Blue 311: Lynch, McCarthy, McKenzie, Woodruff, Yu

ASICS: Choosing a Branded House Hybrid for Efficient Expansion

ASICS Brand Foundation and Evaluation

ASICS Onitsuka Tiger (“OT”) ASICS Tiger

Emotion Competitive, optimizing, elite, Sports-inspired and luxury lifestyle “Sneaker Heads” looking
and Feel hardcore. brand with European influence. for a (street) fashion
statement.

High-end athletic shoes with Retro style sneakers with a clothing Shape and structure of
Products Gel-Technology. built for line to match. older shoes, with bright
performance. Performance colors and materials.
apparel.

While serving serious runners has remained the differentiating strength of the company,
decades of growth and diversification have yielded a “house of brands” structure that is unique
in the industry. Consumers are not able to see that the brands are all connected under ASICS,
even where beneficial brand synergies may exist. ASICS’ signature four-stripe design allows for
some connection among brands, but the image of “an athlete [winning] the race running in
ASICS shoes and [going] on the podium to receive the gold medal in Onitsuka Tiger shoes,” in
the imagining of ASICS CEO Motoi Oyama, is hard to reconcile with ASICS Corporation’s siloed
architecture and distribution globally.
Additionally, ASICS financials show brand-associated cost burdens that will impede the
10% net-income target of the ASICS Growth Plan (“AGP”) 2020 goals:
Net Sales Cost of Gross profit SG&A Operating Net Income
Sales Expense income

% YOY Change 2015 21.0% 23.9% 17.4% 24.0% -9.9% -54.1%

The major increase in SG&A expense and corresponding decline in net income seen in
2015 is associated with that year’s relaunch of the ASICS Tiger brand. Losses occurred despite
the expected jump in Net Sales. Brands are expensive, and ASICS can employ only about 1/24
the brand budget of industry leader Nike. The current house of brands architecture prevents
ASICS from realizing synergies through increased brand awareness and channel savings.
Recommended Changes
Achieving AGP 2020, particularly by doubling sales in running and tripling them in the
lifestyle category (Exhibit 7), will require brand and product discipline and a careful leveraging of
current capacities, all of which brings ASICS closer to the branded house model.
ASICS’ brand architecture should push forward with the planned introduction of the
casual runner product line under the ASICS flagship brand, accompanied by a new, unified feel
to accommodate ​both​ lines, and omni channel marketing driven by Runkeeper. ASICS should
furthermore allocate a substantial portion of its 300 planned store openings to OT in America
and Europe, and leverage that lifestyle brand’s “sports-inspired” identity to succeed in athleisure
and other apparel offerings. Lastly, ASICS should discontinue the ASICS Tiger brand, but move
that brand’s most successful and compatible products to OT, maintaining them under a
social-powered marketing strategy.
Casual Runner Product Line Positioning
Management’s strategy to proactively pursue the casual-runner segment and house its
new mid-tier footwear line under the ASICS brand, though not without risk, is sound. Nesting
both product lines under ASICS—one for serious runners, the other for casual—will generate
beneficial synergies not available to any competitor. Specifically, ASICS’ established brand
identity confers a halo of expertise, quality, and reliability on the casual line, allowing for Points
of Superiority and justifying an incrementally higher price. The causal line can in turn reciprocate
a rarefied, “cut above” positioning back to the performance line.
As with many footwear and athletic apparel brands, ASICS’ store design places its shoes
at the rear wall, past the apparel. ASICS should position each line on either side of a new,
unifying slogan, “In It,” which is a blank-enough canvass to receive the personal aspirations of
both marathoners and casual runners:

Core In it Performance

...For the joy ...To win it

...For the trail ...For every breath

“In it” is a slogan that escapes the competition-oriented feel of ASICS’ current slogan
“want it more”—which is likely to find friction with casual runners (Exhibit 8)—but still resonates
with the stoic and focused feel of marathoners. Sub-branding the serious runner lines as
“Performance” provides clear differentiation (clearer, even, than when it stood alone), while
sub-branding the casual segment “Core” positions it as simply apart from, rather than below, its
cousin.​1
To power the success of this “branded house” product line growth under ASICS, it must
be accompanied by three flanking measures.
1. Store presentation roll-out must be accompanied by a multi-channel marketing campaign
announcing ASICS’ lateral sub-brand positioning. ASICS’ website should also align with
the Performance vs. Core product framework, with assisted self-sorting on its landing
page.
2. Any radical changes to the shoes in the pipeline for ASICS Performance (previously
ASICS) should be moderated until the following season, so as to not overwhelm ASICS’
traditional customer segment with changes, providing reassurance that this foundational
segment can still depend on the brand and products they love.
3. ASICS’ salespeople must be trained on how to manage two parallel sub-brands. Sales
should continue high-value service for serious runners, while emphasizing to casual

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​In the short run, both sub-brands will be driven by the master brand, but with consumer acclimatization will fall more
under a co-driven brand relationship.

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 runners that ASICS Core provides a quality, dependable athletic shoe made by experts
to minimize injuries and maximize fun. Compensation should be largely product-line
agnostic, to avoid both pushiness towards new casual runners and cannibalization of
serious runners. ASICS’ Foot ID system should be expanded as an option for buyers in
either product line, further accentuating the ASICS brand’s overall USP as athletic-shoe
experts.​2
The two chief risks of taking a sub-branding approach are alienation of ASICS’
long-standing serious runner segment, and cannibalization of that segment. Measures to
address both risks are noted above, but ASICS must also ​measure​ for evidence of either
deleterious trends and tweak the sub-branding rollout in response. Accordingly, ASICS should
choose a randomized set of store locations for the rollout, and perform a corresponding
randomized A/B test of its web updates. Both tests will measure how many Performance line
customers stray into the Core line after introduction, and how many are turned off to ASICS
altogether. Some fallout and adjustment is anticipated, but evidence of cannibalization or
alienation trends can be met with re-positioning each sub-brand relative to one another,
increasing or decreasing the distance and definition between them as indicated.
Core Line Launch Strategy: Alternatives and Further Considerations
An alternative home for ASICS’ new mid-tier running line has its appeal: Onitsuka Tiger’s
family of “sport-inspired” lifestyle products, principally footwear, appears well-suited for shoes
intended to do double-duty for the fashion-conscious. Moreover, OT already counts 50% of its
customer base as women, aligning with the demographic of the casual runner target segment,
whereas ASICS’ customers are primarily male. By using ASICS as the master brand for its new
product line, the company faces a steeper climb in reaching its target segment.
But launching under OT would yield less progress towards the AGP 2020 goals.
Tactically, ASICS’ 2020 sales strategy is founded on a DTC pivot, but operationally, OT’s
current DTC footprint in the US and Europe is either faint or nonexistent (Exhibit 6, EMEA
region), despite the fact that Runkeeper data indicates a strong casual runner segment in these
regions (Exhibit 14, Country breakdown). While ASICS is advised to allocate a generous
proportion of its 300 planned store openings to OT in the US and Europe to support apparel
targets, OT’s current DTC footprint does not currently offer any fast track to reaching more
women in the casual runner segment.
More strategically. launching a casual runner line under OT offers no opportunity for
brand differentiation in an already-crowded field, forgoing the halo of trust and expertise
emanating from the ASICS brand. Nearly all of ASICS’ major competitors already position
themselves with a blend of lifestyle and athleticism (Exhibit 3). ASICS can bring a unique
presentation to market by leveraging its long-established presence and identity in the running
world. Such a halo from ASICS Performance justifies a higher price point for ASICS Core:
$60–$85 instead of the contemplated $50–$75. Instead, OT can be leveraged for another AGP
2020 goal: a US and European OT launch accompanied by a sports-inspired athleisure line will
help accomplish the company’s lofty apparel and lifestyle targets.

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Over time, casual runners can be encouraged to “ladder up” to ASICS Professional as appropriate, and ASICS’
aging marathoners whose running is becoming more casual can be transitioned to ASICS Core (instead of leaving for
another manufacturer).

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 ASICS Tiger and Final AGP 2020 Architecture
Executing the planned sub-brand restructuring of ASICS will require focus, and given the
import of the casual runner segment, will pay off far more than devoting those same resources
to a niche “sneakerhead” segment. Lost sales from discontinuing ASICS Tiger can be offset by
cost savings, and partially mitigated by OT taking up some ASICS Tiger products, many of
which are consonant with OT’s urban fashion identity. Consistent with OT’s recent and
successful pivot to Social advertising, influencers can get the word out about the transition to
ASICS Tiger’s loyal segment at minimal cost. The resulting brand architecture would be:

ASICS Onitsuka Tiger

Core Professional –

Emotion and Feel Empowering, personal, and self-defining Stylish, sporty, and luxurious

For everyday runners, ASICS Core is For dedicated runners, For energetic city dwellers who
the athletic shoe that makes running ASICS Professional is the love to look the way they feel,
Positioning fun, supporting any run you do with performance shoe that Onitsuka Tiger offers stylish
Statement great fit and durable design from the powers your peak with sneakers and sporty apparel to
experts industry-leading embody your inspiration
Gel-Technology and fit

Affordable quality with a great fit to High-end athletic shoes with Retro style sneakers with a
Products maximize fun and minimize injury complete Gel-Technology. sports feel. Luxury sport
Optimized for performance apparel to match

Print and digital “In it” campaign. Print and digital “In it” Continued focus on Social,
RunKeeper app brand marketing plus campaign. Athlete and event especially to promote select
Promotion specific promotions targeted to likely sponsorship (marathons and “sneakerhead” models imported
customers; digital and in-race omni olympics). Athlete-focused from ASICS Tiger. Continue
web magazine
channel marketing marketing campaigns

In ASICS stores, with fine-tuned Shift from third-party Direct through Onituska Tiger
Place spacial and brand positioning lateral distributors to new wave of Stores and website. US and
to Professional line brick-and-mortar stores and Europe diversified
revamped website

Premium price Casual premium Upper price point in Japanese

This branded house hybrid will leverage ASICS’ existing strengths and limited resources
to win over casual-runners and achieve ambitious goals in lifestyle and apparel sales, powering
success in the AGP 2020 Goals. A branded house is also a better home for sub-brands by
sport, an area where ASICS has already found success. (Boxing is recommended as next up in
ASICS’ sub-branded sports, given its consonance with ASICS Professional’s individualistic,
performance-oriented feel). Once the above architecture finds success, ASICS could consider
moving even ​closer​ to a full branded house model by rebranding Onitsuka Tiger for greater
ASICS affinity. To conserve focus and resources, however, such a move would be best
considered as a next step after the AGP 2020 goals have been met.

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Leveraging Runkeeper
The acquisition of Runkeeper provides ASICS with a great opportunity to gather data for
targeted pull and omni channel marketing, build brand awareness among the growing casual
runner segment, and drive DTC sales of ASICS running shoes and apparel.
First, ASICS should leverage existing Runkeeper user data on its 16.5 million active
annual users to better understand the casual runner segment and connect ASICS offerings with
their motivations, preferences, and behaviors. For example, understanding when and where
casual runners train can help ASICS determine the optimal placement and business hours for
new retail stores, ensuring retail stores are visibly located and open near high-traffic casual
runner routes, as well as promoting those locations to applicable users directly through the app.
User data can also be used to support efficient execution of ASICS’ reliably successful race
sponsorship strategy, only now for the fun-run segment. Since the app is already used for race
event sign-ups, ASICS can determine which specific races are experiencing growing popularity
among various customer segments and ensure these races receive sponsorship and promotion,
creating a digital-to-real-life omni channel approach.
In addition to data gathering, ASICS can leverage the Runkeeper app itself as a new,
hyper-targeted marketing channel. For example, after a user logs 400 miles, the app can push a
congratulatory message that reminds them to replace their running shoes to prevent injury. With
shoe replacement top-of-mind, users can be directed to an ASICS store locator map or the
company’s e-commerce site to boost DTC sales. Similarly, once a user completes an in-app
challenge (e.g. 100 miles run in a month or 5,000 feet of elevation gained in a week) they can
receive a user-relevant promotion for ASICS shoes and apparel. By monitoring user response
and keeping promotions relevant, ASICS can avoid being perceived as spamming Runkeeper
users with irrelevant ads. In-app advertisements should phase out competitors, but for variety to
the customer and as leverage for ASICS, ads for OT can also be integrated in concert with that
brand’s US and European rollout.
Next, to align with the branded house hybrid approach for ASICS products and to help
generate brand equity within the casual runner segment, the company should gradually
increase ASICS branding within the Runkeeper app. While there is potential for backlash from
users who enjoy the app’s perceived independence from large footwear companies, it is
important to increase brand awareness and product sales in order to achieve the company’s
ambitious sales goals. Moving incrementally, ASICS can add a “powered by ASICS” endorser
brand relationship to the Runkeeper logo and then, after an adjustment period of ~12 months,
move to a full rebrand under the “ASICS Runkeeper” name. The risk of serious backlash is
mitigated by customer “stickiness” in the fitness app market: if users switch to another app, they
will lose the extensive workout history that they’ve built in Runkeeper. ASICS can also mitigate
any losses in the user base by including a Runkeeper flyer in the box of each pair of shoes sold.
Lastly, the Company should merge its MY ASICS app with Runkeeper and offer users a
two-tiered Freemium price structure. Users will enjoy free access to basic services such as
route planning, workout recording, and workout history, but will require a monthly subscription
for premium services such as dynamic training programs, performance analytics, and digital
competitions. With an expected reduction in margins on its mid-tier Core line, it is important for

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the company to cut costs on redundant services—including managing two separate fitness
apps—and to generate additional revenue where significant value is provided to customers.
To ease the transition for existing MY ASICS users and ensure an adequate
understanding of the full value of the premium services, current MY ASICS users should have
their workout history copied over to Runkeeper and receive an extended free trial of Runkeeper
Premium. With a user base made up of ‘fanatic,’ upper-middle class runners, we expect many
MY ASICS users will perceive value in the premium services and will ultimately pay for the
subscription. Since the existing Runkeeper user base is made up of casual runners, we expect
most of them will be content using the free version of the app.
“Bronze” by 2022-23 Analysis
Consonant with the recommendations above, Under Armour (“UA”) is a company that
has crafted a clear branded house structure and one-stop DTC experience. As such, we believe
it is most likely to take the “bronze” in shoe & apparel brands behind Nike and Adidas by 2023.
UA’s motto, similar to our proposal of “In it,” offers consumers a canvas for their own diverse
aspirations.​3​ UA also has competitive strengths in capturing emerging segments, namely, a
clear and singular brand hosting dozens of sport-specific sub-brands; financial muscle (UA
enjoys the highest growth and margins of challenge brands); market segment savvy (first mover
advantage into athleisure and a strong position in mass market, high growth sports); and proven
marketing prowess (highly effective use of social and other non-traditional media).
Under Armour’s financial flexibility and branded house platform—sub-branded into
multiple sport segments—has allowed it to expand into new sports and lifestyle categories over
the last several years, boxing out challenger brands. UA presents consumers with a one-stop
shop for sports gear, athleisure wear, and appropriate training attire—all under the halo of a
powerful, celebrity-endorsed brand. As recommended to ASICS, UA’s digital experience further
simplifies the buyer journey by allowing self-segmentation into sports of interest, reducing sales
costs via autonomous buying decisions. UA also sells a wide range of accessories including
headphones, sunglasses, hats, visors, backpacks and facemasks. With this diversified portfolio
of products under one master brand, UA saves on brand expense while allowing consumers to
self-sort when visiting their website and stores.
Driving their single successful brand has been UA’s non-traditional marketing strategies,
in particular key partnerships and social media marketing. Strategic partners Dwayne “The
Rock” Johnson and basketball player Stephen Curry provide UA with brand equity that
permeates their broad product portfolio. Johnson amplifies their lifestyle appeal, and even
created “The Rock project” category to have his fans purchase Johnson’s sub-branded products
through UA’s website. Stephen Curry, for his part, lent UA a sport and performance positioning
to extend their shoe line, and is arguably the leading reason for their success in both basketball
and shoes. Both partners make ample use of social media to deliver their endorsements.
To continue its success and seize the “bronze” placement in its industry, UA must
continue to show strength in social marketing, product line offerings for every sports-related
category, and efficient online distribution. Social-endorser marketing is a company advantage
that must be exploited, but the risks of this approach must be managed. Johnson and Curry are
huge influencers, but a personal scandal or career-ending injury can change this overnight. UA
3
​UA motto at time of writing was the malleable ​“This is who we are and what we do, as a team. Every day.”

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needs to continue to develop the next-generation brand champions to fit their lifestyle motto,
and treat successful endorsers well. While the ASICS brand can be built on its trusted status by
everyday athletes, UA’s success will continue to build on key endorsements. UA can continue to
create customer pull through its endorsements, bringing motivated consumers to their
well-designed website and thereby saving on brick-and-mortar store expense vis-a-vis
competitor brands.
International expansion will be the most difficult step under UA’s current and
recommended strategy, as social-driven pull marketing may not replicate well outside the US,
particularly against the resources and global presence of Nike and Adidas, and ASICS in Asia.
While the fundamentals provide for real opportunity, UA will need to shape their social
marketing and endorsement strategy around international applicability, choosing endorsers with
global appeal. Furthermore, some additional expense in overseas expansion should be
budgeted for in the form of more DTC brick-and-mortar stores, to help control the narrative and
presentation among new groups of consumers.