Market Orientation as a Branding Strategy
Charina Montemar Hägglund
Supervisor: Olivia Kang
Bachelor’s Thesis – Företagsekonomi C
Autumn Semester 2007
Department of Business Studies
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The exposure of the group of brands using advertising (Benetton, MANGO and Topshop) will be compared to the brand using market orientation (Zara). The fashion ...
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Market Orientation as a Branding Strategy
Charina Montemar H‰gglund
Supervisor: Olivia Kang
Bachelorís Thesis ñ Fˆretagsekonomi C
Autumn Semester 2007
Department of Business Studies
ABSTRACT
This paper studied the impact of market orientation strategy on brand awareness. Zara, a Spanish leading fashion retailer and an example of a brand using the above mentioned strat- egy, is being compared with three other multinational brands operating in Stockholm, Swe- den, namely; Topshop, Mango and United Colours of Benetton. The latter brands are known to be using advertisement to create brand awareness.
Fashion magazineís attention were used as a measure of brand awareness. Data on the brand awareness were gathered by browsing three leading Swedish fashion magazines - Elle, Glam- our and Damernas V‰rld - and the fashion section of the biggest Swedish tabloid, Aftonbladet.
It was found out that market orientation can compete with advertising as a marketing strategy to create brand awareness, but only in some parts of the market segment. This was concluded from the fact that Zara was featured in some of the magazines, but not all of them.
TABLE OF CONTENTS
- INTRODUCTION
- THEORETICAL FRAMEWORK
- BRAND AWARENESS
- FASHION JOURNALISM / MEDIA........................................................................................................
- ADVERTISING
- MARKET ORIENTATION STRATEGY
- C USTOMER F OCUS
- C OMPETITOR F OCUS
- I NTERFUNCTIONAL C OORDINATION
- M ARKET ORIENTATION AND BRANDING
- MODEL
- METHODOLOGY
- MARKET ORIENTATION STRATEGY
- Z ARA
- ADVERTISING STRATEGY
- B ENETTON
- MANGO
- T OPSHOP
- METHOD
- F ASHION M EDIA
- D ATA GATHERING
- ANALYSIS OF DATA..................................................................................................................................
- DIFFERENT TYPES OF MEDIA...........................................................................................................
- DIFFERENT TYPES OF EXPOSURE
- ADVERTISEMENTS.............................................................................................................................
- CONCLUSIONS...........................................................................................................................................
- SUGGESTIONS FOR FURTHER RESEARCH
- LIST OF REFERENCES
- APPENDICES...............................................................................................................................................
INTRODUCTION
The fashion industry has evolved noticeably over the past few decades. Fashion products that used to be luxury items are now considered as basic commodity products and bought by al- most all segments of the society. 1 Factors that may contribute to this growing demand for fashion products is the continuous low prices that may be brought about by an increasing number of target markets^2 and transferring the production sites to developing countries.
Due to the booming numbers of customers, more and more stores sell fashion items, leading to stiffer competition. Consumers are also more conscious of fashion trends. Furthermore, they are not only conscious of the style but also the quality and the price attached to it. Be- cause of these factors, it is getting harder and more difficult for the sectors involved in fash- ion to stand out in the industry. Nowadays, it is very vital to create value for a product by using successfully proven marketing tools.
Moreover, it is now also equally important for the customer to recognize the existence and availability of a companyís product or service. This is called brand awareness. Creating brand awareness is one of the key steps in promoting a product. The product that promotes the high- est brand awareness compared to its competitors usually get the highest sales. 3
Advertising is one of the basic ways of promoting a brand. Many companies spend millions in advertisement just to introduce a new product or even to remain competitive in the business industry. In fact, it is the primary way of communicating a new product/brand/concept in the market. United Colours of Benetton, MANGO & Topshop are the few examples of fashion retailers which focus a lot on advertising.
This paper will also cite one marketing strategy that can be an alternative to advertising. It is the market orientation strategy , popularly used by leading fashion retailer Zara (Inditex).
(^1) Mazaira, Gonz·lez & AvendaÒo (2003)
(^2) Ibid.
(^3) Brand Awareness n.d.
THEORETICAL FRAMEWORK
BRAND AWARENESS
“A product is something that is made in a factory; a brand is something that is bought by a customer. A product can be copied by a competitor; a brand is unique. A product can be quickly outdated; a successful brand is timeless.”^7
There are so many definitions of a successful brand. According to the book ìBrands Tailored for Retailersî, a successful brand is ìan identifiable product, service, place or relationship, augmented through brand processes in such a way that the brand buyer or user perceives rele- vant, unique, sustainable added values from or together with the brand supplier and seller that match their needs most closelyî.
All the above mentioned concepts emphasize on the uniqueness of the brand. This is very important in able to build a brand different from all the others, a brand that can be an asset of the company. A strong unique brand is an asset that needs to be taken cared of otherwise it will depreciate or totally decline. This constant brand evaluation should be done by the com- pany to maintain the status of the brand in the market. To understand more, a company should know the four levels connected to the brand.
The above book mentioned the four levels of the brand, connected to the needs of the cus- tomer, namely; the generic, expected, augmented and potential levels. The generic level is the part of the brand that meets the customerís basic needs and the expected level consists of the minimum level of product and service conditions customers expect when they buy that spe- cific brand. The augmented level of a brand is a further development of value added that aims to satisfy both the non-functional (can be emotional) and functional needs. The functional part of the brand is what the product or service actually does (features, performance and quality) and the emotional value is the psychological component in relation to the brand userís mo- tives, situation, role needs met by the product or service (e.g. reliability, empathy and respon-
(^7) Ossiansson (2004, pp. 67-68)
siveness from employees). This level can be expanded further by the potential level by also focusing on innovation. 8
Then, it is also equally important that the brand will be known by its target market. Branding a product is useless unless the prospect customer recognizes it. The mass public should be aware that a certain brand exists offering certain type of products. This is called brand aware- ness.
What is brand awareness? Brand awareness can be defined in the following ways: 9
- Getting the brandís name into the target audiences' minds (building momentum)
- Remaining in oneís target audiences' minds ( sustaining momentum)
- Getting people to talk about the brand, consistently (and in a positive light)
- Building brandís credibility... through positioning the brand itself as one of the bests in the industry
- Creating an automatic association between a brand and its services/products
- Creating an image that the target audience will find appealing and engaging
Building brand awareness in the minds of the public is not an easy task to do. Some compa- nies have to stay in the business for quite awhile just to establish its brand name, while others use the marketing communicationsí tools such as advertising and public relations to introduce its brand to the target market. Brand communication can also be projected via mass media attention. Media attention can be exposure in magazines or newspaper, which will be the fo- cus of this study. It is also vital to understand why we choose exposure of fashion brands/products in fashion magazines/tabloid in order to measure brand awareness.
FASHION JOURNALISM / MEDIA
Media as expressed through fashion journalism is not new these days. People of different ages buy fashion magazines / gazettes just to be up to date of the latest trends or just for pure enter- tainment. Lately, itís not only the women who read fashion segments in a magazine or tabloid / newspaper, but men do too. As Susanne Janssen has stated in her paper ìFashion Reporting
(^8) Ossiansson (2004, p. 69)
(^9) The New Age of Brand Awareness ( 2005, ß 1)
Advertising is a message paid by a specific sponsor and released through some medium of mass communication. It is a persuasive way of communication, not neutral, not unbiased and says; ìI am going to sell you a product or an ideaî. 11 Advertising is only one of several mar- keting communication options available to the company.
J. T. Russel et al. (1996) mentioned it is often is difficult to determine why a company chooses to advertise at a particular level. However, there are a number of situations that usu- ally dictate a higher proportion of advertising to sales than might otherwise be the case:
- To introduce or promote a new product or service.
- To be always competitive.
- To maintain a top position in the industry.
- To put emphasis on a new price.
- To keep up with a fast-growing industry.
Moreover, advertisingís primary role is concerned with building brand awareness and prefer- ence ñ both of which are communication functions. 12 As noticed from the above enumera- tions, advertising is a basic tool to promote a product holding a certain brand name, carrying a certain price in order to compete with other products available in the market. Russel Colley (as stated in De Fleur & Dennis 1998) claims in another book that if advertising is successful, it results to closed sales, and to do that it must carry consumers through the four levels of un- derstanding: (1) awareness of a brand or company, (2) comprehension of the product and what it will do for them, (3) a conviction that they should buy the product, and (4) action - that is, buying the product.^13
Furthermore, one of the vital things that advertising does is offering high and better quality products to the consumers. Here, branding comes in. Branding is very important in order that the customer can identify the productís manufacturer and thereby, buyers tend to associate the quality of the product with a certain brand. On the other hand, advertising helps the con-
(^11) Russel & Lane (1996, p. 32)
(^12) Russel & Lane (1996, pp. 31-32)
(^13) DeFleur & Dennis (1998, p.326)
sumers in the decision to choose from the wide array of brands / products available in the market. ìWithout advertising, businesses would not be able to bring new products to the at- tention of enough consumers fast enough to make the enormous cost of creating, developing, manufacturing and distributing these products a rational business decisionî. 14 And without branding, itís is difficult to choose from many same and analogous products available in the market. This study will measure the ability of a branding strategy based on advertising to make fashion journalists recognize and choose the advertised brand.
MARKET ORIENTATION STRATEGY
The main interest in this thesis is to know if market orientation succeeds in getting brand awareness without using advertising. According to articles about one of our subjects, Zara, this strategy is widely used by the said brand, and the brand owner Inditex proudly declared that it hardly used advertising to sustain competitive advantage in the fashion industry. 15
Satisfying a customer has been one of the basic objectives of a business. According to A. Ma- zaira et al (2003) quoting Drucker (1954) in his paper, this market orientation strategy which originated in marketing orientation (developed in the 1950ís), has also the same basic aim. The customers are the main focus of the business in order to attain competitive advantage and projected profitability.
But market orientation is broader than marketing orientation because the former is inter- functional and requires coordination of the culture and behaviour of the whole organization. 16 In market orientation, it is not the sole responsibility of the marketing department to accom- plish a marketing goal, but the company as a whole. Every part of the unit has its role in the fulfilment of the organizationís main objective which is the satisfaction of the customer.
Kohli and Jaworski (1990, p. 3) further discussed that market orientation entails (1) one or more departments engaged in activities geared toward developing of understanding of cus- tomersí current and future needs and the factors affecting them (2) sharing of this understand-
(^14) Rusell & Lane (1996, pp. 37-38)
(^15) Mazaira, Gonzalez & AvendaÒo (2003) (^16) Ibid.
factors (e.g. competition and regulation) that affect customersí needs and preferences and (2) current as well future needs of the customers. 22 The said concept only means that market- oriented business should understand not only its direct customers, but also the chain involved in the customersí business. In short, it should know the cost and revenue dynamics not only of its immediate target buyers but also of all markets beyond, for demand in the immediate and ìupstreamî markets is derived from the demand in the original ìdownstreamî markets. 23
Businesses that have implemented this kind of strategy are always on the endless studies for upcoming ways to satisfy their customerís wants and needs and this can include the service that they can offer before and after sales. Because of this reason, collaboration between the top management and its subordinates is very important. Managers and employees should work as a team in order to maintain superior customer value. Employees play a vital role in this concept, so the company should be paying more attention when they hire their staffs. Regular training is also important to retain the best people in the company. 24
Competitor Focus
Focusing on competitors might not be equally important as customer focus, but as mentioned above, to understand more the behaviour of a customer, one should look through the other factors surrounding the latter. It is vital to consider who are the competitors, what marketing approaches they use, how effective are their products and services and at what prices they are offered. Competitors should be studied upon whether they can be perceived as alternate sup- pliers by the customers. Using target rivals as a frame of reference, competitor-focused firms try to identify their strengths and weaknesses to keep pace or stay ahead of them. 25 Constant variations of the competitorsí strategic policies may occur so close monitoring of the latter is important in order to understand more their capabilities. 26 In this way, the company is always
(^22) Kohli and Jowarski (1990, p. 4)
(^23) (Slater & Narver, 1994, p. 22).
(^24) Slater & Narver (1994)
(^25) Ibid.
(^26) Heiens 2000
ready and flexible to respond for further improvements of its products and thus maintaining its brandís position in the market.
Heiens (2000, p. 2) also stated in his article that ìwhen market demand is predictable, the competitive structure is concentrated and stable and there are few powerful customers, the emphasis on competitors is more important. Moreover, the lesser the degree of competitive hostility, the greater the positive impact of competitor emphasis on performanceî.
To add, in market-driven businesses, continuous meetings among employees and management discussing about their competitors are needed. Supervisors should frequently discuss competi- torís strengths and weaknesses as a guide for future actions. The competitorís weaknesses are often used to obtain more competitive advantage. In some cases, they keep competitors from developing an advantage by responding rapidly or anticipating their actions. 27 An example of this is the launching of ìonline Zara Homeî in many countries including Sweden this October, before H&M has launched its H&M Home division.
Interfunctional Coordination
Being the last component of market orientation strategy, this involves ìthe coordination of the personnel and other resources from throughout the company to create value for the buyersî according to Slater and Narver (1994, p. 23). The role of every unit in the organization must be clearly defined and every employee, regardless of its position must recognize his role in order to help the company achieve its objective. 28
Due to the above, market orientation simplifies the focus and vision of an organisationís strat- egy. 29 It provides a unifying focus for the efforts and projects of individuals and departments within the organisation. It also provides psychological and social benefits to the employees. The latter can then develop a sense of pride in belonging to an organisation in which all de- partments and individuals work toward the common goal of serving customers. The latter authors further add; that responsiveness is important to make this market orientation concept to work out.
(^27) Slater & Narver (1994, p. 23)
(^28) Ibid. (^29) Kohli & Jaworski (1990)
This model shows how the effects of advertising and market orientation strategy can be com- pared in relation to the level of media attention that the brand gets, which impliedly connotes brand awareness. The representatives of brands using market orientation or advertising that we have chosen are approximately equally big and successful, and targeting the same group of customers. According to our hypotheses, these brands should get the same levels of media attention.
METHODOLOGY
In order to investigate the branding aspects of market orientation, we will use Zara as case object and United Colours of Benetton, Mango and Topshop as objects for advertised brands.
MARKET ORIENTATION STRATEGY
Zara
Inditex, or Industria de DiseÒo Textil, and its eight subsidiaries is an international fashion line that focuses on the design, manufacture and sale of clothes, footwear and accessories for both men, women and children including cosmetics and leather goods. The flagship brand of In- ditex is Zara, and the remaining seven brands are Pull and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Kiddy's Class / Skhuaban. Zara Home which is the latest wing included in the Inditex group which caters to home furnishings specializing in textiles, glassware, cutlery, tableware and decorative items. 30
(^30) Inditex n.d., Concepts
Advertising
Market orientation Level of media attention
Level of brand awareness
The primary brand, Zara, offers the latest trends in international fashion and distributes menís, womenís and childrenís clothes tagged at medium to low prices, with quality being medium to high. At present, Inditex has a total of 3.674 stores located in 68 countries. 31 Out of these, Zara is present in 1129 stores including Sweden. 32 They opened their first store in Stock- holm in 2003. 33 There are eight Zara branches located in Sweden; four in Stockholm, two in Gothenburg, one in Sundsvall and one in Malmˆ.
Zara has gained attention in business academia for its successful implementation of market orientation. The market orientation is the strategy of creating customer value by a focusing on the customer throughout the vertical organization of the company. The whole business model of Inditex is characterised by a high degree of vertical integration and very short lead times.
The company states that it hardly uses advertising. It just spends 0.3% of its revenues to ad- vertising and marketing. This is significantly less compared to the industryís average of 3-4%. Instead of spending on advertising, Zara positions itself in primary locations, invests more on store layouts and shortens its lead time. All its stores are also located in prime locations in big city districts. 34 The average store size is 1,376 square meters and make-over of old stores are done every 3-4 years. 35
Moreover, Zaraís drawing power focuses on creating artificial scarcity of its products and fast response to fashion trends. The company produces fewer quantities for a certain design. 36 They manufacture instead clothes of different designs, the latter average 12,000 pieces annu- ally^37. Productsí lead time is the shortest in the industry which averages only to 15 days. 38 The stores are also replenished two times a week to create constant freshness of its ambiance. Customers will be forced to buy the product directly when they visit the store and not delay it
(^31) Inditex. n.d., Our Group (^32) Inditex, n.d., Stores Around the World (^33) Nilsson & Carlsvi (2004)
(^34) Zaraís Business Model, Information and Communication Technologies, and Competitive Analysis:, n.d.
(^35) Ghemawat, & Nueno (2003)
(^36) Dutta (2003)
(^37) Zaraís Business Model, Information and Communication Technologies, and Competitive Analysis:, n.d (^38) Dutta (2003)
ADVERTISING STRATEGY
The brands to be compared to Zara to are United Colours of Benetton, MANGO and Topshop. These were chosen for being comparable to Zara in various ways, and using a marketing strategy different to Zaraís. These brands focus more on advertising among others to get brand awareness.
Benetton
First, United Colours of Benetton was chosen because it has a relative small number of stores in Stockholm ñ three, comparable to Zaraís four ñ while being a large multinational brand. 45 Benetton is also well-known for its lavish advertisements, which on occasion has been inten- tionally shocking to draw attention to the brand. 46 Finally, Benetton produces garments for a target group similar to Zaraís, so that they can compete for the same slot in the fashion re- portages.
Today, the Benetton Group is present in 120 countries around the world, quite more expanded than that of Zaraís. Its garments usually cater to kids and adults who just love to experiment the different shades of fashion. Its core business is being represented with a group whose strong Italian character in style, quality and passion are clearly seen in its brands, the casual United Colors of Benetton , fashion oriented Sisley , Playlife leisurewear and Killer Loop streetwear. To add, the Group produces around 150 million garments every year. Its retail network of 5,000 contemporary stores around the world, offers high quality customer services and generates a total turnover of over Ä 1.9 billion. 47
MANGO
MANGO has a history comparable to Zaraís, being a Spanish company with approximately the same number of stores in the same number of countries worldwide, and a recent history of great success ñ the first MANGO store opened in 1984.^48
(^45) United Colours of Benetton n.d. , Overview , ß
(^46) Website of Marknadsetiska RÂdet n.d.
(^47) United Colours of Benettonís n.d., Overview,ß
(^48) MANGO n.d., Economic dossier
It is a prestigious multinational company dedicated to the design, manufacturing and market- ing of garments and accessories for women. It has over 6,500 employees, and have more than 1,000 stores in 89 countries located on the five continents. 49
Like Zara, all the MANGO stores are located in prime locations, whether in the main shop- ping centers or in premises located in city squares. Stores are of a sufficient size to display its collections. The products of MANGO are quite similar to Zaraís in style, pricing and quality. However, MANGO is very different from Zara in organisational strategy as MANGO is based on a franchising system, and in marketing strategy, relying heavily on advertising campaigns; one example is the autumn/winter 2007 collection with international movie star PenÈlope Cruz as the model. There is only one MANGO store in Stockholm.
Topshop
Topshop is also comparable to Zara because of its size in Stockholm and its target market. Although not of same international magnitude as Benetton and MANGO, Topshop operates in 28 countries. There are two Topshop stores in Stockholm, of which one is notable for being the biggest Topshop flagship store outside UK. 50
On the British high street, Topshop is known to be the fashion destination. It sells an average of 30 pairs of knickers a minute, 6,000 pairs of jeans a day and 35,000 pairs of shoes every week; thereby it is considered as one of the promising brands of today. Offering purse- friendly prices with its trendy style, Topshop attracts women from teens to the 40s who are fashion conscious. 51
Topshop showed its in-house design collection Unique (created in 2001) as part of the official London Fashion Week schedule in September 2005 and subsequently forged exclusive part- nerships with international boutiques Opening Ceremony in New York, Colette in Paris and Tokyo's 10 Corso Como Comme des Garcons. Last summer 2006, Barneys in the US started
(^49) MANGO n.d., Behind the brand , ß1,2,
(^50) SO UK n.d., Topshop
(^51) Topshop n.d., About Topshop , ß.