Catching Up With: Oakley’s Russ Ortiz and Pat McIlvain

With the current economy, businesses are increasingly looking at diversifying their product lines to balance out their risks. In action sports this definitely makes you a target of "authenticity" haters, people that say you're not core if you branch outside or if you start outside and move in. However, some brands are able to successfully navigate this slippery slope through strategic marketing and keeping their brand image strong wherever it is seen. One company that has done a great job of this is Oakley, a brand that started in action sports more than 30 years ago when it began making motorcycle hand grips and has since diversified into a global optics, apparel, and accessories brand that's killing it in markets as diverse as surf, golf, football, and the military. We caught up with Oakley VP of Global Brand Communications Russ Ortiz to find out more about the companies strategy. We also had the chance to sit down with Pat McIlvain, V.P. of Sports Marketing. Take a look:

You guys have done a good job of remaining core in action sports while branching out into a wide array of sports, which can be a tough proposition. How have you been successful?

VP of Global Brand Communications Russ Ortiz: I think if we were to talk about one overriding concept it's to be real and authentic. That's what it gets down to. The whole concept of micromarketing is really trendy and popular, [but] it's really where Oakley was born and how we grew up. We've always stuck to the endemic things and to be real around each of those markets. For us it's really not about line extensions. That's not the way we look at our business. We look at our business as trying to solve problems for individual athletes. There was no big meeting where we said golf is big, let's go into golf. Designers said we think we can make a better golf shoe or apparel to solve problems. The genesis has been around product, but most importantly we work with the best athletes in those individual fields. We're not coming in and saying we have a skate line or a snow line or a moto line. We work with the best athletes in the world and those communities from a grass roots perspective. Whatever we're in, we're not just writing checks to athletes to be in those categories, we're really working with those athletes. What I've really found as well is that those athletes love working with us. It really goes beyond a paycheck for them. Whatever the sport is, Oakley gives them an advantage, which is the most important thing to them. Obviously it's a business and they know the business is reliant on them for performing well and they feel that Oakley gives them that advantage.

How has your size and growth affected your business and marketing?
RO: We're not a small brand anymore, we're obviously very large, but for us being bigger is not just being bigger in the sports that you're in, but it allows us to laser focus on each of those consumer groups whether those are golf, surf, motor sports, whatever it happens to be. What our size has allowed us to do is focus on multiple categories and be the best in each of them. It's not that we're just great in surf and leveraging it across multiple categories. We're looking at each individual activity as a unique challenge from a design standpoint and ultimately a marketing standpoint to see how we really become real in that market. The action sports consumer, that elite core athlete, is probably the most perceptive about authenticity of any other category of athlete that we deal with. Since we were born in action sports and really developed in that market, it allows us to have that authenticity that people from the outside don't have.

When we talk about being in multiple sports, the one thing that attracted me to this brand is that we're as authentic with a surfer in South Africa as we are with a high school linebacker here in Southern California.

So you're leveraging the performance and technology across the platforms?
Exactly. It's interesting, there are a lot of smart people at Oakley that think strategically. But the core of our business is creating great products. We don't sit around in a room and go “What lines can we diversify into because of market opportunities?” It's more coming at it from the opposite way, we've got these great products or these are products we're dreaming up and think can solve problems and moving into the market that way.

When we [started] it was all about performance, innovation, and technology. I think it's attributed to our longevity as well. Brands come and go and when one gets hot just because of their brand image, and not because of what stands behind the products, that's going to be a short ride. It can be a very accelerated ride and you can come into the market and go from 0 to $50 million pretty quickly, but to be able to run past that, there has to be substance.

Tell me a little bit about how you reach consumers in different groups.
It starts with the best athletes. It's a two-way dialogue of our sports marketing groups working with those athletes to find out how we can make things better. That might be everything from make it lighter, to greater range of motion, or make it so I can ride all day and not get wet. We feel if we can solve those problems for the greatest athletes in the world, that those types of features and benefits will help the broader consumer. We do talk to consumers as well. From a design standpoint, from a marketing standpoint, from a sports marketing standpoint – being out in those communities, we talk to consumers all the time.

[We're not a] market research driven company. We're not polling people to see what colors or ideas are popular or what our competitors are doing. Those types of ideas really come from our core. Working with those athletes. We're a market leader. Often times the market doesn't know where it wants to go and needs to be lead in the right direction. Oakley is an impatient company. We're always looking for the next thing. We [want] to go out to the next thing and create what's new and that's what our consumer expects from us.

So what is next?
For us, that gets into the question of the changing market. What we're seeing is a lot of the companies out there aren't in the ball game. They're just struggling for survival. They don't have the dollars to go and invest…in the R&D to come to market with a powerful new technology or story. Although it is a challenging market, we feel it is an opportunity [to] grow our market share. It's a struggle out there and we totally recognize that. We're definitely not having any sense of arrogance about our business and the market place and that we're not vulnerable to the market place because we are, mostly through our consumers and ultimately our retailers, we are sensitive to that, but we feel that there is a market there, that it's not going to zero, and we feel like we can continue to grow it in this time and strengthen.

We have a lot of new technologies [coming] out that we feel give the consumer a compelling reason to buy, which is really what it comes down to. Right now they seem to be more in the 'buy the things that I need, not the things that I want' [mentality]. We want to give the consumers one more [reason] to say 'I really need that if I'm going up to the mountain, or surfing.' For us we feel that the design, development and compelling patterns give them a reason to buy.

How are you communicating that?
It doesn't come down to any one tactic. There's a lot of ways we do that. First and foremost you want to touch the consumer with things like the Rolling O Labs, explain our story and do that close to the consumer. We want to be closer to the consumer [with] in-store point of sale, The Rolling Lab; our electronic and Internet outreach is really important for us.

It's what we like to call 360 degree marketing. Touching them online, through direct mail, through advertising, through our Rolling Labs, through our in-store education of sales associates and a great site we have called O Matter. It's a sales associate training Web site where we're able to tell deeper stories about our technology and pass those along to the consumer.

You mentioned new technologies, anything you can share?
We're very comfortable sharing the things you saw in New York.

Unfortunately we can't talk about all those things because we're not sure if it's going to take one week or one year to solve some of those problems, but they're around better clarity, better protection, and the performance of those lenses. They're working on some amazing things. It's not X Ray vision but it's pretty darn close.

You guys have a strong retail presence with your branded O Stores and I understand you're opening more next year. What's your message to the retailers that you currently work with so that you're not overlapping with them?
We feel like we're going to be a safe bet from a partnership standpoint. We want to extend our hand to those people that are going to continue to invest and grow their businesses and excite the consumer at the retail level. Those are the people that we want to partner with. We're going to be around to do it. We have a lot of strength, not just from a brand perspective, but from a corporate perspective as well that will allow us to be there when this whole financial situation resolves itself which we know it will. This country is resilient.

Our goal is not to take over the retail world by any means. We do it to bring brand energy and excitement to a market. We're pretty strategic that we want to lift the whole market place and really share with our retailers a really exciting place for consumers to shop. The one area that we're underpenetrated is our apparel, footwear, and accessories business because we have been so optics focused for decades. To be out there really creates consumer excitement.

Our strategy is not an off price or off market strategy and we try to stick to our suggested retails outside of traditional mark down cadence, post holidays, etc. Our stores allow us to touch a lot more consumers directly and we use those as a feedback loop into the product engines. We get consumers in here asking about this, or wouldn't it be great if this did this. It's a great feedback loop to feed consumers back into production, which allows all of our retailers to benefit from all of those insights.

What's your outlook for 2009?
Certain categories that we're more mature in, we're not expecting the growth that we've seen in the past. There are other categories where we're so underpenetrated and we're already seeing growth. But I would say it's not going to be a spectacular year for growth at Oakley just based on the marketplace. We want to maintain market share and grow where we can. To say it's going to be a material growth year is a somewhat unrealistic, especially based on the markets outside the US. The international markets are a little tougher to get a read on. And that's a big part of our business.

What opportunities do you see internationally?
In the US, we're an optics company that has grown into other channels. You can go around the world and there are markets like Brazil where it's almost the inverse, where we're seen as a total brand. Optics is a large part, but apparel, accessories and footwear are larger. You see new expanding markets like China and India where we're able to establish ourselves as a sports performance brand and not as [just] an optics brand.