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the
      Tri-Peak Plan
2
OR DO
YOU?
        3
the
      Belief


               AUTHENTICITY




                              4
the
      Reality

INNOVAtION      AUtheNtICItY


                               5
6
the
      Innovation Radar




                         7
the
      Current Innovation Radar




                                 8
the
      Future Innovation Radar




                                9
the
      Tri-Peak Plan


       Outdoor   Performance   Action



                                        10
the
      Tri-Peak Plan


       Outdoor   Performance
                               Action


                                        11
the
      Innovation Path




                        12
Product Innovation
              TV
                              sPoNsorsHIPs




      PrINT     sTAY THE CoUrsE
               BUIlD AwArENEss
                                    DIgITAl




                   APPs

                                              13
Mobile Base Camp



 • Leverage the name recognition of our elite athletes
 • Showcase the technical superiority of our products
 • Educate and engage the consumer


                                                         14
Product Innovation
  Monetary
Experience
  User/
  societal




             Pre-Design   Discover   Design   Market+sell   After sale


                                                                         15
Product Innovation
  Monetary
Experience
  User/
  societal




             Pre-Design   Discover   Design   Market+sell   After sale


                                                                         16
Leveraging New Media
Creating an Emotional Bond Through Digital Experiences
Live direct or indirect view of a physical, real-world environment whose elements
 are augmented by computer-generated sensory input, such as sound or graphics


                                                                                    18
A Consumer Visits TheNorthFace.com



                                     19
Then Prints Out the Special Symbol




                                     20
Then He Holds It In Front Of His Webcam




                                          21
And Can Virtually “Try-On” Items.



                                    22
the
      In-Store Experience
The In-store Experience is the Decision Epicenter
(FITCH study, 2005)




of purchase decisions are made in store




                                                24
the
      Retail Making Framework
             Emotional
       Benefit-oriented
            High Value

                               sTorY     sENsE
                                MAKING   MAKING




                             DECIsIoN    PATH
                                MAKING   MAKING
               rational
       Feature-oriented
              low Cost

                          Pragmatic           Hedonistic
                          Cognitive             Intuitive
                          Conscious        subconscious



                                                            25
the
      Retail Making Framework
                          sTorY              sENsE
                          MAKING             MAKING




                         DECIsIoN            PATH
                           MAKING            MAKING




Create a holistic, emotional but pragmatic experience for the HArDCorE ACHIEVEr


                                                                                  26
Modern Storytelling



                        Aspirational
                        Mannequins
                        and Signage




Lots of
Merchandise
                  The North Face
                  Experience Today
                                       27
Maintain
                                  Modern Storytelling



        Related
        Themed
        Merchandise




                      Story Making Centerpieces such as
The North Face        a Walk in Freezer to Test Jackets

Experience Tomorrow

                                                        28
STORY MAKING EXTENDED
            TNF rETAIl                   sPECIAlITY &
             sTorEs                    MAss MErCHANTs


• In-Store Signage                      • On Rack Signage
    - Highlight Latest Technology       • On Tag Stories
    - Increase Athlete Story Telling
     to Raise Emotional Connection
• Elements from Flagship Stores




                                                            29
What About The Other Peaks?



   Outdoor   Performance
                           Action


                                    30
‘11                  ‘12                         ‘13                        ‘14                       ‘15

                                              OUTDOOR
                  Penetration
                  Events, Athlete Sponsorships, Digital, Local Print

                                              ACTION & PERFORMANCE
                            Awareness & Education
                             Mobile Base Camp

                             Store Renovation

                             Co-Op Ads, Athlete sponsorships, National Print, In-store signage, TV

                                                      Web 2.0

                                                                   New stores
                                                                                         Engagement
                                                                                             Flagship Stores
     29%                    29%                       29%                       29%                          29%
SG&A % of Sales        SG&A % of Sales           SG&A % of Sales           SG&A % of Sales              SG&A % of Sales
   $508 MM                $582 MM                   $669 MM                   $768 MM                      $881 MM
    SG&A                   SG&A                      SG&A                       SG&A                        SG&A
32
FINANCE APPENDIX
Finance Appendix
•Revenue assumptions & analysis

•Simulation analysis – Revenue w/ Strategy & Focus

•Marketing mix analysis

•Simulation analysis – Revenue w/ Marketing
Revenue Analysis
Revenue Analysis
Revenue Analysis
Revenue Analysis
Simulation - Revenue
Statistics:          Forecast values ($mm)
Mean                                $3,040
Median                              $3,041
Standard Deviation                    $70
Minimum                             $2,833
Maximum                             $3,248
Assumptions
Assumption: Action Sports Segment



  Triangular distribution with parameters:
     Minimum                                  9%
     Likeliest                               13%
     Maximum                                 20%




Assumption: APAC market growth

  Normal distribution with parameters:
    Mean                                     30.5%
    Std. Dev.                                10.0%




Assumption: EMEA market growth

  Normal distribution with parameters:
    Mean                                     16.4%
    Std. Dev.                                 3.0%
Assumptions
 Assumption: USA market growth

   Normal distribution with parameters:
    Mean                                     16.9%
    Std. Dev.                                 3.0%




Assumption: Outdoor Activity Segment


  Triangular distribution with parameters:
     Minimum                                         67%
     Likeliest                                       Assumptions`
                                                     72%
     Maximum                                         81%



Assumption: Performance Activity Segment


  Triangular distribution with parameters:
     Minimum                                         3%
     Likeliest                                       8%
     Maximum                                         15%
Moving Sensitivity
Scenario & Sensitivity
          2015 Revenue Sensitivity Analysis                                Downside
                                                                           Upside
                            $2,900     $2,950     $3,000     $3,050        $3,100     $3,150   $3,200


           USA market growth         13.1%                                          20.7%



          APAC market growth                 17.7%                     43.3%



  Performance Activity Segment                   12%                  5%



          EMEA market growth                    12.6%                 20.2%



         Action Sports Segment                    17%            11%



      Outdoor Activity Segment                         70%      77%




                                  2015 Revenue               Input
           Variable          Downside Upside Range Downside Upside Base Case
USA market growth            $ 2,955 $ 3,112 $ 156    13.1% 20.7%      16.9%
APAC market growth           $ 2,999 $ 3,068 $ 68     17.7% 43.3%      30.5%
Performance Activity Segment $ 3,061 $ 3,003 $ 58        5%    12%        9%
EMEA market growth           $ 3,005 $ 3,062 $ 57     12.6% 20.2%      16.4%
Action Sports Segment        $ 3,051 $ 3,012 $ 39       11%    17%       14%
Outdoor Activity Segment     $ 3,023 $ 3,046 $ 24       70%    77%       73%
Current Marketing mix

                                              Co-Op
                    10%
                                  21%         National Print Advertising




                                                                            Marketing Mix
                                              Event Sponsorships
             18%                              Retail Media Efforts
                                              PR
                                        13%
                                              In-Store Merchandising
             10%                              Interactive Marketing
                                   9%         Local Print Advertising
                   9%
                          4% 6%               Television




Proposed Marketing mix

                   9%       9%                 Co-Op
                                               National Print Advertising
                                   8%
           15%                                 Event Sponsorships
                                               Retail Media Efforts
                                         9%
                                               PR

                                         6%    In-Store Merchandising
            21%                                Interactive Marketing
                                    6%
                                               Local Print Advertising
                           17%                 Television
2011      2012      2013     2014      2015
                                  Status Quo % Change Over Previous Year Over Previous Year OverYear Difference
                                                      % Change Over Previous Year % Change 2015 Previous Year
                                                                % Change % Change Over Previous Goal
Co-Op                                    21%       0%       -3%       -3%      -3%       -3%       9%       -12%
National Print Advertising               13%       0%       -1%       -1%      -1%       -1%       8%         -5%
Event Sponsorships                        9%       0%        0%        0%       0%        0%       9%          0%
Retail Media Efforts                      6%       0%        0%        0%       0%        0%       6%          0%




                                                                                                                    Marketing ROMI
PR (including Mobile Base
Camp)                                      4%      0%        1%            1%    1%      1%        6%         2%
In-Store Merchandising
(including store redesign)**               9%      0%        1%            2%    3%      1%       16%         7%
Interactive Marketing (incl web
2.0)                                      10%      0%         3%        3%       3%      3%       20%        10%
Local Print Advertising                   18%      0%        -1%       -1%      -1%     -1%       14%        -4%
Television                                10%      0%         0%        0%       0%      0%        9%        -1%



                                                    ROI/$                               ROI/$



                      Interactive Marketing
                    In-Store Merchandising
                                         PR

                       Retail Media Efforts

                        Event Sponsorships
                  National Print Advertising

                                     Co-Op

                                           $0.00     $1.00         $2.00        $3.00     $4.00
Current Marketing
Tactics Impact




                                                                                 Marketing Impact
                                                            Proposed Marketing



  $7,000

  $6,000

  $5,000

  $4,000

  $3,000

  $2,000

  $1,000

     $-
                 2015                             2020




                       Current Marketing   Proposed Marketing % Increase
                   2015 $          3,040    $           3,615            19%
                   2020 $          5,750    $           6,500            13%
                  ROMI $            1.17    $            1.50            29%
Marketing Simulation
Statistics:          Forecast values
Mean                         $3,547
Median                       $3,544
Standard Deviation             $263
Minimum                      $2,781
Maximum                      $4,453
Marketing Simulation
Statistics:          Forecast values
Mean                          $6,700
Median                        $6,587
Standard Deviation            $1,130
Variance                  $1,277,687
Minimum                       $4,011
Maximum                      $10,948
Assumption: APAC 10yr growth




                                                    Assumptions
   Normal distribution with parameters:
    Mean                                      30%
    Std. Dev.                                 10%


 Assumption: APAC AROMI

   Triangular distribution with parameters:
     Minimum                                   0%
     Likeliest                                21%
     Maximum                                  40%




Assumption: EMEA 10yr growth

 Normal distribution with parameters:
  Mean                                        13%
  Std. Dev.                                    3%




Assumption: EMEA AROMI

 Triangular distribution with parameters:
   Minimum                                     0%
   Likeliest                                  21%
   Maximum                                    23%
Assumptions
Assumption: USA 10yr Growth

 Normal distribution with parameters:
  Mean                                      9%
  Std. Dev.                                 2%




Assumption: USA AROMI
                                                  Assumptions
 Triangular distribution with parameters:
   Minimum                                  10%
   Likeliest                                21%
   Maximum                                  31%
Moving Sensitivity
Moving Sensitivity
Scenario & Sensitivity
2015 Revenue w/ Marketing Sensitivity                                           Downside
                                                                                Upside
                     $3,000     $3,200        $3,400         $3,600           $3,800       $4,000


       USA 10yr Growth                  7%                                     11%


      EMEA 10yr growth                       9%                       17%


      APAC 10yr growth                       17%                      43%


           USA AROMI                         15%                    26%


          EMEA AROMI                               7%         21%


          APAC AROMI                                    9%   31%




                       2015 Revenue w/ Marketing                            Input
         Variable     Downside Upside    Range Downside                     Upside Base Case
     USA 10yr Growth  $ 3,287 $ 3,765 $       478    7%                         11%       9%
     EMEA 10yr growth $ 3,395 $ 3,654 $       259    9%                         17%      13%
     APAC 10yr growth $ 3,421 $ 3,644 $       223   17%                         43%      30%
     USA AROMI        $ 3,406 $ 3,621 $       215   15%                         26%      21%
     EMEA AROMI       $ 3,460 $ 3,551 $        92    7%                         21%      16%
     APAC AROMI       $ 3,498 $ 3,533 $        35    9%                         31%      20%
Scenario & Sensitivity
  2020 Revenue w/ Marketing Sensitivity                                       Downside
                                                                              Upside
                      $5,000          $6,000          $7,000         $8,000       $9,000


       APAC 10yr growth        17%                                    43%


        USA 10yr Growth         7%                             11%


       EMEA 10yr growth              9%                   17%


            USA AROMI                     15%    26%


           APAC AROMI                      9%   31%


           EMEA AROMI                      7%   21%




                 2020 Revenue w/ Marketing       Input
    Variable     Downside Upside Range Downside Upside Base Case
APAC 10yr growth $ 5,703 $ 7,861 $ 2,158    17%    43%       30%
USA 10yr Growth  $ 5,767 $ 7,140 $ 1,373     7%    11%        9%
EMEA 10yr growth $ 5,953 $ 6,986 $ 1,033     9%    17%       13%
USA AROMI        $ 6,226 $ 6,557 $ 331      15%    26%       21%
APAC AROMI       $ 6,297 $ 6,489 $ 192       9%    31%       20%
EMEA AROMI       $ 6,291 $ 6,460 $ 169       7%    21%       16%
Scenario & Sensitivity
  2020 Revenue w/ Marketing Sensitivity                                       Downside
                                                                              Upside
                      $5,000          $6,000          $7,000         $8,000       $9,000


       APAC 10yr growth        17%                                    43%


        USA 10yr Growth         7%                             11%


       EMEA 10yr growth              9%                   17%


            USA AROMI                     15%    26%


           APAC AROMI                      9%   31%


           EMEA AROMI                      7%   21%




                 2020 Revenue w/ Marketing       Input
    Variable     Downside Upside Range Downside Upside Base Case
APAC 10yr growth $ 5,703 $ 7,861 $ 2,158    17%    43%       30%
USA 10yr Growth  $ 5,767 $ 7,140 $ 1,373     7%    11%        9%
EMEA 10yr growth $ 5,953 $ 6,986 $ 1,033     9%    17%       13%
USA AROMI        $ 6,226 $ 6,557 $ 331      15%    26%       21%
APAC AROMI       $ 6,297 $ 6,489 $ 192       9%    31%       20%
EMEA AROMI       $ 6,291 $ 6,460 $ 169       7%    21%       16%
The North Face Case Competition Presentation
MARKETING TABLE OF CONTENTS
1.    Authenticity Equation       14. Current 2010 Marketing Mix
2.    Innovation Radar Defined    15. Projected 2015 Marketing




                                                                      Appendix
3.    Why target Hardcore               Mix
      Achievers?                  16.   Marketing Mix Change by
4.    Youth Happens?                    Year
5.    Very Active Person Club     17.   Initiative Costs
6.    2012 Americas Mobile Base   18.   Competitor SWOT (Nike &
      Camp Tour                         Adidas)
7.    Integrated Marketing        19.   Store Roll-Out Plan by Year
8.    Official Guidebook          20.   Run-off (aka Halo effect)
9.    In-Store Insights           21.   EMEA timeline
10.   In-Store Insights (2)       22.   APAC timeline
11.   CRM to CEM                  23.   SHRM
12.   CRM to CEM (2)
13.   Implementing CEM
Authenticity Equation
 TNF is looking to leverage data-drive
   decisions-making combined with a
unique relationship with consumers who
demand high performance outdoor gear
 that the company defines as authentic.



Authenticity = Innovation + Trust + Protection
Innovation Radar Defined
Hardcore Achievers
Penetration Outlook
                                            Activities
                                  Outdoor       Action    Performance
                           High
   Technical Needs


                         Medium
                         Low




                     Strongest         Strong            Medium         Weak
Youth happens?
   We purposefully didn’t target youth

• Youth happens.
• Majority of purchasers of youth clothing
  (infant to 14 years) are captured in other
  segments (e.g., Hardcore Achievers,
  Trendsetting Competitors)
• By targeting Hardcore Achievers, all other
  segment are boosted because of halo effect
Very Active Person Club
                             V.A.P




•   Cater to heavy brand users
•   Provide incentives to reward loyalty
•   Turn in to brand ambassadors
•   Understanding consumer better through CRM information
    collection, analysis, and use
Mobile Base Camp
2012 Americas Mobile Base Camp Tour
TV




                                                                              Integrated Marketing
      Print

                                                        Sponsorships




      Apps

                                                             Digital




Communication Objective: Bridge the gap between innovation and authenticity
   by linking the brand experience (highly functional production) with the
            inspirational exploration that our HA consumers crave
CRM to CEM
• Recruit consumers from the current
  CRM via email to participate in a North
  Face advisory panel (via email) as well
  as through the Digital Ecosystem
• Shift will allow consumers to opt-in to
  provide insight and feedback on
  products, advertising messages,
  promotions, lifestyle, adventures, etc.
• Cost investment - $120,000/year initial
  and $10K/year thereafter
CRM to CEM (2)
Source: Understanding Customer Experience; Meyer & Schwager; Feb 2007
Implementing CEM
Official Guide Book
                  Part of North Face’s Consumer
                  Co-Creation Strategy

                  Partner with consumers and
                  engage them in sharing their
                  experiences, insights, and advice
                  to help other “High Achievers”
                  achieve their adventure goals.

                  Results:
                  Further reaches and engages
                  consumer segments lower in the
                  “peaks”
                  Builds brand equity
Co-Authored By:
Our Consumers
In-Store Insights
Utilize Augmented Reality
   Technology In-Store
In-Store Insights (2)
Changes with seasonality




Store within a store concept
Current 2010 Marketing Mix
                    TNF 2010 Marketing Mix (Current)
Category                          % $ (MM)         ROI/$ Hist ROI Cont
Co-Op                           21%         85     $0.98       $83.76
National Print Advertising      13%         53     $1.38       $73.02
Event Sponsorships               9%         37     $1.29       $47.25
Retail Media Efforts             6%         24     $0.57       $13.92
PR                               4%         16     $3.18       $51.77
In-Store Merchandising           9%         37     $2.09       $76.56
Interactive Marketing           10%         41     $3.15      $128.21
Local Print Advertising         18%         73       N/A           N/A
Television                      10%         41       N/A           N/A
                                                              $474.48
Projected 2015 Marketing Mix
                    TNF 2015 Marketing Mix
Category                      % $ (MM) ROI/$ NewROI Cont
Co-Op                        9%      79 $0.98     $77.70
National Print Advertising 8%        70 $1.38     $97.26
Event Sponsorships           9%      79 $1.29    $102.28
Retail Media Efforts         6%      53 $0.57     $30.13
PR                           9%      79 $3.18    $252.14
In-Store Merchandising      16%     141 $2.09    $294.61
Interactive Marketing       20%     176 $3.15    $555.03
Local Print Advertising     14%     123 N/A          N/A
Television                   9%      79 N/A          N/A
                                               $1,409.16   197%
Marketing Mix Change By Year
                                                 % Change Over % Change Over % Change Over % Change Over % Change Over
                                                                                                                         2015 Goal   Difference
             Vehicle                Status Quo   Previous Year Previous Year Previous Year Previous Year Previous Year
Co-Op                                 21%           0.0%         -3.00%        -3.00%         -3.00%        -3.00%         9%          -12%
National Print Advertising            13%           0.0%         -1.25%        -1.25%         -1.25%        -1.25%         8%           -5%
Event Sponsorships                    9%             0%           0.00%         0.00%          0.00%         0.00%         9%            0%
Retail Media Efforts                  6%             0%           0.00%         0.00%          0.00%         0.00%         6%            0%
PR (including Mobile Base Camp)       4%             0%           1.25%         1.25%          1.25%         1.25%         9%            5%
In-Store Merchandising (including
                                                     0%           1.00%         2.00%         3.00%         1.00%
store redesign)**                      9%                                                                                  16%          7%
Interactive Marketing (incl web
                                                     0%           2.50%         2.50%         2.50%         2.50%
2.0)                                  10%                                                                                  20%         10%
Local Print Advertising               18%            0%          -1.00%        -1.00%         -1.00%        -1.00%         14%         -4%
Television                            10%            0%          -0.25%        -0.25%         -0.25%        -0.25%          9%         -1%




      Assumption: All segments (Hardcore Achievers) respond similarly to the marketing mix across all
      geographies (source: Q&A session with brand representatives)
Initiative Costs
New Initiative                               2011            2012         2013         2014         2015        Total
Mobile Base Camp*                       $       -   $         540,000 $     60,000 $     60,000 $     60,000 $    720,000
Store Renovations**                     $       -   $       1,200,000 $ 1,800,000 $ 1,020,000                $ 4,020,000
Web 2.0 (incl augmented reality)        $       -   $             -   $    500,000 $    500,000 $        -   $ 1,000,000
New Stores (company owned)***           $ 9,000,000 $       9,000,000 $ 36,000,000 $ 45,000,000 $ 15,300,000 $114,300,000
Flagship Stores (2)*****                                                           $ 20,000,000 $ 20,000,000 $ 40,000,000
Total                                   $ 9,000,000 $      10,740,000 $ 38,360,000 $ 66,580,000 $ 35,360,000 $160,040,000

proposed SGA budget                     $508,000,000 $582,000,000 $669,000,000 $768,000,000 $881,000,000
percent of SGA proposed budget                 1.77%        1.85%        5.73%        8.67%        4.01%

Assumptions:
*6 mobile base camps; cost includes car, wrap, labor, mileage
**67 current store renovations at $60,000 renovation
***$900,000 initial cost per store, opened according to roll-out schedule
****2 flagship stores (Denver and Minneapolis) at $20MM per store
Competitor SWOT
Nike SWOT




            Adidas SWOT
Store Roll Out Plan by Year
          Status Quo               Additional Added by Year
                                                                             Goal
             2010       2011       2012      2013      2014        2015
Owned          67        10         10        40        50          17        194
Partner       133        5          10        15        12          10        185

          *Ramp up in 2011 and 2012; peak in 2013 and 2014; finalize goals in 2015

          source: Case Facts
Run-off effect (aka Halo effect)
WHAT IS IT?
Halo effect explains the biasness showed by customers to certain products or
services based on some favorable or pleasant experience (e.g., advertising,
product experience) with some other products or services offered by the
same manufacturer.




CASE STUDY (FROM ANOTHER CATEGORY):
Apple introduced the iPod some years ago and it was creative in its function
and design. The product introduced a gateway to novel thinking and
extremely eye-pleasing experience for iPod users.

The positive perception about Apple's iPod then had a positive effect on
other Apple products, especially the MacBook.
EMEA Timeline
APAC Timeline
TNF has a fantastic employee base to leverage an innovative
customer experience . Innovation must be engrained deep in the
  Value Creation Chain starting with employees and fostering a
                      creative environment.




                                                                 SHRM

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The North Face Case Competition Presentation

  • 1. the Tri-Peak Plan
  • 2. 2
  • 4. the Belief AUTHENTICITY 4
  • 5. the Reality INNOVAtION AUtheNtICItY 5
  • 6. 6
  • 7. the Innovation Radar 7
  • 8. the Current Innovation Radar 8
  • 9. the Future Innovation Radar 9
  • 10. the Tri-Peak Plan Outdoor Performance Action 10
  • 11. the Tri-Peak Plan Outdoor Performance Action 11
  • 12. the Innovation Path 12
  • 13. Product Innovation TV sPoNsorsHIPs PrINT sTAY THE CoUrsE BUIlD AwArENEss DIgITAl APPs 13
  • 14. Mobile Base Camp • Leverage the name recognition of our elite athletes • Showcase the technical superiority of our products • Educate and engage the consumer 14
  • 15. Product Innovation Monetary Experience User/ societal Pre-Design Discover Design Market+sell After sale 15
  • 16. Product Innovation Monetary Experience User/ societal Pre-Design Discover Design Market+sell After sale 16
  • 17. Leveraging New Media Creating an Emotional Bond Through Digital Experiences
  • 18. Live direct or indirect view of a physical, real-world environment whose elements are augmented by computer-generated sensory input, such as sound or graphics 18
  • 19. A Consumer Visits TheNorthFace.com 19
  • 20. Then Prints Out the Special Symbol 20
  • 21. Then He Holds It In Front Of His Webcam 21
  • 22. And Can Virtually “Try-On” Items. 22
  • 23. the In-Store Experience The In-store Experience is the Decision Epicenter
  • 24. (FITCH study, 2005) of purchase decisions are made in store 24
  • 25. the Retail Making Framework Emotional Benefit-oriented High Value sTorY sENsE MAKING MAKING DECIsIoN PATH MAKING MAKING rational Feature-oriented low Cost Pragmatic Hedonistic Cognitive Intuitive Conscious subconscious 25
  • 26. the Retail Making Framework sTorY sENsE MAKING MAKING DECIsIoN PATH MAKING MAKING Create a holistic, emotional but pragmatic experience for the HArDCorE ACHIEVEr 26
  • 27. Modern Storytelling Aspirational Mannequins and Signage Lots of Merchandise The North Face Experience Today 27
  • 28. Maintain Modern Storytelling Related Themed Merchandise Story Making Centerpieces such as The North Face a Walk in Freezer to Test Jackets Experience Tomorrow 28
  • 29. STORY MAKING EXTENDED TNF rETAIl sPECIAlITY & sTorEs MAss MErCHANTs • In-Store Signage • On Rack Signage - Highlight Latest Technology • On Tag Stories - Increase Athlete Story Telling to Raise Emotional Connection • Elements from Flagship Stores 29
  • 30. What About The Other Peaks? Outdoor Performance Action 30
  • 31. ‘11 ‘12 ‘13 ‘14 ‘15 OUTDOOR Penetration Events, Athlete Sponsorships, Digital, Local Print ACTION & PERFORMANCE Awareness & Education Mobile Base Camp Store Renovation Co-Op Ads, Athlete sponsorships, National Print, In-store signage, TV Web 2.0 New stores Engagement Flagship Stores 29% 29% 29% 29% 29% SG&A % of Sales SG&A % of Sales SG&A % of Sales SG&A % of Sales SG&A % of Sales $508 MM $582 MM $669 MM $768 MM $881 MM SG&A SG&A SG&A SG&A SG&A
  • 32. 32
  • 34. Finance Appendix •Revenue assumptions & analysis •Simulation analysis – Revenue w/ Strategy & Focus •Marketing mix analysis •Simulation analysis – Revenue w/ Marketing
  • 39. Simulation - Revenue Statistics: Forecast values ($mm) Mean $3,040 Median $3,041 Standard Deviation $70 Minimum $2,833 Maximum $3,248
  • 40. Assumptions Assumption: Action Sports Segment Triangular distribution with parameters: Minimum 9% Likeliest 13% Maximum 20% Assumption: APAC market growth Normal distribution with parameters: Mean 30.5% Std. Dev. 10.0% Assumption: EMEA market growth Normal distribution with parameters: Mean 16.4% Std. Dev. 3.0%
  • 41. Assumptions Assumption: USA market growth Normal distribution with parameters: Mean 16.9% Std. Dev. 3.0% Assumption: Outdoor Activity Segment Triangular distribution with parameters: Minimum 67% Likeliest Assumptions` 72% Maximum 81% Assumption: Performance Activity Segment Triangular distribution with parameters: Minimum 3% Likeliest 8% Maximum 15%
  • 43. Scenario & Sensitivity 2015 Revenue Sensitivity Analysis Downside Upside $2,900 $2,950 $3,000 $3,050 $3,100 $3,150 $3,200 USA market growth 13.1% 20.7% APAC market growth 17.7% 43.3% Performance Activity Segment 12% 5% EMEA market growth 12.6% 20.2% Action Sports Segment 17% 11% Outdoor Activity Segment 70% 77% 2015 Revenue Input Variable Downside Upside Range Downside Upside Base Case USA market growth $ 2,955 $ 3,112 $ 156 13.1% 20.7% 16.9% APAC market growth $ 2,999 $ 3,068 $ 68 17.7% 43.3% 30.5% Performance Activity Segment $ 3,061 $ 3,003 $ 58 5% 12% 9% EMEA market growth $ 3,005 $ 3,062 $ 57 12.6% 20.2% 16.4% Action Sports Segment $ 3,051 $ 3,012 $ 39 11% 17% 14% Outdoor Activity Segment $ 3,023 $ 3,046 $ 24 70% 77% 73%
  • 44. Current Marketing mix Co-Op 10% 21% National Print Advertising Marketing Mix Event Sponsorships 18% Retail Media Efforts PR 13% In-Store Merchandising 10% Interactive Marketing 9% Local Print Advertising 9% 4% 6% Television Proposed Marketing mix 9% 9% Co-Op National Print Advertising 8% 15% Event Sponsorships Retail Media Efforts 9% PR 6% In-Store Merchandising 21% Interactive Marketing 6% Local Print Advertising 17% Television
  • 45. 2011 2012 2013 2014 2015 Status Quo % Change Over Previous Year Over Previous Year OverYear Difference % Change Over Previous Year % Change 2015 Previous Year % Change % Change Over Previous Goal Co-Op 21% 0% -3% -3% -3% -3% 9% -12% National Print Advertising 13% 0% -1% -1% -1% -1% 8% -5% Event Sponsorships 9% 0% 0% 0% 0% 0% 9% 0% Retail Media Efforts 6% 0% 0% 0% 0% 0% 6% 0% Marketing ROMI PR (including Mobile Base Camp) 4% 0% 1% 1% 1% 1% 6% 2% In-Store Merchandising (including store redesign)** 9% 0% 1% 2% 3% 1% 16% 7% Interactive Marketing (incl web 2.0) 10% 0% 3% 3% 3% 3% 20% 10% Local Print Advertising 18% 0% -1% -1% -1% -1% 14% -4% Television 10% 0% 0% 0% 0% 0% 9% -1% ROI/$ ROI/$ Interactive Marketing In-Store Merchandising PR Retail Media Efforts Event Sponsorships National Print Advertising Co-Op $0.00 $1.00 $2.00 $3.00 $4.00
  • 46. Current Marketing Tactics Impact Marketing Impact Proposed Marketing $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $- 2015 2020 Current Marketing Proposed Marketing % Increase 2015 $ 3,040 $ 3,615 19% 2020 $ 5,750 $ 6,500 13% ROMI $ 1.17 $ 1.50 29%
  • 47. Marketing Simulation Statistics: Forecast values Mean $3,547 Median $3,544 Standard Deviation $263 Minimum $2,781 Maximum $4,453
  • 48. Marketing Simulation Statistics: Forecast values Mean $6,700 Median $6,587 Standard Deviation $1,130 Variance $1,277,687 Minimum $4,011 Maximum $10,948
  • 49. Assumption: APAC 10yr growth Assumptions Normal distribution with parameters: Mean 30% Std. Dev. 10% Assumption: APAC AROMI Triangular distribution with parameters: Minimum 0% Likeliest 21% Maximum 40% Assumption: EMEA 10yr growth Normal distribution with parameters: Mean 13% Std. Dev. 3% Assumption: EMEA AROMI Triangular distribution with parameters: Minimum 0% Likeliest 21% Maximum 23%
  • 50. Assumptions Assumption: USA 10yr Growth Normal distribution with parameters: Mean 9% Std. Dev. 2% Assumption: USA AROMI Assumptions Triangular distribution with parameters: Minimum 10% Likeliest 21% Maximum 31%
  • 53. Scenario & Sensitivity 2015 Revenue w/ Marketing Sensitivity Downside Upside $3,000 $3,200 $3,400 $3,600 $3,800 $4,000 USA 10yr Growth 7% 11% EMEA 10yr growth 9% 17% APAC 10yr growth 17% 43% USA AROMI 15% 26% EMEA AROMI 7% 21% APAC AROMI 9% 31% 2015 Revenue w/ Marketing Input Variable Downside Upside Range Downside Upside Base Case USA 10yr Growth $ 3,287 $ 3,765 $ 478 7% 11% 9% EMEA 10yr growth $ 3,395 $ 3,654 $ 259 9% 17% 13% APAC 10yr growth $ 3,421 $ 3,644 $ 223 17% 43% 30% USA AROMI $ 3,406 $ 3,621 $ 215 15% 26% 21% EMEA AROMI $ 3,460 $ 3,551 $ 92 7% 21% 16% APAC AROMI $ 3,498 $ 3,533 $ 35 9% 31% 20%
  • 54. Scenario & Sensitivity 2020 Revenue w/ Marketing Sensitivity Downside Upside $5,000 $6,000 $7,000 $8,000 $9,000 APAC 10yr growth 17% 43% USA 10yr Growth 7% 11% EMEA 10yr growth 9% 17% USA AROMI 15% 26% APAC AROMI 9% 31% EMEA AROMI 7% 21% 2020 Revenue w/ Marketing Input Variable Downside Upside Range Downside Upside Base Case APAC 10yr growth $ 5,703 $ 7,861 $ 2,158 17% 43% 30% USA 10yr Growth $ 5,767 $ 7,140 $ 1,373 7% 11% 9% EMEA 10yr growth $ 5,953 $ 6,986 $ 1,033 9% 17% 13% USA AROMI $ 6,226 $ 6,557 $ 331 15% 26% 21% APAC AROMI $ 6,297 $ 6,489 $ 192 9% 31% 20% EMEA AROMI $ 6,291 $ 6,460 $ 169 7% 21% 16%
  • 55. Scenario & Sensitivity 2020 Revenue w/ Marketing Sensitivity Downside Upside $5,000 $6,000 $7,000 $8,000 $9,000 APAC 10yr growth 17% 43% USA 10yr Growth 7% 11% EMEA 10yr growth 9% 17% USA AROMI 15% 26% APAC AROMI 9% 31% EMEA AROMI 7% 21% 2020 Revenue w/ Marketing Input Variable Downside Upside Range Downside Upside Base Case APAC 10yr growth $ 5,703 $ 7,861 $ 2,158 17% 43% 30% USA 10yr Growth $ 5,767 $ 7,140 $ 1,373 7% 11% 9% EMEA 10yr growth $ 5,953 $ 6,986 $ 1,033 9% 17% 13% USA AROMI $ 6,226 $ 6,557 $ 331 15% 26% 21% APAC AROMI $ 6,297 $ 6,489 $ 192 9% 31% 20% EMEA AROMI $ 6,291 $ 6,460 $ 169 7% 21% 16%
  • 57. MARKETING TABLE OF CONTENTS 1. Authenticity Equation 14. Current 2010 Marketing Mix 2. Innovation Radar Defined 15. Projected 2015 Marketing Appendix 3. Why target Hardcore Mix Achievers? 16. Marketing Mix Change by 4. Youth Happens? Year 5. Very Active Person Club 17. Initiative Costs 6. 2012 Americas Mobile Base 18. Competitor SWOT (Nike & Camp Tour Adidas) 7. Integrated Marketing 19. Store Roll-Out Plan by Year 8. Official Guidebook 20. Run-off (aka Halo effect) 9. In-Store Insights 21. EMEA timeline 10. In-Store Insights (2) 22. APAC timeline 11. CRM to CEM 23. SHRM 12. CRM to CEM (2) 13. Implementing CEM
  • 58. Authenticity Equation TNF is looking to leverage data-drive decisions-making combined with a unique relationship with consumers who demand high performance outdoor gear that the company defines as authentic. Authenticity = Innovation + Trust + Protection
  • 60. Hardcore Achievers Penetration Outlook Activities Outdoor Action Performance High Technical Needs Medium Low Strongest Strong Medium Weak
  • 61. Youth happens? We purposefully didn’t target youth • Youth happens. • Majority of purchasers of youth clothing (infant to 14 years) are captured in other segments (e.g., Hardcore Achievers, Trendsetting Competitors) • By targeting Hardcore Achievers, all other segment are boosted because of halo effect
  • 62. Very Active Person Club V.A.P • Cater to heavy brand users • Provide incentives to reward loyalty • Turn in to brand ambassadors • Understanding consumer better through CRM information collection, analysis, and use
  • 63. Mobile Base Camp 2012 Americas Mobile Base Camp Tour
  • 64. TV Integrated Marketing Print Sponsorships Apps Digital Communication Objective: Bridge the gap between innovation and authenticity by linking the brand experience (highly functional production) with the inspirational exploration that our HA consumers crave
  • 65. CRM to CEM • Recruit consumers from the current CRM via email to participate in a North Face advisory panel (via email) as well as through the Digital Ecosystem • Shift will allow consumers to opt-in to provide insight and feedback on products, advertising messages, promotions, lifestyle, adventures, etc. • Cost investment - $120,000/year initial and $10K/year thereafter
  • 66. CRM to CEM (2) Source: Understanding Customer Experience; Meyer & Schwager; Feb 2007
  • 68. Official Guide Book Part of North Face’s Consumer Co-Creation Strategy Partner with consumers and engage them in sharing their experiences, insights, and advice to help other “High Achievers” achieve their adventure goals. Results: Further reaches and engages consumer segments lower in the “peaks” Builds brand equity Co-Authored By: Our Consumers
  • 69. In-Store Insights Utilize Augmented Reality Technology In-Store
  • 70. In-Store Insights (2) Changes with seasonality Store within a store concept
  • 71. Current 2010 Marketing Mix TNF 2010 Marketing Mix (Current) Category % $ (MM) ROI/$ Hist ROI Cont Co-Op 21% 85 $0.98 $83.76 National Print Advertising 13% 53 $1.38 $73.02 Event Sponsorships 9% 37 $1.29 $47.25 Retail Media Efforts 6% 24 $0.57 $13.92 PR 4% 16 $3.18 $51.77 In-Store Merchandising 9% 37 $2.09 $76.56 Interactive Marketing 10% 41 $3.15 $128.21 Local Print Advertising 18% 73 N/A N/A Television 10% 41 N/A N/A $474.48
  • 72. Projected 2015 Marketing Mix TNF 2015 Marketing Mix Category % $ (MM) ROI/$ NewROI Cont Co-Op 9% 79 $0.98 $77.70 National Print Advertising 8% 70 $1.38 $97.26 Event Sponsorships 9% 79 $1.29 $102.28 Retail Media Efforts 6% 53 $0.57 $30.13 PR 9% 79 $3.18 $252.14 In-Store Merchandising 16% 141 $2.09 $294.61 Interactive Marketing 20% 176 $3.15 $555.03 Local Print Advertising 14% 123 N/A N/A Television 9% 79 N/A N/A $1,409.16 197%
  • 73. Marketing Mix Change By Year % Change Over % Change Over % Change Over % Change Over % Change Over 2015 Goal Difference Vehicle Status Quo Previous Year Previous Year Previous Year Previous Year Previous Year Co-Op 21% 0.0% -3.00% -3.00% -3.00% -3.00% 9% -12% National Print Advertising 13% 0.0% -1.25% -1.25% -1.25% -1.25% 8% -5% Event Sponsorships 9% 0% 0.00% 0.00% 0.00% 0.00% 9% 0% Retail Media Efforts 6% 0% 0.00% 0.00% 0.00% 0.00% 6% 0% PR (including Mobile Base Camp) 4% 0% 1.25% 1.25% 1.25% 1.25% 9% 5% In-Store Merchandising (including 0% 1.00% 2.00% 3.00% 1.00% store redesign)** 9% 16% 7% Interactive Marketing (incl web 0% 2.50% 2.50% 2.50% 2.50% 2.0) 10% 20% 10% Local Print Advertising 18% 0% -1.00% -1.00% -1.00% -1.00% 14% -4% Television 10% 0% -0.25% -0.25% -0.25% -0.25% 9% -1% Assumption: All segments (Hardcore Achievers) respond similarly to the marketing mix across all geographies (source: Q&A session with brand representatives)
  • 74. Initiative Costs New Initiative 2011 2012 2013 2014 2015 Total Mobile Base Camp* $ - $ 540,000 $ 60,000 $ 60,000 $ 60,000 $ 720,000 Store Renovations** $ - $ 1,200,000 $ 1,800,000 $ 1,020,000 $ 4,020,000 Web 2.0 (incl augmented reality) $ - $ - $ 500,000 $ 500,000 $ - $ 1,000,000 New Stores (company owned)*** $ 9,000,000 $ 9,000,000 $ 36,000,000 $ 45,000,000 $ 15,300,000 $114,300,000 Flagship Stores (2)***** $ 20,000,000 $ 20,000,000 $ 40,000,000 Total $ 9,000,000 $ 10,740,000 $ 38,360,000 $ 66,580,000 $ 35,360,000 $160,040,000 proposed SGA budget $508,000,000 $582,000,000 $669,000,000 $768,000,000 $881,000,000 percent of SGA proposed budget 1.77% 1.85% 5.73% 8.67% 4.01% Assumptions: *6 mobile base camps; cost includes car, wrap, labor, mileage **67 current store renovations at $60,000 renovation ***$900,000 initial cost per store, opened according to roll-out schedule ****2 flagship stores (Denver and Minneapolis) at $20MM per store
  • 76. Store Roll Out Plan by Year Status Quo Additional Added by Year Goal 2010 2011 2012 2013 2014 2015 Owned 67 10 10 40 50 17 194 Partner 133 5 10 15 12 10 185 *Ramp up in 2011 and 2012; peak in 2013 and 2014; finalize goals in 2015 source: Case Facts
  • 77. Run-off effect (aka Halo effect) WHAT IS IT? Halo effect explains the biasness showed by customers to certain products or services based on some favorable or pleasant experience (e.g., advertising, product experience) with some other products or services offered by the same manufacturer. CASE STUDY (FROM ANOTHER CATEGORY): Apple introduced the iPod some years ago and it was creative in its function and design. The product introduced a gateway to novel thinking and extremely eye-pleasing experience for iPod users. The positive perception about Apple's iPod then had a positive effect on other Apple products, especially the MacBook.
  • 80. TNF has a fantastic employee base to leverage an innovative customer experience . Innovation must be engrained deep in the Value Creation Chain starting with employees and fostering a creative environment. SHRM