Market Segmentation in the Fashion Retail Sectors - Essay Example

Market segmentation suggests that the is at the center of marketing effort. When the market is heterogeneous, retailers segment the market into homogeneous groups, which facilitates application of marketing mix and helps the company to service the customers better. Product styles and timing can be customized to generate better customer satisfaction. This has become especially important in the fashion retail sector as shopping and clothing consumption is no more a female issue. Environmental changes have redefined what it means to be a man (Bakewell, Mitchell, & Rothwell, 2006). Besides, clothing for every season is being produced to suit every market and every generation. This enhances the importance of market segmentation in the fashion retail sector. This essay will critically analyze the approaches that can be applied to the retail fashion sector. The fashion retail industry in UK is turbulent as the fashion conscious consumers expect and thrive for constant change. This requires proper market segmentation so that retailers are in a position to satisfy individual customer needs. The fashion retail market is split into number of segments – luxury, high street and supermarket/out-of-town discounter (Bruce & Daly, 2006). With the supermarkets having entered the clothing sector, the fashion retail has been redefined. It enables the time-starved consumers to purchase cheap clothing instead of visiting high street. Different retailers adopt a different segmentation strategy depending on the market and the products they have on offer. Segmentation according to Bond and Morris (2003) can either be attitudinal or latent class segmentation. Consumers have different attitudes and these lead to different behavior but this does not apply to the retail fashion sector where customer preferences change by the season. Results on the basis of attitudinal segmentation have been very flat. Latent class segmentation differentiates people on the basis of the degree of their perception of brand, price promotion, sales personnel and product line. Segmenting on this basis gives a better cluster solution which is more robust than based on attitudes. Market positioning strategies are developed by retailers based on product, price and service provision. Store images assist the retailers in determining the positioning strategies (Birtwistle, Clarke & Freathy, 1998). The retailers project an image which matches the targeted customers’ self-image world, which increases customer loyalty. The store image is linked to customer expectations, previous purchase experience and customer perception of the store. An understanding of the customer perception of the store attributes can be used in encouraging customer loyalty. This link with store image has been used by fashion retailers to segment the market. The latent class segmentation theory applies when store image is planned. The normative segmentation model suggests that, before retailers decide what to offer, they should divide up the market into groups of similar customers, and then they should decide which of these groups to target (Danneels, 1996). Market segmentation provides an understanding of the consumer characteristics which helps to project the right image of the store. Segmentation further helps to evaluate the market viability and the needs of consumers with differing tastes, life-styles and motivation to be met. The recent trend in fashion retail sector has been to employ psychological, psychographic and behavioral segmentation variables to develop both products and services. The sub-group segmentation further helps the retailers to reach the different target groups by combining the attributes important for individual customers. Despite the various market segmentation concepts, very few retailers follow the model. Next for Men realized that their target market was very fragmented. In an attempt to persuade the existing and potential customers to shop with them they developed broader range. Their target segment was the price conscious customers so they had a limited range at competitive prices. For the fashion conscious they had a high priced range and hence catered to all tastes and preferences. They even trained their staff to recognize the customers’ needs and approach without being asked for assistance. Next for Men appeals to a cross section of consumers, which they have been able to procure due to market segmentation. The concept of store image has not been effectively utilized by Burton Menswear whose primary target was the 25-45 males but they wanted to serve everybody. In an attempt to do so they failed because when they tried to display high fashion in store front, it chased away the older customers who were the historic customers (Birtwistle, & Freathy, 1998). If they display the classic collection, the younger generation does not step into the stores. Hence, trying to cater to all segments at the same time from the same store does not reap benefits. This conforms to Danneel’s concept that customers segment themselves rather than the retailer trying to segment the market, a form of reverse market segmentation. Burton wanted to use visual merchandising as a strategy but they failed. According to Lea-Greenwood (1998), visual merchandising in windows is the external communication to potential customers. Burton was aware that they needed to appeal to a certain group but they did not restrict their activities accordingly. They relied on the concept that young people also wear classic clothing. This is based on the assumption that socio-demographic factors like age and social class are no more related to buying behaviour. Store image and store layouts are meant to appeal to a certain segment of the customers but store image and in-store layout may not be the only factor to be considered in segmenting the market because according to Newman and Patel (2004), Topshop and Gap had similar store front strategy and targeted the same segment but Topshop faired better due to its quick response times. Even though the market was segmented, but Gap’s efforts to retain and attract the segment were not in place. Gap neglected the core base of the young consumers like responding to catwalks and celebrity fashion shows. Topshop had a less aggressive technique but what matters is not to leave a gap between customer expectations and marketing objectives. Marks and Spencer in 2003, when the times were bad, in order to regain the lost market wanted to change many things at once. They started targeting the below 35 segment and increased the product line (AR, 2004). They changed their products too often which confused the customer and the store layouts were clustered. Besides, they used press advertising to appeal to the young customers. Danneels suggests that a store which tries to serve all consumers may end up appealing to none. Targeting implies renouncing a great number of potential consumers and it contradicts the tendency to sell as much as possible. This suggests that Marks and Spencer did not really set targets but wanted to sell as much as possible, which prompted then to expand the product line. The new management team at M&S felt too many sub-brands had diluted the brand so they removed the slow line and simplified the range. They concentrated on the 30-35 age groups, de-cluttered the stores and simplified the layout (AR, 2005). They stuck to a selected range, high quality merchandise at reasonable prices with high value and had sharp, very competitive opening prices. This strategy clarifies that segmenting has to be supported by other factors like positioning, store-layouts, very selective range and quick response times. Along with these, the reputation, the store sales personnel, and the store location also hold importance (Newman & Patel). Surveys have revealed that price is the least important attribute for consumers which also demonstrate how seriously fashion is taken by these consumers (Newman & Patel). Based on this concept, Zara, the global leaders in fashion retail have remained focused on the core fashion philosophy - creativity and quality design combined with rapid response to market demands. Zara’s fashion clothing keeps in tune with the seasons and responds quickly to customer preferences. To find a market segment retailers make an initial offer, observe the market response and then decide on the market mix to be applied to that segment (Danneels). Based on this concept, Zara, now fully established in the teenage and young age segment, wants to introduce larger garments for the older women (Tagliabue, 2005). This would mean the teenagers have to shop where their mom shops, which might not be appealing to them. Zara explains that customers have been buying with them since they were 20 and who are now 45 or 50 and wish to continue buying with them. Zara wants to maintain customer loyalty and is experimenting in catering to this segment. Zara may lose out on the teenage clientele, but they are prepared for this risk as they do not carry heavy inventories and have shorter product life cycle. In diverse market segments, customers reveal their patronage, states Danneels, in which case the small retailers take a passive approach. They rely on word-of-mouth and footfall to generate business. Retailers now recognize the limited value of segmentation on the basis of socio-demographic variables. Choices are now determined by lifestyles and hence usage situation is necessary to be considered in the fashion retail sector. For instance, they might purchase a cheap t-shirt from the supermarket but they would prefer branded jeans from the high street. Daneels feels as long as the sales and profits are satisfactory, formal segmentation of the market is not essential. At the time of the downslide in 1997, Burberry had 60 stores in London and a new management team took over the operations (Moore & Birtwistle, 2004). It had a narrow customer base comprising of middle aged, fashion-conservative men. They then decided to target the new, younger, fashion-forward customers, while still retaining the traditional customer base. The new strategy provided a platform for a revised business model for Burberry that would provide for future growth, stability and innovation. It segmented the high priced, fashion conscious customers and wanted attention from international fashion press. It upgraded the product range to suit the changing lifestyles. They adopted the multi-level brand strategy to cater to all segments. In the past they had stuck to men’s and women’s ranges only for autumn and winter collections but now they catered to summer and spring collection as well. They now catered to the highest segment, which is at the tip of the pyramid as well as to the accessories collection which was at the lowest end of the pyramid. This multi-brand strategy gave them the maximum market coverage with broader customer appeal. The differential price positioning helped them to boost sales. This business model defies earlier theories that trying that a store which tries to serve all consumers may end up appealing to none. Burberry changed its strategies in all the marketing mix and achieved success through its new business model. The fashion industry today is marked by short life-cycles, high volatility, low predictability and high impulse purchasing (Christopher, Lowson & Peck, 2004). This implies according to Zara, that there could be as many as 20 seasons in a year. Under such circumstances, segmentation of the market becomes difficult. Research and study of various fashion retailers suggests that segmentation have not always been helpful. Theories have been defied and new strategies have been successful. In the case of M&S multi-brand approach was unsuccessful but the same principle brought back Burberry to a profitable position. This implies that segmentation of the market cannot work in isolation. Various other factors have to be considered along with segmentation, for instance, the positioning, the timing, the sourcing, the visual merchandizing, the sales personnel, and the overall marketing objectives of the company. At the same time, trying to cater to too many brands and customers can take the company off the main track, which is what M&S suffered from. Fashion retailers tend to rely on past experiences but it is not always advisable especially when the outcome was not successful as in the case of Burtons. Their past product strategy influenced its ability to respond to changes in the fashion market. Relying on the past strategy and trying to reposition itself, trying to build a reputation and brand image may take considerable amount of time. References: AR (2004), Annual Review - summary and financial statement, Marks & Spencer. AR (2005), Annual Review - summary and financial statement, Your M & S Bakewell, C Mitchell, V & Rothwell, M (2006), UK Generation Y male fashion consciousness, Journal of Fashion Marketing and Management Vol. 10 No. 2, 2006 pp. 169-180 Birtwistle, G Clarke, I & Freathy, P (1998), Customer decision making in fashion retailing: a segmentation analysis, International Journal of Retail & Distribution Management Volume 26 · Number 4 · 1998 · pp. 147–154 Birtwistle, G & Freathy, P (1998), More than just a name above the shop: a comparison of the branding strategies of two UK fashion, International Journal of Retail & Distribution Management Volume 26 · Number 8 · 1998 · pp. 318–323 Bond, J & Morris, L (2003), A class of its own: latent class segmentation and its implications for qualitative segmentation research, Qualitative Market Research, Vol. 6 No. 2 2003, pp. 87-94 Bruce, M & Daly, L (2006), Buyer behaviour for fast fashion, Journal of Fashion Marketing and Management Vol. 10 No. 3, 2006 pp. 329-344 Christopher, M Lowson, R & Peck, H (2004), Creating agile supply chains in the fashion industry, International Journal of Retail & Distribution Management Volume 32 Number 8 · 2004 · pp. 367-376 Danneels, E (1996), Market segmentation: normative model versus business reality, European Journal of Marketing, Vol. 30 No. 6, 1996, pp. 36-51 Lea-Greenwood, G (1998), Visual merchandising: a neglected area in UK fashion marketing? International Journal of Retail & Distribution Management Volume 26 · Number 8 · 1998 · pp. 324–329 Moore, C M & Birtwistle, G (2004), The Burberry business model: creating an international luxury fashion brand, International Journal of Retail & Distribution Management, Volume 32 · Number 8 · 2004 · pp. 412-422 Newman, A.J. and Patel, D. (2004), ‘‘The marketing directions of two fashion retailers’’, European Journal of Marketing, Vol. 38 No. 7, pp. 770-88 Tagliabue, J (2005), Spanish Clothing Chain Zara Grows by Being Fast and Flexible, Boston College Carroll School of Management, < http://www.bc.edu/schools/csom/newsevents/news/2003/gallaugher/> 04 November 2006 Read More