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2. Strategic Planning
for Fashion Marketing
Dr Patsy Perry
Lecturer in Fashion Marketing
School of Materials
The University of Manchester
Manchester, UK
Lecture Aim
To understand the strategic planning process
for fashion marketing
To understand 4 strategic planning models
and their application to strategic planning for
fashion marketing
Porter’s 5 Forces, PEST, SWOT, Ansoff’s Matrix
To understand the process for identifying
strategic options
Porter’s Generic Strategies, STP
The strategic planning process
Where are we now?
Porter’s 5 Forces, PEST, SWOT, Ansoff’s Matrix, competitor and customer analysis
Where do we want to be?
Porter’s Generic Strategies
Segmentation, Targeting & Positioning (STP)
How might we get there?
Marketing mix – the 7 Ps
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Porter (1980)
Rivalry amongst existing firms
To pursue competitive advantage:
Raise or lower prices (temporary advantage only)
Product differentiation – improving features, innovation in manufacturing process
Creatively using channels of distribution – VI or non-traditional channels e.g. supermarkets
Exploiting relationships with suppliers e.g. CSR & sustainability focus
Supplier Power
Industry is dominated by large numbers of
small firms which are fragmented and
have little market power
Many competitive global suppliers
Standardised products
Low cost of switching suppliers
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Buyer power
Industry is dominated by fewer numbers of
powerful retailers with large market share
e.g. Walmart, Arcadia, M&S, Primark
Some buyers demand exclusivity of supply
Suppliers tend to have one or few
customers
Threat of New Entrants
Low barriers to entry on supplier side
Commoditisation of garment manufacture
process: low start-up costs, low technology
and relatively low skills required
Readily available pools of cheap labour
Removal of international trade barriers
Threat of Substitutes
In Porter’s model, this refers to substitutes in
other industries
Competition for consumer disposable income from
leisure goods & services e.g. communications
technology, audiovisual/electrical & computer
equipment, travel, eating out etc.
Consumer spend on apparel (proportion of disposable
income) has decreased steadily over the years
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PEST Analysis
Analysis of external macro-environment in
which the firm operates
Political / legal
Economic / financial
Social / cultural
Technological
Political / legal
Tax policy
Employment laws
Environmental regulations
Trade restrictions and tariffs
Political stability
Economic / financial
Economic growth / slowdown
Interest rates
Exchange rates
Inflation rates
Employment rates
Consumer credit
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Social / cultural
Population growth rate
Age distribution (disposable income)
Role of clothing
Lifestyle changes
CSR / environmental concerns
Technological
Trends in fibres and fabrics e.g. smart
sportswear fabrics, eco-friendly fibres,
easy-care fabrics, wearable technology
Body scanning technology
Application of IT in supply chain e.g.
CAD/CAM, global SCM, collaboration,
VMI, CFPR
Web 2.0 / E-commerce / Digital marketing
SWOT Analysis
Analysis of internal and external micro-environmental factors
Strengths
Weaknesses
Opportunities
Threats
To enable firm to match its resources & capabilities to the competitive environment in which it operates
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Strengths
Strong brand name & reputation
Well-established structured industry: low
barriers to entry
Growth of e-commerce
Supply chain management (SCM):
Long-term mutually beneficial trading
relationships
Harnessing IT for more effective SCM
Weaknesses
Low margins
Labour-intensive not knowledge-based
Poor ethical reputation
Low barriers to entry
High level of competition
High degree of buyer concentration & power
Long and geographically complex supply
chain
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Opportunities
Removal of international trade barriers
Technological progress e.g. fibres, online
retail, digital marketing
Increasing disposable income in newly
industrialising countries e.g. Brazil, India,
China, Russia and potential for
international expansion
Unfulfilled consumer desires…?
Threats
Increased social and environmental
pressures
Dwindling share of consumer disposable
income – shifts in consumer tastes
Economic slowdown
Ansoff’s Matrix
Ansoff’s Matrix is used for planning and
analysis of alternatives for business growth
Considers these alternatives:
Selling existing products to existing markets
Extending existing products to new markets
Developing new products for existing markets
Developing new products for new markets
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Ansoff’s Matrix
Manipulation of products and markets
MARKET
PENETRATION
PRODUCT
DEVELOPMENT
MARKET
DEVELOPMENT
DIVERSIFICATION
New
Mark
ets
Exis
ting
Mark
ets
Existing Products New Products
Strategy 1 - Market Penetration
Focus on existing products & markets
Advertising promotions
Sales promotions
Discounting prices
2-for-1; BOGOF; etc
Aim to develop consumption of current products within current markets
Market Penetration
Market Penetration
Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion
Secure dominance of growth markets e.g. value sector
Restructure a mature market by driving out competitors – would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors
Increase usage by existing customers – for example by introducing loyalty schemes
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Strategy 1 - Market Penetration
Focus on developing, profiling and meeting the needs of new market segments with existing products
Extend offer to new regions / demographics
Promote existing products to new users
Chanel (single brand) vs. Armani (6 brands)
Aim to make new consumers buy existing products and services
Market Development
Market Development
New geographical markets
New product dimensions or packaging e.g.
plus-size or petite range
New distribution channels
Different pricing policies to attract different
customers or create new market segments
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Focus on introducing new products to existing markets
New product launches
New variations
Product line extension
Aim to make existing consumers spend more by developing new products they want
M&S Per Una ‘memory’ jersey collection
Uniqlo ‘heat-tech’
Joe’s Jeans
Product Development
Product Development
This strategy may require the development
of new competencies or strategic alliances
The business develops modified products
which can appeal to existing markets e.g.
accessories or cosmetics
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Strategy 1 - Market Penetration
Focus on changing everything to profit from developing new products, markets, brands
Acquiring new businesses
Entering co-operative alliances
Launching complimentary services
Aim to attract customers by offering products or services which will provide revenue for the business
Diversification
Diversification
The riskiest strategy - the business is
moving into markets in which it has little or
no experience or skill
But possibility of high rate of return for
higher level of risk..?
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Caterpillar industrial products
Caterpillar industrial products
Caterpillar clothing
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References
Posner (2011) Marketing Fashion, Laurence King, UK
Porter (1980) Competitive Strategy
Porter (2008) ‘The five competitive forces that shape
strategy’, Harvard Business Review, 86 (1), 78-93
Ansoff (1957) ‘Strategies for business diversification’,
Harvard Business Review, 25 (5), 113-124
Porter’s Generic Strategies (1980)
Cost Leadership
Key features:
Highly efficient processes/manufacturing
Low cost distribution
Low-cost built into the product/service design
Risks:
Technological change – so you get left behind
Imitators – other companies try to copy you
Cost focus may hide the need for product/
service changes
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Differentiation
Based on:
Design, Brand image, Technology, Service
Key features
Strong marketing
Willingness to invest
Clear definition of the service level
Risks
May become insufficient to support price
differential e.g. Mulberry reduced bag prices
Imitation – others try to copy you
Focus
Based on niche marketing i.e. application of
either cost or differentiation in selected sub-
market segment(s)
Risks
Imitation
Cost advantages of broad range competitors
eliminate advantages of narrow focus approach
Product differences narrow
Market share becomes too small
Exercise
Place a selection of fashion brands
(including local and international brands)
onto Porter’s Generic Strategies Matrix
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Segmentation, targeting &
positioning (STP)
It is impossible to create a marketing mix that satisfies the particular requirements of every single customer
Enables creation of a differential advantage to differentiate from competition and also across segments
Markets are rarely static – emergence of new profitable segments e.g. success of Next built on identification of
new UK market segment during 1980s – young professionals who wanted smart fashionable clothing at affordable prices
Burberry segmentation model (Moore & Birtwistle, 2004)
How can we segment markets? Geographic
Urban/rural, city/suburb, climate/temperature e.g. rainfall, sunshine levels
Demographic
Age, gender, size, marital status, education, socioeconomic status, life cycle stage, income & occupation, ethnicity
Geodemographic
Combination of geographic and demographic factors
Psychographic
Lifestyle – activities, interests, opinions, personality – introvert/ extrovert, youth subculture, generational cohort – Baby Boomers, Generation X, Generation Y
Behavioural – purchase behaviour e.g. benefits sought, purchase occasion/usage situation, usage rate, perceptions and beliefs, brand loyalty, price sensitivity
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http://fashionwows.com/blog/2014/02/05/street-style-japan/
Generational cohorts Baby Boomers – born after 2nd World War
By the sheer force of its numbers, they were a demographic bulge which remodeled society as they passed through it – they were the world’s first teenagers – they experienced popular culture and lived through Beatlemania, Woodstock, Vietnam anti-war protest, birth of rock ‘n’ roll, Motown, JFK assassination, Martin Luther King, Stonewall riots, social experimentation, sexual and drug experimentation, feminist movement, abortion, rejection of traditional values up til that point.
Generation X
Born between ~ 1961 and 1981, they are now in their 40s. Growing up in an historical span of relative geopolitical peace for the US, this generation saw the inception of the home computer, the rise of videogames, and the Internet as a tool for social and commercial purposes. Other attributes identified with this demographic are Dot-com businesses, Desert Storm, 80's rock, Heavy Metal, grunge and hip hop culture and punk rock bands. Age blur, again they have lived through popular culture, some now staying in a state of adolescence, hold great wealth.
Generation Y
Born between ~ 1977 and 1994, the ‘net generation’ grew up amid economic abundance and have been ‘wired’ almost since birth. Sense of entitlement from growing up during boom years and being pampered by their Baby Boomer parents. Selective, confident and impatient, they get what they want when they want it – often using credit cards. Marketing savvy so overt branding practices and hard sell marketing approaches do not work!
Generational cohorts
Greatest Generation (1901-24)
Silent Generation (1925-45)
Baby Boomers (1946-64)
Generation X (1965-76)
Millennials/Gen Y (1977-95)
Younger Millennials (18-27)
Older Millennials (28-36)
Generation Z (1995-Present)
http://www.nielsen.com/us/en/insights/reports/2014/millennials-breaking-the-myths.html
(USA)
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Understanding your target
customer – things to think about: Who is your customer?
male or female
age
occupation/profession
income range – level of disposable income?
marital status, number of dependants – how does this affect disposable income?
where do they live? Urban or rural?
hobbies, holidays, travel
do they go to clubs, bars, restaurants, theatre, cinema, gigs or other events?
car?
life stage? Have they grown out of any clothes styles?
Shopping behaviour where, when & how often do they shop? Level of spend?
what do they buy? Brand driven or functionality driven? Looking for fast fashion or investment pieces, or something in between?
do they read fashion magazines? Are they trend setters / trend followers? (Rogers’ diffusion of innovation)
ethical/eco fashion?
Anything else??
Consumer profiling
(Masson et al, 2007)
Target segments with surplus income
YUPPIES
Young
upwardly
mobile
professionals
DINKIES
Dual income,
no kids
WHOPS
Wealthy,
healthy
old people
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Strategies for targeting segments
(using the 7 P’s)
Undifferentiated marketing – one marketing mix for the whole market
Differentiated marketing – individual marketing mix for each segment
Concentrated marketing – focusing on one segment with a particular marketing mix
Customised marketing – targeting individual customer with particular marketing mix
Marketing Mix A
Target A
Target B
Target C
Target A
Target B
Target C
Marketing Mix A
Marketing Mix A
Basic Positioning Strategies
Hooley et al, 1998:
Low price
Premium quality
Rapid innovation
Superior service
Differentiated benefits
Tailored offering
Influences on positioning
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Repositioning a brand:
Burberry “Burberry, a British firm that makes pricey
raincoats, got a fright a few years ago when its
distinctive brown checks became associated
with “chavs” – a white working-class group at
whom snobs poke cruel fun. (For example:
What do you call a chav in a suit? The
defendant). It protected its brand by making
those checks quieter and costlier, and boosted
its sales by expanding into China, where no
one tells chav jokes. Its global sales were up by
27% for the year to March 31st 2011, to £1.5
billion ($2.3 billion)” (The Economist, 2011, http://www.economist.com/node/21530989)
Positioning / perceptual maps
2 dimensions e.g. price/quality, price/design
High price
Fashionable
design
Low price
Unfashionable
design
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Activity
Firstly, map the Chinese fashion retail
market onto a strategic positioning map
(price/design or price/quality)
Secondly, pick one retailer and draw up a
target consumer profile
References
Porter (1980) Competitive Strategy, Free Press
Moore & Birtwistle (2004) ‘The Burberry business model: creating an international luxury fashion brand’, International Journal of Retail & Distribution Management, 32 (8), 412-422
Quinn et al (2007) ‘Making sense of market segmentation: a fashion retailing case’, European Journal of Marketing, 41 (5/6), 439-465
Masson et al (2007) ‘Managing complexity in agile global fashion industry supply chains’, International Journal of Logistics Management, 18 (2), 238-254
Newman & Patel (2004) ‘The marketing directions of two fashion retailers’, European Journal of Marketing, 38 (7), 770-789
Hooley et al (1998) ‘Competitive positioning and the resource-based view of the firm’, Journal of Strategic Marketing, 6 (2), 97-115