Success in marketing requires of the right convergence of several factors: a) the existence of a real, unfulfilled consumer need; b) a product proposition that effectively addresses such need; c) the ability to not only get the consumers to know of such product proposition, but to believe it; and last, d) sheer momentum. It seems simple, but achieving this confluence of elements is actually a delicate balancing act. Therefore, when I see a company that has stricken such balance, I jump at it with my two feet.
Case in point: Skechers (SKX) and its line of Shape-Ups shoes. Let’s see why I am so excited about this opportunity:
Consumer need: Everyone wants to be in shape. Not everyone is willing to endure the sacrifices and hard work required to achieve that condition, though. We all know we have to exercise and promise ourselves to do it at some point. But in reality, most of us barely scratch a vigorous walk now and then. It is our natural tendency to cut corners and look for the most efficient (or shall I say ‘easy’?) way to achieve what we want. Want to lose weight? There is a pill for that. Need more energy? Let me grab the energy shot. Want more money? Let me watch Mad Money. So, the opportunity to make those rare low-intensity exercise sessions really count is irresistible.
Product proposition: “So, you are telling me I can burn more calories, improve my posture and tone my muscles just by walking in your shoes? I want in!” Skechers’ Shape-ups’ proposition is simple and has ample appeal. The key is that they have developed and positioned it for the regular people. Reebok (a Adidas AG brand) has a similar line, called EasyTone. What is the difference? Reebok targeted its shoes to the image-conscious female athlete; people who already exercise. By definition, the segment is smaller and has a lot more ‘conceptual’ competition: most of these women are mostly looking for something else in their shoes: performance, balance, avoiding injuries and so on. So, when the infrequent occasion to purchase a pair of athletic shoes finally arrives, what benefit will drive the decision? In the case of Skechers Shape-Ups, the segment is practically uncontested. For walking, most people basically use whichever pair of shoes is comfortable. But there are no special technical requirements. So Shape-Ups is the first line that offers true benefits –reason to buy- to the casual exerciser. In addition, Skechers has been careful to offer a full range of shoes for every occasion: from the cool-looking sneaker-style shoe, to the casual shoe for work. Last, the Shape-Ups shoes are not cheap: ongoing retail price is above $100 a pair, but Skechers have made sure that the quality of the shoes is commensurate to the price. Ultimately, the perception of high quality in combination with a unique functional promise is the final rational driver that consumers need to see this purchase more as an investment than an expense, therefore providing the perfect justification for an otherwise questionable outlay of cash.
Awareness and Credibility: Skechers is marketing the Shape-Ups line intensely, with particular emphasis on the Internet. Judging by the number of Shape-Ups banners and promotions I’ve seen in different websites, I’d venture to say that nowadays Skechers can easily be one of the top Internet advertisers. And it does not stop there: almost any shoe store has prominent Shape-Ups displays. The unique shape of the product and the profuse technical information offered in their website and in their marketing materials make the proposition easy to understand and very credible.
Momentum: Shape-Ups is building tremendous momentum. At the stores I visited researching this product, the clerks reported brisk sales. Most importantly, consumers are raving about the comfort of the shoes in their reviews in sites like Zappos.com and Shoes.com. This viral momentum is infectious; consumers are encouraged by the positive remarks of their peers, and the momentum gains strength. My impression is that we are just at the beginning of the post-launch inflexion point in the life-cycle curve, so we should see accelerated growth for the years to come.
Based on all these considerations, I pulled the trigger and made an investment in Skechers on July 15th. Around that date I started writing this note. On July 28th, Skechers reported a stellar quarter and as a result, the share price jumped approx. 7%. While I regret I didn’t have this note ready before that date, my estimation is that this is just the beginning of a nice upward trend for Skechers. So, it’s not too late. This is a stock that can shape up your portfolio.
Disclosure: I own shares of SKX