Introduction of a New Food Offering into a Cluttered Marketplace - Essay Example

Expanding the product line within a clothing company: Introduction of a new food offering into a cluttered marketplace BY YOU YOUR SCHOOL INFO HERE DATE HERE TABLE OF CONTENTS 1.0 Introduction 2.0 Macro-level analysis 2.1 Political and legal factors 2.2 Economic factors 2.3 Social factors 2.4 Technological factors 2.5 Environmental factors 3.0 Marketing strategy 4.0 The value proposition 5.0 Distribution and pricing structure References Introduction of a new food offering into a cluttered marketplace 1.0 Introduction Hennes & Mauritz AB, also known as H&M, is a multi-national clothing company founded in the year 1947. H&M is a clothing retailer with an emphasis on fast fashion, offering consumers modern clothing with an affordable price point for its most desirable target markets. H&M primarily caters to the youth market, between 18 and 34 years of age, who demand exclusivity in their clothing purchases with a modern flair to fit their less-resourceful budgets. In this highly saturated and competitive industry, fast fashion is the ability of a clothing company to produce clothing quickly from the design stage to final production in the most efficient and timely methodology possible, with an emphasis on providing unique fashion designs to fit the needs of a changing consumer culture (Hines and Bruce 2001). H&M creates clothing known as being boho-chic, providing merchandise offerings with a hippie flair and Bohemian styles that have been heavily promoted by reputable celebrities such as Kate Moss. The retro appeal of H&M’s offerings inspire youths with a need for chic and in vogue, exclusive products. The ability of H&M to blend celebrity endorsements from reputable youth-oriented famous persons has built a potent and recognisable brand, giving the business considerable brand equity as a pioneer in providing relevant fast fashions. It is this brand equity that will now allow H&M to expand its product line to include a new food offering, branded under the H&M established brand reputation. The company will be launching gourmet chocolates and specialty, gourmet candies known as H&M Sweet, an effort to improve revenues and gain even more brand preference for the H&M brand name. 2.0 Macro-level analysis This section provides an analysis of the macro-environment utilising the PESTLE model. 2.1 Political and legal factors In the UK, the corporate tax rate was lowered from 22 to 21 percent in 2014 (Sharma 2012). This provides one of the lowest corporate taxation rates across the world, which will provide H&M with more financial capital earned through revenues. This lowering of corporate tax rates provides an environment where H&M Sweet can recapture the costs of new product development, production, distribution and marketing. To the disadvantage of the company, the UK Value Added tax increased from 17.5 percent to 20 percent. As a result, H&M will now have to hold 20 percent of its earnings to ensure compliance with this recent change in legislation. There are no corporate-oriented exceptions to the Value Added Tax increase, therefore H&M may have to engage in hedging activities as a means of offsetting this increase in taxation expenditures annually. Additionally, H&M will be subject to 18 percent taxation rate for capital gains, which involves disposal of a capital asset and the level of economic gains achieved through such divestiture of an asset (HM Revenue & Customs 2014). This has long-term, negative implications for H&M Sweet in the event that new retail centres are unable to support the new brand and must be disposed of. Antitrust laws, or competition laws, in the United Kingdom are very stringent. Companies are prevented, under law, from collusive agreements with firms for price fixing, sharing of privy information between two corporate parties, and such laws prevent price discrimination in order for a firm to gain competitive advantage (legislation.gov.uk 2014). This has implications for H&M in the event that H&M Sweet desires to partner with other corporate organisations or control pricing in its new market. Such antitrust laws also prevent companies from establishing monopolies in a market (such as using strategies to drive out competition), which could limit the scope by which H&M Sweet could gain competitive advantage. 2.2 Economic factors Fortunately, the UK has begun a strong economic recovery that once plagued the nation stemming from the 2008-2010 recession. Today, the Consumer Price Index in the UK has shown that inflation is stabilising which gives consumers much higher disposable incomes (ONS 2013; Forex 2012). Consumer incomes in multiple markets are rising at a higher pace than inflation (ONS). Therefore, there is ample evidence that consumer will be willing and interest in buying gourmet products as there is less risk of economic instability in the contemporary UK household. This is a major change in economic stability in the UK from just two years ago where inflation was continuously increasing as a result of government-imposed austerity packages that were intended to stabilise the struggling economy (Elliott and Stewart 2012). Today, the inflation rate is only 3.3 percent (much lower than in other developed nations) and has remained stable (BBC News 2013). Hence, there is less risk that consumers will be unable to purchase gourmet food products produced and distributed by H&M which points toward more probability for achievement of increased revenues for this new product line. 2.3 Social factors There is a growing trend in multiple markets in the UK toward ethical consumption. This involves consumers being more attracted to a brand that promotes environmental sustainability and ethical behaviours. It is recognised by Globe Scan (2009) that consumers boycott companies that do not comply with high standards of ethics. Lys, Naughton and Wang (2013) indicate that companies that express this focus have higher profitability. A study reinforces this trend in the social condition in the UK. Grande (2007) points out that 5,000 consumers that were targeted to participate in a primary study showed they would pay premium prices for products if there was a high emphasis on promoting ethical standards by the selling company. This has tremendous implications for H&M Sweet if the business focuses on corporate social responsibility as part of its promotional focus as a result of this growth in consumer social trends in the UK. Because H&M Sweet is gourmet, it will have a higher price point than other food products in the UK. With an emphasis on ethical positioning for the firm, there is a greater opportunity to gain consumer attention in multiple markets. Furthermore, because H&M currently maintains brand preference and equity with the youth market, it is important to focus on the social condition with this group. A study involving consumer participants between 25 and 34 indicated that they are attracted to premium products in an effort to enhance their social identity (Executive Digest 2008). When a brand is able to enhance a youth consumers’ social self-expansion, they are more likely to be attached and loyal to the brand (Muniz and O’Guinn 2001). Hence, consumer characteristics in the most desirable target audience for H&M Sweet maintain social attitudes that could provide more interest in buying gourmet chocolates and candies if the promotional strategy utilises lifestyle-based (psychographics) marketing to make the brand appear more relevant and socially-oriented toward this youth market segment. 2.4 Technological factors The UK maintains a supply chain environment for procurement of modern technologies which support business. The most substantial development in the technological environment is the advance of mobile credit card payment systems. Youth consumers are utilising the Internet and smartphone technologies to access shopping channels in a variety of different markets. This trend allows for H&M to build a better digital presence to reach these markets, such as promoting an online website and using digital marketing tools to provide consumers with information and incentives for H&M Sweet using mobile technologies. 2.5 Environmental factors Companies that emphasise corporate social responsibility are successful in outperforming competition without such an emphasis. Competition in H&M’s market, Sainsbury Supermarket, has gained considerable brand equity by focusing heavily on promoting its CSR objectives. In the year 2011, this competitor launched Sainsbury’s Diets, a program online that teaches consumers about healthy food preparation and how to manage dieting practices to better improve consumer health (Sainsbury 2011). This is evidence that high emphasis on corporate social responsibility related to the consumer increased brand reputation and also revenues. Another competitor in H&M Sweet’s new market is Thornton’s, the UK’s leading gourmet chocolatier. Thornton’s has developed an online sales model which provides consumers with the ability to engage with chocolate experts at the firm. It even provides consumers with a virtual chocolate tasting guide, much like wine tasting, in order to enrich its relationship with consumers and establish a sophisticated presence. Offers Thornton’s to its consumers, “before you polish off that tray of Thornton’s in record time, follow these tips and get ready to impress your friends” (Thornton’s 2014, p.1). Thornton’s illustrates its focus on enhancing consumer lifestyle through this methodology of CSR which builds more brand interest. This model is also aligned with relevant theory of consumer behaviour in which social self-expansion, when illustrated and provided by a brand, builds more brand preference (Muniz and O’Guinn 2001). 3.0 Marketing strategy With the notion that consumers are attracted to a brand that provides them with a premium experience, in the most desirable target market of youth consumers, the H&M Sweet brand will utilise an emphasis on product in the marketing mix to gain their attention. H&M has found considerable success with celebrity endorsements whilst selling its fast fashion clothing line to this market and will continue with this model. H&M Sweet will seek recruitment of Nigella Lawson, a renowned and respected chef and food critic in the UK who has many top-selling cookbooks and a successful cookware line. Lawson is known for being sensual and sophisticated (Sands 2006). This strategy aligns youth consumer attitudes with the brand personality of H&M Sweet, giving the business a unique position among competition in terms of lifestyle marketing. Figure 1: Nigella Lawson Source: BBC. (2014). Nigella Lawson. http://www.bbc.co.uk/food/chefs/nigella_lawson Lawson will endorse the premium features of the H&M Sweet chocolates and candies brand, emphasizing the sophisticated benefits of the product in relevant advertisement. Furthermore, the pricing structure of these premium chocolates and candies must also be emphasized in order to appeal to the youth consumer who builds social identity through the consumption of premium products. The business will utilise the brand tagline, “You get what you pay for at H&M Sweet” in order to align the brand with conspicuous consumption behaviours of the target market of 18-34 year olds, as identified by Executive Digest (2008) as being what interests the youth market in top quality, premium products. It will also be necessary to promote the emphasis that H&M Sweet places on corporate social responsibility to gain more interest by the target market. H&M Sweet will seek procurement of raw materials used in premium candies and chocolates from foreign source agents in developing nations. H&M Sweet will promote that the brand donates 1.5 percent of all profits toward improving the infrastructure and lifestyles of important international vendors, such as putting investment into education, farming techniques, and technology implementation in these nations. By illustrating in print advertisement that H&M Sweet maintains a dedicated emphasis on CSR, it should improve consumer perceptions of H&M Sweet over main competition such as Sainsbury, Thornton’s, and the plethora of other gourmet food companies in the UK. Hence, the brand will be positioning itself amongst competition in the UK with emphasis on premium quality and a supplementary focus on social responsibility. Following the Sainsbury model in which governance promotes its ongoing methods of improving lifestyle of vendors and consumers, H&M Sweet should rapidly gain brand recognition and brand preference for markets that are already loyal to the brand for its sophistication in clothing merchandise. In the long-term, H&M Sweet will utilise a variety of marketing metrics (inclusive of consumer surveys, focus groups, and revenue analyses) which will determine whether this marketing strategy is meeting with positive consumer perceptions about this new premium brand extension for H&M. By engaging with consumers in real-time, the brand can adjust promotional strategy to better fit the evolving consumer attitudes about H&M Sweet. If revenue analyses determine that there is not enough consumer interest in the targeted youth market, new markets will be sought based on market research on consumer characteristics for different niche markets that might be attracted to the premium quality food brand. 4.0 The value proposition It will be necessary for H&M Sweet to express value to consumers in order to improve brand preference with its desired youth target market. The construction of a value proposition is to differentiate the brand from competition and express sustainable value for the brand (Barnes, Blake and Pinder 2009). With recognition that the youth target market finds social value in consumption of premium products, the value proposition must be constructed to match lifestyle with brand personality in a way that is meaningful to the target segment. As a result, H&M Sweet’s value proposition is: “H&M Sweet enhances the gourmet consumer experience by offering top quality, unparalleled chocolates and candies. The consumption of premium chocolates improves consumer well-being and satisfies all consumer desires for sophistication. H&M Sweet uses only top quality ingredients in all of its products and donates a portion of proceeds to enhance the lifestyles of international vendors in developing nations. Through this partnership, we are able to ensure consumers buy only the most sophisticated and delicious products. H&M Sweet hopes you share them with friends so everyone can experience our dedication to quality and elegance that you recognise so well in our fashion business”. Through this proposition, H&M Sweet illustrates that the brand can improve social self-expansion, ensures a dedication to corporate social responsibility, and reinforces that quality is the main emphasis of the brand’s business model. Value is expressed by linking lifestyle to corporate values and beliefs which is critical to gaining brand preference in the youth target market. This value proposition aligns the H&M Sweet brand with the established brand personality of H&M fashion which is already respected and in high demand by consumers. The value proposition illustrates that the social condition of consumers is important to the company which builds more of a lifestyle connection between the target segments and the brand identity of H&M and H&M Sweet. 5.0 Distribution and pricing structure H&M Sweet, which intends to express exclusivity to consumer target segments that already demand this of the clothing line of the company, will be distributed in H&M stores in the United Kingdom. It could cheapen the brand if it were distributed to supermarkets and hypermarkets that already carry lower-end chocolate products such as those produced by Cadbury and other chocolate and candy producers that utilise this mass distribution strategy. Consumers need to have the impression that H&M Sweet is top quality and unmatched by competitors. H&M Sweet will sustain in-store print advertisements heralding the launch of this new product. Additional billboard advertisements will be established throughout the United Kingdom where H&M already maintains presence to gain consumer interest. This integrated campaign will also be inclusive of magazine advertisements, such as Cosmopolitan and other youth-oriented publications, as part of the integrated marketing strategy pre- and post-launch of H&M Sweet. This strategy will ensure that more consumers come into the H&M retail stores to purchase not only this new food product, but also browse our extensive and updated fashion merchandising selections. There will be, at launch, a one-time price promotion offered to gain consumer interest in buying H&M Sweet products. The company will utilise the high-low pricing strategy where short-term promotions incentivise consumer consumption desire. With H&M Sweet being a promotional product, customers will be provided a coupon that takes 30 percent off a single piece of fashion merchandise with the purchase of H&M Sweet products. This will not only motivate purchase of the new premium chocolates and candies products, but create opportunities to gain consumer interest in buying fashion merchandise in-store; thus enhancing revenue production. At the end of the promotional period, these coupons will be removed from magazines and newspapers once consumers have become interested and loyal to the H&M Sweet brand. The company will track response rates and returned coupons to the in-store environment to determine whether keeping the product exclusive to H&M bricks-and-mortar retail environments is viable for long-term revenue production. If there is less-than-expected consumer interest in this high-low pricing strategy, the company will consider utilising different marketing channels to distribute its products. This might involve strategic alliances with high street retailers such as Gucci, Versace and other organisations to not only keep with sophistication and class, but to gain market attention from different target markets that have more resources, but also share the trend of conspicuous consumption and the importance of social influence in consumption decision-making. By distributing H&M Sweet in other high street retailers through these partnerships, it will also introduce high class fashion brands into H&M to maintain a more positive modish brand personality and gain revenues from a variety of high class consumer markets. The company will also utilise appropriate, sophisticated packaging that is relevant for both the male and female youth market, whilst also representing the chic aspects of the H&M fashion brand. The company will be offering gourmet jelly beans which will be packaged using sophisticated-looking wine bottles that serve as keepsakes of the H&M Sweet experience. All chocolates will be packaged in upscale-looking, cedar boxes branded with the H&M Sweet logo that also serve as important mementos that remind consumers of their H&M Sweet encounters. This justifies the higher, premium pricing structure and also places the H&M Sweet logo as a permanent fixture in the younger segments’ households, thus serving as long-term and effective advertising for the brand. To supplement the growing trend in mobile retailing, H&M Sweet will also develop an online sales website modelled after the consumer-oriented website of Thornton’s gourmet chocolates. There will be testimonials from other youth markets that have experienced the H&M Sweet brand (thus enhancing social connection and social relevancy), whilst also allowing for sign-up to provide digital marketing content to consumers for future exclusive price discounts and other important consumer-related information related to the brand. Such advertisements could include chocolate tasting step-by-step guides, becoming familiar with foreign vendors to express emphasis on corporate social responsibility, or new product offerings being developed under the H&M Sweet brand. Mobile marketing could provide a variety of convenience sales from consumers willing to make impulsive purchases, thus enhancing the revenue stream for this new product line. References Barnes, C., Blake, H. and Pinder, D. (2009). Creating and delivering your value proposition: managing customer experience for profit. London: Kogan Page. BBC News. (2013). Economy tracker: inflation. [online] Available at: http://www.bbc.co.uk/news/10612209 (Accessed 19 July 2014). Elliott, L. and Stewart, H. (2012). UKs economy falls into recession deeper than expected, The Guardian. [online] Available at: http://www.guardian.co.uk/business/2012/may/24/uk-economy-contracted-2012 (Accessed 15 July 2014). Executive Digest. (2008). 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I don’t want to be some kitchen blow-up sex doll, Daily Mail. [online] Available at: http://www.dailymail.co.uk/femail/article-420003/I-dont-want-kitchen-blow-sex-doll.html (accessed 14 July 2014). Thornton’s. (2014). Chocolate tasting. [online] Available at: http://www.thorntons.co.uk/content.jsp?pageName=tasting_guide (accessed 15 July 2014). Read More