Reference no: EM132193234
CASE STUDY
COMPETITIOR ANALYSIS AND THE DEVELOPMENT OF A BRAND
COMPLACENCY CAN BE THE BIGGEST ENEMY OF RETAILERS
"There's no need to ask the price - it's a penny" was the proud claim of Marks and Spencer a hundred years ago. From the start, it had developed a unique position in its market - an emphasis on low price, wide range and good quality. Over time, the Marks and Spencer position has been steadily developed, along with its profitability. By the 1990s it looked unstoppable as a retailer, as it progressively expanded its product range from clothing to food, furnishings and financial services. The world seemed to be waiting for M&S to exploit, and despite disappointing starts in the US and Canada, it developed steadily throughout Europe and the Far East. Then, just like any star who has been put on a pedestal, the media began to savage the company. After a sudden drop in profits and sales during 1998, critics claimed that the company had lost its position in the market place. It appeared to be like a super tanker, ploughing straight ahead with a management that had become much less adaptable to change than its nimbler competitors.
Many observers had commented on the fact that the company did not have a marketing department until 1998. Marketing, at least in terms of advertising the brand, had become so important to its competitors, but had never been high on Marks & Spencer's agenda. According to Media Monitoring Services, M&S's total media spending between Dec 1997-Nov 1998 was just £4.7 million, almost a drop in the ocean compared to the spending of Sainsburys (£42.1m); Tesco (£27.5m); and Woolworths (£21.5m). While other retailers had worked hard on building a brand image, M&S has relied on the quality of its stock to do the talking. The argument was that everyone knew what they were getting with M&S underwear or shirts - good quality at fair, but not cheap, prices. Similarly with food, M&S's offering was about quality rather than price. M&S believed its customers knew what the brand stood for and advertising was much less important than ensuring that it could obtain the right products at the right price.
In 1998, M&S looked to marketing to help turn around its performance, describing its new marketing division for UK retail as "a significant development in our retailing philosophy". Many suspected that M&S's conversion to marketing had been encouraged by the example set by the star of modern retailing, Tesco. There are many similarities between the problems facing M&S and those which Tesco faced a decade previously. In the early 1990s Tesco was a brand which looked like it had seen better days. The retailer's format was tired, its stores poorly laid out and the positioning of the company was still based on its founder's principle of 'pile it high and sell it cheap'. Its arch-rival, Sainsbury's, was regarded as the more upmarket store for the middle classes, who shopped for quality food in a more pleasant environment. Since then, Tesco had innovated with improved store designs, petrol stations, coffee shops, a new fascia, the Tesco Clubcard and 24-hour store opening. The list of Tesco's marketing initiatives seemed to be unstoppable, in an attempt to keep one step ahead of its competitors.
In contrast, M&S had failed to keep pace with customer service. In many issues of retail development, such as out-of-town shopping centres, Sunday opening and loyalty cards, it had lagged behind its main competitors. While it has stood still, the likes of Tesco and Sainsbury's marched ahead until there was no longer much that felt exceptional about the M&S shopping experience. Analysts argued that M&S had failed to make its store layouts help shoppers bring clothing together to make outfits. In a typical M&S store, all jackets would be located in one area and all cardigans in another, for example. Its competitors had made much greater progress in bringing together co-ordinated sets of clothing which would encourage shoppers to spend more. M&S has also been criticized for making things difficult for customers by not accepting payment by major credit cards.
In response to its current troubles, the newly created marketing department of M&S launched its first national campaign for retail towards the end of 1998. The ads followed an initial attempt at regional TV advertising earlier in the year, which the company was said to be very pleased with. The newly appointed Chief Executive claimed "It's not that people don't like what we're selling, but that we haven't got the message across. There are an awful lot of people who love us for our knickers, but they don't love our home furnishings because they don't even know they are there." Many critics thought the problems were much more deep-seated and blamed the store's problems on the fact that its autumn fashions were seen as dull and uninspiring, and out of touch with consumers' preferences. Greater authority was pledged to the marketing department when it came to new product design.
In response to its pledge to listen to what its customers wanted, new designers were brought in to try and give the company's ranges more sparkle. The company even thought the previously unthinkable by proposing to stock manufacturers' own branded products, instead of relying entirely on M&S's own label products. If customers wanted to obtain variety at M&S, the new thinking was that the company must adapt and offer it. Another area identified for development was direct marketing of fashion products - an area where the company had begun to lag behind its rivals who had developed interactive web sites.
Serious questions remained about the company. How quickly could it change in response to its changed environment? The company had not been known for speedy decision making, so probably a major structural overhaul was essential before it could get down to the serious business of adapting to customers' changing needs. Also, there was a great danger of changing the company's position too far and too fast, thereby alienating its traditional customers without gaining sufficient new ones. As a warning of how not to change, M&S's rival Laura Ashley had repositioned itself so radically from its original format that it now failed to gain the support of any major group. M&S had itself tried to become more fashion conscious during the mid-1980s with similar effect, and had to make a hasty retreat to its traditional, more staid image.
CASE STUDY REVIEW QUESTIONS
1. What do you understand by positioning, and what tools are available to Marks and Spencer to give it a positioning advantage?
2. There has been a lot of debate bout whether the existence of a marketing department can actually be harmful to services companies because it absolves everybody else of marketing responsibilities. What then, do you make of M&S's decision to introduce a marketing department?
3. What are the dangers to M&S of moving its market position too far and too fast? How can it try to alleviate these problems?