Marketing Planning and Promotion at Abercrombie & Fitch - Research Paper Example

Marketing planning and promotion at Abercrombie & Fitch Introduction This marketing report highlights the different marketing strategies utilised at a major clothing retailer in the United Kingdom, Abercrombie & Fitch. This particular business generally caters to the youth demographic, using sex appeal and beauty as a means to reach their target audiences. Most of the clothing, though not necessarily spectacular in terms of casual wear in other competing companies, is priced noticeably higher as it seems that the firm tries to link pricing with brand reputation as part of marketing strategy. This report identifies areas of the marketing function at Abercrombie & Fitch (A and F), focusing on company communications, the business’ total promotional philosophy, and specific elements of the company’s marketing plans which either contribute to success or cause problems with reputation at the company. Marketing orientation at A and F When developing a sound marketing plan, companies like A and F must consider the income levels of their expected target audience, an intelligent understanding of what drives specific consumer behaviour in their desired market buyers, and how best to create a solid, positive perception of the brand’s image in the process. At Abercrombie, the organisation has created a marketing strategy where youthful and attractive appearance is the focus of most marketing communications and marketing literature in promotion activities. This is even noticeable in the company’s online investor report (annual report) which shows young men, partially clothed, with well-detailed bodies when presenting the annual investor data. The marketing strategy at A and F relies on attracting a more youthful demographic and uses different marketing communications to reach these audiences. For several years, A and F has managed to find high profitability by creating the brand perception that the company understands the values and beliefs of younger buyers. This has given the company the ability to set higher prices because most of the A and F casual wear shows the company’s logo very clearly. Thus, by wearing an item of clothing purchased at A and F, this would be part of the marketing strategy which puts the consumer into an elite category of fashion and improves their image among their younger peers. This shows that the company uses psychographic segmentation and similar strategies related to the psychology of human behaviour in an attempt to research and understand their young adult buyers. Since the business is so image-conscious, this type of psychographics would seem to the most appropriate method of using brand appeal to build higher profitability. Casey (2009) details that revenues, however, at Abercrombie fell sharply in the second quarter of 2009, by a margin of 24 percent. There seems to be a change in marketing strategy at A and F which is making this happen. The business had traditionally focused their marketing efforts at the younger market, however the business is now trying to capture a higher portion of the adult market (Casey). Also from the financial and investment environment, another author paints a very bleak portrait of A and F profitability in the previous quarter, with sales dropping another 28 percent (Jackson, 2008). It seems that the company had begun to refuse running marketing promotions during these periods as well, maybe in an effort to save costs, which also contributed to the business’ loss in sales revenue. A and F ran more advertisements showing youth models in provocative situations as part of their traditional marketing strategy and seem to have moved away from this focus. This would show the importance for A and F to consider whether radical changes in promotion should be performed when they have been experiencing high profit and sales success with their original focus. One interesting statistic involves competition, with some more upscale competitors achieving profit gains by 4.4 percent during the same time period when A and F profits were slipping (Lemer, 2008). This could indicate that Abercrombie might need to better understand its competition and their own, unique marketing strategies to find out where their strengths lie in marketing as part of a SWOT analysis. Competition represents considerable threats and it could be that their competitors have a better method of reaching their intended buying markets through different, unique promotions. When setting up a marketing strategy, it is important to understand what competitors are doing in terms of marketing, view their promotions, view the competitor’s financial records (when publicly available), and then try to create a picture as to whether some of these competition efforts can be benchmarked or should not be considered for A and F marketing efforts. Such high declines in sales volume in a short period of time, while other competition is experiencing higher sales success, should create a sense of urgency at A and F to try to create better marketing through brand building so that the original pricing expectations meet with profitability. If the consumer does not feel favorably about the price matched with expectations or perceptions of brand quality, companies like A and F could experience sales losses simply by losing touch with what consumers really want in a clothing purchase. The above reasons highlight why the development of a marketing strategy involves looking at consumer behaviour, knowing and researching the desired target audiences, creating promotion which is centred around these values as part of psychographics, and then delivering on any marketing promises made in communications. The next section of this report highlights the key elements of existing marketing strategy at A and F. The total planning process One key element of the marketing plan which was discussed in the previous section was pricing which is a key consideration for Abercrombie. Pricing is part of the company’s positioning strategy where they have set up a positive brand image where upscale buyer perceptions drive a higher price tag. There seems to be a good foundation of buyer confidence, for their desired target markets (the youth buyers) about quality and reputation for the company. This seems to be the most important part of the total planning process to meet profit expectations and satisfy investors in this publicly-traded company. Pressures from investors to perform financially is another push which likely drives pricing strategies. Something interesting for Abercrombie to consider comes from an author with a somewhat negative viewpoint of A and F, stating “beautiful boys may discover, that being a sex symbol is a limited kind of existence (Sands, 2007, p.2). What Sands is attempting to express is that youth is fleeting are so are the perceptions of young adults after the allure of youth and beauty is no longer a physical reality for this target group. Therefore A and F must consider the life cycle of their buyer markets, the target markets, before launching any long-term brand-building exercises or attempts to make their youth markets life-long buyers. Therefore, it is likely that A and F must consider, as part of their marketing strategy, how to create short-term, innovative marketing and offer similar changes in their clothing offers, to keep the buyers interested until their inevitable life cycle decline occurs. Not only the life cycle of the product must be considered, but the brand and the buying audience as well. In this company, youth is the key factor, therefore the company must also consider how to reach upcoming markets, perhaps the young teenager, to get them committed to the A and F brands and clothing lines. Clark (2007) offers that A and F has taken a premium positioning approach and has been able to create buyer excitement in the process. However, the author clearly is dissatisfied with the pricing strategies at the company and flatly calls their clothing as “being sold at a significant mark-up” (Clark, p.15). This means that in the general public, there are those potential buyers who might not be willing to pay the higher price tag associated with most of Abercrombie’s merchandise. In their desired target market, if these perceptions were allowed to develop, A and F could face profit crisis if the company were forced to lower the prices of their merchandise. This is another key element of the marketing plan which must be considered: How long can premium positioning last before the company needs to reposition its clothing in a lower resource market environment? At a time where the global economy is in a slow-down, it is a likely assumption that potential buyers will have less cash to spend on a variety of merchandise. Therefore, a recommended for A and F would be to spend a considerable time researching whether a great deal of potential buyers are aware of the higher mark-up and therefore select competition. This could be eroding the company’s brand image without their knowledge which is causing the current slips in profitability. The develop of loyalty programmes or some other form of incentive to build sales might seem to be important at this time, even if it cuts away from some of the premium positioning and value perceptions from buyers just to get once-loyal youth customers back in the door to make purchases. There is an importance which should be considered in developing the marketing strategy, which involves place as part of the marketing mix. Currently, A and F uses modern, youthful in-store music as part of the buyer appeal (Annual Report, 2008). The business wants to use different lighting experiences and the music to build more excitement and make the shopping experience one which is innovative and unique. Also, in terms of people in the marketing mix, the company quotes, “energetic brand representatives” (Annual Report, p.5) when describing their internal sales culture. This would suggest that A and F, as part of total marketing strategy, wants an interactive experience with sales representatives who are excited about the company and can relate well face-to-face with their desired youth markets. Place seems to be an important factor for the company in creating the long-lasting positive brand perception of innovation, elitism and quality. A and F would seem to be marketed as more of an in-store experience than simply a clothing shopping trip. No recommendations for place and in-store activity is suggested as these seem to appeal to their youth and beauty-oriented markets. It does not appear that A and F is quick to move in terms of making strategic changes in the face of dropping sales and unexpected changes in consumer behaviour. For instance, the company’s 24 percent loss of revenue in the second quarter of 2009 led to a public disclosure of an upcoming strategic review, showing that A and F was concerned about profit and investor confidence (Casey). The company representatives did not, however, give any notification of how long such a review would take place. Sales drops which measure in double digits would be a cause of concern, which should make the company’s leadership consider whether it is because of pricing, consumer values changes, or other issues which lead to lost sales volumes. Instead, A and F seems to rely on its previous marketing successes and does not seriously consider the life cycle of the buyer. It is recommended that the company react more quickly in terms of researching buyer preferences (perhaps through surveys or other quantitative studies) so that strategic changes can occur rapidly. This marketing-focused company, which often relies on heavy advertising, needs a more thorough strategic analysis in a real-time buyer environment in order to remain highly profitable and achieve success in marketing strategy. Communicating with A and F customers Abercrombie seems to understand their youth and sexually-minded buyer markets. Communications on this level do not seem to be causing the company to lose sales. However, there is a public relations image problem which seems to exist in the non-buyer, adult markets in Europe who do not necessarily believe that A and F branding strategies are ethical and sometimes even moral. Spurgin (2006) describes the company’s previous marketing promotion known as the magalog which showed semi-nude models in sexually-provocative situations. Public outcry against this magalog believed it was aimed at teens in a method which went against the larger public set of values and morality. Additionally, Ritson (2008) describes his own personal bias against the company, suggesting that there are no larger sizes of the A and F clothing line available for the larger consumer who is not as trim and fit as the desired markets at this clothing company. The author suggests that A and F should, “stretch (their clothing line) across the flaccid girth of a balding and out-of-shape bloke who fancies himself” (Ritson, p.21). This would suggest that there are some individuals in the general society who do not feel that A and F communicates with them effectively nor makes any effort to recognise the needs of the less-chiseled body. This could interrupt any low volume sales from this group, the browsing but untargeted market, which might be affecting some sales successes from occurring at A and F. When there are attempts to send positive messages to a narrower market, but there is outcry from a broader, non-buying market, A and F might wish to reconsider whether their promotional materials are going to be taken well. Since the company’s desired market is the youth consumer, it is likely to believe that some of these youths rely on their parents’ income in order to make clothing purchases. If the parent develops a negative view of the brand or the entire clothing line, this also could impact sales successes even if the desired target market is still feeling favourable about Abercrombie and the brand name. It does seem that A and F has created a great deal of negative public relations in their regular advertising and promotional campaigns which would not be something to take lightly when thinking of future communications. The in-store experience, with clever lighting, music and energetic sales associates, is also another method of communicating with customers which A and F has adopted in Europe. Sometimes non-verbal communication can establish relationships, especially if psychographic values exist in the buyer where they strongly rely on peers to make brand decisions. For example, if the youth markets are not shopping alone but with friends and associates, they are likely looking to one another for acceptance of the brand or denial of the sales environment. Abercrombie appears to be doing a quality job of communicating with customers from an in-store perspective and no recommendations for changes are proposed. Figure 1 (below) illustrates the type of images which A and F utilises in most of their promotional literature and other marketing communications. For their desired demographic, who work to maintain similar body types and stay youthful-looking and fit, this type of information likely speaks to them and their unique values. Creating a connection through this type of additional non-verbal marketing efforts (promotion), along with the smaller sizes available to complement these well-maintained physical figures, seems to build measurable profit value for Abercrombie. To simply abandon this tested and financially-successful marketing communications effort would not bring value to A and F, therefore no recommendations for changes are offered. Figure 1 – Annual report image in investor-related communications In terms of overall marketing communications, Abercrombie & Fitch appears to remain dedicated to sending this beauty-oriented message to its buying audiences (the young adult group). A and F has managed, through these communications, to build a positive brand image and considerable brand loyalty in the process in order to be profitable (except in recent quarters with sales drops). To recommend new strategies would erode the value added to the current A and F brand, making the company have to, in the long-term, reposition the company as a less elitist brand with a much lower price tag due to less consumer confidence about value and quality as it fits their psychological preferences and lifestyle values. Promotional policy It was already identified that Abercrombie relies heavily on promotion in order to reach their desired consumer markets. Heavy budgets and concentration and print advertisement, with the use of images and the company’s trademark logo, is the emphasis of the company’s marketing and communications focus to build profit and sales success. However, there is no evidence of any incentives in the current promotional policy, such as coupons, discounts, refunds, or bonus purchase offers which are commonly found in other competition. These types of sales promotions are recommended in a time where there is uncertainty as to whether current sales declines are coming from changes in buyer behaviour or whether pricing may be an issue. Getting customers an incentive to visit the A and F environment in the promise of a discount could, at least short-term, change the promotional strategy at the company and build more loyalty in the process. There is no evidence, either, that any prospecting or other trade show events occur at A and F, such as taking their merchandise into convention environments to gain even more support from their buying audience. These types of trade shows, if marketed properly, could give A and F more exposure to other youth buyers the company has been unable to reach previously, or introduce upcoming fashions before they are launched on the actual in-store sales floor. This could accomplish a different type of promotion where the same energetic sales representatives can, in a public environment, get people excited about the brand and make them want to visit the store environment. There is not enough emphasis on unique promotion at Abercrombie where the business is willing to take its merchandise to the buyer rather than forcing the buyer to visit the store. Special sweepstakes or contest entry could be a quality promotional incentive to get people to visit the various trade show booths or convention centres, while at the same time being exposed to the familiar, provocative communications and advertisements which were successful for A and F for such a long period; financially. Trade shows such as these, if coordinated properly and with the right staff and management, could probably rebuild any negative perceptions of the company and change the way that the business approaches its customers or non-customers (potential buyers) as well. Since there does not seem to be a justification for the high price tag of A and F clothing, other than perception and positioning success, this means that actual quality of the products is not much superior to that of competitor products. However, by taking this merchandise into a trade show or expo environment, this could give more emphasis to product in the marketing mix by allowing customers to examine the different clothing varieties offered and even make suggestions on different styles or textures (or logos) which they would like to see. This could be a very low-cost, but effective promotional tool for building customer relationships and also providing the much-needed consumer research information described earlier in this report. Abercrombie could benefit from a more radical and unique method of reaching clients by creating an in-store experience outside of the store. For any buyers which might be turned off by the in-store music and lighting, this could provide more positive brand acceptance and preference from these groups. Further, in terms of promotional recommendations, the goal of a company which markets in this fashion is to create a lifestyle connection with the buyer. Various in-store promotions which focus on lifestyle elements in these groups, such as spotlighting famous youth body-builders, could be another strategic option for A and F by creating celebrity linkage with other promotional activities and the marketing mix. Youth models are currently utilised in A and F catalogs and other marketing literature, however there is no evidence of celebrity endorsements as part of promotional and advertising strategy. This new dimension of promotion, though a more costly effort, could build more of the elite appeal which Abercrombie is trying to develop in building a stronger brand with sexy attitude. A famous, similarly-fit celebrity which is appreciated by their desired markets would also change, for the better, promotional strategy at the company. Conclusion Abercrombie & Fitch has many different talents in combining elements of the marketing mix with promotional strategy in order to create a positive brand image. However, it was identified that the business has measurable problems with public relations in certain large-group, non-buyer markets. This is something which should give serious thought to A and F. It was also identified that there is uncertainty, which means an element of risk to Abercrombie, based on why sales are slipping at a time when competitor sales are moving upwards by a small degree. Strategic analysis and rapid response is most definitely needed at the firm, along with different and innovative promotional strategy. Bibliography Annual Report. 2008. A & F Annual Report. http://library.corporate-ir.net/library/61/617/61701/items/295294/Final_AF_07ANNUAL_REPORT.pdf. (accessed 17 July 2009). Clark, Nicola. 2007. Over here and over-priced. Marketing, London. 11 Apr 2007, p.15. Casey, Nicholas. 2009. Corporate News: After Big Loss, Abercrombie to Cut Prices. Wall Street Journal, 16 May 2009, p.B.5. Jackson, Alonzo. 2008. Consuming passions still smoulder. Fund Strategy, London. 15 Dec 2008, p.9. Lemer, Jeremy. 2008. Resilient retailers impress with a display of strength. Financial Times, London. 16 Aug 2008, p.14. Ritson, Mark. 2008. Abercrombie has XXL-sized problem. Marketing, London. 9 Jul 2008, p.21. Sands, Sarah. 2007. Male sex symbols, silence and snore bored Sara Sands. Financial Times, London. 16 Jun 2007, p.2. Spurgin, Earl W. 2006. What was wrong with Abercrombie & Fitch’s Magalog? Business and Society Review, New York. 111(4), p.387-398. Ebsco Database. (accessed 16 July 2009). Read More