Good for the Gander
If $1000 sounds like a lot to pay for a jacket, think about another number: $1.82 billion. That was the market value of Canada Goose, producer of those pricey jackets, when its IPO hit the market in March of 2017. This was the highest valuation of any luxury retailer in the world. Not bad for a company that started in a small warehouse in Toronto in 1957. Entrepreneur and immigrant Sam Tick opened that warehouse more than 60 years ago, selling woollen vests and snowmobile suits. But there was not the same sticker shock back then when the company was known as Metro Sportswear, compared to the luxury prices being charged by its current offspring: Canada Goose.
As Sam and his son‐in‐law began developing innovative ways to create outerwear that would withstand the harshest of elements, the reputation of Metro Sportswear grew. The branding changed from Snow Goose to Canada Goose. But much of the growth in the reputation of Canada Goose comes from partnerships with customers such as climbers and field researchers and film crews working in extreme environments.
Along the way, the Canada Goose name developed a reputation for quality and innovation. The firm continues to seek new means to deliver quality, with a focus on “Made in Canada.” In the last decade, Canada Goose began to grow exponentially, with two new manufacturing facilities opened in 2017, expansion of both the factory and office spaces in its global headquarters in Toronto, and flagship retail stores in Toronto; Calgary; New York City; Chicago; Boston; London, U.K.; and Tokyo.
With the very successful IPO in 2017, Canada Goose seems to have created a permit for printing money. Despite uncertain economic times, those interested in buying a Canada Goose product don’t seem to be fazed by the price of the product. This willingness to buy despite the high prices has remarkably impacted Canada Goose’s bottom line: profits increased from $5 million to $200 million once the company expanded its manufacturing and retail operations.
There is a lot of competition for high‐quality outerwear, including from The North Face and Patagonia. Those brands are well established in the market, so it was a calculated risk for Canada Goose to go head to head with those brands and charge a premium price on top of the existing high prices charged by highend competitors.
But Canada Goose first had to leave Canada to get people to pay a steep price for its products. In the early 2000s, Sam Tick’s grandson Dani Reiss took the reins of the company and began selling Canada Goose products in Europe. And it was the cachet of “Made in Canada” that had Europeans willing to pay more for a Canada Goose jacket. Reiss noted, “For them a Canada
Goose jacket made in Canada was like a watch made in Switzerland…. Rolex is not going to move their production to China.” Made in Canada became a marketable, bankable factor.
But moving to China is precisely what many clothing and outerwear manufacturers did. And Canada Goose took advantage of this by positioning themselves as the only truly Canadian alterative. Reiss believed that people would be willing to pay for an authentic, expertly crafted product.
Today, Canada Goose is at an important crossroads. Its growing popularity means that the early adopters are now starting feel as though the brand no longer belongs to them. But there is a huge market out there waiting to be targeted. One way to test a brand’s presence in the market is to create brand extensions. 2 Canada Goose recently started making knitwear, mostly sweaters. The worldwide sweater sales market is growing at around 3 percent, while the outwear market has stagnated recently at below 1 percent.
You are asked to assess the knitwear (sweater) market for Canada Goose to determine if it’s a viable market. This means you will have to search Canada Goose’s offerings, along with those of competitors. Do a pricing analysis based on other marketing factors like economic and competitor forces. A brand extension is always a risk, so the information you gather will be important for Canada Goose to proceed in this market. You will need to use your marketing skill set to make sure that this goose is not cooked.
Question
There are five Cs that a company takes into consideration when it decides to fix (or change) a price In the case of Canada Goose introducing a new line of knitwear, discuss how each of those factors would have an influence on the company’s decision.
Canada Goose, renowned for its luxury outerwear, is contemplating a brand extension by entering the knitwear market. This decision involves a thorough analysis of the five Cs of pricing: Cost, Competition, Customers, Company Objectives, and Channel Members. Each of these factors plays a crucial role in shaping Canada Goose’s pricing strategy and market entry plan for its knitwear line.
Cost considerations are pivotal in determining the pricing of Canada Goose’s knitwear line. The company must evaluate the expenses associated with designing, manufacturing, and distributing the new product. Unlike outerwear, knitwear involves different materials, production processes, and possibly new manufacturing facilities. The cost of materials, labor, technology, and overheads will influence the final price. Additionally, the brand’s commitment to maintaining its reputation for quality might entail higher production costs. Pricing must cover these expenses while ensuring a suitable profit margin.
The competitive landscape is another significant factor to consider. Established competitors like The North Face and Patagonia dominate the market, each with their customer base and brand loyalty. Canada Goose’s knitwear must differentiate itself to stand out amidst competition. Pricing can play a role in positioning the brand—setting the price either slightly higher to convey exclusivity or competitively to attract a wider customer base. An analysis of competitors’ pricing strategies, as well as their product offerings and market share, will guide Canada Goose’s decision.
Understanding the preferences and buying behavior of the target customers is vital. Canada Goose has historically catered to a premium clientele willing to pay for quality and authenticity. The company must assess whether these customers would be willing to extend their loyalty to knitwear, a different product category. Moreover, with the knitwear market’s growth rate exceeding that of outerwear, there might be an opportunity to attract a broader audience. Analyzing customer segments, their income levels, shopping habits, and willingness to pay will help Canada Goose align its pricing with customer expectations.
Company Objectives Canada Goose’s objectives play a central role in pricing decisions. The company’s reputation for luxury and quality must be maintained with the knitwear line. Pricing too low might undermine the brand’s positioning, while pricing too high could alienate loyal customers. The brand extension’s purpose must be defined—whether it’s to capture a larger market share or to strengthen the brand’s exclusivity. Balancing these objectives while ensuring profitability will guide the pricing strategy.
Collaboration with distributors, retailers, and online platforms is critical. Canada Goose needs to work closely with its existing channel partners to integrate the knitwear line into their offerings. These partners might have their own pricing strategies, which must align with Canada Goose’s pricing model. Communication about the new product’s value proposition and positioning is key to maintaining consistency across all touchpoints. The company’s relationship with its channel members will influence the distribution strategy and pricing adjustments.
In conclusion, Canada Goose’s entry into the knitwear market requires a comprehensive analysis of the five Cs of pricing. The company must carefully consider costs, competition, customers, company objectives, and channel members when determining the pricing strategy for its knitwear line. A balance between maintaining brand prestige, meeting customer expectations, and achieving profitability will be crucial for the success of this brand extension. By leveraging these factors, Canada Goose can ensure that its new venture into knitwear is a well-informed and strategically executed endeavor, ultimately ensuring that this brand extension takes flight successfully.
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