The group's marketing strategy is focused on raising awareness on social issues concerning today's society and taking a stance of the real world, rather than encourage costumers to buy its products.
Considering the large product diversification characterizing Benetton's portfolio, it is very difficult to define the manufacturer's main competitors, as it's difficult to define it's industry. Thus, according to Hoovers.com (Accessed January 2009), the company's top 3 competitors are: Inditex, GAP and H&M. Inditex is a Spanish based, clothing group, which is considered to be Benetton's main competitor as it designs and retails its own products. It is also a global company managing over 3,690 stores in 68 countries. GAP is an American-based company with 4,250 stores worldwide. Unlike the Italian company, GAP doesn't manufacture its products, being responsible only for the retailing part. H&M is a Swedish-based company with over 1,500 stores in 28 countries.
Benetton has often been labeled as the fast food of fashion, or better said McFashion. Luciano Benetton himself, the company owner, clearly distinguishes between the artistic fashion of Italy and France, such as Armani or Chanel, and Benetton which he refer to as industrial fashion. Nevertheless, the company's competitive advantage relays in its ability to understand the key success factors behind the McFashion business.
Benetton's product strategy is a global one. The same garments are sold across countries in the same small boutique-style shops, which follow strict corporate merchandising guidelines, and are promoted by print media using identical advertisements worldwide. This is a total look strategy involving color coordinated garments, rather than individual products.
Around the year of 1995, Benetton adopted a price reduction strategy at worldwide level. This strategy was meant to enable the company to guarantee its customers a both more suitable and competitive supply of products. The price reduction was simultaneously joined by decreased production costs. The two actions resulted in an 8% increase in goods sold. Nowadays, the company has different price levels across countries and brands. Thus, in Europe the average prices are higher than U.S., but in the same time some brands such as United Colors of Benetton are priced substantially lower than others such as Sisley who is addressed to a more sophisticated market segment.
Benetton also has an extended system of outlet stores in which its products are sold at large discounts. The products sold in these stores are usually from prior collections and the use of large discounts is meant to stimulate customers to buy collections that are slightly expired, thus avoiding additional inventory costs.
In the late 1990s - early 2000, the Italian manufacturer restructured its distribution network by implementing a new logistic system in which the warehouses became part of a centralized distribution system, rather than just being simple storing facilities. This system was much more efficient logistic-wise as it reduced the fragmentation of inventories at international lever by concentrating the finished goods in 3 centers, one in the U.S., one in Italy and one in the Far East. Initially, the automatic distribution system handled over 30,000 packages a day and was managed by a 10-member staff, while a traditional one would requires a staff of 400 for the same workload. In 1996, the implementation of this new system resulted in roughly €5 million savings in transportation costs.
An efficient production system was added to improve logistics efficiency. The company worked on developing an advanced dyeing process, which would enable the finished product to be dyed instead of dying the yarn first. Thus, the manufacturer was able to run an efficient customized production system, always updated with the latest market trends in the fashion industry in which tastes in color change very often.
Benetton's promotion strategy reflects the company's desire to create images of global concern for its global customers. This strategy is well-known for targeting issues rather than clothes as the company believes it is more important for companies to address a current important issue of today's society, rather than use their advertising budget to convince consumers that they will be happy if they purchase of their products. Thus, Benetton managed to attract substantial attention from the public and stand out in its industry in terms of social responsibility.
The means involved in the company's promotional activity include: (1) sport and event sponsorship, (2) Colors magazine, (3) Fabrica project, (4) image advertising and (5) controversial campaigns.
Benetton sports system changed its name to Playlife in 1998. This division manages famous brand names, such as Prince, and reflects the Group's involvement in the sports related activities, covering a wide range of sports from skiing to tennis. The Italian manufacturer sponsors basketball, rugby, volleyball, motorcycling and Formula One teams, which is one of the reasons why many young athletes chose Benetton products to be their favorite sports brand. Additionally, the company is involved in developing sports facilities success in communicating through sports can be seen by its efforts in developing sport facilities.
Colors magazine is a bi-monthly publication which is distributed in 6 bilingual editions in 3 continents.
The Fabrica project is both a workshop environment and a center of communications in which a group of 20 students from the field of communications from various countries research future trends and new ideas.
One of the specific features of Benetton's image advertising is that its images do not include a product, but only the company logo. Moreover, its adds to not suggest customers to buy its products. These are designed to increase awareness regarding global issues that concern today's society. As far as their products are concerned, Benetton advertises those via catalogues and fashion editorials that are displayed to consumers in the stores. Additionally, the public relations offices are in permanent contact with fashion editors in different countries across the world. These offices engage traditional marketing techniques thus making sure that the products receive an optimal exposure or sales personnel.
Image advertising is a form of lifestyle marketing. Advertising industry experts associate image advertising with a plan of getting the customers to "buy-in" to a certain lifestyle, such as Benetton's which is very controversial, by connecting to later through a psychological level first and on the product lever after.
Shockvertising is a special type of emotional branding by Benetton with many occasions, though which the company sells images rather than products, by connecting to the customer's emotions.
Benetton's advertising campaigns have always been focused on deep social issues of global concern, such as death, AIDS and racism. The HIV Positive campaign used shockvertising to raise awareness about the disease by displaying the words HIV Positive tattooed on a person's arm, front and back (see appendix section). The purpose of this campaing was both to raise awareness of AIDS, but also to draw attention on the danger of stigmatizing certain social groups.
One of Benetton's most damaging campaigns for the company's revenues addressed the capital punishment by displaying images of some of America's death row inmates. The campaign was meant to show the world that death penalty is not a distant problem, which is occasionally present in the media, but a current, serious problem. The reaction of some the true believers in the old American values was quick and acid. Consequently, the Benetton lost a number of contracts with its retailing partners in U.S..
Many of the company's communication initiatives come to support international humanitarian associations. As such in 1993, Benetton was part of a global project involving clothing redistribution to people in need, being assisted by the International Federation of the Red Cross, alongside other humanitarian groups.
The logistics and promotion activities are the company's keys of success. The first enables the company to adapt to a fast changing environment and rapidly changing needs of the customers with flexibility and speed, while the second enables the manufacturer to both stand out of its crowd and be remarked by a substantial number of consumers and give the company the opportunity to address social important issues. Nevertheless, the character of the promotional activities undertaken by the company didn't always have the success the group aimed for as certain groups of individual felt offended by the messages contained in these campaigns, generating negative consequences in terms of revenues.
The pricing strategy is definitely one where Benetton can dwell on as it's not globally aligned, unlike all others. The price levels vary across countries and on different continents for the same brands. Such a strategy wouldn't be so difficult to achieve, as the groups production and distribution activities are centralized and managed in an efficient manner via high technology systems.
Finally, the product strategy is a well chosen one. The group acquired different brands along time to cover more market segments in terms of age, style, gender, revenues and so on, thus, diversifying the product portfolio and reducing from the potential vulnerability of a changing economic environment.