Diesel Situational Analysis

SITUATIONAL ANALYSIS

Keri Breen

N0746556

Word Count:1,605

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10. Appendix

11. Bibliography

12. References

13. Photo References

INTRODUCTION

This Situational Analysis Report will include a detailed review of Diesel and their current marketing environment.

Throughout this report it will include and discuss the key issues that may affect Diesel and recommendations for new opportunities which are open to them.

WHO IS DIESEL?

Diesel is an “innovative international lifestyle company” who are best known for their premium jeans.

From its creatin in 1978, Diesel has experienced tremendous growth and success through its high performance of establishing themselves as a premium denim brand in the luxury market.

In recent years, Diesel has been steadily evolving from being the leading pioneer in denim and has been confidently striding into the world of premium casual wear, quickly becoming a “true alternative to the already established luxury market.”

However, Renzo Rosso has expressed the importance of Diesel being a lifestyle brand on multiple occasions, ‘It’s about providing loyal customers with a choice to create a lifestyle.’ This has been demonstrated through products like their home wear collection and inclusive, hard hitting campaigns which conveys the global message that no matter race, gender or sexuality, we as people are all connected and equal.

This important message is further conveyed through Diesel’s brand philosophy which has remained the same since its creation; ‘standing for passion, individuality and self expression.’ (Diesel.com)

Diesel’s Gender Neutral Campaign, 2015

CUSTOMER PROFILE

In order to create a successful and accurate customer profile for Diesel, a questionnaire was carried out.

The questionnaire proved extremely succesful in allowing to create a customer profile for Diesel, with over 100 responses.

Generally, Diesel’s customers are more female based than male (refer to appendix 1.) with 76% female and 23% male. Their customers are also usually between the ages of 18 - 24 (refer to appendix 2.).

Therefore, the average Diesel customer will be a young adult from the upper middle class, who can afford to pay the premium prices which Diesel offers. They will look towards Diesel’s individuality and edgy style in order to stray away from fashion norms and what is currently branded as ‘trendy’ to other fashion retailers.

“To create an apparel line perfect for individual people who follow their own unique path in life and for those style - makers who express their individuality by the way they dress.”

Diesel has committed to their objectives within their mission statement successfully. They hire people who have gathered knowledge through extensive travelling and keep a close eye on what is currently going on in the fashion industry.

Diesel produces no less than 3,000 products every season in order for their collections to remain innovative and individual to their consumers.

BRAND AUDIT

Current Marketing Environment

Diesel’s founder Renzo Rosso has explained in an interview with Forbes that Diesel does not have a focused target market.

“In fashion, it is about staying cool. Everyone wants to be cool, look cool. In Europe and the U.S. the age gap between the young and the old is not much.

Now consumer groups are not fixed by age as much as they are by lifestyle. It is not uncommon to find couples with an age difference of 20-30 years. The young and not-so-young want to look and feel the same. Both of them want to look cool and fashionable. They want to wear similar kinds of clothes and accessories that are considered in fashion. So, there is no target group and the real focus is on lifestyle.” - Renzo Rosso, Forbes.

While Diesel does not have a specific target market, they do belong to the luxury retail sector more specifically, the premium lifestyle market. Bain & Company states this sector has seen major growth over the past decade, through the economic downturn in 2007 which lasted until 2009 - a growth of 8% forecasted in 2011.

Diesel’s parent company OTB understands that luxury retail brands in todays market must establish a network of mono-brand stores in order to differentiate the retail experience in which they provide and increase consumers time within the brands store.

Diesel focuses heavily on the location and the interior aesthetic of their stores because they have a deep understanding of their market and what their consumers expect.

A brands aesthetic is the ground work of communication and a personal relationship with their customers. It allows them to be consumed by the brand and triggers one’s emotions, desires, fantasies and passions.

For Diesel, it is vital that they ‘stay true to the source of their expertise’ (Profiling Customer Types in Luxury Retailing, Tisovski, M, 2014) which is their iconic denim jeans, this because that will be what allows Diesel’s brand identity to remain a dominant feature of their lifestyle brand.

Luxury products often create a desire for social approval within the consumer because they represent status and power. (cf. McKinney et al, 2004).

There are two types of purchases in the luxury market; for oneself and for others.

Consumers will often be influenced to make a purchase on a personal basis. This is supported by the Cognitive Dissonance Theory that if a brand can connect with a consumer on an emotional level they will be more likely to make a purchase.

Diesel has been extremely successful in its venture to connect with their consumers on a personal basis by offering a Diesel lifestyle. This subconsciously allows consumers to understand that they can trust in the quality and service provided because Diesel has their consumers at the heart of everything they do.

The luxury retail sector in the UK was forcasted to double in its size from £6.6 billionto £12.2 billion between 2012 and 2017 (Ledbury Research and Walpole, 2013).

Growth in this market is likely to be driven by the following factors;

- The desire on behalf of the consumer to more responsibly invest in their purchases.

- Renewed interest in the creative capacities of experimental retail spaces.

- Luxury brands are using geographical variation as an organisational growth strategy; this is does not only have positive implications on the brand but is drving luxury consumption.

- Growing global deman for luxury products, particularly in emerging markets such as China, India and Brazil.

- Geographic expansion, especially where it concerns the emerging market in China.

(Bourdieu, 1984; Capegemini 2013) (McKinsey & Co, 2013, Shukla, 2012; Tynan et al., 2010)

Brands Growth Engines

In the past, Diesel has used the paid growth engine through their controversial and memorable advertisements which they are most famous for.

Diesel have also been using the sticky growth engine; this is where Diesel will focus on maintaining loyal customers through the excellent quality of products and innovative designs.

Diesel has been predominantly affected in the past after their ‘90s heyday’ because they made the mistake of targeting consumers who were too young and unable to afford the premium prices the brand offers (refer to appendices 4&5). This led Diesel to fall into decline as they struggled to compete with cheaper, emerging, fast-fashion retailers.

However this issue has been resolved in 2013 when Diesel’s Scott Morrison had introduced the FMCG approach into the company. ‘You have to be looking at where the business is moving to in the next three to five years. We need to deliver long-term growth that is both profitable and sustainable, rather than a short term gain with a (retailer) that might then sell out of the brand the following season,’ Says Morrison. ‘With a lifestyle brand such as Diesel, it’s so important that you maintain and grow the customers that you have.’ (Barnes, 2013)

This has been a major achievement for Diesel; working to grow back their customer base and give the brand structure and objectives to aim towards making it the third most popular jean brand in the world.

While the focus on advertisement and maintaining loyalty is key to Diesel’s success, if they were to also focus heavily on the viral growth engine; although this can be a difficult task, if Diesel were to develop their social media presence and become a very influential brand through direct communication with their current and potential customers, they would successfully attract positive attention to their brand through word of mouth.

To do this Diesel must engage their followers and create a virtual Diesel world that people can’t help but want to be apart of. It is recommended that they stop posting unnecessary content and ensure that their products and ‘lifestyle’ brand reputation are at the forefront of their social media platforms. (Refer to appendix 8)

With the growing popularity of Youtube as a successful marketing tool. Diesel has a huge opportunity to develop their channel and potentially gain an audience of millions of people.

An example of a successful business using this technique is Kylie Cosmetics. It is proposed that Diesel begins to create and upload styling videos featuring a famous celebrity or model, not only will this attract positive attention to the brand but it will make their products wearable and desirable for the consumer.

Diesel could also partner up with celebrities or social influencers such as Cara Delevinge, Chiara Ferrangi and David Beckham who fit the brands essence.

Partnering with such celebrities and social influencers will mean that Diesel will become more talked about, spreading to a larger volume of people because their fans will get involved with the brand through them, potentially becoming a loyal customer.

However, there are many barriers to the viral growth engine because it is very difficult to build intentionally.

Diesel cannot rely on the viral growth engine alone because it is too risky. In order for the viral growth engine to be a success Diesel must ensure that all of their products are at a standard which is better than that of their competitors and fits their target market flawlessly. Without this, Diesel will fail to attract new customers from the word of mouth of their current ones.

Brand Positioning

In order to build a strong brand, you must shape how your consumers think and feel about your products.

Therefore, Diesel must create positive experiences for their consumers so that they have positive thoughts, feelings, opinions, beliefs and perceptions.

In comparison to their competitors, Diesel has a strong brand positioning through powerful brand identity and a strategy to differentiate themselves from competitors. Whereas Levi’s relies on their brand history and iconic brand image.

Diesel differs from their main competitors in that they stray away from fashion norms and always make sure that their collections are unique and dynamic. Diesel communicates an unconventional image to their free spirited and independent consumers unlike most brands.

On the other hand, Levi’s conveys the image of being an authentic brand who designs are inspired by their older collections and have opted for stability and continuity within their brand positioning.

SWOT ANALYSIS

Strengths

- Well established brand.

- ‘Lifestyle’ brand makes consumers feel included.

- Global presence (over 80 countries and 400 stores).

- Omni channel (online and instore)

- Technology instore

- Subscription via email.

Opportunities

- Social media (create a desirable image to attract a large following).

- Allow consumers to personalise their items at a Diesel store.

- Create an app where consumers can purchase items and be updated on news about Diesel.

- Create a budget friendly collection.

- Hire younger digital marketers to improve their social media presence.

Weaknesses

- Weak social media pressence.

- Premuim price (doesn’t fit younger consumers which Diesel targets).

- Advertisements are not broadcasted enough.

Threats

- Largest competitor Levi’s (more affordable premuim brand and has been successful in marketing to young adults).

- High street stores duplicating Diesel’s designs for a lower price.

- As a worldwide brand, Diesel are opening themselves up to a larger market and therefore more competitors.

An important strength of Diesel’s is that it is a prestigious, well established brand that is extremely popular globablly in the luxury market.

The brand is always reinventing itself, straying from market norms and constantly coming up with new ways to differentiate themselves from their competitors, by taking classic designs and putting an exciting twist on them.

WA huge weakness for Diesel is their lack of presence on social media (Refer to appendix 8). In comparrison to their competitors Diesel lacks the same following and engagement that competitors such as Levi’s recieve. For example Diesel has 1.3M instagram followers with an average engagement of 8,000 likes; while Levi’s has 3M instagram followers with and average engagement of 23,000 likes.

Another weakness of Diesel’s is their premuim price. Although Diesel does not have a specific target market they focus mainly on younger consumers; this is a problem because young adults cannot afford to pay the premuim prices which Diesel offers (Refer to appendicies 6&7). It is recommended that Diesel creates a budget friendly line for their younger consumers to successfully transform consumers who invest in a one off purchase into returning customers.

There is an opportunity for Diesel to improve their competitive advantage by creating an app like many of their competitors. This would allow their consumers to be consumed by a world of Diesel. This would give their consumers 24/7 access and relevant information into what Diesel is currently doing.

Another large opportunitiy for Diesel is personalisation. Consumers today continually want ‘VIP treatment from brands that will respect their time, their individuality and can inspire them in unique, personal ways’. In the past Diesel had a pop-up shop were consumers were able to personalise their jeans by putting designs, emelishments or initials on them. It is recommended that Diesel makes this personalisation a permanent feature of the consumers instore experience.

TDiesel’s biggest threat is their largest competitor Levi’s; voted the most popular denim brand in 2016. Although Levi’s is a luxury brand with high quality products, it is a more affordable brand in comparrison to Diesel; this means that Levi’s are not limiting their market in terms of who can afford to purchase their products.

Diesel spends a lot of time and resources into creativing inovate, authentic designs unlike that of their competitors. With the continuing trend of high street stores duplicating luxury brand designs and producing them quickly for a fraction of the price, Diesel is loosing out on potential business.

ANSOFF MATRIX

Market Development

By creating an association of a lifestyle with their products, Diesel’s loyal customers trust in the brand and the quality that they recieve in both service and product.

It is easier for them to market the same products to a different set of customers who already have knowledge of the brand.

An example of this is the emerging luxury market in China. The chinese market holds no individuality, duplicating existing products with no desire for a new brand experience.

Market Penetration

This is Diesel’s main method of growth as it is very easy for them to market more of the same products to the same market.

To gain a larger number of loyal customers Diesel could introduce a loyalty scheme where their customers can recieve points or discounts for their purchases and because Diesel is a premuim brand with high prices this will make it easier for their consumers to purchase new items.

Product Development

In the stage of product development, Diesel would attempt to market different products to the same people.

In order to do this successfully, they would need to develop exisiting products or repackage them. For example, if Diesel were to take a pair of their most iconic jeans (772) and modify the designs to modernise them. Diesel’s largest competitor Levi’s has already been doing this with their iconic 501 jeans, therefore, attracting new customers and generating more sales.

Diversification

Currently, Diesel has been seen to diversify themselves from their competitors in the form of the type of products they offer to their consumers. Diesel offers a wide range of products including flooring and ceramic tiles to their customers - this was a risky step forwards for Diesel because they are not a well known brand for providing such products, therefore consumers do not know to go there for such needs, and instead may go to better known businesses such as B&Q and Homebase.

Instead, to diversify themselves from the competition Diesel could focus on their service and what their competitors are doing that Diesel could do better in order to give them a competitve advantage.

For example, Levi’s offers a station within their store where customers can personalise and design their own pair of jeans. Diesel has done this in the past but only as a popup, if they were to make it permanent it will show they are going that extra mile for their customers.

Political

PESTLE ANALYSIS

One political factor that will affect the luxury sector is Brexit. From the results of the referendum the value of the £ had fallen against the $, this meant that there was a temporary lift in sales in the UK luxury market.

However, the move in pricing was forcasted to negatively affect domestic and international spending.

For UK shoppers, luxury purchases have become smaller and less frequent. Yet, in Feburary of 2017 there was a report that stated that globally London was the city with the most potential for luxury retail growth.

It will be hard to know what the value of the £ will be over the coming years.

However, Diesel will remain on top of the UK market if they show to their

consumers a high level of customer service, communication and individuality.

If Diesel were to share a sense of commitment to increasing the sustainability of their company towards the environment and their social responsibility as it will allow them to stand apart from their competition (Refer to appendicies 9&10). (Verde Nieto, 2017)

Another political factor that is affecting the luxury sector is the sudden surge in terrorism.

Europe houses almost half of the major fashion capitals in the world. Statistics show that there has been a decline in tourism in 2016 than that of 2015. This a problem because in many luxury markets, tourists make up most of their consumers; an example of this is the French luxury market.

Economic

The first economic factor that has affected the luxury sector is the end of the recession. With the increase in employment, consumers now have more money to spend on luxury items and therefore sales will increase for luxury brands such as Diesel.

Another economic factor that will affect the luxury market is the falling price of cotton however reports show that demand is only to increase.

The price of cotton began to rise in 2016 due to the increase in its demand, supply then fell from the Chinese market sending cotton buyers into a panic. The fall in global ending stocks is predominitly due to the reduced ending stocks in China as well as global consumption outweighing production. (Neate, 2013 & MINTEC, 2017)

Social

Today’s society is more environmentally aware than ever. Consumers want to buy into a brand that supports social injustices and environmental issues.

Ethical shopping is becoming increasingly important, consumers are becoming increasingly aware of the source of their products and how it is produced (Refer to appendix 10). This influences fashion brands such as Diesel to become more sustainable and close the loop around recycling and reusing clothing.

Another social factor that affects the luxury retail sector is that Diesel must compete with other fastfashion retailers; todays consumers are impatient and unloyal to just one brand, they see what is on the catwalk and will gravitate towards the brand who can provide a balance between high quality and reasonable prices.

Technological

Diesel’s main competitor Levi’s offers a virtual try on experience for their consumers; this is where the consumer puts all of their measurements, height, age and weight.

The system will then bring up an image of a body type similar to that of the consumers so that they can know what a specific pair of jeans looks like on them without having to physically try it on.

If Diesel were to update their technology to the standard (or higher) of that of their competitors so that they can remain competitive in this fast moving industry and do not fall behind.

Another technological advancement Diesel could make in order to enhance their competitiveness in the luxury retail sector is to introduce iBeacons.

iBeacons allows mobile apps (running on both iOS and Android devices) to listen for signals from beacons in the physical world and reacts accordingly

to deliver relevant information based on the consumers location (in-store or passing by).

The iBeacon can create notifications for the consumer such as;

- Personalised deals

- Discounts

- Products recommendations (for example, in-store availability of viewed products to help improve the consumers experience.

‘Retailers can combine online buying behaviour in-store location data gathered via beacons to serve customers with relevant information or offers right at the point of sale.’ (iBeaconInsider)

Legal

A legal factor that will affect the luxury retail sector is that of corporation tax. This is because if corporation tax rises, businesses will be more likely to move to third world countries where corporation tax is lower.

In the UK, corporation tax for Main Rate (companies with profits over £300,000) such as Diesel has remained at 30% from 2014 up until 2017(GOV.UK, 2017).

Another legal factor that has affected the luxury retail sector was the increase in taxes and levies. However it has been reported from Bain & Co. that the luxury market in the US and Europe had improved tremendously despite these factors, and demand in China continues to rise.

However, it has been recognised that governments tend to target the luxury retail sector, implementing increased taxes and levies because their consumers have a higher disposable

income. Yet according to Bain & Co., ‘sales are defying initial concerns over eurozone turmoil and fears of a cool down in emerging markets.’

Environmental

The first environmental factor that will affect businesses such as Diesel in the luxury retail sector is cotton.

Cotton is a major factor when dealing with denim. Diesel must think of new ways in how to tackle the affects it has on the environment and to become a more environmentally sustainable brand by moving towards organic cotton certified by GTOS which are tested against a strict criteria of environmental and social criteria. Cotton growing uses large masses and pesticides than any other are of agriculturial production, poisoning the earths air, water and soil (EcoOutfitters, 2014).

Diesel’s parent company OTB is very vocal about their ethical ventures. Their newest project is the collaboration with San Patrignano. This focuses on the Italian communitiy, coming together in order to help young people suffering with any kind of addictions.

KEY ISSUES AFFETING DIESEL

One of the main issues affecting Diesel is their main competition Levi’s. Through observation it is as though in recent years that Diesel and Levi’s have swapped places.

Diesel was one of the most popular brands in the 90s and 00s while Levi’s had lost a lot of their popularity among the mass, but in recent years it can be seen that Levi’s has regained its popularity as a premium brand within the luxury retail sector - while Diesel’s popularity has gone into decline by some (Refer to appendix 4).

The first recommendation would be for Diesel to focus heavily on their social media, specifically Instagram because it is the most popular social media platform “with more than 500 active users” and now “considered the best social media platform for customer engagement”. Currently Diesel does not have a great influential social media presence over the public in comparison to their competitor, Levi’s (Refer to appendix 8). While Levi’s has 2.9M followers, Diesel only has 1.3M. Levi’s is doing better than Diesel because, unlike Diesel they upload multiple posts daily, purposely attracting the attention of their consumers/followers; Levi’s are also uploading multiple photos in the one post which is effectively grabbing the viewers’ attention for a longer period of time.

In order for Diesel to attract a larger social media following with dedicated followers they must make their posts exciting and interactive for the viewer; this may involve putting entire outfits together or having one statement piece of clothing that will make their consumers feel like they have to own it.

Diesel could also upload videos where a stylist creates a full Diesel look on a celebrity or model and lastly refrain from using an excessive amount of hashtags in their captions as it turns younger followers of because they like short, simple and catchy captions (DeMers, 2017).

Another main issue affecting Diesel is that although Diesel and their parent group OTB are advocates for fighting social inequality and contributing to sustainable development they have shared very little information about their supply chain and the impact they have as a brand socially and environmentally from all of the work they do (Refer to appendix 9). OTB have also failed to announce what their objectives will be to improve social and environmental conditions within in their supply chain.

A recommendation to resolve this issue may be for OTB to begin publicizing detailed information of their supply chain as they currently do not disclose the countries where their suppliers are located or their names and addresses, and the yearly objectives they set in order to improve the social and environmental issues they are very vocal about changing such as global warming.

OTB could also share more information and make people aware of the innovative projects that they have been a part of – not only would this raise awareness but it would help create a brand recognition that consumers can identify with and have their minds set at ease that they are buying into an ethical and sustainable brand and lifestyle (ProjectJust.com).

A third key issue that affects Diesel is that they are a part of the luxury market which has become in recent years oversaturated with new and emerging premium brands. In order for Diesel to remain as a top premium brand against the competition in this oversaturated luxury market, they must learn to reposition themselves. “To be successful today, you must touch base with reality. And the only reality which counts is what’s already in the prospects mind. The basic approach of positioning is not to create something new and different but to manipulate what’s already up there in the mind, to retie the connections that already exists. Today’s marketplace is no longer responsive to the strategies that worked in the past. There are too many products, too many companies, and too much marketing noise. The mind, as a defence against the volume of today’s communications and rejects much of the information offered it. In general, the mind accepts only that which matches prior knowledge or experience.” Ries, A & Trout, J; Positioning The Battle For Your Mind (2001); McGraw-Hill; pg. 5&8.

The best approach to take is the oversimplified message. Diesel must focus on the prospect rather than their product in order to communicate effectively; it is a selection project, and they must select the material that as the most chance of getting through. Because so little of their message will get through anyway, they must ignore the sending side and turn attention to the receiving end; concentrating on the perceptions of the prospect, not the reality of the product. Ries, A & Trout, J; Positioning The Battle For Your Mind (2001); McGraw-Hill; pg. 5&8.

2.

3.

4.

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https://www.forbes.com/2010/07/08/forbes-india-diesel-renzo-rosso-interview.html#6369fb3c3420 (22/11/17)

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