Marketing Communications Strategy - Zara - Essay Example

Marketing communications strategy – A Case study of Zara Introduction The key to success for any firm is appropriate business strategy. To ensure high customer base along with substantial growth in business, a firm needs to devise several strategies regarding the production process, marketing, distribution etc. and efficiently implement them. Among all these strategies, planning regarding appropriate marketing of the products is very crucial for creating demand in the markets. Unless a firm adopts a proper marketing technique, it would not be able to attract customers towards its products and business will automatically fail. Now marketing is quite a broad area, which embraces various aspects like price, place, promotion and product. These four aspects form a marketing mix of a firm. As far as the issue of marketing communications is concerned, it actually refers to the area of ‘promotion’ in a marketing mix. In most of the business organizations, marketing communication strategies are found to be in integrated form in the sense that it combines several aspects together. Just like has the broad area of marketing itself, marketing communication also has a mix. Under a marketing communications mix, different elements of communications are incorporated in different quantities to form a campaign. A marketing communications mix comprises of elements like sales promotion, publicity, advertising, direct marketing, e-marketing, branding, and sponsorships and so on. All these elements are generally referred to as marketing communications tools. With time, marketing communications is getting more interrelated, and hence it would be quite interesting to conduct a comprehensive study of different marketing communications strategy applied by the firms in today’s internationalized world where intensity of competition has increased significantly and hence to survive in the market excellent communication strategies are needed to be undertaken. This paper attempts to conduct a case study of a well known firm in the international fashion world, Zara, to analyze its current communication marketing strategies and to provide a marketing communications plan that would help the firm in enhancing its promotional capabilities and help attracting more customers to its stores across the world. However, before moving into the case study analysis, it would be beneficial to provide a brief discussion on different communication theories and various marketing communications tools to enhance the understanding of this marketing issue. Communications theories The term ‘communication’ refers to exchange of information. An interesting feature of communication is that although it simply implies flow of information among people, it does not mean one-way exchange of information. A successful communication takes place when the receiver of a message actually receives the message and provides proper response. If the message that the sender intends to send to the receiver gets rejected, or misunderstood or misinterpreted by the receiver, then just the reverse of a successful communication would take place. Every company needs communicate with its customers appropriately, otherwise, errors in communication might result in loss in market share, deteriorating employee relations, as well as make it difficult for the company to survive in an competitive environment. Hence, conducting good marketing communications is very essential for a company for sending messages successfully to its targeted market segment in a cost-effective way. However, the problem lies in the fact that, although apparently good marketing communications seems to be very simple, but in practice it is not that easy. Marketing communications will be successful only when a company will be able to send its intended messages to its targeted customers in such a way that they understand the actual content of the messages. (Egan, 2007; Introduction to Marketing Communications, 2009 ) A number of theories have been developed to discuss different sorts of communication strategies. These can be divided into two main categories- theories of non-verbal and non-symbolic communications tactics and theories of semiotic communications. (Egan, 2007) Non-verbal and non-symbolic types of communications: It is of course true that communications on verbal and visual modes have immense potential to obtain huge attention, but that does not mean that non verbal or non-symbolic ways of communications are not efficient enough to attract the attention of the targeted people. Very often non verbal and non symbolic communications are done through means like space, time as well as kinetics. For example, a crowded area or lace of space in certain area are quite capable of sending certain messages to the brains which in turn can stimulate a different kinds of thought which results in a different types of behavioral responses. The opposite also holds goods. For instance, a very well decorated office or living room is capable of conveying completely different type of images to the brains. In western communities, very often time is used to create various sorts of images. For example, if a person projects himself/herself as busy but organized, then it would immediately create an impression of his/her authority among the others. Various advertisements now try to sell products or services by making the vow of providing tame saving benefits. The value of time has increased by manifolds and hence companies are trying to look for various time saving easy of communications. As far as kinetic communications is concerned, this type of communications sends messages through different types of gestures and movements. (Egan, 2007) Semiotics: Semiology has opened up a new way of conducting rich communications through various symbols and signs. Today advertising techniques are adopting these communication strategies as audiences very often in their unconscious mind perceive those images which are conveyed through some symbols. For example, in an advertisement of a fabric softener of Lever, the company used a cuddly teddy bear. A bear generally carries an ancient image of aggression while a teddy bear provides a softer side of nature. Hence a teddy bear simply stands for a tamed version of aggression, and therefore in the advertisement the teddy bear provided a perfect impression of fabric softener that could tame the roughness of clothing. (Egan, 2007) Marketing Communications Tools Now it would be interesting to look at different marketing communications tools that a company might employ to create successful communications. As mentioned earlier, today marketing communications strategies are getting integrated in the sense that in stead of applying a single technique, the companies are now employing a marketing communications mix by combining different marketing communications tools to conduct effective communications with the targeted population. Till now no agreement has been reached regarding how many elements constitute a complete marketing communications tool box. Although no agreement has been reached regarding the length of the list of element that form a complete tool box, most have, however, agreed on the most important marketing communications tools that for the primary base of creating successful communications. These are advertising, sales promotion, public relations, and personal selling. After forming a base of effecting marketing communication using these four major tools a company can also explore some other marketing communications tools with specific features, like direct marketing, sponsorship and so on. When a company form a marketing communications mix, it is very necessary for it to take under considering certain critical aspects to make decisions on which tools would be incorporated in the mix and in which extents. These factors are as follows: The amount of time that the company is able to avail for the purpose of developing the communication message and the exact format of the message that the company intends to have. The level of control required in the delivery of the message. The extent for financial sources available to the firm for the production of its marketing communications. The amount of skills and expertise that the company has for creating it. The extent of credibility that different marketing communication tools and their deliveries to the targeted population add to the brand value of the company. (Introduction to Marketing Communications; 2009; Egan, 2007; Moore, n.d) It would be now quite interesting to look at the marketing communications strategies of Zara. But before putting complete focus on Zara’s marketing communication strategies, it is necessary to have a brief overview of this firm as it would help in understanding its strategies. A brief overview of Zara Zara is one of the Flagship brands of the largest retailer of fashion garments in the world, Inditex Sabon-Arteixo, which is based in Spain. Zara sells designer footwear and other accessories too. Zara has recently launched fragrances as well. Zara has already begun selling organic cotton jeans, T-shirts, babies and children’s clothes (Dutta, D., 2002. and Annual Report). Zara sells the newest fashions at the lowest prices, and hence caters to a larger varied customer base. Zara, in its endeavor to dress the society, first tries to understand the ideas, the trends, the tastes, and the cultures of the different societies. Zara also caters to children, and has stores in Spain, France, Italy, Portugal and Greece by the name “Kiddy’s Class” (Dutta, D., 2002). During the financial year 2007-08, Inditex achieved a profit of Euro 1,253 million. Dividends of Euro 662 million were distributed. The total sales of Inditex rose from 9435 million euros in 2007 to 10407 million euros in 2008. The net profits rose by 3 million euros in the year 2008 to stand at 1253 million euros. Zara brings in about 65.6% of the total sales (Annual Report, 2008). As on April 2009, the number of Zara stores all over the world stands at 1314 out of the total 4359 Inditex stores. Europe accounts for 971 stores, America 174, Asia-Pacific 104, Middle East 60, and Africa 5. Zara stores are present in 73 countries of the world, and in over 400 cities (Stores around the world, n.d.). Zara has become one of the most successful brands in the international fashion world. The demand for Zara brand is so huge that its clothes take little time to vanish from the shelves of its stores after their appearances. The most crucial thing that a fashion company needs to realize is that to become a successful brand it has to quickly adapt to the continuous change that keeps happening all the time in the fashion world. The most interesting feature about the Zara brand is that it provides a quick response to the market change. The winning formulae that the firm has employed for becoming a successful clothing brand are as follows: Hence Zara concentrates on a winning formula of – 1. Short lead time to get the fashionable clothes onto the shelves 2. Lower quantities , scarce supply 3. More styles, more choice By ensuring shorter lead times, the company is able to make available to the consumers what they want at that point of time. Zara is very fast in identifying, catching and adopting a winning fashion trend. Zara identifies the trends through constant research. Zara usually takes around 15-30 days to identify what is required, and to get them in the store. Competitors usually take around 4-12 months in doing so. The brand has a very short supply chain. Zara is always step in step with its customers, while other retailers forecast what the customers will buy after many months in the future. With this kind of strategy, Zara need not sell its clothes at discounts, and they can get paid fully for their clothes (Dutta, D. 2002). Zara produces a lesser quantity of each style, thus reducing risk and creating artificial scarcity (Dutta, D. 2002). Each style usually comes in three sizes and three colors (Kumar and Linguri, n.d). When a good is scarcely available, it becomes more attractive, unique and desirable. If a particular style does not work, then at the end of the year, Zara has very little products to dispose off. Zara offers discounts on only 18% of its products, while the competitors have to discount nearly 36% of their products (Dutta, D. 2002). Instead of producing more quantities, and lesser styles, Zara does just the opposite. It produces 12000 styles a year, and lesser quantities for each style. This provides variety to the consumers. Zara delivers fresh goods to its stores two times a week, prompting customers to visit the stores every 3-4 days. Zara offers more style, more choice, every week, and most importantly, at affordable rates, so that the society can easily be up to date with the latest fashions (Dutta, D. 2002). It is the structure and the strategies which Zara adopts. Zara closely controls and monitors all its activities, and has mostly all its business elements close by around its headquarters in Spain. The Zara group is vertically integrated, and owns the latest machinery and manufacturing facilities. The activities begin from fabric dyeing and processing, cutting, and garment finishing. The group subcontracts the process of garment stitching. The company owns a design and development team of over 200 professionals who give birth to the 1000 new styles every month. These 200 professionals consist of designers, market specialists, production planners, technologists etc. In terms of volumes, each style contributes to a sale of only 2, 00,000-3, 00,000, which is not cost efficient in terms of the costs incurred on developing that design and product. But the high costs of product development are realized through higher margins. The 200 professionals adopt a market research methodology which comprises of visiting university campuses, discos, and other venues to observe what people are wearing. The company also receives feedback from the general public in the form of comments, suggestions, and complaints (Dutta, D. 2002). The company has a strong information technology and communications infrastructure in place which assists in decision making. The “Information Technology and Communications System” has made Zara so successful. Information from consumers is collected everyday, fed into the database, for use by each and every person from the professional team. The information collected may be include incomplete specifications, or varied product information, but Zara quickly standardizes the information with the usage of common definitions, enabling quick preparation of designs. The company has a smooth inventory management system, whereby semi processed and uncolored fabrics are already stocked at the warehouses. One does not have to wait for the material to come, and the unprocessed raw material purchased by Zara can easily be processed according to different specifications. The distribution process is a computer automated one, and hence the time used up in human sorting is saved (Dutta, D. 2002). Speaking about the cost factor, Zara knows well how to keep them down. The assembly workshops where the garments are processed are not owned by Zara; instead Zara only pays the wages to the workers employed there for their work. The laborers come from villages, and are paid low wages. Zara has opened many retail outlets, which is its advertisement tool. It spends only 0.3 % of its sales on advertising, compared to the 3.5% of its competitors (Dutta, D. 2002). Zaras IT expenditure is 5 to 10 times lower than its rivals (Kumar and Linguri, n.d). At a time when most retailers outsourced their manufacturing process to developing countries and spend millions in advertising campaigns, Zara did the opposite. Zara has turned control over its operations into its competitive advantage. Zara’s competitive advantage lies in its control over its operations – designing, manufacturing as well as distribution. This model gives the company flexibility in production, sales and stock management. Even investment bankers said that this model won’t work for long, but Zara proved all wrong. World wide Zara has over 1000 stores, but never had felt the need to advertise. It gained popularity on its own. The rivals of Zara include “H&M” and “Gap”. As per the data available, sales in the year 2000 was $2.43 billion for Inditex, $3.2 billion for H&M, and $13.6 billion for Gap. But, the growth percentages for the 3 companies in the year 2000 were as follows: 28% for Inditex, 9.2% for H&M, and 17.5% for Gap. This clearly shows that Inditex is a fast growing company (Zara, a Spanish success story, n.d). Gap’s business model is all about its own designs and sales, where all the production is outsourced. It’s positioning is not so much about fashion, and the prices are on the higher side. The business model of H&M is similar to that of Gap’s, and its positioning is similar to that of Inditex’s. The quality offered by H&M is inferior, when compared with Zara’s. These business models have not brought about much success to these companies. Zara has been able to register a growth when Gap suffered due to a decrease in consumer spending in the US (Fashion Chain Zara Reclaims the Glory of Spain, n.d). Regular shoppers are so addicted to this brand, that they very well know exactly when deliveries arrive at the stores, and they arrive before opening hours so that they can pick up the latest. The designers in La Coruña receive everyday from the shop mangers a detailed report about what had and what had not sold the entire day. Decisions are then taken on which product lines, colors and fabrics are to be kept, or altered. Inditex chief executive “Jose Maria Castellano” feels that Zara brings in the "democratization of fashion." Once a famous Spanish actress had wanted to do a photo shoot in one of Zara’s shops, Ortega declined and told "You havent got the idea yet have you” (Zara, a Spanish success story, n.d). Only 10% of Zara’s stores are franchisees or joint ventures, while the rest are company owned. A Zara store finds it’s location at busy shopping streets. Zara advertises its clothes through its shop windows. Zara’s prices and styles are different in different countries. In Spain, the fashion garments are projected as low cost, while in the US, Japan, and Mexico, the brand Zara is projected as providing luxury fashion clothes. Zara’s new products have a failure rate of 1%, which is much lower than the 10% industry average. The global average for Zara is 17 visits per customer per year, while the average of its rivals is 3 visits per customer per year (Kumar and Linguri, n.d). Marketing Communications strategies adopted by Zara This section provides a rigorous analysis of the marketing communication strategy that Zara is currently following to promote its brand. To understand marketing communications strategy of Zara it is necessary to look at its market segmentation, its target market, and the information and communication tools that the company has employed for creating an effective communications with its customers. Market segmentation: Zara targets those customers who want to buy high quality clothing at reasonable prices. Zara’s targeted customers comprise of both men and women. For women it has divided its whole collection into three categories including Zara Women, Zara Basic and Trafaluc. All these three categories target different market segment. For example, Zara Women targets those women, who follow formal styling, while the second category, Zara Basic, targets that market segment which represents younger women seeking informal syling, and the third category, the sporty Trafaluc targets younger women as well as teenagers. As for menswear, the main categories of Zara brand include Zara Basic, the clubwear brand 100Zara and the sporty Zara Sport. This kind of categorization of product simply implies that Zara has targeted almost all age groups. (Expansion of the Spanish clothing retailer Zara’s, n.d) This kind of market segmentation strategy is followed domestically as well as in the international market. In this context a very important crucial feature of the company’s targeting tactics should be mentioned. In the international markets, particularly in non-European markets, the company targets those customers who are interested in European style of clothing. Hence, it can be send that through its marketing communication tools it sends messages to those customers who seek to dress themselves in the European way. (Expansion of the Spanish clothing retailer Zara’s, n.d) In the retail industry, women constitute the major portion of the consumers as compared to men, in most of the countries, women are more involved in social as well as economic activities of life which simply results in higher demands for fashion for creating own style statement and self identity. In case of clothing the involvement of women in the evaluation of a particular brand as well as its alternatives is quite high. Zara has well realized this fact and hence it employs effective marketing communications tools in order to maintain its customer loyalty by providing those clothing which are relevant to the current market preference and also capable of adding value. (Expansion of the Spanish clothing retailer Zara’s, n.d) Marketing Communications tools: In the retailing industry within any framework of branding strategy, an integrated marketing communications strategy holds a very important position. Particularly in clothing retailing business it seems to be much more important. Many fashion brands use celebrities to build successful communications with their targeted customers. According to Blythe, major objectives underlying good marketing communications strategies are to develop a wide customer base and improve the level of sales by creating new customers as well as maintaining the existing ones. But a unique feature about Zara’s marketing communication strategy is that this company rarely uses the crucial marketing communication tool of advertising. It has not exploited the strategy of advertising for its brand promotion except in case of the launch of its two product ranges which occur seasonally every year. (Expansion of the Spanish clothing retailer Zara’s, n.d) Among the other marketing communication tools, visual merchandising including design and layout of stores has been started to be regarded as very important communication tools for retailer, particularly for fashion retailers like Zara. The design of Zara’s outlets reflects a pure European style with clear lighting, white colored walls and ceilings. Not only that to create an elegant atmosphere that completely goes with European style, the retail stores of Zara also decorate their walls with different style-related photographs. All these strongly reflect a brand image that strictly follows European styling trend. The employee uniforms also go with this brand image and help in communicating its style statement to its customers. It is always believed that the success of a brand very much depends on its marketing communications strategies. In case of Zara, it is found that it has been able to establish an effective communications with its customers and that too at lower costs compared to its competitor, which results in a competitive advantage for the company. (Expansion of the Spanish clothing retailer Zara’s, n.d)) In this context, it is also necessary to look at the factor that helps Zara to create a quick response communication strategy. Actually it is information system that the company follows which helps the company to quickly respond to the needs of the customers. The system can be described in the following way: Zara store managers carry with themselves Casio computers in order to send online information to their higher authority in the head quarters. These informations are used to be on selling trend, comments of customers on the products or on the services, or about placing orders. Designers on the other hand send their suggestions on designs to factory, distribution department by scanning their designs in a computer and electronically transmitting them into the factory computers. This process reduces time as well as costs effectively. (Kimiagar, 2008) Looking at these marketing communication strategies employed currently by Zara, it can be said that through this strategy it has been able to and would be able create effective communications with its customers, particularly of European Origins. But these strategies have some flaws. Particularly to promote its sales in the international market the company has to be more careful and has to undertake some additional measures. There the company needs to build a comprehensive marketing communications plan that not only suits European market but also non-European markets. Marketing communication plan A SOSTAC analysis can be applied here to provide a marketing communication plan to Zara. The current situation: Zara only expend 0.3 percent of its revenue on advertising and marketing which is far less that its competitors who expend around 3-4 percent of their revenues on advertisement. To increase its visibility among the customers Zara mainly employs the strategy building attractive outlets and locating them in prime areas. But the problem with this current strategy is that with increase in the intensity of competition in the international fashion world, visibility to customers has to be increased by manifolds, otherwise customers will remain ignorant about this brand. Particularly while it enters a new country, particularly in a non-European region, the current strategy is not effective enough of making customers of that new place completely informed about this brand. Apart from this even in the existing market, with increase in the number of fashion brands the probability of becoming visible to a customer in a market which is crowded with so many outlets o different brand gets reduced significantly. So to increase customer base in the international market, particularly in non European markets, it is now necessary to devise new marketing communication plan. Objective: the objective of devising new marketing communication strategy is to increase the visibility of thus brand to wider customer base, particularly in the international market. The demand for fashion garment is increasing day by day almost in every countries. To capitalize on this increasing demand, it is necessary to establish efficient communications with customers so that they can become well knows about the brand name and visit the stores in search of new fashion trends. Strategy: Under the new strategy, more emphasis is needed to be paid on the marketing communication tool of advertising and public relations. Tactics: To follow the above mentioned strategy, the company has to invest huge money on making advertising campaigns. To give a strong competition, it would be a wise step to use celebrities in the advertising as celebrity faces attracts more attentions from the customers. Apart form this, customers are required to be involved in direct product development process so that customers demand can appropriately be met. Activities: 1. to effectively communicate with different age groups, Zara is required to launch different ad campaigns for different market segments. 2. To attract younger generations to the products range made for this generation, Zara can use an international celebrity face that has great appeal to the young generation across the world. On the other hand, for the product range that targets relatively older generation, it can use a different celebrity face that is significantly popular among this age group. 3. For increasing customer involvement in the product development process, Zara can launch an internet site where customers can post their comment as well as give their suggestions on how to improve the styling or what new they want from Zara. Control: As far as the control mechanism is concerned, the company needs to develop a team which will regularly review market growth in every market segment in every country where it has one or more outlets. If certain markets show low customer base, then it would adopt different measures to improve the communications levels. References: 1. Annual Report. 2008. Inditex. Available at: http://www.inditex.com/en/downloads/Annual_Report_INDITEX_08.pdf (Accessed on July 8, 2009) 2. Brand Morocco Case Study - Marketing Plan for Textiles and Apparel Industry. 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