UK fashion brand Next marketing audit and marketing plan

Part 1 Strategic Marketing Audit

NEXT

Strategic Marketing Audit

Tang Tang Winchester School of Art University of Southampton Word Count: 2,246

Content 1. Executive Summary 2. Brand Profile -Mission and Objectives -Brand Values 3. Positioning and consumer segmentation -Consumer Profile -Consumer Pen Portrait (pictures) 4. Marketing Mix -Product -Price -Place -Promotion 5. Financial and Sales Analysis 6. Business Environment -SWOT Analysis -PEST Analysis -Competitor Analysis 7. Conclusion 8. Appendices 9. Bibliography

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1. Executive Summary This audit will explore the brand NEXT plc and its core values, activities, and mission statement. It will also analyse the brand positioning and consumer segmentation of how it segments, targets and positions itself in the marketplace. The brand core marketing mix will also be analysed along with its financial performance. Furthermore, the business environment will also be analysed using the SWOT analysis, PEST analysis and competitor analysis which will give an insight of how the business is performing in the internal and external environment.

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2. Brand Profile NEXT plc is a British high street retailer that was launched in 1982 and the first store offered an exclusive collection of stylish clothes, shoes and accessories for women. Collections for men, children and home was later followed. NEXT clothes are designed by its in-house design team and are designed in high quality with a twist of contemporary edge. NEXT has a strong brand image of being modern and distinctive (see appendix A).

NEXT operates 3 main distribution channels which include NEXT Retail, a chain of more than 5000 stores in the UK and Eire; NEXT Directory, a shopping catalogue and website with over 4 million customers and international websites; and NEXT International with around 200 franchised stores around the world. Furthermore, NEXT also operates other channels in the group which includes NEXT Sourcing which focus on designing, sourcing and buying branded products. NEXT also manage the brand Lipsy that targets younger women and its designs and sells its own branded fashion products to this market. (Information gathered from NEXT plc, 2015).

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Mission and Objectives NEXT aims to meet or exceed its customers’ expectations by providing “exciting, beautifully designed, excellent quality clothing and homeware” (NEXT plc: corporate responsibility, 2015). It achieves this goal by following a range of strategies which includes improving and developing product ranges, increasing store spare, increasing the number of NEXT Directory customers and their consumption in the UK and online sales, and managing financial performance (see appendix B). In addition, it also aims to deliver long term returns to shareholders by establishing a sustainable growth in earnings per share and payment of cash dividends.

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Brand Values NEXT has an extensive value on developing ethical manner, maintaining positive relationships with its suppliers, promoting a positive working environment for its employees, being responsible for its impact on the environment, supporting charity organisation, delivering value to its customers.

NEXT core values are to sell and design high quality products. NEXT also aims to improve and expand its product ranges and to focus on being better by design (NEXT plc Annual Report, 2014). The company is also committed to designing products that are ecologically safe and are sustainable throughout the supply chain.

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3. Positioning and Consumer Segmentation NEXT has a very diverse consumer group that it get targets different age groups, gender groups and geographical locations. NEXT targets its consumers through a combination of social network, advertising, direct marketing and its own website.

NEXT target market is young consumers around 20s-30s who are fashion conscious and price sensitive (HOOVERS, 2015).

They are likely to the generation of X and Y who are born between 1980-1994 and 1965-1980 respectively. The generation Y heavily influenced by technology than the generation X due to they were raised in the period of emerging technologies (Value Options, 2015). They are also more likely to be loyal to a brand or product than other generations including generation X. Furthermore, branding and marketing is very important to generation Y than other generations.

In terms of their lifestyles, they are both likely to be busy or socially active. When it comes to buying they are likely have a clear knowledge about the product quality and distinctive range of trends. According to VALS II lifestyles system (Jackson and Shaw, 2009), they are likely to be believers and strivers because they are conservative buyers who would buy products based on their knowledge about the quality of the products and its value.

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Consumer Profile Demographic Age: 20-30s Gender: female Income Level: low - medium (10,000 – 25,000) Education: Secondary – Bachelor degree Position: white collar

Psychographic Lifestyle: fashion trend early and late adopters, enjoy comfortable and laid back lifestyle, family oriented and socially active.

Personality: easy going, sociable, trendy, family oriented and tech savvy.

Behaviour Buying Behaviour: Believers and strivers Other brands that they would normally buy: John Lewis, Arcadia Group Limited brands (Topshop, Miss Selfridge, Dorothy Perkins), and Zara.

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Customer Pen Portrait

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4. Marketing Mix Product NEXT offers a wide range of products including womenswear clothing, women’s accessories and shoes, menswear and childrenswear and homewares. The products are designed in house by specialist teams and are sourced directly from its suppliers. NEXT designs its products in high quality but at an affordable price. Based on the levels of products, NEXT shows a highly quality, stylish and modern clothing and accessories which are the core benefits of its products. The actual product that its shows are simple and sophisticated designs, high quality materials and trims, and well-tailored designs. The augmented product is high quality service and customer focused (see Appendix C).

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Price NEXT prices are mid-range from under 10 to over 200 for clothing and accessories. Prices are matched based on the quality of the product and brand name. The directory designer brands are marked at the highest price from under 10 to over 500. NEXT uses a combination of market skimming pricing and market penetration pricing. Market penetration is setting a low price for a new product in order to attract large number of customers and a large market share, whereas marketing skimming is setting a high price for a new product to increase revenues for exclusive or for limited products (Kotler et al, 2008). Using these pricing strategies help to attract a diverse number of customers and type of customers.

This helps to distinguish the brand from its competitors by offering differing price ranges based on the quality of the product and brand name.

Place NEXT has an omnichannel that allows customers to easily make a purchase through smart phones, tablets, catalogues and telesales. Next has around 539 stores across the world and have recently opened more stores since the credit crunch in 2008. NEXT has also significantly extended some of its existing stores from 5.2 million square feet to 7.4 million square (NEXT plc Annual Report 2015). NEXT has especially increased new space for Home and Fashion stores by 75% to allow new products to be moved about and to ease delivering products.

Furthermore, the brand will continue to look for opportunities to increase UK selling space from 20162017. The brand believes that it will add an additional 350,000 square feet of net trading space in each of these two years (NEXT plc Annual Report 2015).

NEXT also has an international website that attracted millions of customers from around the world (see Appendix D).

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Promotion NEXT uses a range of promotional channels to promote its products and services. It uses a combination of sales promotion, direct marketing, advertising and public relations.

NEXT mainly use direct marketing to promote its latest products and offers to customers, such as through emailing and home catalogues. Sales promotion is used to promote discounts and offers, such as through the website and social network (Facebook, Twitter and Instagram). Advertisements are used to promote new collections and offers. NEXT mainly use TV ads, fashion magazines and other print materials. Furthermore, the brand also promotes its latest fashion collections at fashion and press events. Celebrity endorsement is occasionally used to enhance the brand image and product quality. For example, NEXT’s advert in 2011 was directed by Ben Watts which filmed on the banks of the river Seine showing the season’s Parisian trends and it featured Brazilian model Emanuela de Paula and Spanish actor Jon Kortajarena (Whitelocks, 2011).

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5. Financial Analysis Next has a positive financial performance that it has experienced an increase on overall sales of 7.2% from last year, which was the top figure that it has issued in March 2014. The profit grew to ÂŁ782m which was up to 12.5% compared to previous year it was ÂŁ695.2. The company demonstrated a strong financial performance which enabled them to gain a high dividend growth of 16.3% and Earning Per Share (EPS) of 14.7%. This gives the company a positive financial outlook for the future.

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Table 1 - Sales Before VAT

January 2015 ÂŁm

January 2014 ÂŁm

NEXT Retail

2,348.2

2,240.5

+ 4.8%

NEXT Directory

1,540.6

1,373.9

+ 12.1%

NEXT Brand

3,888.8

3,614.4

+ 7.6%

139.0

143.8

Total Sales excluding VAT

4,027.8

3,758.2

+ 7.2%

Statutory Revenue

3,999.8

3,740.0

+ 6.9%

Sales excluding VAT

Other

Table 1 shows NEXT Retail sales have increased to 4.8% and Directory increased to 12.1% which reflects on its high sales growth on digital shopping than in stores. This has led the company focus on improving delivery services and expanding its new branded business, LABEL. It has also been working on expanding its overseas market, especially in China. Moreover, the table shows a positive sales growth on NEXT BRAND which has increased to 7.5%.

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Table 2 - Profit and ESP January 2015 £m

January 2014 £m

NEXT Retail

383.8

347.7

+ 10.4%

NEXT Directory

376.8

358.5

+ 5.1%

NEXT Brand

760.6

706.2

+ 7.7%

51.5

16.6

Operating Profit Net Interest

812.1 (29.9)

722.8 (27.6)

+ 12.3%

Profit before Tax - Underlying

782.2

695.2

+ 12.5%

12.6 (159.9)

(142.0)

Profit and Tax

634.9

553.2

+ 14.8%

EPS - Underlying

419.8p

366.1p

+ 14.7%

Ordinary Dividends Per Share

150.0p

129.0p

+ 16.3%

Profit and EPS

Other

Exceptional Disposal Gains Taxation

Table 2 shows NEXT’s profit and ESP have increased due to the economy is growing with unemployment falling and wages rising (Hargreaves, 2015). This has helped increased profit for the business, as well as enhancing people’s incomes. Furthermore, there is also a booming housing market for home brands to enjoy this opportunity which NEXT has already experienced with its home stores.

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6. Business Environment

Strengths

• Strong brand image and reputation for its distinctive style and high quality products.

• It offers a wide range of channels that enables customers to access its website and retail stores on mobile phones, tablets, outlets and shopping malls.

• Strong online store and social network on Facebook, Twitter, Instagram, and YouTube (see appendix F).

Weaknesses

SWOT Analysis

• Competitive market with many similar brands and products, such as Debenhams and Marks & Spencer.

• The Pricing can be uncompetitive in the discount driven market.

• The pricing can be seen expensive than its competitors.

Opportunities

• Improving the website and customer online shopping experience – buying methods, browsing experience, quality of images and videos and delivery capabilities.

• Increasing number of stores in the UK and overseas.

• Increasing retail sales and online sales from the UK and overseas.

Threats

• Being in a highly competitive market can cause many problems, such as facing discount brands like TESCO and ASDA which offers cheaper products.

• It can be difficult to compete with predominant brands that have distinctive styles and image, such as ZARA is known for its sophisticated and classy styles.

• Customers are still price sensitive and discerning with brand image and labels.

(See Appendix D for full SWOT analysis).

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PEST Analysis Political

Economical

• Legal and political policies and regulations can have a major impact on the clothing industry, e.g. worker’s rights and child labour laws (Suttle, 2015).

• NEXT has to adjust to the legal and political factors in its operations, e.g. it has a CSR of social, ethical and environmental actions.

• NEXT managed its financial risks through a treasury function which is responsible for managing its liquidity, interest and foreign currency risks (NEXT plc Annual Report 2013).

• The economy has been improving with lower unemployment rates and wages are increasing after a long period of recession. This gives hope for businesses to flourish including the retail sector.

• NEXT is one the top retailers that has generated high sales growth for 2015 (Hargreaves, 2015). It has forecasted an impressive £360m of surplus cash 2015.

• NEXT also has high dividends which was predicted to be worth £90m (Hargreaves, 2015).

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Technological • E-commerce and multichannel retail are growing rapidly and are changing the retail industry of how it operates its business and the locations in which it operates. For example, E-commerce and internet shopping has been a threat to bricks ad motor retailers.

• NEXT has a strong social network that it has its own Facebook, Twitter, Instagram and YouTube. Its website has also attracted many users from around the world.

• Technology is very pivotal for the company that it has set some clear objectives of enhancing its digital channel.

(See Appendix F for full information).

Social • Consumer buying behaviour and attitudes are always changing and have become very competitive. This makes it difficult for retailers to adjust to their needs and wants.

• People’s lifestyles are changing rapidly that there are more people working longer hours than before or have a busy lifestyle (The Department for Business 2013).

This has forced retailers to adjust to their needs.

• NEXT has an omnichannel that allows consumers to buy products at their own comfort and convenience. For example, it offers a channel of online store, retail store, app store and catalogues.

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Competitor Analysis

NEXT is positioned in the middle mainstream market. It has many competitive competitors in the mainstream market that offer similar product range and services, such as multichannel retailers (Marks & Spencer, Debenhams and John Lewis) and high street brands (ASOS, H&M, and Zara).

The perceptual map can be used to show where the brand is positioned in the market with its key competitors, which can be measure by the price and fashionability.

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7. Conclusion NEXT is one of the top multichannel retailers in the UK and will continue to grow. It has strong financial performance and customer base which has grown dramatically to 3.8 million on online active users and profit has increased to £782m from £695.2m in 2014. It also has an extensive store profile and it will continue to grow in the future. The Directory business has also helped to increase sales and number of active users online. However, recently the directory business is slowing down which is a problem as it the most profitable and the fastest growing part of the group (Ficenec, 2015). Next claimed that it lost 74,000 UK credit account customers which accounted for two-thirds of NEXT’s total directory clients and it bought down the total to £2.72m (Ficenec, 2015). The Directory business generates half of the company sales which is a very significant group. Thus, the company needs to improve its directory business which can be achieved by enhancing its website designs and technology channels. In addition, NEXT could consider other marketing strategies that will help enhance its brand image: • Improving store design and shopping experience with better payment methods and queueing time, e.g. QR code, NFC or virtual shopping experience.

• Enhancing internet technology – e-commerce, m-commerce and s-commerce which will help improve the directory website.

• Increasing overseas market in China and other emerging markets, such as India and Brazil.

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Appendices

Appendix A – Brand Onion In order to understand the brand identity, brand onion can be used to analyse the brand essence, value, and personality and action (Posner, 2011).

Brand Essence British Heritage Home and Garden Better by design Natural choice

Brand personality Contemporary Stylish Edgy Innovative Creative Ambitious Reliable

Brand Value Ethical and ecological Affordable High quality Value for money Aspirational Functional Exciting

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Brand in Action International business Leading retailer Mass market Improving product quality and services Expand product ranges and stores Expand Directory and LABEL

Appendix B - Strategies and Objectives Next has a comprehensive objective that it follows a range of strategies that will help achieve its goal which includes: • Improving and developing product ranges which is measures by sales performance.

• Increasing retail selling space and obtaining financial criteria before the investment is made which is measure by achieved product contribution and return on capital against appraised targets.

• Increasing the number of profitable NEXT Directory customers and their consumption, both in the UK and online sales.

• Managing gross and net margins through efficient product sourcing, stock management and cost control.

• Focusing on customer service and satisfaction levels in both outlets and directory.

• Managing the Group’s financial performance through an efficient balance sheet and secure financing structure.

• Generating surplus cash to shareholders by using share buybacks or special dividends.

(Information gathered from NEXT plc: About Next, 2015).

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Appendix C – Levels of Product In order to analyse a product, the three levels of product can be used to extract all the benefits that a product offers (Kotler et al 2008). This strategy includes looking at the core product if it’s basic level, then the actual product of what it actually offers and finally the augmented product that gives additional non tangible benefits.

Augmented Product Warranty – most items are 1 year guarantee

Actual Product

Return Policy – within 14 days on the day of purchase which can be made through the store or by courier.

High quality materials and trims

Core Product High quality, stylish and modern

Trendy and sophisticated

Well-tailored designs

Customer services - email, customer service line, Help information online

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S i m p l e and trendy packaging

Delivery – free express next day to store, next day delivery to Home, 4 day delivery for Home furniture.

Appendix D – International website NEXT also has an international website that serves around 70 countries and it also has over 4 million active customers that use NEXT Directory. The Directory sales have increased to 12% from previous year and the sales in the UK grew by 8%, and overseas online sales have also increased by 6% (NEXT Annual Report 2015). Recently, NEXT has launched a new territory in China and sales have slowly increased with their expectations and it believes that it will become one of its top ten territories in the future (NEXT Annual Report 2015).

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Appendix E - Full SWOT Analysis Strengths Next has a strong brand image and reputation for its stylish fashion and accessories. Next is also one the pioneers of enabling customers to buy through a number of channels, retail stores, online stores, mobile apps, telephone sales and it is already ahead of most brands in the market (Ipsos Retail Performance, 2012). Furthermore, it also has a strong online store which has helped increased its sales with retail sales. NEXT’s sales growth is mainly driven by its online channel which shows the benefits of a multichannel strategy, according to industry commentators (Rigby, 2012).

Weaknesses The retail market is very competitive and fierce with many fashion brands in the market. For example, in terms of e-commerce division, NEXT invested £125,000 to improve its online store and delivery but in comparison to Debenhams, it invested more than 5m on internet technology and Mark & Spencer invested 50m on e-commerce and digital TV (Giffels, 2001). This makes it very completive for the brand NEXT to compete with and to win over its customers. The other significant weakness of the brand is its pricing is uncompetitive in a discount-driven market (Omolu, 2013). NEXT price range is mid-range which will not out beat other brands that provide lower costs and at the same quality, such as Debenhams with its big discounts.

Opportunities NEXT has been focusing on improving its online store through developing buying techniques, customer service and delivery capabilities (NEXT plc Annual Report 2015).

There is a growing demand for online purchasing which has helped contribute to most of it’s sales. According to Tong (2010), there is an excess of £50 billion that is expected to change hands online in 2011. This gives a bright future for the brand to continue improving its e-commerce strategy.

Moreover, the brand has also been focusing on expanding its store portfolio, such as store size and number of stores in the UK and overseas. NEXT has a very active management of its store portfolio which has significantly generated a healthy profit, with 97% of its space delivering a net branch profit of more than 10% (NEXT plc Annual Report 2015). With international sales, it is expected to grow by 50% to £150m in the year ahead, which is why the brand is expanding its operations in China (Rigby, 2014).

Threats The biggest threat to the company is its highly competitive market. According to Key Note (2000), the discount clothing brands in particular has considerable opportunities to take sales away from the standard clothing market. For example, companies such as TESCO and ASDA offer cheap clothing and accessories than high street brands. Furthermore, it can also be difficult to compete with well-known brands such as ZARA is known for its sophisticated and classy styles and trends. This can make it very difficult for the company to compete with discount retailers as the economy is still improving and consumers are becoming more discerning to prices and brands.

Appendix F – Full PEST Analysis

Political Legal and political factors can have a major impact on the clothing industry (Suttle, 2015). The industry has been affected by many regulations and policies that are induced by the governments, such as workers’ rights and child labour laws. NEXT is very committed to being a responsible business which means addressing key problems of social, ethical and environmental factors (NEXT plc Annual Report 2013). Furthermore, NEXT managed its financial risks through a centralized treasury function which is responsible for managing its liquidity, interest and foreign currency risks (NEXT plc Annual Report 2013).

Economical The economy is booming with lower unemployment rates and wages are increasing after a long period of recession. According to Kalish et al (2014), the Eurozone is growing and the British economy has managed to avoid another downturn and is now starting to improve. This is a great opportunity for retailers to rebuild their business and to move forward to a brighter prospect. NEXT is one the top retailers that are experiencing high sales growth for 2015 (Hargreaves, 2015). NEXT has forecasted an impressive £360m of surplus cash 2015 and the management has stated that if it is unable to return cash by buyback scheme, it will return the cash through four quarterly special dividends which will worth £90m (60p per share per quarter) (Hargreaves, 2015).

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Social Consumer buying behaviour and attitudes are always changing and have become very competitive. UK consumers will continue to be demanding with buying methods, shopping experience, brand image and brand name (The Department for Business 2013). Thus it is very important that NEXT delivers these qualities effectively in order to satisfy the demanding consumers. NEXT has an omnichannel that enables consumers to buy products through a wide range of channels via the online store, retail store, app store and catalogues.

At the same time, lifestyle are also changing with many people living a busy lifestyle or working longer hours than before (The Department for Business 2013). This will lead to higher demands for better quality products and services, and convenient purchasing and delivering methods. It will also affect retail to adjust their openings hours to their consumer needs.

Technological E-commerce and multichannel retail are growing rapidly and are changing the retail industry of how it operates its business and the locations in which it operates. E-commerce and internet shopping has been a threat to bricks ad motor retailers as many people are spending their time browsing and shopping for goods and services.

The e-commerce is broadening the m-commerce and s-commerce over the years (The Department for Business 2013). Thus, NEXT is focusing on improving its e-commerce layouts and designs to satisfy the digital savvy consumers. NEXT also has a strong social network that it has its own Facebook, Twitter, Instagram and YouTube which has attracted many active users from around the world.

Competitor Analysis NEXT is positioned in the middle mainstream market. It has many competitive competitors in the mainstream market that offer similar product range and services, such as multichannel retailers (Marks & Spencer, Debenhams and John Lewis) and high street brands (ASOS, H&M, and Zara). The perceptual map can be used to show where the brand is positioned in the market with its key competitors, which can be measure by the price and fashionability.

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Appendix G – Social Network

NEXT has a very strong social network that it has its own Youtube channel, Facebook, Twitter and Instagram. This shows NEXT is socially savvy towards its customers.

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9. Bibliography

Department for Business Innovation & Skills (2013), A STRATEGY FOR FUTURE RETAIL [PDF]. [Online]. Available from: https:// www.gov.uk/government/uploads/system/uploads/attachment_data/file/252383/bis-13-1204-a-strategy-for-future-retailindustry-and-government-delivering-in-partnership.pdf [Accessed: 22/07/15].

Ficenec, J. (2015), Questor share tip: sell Next as guidance lowered. Telegraph [online]. Available from: http://www. telegraph.co.uk/finance/markets/questor/11484774/Questor-share-tip-Sell-Next-as-guidance-lowered.html [Accessed: 22/07/15].

Giffels, M. (2001), Analysis of NEXT plc and its environment. Available from: http://www.hausarbeiten.de/faecher/ vorschau/99429.html [Accessed: 14/07/15].

Hargreaves, R. (2015), 3 Top Picks On The UK’s Booming Economy: Dixons Carphone PLC, Home Retail Group PLC & NEXT plc. Available from: http://www.fool.co.uk/investing/2015/02/18/3-top-picks-on-the-uks-booming-economy-dixonscarphone-plc-home-retail-group-plc-next-plc/ [Accessed: 08/07/15].

HOOVERS, A Dun & Bradstreet Company (2015), NEXT PLC Company Information. Available from: http://www.hoovers. com/company-information/cs/company-profile.NEXT_PLC.e5d5f04f88dfe0b3.html [Accessed: 08/07/15].

Ipsos Retail Performance (2012), FORGET BRICK VERSUS CLICK – IT’S ALL ABOUT MULTICHANNEL RETAILING. Available from: http://www.ipsos-retailperformance.com/resources/blog/forget-brick-versus-click-its-all-about-multichannel-retailing/ [Accessed: 14/07/15].

Jackson, T and Shaw, D (2009) Fashion market¬ing. Hampshire: Palgrave Macmillan.

Kalish, I. Bearse, S. and O’Connor, C. (2014), Deloitte; Global Powers of Retailing 2014, Retail Beyond begins. [Online].

Available from: http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Consumer-Business/dttl-CBGPR14STORES.pdf [Accessed: 21/07/15].

KOTLER, P. and AMSTRONG, G (2011) Principles of Marketing. 14th ed. New Jersey: Pearson Educa¬tion, Inc. NEXT plc (2015), Our Customers and Products. Available from: http://www.nextplc.co.uk/corporate-responsibility/ourcustomers.aspx [Accessed: 08/07/15].

NEXT plc (2015), Business Overview. Available from: http://www.nextplc.co.uk/about-next/business-overview.aspx [Accessed: 08/07/15].

NEXT plc (2015), About Next. Available from: http://www.nextplc.co.uk/about-next.aspx [Accessed: 08/07/15].

NEXT PLC (2015), Annual Report and Accounts 2015. [Online]. Available from: http://www.nextplc.co.uk/~/media/Files/N/ Next-PLC/pdfs/reports-and-results/2014/NEXT%20Annual%20Report%202015%20FINAL%20Web.pdf [Accessed: 08/07/15].

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NEXT PLC (2014) Annual Report and Accounts 2014. [Online] Available at: http://www.nextplc.co.uk/~/media/ Files/N/Next-PLC/pdfs/corporate-responsibility-report/cr-2014.pdf [Accessed: 08/07/15].

NEXT plc (2013), Annual Report and Accounts 2013. [Online]. Available from: http://www.nextplc.co.uk/~/ media/Files/N/Next-PLC/pdfs/latest-news/2013/ar2013.pdf [Accessed: 08/07/15].

Omololu, E. (2013). The Strategic Expansion of Hennes & Mauritz AB: A Potential Acquisition of Next or Ted Baker PLC. Available at SSRN 2202976.

Posner, H. 2011. Marketing fashion. London: Laurence King.

Rigby, C. (2012), Next’s multichannel strategy ‘exactly reflects UK retail trends’. Available from: http:// internetretailing.net/2012/08/nexts-multichannel-strategy-exactly-reflects-uk-retail-trends/ [Accessed: 14/07/15].

Rigby, C. (2014), NEXT looks to delivery and international expansion to boost online sales growth. Available from: http://internetretailing.net/2014/03/next-looks-to-delivery-and-international-expansion-to-boost-online-salesgrowth/ Suttle R. (2015), The Macroenvironmental Factors Affecting the Clothing Industry. Available from: http:// smallbusiness.chron.com/macroenvironmental-factors-affecting-clothing-industry-37254.html Tong, L. (2010), Online shopping statistics. Available from: http://brightlemon.com/blog/online-shoppingstatistics-july-2010 [Accessed: 14/07/15].

Value Options (2015), Generation Y. Available from: http://www.valueoptions.com/spotlight_YIW/gen_y.htm [Accessed: 08/07/15].

Value Options (2015), Generation X. Available from: http://www.valueoptions.com/spotlight_YIW/gen_x.htm [Accessed: 08/07/15].

Whitelocks, S. (2015), The Next chapter: Fashion chain unveils revamp with new ad campaign. Daily Mail.

Available from: http://www.dailymail.co.uk/femail/article-2047920/Next-unveils-revamp-new-ad-campaign.html [Accessed: 08/07/15].

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Part 2 Strategic Marketing Plan

Next plc Strategic Marketing Plan

Word Count: 2,365

Contents 1 Executive summary 2 Introduction 3 Internal and external current situation 4 Customers and markets 5 Segmentation, Targeting and Positioning 6 Objectives and Issues 7 Marketing strategy and programmes 8 Controlling marketing and implementation 9 Evaluation 10 Appendices 11 Bibliography

1 Executive Summary

This marketing plan will analyse the brand NEXT plc in terms of technology development in stores and online for the next 3-5 years. This marketing plan will also analyse the company current environment of its internal and external factors, such as products, promotions, consumers, and the market. The main research will be based on secondary research, primary observation and the company online profile. The plan will be divided in six stages of marketing planning by Wood (2013) which will cover the current situation, consumers and the market, marketing strategies and programmes, and the measuring progress and finally the implementation plan.

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2 Introduction

NEXT plc is a British high street retailer that offers a wide range of fashion products from clothing, shoes, accessories and homeware products.

NEXT’s products are designed by in-house better by design team and are designed in high quality with a contemporary edge that value for money (over Marks and Spencer in early 2012 and 2014 (Ruddick, 2014).

NEXT’s value of share has soared to 10.2bn compare with M&S is 7.5bn (Ruddick, 2014.

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3. Internal and external current situation

3.1 Internal Audit NEXT plc Annual Report, 2014).

NEXT is one of the largest clothing retailers by sales in the UK after taking NEXT is one of the UK’s largest fashion retailers and has overtaken its leading competitor Marks & Spencer group plc for the first time in the company’s 32-year history (Bloomberg, 2014). Its profit has rose to 695.2 million in the 12 months and has excessed the 665.2 million pounds of Marks & Spencer’s sales at the end of March 2013 (Bloomberg, 2014).

Its success is based on its business model that has adapted to the rapid changing consumer shopping habits. Furthermore, NEXT Directory has become the UK’s biggest home shopping business which has beaten many of its competitors including M&S. NEXT also has a very large supply chain and distribution actives that it has three main channels, which are NEXT RETAIL, NEXT DIRECTORY and NEXT INTERNATIONAL (see appendix A).

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3.11 Current Offerings

Identifying the company current offerings will help set them apart from the competitors by analysing their unique selling proposition (USP) (Jackson and Shaw, 2009). There are several factors that NEXT use to differentiate itself in the market.

One of the main factors is the combination of customer-centric thinking and technological implementation that helps make customers feel connected, appreciated and loyal (Peart, 2014). The Main aim of NEXT is to meet or exceed consumer expectations through product quality and customer service. For example. NEXT introduced a four season buying process rather than the traditional two in a bid that are used to make the cold weather clothing available in January, February and March and warm weather clothing in August and September (Peart, 2014). In addition, NEXT also provides quick and easy delivering and buying methods on Click and Collect, which was one of the biggest success stories (Peart, 2014).

NEXT Directory has been very successful with high sale growth of 12.1%, generating a profit of 1540.6m in 2015 (NEXT plc, 2015). NEXT Directory allows customers to view numerous of catalogues on the website, which can be accessed through smartphones and tablets. This shows how speed and efficient is important in meeting the digital savvy the company interaction with its customers. Furthermore, NEXT also offer the LABEL catalogue which was launched last year. It provides selected premium clothing and accessories to online customers at an affordable price. LABLE products can be bought on the NEXT website or through LABELONLINE.CO.UK. This shows how the company competes with its leading competitors that offer premium products such as M&S and John Lewis.

NEXT Sourcing provides 40% of NEXT brand stock from its global supplier base which source from 18 countries (NEXT plc, 2015). It employees 3,600 workers in 12 countries and owns around 27000 factories (NEXT plc, 2015). NEXT also collaborates with third party suppliers such as Cable & Wireless Worldwide, which has been with them for 5 years (Anon, 2010). The Cable & Wireless Worldwide plays a crucial role in processing orders, dispatching goods and receiving goods warehouses. The Cable & Wireless Worldwide company also provides Application Performance Management (APM), which allows NEXT to control its network and meet the needs of its business and customers. Furthermore, NEXT also has a strong social network that it has its own Facebook, Twitter, Instagram and YouTube (see Appendix B).

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3.2 External 3.21 PEST Analysis The pest analysis shows the business environment and how it responds to the microenvironment factors on political, social, economical and technological.

Political

Social

The government in stable in the UK, despite that it fail to comply with the European Union (EU) policies from time to time. The UK is part of the EU group, which prohibits them to trade freely within the European zone. However, being in the EU can be a disadvantage for retailers in the UK, as it can cause problems and disruption to the business. For example, the British retail consortium is yearning the government to persuade the EU to remove the barriers hindering online trade between European countries (Baldwin, 2015). This action will be implemented to help make trading more attractive and feasible in Europe. NEXT Directory is the most profitable and the fastest growing part of the group (Ficenec, 2015). Thus this political factor is very significant in affecting the brand online business.

The UK population is reaching its highest record that there are around 64,595,800 people living in the UK and 259,700 migrants, which has overtaken natural growth of births minus deaths (BBC NEWS, 2015). This gives great opportunities for the company to employ more workers and attract new customers. The UK population is also aging that there are high number of mature people living in the UK. The aging population has increased from 11.1m to 11,4m in 2015 (BBC NEWS, 2015). This changing population will affect how the business segments and targets its customers. NEXT provides a wide range of fashion goods that suit each individual’s gender, age, style and personality. E.g. LIPSY is suited to younger women who are in their 20s-30s.

Economical

Technological

The UK economy is booming with lower unemployment rates and wages are increasing after the global crisis. The economy has been improving and avoiding another downturn (Kalish et al, 2014). This gives a great opportunity for NEXT to maintain its sales growth and investments. NEXT has performed very well in terms of its financial performance, it became one of the top retailers with high sales growth in 2015 (Hargreaves, 2015).

The development of technology plays a pivotal role in business. This fast growing technology has changed and influenced how company operates and it working operations. There is an increasing number of retailers embracing e-commerce strategies and multichannel models.

E-commerce is becoming very crucial in widening the m-commerce and s-commerce (Department for Business Innovation & Skills, 2013).

NEXT has a very strong social networks and customer services.

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3.22 SWOT Analysis The SWOT analysis shows the company key strengths, weaknesses, opportunities and threats that it is faced with and it also shows how it deals with these factors when it comes to investing a new project or making a decision.

Strengths · Strong brand image and reputation for high quality products at an affordable price. · Strong social networks – NEXT responds to online customers straightaway with their inquiries and issues. E.g. on Twitter, it responds to customers within every few minutes. · Provide fast delivery and response to customers compare to other high street retailers – next day delivery to stores before 10pm. · Multichannel company – NEXT website is very attractive in terms of its design, quality and efficiency (NEXT plc 2014). · Collaborated with the top suppliers and third parties to deliver products to stores and customers’ homes – NEXT Sourcing has increased sales and achieved a profit of 24m (NEXT plc Annual Report, 2015).

Weaknesses

Opportunities

· Pricing is uncompetitive in a discount-driven market (Omololu, 2013). E.g. supermarkets offer cheaper clothing and accessories. · Depends on third parties to deliver the goods to stores and homes – NEXT profitability was lower than previous year due to trading with third parties on LABEL business which was based on a commission basis (NEXT PLC, 2015). · Less adoption of new and innovative technologies – many brands are adopting innovative technologies to meet the digital savvy consumer needs, e.g. John Lewis made a significant investment on technology development (Hall, 2012), · Less focus on personal customization and high fashion trends compared to other competitors such as ASOS. · Less focus on implementing advanced technologies with social media.

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· Invest in technology development – Next aims to improve its online strong through developing efficient delivery services and capabilities (NEXT plc Annual Report, 2015). · Invest in innovative technologies – NEXT should consider new and innovative technologies that will help improve customer shopping experience. E.g. customize virtual fitting rooms and NFC payments. · Expand store portfolio – NEXT is also focusing on expanding its number of stores in the UK and internationally. It has high sales growth from international stores that it was expected to grow by 50% in the year ahead (Rigby, 2014), · Improve delivery services – NEXT consider for more reliable suppliers that provide fast delivery services and communication.

Threats · Competing in a highly competitive market – NEXT has to compete with renowned brands such as John Lewis and M&S which offers similar wide range of products and services. · Competing with brands that are highly advanced in technology development, such as the Arcadian Group (Topshop). · Competing with fashionable and niche brands that meet individual needs, such as ASOS provides an online market for customers to search for unique vintage items. · Competing with value markets such as TESCO and ASDA offer lower priced fashion and accessory products. · Consumers buying behaviour is always changing rapidly and are becoming sensitive to prices and brand names.

4 Customers and Markets

NEXT has a very diverse range of customers from different gender groups, age groups and location areas. NEXT targets the mass market through using a wide range of marketing tools that will help attract the large number of customers from around the world. The main marketing tools are the website, social media and the directory business which is the most significant group that generates half of the company profits (Ficenec, 2015). NEXT shows increase in its directory business by 12.1 from 4.8%, generating 1,5406m from 1373.9m from previous year (NEXT plc Annual Report, 2015). Furthermore, NEXT also has a large number of online users which have increased by 11.3% to 4 million (NEXT plc Annual Report, 2015). This shows the brand has many digital savvy consumers who prefer shopping online than in stores.

Customers are becoming more demanding and sophisticated than ever before with the rise of advanced technologies and competitive companies competing to be the best in the industry. They want a seamless shopping experience that will give them full comfort and convenience ways of shopping. Thus retailers are looking for ways to satisfy these customer needs by delivering high levels of customer services and products. According to the design consultancy, Brand Union, retailers are facing issues with technology as many customer want all websites to be fast and efficient (Benady, 2014). Retailers are also struggling to make every technology channel consistent – mobile, website, in-store and through social media. It is crucial to make all technology channels are consistent as each other so that customers can have the same experience as they would expect in stores. NEXT has a very strong website and directory but it is aiming to improve its online shopping experience through payment processes, account management screens, NEXT app on iPads and iPhones, and mobile site (NEXT plc Annual Report 2015).

NEXT can use advanced technologies to analyse consumer needs and demands by using technologies that will allow the company to see what makes customers buy a particular product and how they respond to products or promotions (see appendix C).

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5 Segmentation, Targeting and Positioning

Demographic NEXT has a very wide customer base from different age groups, gender groups and geographic areas. However, its typical customer age tends to be around 20-30, and are mixed gender with a low-medium income. They also tend to be generation X and Y.

Geographic NEXT is a global brand with more than 500 stores in the UK and Eire, and around 200 international franchised stores in Europe, America, Asia and the Middle East. NEXT Directory has around 4 million users and it serves over 72 countries. NEXT stores are predominately located in urban areas where they are high customer traffics.

Behaviour Next consumers tend to be independent buyers with distinctive tastes in brand names and products. They have moderate levels of loyalty as there are many competitive brands in the high street market.

According to the VALS II lifestyle systems, they tend to be believers and strivers due to they are conservative with what they buy and would only buy products based on their knowledge about the product quality and its value (Jackson and Shaw, 2009).

Psychographic NEXT customers tend to be working class and middle class. Their lifestyles tend to be busy and socially active. Thus, they occasionally buy goods for their family and friends, or for their personal usage. Price and product quality is also very important to them.

According to Rogers’ model of diffusion of innovation (1983), they are likely to be early majority and late majority adopters due to their personality of being trendy but not very creative, and they also tend to be trend followers (Jackson and Shaw, 2009).

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Fashionability High

Price £ High

Low e

Low e

5.1 Positioning Map NEXT main competitors are high street brands and multichannel brands. NEXT is positioned in the middle of the market due to its mid-range prices and wide range of products. The positioning map shows there are few top brands such as John Lewis, Acadian Group Limited and Zara with high prices and fashionable products. On the map also shows there are few brands with lower prices or fashionability (ASOS, Debenhams, Marks & Spencer and Primark).

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Product Category

6 Direction, Objectives and Strategies Direction Strategy NEXT main focus is to expand its business through constant opening of new stores in different locations and expanding product ranges and online services.

For this marketing plan, NEXT should focus on developing cutting edge technologies on its omnichannel – stores, website, apps on smartphones and tablets. This will help make the brand more innovative and creative with its technology development. It will also attract digital savvy consumers as well as strengthening the relationship with existing consumers.

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Marketing Strategy The purpose of this marketing plan is to create a plan for 1-3 years on enhancing its technology development which will help increase the brand affiliation, market share, consumer loyalty and satisfaction.

Financial Strategy The financial strategy is to deliver long term returns to shareholders returns through establishing a sustainable growth in earnings per share and payment of cash dividends (NEXT plc Annual Report, 2015).

Marketing Objectives · Increase number of visitors in store and on the NEXT Directory in the next 1-3 years. · Increase sales in store and on the NEXT Directory in the UK and worldwide. · Meet customer demands by developing cutting edge technologies that deliver high customer services and shopping experience. · Become a leading multichannel retailer with innovative and creative technologies. · Engage and understand customers with the new technology development.

Financial Objectives · Increase sales growth in store and on the NEXT Directory in 1-3 years period. · Increase dividends to shareholders in terms of earning per share and cash dividends in 1 -3 years period. · Maintain a healthy financial performance through using a financial risk management – managing the business liquidity, interest and foreign currency risks (NEXT plc Annual Report, 2013).

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7 Marketing Strategy and Programmes

The main marketing strategy for NEXT is to strengthen its multichannel into omnichannel retailing. Omnichannel is a multiple approach that provides customers a seamless shopping experience through cross channels (Rouse, 2015). Adopting omnichannel has become a norm with many brands have already incorporated or planning to incorporate this into their marketing plans. According to 2014 KPMG and CGF Global Consumer Executive Top of Mind Survey, 54% of companies believe that omnichannel or digital strategy is a vital part of their business plan and 56% also believe that data analytics is another important part of their overall strategy (WURLF, 2015). Many businesses are adopting omnichannel as many consumers are becoming demanding and digital savvy.

Consumers want seamless shopping experience that offers easy and comfortable buying processes. Consumers have increased their shopping expectation in the era of omnichannel – 71% want to view in store inventory online, while 50% want to buy online and collect it in store (Forrester, 2014). Furthermore, adopting omnichannel will help differentiate the brand from other competitors as well as increasing customer satisfaction and loyalty.

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NEXT should consider using a range of technologies that will help enhance customer shopping experience such as virtual fitting rooms (see appendix D), iBeacons (see appendix E), and digital kiosks for in-store ordering. Many retailers have already adopted these technologies such as Marks and Spencer has its own browse and order hubs which allows customer to order on the devise and collect it at a later time or have the product delivered to their homes. With the virtual fitting rooms have been a new technology trend for 2015 as it allows customers to try clothes online and adapt it to their sizes and heights (Retail Innovation, 2015). IBeacons has also been very successful as it allows retailers to measure customer volume in a particular area and target them directly through their devises. Furthermore, IBeacons will be the biggest change for retailers since smartphones and will be support by 700m iOS devices in the future which will enable indoor positioning micro-location, and a new form of contactless payment (Moth, 2013).

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Marketing Mix

Price The technologies will be free to customers that they can use it whenever they are connected to the BLE or in store. Customer can download the app from iTunes app store to their iPhone or android smartphones.

Place The technologies will be placed in store and online.

For the virtual fitting rooms will be place in store and online for customers to access it at any locations.

For the iBeacons and kiosks will be placed in store.

Promotion The main promotion will be social network as customers have become very socially active and digital savvy. Thus social network will be the main promotional channel to target the target market. Social network will include NEXT’s Facebook, Twitter and Instagram. Direct marketing will also be applied to target the target market, such as emails and newsletters. Furthermore, PR and press will also be applied to launch the new technologies during the launch day.

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8 Controlling marketing and Implementation

Profitability control Sales will be increased by 6% in store and 15% online by next year 2016 based on the company previous sales growth was 4.8% in store and 12% on Directory (NEXT plc, Annual Report 2015). This means the sales in store will be increased to 3m from 2.3m from previous year and online sale will be increased to almost 2m from 1.5m. Revenues will be measured at the end of every year and can be compared to the current revenue growth. Furthermore, KPI quantitative indications can also be used to measure the financial performance by measuring the traffic of the store and online webpage.

Financial control Budgets and forecasting can be used to measure the financial performance by comparing the actual spending with the budgeted figures.

Productivity control Number of customers in store and online can be used to measure the productivity of the marketing plan.

The number of active customers online will increase at the end of year one by approx. 12% from 4m to 4.5m, which is the company current number of active customers. This can be used to measure the efficiency of virtual fitting room and kiosk development. For iBeacons, NEXT app can be used to measure how many customers are downloading the app to use the iBeacons in store. Furthermore, customer satisfaction and feedback can also be analysed to see how satisfied customers are with the new technologies.

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Metric and Implementation

Brand affiliation – measure how many customers are aware of the new technologies through social network and word of mouth.

Launch day of the new technologies.

Measure the profitability of the new technologies.

Evaluate the progress of the new technologies.

2015

Ju

ne

Au gu

st

Measure the progress of the new technologies – the number of apps being downloaded and u sed in store and number of customers using kiosks and virtual fitting room services.

to

be r

De

ce

Measure customer satisfaction levels – feedback and ratings.

m

Fe be r

br

ua ry

Update and improve any defects on the new technologies

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M

a rc M

2016

ay

h

ry

mb er

ve

Oc

Ja n ua

M

Ju

ly

ay

No

Se p p t tem em b b er

Ap ril

Monitor the sales and revenues to see if it has increased by 6% for retail and 15% for online.

9 Evaluation

The new technologies will help increase sales to 3m at the end of the first year and will also develop a strong brand affiliation during the launch period. It will also help increase number of active online customers to approx.

4.5m at the end of the first year. This will help attract potential customers and will project a positive image on the brand. Implementing this marketing plan will help make the brand a competitive brand in the market by improving its ecommerce strategy and technology development. Besides this customers will feel more connected with the brand and it will make their shopping experiences more enjoyable and practical. It is crucial to be innovative and creative with technologies as many customers are becoming more demanding and digital savvy.

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10 Appendices

Appendix A – NEXT Supply Chain and Distribution Activities · NEXT RETAIL – based in Enderby, Leicestershire with a chain more than 540 stores in the UK and Eire (FT, 2014) · NEXT DIRECTORY – an online shopping website and catalogue that has over 4 million active customers and serves over 70 countries (NEXT plc, 2015). · NEXT INTERNATIONAL – a supply chain of over 200 franchised stores around the world. The biggest international markets are Russia and Ukraine. NEXT has recently launched a new territory in China in 2014 and is expected to become one of the top ten trading territories. New distribution hubs will be established in leading Asian countries, such as Mainland China, Japan, Hong Kong and Taiwan (NEXT plc, 2015).

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Appendix B - Social Networks

Twitter

Facebook

Instagram

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Appendix C – Customer and Markets In order to analyse consumers and the market, retailers need to understand their needs and wants. There are advanced technologies that can detect customers’ wants and needs with indepth details about their personal and dynamic knowledge (Severs, 2014). This advanced technology involves using in-store eye tracking technology which allows retailers to analyse what factors will attract customers to buying products. In addition, it can also perform emotional responsive and shopper mood software which measures emotional responses through their facial expression. It can also recognize whether customers are willing to buy a product or not, as well as detecting their age and gender, and simply dividend the market. Furthermore, it can help retailers to control promotions and sales through using software or technologies that will analyse information about the consumers and sales. For example, Apple introduced its IBeacon technology in New York to give customers the ability to receive customized messages about sales promotions and events that are available in certain Apple stores (Wired, 2015).

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Appendix D – Virtual Fitting Rooms The main technologies that NEXT could consider is virtual fitting rooms that can be placed in store and online. It will help enhance customer shopping experience and confidence in their size selections when purchasing apparel online (Randall, 2015). Size and fitting is one of the biggest problems for online customers as they are not able to psychically to try it on and adjust it to their size. According to Tamara Sender, Senior Fashion Analyst in the UK agrees that it is one of the main barriers to shopping online for clothes is fit and it is still a category where consumers like to try on and see items in person” (Randall, 2015).

NEXT could consider using Fashion3D which is a new augment reality virtual fitting room that has been recently launched in a ‘virtual style pod’ popup shop (Retail Innovation, 2015). The Fashion3D uses Kinect motion direction technology and 3D stimulation pictures which allows customers to select their garments by gesture or iPad interfaces (Retail Innovation, 2015).

It also allows customers to try on their chosen outfits from their inventory (Retail Innovation, 2015). Customers can also take a picture of their chosen outfits and share it on social networks.

This will attract the digital savvy consumers who are into their social networks.

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For online, NEXT could a virtual fitting room services that will enable customers to input their measurements, such as height, weight and bra size, which can be created into 3D model of themselves. For example, Metail allows customers to create their own 3D model of themselves and be used to try clothes online from retailers (Retail Innovation, 2015). Customers can also take a “virtual snapshot� of themselves and share it on social networks. Alternatively, Fit.Me can also be used to create this online shopping experience, which has been adopted by leading retailers such as Superdry, Hugo Boss and Tesco.

3D Model Virtual Fitting 22

Metail

23

FitsMe

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Appendix E - IBeacons Alternatively, NEXT could consider using iBeasons in store and on its mobile app or tablet app.

IBeacons is an Apple marketing term for Bluetooth Low Energy (BLE) which can be used on any hardwares that have Bluetooth connection or iOS 7 devices that has iBeacons via third part apps (Moth, 2013). This technology allows users to be greeted on their devise as they enter into a store and be guided through the store’s layout with information and promotions about the products. Users can also checkout on their devices without having to queue. The main benefits of using this technology is that it can provide faster and efficient location-base marketing and payment than NFC and QR codes (Moth, 2013). Furthermore, the BLE devise has its own internet connection which allows users to be connected without having any network connections.

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