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Marketing Strategies of Primark

Info: 5458 words (22 pages) Dissertation
Published: 3rd Sep 2021

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Tagged: MarketingRetail

1.0 Introduction

The research report under consideration is aimed to explore the significant role played by Marketing Strategies in today’s modern and dynamic business environment. Marketing has gained substantial importance and has become first priority of decision makers in any organisation.

This document presents a research report analyzing and forecasting marketing environment faced by leading retailer Primark with special focus on competitive analysis.

Primark Stores Ltd, an Irish upstart and subsidiary of Associated British Foods, is second largest clothing retailer in terms of sales and revenue with its existence mainly in Ireland, UK, Spain and expanding further in the Europe. It is believed that soon it will become leading clothing retailer.

This extensive research is aimed at exploring current marketing strategies adopted and evaluating their effectiveness. The critical review of current segmentation, targeting, positioning, branding and marketing strategies of Primark and an extensive market analysis is carried out to suggest future marketing strategies and growth areas and to improve and sustain quality of services provided. The expected outcomes of document are recommendations to use marketing strategies tactically in decision making to enjoy sustainable growth.

1.1 Reason for choosing the topic

I have selected this topic realizing the fact that in today’s intensively competitive business environment, financial successof any company depends on combined efforts of its financial strategy and marketing strategy. In fact, only those companies thrive in business who works closely with their customers; and, marketing has become a successful tool to create a relation with customers indirectly. From small to large, every organisation is realizing that effective marketing strategies can add value and exert tremendous influence over their ability to attract customers, leaving positive impact on company’s performance and profitability.

“Marketing is defined as management process that identifies, anticipates and satisfies customer requirements profitably. It involves integrated analysis, planning and control of marking mix variables (Product, Price, Promotion and Distribution) to satisfy both individuals’ and organizations’ objectives (Lancaster and Massingham, 1999). Marketing Environment consists of actors; and forces outside that affect marketing management’s ability to develop and maintain successful relationships with its target customers (For further information on Marketing Environment, see Appendix I).

1.2 Reason for choosing Retail Industry and Primark

Reason for choosing retail industry for research project is because it is a high profile and constantly changing business at the sharp end, but now-a-days, retail industry in UKis under high pressure as key factors like troubled mortgage and housing market, rising fuel prices and utility bills, high interest rates in UK are challenging retail environment as compared to years of strong growth between 2002 and 2004. Formally retail is defined as “sale of commodities to household or ultimate consumers” (Barry and Evans; 1986).Retail industry can be categorised in various sectors as food retailers, health and beauty retailers, clothing and footwear retailers, home furniture and household goods retailers etc. But now discount, budget or value retailing in UK has taken on a higher profile over recent years despite effects of recession. Especially interests have largely centered on growth of value or discount clothing retail industry.

The organisation under focus in this report is Primark known for selling clothes at budget end of market and it is second largest clothing retailer in UK in terms of sales and revenue. Reason for choosing Primark is its wonderfully sustained growth in the worst recession times of history. Retail clothing industry is a fast moving and complex, high profile and constantly changing business environment which demands that marketing process of a large retail organisation like Primark should be managed strategically. Report is aimed at evaluating marketing strategy of Primark and to determine its effectiveness.

2.0 Primark: A Brief Overview Of The Business

Primark is a brilliant and unique organisation with a mission statement to enrich the life of everyone with fashionable clothing regardless of social status. It emerged as major force in the British retail industry, contributing through its low price value and great quality fashion products for everyone in society as a whole and leaves remarkable impact on social, environmental and ethical behavior of people. Primark does not rip off its customers and presents excellent example of it motto which states “look good, pay less” Primark, (2010).

Most of their clothes are bought from same factories as other fashion retailers and people producing them are paid exactly the same whatever label and whatever price in shop. Company’s success is based on sourcing supply cheaply, they buy directly from factories without involving any agents, making clothes with simple designs and fabrics, only making them in the most popular sizes, buying stock in huge bulks and varieties and targeting young, fashion-conscious buyers under 35’s, offering them high quality, fashion basics at value for money prices. They are able to offer such good value and good quality because of low mark-ups and big volumes. Their overhead costs are extremely low as they do not run expensive advertising campaigns; instead they have wonderful strategic marketing approach that stands them out.

3.0 Marketing Strategy Of Primark

Retail clothing industry is a fast moving and high profile business environment which demands that marketing process of a retail organisation should be managed strategically. Strategy of an organisation is roadmap towards attainment of its long term goals and objectives. Strategic marketing management involves implementing principles of strategic management in the context of marketing function in organisation. At corporate level, marketing inputs (e.g., competitive analysis, market dynamics, and environmental shifts) are essential for formulating a corporate strategic plan. Primark has well organized strategic Target marketing and Product marketing approaches in place.

3.1 Target Marketing Approach

Strategic marketing is about achieving maximum possible differentiation over competition in meeting customer needs, gaining and sustaining competitive advantage and capitalizing on corporate strength and capabilities. In today’s dynamic environment, it is highly important for companies to relate characteristics and attributes of their products to customer requirements more closely. Firms are more concerned with the most commercially attractive segments of market for a given product. This not only increases opportunity but also reduces overall costs incurred by company. This process is called target marketing and it must be carried out systematically to be effective and for this purpose it can be divided into three stages as in Figure;

3.1.1 Segmentation

At first stage of segmentation, overall market is divided into distinct groups of buyers who are likely to respond favourably to different products, services or marketing mix. Company needs to determine most appropriate basis for segmentation, identify characteristics for each segment and develop criteria to evaluate their commercial attractiveness and viability. Market segmentation allows managers to see clearly the diversity within their markets and uncover opportunities that may exist or segments whose needs have not been properly met by other offerings. Figure, depicts segmentation criteria for consumer market, determines base of segmentation and explains variables for each base

As Primark is tagged a value clothing retailer, clothing is most important and leading item in its product portfolio follower by footwear. Its marketing segments are evaluated on basis of clothing and footwear. Although all above determined segmentations bases and variables are important but demographic factors are the most straight forward base for segmenting Primark’s consumer market, as they are most meaningful.

Main demographic variables for Primark consumer market are identified as in charts below. All demographic factors are identified according to their percentage relative attractiveness for targeting them depending upon their market share for Primark. Hhighlighted segments in diagrams are identified as most meaningful for Primark and they must be targeted to gain marketing objectives.

3.1.2 Targeting

Next stage of market targeting focuses on evaluating and selecting one or more previously identified market segments at which to direct marketing resources, developing an appropriate marketing mix for them and develop segment coverage strategy. This selected segment is made focus of comprehensive marketing plan. Kottler (1984) suggested that in order for market segmentation to be effective each of the segments must be distinct, assessable, measurable, and profitable. Once determined which segment attractiveness factors are important, evaluate each of those factor against selected segments using segment attractiveness evaluation matrix below;

There are four different targeting approaches can be considered to develop marketing mix to meet marketing objectives. Undifferentiated marketing is used for one marketing mix, targeted towards whole market and marketing mix (Price, Place, Product, Promotion, Distribution), and targets towards everybody. Differentiated marketing is used for multiple marketing mixes and involves multiple products, targeted towards multiple segments. Focused marketing is for one marketing mix and multiple segments with focus on one segment in particular, who will have control over other segments. Customised marketing is used for one marketing mix per customer as in figure below;

For Primark, targeting strategy that I have decided to use is differentiated marketing strategy because we have multiple products and consumers can be segmented into multiple segments, hence best approach to be followed is differentiated marketing approach. Different segments identified are based on age, sex, life style, income level and social status and we have multiple products portfolio that can be targeted towards these various segments.

3.1.3 Positioning

In third phase of product positioning all marketing mix elements are designed to fit a given place within a particular segment. This is how consumer perceives products relative position to competitor’s product which is highly important. It is like developing a marketing strategy aimed at creating and maintaining a desired concept and image for a product or service in consumer’s mind (See Appendix V for further information). Key to success is identification of attributes that are considered to be more important. Through market research we can identify what factors (attributes) are key drivers of a consumer’s preference for a brand. For instance, it was identified from a sample of female teenagers that were surveyed, that being trendy and stylish, having a good range of clothing, and good brand reputation, were most important factors for this target market when selecting a preferred brand Young Dimension of fashion retailer Primark.

Brand positioning provides insight into brand performance and gives important inputs for marketing communications used to support a brand. Through communications, especially advertising, information can be conveyed about each attribute and in doing so adjust perceptions customers have of brand. As Primark need to reposition the perception market has of its brands from range and quality of clothing to be more trendy and stylish. Primark has emphasized more on in-store service and convenience; and as Budget Fashion retailer, they might want to maintain their current positioning of low price, affordable, but also good value for money.

3.2 Product Marketing Approach

A company’s performance is closely linked to its marketing strategies. Each company’s strategy must be unique since each company is different with respect to customer, brands and competitors. I used Ansoff Matrix to determine product marketing strategies for Primark to set the directions for its business. With this matrix; I plot current and potential products along one axis and current and potential new markets along other axis. Thus it demonstrates low and high risk options and helps to think about business growth with new or existing products in new or existing markets. Each cell of matrix suggests a particular strategic approach. Output from Ansoff matrix is a series of suggested growth strategies.

Market penetration is a growth strategy where business runs as usual and focuses on selling existing products into existing markets with good information on competitors and on customer needs. Primark can maintain or increase market share of its current products by a combination of competitive pricing strategies, advertising, sales promotion. Primark has extensive portfolio and it cans secure dominance of growth markets and drive out competitors by more aggressive promotional campaign. For example Primark brand Active, supported by a pricing strategy designed to make market unattractive for competitors. Primark must uses internal promotion strategy by introducing loyalty schemes and increases its usage by existing customer. One of penetration strategy adopted by Primark is expansion of shop floors and opening new stores.

Market development is a growth strategy where business seeks to sell its existing products into new markets. There are many possible ways of approaching this strategy, including moving to new geographical markets; for example exporting product to a new country, new product dimensions, new distribution channels, or different pricing policies to attract different customers or create new market segments. I suggest Primark to move online by launching high tech website for online sales.

Product development is growth strategy where business aims to introduce new products into existing markets. It requires development of new competencies and to develop modified products which can appeal to existing markets. Diversification is a growth strategy where a business launches new products in new markets. This is an inherently more risk strategy because business is moving into markets in which it has little or no experience. For a business to adopt a diversification strategy, it must have a clear idea about what it expects to gain from strategy and an honest assessment of potential risks. Analysing Primark’s position and its strategies over past decade, we can better construct a growth strategy for Primark using Ansoff matrix model below in Figure;

3.2.1 Product Portfolio Analysis

Marketing mix refers to set of marketing ingredients and tools a company can use to pursue its marketing objectives in target market. According to Lancaster and Massingham; (1999), it is at marketer’s decision to choose from an extensive set of marketing components to find right combination while marketing a product. 4Ps form basis of marketing mix. Kotler (1996) describes, “Marketing Mix is a social and managerial process by which individuals and groups achieve what they need and want through creating and exchanging products and value with others”.

Marketing Mix is viewed as combination of elements that contribute to success of an organisation. If market research is carried out effectively, a company can plan a promotion for right product, at right price, and to get it to their chosen market, in right place.Getting this mix right is critical in order to successfully market a product. 4Ps are Product, Price, Promotion, Place as shown in figure below;

Primark needs to combine various elements of marketing mix in order to achieve both a competitive advantage in market place and company objectives. Although company has control over these elements of marketing mix, but must cater elements in company’s environment over which it has little or no control (figure above). For organisations like Primark although marketing mix must be is consumer-orientated catering not only profitability but also considering customer needs as in figure,

Table below shows some of marketing mix decisions for Primark including aspects from each of marketing mix elements.

3.3 Brand Strategy

A successful marketing mix contributes to good marketing of a product; hence there must be a brand strategy in place. American Marketing Association (AMA) defines a brand as a “name, term, sign, symbol or design, or a combination of them intended to identify goods and services of one seller or group of sellers and to differentiate them from those of other sellers”. (See Appendix VI for characteristics of a brand). A strong brand strategy can increase awareness of a company and its offerings in such a way that establishes strong feelings and reactions and a favorable view towards company as a whole. To begin development of brands strategy for Primark, there must be clear identification of Primary Target Customer and/or Client, Competition Product and Service Mix, Unique Selling Proposition

First step in developing brand strategy is defining brands. By defining brand, it’s easy to create foundation for all other components to build on. Brand definition serves as measuring stick in evaluating marketing strategies. Primark has an extensive brand portfolio;

Brand portfolio usually refers to company’s set of brands and/or products. The logic behind having a portfolio of brands rather than a single brand is possible diversification and risk minimization. Hence brand portfolio is a treasure trove. Next step is to determine our brands objectives, Primark’s branding objectives include:

  • Delivers message clearly
  • Confirms your credibility
  • Connects your target prospects emotionally
  • Motivates buyer
  • Concretes User Loyalty
  • Gaining a specific number of new clients in next year
  • Positioning company as an industry leader in next 12 months

To succeed in branding company must understand needs and wants of your customers and prospects. Brand objectives should be comprised of company personality, image, core competencies and characteristics. The impressions that it makes as well as words people will use to describe company to others, are basic framework of a brand.  With a strong brand company builds credibility, has more influence on its market, and motivates customers and clients to purchase from it. If done correctly company will be looked at as a leader not a follower.

Identifying marketing targets enables company to find opportunities available. It gives information needed to focus on buyers that are interested in what company has to offer. This can save both time and money in an ever-changing business environment. Power of brand relies on ability to focus target audiences. That is why defining target market will help to strengthen Primark’s brand’s effectiveness. Target market for Primark is people up to age of 35 who are fashion conscious.

Next step in developing Primark’s brand strategy is to perform a careful analysis to determine principal barriers that it may face. These barriers are also known as market conditions that can keep your product or service from achieving success. The potential barriers in deploying Primark’s brand strategy can competition, timing, financing, location, lack of demand, suppliers not meeting demands and targets. In order to face these obstacles it’s important to spend time doing a careful analysis of products or service to assist in developing brand, and positioning products in the market.

Last step in brand strategy is branding company’s identity in marketplace where image is all about appearance of packaging. It’s important to realize that packaging always either has a negative or positive influence on purchaser. A negative impression can detour a potential customer, just as a positive reaction can influence a customer to buy. A time to pay special attention to packaging is when going to launch a new brand. If you’ve already built a strong brand that others recognize often people may not pay as close attention to packaging. Packaging is judged and represented by business cards and stationery, web site, answering system, presentation of finished products.

Brand equity does not develop instantaneously. A brand needs to be carefully nurtured and marketed so consumers feel real value and trust towards that brand. When a company manages its brands it has a number of strategies it can use to further increase its brand value. (See Appendix VI for further explanation). Brand strategies that are more suitable for Primark are line extension and introduction of new brands. Primark must focus on its brand management as it’s a dynamic and a continuous process that needs consistent investment of time and it must be allocated a specific budget as it is much more than mere marketing communications. Due to intangible nature of branding, results may not accrue in a short period of time a it takes time and reinforcement to build customer loyalty. Successfully out-branding its competitors is a continuous battle for hearts and minds of your customers. Proposition that Primark’s brand strategy makes is very compelling, attractive and unique among competitive offerings. It must also be consistently reinforced throughout all phases of an organization, from senior executives to customer service, business development and even business partners.

Primark is respected for quality of its products and cheap prices. If we briefly review business environment and other factors identified in this report for Primark then we may realize that consumer behaviour is changing and business environment evolving across retail industry. Concern is rise in supplier’s demands regarding price and costs. If it continues to rise steeply it will damage profits that it is currently enjoying. Reviewing forces and factors faced by Primark and their impact on organisation, it is obvious that Primark is facing many challenges and standing at verge of it survival in long term.

Market Research World, 2011 revealed that value fashion sector sees worst decline for first time in over 16 years – much to gain of higher-priced retailers, reveals data by TNS Worldpanel Fashion. While fashion discounters such as Primark, Tesco, George and Matalan saw a phenomenal sales increase of nearly 30% last summer, growth has now ground to a hold with sales falling by 1% over last six months. In contrast, sales of most expensive clothing are up by 4%, as shoppers head to generally more expensive retailers such as multiples and mail order retailers. Clothing industry has been globalised. Strategies followed by clothing firms, to survive in a context of strong pressure from retailers and from competition from low-wage countries, are a combination of two trends. First trend is relocation of production to low-wage countries; second one is the development of six added-value activities: niche, Quick Response, full package, innovation, branding and retail.

Elaine Giles, Research Manager, TNS says, “Shoppers are starting to favour higher priced retailers and premium end of market is performing well. Growth of value sector last year came on back of new store openings and expansions that brought an influx of new buyers, but now sector seems to have reached saturation point. The only way, budget retailers can continue their success is to increase spend of existing buyers, something they may struggle to do given current retail climate.”

4.0 Strategic Marketing Environment Analysis

Primark is one of the leading value clothing retailers in UK. It is highly crucial for an organization like Primark to periodically review its marketing environment to gain competitive advantage in market. Discount cloth retailing in UK has several characteristics including clearance outlets, core business discounters, planned purchasing at high volume, own-label or branding, relationships with manufacturers, attracting customers with good image and service. There are three different analytical tools used to assess marketing environment of an organisation; Porter’s Five Forces Analysis, SWOT Analysis and PESTLE Analysis.

4.1 Porter’s Five Forces Analysis

First of all Porter’s Analysis is carried out which is a technique for identifying forces which affect competition level in industry as shown in figure A below;

The threat of new entrants in market is a critical element haunting Primark much as there are less entry barriers including low entry costs, high volume of suppliers, vast market in India and china, higher growth space in market, economies of scale, low capital requirements, access to distribution, government policy, low cost product design, access to necessary inputs. But new entrants in industry are not likely to cut their price to defend their market position. In an industry experiencing fast market growth, patents, proprietary knowledge, and brand reputation are also considered as barriers for companies entering industry.

Strategic position of a company depends upon the extent to which what it offers is unique and cannot be replaced by something else. Primark has strong brand portfolio which is its uniqueness. As for some of products, like Primark cheap clothing there are alternatives. But there is no substitute for low price of Primark’s products. Determinants of these substitution threats include relative price of substitutes, buyer propensity to substitute.

Buyers/customers have greatest impact on Primark’s strategies as its vision and strategies are customer focused. Hence, it has to cater changing customer trends, their demands and requirements. Customer’s volume, customer information level and trends, substitute products pull through, price, product difference, brand identity, impact on quality, buyers profit and incentives are few factors that Primark is facing as major challenge in competitive market.

Suppliers might have high impact on Primark if they are bigger company and have less competitive market for their products. Primark is facing big challenge from supplier as it has good and long term relationships with its suppliers build on trust but recently three of its main suppliers are found involved in child labour and Primark has to cut-off ties with them immediately which is definitely a big blow for Primark. Primark pays its supplier competitive price for their products to retain them. Primark maintains substitute inputs, and high volume of supplier to avoid extra costs.

Apart from five forces identified by Porter’s Analysis, there are other factors revealed by PESTLE Analysis challenging Primark’s position in competitive market, in figure below;

(For PESTLE Analysis, refer to Appendix II; and for SWOT Analysis, Appendix III)

Strategic marketing analysis of Primark, using different analysis tools reveal that Primark is expanding globally and being in the global market; Primark has adopted an approach of “Think globally, Act locally” as stated by Armstrong, (2006). They are expanding globally but cater needs of local market and fashion trends in local culture. Primark supports UK’s global role by showcasing the best of British fashion to a global customers as well as it reflects how it builds social cohesion and business ethics between customers and its suppliers.

Primark faced a major blow to its reputation on 24 June, 2008 after being exposed by and undercover report by BBC exposing it using child labour. Afterwards, Primark’s marketing strategy mainly focused to promote itself as ethical organisation with a clear and strict code of conduct to which all suppliers must adhere and which forms part of the terms of their contract. Primark supports nearly two million people through its supply contracts worth £700 million and is dedicated to improve their standard of living and quality of life. For this, Primark has established ‘Primark Better Lives Foundation’ (Primark Ethical Trading, 2011 a). In response to the allegations of use of child labour by its suppliers, identified by Panorama (BBC program) Primark stopped buying from three factories in southern India for breaking its Code of Conduct. It also took other major initiatives and is now active member of ETI that announce it ‘Achiever’ in year 2009-2010 independent audit (Primark Ethical Trading, 2011 b). (For further information on ETI and Primark code of conduct, see Appendix IV)

Further apart the positions, greater the opportunity for new brands to enter market, simply because competition is less intense. For example, in fashion retailing there are numerous brands in marketplace all competing with each other across differing core attributes, brand reputation, store presence, price, and clothing quality or trendy and stylish. To show how differing brands might be positioned relative to each other using attribute scores for each brand of fashion retailer we can measure and map brand positioning for respective brands. Figure below shows positioning of a number of fashion retailers using dimensions of price, store presence, and trendy and stylish.

Using this list of drivers we can further depict on what we call a perceptual map how different competing brands of fashion retailers in market are positioned according to these drivers.  Understanding complexity associated with different attributes and brands can be made easier by developing a visual representation of each market. These are known as perceptual maps and they are used to determine how various brands are perceived according to key attributes that customers’ value. Perceptual mappingrepresent a geometric comparison of how competing products are perceived (Sinclair and Stalling, 1990). One thing to note is that closer products/brands are clustered together on a perceptual map, greater the competition.

Mapping can provide significant insight into how a market operates. It provides marketers with an insight into how Primark’s brands are perceived and it also provides a view about how their competitors’ brands are perceived. In addition to this substitute products can be uncovered, based on their closeness to each other (Day et al., 1979). All of this data reveals strengths weaknesses that in turn can assist strategic decisions about how to differentiate on attributes that matter to customers and how to compete more effectively in target market.

4.2 Competitor Analysis

Like any other business, Primark is also facing tough competition from George at ASDA, Tesco, Marks & Spencer, TK Max, Costco, Next, Zara, New Look, Peacock and Matalan. Analysis for each major competitor determines that Primark has better business strength and high market share. It has good financial strengths and high profitability but relatively poor quality of management and low standards of technology position. Primark is paying least attention to its marketing strategies. Marketing represents boundary between marketplace and company, and knowledge of current and emerging happenings in marketplace is extremely important in strategic planning exercise.

In relation to competition, several external forces and environmental changes are faced by Primark that need to be considered to formulate its marketing strategy. Currently, Primark is facing high competition with quality competitors like Peacock, Matalan etc. They are offering cheap products as well and growing at tremendous speed, threatening position of Primark. Most of Primark customers are switching to rivals because of their quality products and good marketing strategies which Primark lacks. Marks and Spencer, the biggest rival of Primark has very extensive marketing strategies with strong brand portfolio. They do advertisement on almost every media available; while Primark do not use even single media for advertisement.

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