Abercrombie and Fitch Marketing Strategy Analysis - Literature review Example

The literature review sought to establish possible explanations for Abercrombie and Fitch’s (A&F) loss in market share. Four broad areas were examined and they included advertising effectiveness, social media strategies, industry analysis, and consumer switching. These issues were examined in light to current reports in the media about A&F. The literature review illustrated that the apparel industry is changing structurally. Persuasion techniques, consumer control and relationship-building are critical factors in advertising effectiveness. Social media literature emphasises the need to stick to a certain message, group of people and environment. Customer switches focused on variety seeking and relationship-building. Most of the research dwelt on general issues. A gap exists in terms of application to real-life case studies in the apparel industry, and this is what the paper will focus on. Introduction Abercrombie and Fitch is losing market share to competitors like Super Dry, Gap and low-cost sellers like H&M and Primark. Some of its retail outlets in the UK have been closed as a result. Furthermore, the company’s advertisements appear not to resonate with the general market. In order to establish what could be going wrong, it is critical to study external and internal forces affecting the organisation. The research methodology section of the paper will strive to do this. In this literature review, great attention will be given to theoretical underpinnings behind these occurrences. Articles on advertising effectiveness will be included in the paper. Retail industry analysis of the UK apparel sector will also be examined. Social media and its role in creation of new product awareness must also be addressed. Determining what scholars suggest on factors that cause consumers to switch is critical in this literature review. Finally, recommendations on building new capabilities will be looked into. All the above will be studied on a theoretical level; they will be applied to Abercrombie and Fitch in the methodologies section through primary research. All books, articles and analyses included in the review address these matters directly. Most of them involve primary research in the retail industry generally while others entail secondary research in marketing. Some specifically focus on the clothing sector because this industry has unique characters. Since marketing and strategy is a time-sensitive issue, articles no older than 7 years were utilised. However, for advertising effectiveness, only work from 2010 was included. Literature review Industry overview Bhardwaj and Fairhurst (2010) assert that the apparel industry is slowly reporting declines in mass production. During the 1980s and years before, clothing retailers sold low cost, standard styles like the male white shirt and denim. However, demand for classic apparel began to fade out in the 1990s when women became highly fashion conscious. From this time onwards, it is increasingly difficult to make huge profits when a company specialises in mass production. BBC (2013) reports that the casual look, synonymous with A&F, is slowly losing its appeal among the core-teen market. One of the possible explanations for this could be a renewed orientation towards customised apparel. Hoffman (2007) believes that fast fashion is taking over the industry, and those who do not join in will suffer huge losses. Fashion used to be regarded as a cyclical phenomenon that entailed the introduction, adoption, growth, public acceptance, maturity and obsolescence of new fashion. Most times, the cycles would cover all four seasons of the year. However, now retailers have expanded their product ranges. Several of them feel that it is necessary to offer refreshing products to their target market. In order to boost variety in these stores, a number of retailers have introduced mid season offerings. Changes in consumer lifestyles require sellers to adjust to their wants. A&F may still be oblivious to these new preferences thus explaining their unsatisfactory performance. Tokalti et. al. (2008) reiterate these sentiments in their work. They explained that the concentrated nature of the UK fashion market has caused several retailers to increase variety at low prices. Bhardwaj and Fairhurst (2010) add that many clothing sellers have found that, on its own, the outsourcing model may not necessarily cause profits to increase. Instead, businesses need to work hand in hand with suppliers and other members of the supply chains. Huge retailers with rigid supply chains presently find it difficult to maintain their lead in the retail clothing market. H&M, Zara and other brands like New Look currently require only three to six weeks to get new designs from runways into their stores. Abercrombie and Fitch do not belong to this new breed of fast fashion retailers (Prior and Kapner, 2013). The organisation prefers to use its tested-and-proven methods of long product lifecycles and predictable designs. A speed-to-market approach is evidently lacking from this organisation. In an industry where agility and fast market responsiveness are boosting profit margins, it comes as no surprise that A&F are struggling. A business ought to look at two critical forces when aligning its strategies to its external environment. First, it needs to look at the market attractiveness of that industry as well as its own business strength (Kotler, 2007). This means that if either of the factors is missing, then an organisation is unlikely to do well. It appears that the apparel industry is an unattractive market, especially in the UK. It is highly concentrated and requires companies to reinvent themselves from time to time. If too many resources have been targeted towards setting up initial structures, then reorganisation may be extremely difficult. It is because of this that an organisation like A&F is reluctant to use the fast fashion model. This would require the company to break everything down and start from scratch. When a company is weak, it can specialise on its little strengths, withdraw from the market, or look for ways of overcoming its weaknesses (Kotler, 2007). Abercrombie and Fitch may either embrace the new innovations in value chains or could merely solidify what it does best as quitting is not a strategy. On the other hand, the company has been using the same business model for years. Perhaps it would be wise to consider a different approach. Baker and Hart (2008) augment this finding when they add that the heterogeneity of the market is manageable in marketing. It must involve acknowledgement of the role played by the ecosystem of the organisation as well as the company itself. However Baker and Hart (2008) disagree with Kotler (2007) on whether the alternatives for market adjustments are clear cut. The heterogeneity and uncertainty in the retail market makes it difficult for analysts to prescribe, with certainty, rules for success. The former authors believe that certain traits do indeed exist among successful marketing strategies. However, narrowing down a company’s choices to one or two options as stated in the above paragraph may not be realistic. Prescriptive approaches work when consumer preferences are well known and have stayed that way for a long time. Therefore, Kotler’s suggestions are indeterminate in a novel industry like fashion (Baker and Hart, 2008). The above articles on industry trends are quite insightful in explaining the rapid alterations that have occurred in this market. A few of them have also looked at retail apparel sellers like Zara and H&M. The only problem in the general direction taken by most scholars is their overreliance on success stories. Few journal articles dwell on organisations that have misapplied or rejected these new industry trends. This paper seeks to close the gap by applying industry trends to A&F. Such a case study will be critical in showing the organisation how it can improve its performance. Alternatively, it may show other retail players what not to do in their sector in order to stay afloat. Advertising effectiveness Effective advertising is critical in keeping a company successful within the fast-paced apparel industry. Shimp (2010) identified a number of issues that make marketing efforts successful; top on this list is consumer control. A buyer usually wants to be in control, so successful marketers need to make their advertisements customer-centric. Sellers sometimes care too much about their products that they perceive consumers only as passive listeners to their marketing messages. Organisations that do well ought to empower their buyers. They can involve them in advertisement efforts through social networks, blog and video-related websites. In fact, companies need to be open to the possibility that the internet has given consumers the power to either ignore or pay attention to their messages. Additionally, companies are currently reducing their dependence on mass media as they have realised that it is not engaging enough (Shimp and Andrews, 2013). Digital advertising, mobile advertising and event sponsorship are the way to go today. It is for these reasons that Abercrombie and Fitch must examine its overall advertising strategy and determine whether it needs to incorporate these new dimensions. The notion of giving consumers control also extends to relationship building. Successful marketing communications need to inspire repeat purchases as well as a high degree of loyalty. For the seller, it makes sense to seal the leak at the bottom of their bucket in order to keep profitability high than to replace lost consumers. Since it costs businesses as much as 10 times more money to acquire new clients than to replace old ones, it is essential to work on strategies that maintain the current customer base than to dwell on acquiring new ones (Kotler, 2007). Prior and Kapner (2013) note that Abercrombie and Fitch appear to be suffering in the area of relationship marketing. A number of their previous clients have now moved on to different fashion retailers. The organisation’s marketing approaches ought to involve tactics that inspire repeat purchases, For instance, it could borrow a leaf from Molson Beer. The latter organisation is based in Canada and did an experiential marketing program. It created a brand experience that lasted in consumers’ minds. They developed the idea that consumers require the brand in order to maintain their lifestyle. Participants of a sweepstake campaign received an opportunity to go camping and do extreme events like mountain climbing (Shimp, 2010). A&F may thus need to consider such approaches when attempting to build relationships with its consumers. When sending messages to buyers, companies need to pay to particular attention to how persuasion occurs. Shimp and Andrews (2013) explain that the persuasion process involves understanding what goes through the mind of the consumer as he or she purchases an item. Many buyers often think about a message, evaluate its arguments and engage with a message prior to their involvement. This process is called elaboration, and entails the application of cognitive processes in assessment of a marketing communication message. The extent to which a potential consumer engages in elaboration depends on their motivation. Messages need to relate to individuals’ goals. They need to speak to their current needs and offer solutions for them. Daily Mail Reporter (2013) talks about how a number of people feel disgruntled with the Abercrombie and Fitch message. They do not think that it speaks to them because they are not popular or as attractive as the company’s models. It is for this reason that the organisation needs to consider its current direction. Walsh (2013) affirms that sometimes advertisements may be ineffective when a company has done a poor job of protecting its brand image. The author introduces a term called genericide, which he describes as the process by which other parties use a company’s trademark or brand unofficially or illegally. This creates confusion in the minds of consumers who then develop a disdainful attitude towards the original brand. Ineffective handling of a company brand can lead to financial disaster as advertisements or other marketing strategies will not resonate with the market. The above author claims that some organisations have done relatively well in safeguarding themselves against genericide. To find themselves in this position, they have selected unique names, monitored their competitors’ use of the trademark and watched how advertisements have depicted this method (Walsh, 2013). During A&F’s profitable seasons, one may argue that the exclusionary nature of their advertisements earned them a lot of acclaim. Then again, the Daily Mail Reporter (2013) affirms that this overemphasis on “cool kids” has created a backlash among the masses. Many observers currently object to the organisation’s contribution to low self esteem by teens. The fact that it does not make plus sizes teaches teens that they cannot be accepted as they are. Even the organisation’s CEO, Mike Jeffries, asserted that their clothes were exclusionary and only for popular teens. This strategy may have been motivated by their need to protect their brand. Currently, it may need to be re-examined because it is pushing away the very consumers it was meant to attract. (Prior and Kapner, 2013) All the above articles are helpful in providing a general context for advertising effectiveness. However, these concepts have not been applied directly to a case study like A&F. Most of the assertions in the literature emphasise prescriptive ideas. It would be helpful to apply concepts like experiential marketing and then measure outcomes in terms of profitability as this would prove that the methods are tenable. Since such an approach is lacking in the literature, this research will close that gap by applying it to A&F. Social media and the creation of awareness As alluded in the previous sections, several scholars have found that consumers want to be in control of marketing messages. Additionally, a need for relationship-building exists in effective communications. Social media is the platform that companies can use in order to achieve these primary advertising and marketing objectives. However, authors have found that certain features ought to be given specific attention when doing so. An effective social media marketing message is one that starts with the right people. A company needs to have market mavens, whose role is to actively diffuse market information (Kaplan and Haenlein, 2011). Goldenberg et. al. (2009) add that organisations ought to work with social hubs. These are people who have large social connections and can facilitate information transmission to various subcultures. Sales people could also come in to amplify the message from the market maven in order to increase its persuasiveness (Kaplan and Haenlein, 2011). Hanna et. al. (2011) differ slightly on what the right people in a social media message involve. They characterise them into critics, collectors, joiners and spectators. Each of these parties forms part of the message ecosystem and their contribution ought to be analysed. One may compare message collectors to market mavens in the model put forward by Kaplan and Haenlein. Collectors would be the social hubs in the previous model. However, Hanna et. al. (2011) appear to have done a more expansive job by considering potential retractors and passive members of the social media message than Kaplan and Haenlein (2011). Aside from selection of the right people, effective social media marketing involves having the right message. Plenty has been written about persuasive messages. These need to contain information that is memorable and interesting enough to stick. Dobele et. al. (2007) postulate that the message needs to elicit an emotional response in the target audience. Messages may include true stories, elements of surprise, or can trigger either positive or negative emotions like disgust and fear. Hanna et. al. (2011) gave a fitting illustration of how companies can trigger emotional responses. They carried out an analysis of a Grammy Awards social media campaign involving most of the stakeholders in the event. The celebrities all affirmed that they were fans of the Grammy Awards, so they each told their story on why they belong to such a group. The overall outcome was a highly engaged consumer base. Hanna et. al. (2011) also found that authenticity and uniqueness were critical in eliciting right responses. Since the online community is awash with advertisements, only the most captivating will get noticed. Boring messages are simply unforgivable in this environment. Perhaps the most complex element to get right in the social media environment is harnessing the right environment. It may be more effective to select platforms that have several subcultures like virtual social worlds. Instead of spreading the message too broadly, it may be more effective to narrow down one’s interests to those individuals who are most likely to respond to the message (Kaplan and Haenlein, 2009). However, Goldenberg et. al. (2009) cautions that companies need to refrain from copying their competitors or their own successes when using this platform. Sometimes the political or economic environment may make strategies that have worked in the past fail miserably in the future. A lot of insight is necessary in discerning the best time to use certain approaches. Why consumers switch to competitors Walsh (2013) pointed out the consumer apathy that is now plaguing buyers of A&F merchandise. This has caused many of them to switch to computers within the apparel industry. A number of factors may affect brand loyalty in the apparel industry. Sometimes these could be general in nature or could apply to fashion specifically. The literature is filled with possible explanations on why consumers may switch from store to store. The most obvious factors include the physical environment of the store, such as its colour, style, architecture and aesthetics (Ramayah 2013). HCO Hounds (2013) explain that the A&F retail format is designed in way that attracts its target demographic; that is, teens. The walls are sometimes aligned with large screens containing live fed from surf beaches. Even the in-store arrangement itself consists of this same approach. The key challenge with this idea is making sure that the layout is one that teens resonate with. Currently, one may question these alignments. In-store treatment of consumers may also play a critical role in fostering loyalty. Personal interactions with buyers affect whether they will switch to a different supplier. Personnel need to inspire confidence but still be courteous to consumers. In case of a complaint, staff ought to be friendly, knowleadgability and honesty (Jung and Yoon, 2012). Failure to exude these qualities may lead to a mass exodus from the concerned organisation. While the above factors may be useful, they still do not acknowledge certain intangible qualities like trust and satisfaction. During the sale of a product, it is critical to work on the relationship quality between sellers and buyers. Firms have realised that there is much value in retention of the current client base. If the relationship quality between a company and its buyers is satisfactory, then it can affect a buyer’s willingness to stay with the organisation. Hiring the right person that can foster commitment and trust in the company is one way of achieving this (Ramayah, 2013). Not all scholars concur with Ramayah (2013) on consumer loyalty as others believe that more obligatory factors may come into play. Harrison et. al. (2012) affirms that sometimes customers may feel locked into a relationship with a retailer. The authors wanted to establish reasons behind the lock-in phenomenon. They studied 44 customer relationships and interviewed participants on why they continued to stay. The authors divided responses into fourteen categories. Among these answers were personality factors, switching barriers and obligatory factors. Harrison et. al. (2012) thus filled a gap in the retail loyalty literature. They have studied obligatory factors in locking buyers into relationships. Few researchers have paid attention to this aspect in their studies. A&F may obtain insights on how to possibly deal with personality factors or lock in when interacting with their buyers. Regardless of the above findings, one must look into the fashion industry in particular. Consumers in this industry often switch from one brand to another owing to a number of factors. Sometimes they may do it because of their loyalty to a manufacturing brand over a retail brand. Alternatively, it could be the reverse. Broyles et. al. (2011) looked into the issue by studying 1,120 samples to determine whether manufacturer brands had greater influence on retail brands. It was found that loyalty to retail brands causes more purchases than loyalty to manufacturing brands. If a person’s attitude towards a particular store is positive, it can affect their tendency to switch to these stores. These findings indicate that organisations ought to tailor their marketing methods to consumers who are loyal to retail brands and to manufacturing ones. Jung and Yoon (2012) appear to look at things from a different angle. They carried out a study in Korea in order to determine factors that cause consumers to switch from one brand to another. They believed that sometimes variety-seeking behaviour may motivate buyers to try new brands. Furthermore, if customers have a high a tendency to be involved in purchasing decisions, then they are more likely to be disloyal to a previous brand or try a new one. Customers need to be satisfied by the product or service providers that they plan on switching to. Therefore, organisations that want to minimise switching need to increase the level of satisfaction they accord their buyers. Additionally, they ought to offer variety to their clients in order to keep them there. The above literature largely focuses on switching in general. The apparel industry is unique because certain critical factors are unique to it. First, it is seasonal in nature, and even though some organisations are introducing fast fashion models that cater to consumer needs, most times, these designs are introduced in intervals of several weeks. Additionally, consumer preferences are quite variable in the fashion industry. This fact is relevant to businesses that target teenagers as their target market. Therefore, it would be critical to know how variety-seeking, lock-in factors, relationship-building, tangible and intangible in-store qualities affect consumer loyalty at Abercrombie and Fitch. The paper will thus contribute to literature by combining most of the forces that may relate to this industry, and hence other clothing retailers. Conclusion The literature review has found that the apparel industry is changing structurally. While a number of studies have been done on success stories, few exist on those that choose to maintain their old ways; this is what the paper will focus on. In regard to advertising effectiveness, scholars have studied persuasion techniques, consumer control and relation building. These factors will again be applied together in the A&F case study. Social media literature emphasises the need to stick to a certain message, group and environment. It will be critical to examine whether the case study organisation is applying these techniques and what it could do to change it. Finally, the review also examined reasons behind consumer switches. Factors like lock-in, relationship-building and variety-seeking were only discussed generally but not placed in case studies. References Baker, M. and Hart, S., 2008. The marketing book. Oxford: Butterworth-Heinemann. BBC News, 2013. Abercrombie and Fitch shares slump as sales fall 10%. [Online] Available at [Accessed 10 March 2014] Bhardwaj, V. and Fairhust, A., 2010. Fast fashion: Response to changes in the fashion industry. The International Review of Retail, Distribution and Consumer Research, 20(1), pp. 165-173. Broyles, A., Ross, R., Davis, D. and Leingpibul, T., 2011. Customers’ comparative loyalty to retail and manufacturer brands. Journal of Product and Brand Management, 20(3), pp. 205-215. HCO Hounds, 2013. Real history of Hollister Co. 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