John K. Buller

September 23, 1996

TO:      Walter Schoenfeld Gary Schoenfeld

RE:      Vans, Inc.

It was a pleasure to spend a day with you discussing Vans and how to increase business with a diverse customer base.  Our initial discussions were about how you can add value to drive Vans business through a layered point-of-sale marketing approach.  The overall issue is:  How does Vans segment the distribution channels to ensure as growth occurs in the larger national retailers, Vans does not lose its position as the authentic alternative sports shoe distributor in the niche market.  Attached are:

I. Market Segmentation Strategies:

(                   They focus on issues, objectives, marketing, point-of-sale, and communication strategies

tailored to each specific niche.

1. Potential Pro jects:

This is a potential list of projects and incentives that would serve as a base for a relationship between Vans and John Buller.

1. Sponsorship Proposal for the Internet:

An opportunity may exist with “Alice in Chains.”

1. Expenses:

Potential expenses that might occur as a result of a relationship between Vans and John Buller will be discussed after we figure out the relationship.  Attached are expenses from my trip on September 10.

2030 Dexter Avenue North, #250 • Seattle, Washington  98109 • (206) 292-9979

MARKET I:

Extreme Regional/Specialty Alternative Sports Shops

Issues:

I .   Vans must maintain its direct connection to the alternative sports shop as the leader of the sports-specific market.

1. Vans must consider that as the “boarders” of today get older and the market expands, Nike may become a product provider in this area.

Objective:

Through consistent product introduction of fashion and new product launches, Vans maintains its leadership position in the alternative specialty store market.

Event Marketing Strategies:

1. Continue to expand Vans relationship with the national championships of snow boarding and skate boarding.  These championships should be leveraged through partnerships with other extreme niche products to extend the reach of these events.

1. Through strategic alliances, identify two to four extreme compatible niche products that expand the financial strength to drive the marketing of these products.   Suggested products are:  sunglasses, clothing, accessories, i.e. pads, braces, etc.

1. Consider product launches into new extreme sports. “Luge” represents a true opportunity. A second opportunity exists in extreme down hill mountain biking. The key factors are “speed” and “vertical fall.”

1. In conjunction with prod uct partners and regional alternative sports retailers, take demonstrations and product sampling to key markets and alternative sports venues (e.g. at the skate board park in Seattle, Vans could be there promoting the product to the “boarder” and possibly conducting mini competitions with Vans products as prizes).

Point-of-Sale:

While all creative must focus on the product and the extreme sport, the creative needs to be more extreme.  The features should be product, speed, and vertical drop.

Communication  Strategies:

I . The main focus of alternative sports shops is very similar to the current marketing plan.  Use of extreme sports publications should be focused on the connection between Vans and these specialty shops.

1. There is an opportunity to become more interactive with enter-to-win contests to all national championships and the WARP concert series.

1. Ifnew product is launched, it should always be launched in the key markets with regional retailers.   ·

MARKET II

Specialty Shoe Retailers

Issues:

The specialty shoe retailer is the best natural progression from the alternative sports shop. They are positioned in the high traffic retail centers to expose the product and be psychographically compatible to Vans extreme position.

Objectives:

I .   To choose national specialty shoe retailers and focus on key markets to drive incremental sales.

2.  To be considered the authentic shoe of choice for the alternative sports consumer and those consumers that “want-to-be.”

Marketing:

I .   Use Vans’ sponsorship of the nationals and WARP tour with enter-to-win contests focused on targeted specialty shoe retailers.

1. Consider adding a spring concert series that allows for major point-of-sale efforts four times per year; two concert series held spring and back-to-school, plus two national board championships during winter and summer.

1. Create a post card entry form and survey card that is included in shoe boxes.  The goal would be to start collecting customer information and develop direct relationships to the Vans customer to be discussed later.

1. Develop a gift-with-purchase or purchase-with-purchase  program directed at the specialty  shoe stores.  Potential cross promotion between compatible niche products or product specific retailer, i.e. Sunglass Hut.

Point-of-Sale:

1. Through the use of the concert series and national championships, Vans should try to  negotiate use of posters and contest forms during key season periods.  These programs should focus on markets in conjunction with specialty shoe retailers.

2.   Use in-box printed material with emphasis on the enter-to-win promotions.  The goal would be to get Vans customers to send names and addresses to a central processing house for customer list building.

Communication  Strategies:

I .  Use national advertising to leverage enter-to-win trips to the national board championship and the Vans concert series.  The listings should be a combination of key regional sports stores  and selected national specialty shoe retailers.

2.   Once enough post cards are returned to start building a viable mailing list, bounce-back loyalty programs could be started.

MARKET III

Multi-Classification  Retailers

Objective:

I .  To define potential interactive customer involvement programs that will help drive customer counts and product sales (i.e. relationship marketing)

1. To maximize the revenue off existing Vans customers through increased communication.

1. To focus these programs on increasing customer frequency and purchasing.

Assumptions:

1. Vans must stay in front of the style curve to maintain sales growth.

1. Vans must be able to access traditional mass-distribution channels to increase sales growth.

1. Vans needs to develop  a three-tiered  promotion  strategy to accomplish # I  and #2 at the same time.

JC Penney’s Assumptions:

1. JC Penney’s is a traditional store that views Vans as a fashion-forward, younger product.

1. JC Penney’s is insecure about their ability to attract the Vans self-purchase customer.

1. JC Penney’s merchandises by classification; Vans is a life-style product.

Vans Ob jective  in Driving JC Penney’s  Business:

1. Vans wants front and forward display positions during key promotional periods.

1. Vans wants enhanced point-of-sale visual display, employee motivation, and management focus on selling greater quantities of Vans Shoes.

1. Vans wants exposure in both the young men’s and young women’s departments.

Promotional Ideas for JCPenney’s:

I .    Contests:

Three or four times per year, Vans provides JC Penney’s with a contest package.  These packages would be directly associated to Vans national advertising focus but targeted directly at JC Penney’s customers.

1. Prizes:

The following is a list of potential prizes for contest winners:

Snowboards Gargoyles Sunglasses T-shirts & Hats

Sierra On-Line CD Games

Skateboards Watches

Music Concerts Movie Passes

1. Contest Elements:

1. Point-of-Sale:   Two graphic images would be created, one for young men’s and one for young women’s.  These images would be used on poster signage (112 sheet) and post cards.  The posters would be located on traffic aisles in young men’s and young women’s areas.  Message would include “Vans fashion for men and women” and “enter to win.”

1. Floor Visual:  Vans would create a floor visual rug that would scream Vans.  The rug would be designed to work with a 112 sheet sign to increase impact.

1. Enter-To-Win Form:  The entry to win would have a customer survey that asks four basic questions:  Age/sex, favorite music, greatest concern about the society, and how many Vans shoes do you own?  For 100% completion of the entry form, including the contest and the survey, a 5% discount would be given to the customer.

1. Advertising:

I)      Vans would supply JC Penney’s with two distinct post cards, one male and one female.  JC Penney’s would pay for the postage.

2)      Vans would co-op JC Penney’s logo ads in any non-traditional music/active specific publications (dollar limits need to be established) that focus on the product and enter to win.

3)     In key markets, Vans would co-op target niche radio spots with efforts to bring in live remotes and special events to build around the contest event.

4)      Vans would pick an appropriate print media to run an announcement ad as to who has won.

5)      Vans would get JC Penney’s to put these enter-to-win contests in the appropriate maga-log — 118 page required.

e.              Customer Follow-up Response:   All enter-to-win cards would be sent to a processing center for data collection.  All names and addresses would be built into a customer file.  A post card would be sent to all entrants with a I 0% discount on the next visit to JC Penney’s to buy Vans shoes.  These discounts would have a 30 day time limit.

CONCLUSION

MARKET I                         MARKET II                        MARKET III

Regional Stores:                  National Snecialtv               Multi-Classification

Shoe Stores                          JC Penney’s

I. Product Launches:                      I. Select key markets and               I. Select key markets and Enter into new extreme                                            retailers for association                    run contests to win areas: Luge, mountain                                          to national board                             boards and niche- downhill.                                                        championships and                               matched product.

national music tours.

2.   Gorilla Marketing:                                                                              2.  Use retailers mailing

Taking contests and                2.   List in sport-specific                lists to drive awareness products to the streets                     media as a place to                          to their customer base. in key markets.                                 enter-to-win.

3.   Work on visual focus in

3.   Association to national              3.   Create in-box post                          life-style merchandise board competitions and                             cards with distinct                            areas to drive

music concert series.                       enter-to-win to capture                    customers to product

names.                                             classification areas.

1. Advertising in sport-

specific media; list                    4.   Create gift-with- regional chains.                                                      purchase and purchase-

to-purchase to enhance decision to buy.

OTHER

I .   Vans and  Strategic Alliances:

Form strategic alliances with selected niche products that match Vans demographics. Sunglasses and clothing could be the first areas.  The goal would be to increase the marketing of these products by using the financial leverage of all products toward the alternative extreme sports niche.

1. Vans Product Launches:

The extreme concepts related to the Vans male demographic is speed and vertical fall.  I suggest Vans take its skate and snow board crowds into luge competition.  Vans could form a relationship with the country’s luge courses and use its contest formula to take its current boarders to the next extreme level.  This would be its winter promotion.  In summer, sky diving or bungee jumping could be the next extreme level.  Vans could create shoes fore these new extreme sport efforts.

1. Develop  Customer Data Base:

By using post cards to collect customer names in specific shoe retailers as well as multi­ classification retailers (Markets I and II), Vans could form a relationship with its customers and mail special offerings to drive these customers back to retail for more purchases.

(              4.   Vans and The Internet:

Vans has a web site.  In viewing this site, the information was outdated and the creative did not match the extreme nature of the Vans customer.  Attached is a proposal to create a state­ of-the-art internet retail site.  All Vans advertising would reference the internet site.  The site would have the same enter-to-win contest that would allow Vans to use the same post card and I 0% discount to purchase a new piece of merchandise.

1. Vans and  Cause Marketing:

After six to nine months of collection of enter-to-win surveys, a profile of the Vans customer would become clear.  Vans could launch a major “cause” marketing campaign that the customers would have defined as important.  From the database, a post card with a I 0% discount could be mailed to he!p kick off the cause and drive customers back to the stores.

1. Vans Pricing:

Vans should not allow any retailer to use the word “sale” in conjunction with a Vans product. Discounts on product should be controlled by Vans to help foster customer relationships and drive known customers back to the stores to purchase new product.   Requests for “sale” merchandise should be handled by offering “clearance” and let major chains merchandise “clearance” in their major store wide events.

1. Vans Group Buy:

To help promote the group aspect of Vans shoes, I suggest looking at a bundle pricing structure.  Ifthree friends buy Vans Shoes at one time, they receive a I 0% discount.   Iffour or five friends purchase Vans Shoes at one time, they receive a 15% discount.  And, if six or more friends buy Vans Shoes at one time, they receive a 20% discount.  This campaign would need to be treated as a launch to insure clear execution.  The promotion would have limited duration and timed during off seasons (i.e. February).