Inditex Company Report on Brand Development
The first part of this report starts with the background of Inditex including its business values and strategies with particular emphases on technology innovation. Then it will introduce Zara and Massimo Dutti history, markets and business achievements. The second part is about the role of Inditex as umbrella company. There is also a brief paragraph about the Inditex recruitment centre which links to brand identification. It follows with the description of brand strategy and the management of tangible and intangible assets. Brand strategy is designed to influence the perception of the consumers towards the brands. Consequently, the definition of brand and the difference between brand equity and brand value are explained. The third part is about the brand management analysis and Key Performance Indicators (KPI) that are relevant for the company to analysis the market, consumer, competitors and brand awareness. Throughout the report there are some examples of Zara and Massimo Dutti accordingly. The forth part is about purchasing decision-making and customer behavior which links to the pricing and differentiation strategy. Brand gender and communication strategy are then discussed. The conclusion summarize the success of Inditex and its ability to put strong brands together. Finally, there is a strategic recommendation for Zara.
Some piece of information about the company comes from personal knowledge as I am an Inditex employee. I have used the acronym (P.K) to refer to it.
Inditex is the company that owns Zara, Massimo Dutti, Stradivarius, Bershka, Pull&Bear, Zara Home, Uterqϋe and Oysho. It has more than 7400 stores worldwide and it is present in 96 market which 46 of them are online. Inditex mission is “… to create value beyond profit by putting people and environment at the centre of their decision-making…”. (Inditex.com, 2018) Although it sounds a typical corporate statement, Inditex make significant investments in social and eco-friendly programmes.
Inditex strategy concentrates on the optimization of store location and the integration of cutting-edge technology such as augmented reality and radio identification frequency to improve store inventory. The group internal audit director, Carlos Crespo, focuses on the digital transformation of the company while reinforcing the groups’ integrated stores and online business model. (Singh, 2018)
For the purpose of this report only Zara and Massimo Dutti will be considered. These two brands have distinctive history and target different market segments.
Zara is one of the most successful retail brand in the world. It is considered to be the flagship brand of Inditex, not only because it was the first to be open but also for its ability to put customers first. Zara is obsessed with customers. Its business model is to bring customers closer to the products while offering lower prices. (Martin Roll, 2018) The origin of the brand name is quite appealing. In fact Amancio Ortega, founder of Inditex, wanted to name the company after a famous film called Zorba the Greek, but he had to change it to Zara as that name was already taken by a local bar in A Coruna. Curiously, the brand personality seems to have some traits of this stylish, confident and exuberant character. (Hansen, 2012)
Massimo Dutti was founded by Armando Lausaca and incorporated to Inditex Group in 1991. It is clearly the classy and chic brand of Inditex. As the prices are higher than the other brands, it targets a niche market. In fact it appeals mostly to urban, cosmopolitan and independent customers. (SpellBrand®, 2018) Although the brand is totally Spanish, Massimo Dutti is an italian name. Some customers in fact may perceive it as an italian brand.
Inditex and Recruitment talent Centre
Inditex brought about a new design, manufacturing and distribution process that minimize the unit costs and reduce lead times to react and respond to new trends. This achievement is driven by heavy investments in information technology and human capital. (Inditex.com, 2018) Moreover, Inditex provides strategic protection and support line extensions to these brands. For example, if not sold, the textiles are sent back to factories to be re-designed, re-manufactured and eventually re-launched for the following seasons. (P.K., 2018) Inditex is aiming to have zero waste while managing the supply chain efficiently.
Inditex is a very multicultural and diversity company. The recruitment centre based in Bond Street in London manage hundreds of online and walk-ins candidates every day. According to the recruitment process these candidates are selected, appointed to group interviews and finally evaluated by professional recruiters. Independently of their backgrounds , the candidates are offered the positions according to three criterias: attitude, communication and time availability. However, since the brands of Inditex are different, the candidate will be matched in line with brand identification. For example, a sales assistant in Massimo Dutti may have a different profile from a sales assistant in Zara or Bershka. Overall, Inditex is a very inclusive company as it owns eight distinctive brands, each of which give the candidate the opportunity to work within (P.K., 2018)
Brand strategy, brand equity and brand value
Brand strategy refers to the set of decisions and actions that a company takes to manage its resources in order to achieve long term competitive advantages. This may include a marketing strategy to implement the products, communications, distribution channels, and especially the brands which are the key elements that contribute to add value to the company. (Keller, 2013) Thus the brands represent a guiding force that brings together the overall strategy of the company.
Brands can change people behavior. They can influence how people think, feel and act. For example, Zara creates brand evangelists by making brand experience meaningful and the exchange valuable. (Danziger, 2018). A brand refers to “…a set of mental associations, held by the consumer, which add to the perceived value of a product or service” (Keller, 2013; p.8). Brand equity refers to intangible assets such as loyalty, identity and perceived quality (Calderon et al., 1997) Whereas the brand value indicates how much the brand is worth financially if it is sold. Brand equity valuation is important to create an efficient branding strategy. In essence, a company needs to have a clear and defined brand strategy to establish a long and loyal relationship with customers.
Key Performance Indicators
A measurable framework for brand equity is the Key Performance Indicators or KPI’s which use proxies such as brand awareness and market shares to better understand the impact of a corporate brand on sub-brands. In this way marketers can make decisions and manage the brands successfully. (Phillips, C., Hopelain, J., 2017) Similarly, brand assessment can be an opportunity for the brand to evaluate its strengths and weakness in the marketplace and to underscore its values.(Keller, 2013) In particular it can assess how the customers perceive the brands within the company portfolio. Then, the brands choose their values and positions accordingly.
Zara pricing strategy and vertical integration strategy
On the one hand, some brands gain market shares by adopting a pricing strategy which is normally done by offering sales and promotions to customers (Keller, 2013) Zara for example can offer lower prices as it succeeds in covering the distribution channels better than its competitors while using a vertical integration strategy; thus minimizing the unit costs.(Tradegecko.com, 2018) The supply chain of Zara is probably the most appealing brand element. None of its competitors such as Mango, Gap and Forever 21 are able to design and deliver the goods as quick as Zara. (Kumar, N., Linguri, S.,2016) This brand element is viewed positively by customers as it contributes to their perception of uniqueness of their purchase.
Zara is currently ranked by Forbes the 46th world’s most valuable brand and surprisingly does not make any investments for advertising the company. The success of Zara is in fact due to heavy investments on beauty, historical appeal and store locations: Zara’s stores are located nearby luxury brands in the high street so that customers can think of it as a respectful and successful brand. (Forbes.com, 2018) Similarly, Zara is ranked by Interbrand the 25th most influential brand in the world due to its responsiveness to market changes, relevance to the customers’ needs and desires, and innovation (Interbrand, 2018) Although brand innovation is an important part of brand strategy, it can also generate plagiarisms between different brands; in fact It is argued that certain items of different brands are sometimes identical. For instance Zara faced criticism for copying the designs of independent artists based in Los Angeles. (Puglise, 2016)
Customer behavior and perception
Nevertheless, customers are generally urged to buy for hedonic and not functional reasons. In essence, customers appreciate and desire an item because of the brand. ( Kapferer, J. 2012) Curiously, if the product is not high quality, the brand will be affected. Thus Zara uses both low price and premium strategies to keep its brand equity. In other words, it retains customers by offering sales and promotions, and acquires new customers that are willing to pay more by offering them higher quality products. However, when trying to satisfy the key criteria of multiple market segments the risk is to create a chameleon brand ( Keller,2013). Some brands may lose the affinity with their customers as they try to accomplish a larger market segment especially when penetrating into a different market. (Hollis, n.p ) If the customer do not perceive the brand as differentiated or exclusive they might as well go for other brands.
Massimo Dutti differentiation strategy
On the other hand, when a brand adopts differentiation strategy the products are more expensive than competitors’. A well-established and trusted brand simplifies decision making for customers. (Keller, 2013) Massimo Dutti for example has different value proposition from Zara as it is aligned with customers that have desire for quality. Trust comes from a brand that always deliver its promise. As a consequence, customers are always willing to spend more money. Behind the success of Massimo Dutti there is a deep understanding of the market segmentation. (P.K., 2018) Since Inditex launched the first UK marketing database for Massimo Dutti, the company reinforced its marketing strategy to better understand the customers, raise brand awareness and expand its high street presence.( Precision marketing v. 15, n. 44, p. 6., 2013)
Brand personality and gender
Brand management involves creating an aura around the brand that suggest positive associations including desirable personality. Brand personality can be defined as a set of human traits that is perceived by the consumers towards the brand (Mishra, M.; Mohanty, S., 2013). It has been suggested that male and female consumers have significantly different approaches in their decision-making and purchasing behavior. At the same time, marketers are aware that brand personality traits can influence consumers’ perception. Not surprisingly, brands send out gender signals: some are masculine, others are feminine. Brands with stronger gender traits are more liked by consumers: the more gender signals, the greater brand value. As a consequence, marketers consider brand gender to be a key element of brand value (van Tilburg et al., 2015). According to O’Connell(2015) ”…certain mainstream brands are aiming at gay and lesbian consumers, and others are trying to capitalize on the idea of empowering girls and women.”
Customers fall in love with the brands as long as communication enable social and emotional associations. Communication is the attachment to sustain the brand, by promoting intangible values, even though these values may erode in store through sales promotions (Keller, 2013) Similarly, marketing communication can be integrated to enhance brand equity. An integrated marketing communication consists of a variety of different communication options such as online, public relation and advertising (Kapferer, 2012). As a result brand image and reputation can be either destroyed or reinforced. For example, Zara faced a public relation crisis as it was promoting some denim line trousers with the slogan “love your curves” while using two thin models (The Sun, 2017). Nevertheless, communication contributes to highlight corporate brand actions towards social and environmental problems. For example, Massimo Dutti was the first brand to take part of the for&from social programme which aim at providing employment for disabled people (Inditex.com, 2018)
Inditex managed to put strong and distinctive brands together under its umbrella. From the beginning, it laid the foundation to build up a robust manufacturing and distribution channels which gave the company a competitive advantage over its competitors. Secondly, it cut cost on advertising while clustering the stores around key cities so that customers could perceive it as being edgier and fashion-forwards. Ultimately, it was faster to react to market changes while integrating cutting-edge technology into its business model. In essence, right attitude, knowledge and hard work are important elements to create strong brands. In the coming months and years all the brands of Inditex will continue developing local online platforms while expanding to new markets.
Strategic recommendation for Zara
Trend follower, not trend setter: Zara should extend product offerings while capitalizing on its well-know brand name while avoiding plagiarism. As many customers trust Zara brand, they are more likely to buy new product offerings.
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