Strategic Management and Marketing for the Luxury Goods by Vivienne Westwood - Assignment Example

? Vivienne Westwood Table of Contents Table of Contents 2 Part A 4 Introduction 4 Situational Analysis 4 Political 6 Economic 6 Social 6 Technology 7Vivienne Westwood- Soul & Skin of the Brand 7 Skin & Soul of Vivienne Westwood & Differentiating factor 8 Luxury Brand Experience 9 Part B 10 Marketing Objective 10 Marketing Strategy 12 Action Program & Control Method 13 Conclusion 15 Appendices 20 Part A Introduction “Today luxury is everywhere” - Kapferer and Bastien (2009, p. 311) Can Kapferer and Bastien (2009) be blamed for exaggerating a particular phenomenon? Probably not because growing demand for luxury products like clothing, jewellery, cars or even house hold equipments is substantiating the claim of Kapferer and Bastien (2009). In such context, Luxury Goods Company Vivienne Westwood has been selected sample organization in the paper and study will conduct marketing audit in order to help the sample organization to decide marketing strategy. McDonald and Wilson (2011) suggested that organizations should use both strategic and tactical marketing plan in order design marketing strategy. According to these scholars, strategic marketing includes situational analysis, customer segmentation, and macro environmental audit while tactical marketing plan includes implementation marketing strategies. The paper will follow the mentioned approach while doing marketing audit for Vivienne Westwood. Before going to the main discussion, the study will analyze the business situation and macro environment for Vivienne Westwood in order to create background for marketing audit. Situational Analysis There is no doubt that primary operational hub for Vivienne Westwood is UK and therefore the study will concentrate on macro environmental parameters of UK which can influence business dimensions of Vivienne Westwood. At present, value of designer clothing and luxury clothing is almost ?3.5 billion while the industry is growing at rate of 19.1% per year (British Fashion Council., 2012). Another thing is that, retail spending on luxury and designer products are growing at a rate of more than 6% while econometric analysis shows structural decline of UK fashion manufacturing sector (British Fashion Council., 2012). Figure 1: Rise of Luxury Product Consumption in UK (British Fashion Council, 2012) The above diagram is showing the rise of luxury consumption expenditure in UK while the following diagram will depict the structure of designer and luxury fashion industry in UK. Figure 2: Industry Structure (British Fashion Council, 2012) It is evident from the diagram that retail luxury clothing and footwear are the primary revenue generating option for designers like Vivienne Westwood, Paul Smith, Burberry, Stella McCartney, Mulberry etc. In such context, PEST (Political, economic, social and technological) analysis can be done in order to understand macro environmental aspects of UK. Political Government of UK follows trade policy as directed in NATO or North Atlantic Treaty Organization. However, in recent years the UK government has taken steps as budget cuts (more than 20%) in entertainment, fashion and sports sector which negatively affected growth of fashion and designer merchandises manufacturing sector (British Fashion Council, 2012). The government has also reduced corporate tax to 23% and such reduction would bound to increase operating margin for fashion retailers like Vivienne Westwood, Paul Smith, Burberry and others. Economic Spending capacity of people is being negatively affected by the trailing effect of Economic recession started in 2008 and Sovereign debt crisis. For example, the industry growth has been dipped by almost 0.2% in recent years (Marketline, 2012). However, British Fashion Council (2012) reported that economic slowdown might have increased cost of manufacturing for luxury retailers like Vivienne Westwood, Paul Smith, Burberry and others but it has hardly any impact on luxury consumption in UK. This divergence occurs due to the fact that generally affluent class purchases luxury products and economic slowdown hardly affected their purchasing capacity. Social British Fashion Council (2012) reported that more than 80% of retail luxury consumption is done in London, Liverpool and Manchester. In last few years, customers are showing the tendency to purchase luxury fashion products during special occasions or carnivals. In some cases, customers even prefer to spend extra money for purchasing bridal apparel and bridal make over (British Fashion Council, 2012). Customers in UK still perceive luxury items as status symbol and younger section of the society even ready to spend extra bucks to acquire luxury items. Companies like Vivienne Westwood and Burberry have even reduced the price of the luxury items to tap the younger section of the society. Technology British Fashion Council (2012) reported that fashion and luxury retailers are using modern technologies like e-commerce, web 2.0, digital marketing, RFID, ERP and others to not only cater demand of customers in responsive manner but also speed up the business process. However, only 2% growth rate has been seen in overall technology sector in UK which is showing the level of confusion among industry players regarding use of technology. Therefore, it can be predicted that companies like Vivienne Westwood might not be ready to invest huge amount of resources to achieve breakthrough technology innovation. Vivienne Westwood- Soul & Skin of the Brand Vivienne Westwood is an iconic fashion and luxury clothing retailer specializes in offering array of stylized garments and fashion apparel products to customers. The company is in the name of Vivienne Westwood who was not only co founder but also a renowned fashion designer. Vivienne Westwood and Malcolm McLaren established the company in 1971 and first store was opened in 430 Kings Road (Vivienne Westwood, 2013a). In last few years, the fashion retailer has expanded its distribution channel by establishing six company owned stores across London (4 stores), Leeds (1 store) and Milan (1 store) and franchise stores across Manchester, Newcastle, Glasgow and Liverpool (Vivienne Westwood, 2013a). Vivienne Westwood mainly targets woman segment that is ready to experiment with clothing style, appeal, design and presentation. Product portfolio of the company includes women’s accessories, women’s clothing, jewellery, watches, bags, fragrances and gift merchandises (Vivienne Westwood, 2013b). Under women’s accessories, Vivienne Westwood maintains sub product categories of wallets & purses, eye wear, shoes, belts hosiery etc. Although, primary target market for the company are women who are ready to spend extra bucks to enjoy fashionable and luxury clothing but recently the company has started giving importance to catering men’s luxury requirements. For example, Vivienne Westwood offers range of men’s luxury fashion product portfolios like trousers, knitwear, tops, coats, shirts and suits (Vivienne Westwood, 2013b). Unique selling proposition (USP) of the company is directed by factors like unique design, appeal of the products, colour combination and brand heritage. Considering the product portfolio of Vivienne Westwood reveals the fact that the brand has both skin and soul in the right place to create the luxury appeal among customers. Positive word of mouth, heritage associate with the brand name can be considered as skin of Vivienne Westwood while crafting of the unique product design and skill is being used to design the fashion offering can be classified as soul for Vivienne Westwood (Vivienne Westwood, 2013b). Consideration of the research works of Aaker (2010) reveals the fact that a brand must have synergize the soul and skin in order to create the right appeal among target customers and Vivienne Westwood also invested significant amount resources in order to establish mentioned synergy. In the next section, the study will analyze the business environment for Vivienne Westwood with the help of micro and macro environmental audit. Slone (2012) pointed out that excitement regarding the brand Vivienne Westwood is directed by three factors, 1- variety in collection of the fashion apparel, 2- use of premium quality material and integration of supreme level of craftsmanship in order to design luxury items and 3- uniqueness of offering because there are limited number of franchises who sell Vivienne Westwood collections hence customers need to spend intangible resources like time and cognitive sense to experience the offering of the country. Therefore, it can be said that skin or excitement regarding the Vivienne Westwood brand is backed by the soul of the brand like provenance, exclusiveness of the material used for crafting the cloths and skill set of designers who design cloths. However, the question may arise how soul and skin of Vivienne Westwood have given them competitive advantage over competitors? The answer of this question can be given in the following manner. Skin & Soul of Vivienne Westwood & Differentiating factor Reddy et al. (2009) stated that luxury fashion brands need to expand their product portfolio in order to achieve diversification and creating challenge for competitors to copy the offering and collection of the respective luxury brand. Reddy et al. (2009) argued that luxury brands try to reflect a certain image or culture which is basically intangible in nature and intrigued in the mind of customers therefore it is not easy to explicitly query the competitive positioning of luxury brands. In such context, Palomo-Lovinski (2010) stated that Vivienne Westwood used punk movement in London, England during the 1970s to enter the fashion industry. Even today, product designing, colour schemes and appeal of the offering of Vivienne Westwood are directed by punk culture. For example, “Rock and SEX” themes are being largely used Vivienne Westwood to design its fashion apparel and such kind of brand appeal was not less than shock to older generations (Palomo-Lovinski, 2010). Even today, Vivienne Westwood’s offering was not much appreciated by older generation but it can create craze among youngsters who want to use their fashion apparel to support punk culture (in punk culture, anger is being shown to conservative lifestyle of parents and existing social problem (Palomo-Lovinski, 2010). Phelps (2008) rightly criticized that soul of Vivienne Westwood is being created to facilitate the skin or excitement or creating fashion statement which criticizes existing social norms. So, are Vivienne Westwood’s product offerings rebels without a cause? Apparently not, because Vivienne Westwood has used both its skin and souls instantaneously to cover harsh political issues, environmental sustainability issues or social problems and their luxury offering also reflects political, social and environmental concern of the brand. For example, in 2008, luxury collection of the brand featured drawings about “jungle-dwelling eco-warriors” theme which is supporting environmentally sustainability causes (Phelps, 2008). In UK, Vivienne Westwood competes with brands and designer labels such as Paul Smith, Burberry, Stella McCartney, Mulberry etc (British Fashion Council, 2012). Now, the fact is that Vivienne Westwood carefully used the punk culture, social themes to design and differentiate its offering from competitors like Paul Smith, Burberry, Stella McCartney, Mulberry etc. Therefore, it can be assumed that Vivienne Westwood has not only communicated its souls like expertise, craftsmanship, quality of the products used etc to customers to create the excitement level among customers but also synergized social themes, cultural beliefs to achieve the desired level of differentiation. Luxury Brand Experience Although, the term “luxury” is being widely used in daily life but interesting fact is that definition of the term is pretty much blurred among scholars. Hudders, Pandelaere and Vyncke (2012) argued that understanding of luxury may differ in accordance with the perception of individuals. Therefore, it is very difficult to assess nature of luxury brand experience offered by Vivienne Westwood because product offering of the company might be perceived as luxury for one while for other, product offering of the company might classify as necessity (Wiedmann, Hennigs and Siebels, 2007). In such context, Silverstein and Fiske (2003, p. 3) defined luxury products and services as “products and services that possess higher levels of quality, taste, and aspiration than other goods in the category but are not so expensive as to be out of reach.” Vivienne Westwood uses both product and service experience to create luxury brand image among customers. For product experience perspective, Vivienne Westwood offers wallets & purses, eye wear, shoes, belts hosiery etc and subdivision of each of this category is also available for customers. For example, in men’s category, Vivienne Westwood offers range of men’s luxury fashion product portfolios like trousers, knitwear, tops, coats, shirts and suits (Vivienne Westwood, 2013b). Wide range of collections and variation in product offering differentiates or better to say give competitive advantage to Vivienne Westwood. Riley, Lomax and Blunden (2004) and Shukla (2011) stated that service offering can also help brands to establish the sense of luxury. Vivienne Westwood also uses service experience to posit luxury brand image among customers. For example, online shop for Vivienne Westwood Ltd offers exclusive stockist of items which may help customers to select their preferred item in customizable fashion. The brand uses hub & spoke supply chain model in order to deliver goods in responsive fashion while Vivienne Westwood also follows rigid user information criterion to despatch order in accurate manner (Vivienne Westwood, 2013c). Consideration of research works of Stegemann (2006) and Truong, McColl, and Kitchen (2009) reveals the fact that luxury fashion retailers can even use in store service elements to create luxury experience among customers. Vivienne Westwood even uses unique store design, customizable client servicing, personal care for patron, entertainment facilities in order to create the luxury experience among customers. Therefore, it can be said that Vivienne Westwood synchronizes product and service experiences altogether in order to achieve competitive advantage over other existing players. Part B Kapferer and Bastien (2009) estimated total value of luxury segment across the globe is $2 trillion and the market is growing at double digit growth rate. In such context, consideration of the research works of Johnson, Scholes and Whittington (2011) reveals the fact that luxury companies can establish their brand image by implementing both tactical and strategic marketing plans. It is evident from the above discussion that luxury market has growth potential and companies need to develop proper strategy to penetrate in luxury sector. In such context, marketing objectives of Vivienne Westwood can be defined in the following manner. Marketing Objective According to Maison, Greenwald and Bruin (2001) and Nosek (2007), consumer behaviour and psychological aspects of consumers play vital role in accepting or rejecting a particular brand. Same arguments hold true for luxury retailers and designers who offer luxury & fashion merchandises to customers. The study has found that competitive position of Vivienne Westwood has been weakened due to three factors like 1- absence of proper advertising and marketing strategy to promote the brand, 2- lack of financial and non-financial resources to finance its strategic initiatives and 3- over dependency of punk appeal which limited the penetration of the brand to certain section of the society. In such context, this paper will try to formulate strategic marketing plan for Vivienne Westwood which can revive their brand image and help the company to gain market share. Magnoni and Roux (2008) suggested that it is very difficult to extend appeal of a luxury brand due to intangibility customer’s perception associated with the brand. However, the study will use SMART objectives in order to establish measuring parameters while suggesting marketing objectives of the plan and establishing marketing objectives will help the researcher to get rid of intangibility issue. In the last 40 years, Vivienne Westwood has not expanded much internationally hence in accordance with business policy of the company, the study has set UK specific marketing objective. Therefore, the marketing objective for Vivienne Westwood should be “increasing the overall market share in major regions of UK.” Table 1: SMART Marketing Objectives Specific Achieving 15% to 20% market share in luxury fashion retailing in UK. Measurable Sales revenue increase and customer base increase will be used to measure the rise of market share. Achievable The objective can be reached by deploying existing resources and strategic marketing planning. Realistic Vivienne Westwood has already established presence in UK hence it will be achievable for them to increase market share by implementing proper market strategy. Time Bound 24 months will be needed in order to achieve the marketing objectives. Marketing Strategy As part of strategic aspects, Vivienne Westwood should identify target market on the basis of demographics, income level, educational level etc (Berkowitz, 2011; McDonald and Wilson, 2011). Table 2: Customer Segmentation Gender Age Group Annual Income Level Psychology Students and young working professionals (Male & Female) 18-25 > $35,000 Purchase decision will be influenced by TV advertisements and urge to increase social status among pear groups by possessing luxury items. Bachelors, couples, family members 26-35 $35,000-$70,000 or beyond $70,000 They understand the legacy associated with the offered luxury brand and they perceive luxury merchandises as part of lifestyle products. (Source: British Fashion Council, 2012) Penz and Sto? ttinger (2008) and Nia and Zaichkowsky (2000) stressed on the fact that in case of marketing strategy for luxury products, companies should more focus on product, place (distribution channel) and promotion attributes in contrast to other P such as price. Fionda and Moore (2009) also luxury companies cannot create successful marketing strategy without having a diversified and trendy product portfolio. In case of Vivienne Westwood, the company should use the above segmentation table in order to decide its marketing strategy. Consideration of research works Johnson, Scholes and Whittington (2011) reveals the fact that Vivienne Westwood can implement following marketing strategy. Product- Diversify the product portfolio by putting equal importance on latest fashion trends along with punk culture or social issues. Focus should be more on the female customer segment while the company should expand the depth of its gift item portfolio. Price- premium pricing policy should be followed for designer items but the company should think about seasonal discounting on certain products on the basis of inventory cost, value chain cost and length of sales cycle. For online product selling, the company can go for dynamic pricing model (changing the price of the product as per economic outcomes and financial volatility). Place- the company should increase store numbers across provinces in UK apart from focusing only on London, Liverpool, Manchester etc. In long run, they should double the franchise store numbers in next two years and can also enter the high end retail market through private label brand placement. Promotion- Vivienne Westwood should go for celebrity endorsement in through television commercial, print advertisement and billboards placements. In store electronic displays might be used to attract customers and sales promotion techniques such as seasonal discounting might be used for slow moving fashion and luxury items. The company can even use digital marketing to promote their offerings in social media sites or in the form of web advertisement. Action Program & Control Method Table 3: Action Program & Control Method Action Characteristics Time period Control Promotion Hire local celebrities to endorse the product. At least 6 different TV commercial should be launched in the TV. More than 15 print advertisements should be launched in next two years while 20 bill board promotions will be needed in next two years. Seasonal discounts can be offered during Christmas season while social media campaign should be launched throughout next two years. January 2014 to December 2016 Media calendar and advertisement budget should be prepared in order to control cost of promotion. Seasonal forecasting model can be used as control measures. On the other hand, advertising to revenue ratio or A/R ration will be used to realize effectiveness of advertisement and on the basis of effectiveness, control measures can be taken to eradicate redundant advertising activities. Place Open one new store in London, 2 new private label stores in Birmingham, Leeds, and Nottingham. Open at least 10 franchised stores across different regions of UK. Even, the company should increase the product diversity and product portfolio online stores in order to cater demand of larger customer base. January 2014 to December 2016 Vivienne Westwood should only provide licenses to franchisee stores but control culture, product portfolio, merchandises, training of personnel. Performance indicators will be set for each store as part of benchmarking process. Conclusion Hudders, Pandelaere and Vyncke (2012) pointed out that there is large shift has been occurred in the field of luxury branding and according to them, small companies from emerging markets are even competing with established big players in the market. Yeoman (2011) also pointed out that in modern day, luxury items not only serve the desire of affluent sections in the society but also can generate impulse demand among middle class section of the society. Yeoman and McMahon-Beattie (2006) and Vigneron and Johnson (2004) found that purchasing capacity of people has been increased manifold in recent years due to extensive amount of industrialization and globalization and such increased purchasing capacity and disposable income have gave the opportunity to middle class segment to afford luxury items. Therefore, it can be concluded that this paper has tried to formulate a marketing strategy for Vivienne Westwood by addressing the mentioned shift in consumer perception and market trend regarding luxury fashion products. Reference List Aaker, D. A., 2010. Strategic market management. 9th ed. New York: Wiley. Berkowitz, E. N., 2011. Essentials of health care marketing. 3rd ed. Burlington, Massachusetts: Jones & Bartlett Learning. British Fashion Council., 2012. The Value of the UK Fashion Industry. [pdf] British Fashion Council. 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Academy of Marketing Science Review, 7(1), pp. 1-21. Yeoman, I. and McMahon-Beattie, U., 2006. Luxury markets and premium pricing. Journal of Revenue and Pricing Management, 4(4), pp. 319-329. Yeoman, I., 2011. The changing behaviours of luxury consumption. Journal of Revenue & Pricing Management, 10(1), pp. 47-50. Appendices Vivienne Westwood’s Media Calendar-2014 Read More