Burberry: Assessment of Marketing Strategy - Essay Example

Burberry: Assessment of Marketing Strategy Introduction Burberry, an upscale British clothing and accessories retail company, is achieving superior performance amidst a highly competitive environment. A variety of the company’s key competitors, such as Saks Fifth Avenue, Neiman Marcus, and Harvey Nichols have not been able to sustain competitive advantage in terms of marketing due to fluctuations in an increasingly hostile financial marketplace. Burberry’s successes are evident in both recent financial documentation and the speed by which international expansion is occurring. Burberry’s competitive edge is built around unique positioning strategies unlike those of competition, the company’s ability to understand and relate to growing trends in consumer preferences and improvements in the company’s supply chain methodology. Primarily, even more than the tangible cost savings and improvement efforts related to supply chain is Burberry’s recent efforts to improve the consumer perception of the retail company by changing its strategic planning from one of traditionally-inspired clothing to modernism, bringing the company a much larger target audience to market its brands. Burberry understands its consumer audience and has implemented a variety of marketing strategies which have brought the company increased competitive advantage. The business has a flexible internal culture and structure which allows the company to adapt to changing trends in consumer buying behavior. Outperforming competition in heavily saturated market environments is something that Burberry has managed to accomplish by recognising contemporary consumer behavior. This report identifies the marketing strategies of Burberry and compares the company’s financial statistics to marketing focus to determine how Burberry remains a leader in upscale clothing and fashion. The report will illustrate how the company views the external competitive environments and foreign business environments to appeal to a diverse blend of consumer demographics. The statistics Burberry currently operates 97 stores and 366 concession outlets both domestically and abroad (Rigby & Vermeulen, 2008). Burberry achieved annual sales of £995 million in fiscal year 2008 (Burberry Annual Report, 2008), which represented an increase of over £100 million since 2007. The company witnessed individual store sale increases of 14 percent in the same period, making Burberry a leader in its particular fashion market (Braithwaite, 2008). Interestingly, in early January 2008, one British analyst warned that Burberry may well miss its target sales expectations for the year, indicating that Burberry can rather quickly outperform market conditions and other competitors through creative and innovative marketing principles. Burberry’s success strategies Two of the most fundamental strengths of Burberry’s marketing focus lie in the product and promotion element of the marketing mix. In relation to product, the company is swiftly moving away from its more traditional consumer and working toward the creation of a contemporary image by carrying wide varieties of clothing and accessory fashions which cater to the youthful, trendy consumer searching for upscale fashion. One competitor of Burberry states the following regarding product: “Retaining a traditional customer while courting a fashion-conscious one, is a risk” (Sims, 2008: 10). This might suggest why Burberry maintains a sales leader as the company does not believe that blending styles for broader demographic reach is a risky strategy but is part of its branding focus and product positioning strategies. One retail expert offers that the upscale clothing market is “a very unforgiving market” and if there is one element of the consumer overlooked or under-valued, retailers operating in these marketing environments will be “punished severely” (Gray, 2008: 20). The expert is essentially suggesting that companies which are not focused on delivering customer value through appropriate product or product positioning strategies, they will likely be outperformed by more progressive competitor marketing. Even though Burberry is not a luxury fashion company, the focus of its positioning efforts is one of luxury for those consumers in the mid-fashion level who wish to trade up to more upscale products. Product and the company’s positioning strategies are vitally important to Burberry’s long-term success and growth rate in the firm’s attempt to lure the contemporary consumer. Brunelli (2007) identifies that Burberry made sweeping changes to its marketing division and has hired a younger and more dynamic group of marketing professionals in order to change the image of tradition to one of progressive modernism. This blended approach toward product, as an element of the marketing mix, is a likely success factor in the majority of the company’s retail outlets. For instance, Rigby & Vermeulen (2008) offer that classic trenchcoats achieved large sales volumes whilst funky and progressive shoe sales saw the largest increase. Compared to competition that are under-performing for fear of the risk of blending fashion genres, Burberry’s focus on blending its clothing lines is allowing them to maintain superior competitive advantage in terms of product focus in company marketing. In regards to promotion, the company’s advertising literature depicts several youthful, hip and modern UK youths, adorned in glittery lipstick, extraordinary grooming and styling and a variety of gold-gilded attire. In many respects, the firm’s representative advertising literature positions the business as luxury and upscale to even the youthful consumer, illustrating a connection with youths of this category. This was a deliberate focus as Burberry decided to do away with lower-end merchandise such as scarves and hats which cost less than $50 which had been aimed as the less-affluent teenage or young adult shopper. Burberry decided that such products eroded the importance of the new modern, upscale brand and eliminated them from the sales floor (Mitchell, 2007). The company is also enhancing its emphasis on building brand preference and brand awareness in its newly-diversified consumer audience. Burberry reports front-end evolution consisting of a one brand strategy which is unique as the company attempts to draw not only on the strengths of the various merchandise brands Burberry carries, but the company’s own consumer image. The one brand philosophy allows the business to create a variety of promotional literature which emphasizes the attitude and dynamic personality of today’s Burberry without necessarily relying on other brands to sustain higher sales volumes. This does not appear to be a strategy that the company’s largest competitors have been able to capitalise on. The company performs adequate marketing research in attempts to understand its customers, which is evident in Burberry’s recognition of existing trends in the consumer market. For instance, analysts suggest that the rise in single (unmarried) individuals is growing and the trend to trade up for top-class products are the largest growth factors for luxury product sales (Financial Times, 2008). Additionally, with a new fashion forward consumer audience, handbag demand is also on the increase, giving the business strong sales growth in this area. This analyst recognition of consumer trends is a likely catalyst for Burberry’s current high performance as the company announced a superior stock replenishment system for handbags and a new target focus in non-apparel sales (Investors Chronicle, 2007). It would be illogical for Burberry, or any other competitor, to make sizeable changes to the company’s internal logistics systems without a proper marketing research focus which understands consumer buying trends and preferences. Superior performance suggests a company which is well positioned to understand what drives its customers and how quickly the company must respond to these needs both internally and externally in terms of product, promotion and generic consumer research. As previously identified, mid-level customers are aspiring to upper-level brands, offers many financial and investment strategists (Newman, 2008). This shift in consumer patterns can likely not be explained away by economic conditions, as it is relatively common knowledge that there are significant strains on the financial condition of many companies and countries today. Thus, at a time when various predictive models might indicate a lessening of consumer spending, Burberry’s increase in sales volumes amidst an economic downturn speaks volumes of the company’s dedication to understand what drives the consumer to buy. Research did not uncover specific information as to what intrinsic or extrinsic factors were driving customers to trade-up to luxury items, however it would explain why Burberry has changed its focus from mid-level consumer positioning to one of luxury and has built a solid brand in the process. A global focus 2007 represented a significant year for Burberry as the company opened its first store in Florence, Italy as well as in Malaysia. The only non-performing sales environment is Spain in which sales are down 20 percent (Rigby). However, in response to these declining sales, the business is restructuring the company in an attempt to understand the foreign consumer. For instance, the company realises that its domestic advertising literature is not appropriate for the Spanish consumer and is working to redevelop strategies which are focused more around the cultural expectations of Spanish citizens who are generally proud of heritage (Jackson & Cully, 2006). This represents a flexible marketing model whereby the company can create domestic promotional and sales literature whilst still maintaining a different marketing strategy in foreign market environments. A retail company with a diversified outlook regarding various, multi-cultural marketing campaigns would best describe Burberry’s modern attempts at building a solidly performing company. Boone & Kurtz (2006) identify that many retailers are unable to balance multiple international strategies appropriately and cause negative consumer perceptions with companies’ lack of dedication to foreign consumer research. Since the majority of Burberry’s foreign stores are experiencing growth, the company appears to have found its successes in global consumer research. Interestingly, the company relies on the majority of its total business revenues to come from business practices in Japan (Burberry Annual Report). This is largely from various licensing agreements held on contract which, for the purpose of this report, do not need to be identified in detail. However, from a business perspective, Burberry takes steps to protect its intellectual property and ensure the integrity of licensing agreements as investment strategies. How is this related to marketing? The investments gained from foreign markets allows the company to redevelop supply chain, increase global expansion and gives the capital necessary to make marketing improvements company-wide. Protecting intellectual property and ensuring that licensing agreements are enforced would be a part of the business focus which is directly tied to marketing strategies as a form of risk control and brand control. Counterfeiting is a real problem in the upscale retail market and Burberry has dropped various fashions because they can be easily reproduced and erode the brand (Mitchell). Though this is legal protectionism, it is part of the marketing focus as the Burberry brand (and its licensing partners) are a significant portion of brand strategy and total sales promotion. Price not an issue? Because of the shift in the mid-level consumer to a high-priced mentality, pricing is not a significant focus of the company related to the marketing mix. Of course, any business is going to have budget restrictions and other issues related to finance, however there is not significant evidence of reference to extensive or complicated pricing models other than that of strategic expectations related to sales growth. Why is this? It could be attributed to shifts in consumer patterns where competitive pricing on quality merchandise is guaranteeing superior sales volumes. As Burberry is not a retailer of luxury goods but has positioned the business as luxury-inspired, consumers appear to be willing to pay superior or competitive prices. It would be somewhat irresponsible to say that Burberry does not focus whatsoever on pricing, however it does not appear to be a critical success factor for the company other than in terms of revenue gains. It is attitude and a contemporary connection with the customer which justifies Burberry’s price positioning strategies. Men as marketing advantage Unlike many multi-consumer retailers, Burberry is gaining profitability through sales of mens’ wear clothing, suggesting that this is because men are steering away from casual dress and moving toward semi-formal fashions (guardian.co.uk, 2007). These male consumers are reacting in an environment where they are willing to pay upscale prices so long as they feel they are not being ripped off (guardian.co.uk, 2007). In terms of understanding the male consumer, Burberry has positioned itself well by providing higher-end mens’ wear merchandise and providing the consumer sentiment of quality at a reasonable price. The company’s position related to the male consumer again comes back to understanding the external business environment and capitalising on its trends. Having a flexible business model in terms of supply chain improvements and stock ordering changes as well as having a business which is quick to react to changing consumer values and preferences has given the business a strong edge in terms of reaching the male client. The apparent ability to shift merchandise in and out based on what demographic has leaned positively toward the brand is a critical success factor of Burberry’s overall marketing (and operations) model. The missed deadline Referring back to supply chain and logistics, Burberry maintains another competitive advantage as their largest domestic competitors are relying on outdated technologies in distribution. Passariello (2008) offers that Harvey Nichols misses delivery deadlines to customers regularly. Burberry, however, has spent considerable financial resources in redeveloping the technological aspects of supply chain which allows the company the flexibility to reduce unsold merchandise and replenish with new stock, as well as ensuring timely deliveries (Passariello). Issues of supply chain would not seem to be significant in terms of maintaining superior sales volumes, however it is all about the positioning strategies of the company and its brand. Ensuring adequate supply and timely delivery dates will only serve to create enhanced consumer perceptions of quality customer service, delighting them in not only product but in the delivery systems which provide it. Harvey Nichols caters to the upscale consumer as well at it would not bid well for the company and its consumer sentiment ratios if antiquated technology systems create perceptions of lack of quality and value. Simply by being efficient, Burberry appears to maintain a superior and flexible distribution and stock replenishment model. There are also only a small number of suppliers from which Burberry buys its merchandise, creating risk for the company (Burberry Annual Report). However, the company understands these risks and works on continuous improvements to counter these risks such as the development of manufacturing capabilities. This only tends to illustrate that Burberry is adaptable and well-suited for further enhancements to supply chain and distribution as a means to minimise risk to the business and ensure adequate product supply. Recommendations Though it is clear that Burberry experiences considerable marketing advantages in terms of supply chain, positioning, and consumer research knowledge, the business might benefit from granting higher emphasis to advertising promotion. Using catalogs as the primary medium for reaching upscale-minded consumers could be expanded with the utilisation of direct mailing strategies and other electronic promotional materials to widen Burberry’s target reach. Research uncovered no evidence of similar campaigns currently in existence at Burberry and these are low-cost efforts to boost marketing efforts and achieve higher sales volumes. It is likely that a similar campaign would work in non-domestic sales environments if catered to the unique consumer culture. Conclusion Clearly, Burberry enjoys the position of a marketing leader with strong advantages in distribution, a solid brand and a solid focus toward growth and improvement. Understanding what drives the customer to make a purchase is a foundation of the business’ strengths and Burberry has created a positive consumer sentiment and a quality reputation as a sales and product leader. All of these benefits are being enjoyed by a flexible and progressive marketing model whereby the business responds to changes in the business environment quickly rather than working on the premise that consumer trends are always going to remain the same. In terms of competition, Burberry clearly outperforms them in terms of increased global sales volumes and in ensuring adequate supply of what the consumer really desires. Whether it is shifts in mens’ wear preferences or a trend toward the haphazard, it appears that Burberry understands its risks and limitations (as well as strengths) as related to distribution and is acting on a continuous improvement philosophy of adaptability. This links the business’ marketing competence with leadership and a business goal toward marketing excellence. Linking a mid-level brand with upscale exclusivity is a significant success of Burberry and can be attributed to a brand focus which reacts to consumer sentiment. Creating the impression of a luxury brand has been accomplished with a shift from traditional to contemporary and, essentially, white-washing the company to create a fresher consumer perception. It has apparently worked for Burberry as the company’s sales revenues and expansion ratios tend to speak for themselves. It would be best to suggest that Burberry has found just the right connection with their target consumers and work continuously to stay connected with them. By taking the approach of brand unification, the firm’s one brand strategy, it makes the business less reliant on the brand power of other competitors but allows the business to focus on its core brand strengths. This appears to be what Burberry is all about: Creating consumer value and positive sentiment with a well-established brand name that speaks volumes about the company’s attitude and culture. In a selling environment where economic conditions can potentially erode successful sales, other companies which are failing to meet financial expectations might take a second look at Burberry and ask what the company is doing right to thrive in a difficult marketplace. Burberry’s marketing models are both efficient and value-adding, giving the firm a well-positioned brand which can outperform competition and ensure longevity for the company. Not every company could say the same. Bibliography Boone, L. & Kurtz, D. (2006). Contemporary Marketing. 12th ed. Thomson South-Western, United Kingdom. Braithwaite, Tom. (2008). “Burberry enjoys solid luxury sales”. Financial Times, London. 15 Oct 2008: 25. Brunelli, Richard. (2007). “How they got their buzz back”. Adweek. 48(35): 14. Burberry Annual Report. (2008). “Burberry Annual Report”. Retrieved 8 Nov 2008 from http://smartpdf.blacksunplc.com/burberry2007-08ara/Burberry_2007-08_AnnualReport.pdf Financial Times. (2008). “Demand for luxury is on the increase”. 4 Jun 2008: 18. Gray, Alistair. (2008). “Burberry warns it could miss profit forecasts”. Financial Times, London. 16 Jan 2008: 20. Guardian.co.uk. (2007). “Dressed for Success”. Guardian News and Media Limited. Retrieved 8 Nov 2008 from http://www.guardian.co.uk/print/0,3858,4549756-103676,00.html Investor’s Chronicle. (2007). “Handbags in vogue at Burberry”. London. 14 Nov 2007: 1. Jackson, A. & Cully, C. (2006). The Ethnographic Survey. Hamish Hamilton Publishers, London: 117-118. Mitchell, B.E. (2007). “Mining the past to seize the future”. Business Week. Iss. 4045: 58. Newman, Eric. (2008). “Mass Afluents Retreat En Masse”. Brandweek. 49(3): 4. Passariello, Christina. (2008). “Logistics are in Vogue with Designers; As Slump Threatens Luxury Goods, Systems on Track”. Wall Street Journal. NY, NY. 27 Jun 2008: B.1. Rigby, E. & Vermeulen, A. (2008). “Burberry gets boost from classic mac”. Financial Times, London. 16 Jul 2008: 20. Sims, Josh. (2008). “Second to none”. Financial Times, London. 19 Feb 2008: 10. Read More