database marketing initiative for lululemon athletica
TRANSCRIPT
Table of Contents Situation Analysis ...................................................................................................................... 2
Company sales volume ...................................................................................................................... 2 Brand positioning ............................................................................................................................... 2 Historical Marketing Activities ....................................................................................................... 3 Category-Market Growth ................................................................................................................. 4 Segment analysis ................................................................................................................................. 4 Competitive Analysis ......................................................................................................................... 4 Market and Consumer Factors ..................................................................................................... 5
SWOT Analysis .......................................................................................................................... 6
Target Market for Lululemon Customer Rewards Program .......................................... 7 Program Objectives ................................................................................................................... 7
Strategy ........................................................................................................................................ 8 Marketing and Promotional Tools .................................................................................................. 9
Tactical Requirements ........................................................................................................... 10
Database Requirement .......................................................................................................... 12 Customer Life Time Value ................................................................................................... 13
Measurement, Testing and Evaluation .............................................................................. 16
Capital Requirements ............................................................................................................ 16 Work cited list ......................................................................................................................... 17
Appendix A .............................................................................................................................. 19 Appendix B ............................................................................................................................... 19
Appendix C .............................................................................................................................. 20
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Situation Analysis
Company sales volume Lululemon has increased 21% of its net sales revenue for the first three quarters of fiscal year 2013 to $1,070.2 million from $884.9 million in the same period of fiscal year 2012. It ended the third quarter of fiscal 2013 with $600.7 million in cash and cash equivalents compared to $439.4 million at the end of the third quarter of fiscal 2012 (Lululemon Athletica Inc. 1)
Market Share & Growth Rates
Brand positioning
• Target Customer/Core customer: Young educated women who are concerned about balancing their work and life. They incorporate yoga and sport activities to fulfill the balance
• Point of Parity: Lululemon Athletica chooses to concentrate on the design and production of technical athletic apparel
• Point of Difference: Creating and delivering technical apparel for a specific segment of the market: yogis (a practitioner of yoga) by offering their first unique fabric, their signature "Luon" at premium price
Company CAGR (2010-2012)
Adidas (includes Reebok)
8.1%
Nike 12.3% Puma 10.6% Under Armour 27.4%
Lululemon athletica 38.7%
Asics 4.9%
43%
33%
8%
7% 7%
2%
Market Share of Global Sports Apparel Market 2012
Adidas (includes Reebok)
Nike
Puma
Under Armour
Lululemon athletica
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Historical Marketing Activities
- Yoga Class at nearly all stores - Ambassadors programs who embody the Lululemon lifestyle: Certified yoga and
fitness instructors in the community are offered a 15% discount on purchases, in return for written feedback to be provided on the items purchased
- Lululemon promotes its brand, its community and its culture with local events
Social Media Channel Social network # of Followers Posts Comments Facebook.com https://www.facebook.com/lululemon
911,196 likes · 6,060 talking about this
Total posts: n/a
Like and share photos of new products, recent events, Yoga Pose
Youtube.com https://www.youtube.com/user/lululemon
17,037 subscribes 6,152,483 views
Total posts: 200+ Video
Introduce product function, yoga events, yoga lessons, ambassadors sharings
Twitter.com https://twitter.com/lululemon
583K Total posts: 58.5K
Yoga pose featured by lululemon prduct, sport activities photos
Pinterest.com http://www.pinterest.com/lululemon/
1,923,239 Total posts: 1313
Lululemon events and store all over the world.
Instagram.com http://instagram.com/lululemon
498,799 1275 Feature all sport activitites
Blog http://blog.lululemon.com
Blog, articles relates to lifestyle, health and sport activities
Current Status
Lululemon is a global leader of yoga inspired women's athletic apparel. Currently Lululemon is available for purchase only in North America and Australia. International expansion is in the works with show-rooms in Hong Kong and London.
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Category-Market Growth
• Revenue has increased $40.7 million in 2004 to $1.0008 billion in 2011 which shows compound annual growth of 58%
• Net revenue in 2011 was $1.008 billion in compare to $711.7 million in fiscal year 2010 resulting 41%increment in revenue
• Corporate owned stores comprise 89.3%of net revenue. Company has 103 corporate owned stores in Canada and US
• Store productivity is approximately $2004 per square foot in 2011 in compare to $1726 in the fiscal year 2010
• Franchises contribute 4.6% of the net revenue for Lululemon • Other contribution comes from wholesale sales; telephone sales and sales through
company’s showroom provides 6.1% of the net revenue
Segment analysis Two major segments of global sports and fitness clothing markets are:
1. Sports apparel 2. Fitness clothing
Sports and fitness clothing market is increasing day by day due to the general awareness and interest in more sports related activity. Consumers are leading healthier lifestyle by taking participation in different sports. Increase number of women participation in sports and yoga represents growth trend and opportunity for apparel and fitness clothing.
Competitive Analysis Top competitors of Lulu lemon are Nike, GAP and Adidas.
Ø NIKE-Nike is the leading and most recognized brand in sportswear Strength-
• Strong brand awareness • Strong global market presence • Nike makes very strong marketing effort and endorse top athlete like Michel
Jordan and Derek Jeter for their marketing campaign
Weakness- • It is considered as “the expensive brand” • Broke Labour law in third world countries by paying the labours below
minimum wage
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Ø The Gap Inc.-GAP is leading global speciality wear. The company offers product under the name of Gap, Old Navy, Banana Republic, Piper Lime.
Strength- • Increase in revenue helped the company in internal funding for expansion of
its operation further • Strong product portfolio and brand recognition • Wide geographic presence-Gap operates 3095 stores across North America,
Europe and Asia Weakness-
• Dependency on third party manufacturer-company purchase private and non-private level from approximately 1000 vendor from 40 countries. This may affect its ability to meet any emergency
• Companies various product recalls generate negative publicity among their consumer
Competitive Chart
Market and Consumer Factors
• Demographics – study of population changes - 29% of Canadian population comprises of people from Baby Boomer
Generation (born between 1946 – 1965) and 27% of the total population, belong to the children of baby boomers generation (born between 1976- 1994). This generation is often called Millennial. (Generations in Canada)
• Health Trend: - The percentage of Canadian adults, age 20 to 39, at risk for health problems
because of expanding waistlines has quadrupled in the last 30 years, from 5% to 21% for men, and from 6% to 31% in women (Yoga in the Workplace)
• Growth of Yoga Industry: - There are 250 million yoga practitioners worldwide which lets yoga to become a
cash cow among North American Yogis. (Yoga’s evolution)
-‐10 0 10 20 30 40 50 60 70
Lululemon
Addidas
GAP
Nike
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SWOT Analysis STRENGTHS OPPORTUNITIES
Ø Global market leader in yoga apparel
Ø Premium quality and innovative products
Ø Personalized customer service and highly trained staff
Ø Actively engaging towards local community through Brand Ambassador program
Ø Strong social media presence Ø Utilizing customer feedback
through its blog and feedback website tool (heylululemon.com)
Ø Growth of Yoga industry worldwide can lead to international stores expansion
Ø Increasing number of Canadians are classified as being overweight and they can be its new target market
Ø Brand recognition in Asia and Europe
WEAKNESSES THREATS Ø Weak brand recognition in
Asia and Europe Ø Lacking stores expansion
outside North America
Ø Competitors, such as Nike and GAP, are now having yoga product line
Ø Competitors are having cheaper price for similar products
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Target Market for Lululemon Customer Rewards Program Specific and Niche approach Lululemon has had a rough year in 2013 in terms of its sales, marketing, and Public Relations strategy. After its CEO controversial public comments on Lululemon yoga pants and women’s bodies; as well as banning its own loyal customer to shop there just because they are reselling their Lululemon’s product through other online distribution channel, Lululemon has lost its loyal customer brand engagement. This reflected on their stock market shares that slipped dramatically (Shaw). Lululemon needs to develop innovative strategies to win its loyal customers back. Currently, Lululemon is actively engaging towards local community through their brand ambassador program. Target market is as below:
• Female, age 25-39 years, high income, well educated, sophisticated, mature professional, have urban, dynamic, and trendy lifestyle
Needs: • Active & busy females seeking for a better work life balance towards
yoga/meditation and other range of sport activities Value:
• Lululemon successfully developed a specific target market and worked hard to satisfy them through personalized customer service & its growing local community
• Their product has reflecting the dynamic women’s needs in balancing style and performance for a wide range of activities (InterBrand)
• Consumers are willing to pay higher price for premium quality product and the service too
Program Objectives
• To successfully launch LuluCard program by May 1st, 2015 • To acquire 400,000 customers to be a member of LuluCard by the end of fiscal
year 2015 • To gain 10% referral rates for LuluCard membership by the end of fiscal year
2016 • To achieve 30% Return on Investment (ROI) of LuluCard membership by the end
of fiscal year 2016
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Strategy • Lululemon Customer Rewards Program (LuluCard)
o Target market will be Lululemon existing loyal customer (including Lululemon Brand Ambassador & Female Yogis) in Canada
o Rewards Program is based on points system. There are 3 levels for this program (Silver, Gold, and Platinum)
• Integration between LuluCard and Lululemon Brand Ambassador o The Ambassador program is presented to unique individuals in each
Lululemon store communities who characterize the Lululemon lifestyle and live the culture
o Main focus for the first year of launch will be to engage with Lululemon Brand Ambassador and encourage them to join Lululemon rewards program. As Brand Ambassador, they will be the most loyal customer for Lululemon and will represent positive association towards the brand
• Brand reactivation for Lululemon Om Finder Yoga App
o Adding features to existing Lululemon Om Finder Yoga Apps. For example: customer logins using LuluCard username. From that login they can track their purchase and reward points, refer their friend, and view current promotions
Benefits for Member
• Member can track their points and purchase history through Lululemon website and Om Finder Yoga Apps 24/7
• Member can refer a friend and get 20 bonus points + 10% Discount for their next purchase
• Member will be the first to receive notice of promotions and deals, through Om Finder Yoga App or email newsletter
• Monthly exclusive promotions only available for LuluCard member • Special birthdays’ promotion for member. Member will receive advance notice
through email, explaining what their birthday promotions are Point of Difference The only customer rewards program in sport/yoga apparel category that provide customer with convenience access to track their account (through Om Finder Yoga App), earn bonus points + discounts for referring a friend, and engage with their local store community.
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Marketing and Promotional Tools
• Advertising Promote LuluCard through:
o Online Advertising (Lululemon official website, Google ad) o Social Media (Lululemon FB, Twitter, Instagram, Twitter) o Print (Women Magazines, Health & Lifestyle Magazines) o In store display (poster, banner, and brochure at each Lululemon store)
• Public Relations
o Use existing Lululemon blog to gather reviews from Brand Ambassador and loyal customer
o Invite media relations to LuluCard launch and promotional event
• Event Marketing and Sponsorship o LuluCard launching party o Sponsor sports and yoga event to create positive brand association o LuluCard booth at each sponsored events to gain awareness from customer. The
booth will have at least 1 Lululemon Brand Ambassador as a representative that will explain all the features and benefits of LuluCard.
Drawbacks From This Program
• Customer information may be partial or misleading • Risk of failing of Privacy Act
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Tactical Requirements
1) Features & Benefits: For Consumers: - The “Om Finder App” will allow customers to track the reward points that
they earn from their subsequent purchases - Customers can redeem their points directly by converting into equivalent
dollar value or by participating in promotional offers - Elite Ambassadors and Platinum Card holders shall be Lululemon’s brand
advocates and will gain additional media points upon each referral - Ambassadors achieving premium target points for referrals shall receive
special invitation for ‘new brand line launch’ every pre-season - Elite Ambassadors and Platinum Card holders will have unlimited access
to in-store yoga classes For Lululemon:
- Track consumer buying behavior for efficient inventory management - Act as a prediction tool to gather insight of what Lululemon customer
needs and wants - Encourage referrals to grow revenue
2) Member administration process
Signups / Inquiries: - The membership card will be available at the purchase counter of all stores
across Canada - The staff will be specifically trained to encourage all customers to sign up
for the rewards program - Referred customers can directly sign up for the rewards card online and
collect the card in-store, upon their first purchase
Terminations: - All customers and ambassadors can at anytime terminate their rewards
program - Upon termination, all benefits of the rewards program shall be withdrawn
3) Levels (if there is more than one)
- Lululemon Silver Card: This is the basic card which every customer shall get upon signing up to the loyalty rewards program
- Lululemon Gold Card: Upon accumulation of 800 points, the customer gets upgraded to Gold Class
- Lululemon Platinum Card :Upon accumulation of 1500 points, the customer gets upgraded to Platinum Card
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4) Offer and Fulfillment: - “With every $50 spent on your purchase of tops / bottoms / accessories or
swimwear, get 20 points on your reward card” - Gold Card customers will have access to additional seasonal discount
which is reserved for optimum members only - Platinum Card customers will have access to premium weekly deals,
exclusively for Platinum Customers and by invitation only - Elite Ambassadors & Platinum Card customers will receive 1 additional
points for every $1 dollar spent above single purchase worth $300 and 50 points for every referral
5) Redemption Process:
- Every 50 points carry a dollar value of $2 - Points can be converted to equivalent dollar value and subsequent discount will
be applied on the current purchase - Points can also be redeemed to purchase weakly deals
6) Customer Communications Process:
- All communications with the customer will be done via postal mail and email
7) Privacy Laws:
- All communications with the customer shall be done complying under PIPEDA and CASL
- The customer will sign and agree to the privacy terms and policy before taking part in the rewards program
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Database Requirement Registration for Lululemon Silver Card
- Customer Personal Details 1) Title 2) First Name* 3) Last Name* 4) Address* 5) Email Address*
I would like to receive messages / offers from Lululemon Reward Program and its Sponsors to my email address.
6) Phone Number
- More Information 7) Gender 8) Language 9) Date of Birth (yyyy/mm/dd)* 10) Income (under $35,000 / $35,000 – 49,999 / $50,000 – 74,999 / $75,000 –
99,999 / $100,000 +) 11) Marital Status (Married / Common-Law / Separated / Divorced / Widowed
/ Single) 12) Household Size (1 / 2 / 3 / 4 / 5+)
I have read and agree to all of the Terms & Conditions and the Privacy Policy. I am 18 years of age or above
* Required Field Existing Internal Data Sources
• The buying behavior of consumers will tracked from the existing database of online registered customers in www.lululemon.com
• After RFM analysis, proposal of enrollment to the rewards program shall be rolled out to the most recent and frequent online customers
• The UPC Scanner data shall be utilized to identify consumer behavior across stores to plan the in-store promotion of the rewards program
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Customer Life Time Value Assumption 1: Acquiring 400,000 customers The number of 2,096,000 female aged from 25 – 35 from main provinces are prospective customers of Lululemon. (Appendix) Using rule 80/20, which 80% of major revenue comes from 20% customers. In the other words, 20% of 2,096,000 female (400,000) are assumed to be the major spenders or heavy users of Lululemon. Therefore, in this program we will aim to acquire 400,000 customers. Assumption 2: 300$/customer/year. Retention rate increase in the future. According to TickerMine's survey, most shoppers spend around 75$ per visit. Every customer is expected to return to the store 4 times a year (every 3 months). Thus, an average customer spend $300 per year. Increase 18% year 2, 20% year 3. In future years the retention rate grows. The loyalty of retained customers is higher than that of newly acquired customers. As customers stay with Lululemon, their number of orders per year and their average order size tends to increase. Thus, Spending rate and retention rate are expected to both increases. Assumption 3: Variable cost takes up 50% of Sale revenues In year 1, 40% in year 2, and 35% in year 3. The cost typically goes down after the first year. The cost of customer service to existing customers is usually lower than that to new customers. Assumption 4: Acquisition cost is $40/customer. Acquisition cost is calculated covering all the marketing program, advertising cost, sales cost. With the amount of $16 mil, acquiring 400,000 customers is achievable. Assumption 5: Discount rate 1.16 in year 2, 1.36 in year 3 Factor of risk = 2. Current interest rate = 8%. Therefore, D year 2 = 1.16, D year 3 = 1.26 Assumption 6: Referral rate 10% in year 2, 15% in year 3 With the effectiveness and efficiency of tools and methods used in referral program, in year 2, we believe to acquire another 10% customers who are referred by brand ambassadors and loyal customers (who are maybe their friends, colleague, relatives, etc).
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Base Case – Lululemon Customer Life Time Value Year 1 Year 2 Year 3
# Customers 400,000 180,000 90,000
Retention Rate 45% 50% Spending Rate $300 $354 $425
Total Revenue 120,000,000 63,720,000 38,250,000
Variable costs % 50% 45% 40%
Variable costs $ $60,000,000 $28,674,000 $15,300,000
Acquisition Costs ( $40) $16,000,000 0 0
Total Costs 76,000,000 28,674,000 15,300,000
Gross Profit $44,000,000 $35,046,000 $22,950,000 Discount Rate 1 1.16 1.36 Net Present Value Profit $44,000,000 $30,212,069 $16,875,000.00
Cumulative NPV Profit $44,000,000 $74,212,069 $91,087,069
LTV – Lifetime Value $110.00 $185.53 $227.72
Referral program -‐ Lululemon Customer Life Time Value Year 1 Year 2 Year 3
# Customers 400,000 400,000 220,000
Referral Rate 0 10% 15%
Referred Customers
0 40,000 33,000
Retention Rate 45% 50%
Retained Customer 400,000 180000 110000
Total Customer 400,000 220,000 143,000
Spending Rate $300 $354 $425
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Total Revenue 120,000,000 77,880,000 60,775,000
Variable costs % 50% 45% 40%
Variable costs $ $60,000,000 $35,046,000 $24,310,000
Acquisition Costs ( $40)
$16,000,000
0
0
Program Cost ($20)
800,000 660,000
Total Costs 76,000,000 800,000
24,970,000
Gross Profit $44,000,000 $42,034,000 $35,805,000
Discount Rate 1 1.16 1.36
Net Present Value Profit
$44,000,000 $36,236,207 $26,327,205.88
Cumulative NPV Profit $44,000,000 $80,236,207 $106,563,413
LTV – Lifetime Value $110.00 $200.59 $266.41
Year 1 Year 2 Year 3
New LTV $110 $200.59 $266.41
Original LT $110 $185.53 $227.72
Change in LTV 0 15.06 38.69
Potential net Profit or loss @ 400,000
0 6,024,000 15,476,000
From this table, we can see, acquiring new customers does not yield profit. Customers, in this case, become profitable only in the second and third years. This is typical. It is why money spent on increased retention has a higher payoff than money spent on acquisition. It is much more profitable to conduct the referral program which can yield the amount of 15.5 mil in the third years.
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Measurement, Testing and Evaluation
• Daily performance measurement report using Customer Relationship Management software tools (SAS Marketing Automation). This tool will specifically measure number of customers acquired, spending rates, and referral rates.
• Monthly LuluCard marketing team meeting to review our objectives. • Monthly promotion plan evaluation through AC Nielsen rating report • Online survey for every LuluCard members on their 3 months anniversary as a
member. Survey will focus on measuring customer satisfaction and customer engagement.
Capital Requirements
• Database tools will be empowered by IBM Power and Windows Server Cost for IBM Power and Windows Server:
Total First Year Database Software $50,000 $143,000
Hardware required (PC’s and server to host the database)
$20,000
Hardware Maintenance $5,000 System Administrators (Development Cost, Support, Back-up Staff)
$73.000
Second Year Hardware Maintenance $5,000 $78,000 System Administrators $73.000
Third Year Hardware Maintenance $5,000 $78,000 System Administrators $73.000
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Work cited list GAP. “Credit Card Rewards”. Web. 24 March 2014. < http://www.gap.com/customerService/info.do?cid=44651> Google Sites . "Competitive Advantage.". Web. 16 Apr. 2014. <https://sites.google.com/site/mngt255tina/managementenvironment/competitive- advantage> Interbrand. “Best Retail Brand 2013: Lululemon Athletica”. Web. 24 March 2014. <http://www.interbrand.com/en/BestRetailBrands/2013/LululemonAthletica> International Technology Group. “Management Brief.” Editorial. VALUE PROPOSITION FOR IBM POWER SYSTEMS AS DATABASE SERVER IN MIDSIZE COMPANIES (2008): 2. Print. Lululemon Athletica. “Community @ Lululemon”. Web. 24 March 2014. < http://www.lululemon.com/community/?mnid=mn;community> Lululemon Athletica. “Who Is Lululemon Athletica?”. Web. 24 March 2014. <http://www.lululemon.com/about/?mnid=mn;education;about-us> Lululemon Athletica. “Lululemon Athletica Inc. Announces Third Quarter Fiscal 2013 Results” Rep. VANCOUVER, British Colombia. Web. 16 Apr 2014. <http://files.shareholder.com/downloads/LULU/3024194148x0x713422/2481a4d 6-3ce2-4397- b2f908905ba88fd7/LULU_News_2013_12_12_General_Releases.pdf> Marketing Teacher Ltd. "SWOT Analysis Nike, Inc." Nike SWOT. n.d. Web. 14 Apr. 2014. < http://www.marketingteacher.com/swot/nike-swot.html> NASDAQ.com. "Lululemon athletica inc. (LULU) Forecast Earnings Growth." N.p., n.d. Web. 15 May 2014. <http://www.nasdaq.com/symbol/lulu/earnings-‐ growth>. Peppers, Don. “5 Best Practices for Loyalty Program”. Fast Company. 9 July 2012. Web. 1 April 2014. <http://www.fastcompany.com/1842195/5-best-practices-loyalty- programs> SAS. “SAS Marketing Automation”. Web. 24 March 2014. <http://www.sas.com/en_us/software/customer-intelligence/marketing- automation.html>
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Shaw, Hollie. “’We Get It,’ Lululemon says, as it pledges to win back customers after blunder-filled year”. Financial Post. 14 January 2014. Web. 28 March 2014. < http://business.financialpost.com/2014/01/14/lululemon-athletica-brand- blunders/> Statistics Canada. “Population, by province and territory, Canada, 2010”. 13 May 2013. Web. 24 March 2014. <http://www.statcan.gc.ca/pub/89503x/2010001/article/11475/tbl/tbl003- eng.htm> Statistics Canada. “Population, by age group, Canada, 2010”. 13 May 2013. Web. 24 March 2014. <http://www.statcan.gc.ca/pub/89-503-x/2010001/article/11475/tbl/tbl002- eng.htm> Tapper, Josh. "Yoga’s Evolution: From Basement Studios to Big Business”. Toronto Star." Web. 19 March 2013. Web. 16 Apr. 2014. <http://www.thestar.com/life/health_wellness/fitness/2013/03/19/yogas_evolution _from_basement_studios_to_big_business.html> Tucker, Erica. “Why Is Lululemon so successful?”. Global Toronto. 6 December 2012. Web. 28 March 2014. < http://globalnews.ca/news/316659/why-is-lululemon-so- successful/> WikiInvest. "Lululemon (LULU) Stock:/Bulls”. Web. 16 Apr. 2014 < http://www.wikinvest.com/stock/Lululemon_%28LULU%29/Bulls> Yoga in the Workplace. "Yoga in the Workplace." N.p., n.d. Web. 16 Apr. 2014. < http://www.yogaintheworkplace.ca/2005/01/statistics-canada-released- canadian.html>
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Appendix A
Appendix B Province Female (Thousands) Quebec 3,986.70 Ontario 6,700.30 Manitoba 620.3 Alberta 1,820.50 British Columbia 2,284.20 Total 15,412.00 Age 25 – 35 (13.6%) 2,096.03 Source: Statistics Canada
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Appendix C
Source: Euromonitor