Zara's Marketing Communications Plan - Case Study Example

Marketing Communications Plan A Case Study on Zara Table of Contents Topic page Introduction 3- 4 Marketing Communication Practiced by Zara 4-8 Marketing Communication Objectives 8 Marketing Communication Plan 9 Conclusion Introduction Spanish Retail Chain, Inditex SA’s flagship brand Zara has become one of the popular names in the global fashion industry basically for two reasons: the design of the garments reflect fashion and are priced economically. Amancio Ortega Gaona started the company in 1975 in La Coruna, Spain. Inditex, the Corporate Group founded in 1985 took over the reins of Zara. The Zara clothing line became one of the most successful product lines for the company contributing about 80 percent to the total group sales. Success of the Zara Brand owes mainly to three strategic factors viz. Reduction in the Lead Time; Reduction in the quantity supplied against each style and Production of large varieties of different styles per year. The reduction in the lead-time or the delivery period has helped the brand to cater to the needs of the customer within a smaller time frame of 30 days. Reduction in the delivery period was made possible by rightly and timely identifying the fashion needs and thereby acting promptly. This strategy has helped Zara stand apart in relation to its competitors. Zara, by the method of reducing the quantity supplied in each style creates hype on the specific style. The desire of the customers to own the particular style increases owing to an ‘out of market’ situation created. (Dutta, 2002) Zara’s business activities Zara produces a huge quantity of styles per year, which helps mass-market penetration in comparison to its competitors. The brand produces about 12,000 styles per year, which creates an image of sophistication of the Zara, Brand. The achievement of the above strategies by Zara has been made possible by certain contributing reasons like the brand gives primary focus on the art of selection of the right fabric. It makes a purchase of semi-processed and uncolored fabrics, which they design, and color depending on the needs of the specific season. The second contributing factor is unlike its competitors like Gap of America it does not outsource its manufacturing operations. An estimate shoes that 80 percent of Zara’s production is carried out mostly in Spain. Thirdly, the product development team with manpower above 200 is one of the most important departments of the company that helps in incorporating the most modern concepts in the products. (Dutta, 2002) At present the brand has its presence in 63 countries with a total of 997 stores worldwide. (Nidasio, March 7, 2007). Zara, makes huge investments on parameters like store location, store layouts and on product development activities and quite less as regards to advertising and promotion activities. It spends only 0.3 percent of its revenues in advertising operations. (Zara’s Business Model, Information and Communication Technologies, and Competitive Analysis, N.D.) It is in this light that the paper undertakes the research as to the strategies followed as regards to marketing communication activities and developments needed thereof. Marketing Communication practiced by Zara Marketing and Distribution Strategies Zara, as a brand has some unique promotional features as regards to its competitors. The advertisement expenditure incurred by Zara comes to about 0.3 percent of its revenues as compared to its competitors incurring about 3-4 percent on such. It reflects a cost advantage model practiced by the brand. Zara, on the other hand renders puts stress on enhancing the store layouts, conducting product development activities by producing large amount of new styles and on store locations in respect to its competitors. Zara’s stores are mainly located in prime districts thus giving ‘visibility marketing’. The production of less quantity per style increases customer hype for such and visits to the store increases to get newer styles. Further, the stores are kept spic-n-span and fresh with much investment on store layout functions. The stores are also redesigned every five years to render a new look. These activities carried out by the brand help in attracting a huge customer base. (Zara’s Business Model, Information and Communication Technologies, and Competitive Analysis, N.D.) Zara, in the last there years has taken strategic initiatives in the direction of its adaption to market fluctuations and in making a lean inventory system. The company had even on a previous note depicted the idea that adaptability to change along with an efficient inventory system is far more effective to employing cheap labor to help increase the profitability and growth of a company. The company by dearth of an efficient supply chain mechanism has endeavored to reach different global markets. (“Zara Clothing Retail Model Based on lean inventories and market flexibility could change the future of marketing”, 2001). Inditex group at present has over 1300 stores across 39 countries contributing to total sales of 3 billion euro. The Zara brand has a unique organizational break up in its design functions as regards to its competitors. The design function in Zara is essentially divided into three product areas viz. women’s, men’s and children garments. Each of the different areas has designers, market specialists and buyers working in an interrelated manner. Small workshops are organized to carry out tests on designs made. Market specialists in Zara track changes in customer needs and are in frequent contact with the retail outlets to understand customer viewpoint to new designs. The seasonal cycle entails a mass issue of new products throughout the year. Further, Zara has a set of automated warehouses located in the vicinity of the production centers. The warehouses mainly stores, packs and allocates merchandise addressing individual orders for the retail outlets. Average size of a Zara store is around 800 square meters. The shelf space of garments in Zara stores varies for two to three weeks owing to new designs rotations. (Leerman, 2010, pp. 16-18). Zara has been referred to as a star in spotting the right fashion mix and thereby converting it into new designs for its products to be sold to a mass of fashion centered customers. The Spanish brand Zara goes by the rule of reacting rather than predicting the change in the market. Designer personnel at Zara often pay visit to nightclubs and other venues to find the modern fashion trends of people. (Lincoln & Thomassen, 2007, p.118) Analysis of Zara by Ansoff’s Matrix The marketing strategy of the retail chain Zara is analyzed using the Ansoff’s Matrix to gain a better insight into the firm’s strategic initiatives. Ansoff matrix is mainly used to track a company’s product and market development activities and to comment on its efficiency. The output obtained from the Ansoff Matrix as regards to strategic functions of a company is divided along four parameters viz. Market Penetration along existing products and markets; Market Development along existing products and new markets; Product Development along new products and existing markets and Diversification strategies along new products and new markets. (Ansoff’s product/market mix, N.D.) In the context of the above discussion the Market Penetration activities of Zara is mainly catering to the active supply chain management of the company. Through the revolution made in reduction of the delivery period the stocks replenishments are made now in about 8-10 weeks from 20-30 weeks at a previous period. The shipments made in the process are generally small and being made often gives a fresh look at the stores. Store managers in the retail outlets report the customer’s enquiry to the head quarters frequently. This helps in pulling out of old and non-moving stocks and putting hot cakes in there. This helps in gaining customer’s attention in the existing markets and helps in enhancement of customer loyalty. (Anderson & Lovejoy, March 2007). Zara’s strategy for targeting newer markets is seen on a contradictory tone in the light of its operations centered only in Europe. Different nations along the world have different tastes and preferences and differ socially, economically and politically. These can prove to be a threat to Zara’s developmental motives for it is bound to face stiff completion owing to its Europe central operations only. In Europe though Zara has excelled in its distribution activities yet outside the European domain Zara lacks the ability of having an effective distribution system. The fall in the value of Euro in terms of Dollar also can increase the cost of the garments in the world market. Competitors like Gap and Benneton are also keen in covering the foreign markets, which create enough competition for Zara in the global sphere. (Zara Fashion Case Analysis, N.D.). Zara, with a team of 200 designers based in Spain have the potential of producing 1000 new styles on a monthly basis. However, the frequency of introducing newer styles in the retail markets is seen to produce only 200,000 to 300,000 amounts in retail sales. The sales obtained are much lower to that of competitors. Even, at times it fails to cover even the product development costs of Zara. (Dutta, 2002) As regards to market diversification Zara has to track new avenues to develop other products and services along with its present line of product development. It has to target a lucrative industry, which provides a healthy market mix in the area of operation chose. Marketing Communication objectives The marketing communication method practiced by Zara is done keeping on view some key objectives. Zara presents a feminine image that is fashion friendly and trendy by nature. The brand also reflects benefits like being economic though fashionable and tries to put emphasis on a street smart look. It also projects key brand attributes like providing a wide range of assortment with variegated hues, colors and designs. The brand in order to market its aforesaid image follows a key business model. The business model of Zara has five main factors like Customers, Stores, Design and Production activities, Logistics and Team Work. Customer is taken to be the main driving factor for the activities of Zara. The other factors mentioned center around the Customer factor of the Brand. The stores are primarily located with properly maintained windows. Zara, stores qualify for their customer care activities and weekly rotation of new merchandise. The brand has a base of 1,186 suppliers and 200 designers who spontaneously work as a team on innovative fashion trends. The logistics department of Zara is highly flexible and customer oriented. Zara, stores with 89,112 people working in a team make the retail outlets a pleasant shopping ground for customers. (New Collection Launch –Marketing Plan, October 22, 2009). Marketing Communications Plan Zara is seen to take very less resort to advertisement activities with spending only 0.3 percent of its total revenues upon it. In this context it needs to be said that advertising plays a key role in promoting business success for a company. It helps in creating of public awareness to the products and services offered by the company. It helps in fetching potential buyers to the company’s products and service portfolio. The expenditure incurred on advertising will act as a boon in the long run in increasing its revenue and sales. Electronic advertising helps in acquiring a huge base of customers from around the globe and thus helps in penetration in newer markets. (Hassam, N.D.). Thus, Zara also has to gear up its advertising activities to gain a larger space in the world market. Spending on direct marketing activities simultaneously with spending on store locations and layouts will add to customer hype in the European markets. Similarly, the firm needs to enter the Internet marketing paradigm also. This will help Zara to diversify its market base and reduce the global problems occurring due to expansion activities. Zara can also take onto some social activities on its Social Responsibility standpoint, which will help creating a favorable public image for the company. In the light of Social Responsibility activities practiced by Zara the Marathon event held in Karatu region of Ngorongoro on April 10, 2010 can be cited. The race is conducted to create awareness about diseases like malaria, which affects many people in the African continent. This year on May 25, 2010 Zara had conducted a Kids Run contest, which was sponsored by Zara Charity. (Zara and Social Responsibility, 2010). This has definitely helped in propagating the brand value of Zara but it not enough in this world of competition. Another problem with Zara’s expansion strategy is that it is more concentrated all over Europe. The company needs to communicate more across the world with different cultures. For this purpose they might have websites in different language for people of different nations to know about their products thoroughly. These websites might have online chatting options for the common people to be able to communicate with the sales personnel of the company. This will complement the communication strategy which the company has between the headquarter and the local stores all over the world. It is not always possible for all the customers to visit the stores and give their opinions or reveal their individual choices. Communication via 24x7 e-chat options would make this easier and enable the customer to find out about the designs and give their opinions right from the comfort of their home. Conclusion Zara has traveled quite far and set an example in the field of marketing strategy through its timely activities and development of communication system. However small steps will make their strategic framework more complete in nature. Large-scale advertising plan is required especially in the emerging economies that are increasingly adopting the global fashion trends. Nations like India and China are increasingly adopting these trends and Zara needs to adopt their choices into their product range as well in order to be globally popular and known. Ethnic features need to be more incorporated into their designs based on what these nations need. Zara in a nutshell has achieved high mark in terms of their perfect business and communication tactics, yet the marketing plan designed here will add even more value to the reputation the company has already earned. References: 1. Dutta, D. (2002). Retail @ the speed of fashion. Third Eyesight. Retrieved on September 10, 2010 from: http://3isite.com/articles/ImagesFashion_Zara_Part_I.pdf 2. Nidasio,G. (7th March, 2007). Zara Fast Fashion. Strategy. Retrieved on September 10, 2010 from: http://www.laju.it/pdf/ZaraCaseStudy.swf 3. Zara’s Business Model, Information and Communication Technologies, and Competitive Analysis. (N.D.). Retrieved on September 10, 2010 from : http://www.123helpme.com/view.asp?id=97642 4. Zara Clothing Retail Model Based on lean inventories and market flexibility could change the future of marketing. (September 10, 2001.). Retrieved on September 10, 2010 from: http://www.allbusiness.com/construction/4266194-1.html 5. Leerman, J (2010). Supply Chain Management. Books on Demand. 6. Lincoln, K & Thomassen, L. (2007). How to succeed at retail: winning case studies and strategies for retailers and brands. Kogan Page. 7. Ansoff’s product/market mix. (N.D.).Tutor2u. Retrieved on September 10, 2010 from: http://tutor2u.net/business/strategy/ansoff_matrix.htm 8. Anderson, K. & Lovejoy, J. (March, 2007). The Speeding Bullet: Zara’s Apparel Supply Chain. Retrieved on September 10, 2010: http://www.techexchange.com/thelibrary/speeding.html 9. Zara Fashion Case Analysis. (N.D.). Retrieved on September 10, 2010 : http://www.scribd.com/doc/28476479/Zara-Fashion-Case-Analysis 10. New Collection Launch –Marketing Plan. (October 22, 2009). Retrieved on September 10, 2010 from: http://www.slideshare.net/preciousssa/zara-marketing 11. Hassam. (N.D.).Importance of Advertising. Retrieved on September 10, 2010 from: http://hubpages.com/hub/Importance-Of-Advertising 12. Zara and Social Responsibility. (N.D.). Zara Tanzania Adventures. Retrieved on September 10, 2010 from: http://zaratours.wordpress.com/category/zara-social-responsibility/ Read More