Report Researching the Marketing Strategies of Zara.

MARKETING REPORT 2019

BY LOIS BETTS WORD COUNT: 2742

1.0 INTRODUCTION This report aims to use academic theories to critically analyse marketing strategies used by the fashion industry, with particular reference to Zara’s approaches. The report’s intention is to research the impact of media marketing when developing and promoting products.

“Fashion marketing is the application of a range of techniques and a business philosophy that centres upon the customer and potential customer of clothing and related products and services in order to meet the long -term goals of the organisation.” (Easey, 2009). This means that differences in size, experience and perspective between brands leads to marketing being not uniform at national level, let alone at an international one (Hooley and Lynch and Shepherd 1990).

Zara, a brand owned by the Spanish Inditex Group, opened with the intention of “selling fashionable clothing at low prices” and with their unique business model and innovative, vertically-integrated strategies, have achieved this (Forbes, 2019). They have consistently been able to offer reasonably priced, stylish interpretations of runway trends at exceptional speed (Zara, 2019).

A tightly-controlled production system enables Zara to move from design drawing to finished garment delivered to store between two to three weeks (Lopez and Fan 2009). By using a vertical supply chain to effectively respond to seasonal demand (Inditex careers, 2019), Zara has spent more than 30 years perfecting this model to give them competitive advantage (Forbes, 2019).

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2.0 CURRENT MARKETING STRATEGIES In today’s hypercompetitive fashion marketing environment, fast delivery and keen prices are essential

ingredients of successful fashion marketing. Most large fashion chain retailers now deal directly with suppliers, cutting out middlemen and enabling fast decision-making to bring fashion to the market at competitive prices (Jackson and Shaw 2010).

2.1 The Marketing Mix -The marketing strategy of a fashion business is the strategy that leads to the implementation of a marketing mix (Oelkers, 2004). The marketing mix refers to a set of actions, different for every business, that a company uses to promote in their market. The ‘4Ps’ make up a traditional marketing mix - Price, Product, Promotion and Place. Recently, the marketing mix increasingly includes three other ‘Ps’ such as Process, People and Physical evidence (Oelkers, 2004). The product element can be seen as the most important of the ‘7 Ps’ because without it you have nothing to sell. Branding can be used to identify a particular business, including its apparel and other products linked with its fashion status. On trend product attributes are essential to appeal to their target market, supported by critical product decisions, portfolio analysis and PLC (product life cycle) modelling. Regarding the pricing element, all pricing decisions are ultimately driven by the overall objectives of the business (Easey, 2009). However, they can be influenced by competitors and secondary sources such as Mintel.

Mass market brands usually rely heavily on sales promotions, whilst luxury fashion businesses use advertising in glossy magazines to appeal to their respective target markets. Whatever tools are chosen, the key is to achieve the best response for the money available (Woodside, 2010). Positioning and geographic spread for fashion retailers depends on available sites, location of targeting market segments and competitor sites. Many retailers choose to place their products through several channels of distribution, for example retail shops but also the internet (Posner, 2017).

In relation to the people element, it is found that personal selling is the front line of marketing, and many businesses are realising its huge significance. Good training, motivation and recognition of the importance of the selling role are critical factors to be addressed (Jackson and Shaw 2010). The selling environment has gained significance, probably as a result of increasing levels of wealth and expectations of customers. The total span of sensory stimulation needs to be addressed in the development of a good marketing mix (Jackson and Shaw 2010).

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Figure 1 - ‘Retail Marketing Solutions’. Available at: https://www.groupfio.com/retail-marketing -solutions/

2.2 Academic Theories - Segmentation, targeting and positioning (STP) is another academic theory relating to marketing strategies used in the fashion industry. This involves analysing the market to identify target segments and select product placement relative to competitors (Tutor2u, 2019).

Porter’s Five Forces is a model that helps companies analyse the competitive environment and is still very relevant in today’s market. The model identifies five major forces that are continually impacted upon the organisation and seems ideally suited to the highly competitive fashion industry (Tutor2u, 2019), namely;

• The level of bargaining power of suppliers • The level of the bargaining power of both businesses • Threat of entry into the market by new entrants • Threat of substitutes coming into the market • The general level of competitive rivalry with the total market-place.

Figure 2 - ‘7 P’s of the marekting mix’. Available at: https://marketing-insider.eu/marketing-mix-for-services/

In the context of fashion retailing, the threat of new entrants always exists. This may come from global competitors such as Mango and H&M, who derive significant sales from overseas and internet trading (Easey, 2009).

Most fashion businesses choose a combination of marketing coverage strategies in order to avoid being locked into single product segments. The fickleness of fashion consumers and their changing fashion demands makes this choice important (Grose, 2012). It is at such decision points in fashion marketing that the benefits of good, consistent and well-analysed marketing research come into play. The relatively high costs of longitudinal marketing research become insignificant in the scheme of things when large fashion businesses start to lose sight of their core customer segments and fail to target them effectively (Grose, 2012).

Figure 3 - A selection of Zara’s marketing photography taken from Zara website. Available at: https://www.zara.com/uk/

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3.0 ZARA’S MARKETING STRATEGIES 3.1 Advertising - Zara is unique to their market as they only spend approximately 0.3% of sales revenue on

advertising compared to the industry average of 3.5% (Zara, 2019). Zara’s direct competitors such as H&M and Mango heavily advertise throughout the year, whilst Zara make almost no investment in traditional advertising.

“Zara’s main focus is on customer, they are the core of the brand’s success and the heights it has achieved today.

Its customers are part of the experience and help build Zara’s brand loyalty. The following tactics are a key to its endurance as a market leader” (Forbes, 2019).

“Zara has evolved to the new 4Es of marketing strategy—Experience replaces Product; Exchange is the new Price; Evangelism is now Promotion; and Every Place is the new Place—that puts the customer at the centre around which the company and brand revolve.” (Forbes, 2019).

Zara has a reputation for their lack of advertising, but research shows an effective advertising strategy outside traditional channels. Firstly, word-of-mouth advertising is key, creating a brand that has to be talked about (Forbes, 2019), relying on customers telling friends about the top they got from Zara for a reasonable price. Zara also benefits from celebrity “fashion icon” endorsements, including the Duchess of Cambridge. Zara has over 2000 stores in 77 countries, meaning its retail outlets themselves promote the Zara brand in the High Street (Mazaira and Gonzalez and Avendano 2003).

3.2 Zara’s Stock - Zara creates over 500 new fast fashion, short-lived designs per month and changes stock up to 17 times a year (Jackson and Shaw 2010). Success is driven by its ability to keep up with rapidly changing fashion trends and showcase it in its collections with very little delay. By focussing on the latest fashion events, Zara’s designers continuously develop ranges that are fed into Zara’s rapid production process and quickly delivered to its stores (Inditex careers, 2019). These shorter lead times ensure that stocked apparel is what customers want at that time. While many retailers try to forecast what customers might buy months in the future, Zara moves in step with its customers and offers them what they want at a given point in time (Hines and Bruce 2008).

Zara’s strategic ability to produce new collections based on latest trends rapidly is what enabled Zara to beat its competitors (Forbes, 2019), and become the go-to store for those seeking to keep up with latest trends. Founder Amancio Ortega is famously known for his views on clothes as a perishable commodity, insisting that people should love to use and wear clothes for a short while and then they should discard, just like bread, rather than store them in cupboards. The media often quotes that the brand produces “freshly baked clothes”, which survive fashion trends for less than a month or two. (Forbes, 2019).

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Even when a style sells out, Zara doesn’t increase production but introduces new styles, roughly 12,000 a year.

This creates more choice for the customer and creates a higher chance of purchase from everyone who enters a Zara store (Jackson and Shaw 2010). Their designs only remain on the shop floor for 3 to 4 weeks. This encourages customers to keep visiting their stores frequently because if they were just a week late, all of a particular style or trend may be gone and replaced. (Ekstrom and Justiss 2006).

3.3 Primark Research - Research by the Author has been carried out to test this method by going to the Zara Manchester store twice, 4 weeks apart, to see if the same item of clothing was on sale. As seen below (Figure 4), the same dress was not found on the same mannequin in store and Zara’s aim to create exclusivity at a reasonable price instore for their customers is demonstrated. Zara stores limited stock and lack of advertising also contributes to the exclusivity factor, which has led to Zara becoming a desirable name associated with fashion-cool status (Forbes, 2019).

Figure 4 - Photos taken of Zara store 4 weeks apart at New Cathedral Street, Manchester (Author, 2019).

Zara uses sales promotions, known as line marketing, to increase demand and boost sales of products that haven’t sold out in time for the new collection. These promotions use pull strategies with price reductions, encouraging regular store visits and purchases of old stock to make room for new collections (Rees and Park 2013). These sections are usually located at the back of stores, forcing customers to pass the new trend collections before reaching the reductions. Zara offer no direct discounts such as student discount, suggesting they are focusing on young professionals as the target market. (Easey, 2009).

3.4 Locations - Zara invests a huge amount of its profits into the locations and image of its physical stores, to bring “exclusive”, trendy, affordable items to the masses in upmarket locations, providing a sense of luxury at reasonable prices compared to its competitors. The intention is to deliver a luxury brand experience at the lower end of the market, demonstrating that fashion is available for all and not only for those who could afford luxury brands exclusivity (Posner, 2017). For example, the large Manchester store is co-located in a popular street full of premium brands such as Burberry, Harvey Nichols and Michael Kors, shown on the following page (Figure 5).

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Figure 5 - Photos taken of New Cathedral Street, Manchester (Author, 2019)

Zara’s store location strategy is high-street retail outlets in major metropolises. Examples include Regent Street, London and Champs Elysees, Paris, where expansive windows and stylish displays promote the brand (Forbes, 2019).

3.5 Ansoff’s Matrix - Ansoff’s matrix is a tool that offers four potential scenarios for opportunity that has been used by Zara as an objective to achieve growth, as follows; (Tutor2u, 2019).

1. Market penetration

Figure 6 - Tutor2U “Ansoff’s Matrix” Avaliable at:

2. Market development

https://www.tutor2u.net/business/reference/ans

3. Product development

offs-matrix

4. Diversification

Diversification means developing a new product for a completely new market. It is the riskiest of the four options, however Zara Home launched in 2003, introducing “the latest trends in home interiors.” (Inditex Careers, 2019).

Their stock includes home decoration with links to Zara clothing, benefitting from association with the Zara fashion brand. Their products offer quality at reasonable prices and again use window displays effectively for marketing. Zara is an example of successful segmentation as they have used STP to gain a deeper understanding of the customer that has enabled them to design their marketing mix effectively and to adapt and respond to changes in the market (Inditex Careers, 2019).

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4.0 ZARA’S ONLINE MEDIA Zara’s flexible supply chain and technology-driven approach have underpinned Zara’s business success. However, social media platforms have become an increasingly popular interface between consumers and companies. They offer a forum for conversations about a company’s actions and also a direct source of data collection to farm and improve efficiency and relevance for customers (Weidmann and Hennigs and Langner 2010).

Zara has social media profiles on all major platforms such as Facebook, Twitter, Instagram and YouTube. The visual imaging offered by these social media platforms, is becoming a significant marketing tool for the brand, providing target market insight into their newest collections. Zara has over 30 million followers on Instagram and over one million in Twitter (Unmetric Social Media Analytics, 2019).

4.1 Facebook - Secondary research into Zara’s social media platforms show that Zara currently has 27 million followers on Facebook, making it one of the most successful fashion retail brands on Facebook.

Figure 7 - Graph to show the posts and engagement of Zara on Facebook over a year. Available at: https://blog.unmetric.com/social-mediastrategy-zara

Zara’s Facebook page displays their latest collections, allowing direct purchase before selling out in-store, delivering effective marketing without third-party advertising cost, especially through customers sharing items with friends over the platform. Their photos and videos include models in a look book style (Zara 2019) and these visual posts achieved the highest overall social media engagement, prompting the brand to promote 87 videos from a total of 126 they uploaded, achieving over 6 million views, shown above (Unmetric Social Media Analytics, 2019).

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4.2 Twitter - Zara has 1.3 million followers on Twitter, growing at 6.5% annually. The Zara Twitter strategy encourages customer interaction with response to queries and feedback. Zara Tweets approximately 52 times per day, 98% of which are replies to customers, as shown below. “Customer tweets primarily relate to delayed deliveries, product damage and bad in-store customer service.” (Unmetric Social Media Analytics, 2019). They target query responses within 14-15 hours of receipt by requesting them to direct message, taking all negative comments off the main Twitter page.

Figure 8 - Graph to show the replies, tweets and retweets of Zara on Twitter over a year. Available at: https://blog.unmetric.com/socialmedia-strategy-zara

4.3 Instagram - Instagram is Zara’s most popular social media platform, having 31.7 million followers. This is hugely important for the brand as it the perfect platform for their visual brand image. In 2017, they published 469 posts on Instagram, out of which 340 were photos and 149 were videos. Shown below is the new amount of followers Zara have on Instagram, each month being higher than competitors such as ASOS and H&M (Unmetric Social Media Analytics, 2019).

Figure 9 - Graph to show the number of new followers on Instagram over a year. Available at: https://blog.unmetric.com/socialmedia-strategy-zara

4.4 Youtube - On YouTube, Zara increased their subscribers in 2017 by over 15% to 68,000 overall. They upload 17 videos annually, showing seasonal new, on trend retail collections. These short one-minute videos are focused on new merchandise (Unmetric Social Media Analytics, 2019).

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4.5 Augmented Reality - Zara have attempted to draw millennials to physical stores by creating fascination and intriguing concepts not available online. They have done this by displaying ‘Augmented Reality (AR) enabled shop windows’. Store customers can now participate by mobile to see models wearing Zara’s fashion when they click on sensors in the store. (Forbes, 2019).

Figure 10 - Photographs that represent the Augmented Reality (AR) available in Zara stores. Available at: https://vrscout.com/news/zara -ar-fashion-looks-stores/

“The two-way communication between the customer and Zara allows for continual improvement of product and services.” (Forbes, 2019). Zara has an extremely sophisticated data collection process, which provides efficient analysis of what’s selling in stores and online but also what’s said on social media. The collected data provides an insight into required improvement to products and both in-store and online quality of service and customer experience (Wiedmann and Hennigs and Langner 2010).

4.6 Corporate Social Responsibility - Zara are weaker than competitor H&M relating to their published position on corporate social responsibility (CSR) and sustainability which is increasingly important to their target audience. H&M have detailed positions of CSR in every country they operate in plus a full sustainability report in relation to their actions and impact on the environment.

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5.0 CONCLUSION In conclusion, Zara is a brand whose marketing strategy is heavily influenced by the company’s customer. Zara’s designs, delivery and service are all driven directly from customer feedback data. As well as their successful supply chain, their capability to have their customers feeding into designs is unique and provides a competitive advantage. Zara excels in development in technology and data collection, which has resulted in smoothly operated logistics and their ability to understand, predict and deliver customers’ preferences for trendy fashion at affordable prices at quick lead times.

However, research has suggested that Zara need additional investment in creating a strong brand positioning on sustainability and CSR, in relation to its competitors and communicate it to their customers. Zara’s use of instore technology helps the customer experience, but with customers expectation of improved personal service to align to the “premium” shopping experience, staff training will become more important. With respect to social media, Zara should seek to improve responsiveness to customer feedback, helping to create customer engagement and a deeper communication strategy going forward.

The firm’s main threat is the possible effect of the worldwide economic recession on the strength of the Euro which could increase the costs of Zara’s outsourcing and ultimately remove any competitive advantage gained by its pricing strategy. However, new markets, new countries and the mobile shopping is a growing opportunity that Zara should make in the near future.

To conclude, Zara is a global success that relies on the culture and the respect that no one is a better, authentic trendsetter than the customer themselves. This customer importance and philosophy is working exceptionally for the brand and needs to be continually shown in its business strategies going forward.

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