The Segmentation of A and F Brand - Coursework Example

International Marketing By of School and Appropriate Marketing Strategies for A&F The growing globalization has provoked a widespread wave of business internationalization over the past decades, with different organizations seeking to tap into the unexploited foreign markets in order to maintain their global status of business practices. In this case, therefore, there has been a need by the different business entities to adopt and implement the most appropriate marketing strategy practices that best enable the fulfillment of the business objectives and goals in the given regions of operationability (Nicholls, 2010). The Abercrombie and Fitch is among the organizations that have sought to venture into the international market, most notably in Europe, where different brands are made available in numerous outlets. For instance, the A&F brand is made available by the company through the experiential marketing policy, in which much emphasis is put on the sales outlets that are tasked with showcasing the brand values. This approach is seen as ideal in enabling the brand have a competitive edge over those provided by its competitors, since the brand offers the consumer a significant experience, as well as creating a brand community (Powers and Loyka, 2010). The company uses in-store experience as the marketing vehicle. Enhancing the product competitiveness and the general organizational profitability involves carrying out a situational analysis, where the company creates a clear knowledge of the respective markets, and eventually evaluates its importance for the company as well as for the other markets where the business operates. International business environment is more dynamic, competitive and complex, hence the need for the management to be knowledgeable of both the immediate situations and the potential impacts of the effected changes in the business area. The European market explored by the Abercrombie and Fitch Company could exhibit various similarities and dissimilarities, hence the need for the company to understand the implications and linkages of the marketing strategy changes in its brand operations. Modern companies have realized the need to target particular customers, since they cannot appeal to all buyers. The buyers are widely scattered and have varying needs and buying behaviors, making it inevitable for the companies to adopt different practices that include segmentation, differentiation, and positioning, in order to satisfy the specific customer needs and ensure their competitiveness and profitability in the market. a. Segmentation The segmentation of A&F brand must take into consideration the diverse nature of the European market, where buyers have varying resources, wants, buying attitudes, buying practices, and living in different locations. In addition, different countries have varying political, economic and cultural makeup (Steward and Bruce, 2010). The segmentation of A&F brand can be done based on geographical locations, where countries are grouped on the basis of their regional locations, such as those in western and eastern Europe. Countries within a given region tend to exhibit similar customer behaviors and geographical segmentation would be ideal in accommodating the similar needs of the regional customers. On the other hand, the segmentation could be done based on the economic development and the population’s income, where the products are offered in varying qualities for varying prices (Wu and Ramesh, 2014). The economic structures in a country shape the needs for services and products for the population, hence, the marketing opportunities offered. Segmentation could also be done on the basis of legal and political factors and the government stability, monetary regulation, receptivity of the foreign companies, as well as the amount of bureaucracy (Steward and Bruce, 2010). The product development must take into consideration the specific cultural factors of the given customer segment, and this is determined by the religion, values, languages, customs, attitudes and behavior pattern of the population. b. Positioning and Differentiation Apart from the decision made on the particular target segments, the company should decide on how it can achieve value proportion, which aims at creating differentiated value for the targeted segments, as well as the specific positions it seeks to occupy in the identified segments (Sheau-Ting, Mohammed and Weng-Wai, 2013). The position occupied by the product is determined by the manner in which the consumer defines the product based on the important attributes compared to those offered by the competing products. The differentiation and positioning of the brand would involve identification of the possible differences in customer value that bring about competitive advantages upon which a position can be built. In addition, it would also include choosing the most appropriate competitive advantages, as well as making choices for an overall strategy of positioning. Identification of the competitive advantages and possible value differences would involve understanding for the customer needs in a better way than the competitors do, building profitable relationships with the customers, as well as delivery of more customer value. The ability of the Abercrombie and Fitch to position and differentiate its product in order to offer superior value, gives it a competitive advantage (Powers and Loyka, 2010). Finding the differentiation points would require that the marketers think through the whole customer experience with the products of the company. Therefore, the full positioning of the A&F brand, also referred to as the value proposition of the brand, should be able to convince the customer on why he or she should buy the product over the others in the market. 2. Standardization vs Adaption of Product Policy The increase in competition over the past decades on the international level has come as a result of trade policy liberalization, the easy process of monetary exchange, as well as the rising regional economic cooperations and improved transport and communication means. This has inevitably made the global corporations’ decision making very difficult, especially on the marketing strategy to be adopted (Zaiem and Zghidi, 2011). This has made it hard for the companies to decide on the best marketing strategy for the company when going global, particularly in making choices between standardization of their processes or adapting their marketing strategy to the international environment. Standardization is considered to be the process where the company extends and effectively applies the product standards dictated by the domestic target market, together with its attributes to the foreign markets, which have different marketing environments (Whitelock, 2007). On the other hand, adapting is defined as the compulsory modification of the product standards dictated by the domestic target market in the foreign country, in order to make the products suitable for the business conditions in the foreign country. Abercrombie and Fitch must make key decisions while embracing the dynamic European market, in regard to the standards of business operation standards that best enable the company to achieve its competitiveness and profitability. In this case, the Abercrombie and Fitch Company should seek to adapt to the specific market environment of the foreign markets in order to meet the respective needs of the customer population in the different countries and regions (Vrontis, Thrassou and Lamprianou, 2009). The adaptation strategy would be ideal for the company, given the significant differences in the consumer wants and needs in different countries, the intense competition that prompts product differentiation, and the need to fulfill the requirements of the host population such as technical, legal and packaging issues. The need for adaptation is also prompted by the living conditions, climate, lifestyle of the customers, income and literacy levels of the consumers, and the climate. As opposed to the standardization approach, the adaptation strategy entails an individual approach where the firm can have the chance to respective wants, needs and preferences of each customer. The need for adaptation is also supported by the great differences in economic situations, culture, regulations and rules, political systems, as well as the different consumer lifestyles and beliefs and values in different geographical regions. The use of adaptation strategy would enable the firm in achieving a competitive advantage. According to Viswanathan and Dickson (2007), the ultimate goal of the company should not focus on cost reduction fostered through standardization, but concentrate on the long-term profitability gained through increased sales realized through better utilization of different needs of the consumers in the different countries. This argument is backed by Horska,Ubreziova and Kekäle (2007) that those who advocate for standardization lack the conventional wisdom required in modern marketing. There have been assumptions that the homogeneity among consumers is on increase, especially in particular geographical areas. However, evidence suggests that consumers are growing more complex and diverse at a gradual pace and they cannot necessarily sacrifice quality for price. Product modification and adaptation strategy would enable Abercrombie and Fitch to increase its product sales volume in the foreign market through better satisfaction of the wants and needs of the customers (Zaiem and Zghidi, 2011). In addition, the company would better retain its customers by ensuring the products are up-to-date as well as considering the offerings made by other competing firms. 3. Differential Pricing Policy Differential pricing involves imposing different prices of a similar product on different access to the services or products. In this case, the company may decide to lower its prices on a particular product in order to encourage the identified customer target to use the products. Cox (2001) explains that in order for a firm to implement a feasible differential pricing, there must be three conditions available to facilitate this, and they include the company’s position of market power. In this respect, the company must not have any other readily available and appropriately satisfactory substitute for the products offered by the company. This means that by adopting the discriminatory pricing strategy in Europe, Abercrombie and Fitch risks losing on its profit and revenue if it offers any other products that would be considered as an alternative to that with a higher price (Kyle, 2007). Another condition under which the company can afford preferential pricing of the products offered is the ability to at least limit or prevent arbitrage. In this case, the company must be certain that the products offered for lesser prices cannot be re-sold by the customers either directly or indirectly to the other customers to whom the products are made available at higher prices (He and Guang-Zhen, 2006). This condition is very complex for the company and there is no surety that such conditions can be ascertained. By providing the company products at lower prices in Europe than it is in the US, there are high chances that customers in Europe buy the less expensive products and export them to the US for sale at relatively lower prices compared to those offered by Abercrombie and Fitch company. The inability to guarantee prevention of arbitrage would lead to tremendous loss of the product value and integrity in the US, and this would lead to inevitable losses for the company (Kyle, 2007). It is also believed that the difference in the value placed by different customers on the product or services offered by the firm should be varying, and the company must have the ability to differentiate between the customers who are willing and able to spend more from those who are willing and able to spend less, in order to make the preferential pricing strategy feasible (Grossman and Edwin, 2008). This means that the mass differential pricing intended for by the Abercrombie and Fitch Company may fail to prove effective, unless the company is convinced that the European market is willing and only able to pay less for the product, and that the US market is willing and able to shoulder the higher product prices. The uncertainty surrounding the company’s ability to ascertain the aforementioned conditions risks the company’s brand value and popularity. The inability to accommodate the respective customer needs through the discriminative pricing approach would lead to inevitable abandonment of the product by the group of customers who feel to be unfairly overcharged on the particular products on offer. Although the preferential pricing seems good in theory, the overuse of prices as proportional tools has impacted significantly on turning the brand into commodities (He and Guang-Zhen, 2006). Effecting a low pricing strategy for an elongated period of time is bound to impact negatively on the brand value, since the brand cannot be viewed as belonging to the premium product by the consumers. The use of low pricing as a key to introduction of the new product may prove to be risky if the product is intended for a long-term existence in the market. An uplift in the sales as well as the need to increase the number of consumers does not have a sufficient worth for the brand if the same brand is undermined or if there is disenfranchisement among the customers (Grossman and Edwin, 2008). On the other hand, the modern communication is an important tool that impacts greatly on product pricing. For instance, the preferential pricing cannot be kept a secret from the US-based consumers, who may revolt from purchasing the company product in order to have a similar price reduction. 4. Exclusive Distribution Policy In its modern form of distribution, the A&F brand is made available in a limited number of distribution stores, which have been historically characterized by long cues and periods of waiting in order to access the product (Levy and Weitz, 2007). This aspect of dsistribution could have potential negative impacts on the brand sale, especially on the new target of customers. Its introduction into the European market needs better publicity and advertisement, as well as proving easy to access by the potential customers. The current form of distribution, which is majorly dependent on limited distribution stores located within the luxurious shopping locations significantly limits the customer segments that can access the products (Ayers and Odegaard, 2008). In order to capture and accommodate the diversity in the different nations within which the brand is to be made available, it is important that the company changes its distribution policy. in this case, it is important that the brand distribution suits the respective customer diversity on cultural and social practices. In the US, it is assumed that the customers belonging in the high social classes, and hence can afford the premium luxury brand, live within the big cities, hence the location of the distribution stores in the high cities (Ayers and Odegaard, 2008). However, this pattern may not be the same in other European countries, and this means the distribution system must be revolutionized to suit the particular characteristics of the target customers. A revolutionized distribution gives the company numerous opportunities, which are normally linked with other marketing mix elements (Coyle, Bardi and Langley, 2003). For instance, the company could seek to introduce a distribution policy that promotes its objective, by use of activities that include in-store samples and demonstrations, as well as the special placements, where the retailer is normally paid. Placement is a good opportunity for the different proportions, which consider themselves as prestigious accounts, to get valuable deals (Levy and Weitz, 2007). The company could also seek to adopt the parallel distribution approach, where the products are made accessible to the customers through conventional outlets and through internet channels. The choice on the distribution policy for adoption must be made based on the respective customer characteristics, which reflects the general diversity of the European population (Sinergija and Handfield, 2006). 5. Elements in Designing Communication Plan Marketing and communication plans have been cited as important aspects that enable the companies to determine the action course in the quest to spread product-related messages to the customers, the industry, and other partners. The marketing efforts are intended to increase the firm’s revenue, product or brand awareness, as well as the customer bases (Palmer, 2009). In this case, the Abercrombie and Fitch’s communication plan and strategy in Europe is instrumental in its marketing strategy, because it could have the appropriate messages, but fail to communicate effectively, rendering the messages useless. a. Focus or Goals Goals or focus constitutes an important element in development of the communication and marketing plan. Focus helps in defining the definite purpose for which the plan is meant, hence dictating the general theme of the business. Therefore, all the tasks and projects proposed in relation to the plan for marketing and communication must comply with the specific details constituted in the goals (Kotler, Armstrong, Wong and Saunders, 2008). It is imperative that the objectives of the communication plans are defined, and it should be ensured that all appropriate parties within the company have a clear understanding and agreement with the goals set in the plan. Similarly, the set goals must be measurable, failure of which makes it impossible to determine the success or failure of their implementation. b. Budget The budget constitutes a vital component in the planning of marketing and communication in Europe. In this case, Abercrombie and Fitch needs to initiate a discussion between the marketing management and finance departments of the company to determine the exact budgets for the project as well as the time period within which such proposals can be effected (Palmer, 2009). Determination of the budget helps in deciding on the resources, tools and actions that can be taken, as well as determining which of those cannot be implemented due to the budgetary constraints. The marketing campaign must generate positive investment returns, and this means that the campaign needs to generate more income than the financial resources spent in their implementation. c. Message The company must seek to have the ideal way of communicating the message to the European audience. This means that there must be a prior definition of the audience and the target market. This definition is important in making decisions on how best the message can be communicated and the exact content, including images and texts (Percy and Elliot, 2005). For instance, the Abercrombie and Fitch company tries to market its products to the teenage range of customers, hence the need to use imageries and phrases that the target customer group would relate to and understand. Poorly communicated messages inevitably waste the marketing finances. d. Strategy The marketing and communication plans adopted by the company should have a particular strategy. Upon identification of the objectives and the budget limits of the plan, it is important that decisions are made in regard to how the set goals can be achieved. There are numerous ways of communicating the marketing messages, and the best alternative is determined by resources available and the target market. Advertisements made in magazines, newspapapers, radio, TV, or through the internet are among the means through which such communications can be made (Percy and Elliot, 2005). Others could include renting billboards for communication to people in particular areas, as well as sending direct mail to the specific population. e-mail marketing is another ideal alternative, where the company could design emails for the targeted group of customers to whom they can communicate the message. References Ayers, J. B. and Odegaard, M. A., 2008. Retail Supply Chain Management. New York: London Cox, J., 2001. Can Differential Prices Be Fair? Journal of Product and Brand Management, 10, pp. 264. Coyle, J. C., Bardi, E. J. and Langley, C., 2003. The Management of Business Logistics : A Supply Chain Perspective, South-Western, Thomson Learning. Grossman, Gene M., and Edwin L.-C. Lai., 2008. Parallel Imports and Price Controls. RAND Journal of Economics, 39(2), pp. 378-402. 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