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Lululemon Company: Business Strategy Case Study

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Updated: Sep 1st, 2020

Statement and Description of Central Issue

Lululemon is a company which specializes in yoga-oriented merchandise. Its initial designs displayed orientation at performance and functionality for serious yoga practitioners, a direction that later was expanded to cover other active sports fields such as running. However, over the recent years, the company shifted from specialized goods to form a more inclusive approach. As a result, the current merchandise offered by Lululemon includes casual merchandise such as dresses, bags, hats, and rain jackets. Most of these goods have little to no connection to yoga or other active sports and offer almost no advantage in terms of performance. Instead, the marketing strategy focuses on what can be described as “selling the goals and ideas.” In other words, the emphasis is made on associations with yoga and appeal of its concepts rather than the actual usability and utility of products.

This approach reportedly allowed Lululemon to significantly expand its customer base by including individuals who were reluctant to engage in physical exercise. On the downside, such strategy gained significant criticism from skeptical community and business ethics advocates. Some analysts also theorize that such reputation caters to the audience of “posers” who value their image over effort. Naturally, some portion of athletes are expected to be dissatisfied by the prospect of being associated with such audience and may stop using company’s services. In addition, some of the claims made by marketers were perceived as attempts of deceptive marketing. To minimize adverse effects of the questionable strategy, the company alternated its practices by excluding explicitly unrealistic claims. However, such move may be insufficient for improving the situation. Thus, additional business strategies should be considered.

Identification/Description of Alternatives

Despite the fact that the company is subject to criticism, there is no data that allows us to conclusively identify its benefits and shortcomings. However, two conclusions can be made with certainty. First, the initial shift of emphasis from functionality to concept proved beneficial for the business. Second, at least some of the specific decisions made by the company’s marketing department, such as its claim of seaweed fabric capable of exerting vitamins and minerals into the customer’s skin, can be clearly identified as examples of deceptive marketing. Since the latter is recognized as a violation and is subject to punitive actions, it is to be excluded from the preferred strategies.

Considering these facts, three options are possible to amend the situation. First, the company can abandon the newly chosen direction and roll back to its initial performance-centered strategy. In this way, the majority of reasons which sparked controversy would be eliminated. Specifically, the opportunity for introducing misleading claims, while still present, will narrow down enough to exclude the possibility of unintentional misrepresentation. More importantly, the brand’s image will distance from the poser audience which will retain a more seriously oriented segment. Naturally, while the brand will become less diluted and attain specific and solid characteristics, it will also lose a significant share of its customers.

Therefore, to retain the necessary customer base, marketing needs to be significantly reconsidered. One possible direction the company can choose as a target is the beginner segment – the customers who find active sports and yoga an attractive field but are for some reason hesitant to begin training. Another possible segment is “die-hard fans” – individuals who take sports activities seriously and are therefore the first to be repelled by Lululemon’s current “yoga chick” image. However, we must recognize the fact that the amount of potential customer that can be retained from these two groups combined does not necessarily supersede the audience lost due to the rollback. Besides, active sports have their share of controversy resulting from unrealistic claims, so the possibility of deceptive marketing cannot be discarded entirely.

The second option is to embrace the current strategies and pursue the chosen path. However, certain interventions are required to avoid potential hazards. First, marketing research needs to be conducted to determine potential benefits and drawbacks of the shift. In particular, the implications behind the most common criticisms need to be verified and, in case they are confirmed, appropriate measures should be considered. For instance, the potential loss of customers due to the changes in a brand image may appear negligible when compared to gains achieved by the coverage of previously unavailable population. Naturally, the unrealistic claims and unfair marketing strategies are still to be avoided in this course of actions, but on the overall, the company will still be idea- rather than functionality-oriented. This option is also preferable since it introduces the least alternations to status quo.

A third alternative is adjusting the existing approach to retain the potential customer base and minimize dissatisfaction of the initial target group. This option resembles a compromise between the former two since it incorporates features of both. However, it also introduces the most changes into the existing course of actions. While this may be considered a disadvantage, the third option offers the best opportunities for the company in the long run.

Rationale for Selection of Best Alternative

There are several reasons why the third alternative is preferred. Probably the biggest advantage is the opportunity to retain the new audience. While we do not have information which offers definitive evidence that this segment is lucrative, the intuitive suggestion is that it is sufficiently larger than a more serious but less numerous stratum of actual athletes. Besides, the previous experience of the company indirectly confirms that the new segment is large enough to provide the sufficient portion of sales. Finally, highly specialized businesses need to rely for the most part on the selective and exclusive distribution models, which necessitate higher pricing to profit from fewer sales. On the other hand, covering a wider audience (in our case – less athletic individuals who are drawn to the ideas and messages of yoga and active sports) expand the market enough to allow the business to maintain prices within a competitive range.

This advantage becomes more obvious once we consider the priorities of the company. It is important to remember that running and other active sports are later additions to its initial production of yoga-related products. The latter is a lot less challenging for the audience than more traditional sports, which makes it attractive for a specific audience of the developed countries. While it would be incorrect to claim that yoga is entirely unchallenging athletically, it certainly is inherently more forgiving and newcomer-friendly. In most circumstances, the audience which chooses yoga is already predisposed to the concepts and ideas of holism, wellness, and spirituality rather than physical achievement and competition.

Therefore, it would be more logical to expect the same values and preferences from Lululemon’s customers. In such a setting, “selling ideas” is fundamentally more appropriate than expecting from the customers to appreciate practical characteristics of the goods such as sweat absorption. Besides, yoga practices are known to relieve stress, reduce tension, and otherwise benefit its practitioners psychologically. The companies which offer yoga services are well aware of that and modify their practices to cater to customer’s perceived rather than actual fulfillment of expectations. This approach eventually predisposes the customers to a specific mindset and prompts the search of recognizable values in supporting products not necessarily directly connected to their activities.

This leads us to another advantage of the selected alternative. It is already obvious that most of the newly obtained customers are interested in the created image more than in the actual value of the product. Importantly, a similar pattern can be traced in the behaviors of the deflecting customers. Specifically, according to the critics, the serious athletes and yoga practitioners are repelled by the new message the Lululemon’s merchandise is associated with – that posing as an athlete rather than being one. An important takeaway here is that both parties are driven by the message associated with the product at least to some degree. This leads us to the conclusion that it is possible to retain the lost audience segment by amending the image of the brand (since neither the quality of goods nor the pricing policies are cited as reasons for dissatisfaction). Importantly, the chosen strategy allows us to readjust the reputation rather than gain favorability of one group by sacrificing the other. It should be noted that while these assumptions align with the existing experience of other businesses, at the current stage they are largely speculative and would require additional research before being addressed in implementation.

Next, the chosen path offers the long-term benefits for the company. First, it leads to covering the biggest audience without repelling the already established customer strata. Second, under the condition that the brand image does not become diluted and lose its appeal to both parties, covering larger part of the market will secure the growth of the company in the future and allow steady growth of sales. Admittedly, such result is only possible in the case where all the marketing decisions are appropriately selected and thoughtfully implemented. Finally, the diversification of markets presents better opportunities to safeguard the business against unpredictable occurrences in any given field. The company will also be able to maintain its knowledge base up to date, covering the quality and technological proficiency as well as design and marketing skills.

As was mentioned above, the chosen strategy also presents the greatest challenge in terms of the amount of introduced changes and allocated resources. On the one hand, it requires a significant alternation of the current marketing policy similar to the first option. On the other hand, it necessitates significant market research possibly superseding that of the second alternative. Nevertheless, upon obtaining a full picture and addressing criticism, the company is expected to get praise of the public, adding to its success.

Description of Implementation Plan

Since the suggested strategy requires significant resource allocation and, by extension, commitment of the company staff, the first stage of the implementation must be directed at sharing vision of the new strategy, communicating its mission, and securing commitment from the company employees. Once this is achieved, a research aimed at determining relevance and weight of the recent concerns (e.g. losing customers due to image backlash) must be launched. During the next stage, the results of the research can be used to construct the strategy addressing the most vulnerable points which also display the biggest threat to corporate image and lead to loss of customers.

Importantly, the development of the transformation model requires the development of the relevant metrics which would allow evaluating the execution of the plan, detecting deviations, and adjusting business practices in a timely manner. Appropriate communication channels are desirable to achieve synchronicity between departments and ensure integrity of operations. One possible way of doing this is establishing scheduled meetings where recent updates would be shared and discussed to review the course of actions and decide on alternatives whenever required. After this, the designed strategy may enter execution phase. All changes in customer behavior patterns must be assessed, logged, and brought up in subsequent meetings. To ensure the success of the process, a workplace culture should be built that can be aligned with the set goals and vision. One important aspect which should be addressed is the attention to marketing decisions that may qualify as deceptive and unethical. This may be achieved by additional employee training and promoting healthy corporate ethics. After this, the process is limited to monitoring, maintenance, and occasional interventions.


The direction chosen by Lululemon is an ultimately correct one since it aligns well with values of its customer base. However, it is coarsely conceived, does not account for important details, and uses deceptive marketing techniques, which led to criticisms and undesirable changes in brand image. The chosen solution allows the introduction of necessary amendments without disrupting the existing business model. If implemented appropriately, the suggested alternative leads to retention of two major customer segments, improved company image, and several long-term benefits. Despite being fairly demanding in terms of resources and staff commitment, the chosen solution is possible under the condition that the suggested plan is followed with proper diligence.

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