Marketing Strategy for Burberry in Fist Half of 2012
The organization I have decided to propose a new marketing strategy for is Thomas Burberry. This organization is a distinctive luxury brand with international recognition and broad appeal. They design, source, manufacture and distribute high-quality apparel and accessories. Burberry was founded in Basingstoke, England in 1856; they have a unique heritage associated with Great Britain and position themselves as the authentic British lifestyle brand. From their founding, Burberry have established a reputation for innovation, quality and style through developments such as the invention of gabardine, which the organization believe was the world's first weatherproof and breathable fabric and the creation of iconic products, including the trench coat and of the Burberry check.
I believe that it is time for a new marketing strategy for the Burberry London perfume, because although the perfume was introduced not long ago- the men's fragrance was launched in 1997 and the women's fragrance was introduced in 1995- sales are not increasing as fast as hoped, probably due to better marketing by other perfume brands in competition with Burberry, In particular I feel that the overall packaging and the bottle design is too plain and does not really persuade the consumers to buy the product. Therefore I feel that we need to give this product a new market strategy and re-launching it with more distinctive packaging (Warren, 2007).
The main aims for the new 2012 strategy are:
To increase overall sales for the Burberry London perfume range
To breathe new life into the product life-cycle by re-launching it
To increase market share against competitors brands
The strategy I have proposed embodies the main principles of marketing. In developing my new market strategy I have tried to ensure that: 1) The new product meets actual and potential customers needs by communicating with the customers; 2) It is based on an understanding of the customers; 3) I have taken into account the competition by understanding them and keeping ahead of them; 4) I have taken into account other external factors which influences this market; 5) I have taken into account internal influences, which may affect the organization and its ability to implement the strategy (Aaker, 2008).
A. The European retail market for the cosmetics and fragrances covered by the key note report was estimated at 1.46 billion pounds in 2011. The figure below represents an increase of 4.4% on the value for the previous year.
Table 1: The European market for cosmetics by value at current prices (Burberry, 2012)
2008 2009 2010 2011
Cosmetics 585.5 620.0 660.0 714.0
Fragrances 650.0 655.0 662.5 680.0
Total 1,235 1,275.0-1,322 1,394.0
% change year 3.2-3.7-5.4-4.4
The perfume & cosmetics industry is a very large industry. The European retail market for perfumes & fragrances grew by 4.4% between 2001 and 2011, to a value of £1.46bn. Consumers base their choice of cosmetic or fragrance on the image of a particular brand, as well as on the product's function. Fashion plays a key role in defining this image, and in-store presentation and method of distribution are also important factors (Simon, 1979). According to International Flavors & Fragrances, the failure rate for new fragrances is approximately 90% after the first year and 99% after 3 years, so for a fragrance to maintain its popularity for decades, brands such as Chanel No. 5 and Miss Dior, is no mean feature. Vast promotional spending is necessary to maintain an established brand, let alone launch a new one. In the year to September 2010 for example, £34.2m was spent on advertising women's premium fragrances alone, which is a great deal of money for promoting a brand (Burberry, 2012).
Fine or premium fragrances account for around two-thirds of the fragrance market by value and a third of the market by volume. Men's fine fragrances tend not to command such high prices as those aimed at women, but male fragrances (premium and mass market combined) still accounted for an estimated £240m or 34%, of total retail sales of fragrances in 2010. Retail sales of fragrances increased by 3.8% between 2001-2011, to an estimated £705.5m. (Burberry, 2012)
The rate of growth in sales of men's toiletries has slowed significantly, and various efforts to encourage the market (such as Boots for Men shops and Lynx Barber Shops) have met unsuccessful. Women on the other hand are keen to try new scents, while still remaining loyal to their old favorites. According to the publication Soap, Perfumery & Cosmetics in March 2011, most women will generally have at least three fragrances they usually use and possibly matching body lotion and sprays as well.
C. There are many major competitors in the perfume & cosmetics industry, such as Chanel, Lacoste, Hugo Boss, etc. The market is increasing rapidly. The fact that Europe has an ageing population is a disadvantage for a market in which young people are the heaviest consumers. However, today's older consumers have a greater interest in personal appearance and most importantly have the disposable income to purchase premium products that claim amazing results. Modernism is the key in this mature and competitive industry and recent years have seen a wide range of products claiming defensive and uplifting qualities. The consumer base will also continue to increase as children become interested in their appearance and in fashion earlier (Miles, 2003).
The Burberry organization has opportunities to aim for, these are as follows: a) Women's magazines have a significant influence on sales. Any approval of products by beauty editors encourages purchases. Therefore Burberry can promote their products in women's magazines; b) Today's "older" consumers aged 50 and over, are frequently financially secure. Marketers are increasingly realizing the value of targeting these older people, the organization have opportunities such as targeting the older population; c) One of the strong areas of growth is fragrance products, sales of which grew by 4.4% between 2001 and 2011, to a value of £1.46bn (Burberry, 2012); d) Supermarkets are increasingly concentrating on creating a different atmosphere for their cosmetics sections, to encourage shoppers to browse, rather than hurry. Burberry can sort a deal out with supermarkets, which can display the products and sell them.
D. The organization faces threats as well as opportunities in 2012, below is a list of threats that can hinder Burberry from succeeding: a) Discounting the prices of top fragrances may damage the exclusivity and image that form part of their appeal to the consumer, so Burberry have to be careful of this factor as it could be a threat; b) Counterfeiting is quite common and can damage Burberrys reputation as well as its profits; c) Research shows that teenagers and young adults, who are the heaviest users of cosmetics and fragrances, are declining in number, this is a threat to Burberry as most users of fragrances are young adults.
F. Another critical point is the opportunity the current currency situation presents. Because Burberry operates in Europe and sell goods worldwide, their sales convert to higher revenue in euros as the currency falls relative to the dollar. There's also a gain to margins because profits grow more than sales given the euro cost base. It is likely that in 2012 European currencies will weaken this year as a result of the region's sovereign-debt crisis, The average exchange rate between the euro and the dollar is forecasted to decline 10% to $1.25, compared with $1.3926 last year, according to Citigroup's estimates. The pound will drop an average 4% to $1.53 from $1.6041, while the Swiss franc- dollar exchange rate will fall about 11% to $1.00 compared with $1.1323 in 2011. The euro will end the year at $1.30, the pound will trade to $1.56 and the Swiss franc will be $1.01, according to the median forecasts of currency strategists (Jackson, 2012). This will allow Burberry to expand its export to non-European markets substantially in the first half of 2012.
Focusing on the marketing strategy directly, A common tool used within marketing was developed by Abell (1980). His model gives organization five strategic business options.
1. Market Penetration: This involves increasing sales of an existing product and penetrating the market further by either promoting the product heavily or reducing prices to increase sales.
2. Product Development: The organization develops new products to aim within their existing market, in the hope that they will gain more custom and market share, for Example Sony launching the Playstation 2 to replace their existing model.
3. Market Development: The organization here adopts a strategy of selling existing products to new markets. This can be done either by a better understanding of segmentation, i.e. asking yourself, who else can possibly purchase the product or selling the product to new markets overseas?
4. Diversification: Moving away from what you are selling (your core activities) to providing something new e.g. Moving over from selling foods to selling cars.
5. Consolidation: Where the organization adopts a strategy of withdrawing from particular markets, scaling back on operations and concentrating on its existing products in markets.