Consumer Marketing - Otto Group Company - Case Study Example

Introduction

A business to consumer (B2C) is a developing e-commerce marketing model in which transactions are carried out between an entity and end-users of a product or service offered. It entails a company selling products or providing services to consumers through an online platform or from a brick and mortar premises, permitting direct interaction with the end users (Dominici, 2009). Otto GmbH & Co KG has existed in the fashion and lifestyle industry for more than 60 years. It is currently one of the most fruitful online retail companies. Otto Group Company is the leading fashion and lifestyle e-commerce company in Germany. 85 percent of the company’s total income is generated from the otto.de internet shop as well as other specialist online shops (Otto.de, 2016).

The company provides a wide range of products through the Otto website shops. The website can be accessed through various media including smartphones, tablets, and/ or computers. One can also leaf through the company’s catalog. On trend, on style, quality, reliability and casual elegance, are the Otto’s brand identity. Products range from outfits, home machinery and appliances, furniture, mobile and computer products and accessories among other superb products (Otto.de, 2016). This study specifically seeks to critically examine the Otto’s outfit product based on consumer decision-making process. It also seeks to determine the factors which influence the process. The outfits are quite diverse including dresses, tops, jackets, trousers, sports wears, tunics, skirts, undergarments among other garments. Furthermore, the paper will analyze the company’s marketing strategy as it targets it range of customers.

Segmentation and targeting

The classification of markets into separate homogenous categories of consumers is known as market segmentation. The separate categories are referred to as customer segments. The characteristic features which can be used to classify markets based on consumers are called market bases. Utilization of a single or combined bases enable companies to evaluate and select appropriate target markets (Cahill, 2006). Hitting the nail on the appropriate market ensure that the consumer needs are met satisfactorily. Consumers often prioritize on their needs. Since appropriate target market is quite reliant on consumer needs, it is vital for various organizations to use combined or hybrid segment bases. Combined segment bases ensure that the companies have wider markets and a great deal of customers to choose from rather than confine themselves to few individuals. The marketer can also be able to clearly identify some market gaps.

Case in point, Otto Group Company can use a wide mix of geographic, demographic and psychographic bases (Cahill, 2006). Based on geographic and demographic characteristics, Otto Group operates across Europe, Asia, North America among other regions, with the company headquarter located in Hamburg, Germany. The company provides clothing for both men and women. For instance, the lascana.de.web shop sells undergarments and swimwear for both men and women. There also exists different varieties of outfits for the different age groups including juveniles, youths, and adults. In a sense the company hopes to target all individuals through its platforms. The company understands that it has to become a diverse entity if it is to reach all its customers. Offering clothes to every age group, as well as genders permits the company to utilize it online platform fully. It also makes it highly convenient for shoppers that prefer completing all their purchases from the same retailer. For example, when mothers shop, they often complete purchases for their husbands and children as they shop for their clothes, shoes or jewelry. This enables the company to take advantage of these opportune purchases that are often not planned for.

Depending on psychographic and behavioral features, the Otto.de shop offer a variety of sports garments for sports lovers. The company also offers a great variety of trendy and fashionable outfits for customers who are into fashion and style. Buyers who select their outfits depending on good appearance and sustainability can also get a wide range of the outfits from the Otto’s Initiative Zukunft platform. The company uses the five green eco-friendly pillars including Engagement, Bio, Recycling, Energy and Vital as appropriate to add sustainability value to the products (Otto.de, 2016). Lastly, the online market is quite a superb idea for consumers who do not find it fun to go for outdoor shopping or rather the “home lovers”.

Market segmentation is essential in designing a market strategy, however, segmentation often overlooks the costs for the particular segments. It is, therefore, important for companies to know the amount of money that will be spent for each segment to prevent failure of the strategy. The model also does not take into consideration completion in the markets. Venturing into the saturated market might eventually lead to higher cost accompanied by lower profit margins. In cases where the consumers are not aware of the need for a certain product, companies need to be careful since that could be a warning sign of potential failure (Cahill, 2006). The company, despite the competition has effectively managed to target all market segments with admirable results. Use of the online platform makes the business model unique in many ways, as most fashion attire retailers are yet to transition into the area. Most still use the brick and mortar model that largely faces challenges as pertains distance and convenience from the target customers.

Analysis of external factors

Cultural and social factors are the external factors which greatly influence the consumer purchase decision making. Cultural factors might include but not limited to culture, sub-culture and social classes. Social factors include reference groups, family, including individual roles and status. Culture encompass shared values, norms, and tradition within a particular community. The difference between cultures between communities in a nation is usually minimal compared to the difference between nations. Culture is central to consumers desire to purchase particularly clothing products (Mooij, 2004).

For a business to flourish in the global market, it is importance to take keen note of the different cultures. To reflect the various cultures and trends in fashion, Otto Group managers occasionally visit the world’s primary cities such as Copenhagen, London, Paris, Milan, New York and Barcelona to seek for the latest trends. The managers also constantly work with fashion agencies from different countries to analytically examine fashion shows, lifestyle magazine, music, art, films, television shows and celebrity appearance. This enables the company to incorporate different culture and new trends into their new collections. The societal difference in values cultures and norms based on consumer behavior are essential in product positioning, target markets, and market segmentation (Mooij, 2004).

Sub-cultures can be established by distinct geographical regions. People who identify themselves with different sub-cultures often have social constructions, values, and attitudes. Hence, sub-culture in the fashion industry is an important element in the determination of brand names, product positioning, market prices and promotional events. Social classes are formed by individuals based on behavior, education levels, attitudes, communication behavior among other features. One social class is often distinct from another social class. Otto Group outfits are particularly targeted to consumers who are keen on fashion, style and value (Mooij, 2004).

Individuals social status greatly depend on his/her financial stability. The economic ability of an individual determines the consumer buying behavior. The higher the dependency and family size of an individual, the lower the lower the income and savings of that particular income. Subsequently, the increased probability of inexpensive purchase. However, individuals with higher income and increased savings, tend to purchase expensive clothing (Kumar, 2011.). Otto Group outfits are expensive and target mainly the middle class and high-income earners.

Social and cultural factors still remain to determine consumer buying behavior. However, globalization and rapid technological advances are creating a shift in individual social behavior. Social groups are diminishing since everyone seem to be busy with own stuff. People spend a lot of time on their computer and children and youth prefers playing video games other than go out and interact with their peers. Fashion trends are increasingly becoming more dependent on individual choice and taste (Kumar, 2011.).

The buying process and the internal process

The five stage consumer buying model was developed by Engel, Blackwell, and Kollat in 1968. The first stage of the model is concerned with need recognition. Need recognition is quite a significance in the consumer buying process because without a need there is no buying (Perreau, 2013). The internal psychological factor involved in need recognition is the consumer motivation. When a consumer motivation or desire to buy a particular product is elevated, then the need perception will also be increased. Increased need perception increases the probability of the individual buying the product. This is particularly in line with the Maslow’s rank of needs which suggests that people will often first tend to satisfy their psychological needs before security, social, self-respect and self-conceptualization needs (Mooij, 2004). Businesses particularly fashion trading that substantially tap into these need will greatly stimulate consumers to buy the products.

The moment the consumer identifies a need, then the individual can begin information search to finds ways in which the need can be adequately met. The potential information sources include the individual’s past experiences as well information from friends, relatives, press and reviews from other end-users of the products (Perreau, 2013). Therefore, perception is considerably important in this stage. An outfit retail shop that showcases itself as high value once established will find it easy to sell their products at a considerably high price as opposed to that which positions itself as low value.

The third stage involves evaluation of the alternatives available. The different alternative have varied levels of importance. The individual will have to decide on the alternatives that adequately satisfies the identified need (Perreau, 2013). The decision might be influenced by the consumer past experience with the particular brand or product that meet the same need. For instance, consumers of the Otto Group outfits who find the brands elegant and of quality will often find it easy to buy the group’s retail shops now and again.

Once, the consumer decides on the best alternative, then it time to make a purchase decision. The consumer decides on the most suitable product or brand that will ultimately meet the desired need (Perreau, 2013). The decision will depend on the data gathered from the previous stages. The consumer beliefs and attitude will also greatly determine the decision to buy. Individuals often bar information that tends to conflict with their personal beliefs and attitudes. Most often, the subconsciously or intentionally retain information or even alter the information for it to remain consistent with their prior perception of the product.

The last stage of the model is concerned with the consumer post-purchase behavior. The consumer often examines if the right decision was made in purchasing the product. The consumer level of satisfaction will greatly determine future decisions and purchase behavior (Perreau, 2013). Hence, it is the work of the manager to consistently stay on top in the fashion industry to inspire consumers to buy their products more often. It is appropriate for companies to understand the consumer buyer process to be able to apply relevant market strategies. However, not always will the consumer be confined by the process. Impulse purchase will never go instinct in the market arena (Darrat & Amyx, 2016).

Marketing Mix

Market mix tactics are the strategies used by a certain company to stimulate demand and desire for a product from the target market. The market mix is classified into four categories, regularly referred to as 4Ps. The 4Ps include product, price, place and promotions (Goi, 2009). Otto Group is a customer oriented company that has substantially succeeded in the business to consumer online trade. The company sells on-trend, on-style, including high quality and durable outfits to its esteemed customers (Otto.de, 2016).

The company made the highly valuable outfits available through its various online shops and the highly informative catalog. The Federal Association of German Mail Orders reports that approximately 70 percent of the company’s online buyers find out about the products from the catalog before making orders from the e-shops (Otto.de, 2016). The group has a good rapport with its customers. Its support group constantly involve in direct conversations with the customers. This is quite essential in for the company to learn and examine the present and potential future need of the customers. It also enables the company to offer optimal services and products to the customers.

The Otto Group has considerably tapped well the online market and the available technological devices. In 2011, the Otto online shop, otto.de received the highest user rating in the shopping classification. It was branded the name Oscar of the Internet in the fashion and lifestyle trade (Otto.de, 2016). Surfing the internet by the use of smartphones and tablets has become rapid in recent times. The company consumers can now purchase trendy outfits at their own convenience and comfort. This saves the consumers considerable time and energy especially during this ever busy era.

The Otto Group outfits are quite expensive. However, the company has successfully branded itself as the high-value entity within the fashion industry. Hence, the big prices have not been a great issue. The company targets a wider group of the middle and high-class individuals who have considerable class levels in the society. It also targets individuals who are classy, trendy and are into fashion. Such individuals will often sacrifice the most they have to maintain their value and status. Although, the company occasionally provides substantial discounts on the marked prices (Otto.de, 2016). This ensures that the outfits are occasionally available to consumers with low income. It also helps to reduce the customers’ expenditure.

The firm has also ensured timely and efficient delivery of the products. The company makes a proposal for delivery time. Although the consumer has the exclusive freedom to choose an alternative if the consumers feel that the time does not suit them. The company also strongly encourage promotional activities. The Otto group guarantees free delivery of the products to its customers during Christmas holidays. The company also occasionally provide gifts to its customers for instance through the Gift Exchange Spree and the OTTO-Gift Exchange promotional events (Otto.de, 2016).

Conclusions

In consideration of consumer decision-making process, market segmentation strategies are quite instrumental in developing appropriate target markets in the fashion industry. External factors such culture and social status considerably influence the consumer decision to purchase a particular outfit. The internal psychological factors like perception and motivation also greatly influence consumer behavior. It is critical for the fashion online retail such as the Otto group to substantially understand the consumer buying process to develop proper market strategies. The Otto Group market mix strategies have successfully executed the company marketing plan.

Recommendations

The Otto Group online business to consumer trade, especially in merchandise of outfits is quite successful. However, the company needs to incorporate the needs of the low-income individuals in their marketing strategies. The company can also adopt the consumer behavior model. The model aims at stimulating the consumers to purchase products from specific loyal retails again and again. In applying these suggestions, the company is likely to increase the volume of business that it does.