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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