Business of Abercrombie and Fitch - Term Paper Example

 Table of Contents Introduction 2 Brand Equity and its Elements 3 Aaker’s Brand Equity Model and its role in Abercrombie and Fitch’s Brand Value Creation 4 Conclusion and Recommendations 9 References 10 Introduction Abercrombie and Fitch can be considered as one of the oldest retail and clothing organisations of the world. The company was started in the year 1892 by founder David Abercrombie in United States. The owner after a period of eight years went on a partnership with Ezra Fitch and thus from then onwards the company was known as Abercrombie and Fitch. The company successfully continued their business in the first part of the 20th Century. In around 1960s, the company went through financial challenges which called for the need to change the strategy. The company was purchased by ‘The Limited’ (Articlesbase, 2010). The company then repositioned itself to be considered as a source of youth related apparel. The company specialised in the field of outdoor clothing. The brand image of the company went through a change period as it transformed itself to a ‘luxury lifestyle brand’ (Articlesbase, 2010). The company expanded to the different parts of the world like United Kingdom and Canada. The expansion coincided with the launch of quite a few new brands (Articlesbase, 2010). At the present stage Abercrombie and Fitch can be called to be a successful company. In their endeavour of achieving success, they have considerably changed their image. The company has transformed itself from just selling clothes to become a lifestyle item. Brand creation provides company recognition and also brings in the customers who with time become a loyal supporter and buyer of a product. Therefore, every company aspires to create a unique brand image of their products. Brand equity is collection of brand assets as well as liabilities which are linked to a brand. Brand equity consists of brand awareness, brand loyalty, perceived quality, and brand associations. Abercrombie and Fitch has over the years established themselves as a recognised brand, therefore they can utilise the brand equity factors to further develop their brands. Brand Equity and its Elements Brand equity basically is a collection of brand assets and liabilities which are linked to any brand. Brand equity consists of four main elements such as brand loyalty, brand awareness, perceived quality, and brand association. The brand equity concept creates a distinction among the value which a brand already has for consumers i.e. the tangible added value related to a brand and the value which the brand has for its owners and the company i.e. brand equity. Brand equity is expressed in terms of strategic, financial, management benefits (European Institute for Brand Management, n.d.). A properly managed brand can become an asset to a company. Brand awareness leads to brand familiarity. It results in increasing the comfort level of a consumer with a brand. Familiarity of a brand creates reliability and thus consumers’ consideration from a brand increases and so does the purchase of the product. Brand loyalty is very important aspect of brand equity. It generally helps to reduce vulnerability of a brand from the actions of the competitors. It helps a company to retain its existing consumers and also helps them to avoid spending money for acquiring existing consumers. Customers associate with a brand because of the quality related to its product. Customer generally relies on the brand name as basic quality indicator. Perceived quality of a brand generally helps a brand to set premium prices and aids the marketers to avoid price competition. Association related to a brand is key component for brand equity. Marketers often try to associate a lifestyle with a product or a specific personality type along with a particular brand. The examples of such scenario can be like De Beers’s diamond which has strong and long lasting relationship. Abercrombie and Fitch are similarly associated their products to a lifestyle and fashion item (Pride & Ferrell, 2004). Aaker’s Brand Equity Model and its role in Abercrombie and Fitch’s Brand Value Creation Brand equity model by David A. Aaker was created based on the idea of brand and its value creating ability. Brand equity as per Aaker can be divided into five factors such as brand awareness, brand associations, perceived quality, brand loyalty, and other brand related assets which enables a company to achieve competitive advantage (Solvay Brussels School of Economics and Management, n.d.). According to Aaker, brand equity can be defined as ‘a set of brand assets and liabilities linked to the brand’ (European Institute for Brand management, 2009). Brand equity can be derived from the names as well as symbols of a brand. Brand equity of a brand can be considered as one which adds value to or which subtracts value from a service or a product. Brand added value is major factor in the brand equity model. The model helps to gain and insight to the idea of brand equity. The model also helps to get an idea of the future performances and the pursued branding policy of a brand. Brand equity will rise along with the increase in brand loyalty; brand name related awareness and perceived quality. The brand association also plays a vital role as stronger and more positive brand association helps to increase the number of brand based proprietary assets. Brand loyalty factor determines the extent up to which people i.e. mainly consumers are loyal with a specific brand. The factors that come into the equation for brand loyalty are reduced marketing costs as hanging onto a loyal and used to customer is much easier than attracting a new consumer, trade leverage as loyal consumers always represents a stable resource of revenue. The other benefits which can be derived from brand loyalty include the benefit of attracting new customer, time to react to any competitive threats (European Institute for Brand management, 2009). Abercrombie and Fitch have established itself as a power shopper. They have in their assortment four diverse apparel brands. They have also gathered international expansion which has resulted in greater earnings and growth. According to Standard & Poor’s equity research, the retailer’s shares are given highest recommendation. Abercrombie and Fitch are a leader in casual luxury based apparel for the age group of 7 to 22 years. This demographics needs and requirements have been considered thoroughly by the company before launching their products. Abercrombie and Fitch have been able to gain benefit from the trend of casual luxury products as they have been able to acquire the benefits from one of the factors of Aaker’s brand equity model. Perceived quality or perceived brand differentiation has enabled the company to set their sights on gaining benefits as an aspirational luxury based brand is expected to outperform comparatively moderate peer brands. The value or price equation is also a critical factor in this regard. As stated by Aaker in his brand equity model, perceived quality helps to attract customers as they get attracted to purchase a product because of the quality of the product. The quality of brands products are judged by a customer generally by comparing a brand with its competitors in terms of level of differentiation, price, availability, and brand extensions. Abercrombie and Fitch has been able acquire the brand loyalty factor described in the model by gaining a favourable outlook of their luxury brands. Strong amount of consumer spending related trends have supported their viewpoint. The diverse brand portfolio in the retail aspect has made their brands more aware and has helped to create brand awareness. They have gained incremental level opportunities in international market also. The four distinct brands are created in such a way that it creates very little amount of cannibalization scenario. Each of the brands target a specific age based groups and also the price points for each product are kept at a different level. The companies four different brands are distributed among accessories, casual sportswear, and personal care products. The brand of the company is an ‘all-American collegiate lifestyle brand’ (Driscoll, 2006). The company gains brand association from its positioning of an all American prep school brand for 7 to 14 year olds. The target demographic of Abercrombie and Fitch is attracted to mainly strong brands and also fashion and value in case of deciding apparels. Apart from the specialty segment, the youth sub segment represents around 3% of the overall apparels retail sales. The barriers to entry are minimal in this segment. The returns on investment are comparatively high as well as quick (Driscoll, 2006). Brand image is a very critical factor for a brand to create brand loyalty and brand association. A retailer has to try and portray similar brand image to a customer of a product. Abercrombie and Fitch try to use this method in their strategy formulation. Brand awareness is major vehicle for the company to create enthusiasm among the consumers towards a particular brand. The brand awareness creation can be accomplished by using promotional vehicle. It is used as a part of integrated marketing communication. The company does highlight their image as a fun loving, independent teenagers and also young adult’s brand. Therefore the brand awareness factor discussed in the Aaker’s brand equity model is very relevant for Abercrombie and Fitch. The company mainly relies on the merchandise assortment which it posses along with pricing strategy to create brand valuation and also perceived quality factor for customers. The main goal of the company is to create a strong association with their customers and also create a distinctly defined brand based image. The company in order to judge market trends employ members to colleges to chat with students to understand their tastes and preferences. Image creation goes a long way in delivering brand equity. Image creation has to coincide with the factors which are provided in the pattern of image creation. A brand has to fulfil their promises and obligation in the brand creation. It will result in benefiting a brand in their venture of creating brand equity (Dodd, 2006). Abercrombie and Fitch as a brand are relevant and authentic in their overall brand equity creation. The brand’s focus is mainly on the direction of creating high quality based merchandise which basically compliments the classic and casual lifestyle of America. The company has gained popularity as a brand because of their approach towards providing customer service. Customer service has been one of the critical success factors. Constant development and increase in their product line along with maintaining fresh product assortment has helped the company to create brand loyalty (Villanova University, n.d.). Conclusion and Recommendations Abercrombie and Fitch have been able to create brand image and brand valuation for itself by keeping a focus on their target customer base and also on their needs. In the coming years, the company can look to acquire benefits form global economy by looking towards market expansion. In the last few years, the company has been looking to increase customer base. They had been generally looking to focus on the male clothing based market. They had shifted towards focusing equally on the female and children segment in recent times. Therefore, they can look to expand their presence geographically as in past they have been consigned to targeting and looking after the needs of the American people. They can gain a strong consumer base by targeting the Asian and untouched part of European market. This would result in increasing their brand awareness which in turn would help to increase the other factors discussed in the brand equity model with time as the brand valuation increases and the customers become more aware of the benefits of the product. The brand loyalty can be created in the geographic expansion planning as it would enable them to create a similar line of loyal customers if they continue to focus on their strategy of providing customer service to the newly ventured audience. In recent times, the global recession has impacted the retail industry; therefore the company can look to provide clothing items at a varied price range especially if they try to expand in the Asian region. Abercrombie and Fitch can look to gain brand equity by venturing with new vigour in the coming years (Villanova University, n.d.). References Articles Base, 2010. Situation Analysis of Abercrombie and Fitch UK. Entrepreneurship. [Online] Available at: http://www.articlesbase.com/entrepreneurship-articles/situation-analysis-of-abercrombie-and-fitch-uk-1814074.html [Accessed August 24, 2010]. Driscoll, M., 2006. Abercrombie & Fitch: Power Shopper. Bloomberg Business week. [Online] Available at: http://www.businessweek.com/investor/content/oct2006/pi20061030_872503.htm [Accessed August 24, 2010]. Driscoll, M., 2006. Abercrombie & Fitch: Power Shopper. Bloomberg Business week. [Online] Available at: http://www.businessweek.com/investor/content/oct2006/pi20061030_872503_page_2.htm [Accessed August 24, 2010]. Dodd, K., 2006. Brand image is critical. North County Times. [Online] Available at: http://www.nctimes.com/business/columnists/dodd/article_54674422-e1b3-5e87-83c8-401add330433.html [Accessed August 24, 2010]. European Institute for Brand management, No Date. Brand Equity: introduction. Knowledge resource centre. [Online] Available at: http://www.eurib.org/en/knowledge-resource-centre/online-recource-centre/brand-equity.html [Accessed August 24, 2010]. European Institute for Brand management, 2009. Model: Brand Equity. File admin. [Online] Available at: http://www.eurib.org/fileadmin/user_upload/Documenten/PDF/Merkmeerwaarde_ENGELS/Aaker-__Brand_equity_model-EN.pdf [Accessed August 24, 2010]. Pride, W. M. & Ferrell, O. C. Marketing:Concepts & Strategies (12Th Ed.). Dreamtech Press, 2004. Solvay Brussels School of Economics and Management, No Date. Brand equity. Advanced Marketing. [Online] Available at: http://www.solvay.edu/PDF/cours/advancedmarketing4.pdf [Accessed August 24, 2010]. Villanova University, No Date. Mission Statement. anthony.bisnath. [Online] Available at: http://www00.homepage.villanova.edu/anthony.bisnath/anfbusndescript.htm [Accessed August 24, 2010]. Read More