
Other executives disagreed. They cited risks to Reebok from association with the tour and advised that the company keep its involvement with the tour low-key in its retail outlets. Some executives were also wary of involving Reebok’s athletes in the tour communications program. They feared that any negative tour publicity could rub off on the athletes and damage their influence as opinion leaders.
At the outset of the meeting, LaBonté stated: “The Human Rights Now! concert campaign promises to be the most exciting event this year in the athletic footwear industry. Our involvement with the tour must be perceived positively by our consumers, dealers, distributors, and employees. We must also ensure that the tour’s advertising and promotion mesh with RFD’s overall 1988 communications program.”
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Exhibit 1 New Product Line Introductions and Acquisitions
Introductions
Year Product Line Introduced
1979 Reebok running shoes 1982 Reebok aerobics shoes 1983 Reebok tennis shoes 1983 Reebok fitness shoes 1984 Reebok children’s athletic shoes 1985 Reebok apparel 1985 Reebok basketball shoes 1986 Reebok walking shoes 1987 Reebok volleyball/Indoor court shoes 1987 Reebok sports conditioning shoes 1987 Reebok infants’ and children’s shoes 1987 Metaphors women’s casual comfort shoes 1988 Reebok golf shoes 1988 Reebok cycling shoes
Acquisitions
Date Company Acquired Product Line
October 1986 The Rockport Company Casual, dress, and walking shoes
April 1987 Avia Group International, Inc.
Donner Mountain Corporation. (subsidiary of Avia)
Athletic footwear for aerobics, basketball, tennis, running, walking, fitness/ sports conditioning, and volleyball Walking shoes, casual shoes, and hiking boots
May 1987 John A. Frye Corporation Leather boots and casual and dress shoes
June 1987 ESE Sports Ltd. Reebok’s Canadian distributor
January 1988 Ellesse USA, Inc.: exclusive rights to the Ellesse trade-marks for the USA and Canada
Sportswear and athletic footwear
Exhibit 2 Sources of Information Which Athletic Shoe Purchasers Used to Help Decide Which Brand to Buy
Reebok
Information Source Total Users Nonusers
Friend or relative 72% 69% 74% Coach or instructor 65 64 65 Salesperson 54 53 54 Article in magazine 50 52 48 Advertisement 45 43 47
Note: All people included in the survey had bought athletic shoes for their own use within the 12 months prior to the survey and were aware of the Reebok brand. Reebok users were people who claimed to own and wear Reebok shoes fairly regularly. Reebok nonusers were people who did not.
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Exhibit 3 1986 Reebok “Motorcycle” Print Ad
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Exhibit 4 1986 Reebok “Spectator Sport” Print Ad
589-027 Reebok International Ltd.
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Reebok International Ltd. 589-027
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Exhibit 5 Reebok Footwear Division Marketing Organization
COO and President Reebok lnternational Ltd.
Joe LaBonté
Corporate Public Relations
Cone Communications Linda Lewi
President Reebok North America
Frank O’Connell
Vice President Business Development
Angel Martinez
Vice President Advertising and Public Relations Sharon Cohen
Manager of Market
Research
Reebok Footwear Division
Category Managers
Reebok Apparel Division
Canada Reebok
Category Manager Tennis
and GoIf
Category Manager
Basketball, Indoor Court, and Walking
Category Manager Running
and Cycling
Category Manager Sports
Conditioning/ Fitness
Category Manager Children
and Reebok
Category Manager Aerobics
and Casual
Exhibit 6 Reebok Footwear Division 1987 Advertising Budget ($ thousands)
Television Network Spot Cable Total TV
$ 6,354 2,107
222 $ 8,683
Radio Spot $ 179
Print Magazines Newspapers Total print
$ 7,475 166 $ 7,641
Outdoor and other Total
$ 350 $16,853
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9-589-027 Rev. November 8, 1989 Ace my homework – Write my essay – Harvard Business School
Tammy Bunn Hiller developed this case under the supervision of Professor John A. Quelch to serve as a springboard for class debate rather than to demonstrate effective or ineffective administrative management. Certain nonpublic information has been masked.
The President and Fellows of Ace my homework – Write my essay – Harvard College own the copyright since 1988. Call 1-800-545-7685 or contact Ace my homework – Write my essay – Harvard Business School Publishing, Boston, MA 02163 to order copies or request permission to copy materials. Without the consent of Ace my homework – Write my essay – Harvard Business School, no portion of this book may be duplicated, stored in a retrieval system, utilized in a spreadsheet, or communicated in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—in any form or by any means.
1
Reebok International Ltd. is a sportswear company based in the United Kingdom.
Executives from Reebok International met in June 1988 to discuss the future of the company.
