Market Orientation
The company’s market is highly
orientated. This is based on several factors that can be derived from the case
study. Among the issues that can be used to make this conclusion is the
decision making perspective, culturally based behavioral perspective and
strategic perspective. H&M is more concerned with its consumers as opposed
to the products being delivered. Consumer orientation is more vivid all
through. This is based on how the needs and wants of consumers are expressed
and met by the organization. An example in the case can be based on the extent
that the organization is willing to go so as to meet the needs of the
consumers. They have embraced the notion that design is a dynamic trend that
must be looked into time and again.
The company has gone ahead to employ designers from Netherlands, Britain, USA, South Africa and Sweden. This is an indication that they want to broaden the scope and bring as much as possible. The average age of the designers is 30 years. At this age, they are more conversant with new trends based on the people that they interact with. Their sources of design are also an indication of how devoted they are to their consumers. Many companies in this industry use fashion shows as their major outsource for designs (Paul & Kapoor, 2008). H&M has gone beyond this in order to determine exactly what consumers want in their marketing strategy. They get most of their designs from the streets based on what people are wearing at that moment. They tend to introduce a design from one region to another. There are also observations of what other companies are producing. H&M picks the designs and tries to modify them in a way that will attract more clients to their business.
Another aspect that can be used to
support this view from the case is the level of competitor orientation. The
company has established the need to create a competitive advantage as a key
component in its business operation. To keep with intense competition, the
company is using the pricing strategy as its tool. In this industry is believed
that combining fashion and price does not work as a favorable business model.
Companies like Benetton tried this model and failed. However, the model is working
for H&M due to various reasons. They try and acquire cheap materials
possible to be used in the production process. Despite the materials being
cheap, they have the ability of bringing the desired designs. Moreover, when
fashion and design involved tastes and preferences change all the time. The
company is aware of this and knows that their clothes will consumer for the
desired time before they are worn out. Along with buying cheaply, the company
ensures that it keeps its overheads exceptionally low. This way they are able
to attract more consumers. The more the consumers, the higher the sales
revenues (Fricke, 2007). A good example in the case is whereby most consumers
are not willing to spend 600 pounds corduroy trench coat. H&M makes a coat
of similar design and is willing to take it to the market for 32 pounds. By
offering this price, there is a profit made.
Responsiveness is another aspect
that can be used to show the extent of market orientation in the company. After
observation, the company noted that the industry is highly segmented. The level
of segmentation that was more vivid arouse from economic differences. H&M
seems to target more of the younger generation. Companies like GAP have been
affected due to lack of embracing this ideology. Most of the young generations
are in school. Providing them with affordable products will enhance their
loyalty at all times (Fricke, 2007). A good example is Sabrina Farhi 22, who
claims that everything offered by the company is nice and cheap. It becomes easy
to lock such a customer on the company’s radar.
Market Segmentation
The company’s market is highly
segmented. Its segmentation is based more on profiler, as opposed to consumer
needs. Under the profiler aspect, the bases of segmentation used are demographic,
psychographic and behavioral. Under the demographic basis, sex, age and family
have been the target definitions. When it comes to sex, the market is divided
into male and female. Based on the observations made by the company, men are
viewed to be less fashion-conscious compared to women. This aspect is more
dominant in the American market. This means that clothes targeted for women
consumption must be up to date with the current fashion trends. Failure to
implement this would lead to loss of a substantial market niche. For men, there
is no need of being more concern about the fashion trends. Being efficient in
production and resource allocation would be favorable for the organization.
This is because men are only after clothes that are decent and worry less on
the fashion attributes. Family on its part has led the company to producing
casual basic outfits. This makes it more appealing for family shopping. It can
create a wider market since when one individual is shopping; he or she will
include clothes for other members of the family (McDonald, 2012). As a result,
the clothes involved for this segment must be appealing to all family members.
Psychographic basis on the other
hand, is more concerned with lifestyle and personality aspects. Some people
want to get involved with some clothing trends due to their attachment with a
certain social class. H&M has been able to bring this to their consumers at
a relatively cheaper price compared to what other companies are offering out
there. It becomes difficult to identify the true worth of these clothes because
the designs are similar and it is only the material that differs. Behavioral
aspects on the other hand, are concerned with brand loyalty. The main target
group here is the younger generation. This focuses more on the individuals in
school. Producing cheaper and fashion trending clothes will attract a huge
market share from this group. This is because money is limited resource to them
but at the same time they want to be at par with the current fashion.
Benefits of Segmentation
Market segmentation enhances
competitiveness in an organization. This
is because segmentation comes along with increased focus on a certain group in
the market. There is a creation of a better understanding of what this unique
segment requires. Better understanding of consumers results to delivering of
effective value positioning. In the long-run, it entices customers to the
relevant brand. This only happens when the company is aware of whom they are
trying to reach (McDonalds, 2012).
Segmentation also enables an
organization to select the most appropriate media for advertising. Most of the
people in a given segment have similar tastes and preference on most areas.
This means that it would be easy to reach them within a short period. Funds
involved here will be minimal since it s not a trial and error basis. The most
suitable media is established based on the behavioral attributes.
Customer retention is also enhanced
through segmentation. This is enhanced
through the life cycle of a customer. Once people are pleased with a good or
service, they tend to plan for it even before the actual time of purchasing
arrives. This is due to loyalty that has been established (Weinstein, 2004).
Segmentation helps in creating consumer loyalty since it helps in the
engagement process. A fruitful engagement process ensures that social
responsibility is enhanced. Social responsibility is a primary ingredient for a
company trying to create consumer loyalty.
Segmentation
also comes with increased profits. Profits arise since segmentation increases
the level of competition. Being able to deal with competition is a stepping
stone towards attaining higher revenues in an organization.
Risks of Market Segmentation
Among the risks is that segmentation
is quite expensive for small companies. A primary research needs to be
conducted so as to identify individuals that buy their products. This becomes
even more challenging when an organization is operating multiple markets. The
process is also relatively time consuming. A lot of time is spent in the
identification process since the organization must enhance some operations so
as to get a clear cut. Customer profiles including their demographics must be
drawn before a conclusion is made (Weinstein, 2004).
Enhancing segmentation may also tend
to overlook other customers. A significant number might fall outside the
bracket that intends to be targeted based on the approved criteria. This means
that the organization will miss on the revenues that would have been generated
by these consumers. It gives competitors an opportunity to attract the
neglected consumers and form a strong market base. Generating a large market
share enhance the competitiveness of an organization. This might work to the
disadvantage of the company that is practicing segmentation.
Limited Edition Clothing
Introduction of the limited edition
clothing comes with a lot of marketing benefits to H&M. Among the benefits
that accrue is consumer connection. Most people enjoy standing out from others
around their vicinity. Wearing clothes that other people do not have helps in
fulfilling their quest. This means that if there is any limited edition offering
on the market, they will out-rightly jump to it. As a result, a favorable
connection is created between the company and consumers (Lamb, Hair &
McDaniel, 2012). There is a form of social responsibility being provided to
this group of consumers. They tend to remain loyal to the organization’s
products so as to reap similar benefits later.
Designing of the limited edition
clothing also acts as a form of sales promotion to the organization. Being
limited edition clothing, once it is gone from the market it will not be seen
again. This creates the urge for every
consumer out there to anticipate for the product. The hype is extreme such that
everyone is aware that this clothing range is gracing the market soon. News
spreads faster through the word of mouth. Others get hyped due to the publicity
being created by their friends and colleagues (Okonkwo, 2007). Once the
products are introduced in the market, long queues are usually experienced.
Some people tend to miss out on the offering. Once the sales are completed, the
company will realize the amount of savings it has made on publicity. Not much
is spent on advertising since an organization’s consumers help in carrying the
message to their friends and colleagues that they think might be interested.
This results in bringing in targeted consumers hence broadening the profit
margins.
H&M would also benefit from
multiple purchases. These clothes are limited edition and only grace the market
once. There are those people that want to the clothes for some time. As a
result, they opt for multiple purchases. This is a preference by consumers to
have their buffer stock in the future (Lamb, Hair & McDaniels, 2012). The
clothes will even be more appealing at a future date since they have already
gone out of the market. Multiple purchases enhance that products move fast.
In marketing limited editions also
come along with brand associations. In the clothing industry, many consumers
want to associate themselves with various designers. Some people will buy
certain products since they are associated with certain individuals. This
effect might work effectively for H&M. It will be way of locking their
consumers. A certain level of loyalty has already being established through
this approach. As long as the designers are operating within the organization,
these consumers will always associate with their brands. In the long-run
consumer loyalty is created and the consumers become affiliated to the company
itself.
Limited editions can also be used by
an organization as a component of market testing. Once the clothing is launched
into the market, relevant variables are put into consideration. These variables
include the nature of people embracing the product and their general feeling.
Based on the product’s performance, the company might decide to include the
clothing into its life line product range. Once a product is identified through
this process, it is bound to bring immense success to the organization. This is
because the company is not doing any form of trial and error (Okonkwo, 2007).
There are statistics that show this supremacy. All the shortcomings from the
product are gathered through this process. The direct interaction of consumers
and the stores involved in distribution make this attainable. This information
will be used in making the brand superior in the future.
Offering limited edition clothing
also helps in reducing total overhead cost. It is apparent that most
organizations spend a lot on the holding costs. For limited edition clothing,
the holding cost involved is minimal. The clothes do not take a long time once
in the stores. Some even get exhausted within some few minutes. All costs
associated with holding these products are reduced substantially.
Marketing Challenges
In the future, H&M is likely to
face a number of marketing challenges. Challenges of effective marketing
continue to increase in the clothing industry worldwide. This has been
attributed by inflationary tendencies, resource constraints, technological
changes and changing lifestyles among others. The clothing industry is
characterized by intense competition and dynamic environment. As a result, it
becomes difficult for organizations to maintain long-term success (Sinkovics
& Ghauri, 2009).
Among the challenges that are likely
to be experienced is competition. H&M is enjoying a favorable market share
based on its business model. Market entry into the clothing industry is always
open. If H&M continues to make these amounts of profits, then things might
change in the industry. Some of the key players might opt to change their
business strategies and embrace the strategies being used by H&M. New
entrants into the market might also come in using a similar strategy. This will
mean that the competitive advantage being enjoyed by the company will be neutralized.
As a result, H&M will face an uphill task to cope with this level of
competition. Through scrutiny to the
existing business model will be of paramount importance. New ideas and
strategies must be implemented during this period so as to propel the company
towards success in the light of this competition.
Another marketing challenge is that
long-term pricing will be difficult to project. This is because the uncertainty
in the economy has made many buyers and sellers exceedingly cautious hence
making business conditions difficult. Volatility of energy resources and raw
materials will make future price projections difficult (Doole & Lowe,
2008). The aspect might affect H&M marketing aspects in many ways. Having
inappropriate projections might come with numerous failures of operations. Once
the operations are not initiated in the best way possible, a lot of questions
arise from the side of consumers. Occurrence of such an event might result to
losing a whopping market share.
Not having enough time to support
the sales might also fall under the marketing challenges that the organization
will face. H&M is at the point where that the organization has already
grown. It is already known to many consumers and enjoys a substantial market
share. Based on this, the company might turn its focus to development. This is
aimed at propelling the organization to a higher level. Most businesses usually
undergo through this period. No one wants static once an opportunity has
unfolded. As a result of focusing on development, minimal time is spent to
support sales (Doole & Lowe, 2008). If the issue is not properly addressed,
severe consequences might follow. The main challenge for the organization will
be balancing time spent on development and support of sales.
Keeping up with the marketing
strategies and trends will also offer food for thought to the organization.
Marketing usually undergoes through many transformations. What might be working
very well today might not be effective in some years to come. This means that H&M
needs to have efficient people within its marketing circle. They must be open
minded to help accommodate any changes in the marketing trends. Adequate
investment for marketing training programs must be made too. Failure of taking
this caution might lead to problems once the challenge arises.
A change in consumer tastes and
preferences is another marketing challenge likely to be faced. Consumers in
most industries are very unpredictable. What might be attracting them today
might not have any appeal tomorrow. This usually affects businesses before they
come to realize. They continue operating on a similar business model for a long
time. For H&M to overcome this, periodic research should be conducted on
the products being offered by the company. It will help in determining whether
the products are still appealing to consumers. This way, effective measures can
be taken to help come in terms with what the current market desires. Being
rigid might be detrimental to the organization (Sinkovics & Ghauri, 2008).
References
Doole, I., & Lowe,
R. (2008). Strategic marketing decisions in global markets. London: Thomson Learning.
Fricke, S. (2007).
Market orientation: The construct, research propositions, and managerial implications. München:
GRIN Verlag GmbH.
Lamb, C. W., Hair, J.
F., & McDaniel, C. D. (2012). Essentials of marketing (7th ed.). Mason, Ohio: South-Western Cengage Learning.
McDonald, M. (2012).
Market Segmentation How to Do it and How to Profit from it.. New York: Wiley.
Okonkwo, U. (2007).
Luxury fashion branding trends, tactics, techniques. Basingstoke: Palgrave Macmillan.
Paul, J., & Kapoor,
R. (2008). International marketing: text and cases. New Delhi: Tata McGraw-Hill.
Sinkovics, R. R., &
Ghauri, P. N. (2009). New challenges to international marketing. Bingley: Emerald Jai.
Weinstein, A. (2004).
Handbook of market segmentation: strategic targeting for business and technology firms (3rd ed.). New York:
Haworth Press.
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