RBV by Deniz Kurugöllü

Organization in Context Individual Coursework

Deniz Kurugollu (10283502) MSc Marketing 13.12.2010

Table of Contents Executive Summary........................................................................................................... - 2 Older consumers ................................................................................................................ - 2 Older consumers in fashion ............................................................................................... - 2 Older consumer in marketing ............................................................................................. - 3 Conclusions & Recommendations ..................................................................................... - 3 Distinctive capabilities: .................................................................................................. - 4 Core competencies: ........................................................................................................ - 4 References ......................................................................................................................... - 5 Appendix 1: Projected UK population by age .................................................................... - 7 -

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Executive Summary Statistics shows that the worldâ&#x20AC;&#x;s population is aging at a rapid rate. In particular, in Europe by 2050, the number of people over 60 will be expected to double. The aim of the report is to evaluate the aging population phenomenon from the fashion and marketing points of view, and the implications of this for Marks & Spencer in relation to older customers. Finally, recommendations based on the resource based view will be produced.

Older consumers

Demographic changes within the population show that older age groups will continue to grow (Appendix 1). In addition, birth rates across Europe are falling. It is estimated that by 2050 the number of people over 60 in Europe will be by 40 per cent of the population (BBC, 2002).

The elderly are the biggest spenders in the market in comparison to any of the other groups. They are becoming more affluent as they age. Their purchasing power is very high (Iyer, 2009). Donald (2000) also points out that 50 plus age consumers in the market have 30 per cent more disposable income in comparison to under-50s. According to Verdict (2010), 50 plus consumers account for 40 per cent of total consumer spending. Many older people are the consumers who have money and willing to spend it. (Thomson and Thompson, 2009). However, older people compare to the younger groups, are more likely to trade down and cut back than to spend. They look for value and invest in something trusted (Mintel, 2010).

Older consumers in fashion

Research by NPD Group shows that elderly women account for 25 percent of the $100 billion total womenâ&#x20AC;&#x;s apparel sales (Iyer, 2009). According to International Council of Shopping Center (2003), older consumers are the big spenders at malls and departmental stores.

Rocha et al (2005) concluded that the aging baby boomers have changed the traditional stereotype of older people. They want to be physically active as well as psychologically young. Old consumers do not like to be reminded that they are old. Mentally most people over the age of 50 probably still see themselves as in their 30s (Donald, 2000). They are still highly interested in fashion and older celebrity role models. They want clothes that are relevant to -2-

suit them considering the age fact, but at the same time they want to look fashionable (Mintel, 2010).

Research (Iltanen, 2005) shows that middle-age women complain that they cannot find clothes that would please them. According to the study, designers were asked to describe clothes for the older female market. The results were the garments with high necklines, long sleeves, and longish tops. It therefore frustrated elderly consumers that they were not the target for stylish fashion designers. Rocha (2005) reveals that older consumers look for fashion products to be not only ergonomic (accepted as a key factor for developing products for older people), but to be stylish and to reflect their own lifestyles.

Older consumer in marketing

Li (2003) states that there is a need for developing a new business model in designing, manufacturing and retailing in order to cater for emerging older age group. Thompson and Thompson (2009) suggest that marketing activities need to focus on improving such components as service, value and loyalty, due to aging consumer base. Reicheld (1996) indicates that loyalty is related to value creation. On the other hand, Brown (2001) reveals that elderly consumers are not more brand loyal than other consumer groups. They make careful assessments of the quality of competing products.

Sudbury (2009) points out that the older end of the market is not homogenous; in fact substantially diverse. Barak and Shiffman (1981) state that one method of differentiating older consumers is by the cognitive age. Segmenting consumers according to their self-perceived age may therefore be a useful approach (Carrigan and Szmigin 2001; Wei 2005). In terms of marketing communication, press may well suit for reaching older people because they want to digest messages. Direct marketing can work well. These people are much more likely to answer the phone and read mail than younger people. Advertising should have clear structures with simple selling messages that they can decode easily (Donald, 2000).

Conclusions & Recommendations

In terms of the level of turbulence in the market, the aging population fact is predictable, which means the future visibility is available and the rate of change can be monitored. Data -3-

show that older age groups will continue to grow, so the phenomenon is clear and serious. The emerging aging population in Europe is obvious and the level of impact on M&S is high. It can therefore be suggested that this phenomenon should be monitored closely and long-term plans should be developed to meet these emerging customers‟ needs and wants.

Resource based view refers to seeking a long-term fit between the needs and demands of the market and the organisation‟s abilities to compete in the market (Hooley, 2008). Lynch (2006) states that resource based view of strategy development focuses on the organization‟s own resources in order to achieve its goals and objectives rather than strategies which are common in the industry. Two components can be related to the resource based view; distinctive capabilities and core competences (Kay, cited in Lynch, 2006). Based on this approach the followings can be noted for M&S: Distinctive capabilities: a. Architecture: Considering the facts in the „older consumers in fashion‟ section, it may be inferred that M&S should allocate more resources for clothing designs in order to meet these emerging groups‟ demand. More stylish, trendier designs for older consumers can be offered under sub-brands of the company. Hence, M&S should use the network of relationships with its suppliers, designers and manufacturers so as to offer more fashion-driven products for older consumers. b. Reputation & Knowledge-based advantage: M&S has already a good reputation and brand awareness among the older age women in the market since the company mainly target 40 plus consumers (Mintel, 2010). In comparison to its competitors targeting the young such as H&M, Zara, Next, Topshop, River Island, it can be noted that the company has a knowledgebased advantage over the older consumers. Core competencies: c. Competitor differentiation & customer value : Focusing on the older end of the market, in other words, leaving the crowded young fashion market to the competitors can be seen as a good strategy. Therefore, the increase of older population can be seen as an opportunity for the company. M&S should continue to serve for this target audience by taking advantage of its knowledge, reputation and core values – „quality, value, service, innovation and trust‟ (M&S, 2010). -4-

References  Barak, B., & Schiffman, L. G. (1981) „Cognitive age: A non-chronological age variable‟. Advances in consumer research. Vol. 8, pp.602–606.  BBC (2002) „Aging: Europe‟s growing problem‟. [Online]. Available at: http://news.bbc.co.uk/1/hi/business/2248531.stm [Accessed 8 December 2010]  Brown, S (2001) Marketing: The Retro Revolution. 1st ed. London: SAGE Publication Ltd.  Carrigan, M. and Szmigin, I. (2001) „Learning to love the older consumer‟. Journal of Consumer Behaviour. (1) 1. pp. 22-34  Helen Donald (2000) „Glad to be grey?‟. [Online]. Available at: http://www.marketingweek.co.uk/home/glad-to-be-grey?/2049144.article[Accessed 8 December 2010]

 Hooley, G., Piercy, N. and Nicaulaud, P. (2008) Marketing Strategy and Competitive Positioning. 4th ed. Essex: Pearson Education Limited  ICSC (2003) ICSC Research Quarterly. Volume 10. Number 2. [ Online]. Available at: http://www.icsc.org/srch/rsrch/researchquarterly/current/rr2003102/trends.pdf [Accessed 10th December 2010]

 Iltanen, S. (2003) „Ageless and ageing: a survey of fashion designers and their conceptions of the target group‟. Royal College of Art, London.  Iyer, R. (2009) „The aging population- a new growth market‟. Bradley University. [Online]. Available at: http://docs.google.com/viewer?a=v&q=cache:VXljefpXiBIJ:www.iatto.org/forum/Do cFile/89359_Rajesh%2520Iyer,%2520The%2520aging%2520population%2520%25E 2%2580%2593%2520a%2520new%2520growth%2520market.pdf [Accessed 7th December 2010]  Keynote (2009) Clothing Retail Market Report Plus. [Online]. Available at: http://www.keynote.co.uk/market-intelligence/view/product/10322/clothingretailing?utm_source=kn.reports.browse [Accessed 8th December 2010]  Li, Z. (2003), “Functional clothing design for the active grey market”. Royal College of Art, London.  Lye, A., Shao, W. and Thiele, S. (2005) „Decision waves: consumer decisions in today‟s complex world‟. European Journal of Marketing. 39 (1). pp. 216-230  Lynch, R (2006) Corporate Strategy. 4th ed. Essex: Pearson Education Limited

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 Mintel (2010) Clothing retailing- UK. Available at: http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id =479925/display/id=551238?select_section=551243 [Accessed 10th December 2010]  M&S (2010) Company Overview. [Online]. Available at: http://corporate.marksandspencer.com/aboutus/company_overview[Accessed 10th December 2010]  Reicheld, F. (1996) The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value. USA: Harvard Business School Press.  Rocha, M., Hammond, L., Hawkins, D. (2005) „Age, gender and national factors in fashion consumption‟. Journal of Fashion Marketing and Management. 9 (4) pp. 38090.  Sherman, E., Shiffman, L., Mathur, A. (2001) „The Influence of Gender on the NewAge Elderly‟s Consumption Orientation‟. Psychology & Marketing. 18(10) pp.1073– 1089  Sudbury, L., Simcock, P. (2009) „A multivariate segmentation model of senior consumers‟. Emerald Group Publishing Limited. Journal of Consumer Marketing. 26 (4) pp. 251–262  Szmigin, I., Carrigan, M., (1999) „The representation of older people in advertisements‟. Journal of the Market Research Society, Vol 41 pp. 331–322  Thompson, N. J. and Thompson, K. (2009) „Can marketing practice keep up with Europe‟s ageing population?”. European Journal of Marketing. 43 (11/12) pp. 1281-8

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Appendix 1: Projected UK population by age

Table A: Projected UK population by age 2006

2011

2016

2021

2026

2031

Age Group 0-14

10,737 10,912 11,428 11,947 12,026 11,974

15-29

11,876 12,614 12,458 12,024 12,191 12,706

30-44

13,302 12,699 12,691 13,492 14,132 13,975

45-59

11,744 12,295 13,094 12,986 12,398 12,420

60-74

8,269

9,265

9,824

10,432 11,035 11,802

75 and over

4,659

4,975

5,480

6,309

7,477

8,223

All ages 60,587 62,761 64,975 67,191 69,260 71,100 Source: Keynote (2009) Clothing Retailing Market Report Plus Keynote (2009) states that the rapid growth in the UK population is â&#x20AC;&#x17E;inevitably expanding the overall market for clothing in the UK. According to official projections, the UKâ&#x20AC;&#x;s population is set to grow to 71 million in 2031, from 60.6 million in 2006. Furthermore, Eurostat has forecast that the UK population will grow from its current figure of 61.9 million, to nearly 77 million in 2060- an increase of 24.4%. However, demographic changes within the population will not be positive for the clothing market. The proportion of children in the UK (those aged under 14)- a key growth area for clothing sales- is set to fall from 17.7% in 2006 to 17.6% in 2016 and 16.8% in 2031. Meanwhile, the 30 to 44 year-old age bracket (another key group for the market) is also forecast to decrease, from 22% of the total population in 2006, to 19.5% in 2016, although it is expected to increase slightly to 19.7% in 2031. Figure 1: Projected UK Population by Age 16

Million people

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