Applying the Marketing Concepts to Forever21 in the Chinese Market - Case Study Example

Principles of Marketing Applying the Marketing Concepts to Forever21 in the Chinese Market Submitted By: Submission Date: 01/01/0001 The Principles of Marketing A world of diversified needs and extremely diverse markets exists today. The demand for international products has been on the high increase recently. Cultural differences have also made the marketers to take it upon themselves to be acquainted with the behaviors of their potential customers so that they know what to provide and to whom (their target market). This and more details will enhance communication with the customers which will contribute to business success. This is why it is important to study a potential (target) market before holding any campaigns for product promotions. Marketers need to mould their products according to different markets in order to better satisfy their needs. Applying the Principles – Forever21 in the Chinese Market I have chosen Forever21 as the organization that I will analyze, in the Chinese market. Forever21 is one of the famous clothing stores existing today. It is known for its trendy and fashionable clothing offered at low and affordable prices that undercut even those of its major competitors, such as H&M clothing and others like Urban Outfitters and Guess. The company has been offering fashion and accessories to teenage men and women for more than 20 years now and most of its apparel is made in California, U.S.A. Forever21, shows no signs of slowing down as it has started making its way across Asia. Despite the recession, the giant retailer is progressing with bold expansion plans. This paper will discuss Forever21’s current marketing techniques and its market segmentation, pricing, positioning, promotional and target market strategies (making some suggestions in regards to the principles learnt in class). If these strategies are not customized according to the target market, there are huge chances that the product might fail. Analysis of Factors Affecting the Chinese Market Culture Culture is mainly defined by the people’s beliefs, clothing, tools, attitudes, values and religions. All this affects the choices that people make in buying their products. China has a diversity of cultures; some people are still tied to their traditional beliefs while a good number has been relaxed. Therefore it is an appropriate nation that can accommodate the various designs of Forever21 clothing. Forever21 deals in clothes like robes, bound feet shoes and cheongsams that are preferred by the Chinese. Diversification People have diverse tastes in every part of the world. Forever21’s clothes must be designed and made for diversity. The clothes should be of different colors and made of different materials putting into consideration the different attitudes of the cultures in colors, especially for the Chinese market. Psychology Psychology discusses their buying behaviors, reasons for buying and many other psychological factors are considered. Among the marketing research done in China, it is realized that there is a general acceptance of American clothing in the country. The youth, who form the largest population in China, have a liking for foreign products which they view as unique and classy. Forever21 products can serve their much needed uniqueness. Clothes from America are also viewed to be of high quality which will make them not stay much in the market without being recognized. Market Segmentation “I don’t know the key to success but the key to failure is trying to please everyone.” (BILL CROSBY) The most important part before marketing a product is to do proper market segmentation, dividing the audience on the basis of their demographics, psychographics and behaviors requiring different marketing mixes. Market segmentation is required to adapt the company’s offerings so they more closely match the segment’s needs. This way, Forever21 can market its products efficiently by targeting its products to consumers that it can serve best. Forever21 can use demographic segmentation for the purpose of marketing its products in China effectively. Forever21 can divide the market into groups based on demographic variables such as age, sex, family size, income, occupation, education, religion, race and nationality. Consumer needs and wants change with their ages. Forever21 can address the market aged between 16 and 30. People in this age group are generally found to be trendy and look for different stylish clothing for themselves that Forever21 can offer. Different products can be designed for specific needs of people in different age segments. Ethnic segmentation is also a part of demographic variables. Since in China there is a majority of Buddhists, the products that Forever21 offers to its consumers can be specifically tailored to the needs of this particular ethnic group, and other ethnicities as well. Life-cycle stage also holds great importance in the clothing business. Forever21 aims to cater young individuals who are fashion hungry, always looking forward to new and modern styles. One of the most important segmentation for Forever21 is the gender segmentation. This segmentation is usual in the clothing business and women are the significant part in it. Other gender segments are men and children. Women have greater fashion clothing concerns when compared to men. To address this, Forever21 can emphasize more on the female segment of the market by developing innovative and attractive designs. China’s huge population is actually a huge bonus for the growth of Forever21. The growth in income has contributed towards Chinese apparel sales growth, specifically the high end market. High-income population has rapidly increased in number and has a strong appetite for high-class brands and luxury products, such as that Forever21 offers. This market also has a great profit potential because the main customers are young people. (Analysis of Apparel Retail Market in China, 2009) For this reason, Shanghai, being the most populous city in China with over 20 million people, and Beijing, the second largest with more than 17 million people are prospective market segments that could be catered and where profit potential exists. These cities are included in the high income region along with Guangdong, Tianjin (another major buyer of apparel) and Zhejiang. Statistics for the Chinese apparel industry (sales and profits) are given below: Sales (2008) Profit 243.2 billion Yuan, up by 28% 10.3 billion Yuan, up by 31% Source: (Analysis of Apparel Retail Market in China, 2009) Statistics show that average clothing consumption growth/capita of China’s urban resident has increased by 15.5% and it is expected that China would surpass Japan to become the world’s largest clothing market by 2010. (reportlinker.com) Target Market Strategy The attractiveness of each and every segment should be evaluated. Segments with the right size and growth characteristics are interesting to every company. Each segment has certain success requirements that can be fulfilled with the rights strengths that the competitors don’t have. Forever21 can follow the concentrated marketing strategy in the Chinese market. It can achieve a strong market position in the segments (or niches) it serves i.e. young generation, especially women because of its greater knowledge of the segments and its special reputation in the clothing industry. It would also enjoy many operating economies because of specialization in production and promotion of its clothes and accessories. Forever21 products need differentiation and concentration. Consumers typically choose products that give them the greatest value, therefore gaining competitive advantage is essential and Forever21 can do this with its relatively lower prices than competitors. It can earn price premiums on its products by offering greater value to its customers and offering accessories not provided by its competitors. Another aspect of product differentiation is to customize products in-line with the taste of people living in China and their culture, e.g. making designs that the Chinese people like on their robes, bound feet shoes and cheongsams. (a one-piece suit for women) Service Differentiation In addition to differentiating its physical products, Forever21 can also differentiate its services that accompany the product. This includes speedy, reliable and careful delivery, allowing for after purchase replacement/exchange and guarantees on product quality etc. the service differentiation areas holds great importance in today’s world. Since the Chinese market is also sound in technology, Forever21 must provide extensive online services related to its stores, products and ways in which customers can shop at their stores. This includes shopping in store, online, by phone and even through cell phones using the SMS service for example. This is also convenient for the young market, a niche that holds great importance for the company. Payments options also have a significant role in service differentiation and provide for customer convenience. These include paying using credit cards, PayPal accounts, through SMS or by gift cards. Positioning Forever21, like every company that wishes to exist profitably in this era, needs to position its products strongly in the minds of its customers. Positioning is the way the product is defined by consumers based on important attributes. It is the place that the product occupies in the minds of the customers relative to those of competitors. Forever21’s competitive advantage like low costs, high quality, fashionable clothing can influence the products’ positioning in the minds of the consumers. However, consumers organize products into categories, or they ‘position’ them in their minds based on the value they get from them in return for their expense. Users can help position Forever21’s products effectively. The market share for the products can be effectively increased by repositioning them and associating them with user classes. For example, the giant clothing retailer can position its products in the minds of consumers as new fashion and everyday deliveries at a great value, which mainly attracts young ladies and their mothers. The combination of low prices, high quality clothing and attributing it with users would preferably work best for Forever21. Pricing If effective product development, promotion and distribution sow the seeds of success, effective and attractive pricing is the harvest and plays an important role in the growth of any business. Customers do not buy benefits and features, they actually buy value! The recent economic downturn has put many companies in a pricing vice and it is impossible to raise prices where the pressure to slash them continues. However, cutting prices always is not the best option as it can signal to consumers that price is more important than the brand; and Forever21does not intend to create such an impression. The giant clothing company must carefully select its target market and position its products well in the minds of its customers. The target market that Forever21 basically addresses is the younger generation including teens, college students and young adults who are fashion conscious and so, the prices need to be adjusted according to the affordability of this target market. Forever21 offers reasonable prices for its clothing with some exceptions such as brands that are specifically targeted towards a niche with the prices tailored to their affordability. An example of this is the “Fabulous Finds” brand by Forever21 which has inexpensive items that are imported from Vietnam. (Forever21: Wikipedia) Another Forever21 brand by the name of Twelve by Twelve is a slightly more sophisticated luxury line with a little bit higher prices, but still lower when compared to its competitors. Twelve by Twelve is targeted towards the high-end market. Merchandise at Forever21 is reasonable, with casual shirts selling from $4.99 to mostly under $19.99. Forever21 also offers hundreds of different $12.99 T-shirts at its stores splashed with sports logos etc. around the world. The same can be done in the Chinese market. The enormous quantities produced allows spectacular economies of sale to Forever21 which it can pass on to its consumers. The right price is that which most adjusts to the value that customer mentally attributes to the product. Product costs set a floor to the price; consumer perceptions of the product’s value set the ceiling. In Forever21’s case, price is a crucial product-positioning factor that defines the product’s market, competition and design. It should follow value-based pricing strategy for its apparel, setting price based on buyers’ perceptions of product values rather than on cost, keeping in mind the pocket book of teenagers and young adults. Value based pricing reverses the process as in cost based pricing. The target value set for the product is then used to drive decisions about product design and what costs can be incurred and the price is set to match consumers’ perceived value. This way, Forever21’s sales can grow, by offering the right combination of quality and price to its target market. (Pfaff) The pricing strategy used by Forever21 also includes “Promotional pricing”, temporarily reducing prices on apparel and accessories (specially on those that are out of season) to increase short-run sales and revenues. Psychological pricing is a basic part of pricing strategies used by many companies today, specially in the U.S, and Forever21 can also practices this in China. (It’s prices are written with “.99” which produces a psychological effect on the buyer of paying lesser amounts. E.g. Writing $29.99 instead of $30) Discount and allowance pricing also has a significant importance. Forever21 offers its product at relatively lower prices than competitors and introduce special offers such as “Buy 2 get 1 free” or get a “20 percent discount on the second item” which actually motivates buyers to buy even more. Promotional Strategy Fashion has been invading people’s style of living tremendously. Every company needs to divide the promotion budget among the major tools to create the promotion mix. Companies can pursue a push or a pull promotional strategy, or a combination of the two. The best blend of promotion tools depends on the type of product/market. Forever21 can follow the push strategy. The company practices a variety of promotional methods in different countries. For increasing sales, one of the most noticeable promotional strategy that Forever21 goes after is providing “free shipping” from time to time and sometimes also applying a limitation on the minmum order amount. This, and charging lesser/discounted prices (set according to the Chinese market) is also another attractive way that Forever21 can to promote itself. Forever21 has also turned its attention towards celebrity ads bringing BoA, a Korean popstar into its promotional campaigns, such as including her pictures on their website. This promotional strategy associates the Forever21 brand with celebrity clothing and thus creates a lot of hype, maximum appeal and excitement amonsgst the younger generation. (Promotion: BoA on Forever 21) This is just one example; Jillian from The Bachelorette also wore a Forever21 dress, available for sale in stores. By virtue of its fashion know-how and its expertise in anticipating trends, Forever21 has achieved popularity among consumers which has enabled the company to grow at a formidable rate; despite overcrowding in the clothing market and slow consumer spending. Forever21 has a keen understanding of its target market which is the low price, high fashion sector. To promote the company and its clothing, Forever21 uses video advertisements, print advertisements and the concept of e-marketing (Electronic Marketing). This promotional strategy will tend to reach consumers from different places around the globe. Forever21 also offers mail in offers and coupons to consumers. Moreover, since the trend in the marketplace today is the usage of e-marketing, Forever21 provides a website that any client can access. (www.forever21.com)  This method of promotion has become helpful in transforming the value-chain from manufacturers to retailers to consumers, creating a new retail distribution channel.  The company can also promote its apparel and accessories on the giant social networking tool, Facebook with a personalized page for the Chinese target market. Forever21 also holds interactive quizes on its global Facebook page (with a note saying “satisfying your craving for fashion”) and awards the winner(s) with particular goodies. This is an attractive way of promoting its products besides television advertisements, pamflets, magazines and kiosks in different shopping malls. Conclusion Forever 21 is a well established brand in many countries around the globe. The Chinese market can effectively be targeted by choosing the right market segment(s) and carefully catering to their requirements, tastes and choices associated with their cultures. Positioning plays a key role in establishing the brand in the minds of the consumers. Strong brand positions would lead to higher growth and sales for Forever 21 in the Chinese market. Works Cited Analysis of Apparel Retail Market in China. (2009, March 18). Retrieved 18 July, 2009, from Reuters: http://www.reuters.com/article/pressRelease/idUS82374+18-Mar-2009+BW20090318 Forever21: Wikipedia. (n.d.). Retrieved May 09, 2010, from Wikipedia: http://en.wikipedia.org/wiki/Forever_21 Pfaff, K. (n.d.). SCT - Shopping Centers Today Online. Retrieved May 09, 2010, from http://www.icsc.org/srch/sct/sct0302/page35.php Promotion: BoA on Forever 21. (n.d.). Retrieved May 09, 2010, from seoulfull: http://seoulfull.wordpress.com/2009/03/13/promotion-boa-on-forever-21-se7en-on-myspace/ reportlinker.com. (n.d.). Analysis of Apparel Retail Market in China 2008. Retrieved May 09, 2010, from reportlinker.com: http://www.reportlinker.com/p0109191/Analysis-of-Apparel-Retail-Market-in-China-2008.html?request=news Read More