The Burberry brand is an icon in the British fashion industry. But in for many decaes it is a company that no longer mattered when it comes to the new generation of consumers. Their problems were exacerbated by the over-licensing of their brand, global recession that severely affected the fashion industry and the work of counterfeiters.
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However, their most seriously challenge was their inability to correctly apply marketing tools. But when they decided to hire experienced business leaders who knew how to deal with the new economy and the new generation of shoppers they were able to turn things around.
Some of the most effective steps taken were the segmentation of the market, marketing mix, and utilisation of digital commerce. But the firm cannot rest on its laurels. They still need to improve their market mix and the way their segmentation of the market. There is also a need to look into their use of digital technology to ensure that the hype they created actually translated into sales. The bottom-line is still the true measure of success.
The global luxury goods market is multi-billion industry. This is comprised of apparel and other accessories. The Burberry firm is taking a significant slice of this market but this is not the only type of business that it is into. The Burberry brand is also a significant player in the fashion industry.
In the United Kingdom alone the fashion industry is already worth £20 billion. However, the recent recession has negatively affected the global luxury goods market as well as the fashion industry. This is not the only problem that the company is facing it is also trying to solve the challenge of stiff competition from other producers of high-end apparel. There is also the problem with counterfeiters.
The struggles of the Burberry brand cannot only be blamed on the recession and counterfeiters. There are also issues with regards to how they had marketed their products and developed their image in the past 150 years of existence. They had problems when it comes the over-licensing of their name and their failure to evolve and adapt to changing times.
But in recent years the world has seen a major comeback from Burberry. The secrets of its success will be detailed in this report. It has something to do with their knowledge and application of marketing principles. This includes market segmentation, positioning, marketing mix, and digital commerce.
Burberry is a company that was established in 1856 in the United Kingdom but today boasts of sales outlets as far as the United States and Japan. It became an iconic brand in the 20th century because it was popularised by celebrities and foreigners who were enamoured with a no nonsense British style as well as the Burberry check that has become instantly recognisable all over the world.
But in recent years the brand had fallen on hard times due to intense competition, negative effect of counterfeits goods and the mismanagement of the licenses that were given out to business partners. Today, the Burberry brand is on the rebound thanks to perceptive business leaders that were brought in to fix the problems that ail the company. The following is a more detailed view of what occurred in the past and the changes that were made to make Burberry relevant even after 150 years of existence.
The Environmental Factors that Affected the Marketing of Burberry
Environmental factors played a major part in the transformation of Burberry from a fledgling company into a global brand. But before going any further it is important to point out what it means. According to experts, environmental factors comprise the marketing environment and it is “the range of external and internal factors that affect the way in which an organisation interacts with its markets.”
Another way to look at a company’s marketing environment is to see the actors and forces that affects its ability to develop and maintain successful transactions with regards to its target market. Burberry’s marketing environment consists of a macro-environment and a micro-environment.
A company’s macro-environment is composed of all the complex and uncontrollable variables that when taken together forms a framework within which it is able to conduct business. This includes government regulations, current events that indirectly or indirectly affected the operations of the company and a host of other issues that are mostly beyond the grasp of the corporate leaders of Burberry. One aspect of this firm’s macro-environment is the fact that it operates within a global luxury market.
In recent years Burberry’s macro-environment is greatly affected by the recession. It has been reported that the global luxury market declined by around nine percent. This is a direct result of the economic downturn that forced many customers to develop austerity measures and as many are aware, in the event of cost-cutting measures, the first thing that consumers can live without are luxury goods.
Since Burberry is not the only company that sells premium products the recession has created intense competition among the players in the luxury global market. This is an environmental factor that Burberry has limited or zero control and the best way that the company can do is to adapt to the changes that occurs externally.
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Finally, the firm was greatly affected by the proliferation of counterfeit products. According to company representatives the actions of counterfeiters is damaging to the reputation of the company and will erode confidence in the Burberry brand in the long run. This is because a customer will buy an item that they believe is an authentic product coming from authorised dealers of Burberry products and will later experience problems commonly associated with shoddy manufacturing practices.
As a result they will no longer trust the Burberry brand. Even if this happens all over the world this is an example of a macro-environmental factor that the company has some control and they deal with it by partnering with other firms that sell luxury goods to prevent counterfeiting. They also partner with government agencies in countries where counterfeiters are doing brisk business.
Not all of the macro-environment factors that directly affected Burberry was necessarily bad for the firm. The weak pound was beneficial to a struggling firm when consumers suddenly discovered that Burberry products are priced competitively as opposed to other luxury brands.
A major consequence of that is the influx of overseas visitors to the United Kingdom because these shoppers can see that the products are priced cheaper. This was made possible by the fact that the firm continuous to create products that are classic in design and therefore these items can still be used for a very long time and added to the benefit of buying the Burberry brand.
The firm’s micro-environment on the other hand is composed of all the variables that are closer to the firm and to some extent it can be controlled. One example is the decision to create different product lines to cater to different segments of the luxury goods market. Another example is the target market that the firm chooses to serve and the kind of distribution system that they will utilise to increase the efficiency and lower overhead costs.
Another aspect of the micro-environment is the way the company developed its image. It came to a point when British and American consumers saw Burberry as an Asian brand therefore lowering its perceived value in the eyes of these consumers. They also saw the firm as nothing more than a raincoat company. The apparel produced by the company became widely accessible even to average consumers that the clientèle belonging to the upper middle-class bracket began to look at Burberry with a certain level of disdain.
If that was not enough mismanagement of the company’s resources and neglect in terms of taking care of the image of the company led to over-licensing and soon the iconic check brand began to flood the market. People began seeing the Burberry brand stamped on many products from court shoes to baby buggies. Since these are part of the micro-environmental factors that are affecting the firm, the company has relative control over it. This means that they can do something to minimise the negative impact to their business.
The company was able to hit two birds with one stone when it pulled back and became more conservative when it comes to giving licenses to business partners. As a result the market is no longer flooded with Burberry products. It suddenly became a premium brand once again in the eyes of the customers both the new and the old. By dealing with the licensing problems the company was also able to focus more on developing their products. This proved to be beneficial when the firm decided to segment the market and focused on their target market.
Criteria and Segmentation Methods Used
Segmentation is the deliberate process of not looking at the market as a whole but breaking it down into groups of people that share similar needs, characteristics and aspirations. It also means knowing the target market well in order to give them what they want or may want in the future.
This means that a firm utilising this strategy is not overly concern with mass marketing and trying to get their products into the hands of as many people as they can. It is now clear that consumers have a wide array of products to choose from and they will definitely buy something that fits their needs and not some generic product created for everyone.
The segmentation method that was adapted by Burberry was to look at their traditional source of revenue and the type of customers that were loyal to the brand. They were able to determine that the Burberry brand was known for its iconic check but at the same time limited its appeal to customers who belonged to a bygone era of waterproofed raincoats and love for everything that is British.
They realised that they need to change and transform its image if it wants to penetrate other markets especially those outside Europe and the emerging markets that can be found in booming China, India, and Russia.
Segmentation Strategy Over Time
In the case of Burberry the segmentation evolved through time. Not a long time ago Burberry focused on producing a luxury ready-to-wear and accessories line that will serve consumers within UK. After a major success of repeatedly doing the same thing, the company began to realize that it made money from foreigners coming in as tourists and attracted to the the cultural aspect of the brand and buying some as some form of a souvenir.
But that was all that there is into their segmentation process. However, in the late 20th century up until the early part of the 21st century the urgency to create segmentations in the market could no longer be denied.
As a consequence there is now a product and brand hierarchy. In the past there was nothing similar to this strategy but today one can find that there is such a thing as a Burberry Prorsum, Burberry London, and the Burberry Brit.
The Burberry Prorsum is the high-end of all three. It is the byproduct of the fashion shows held annually and created for the purpose of providing fashion forward items that were on display in the catwalk to paying customers who are eager to have a piece of the collection. The image of this brand was enhanced when it was made known that celebrities like Victoria Beckham, Liv Tyler and Gwyneth Paltrow were some of the clients that pay good money to acquire products under the Prorsum line.
The second tier is labelled as Burberry London and it is comprised of apparel that are priced in the mid-range and in addition these are designed to be used in week day or work wear. Obviously this is more affordable than the Prorsum line but it caters to people that wanted quality but less expensive clothing that can be used in the offices or in their businesses.
It has to be smart and yet at the same time with enough substance and style to capture a particular segment of the market, specifically the professionals who needed a work wear that is of high-quality and yet more affordable than those found in the Prorsum product range. According to Burberry the Burberry London product line is composed of the more tailored products and at the same time uses beat check and tonal check branding strategies.
The segmentation of the market also prompted the firm to delineate the biggest apparel segment and thus giving rise to Burberry Brit which is a product range that caters to those looking for more casual wear. In the case of the Brit the company decided to be more innovative and thus created a more contemporary version of the core iconic check of the said brand.
The main reason for creating these changes is to target a segment of the market and a company spokesman said that their goal was to attract a new group of luxury consumers that are new to the brand and yet at the same time maintaining their connection to the old way of doing things and this means using the iconic check.
Another consequence of segmentation is to develop new markets outside the UK and even outside Europe. Thus, in 2010 European sales accounted for 44% of sales while the Americas accounted for 27% and Asia Pacific follows with 24% in sales. In addition emerging markets added to the revenue by pumping in 10% this includes sales coming from China, India, Russia, Eastern Europe and the Middle East.
Marketing Mix Variables
A company controls four important elements of marketing and these are: product, price, distribution and promotion. If the firm is able to combine all four together to create a potent market mix then it will result in a matrix that will enable the company to reach a particular target market.
In other words consumers are not going to buy a particular product simply because of its quality but as a result of a well-crafted market mix. Surely the quality of a particular product figures highly in the decision-making process, however, that is not the only consideration or the only factor that will make a consumer decide to buy a particular brand.
The corporate leaders at Burberry realised that it is not enough to produce a high-quality product like the Burberry check there is a need to determine the correct price and the proper way to market it so that the people who can afford will go out of their way to buy their products.
Aside from that the Burberry brand also made the decision that it is now time recreate the firm so that it will not only be known as a producer of trench coats and apparel linked to British culture. Thus, they began to focus more on their segmented markets and as a result of that came up with different products such as men, women, and children’s wear. They also sell shoes, perfumes, and accessories like handbags, leather goods, and scarves.
Rationale of Marketing Mix Variables
The purpose of creating this marketing mix is to increase revenue by tapping into markets that was not possible with the old set-up. By being creative when it comes to product offerings, pricing, marketing and even the logistics behind the distribution of the said products can easily increase Burberry’s slice into the luxury goods market.
Their decision to change their marketing mix yielded results in 2010 based on the number of global retail stores. They had 139 retail stores located all over the globe as well as 140 concessions, 44 outlets and 97 franchise stores.
The company scored big when it made the decision to modify the way they sell their products. Instead of relying on traditional direct retail stores they now added digital commerce by selling items online. They also created a system wherein they can sell wholesale to prestigious department stores such as Harrods and Selfridges.
At the same time the market mix is made more interesting by licensing deals that allow other companies to tap into the Burberry brand when manufacturing and selling products such as perfume, eyewear and watches. The company makes money in a different way and this is done through royalty income coming from licensing channels such as firms that are located in Europe, North America, and Asia.
The best example of applying the principles of creating a marketing mix can be seen in the firm’s decision to develop the Burberry Brit. In this product range the company made available more affordable and at the same time sporty apparel. In 2009 the company started selling jeans and casual wear. However, there is still no mistaking the fact that these products came from Burberry because one can expect quilted jackets and over-sized wool duffel coats for women and for men there are chinos and cotton tees.
Digital Marketing Tools
One component of e-commerce is the use of computer software and hardware to deliver “advertising content” to consumers. Traditionally, the job of advertisers centered on the use of TV and radio ads. The problem with the old method is cost-efficiency.
Companies can spend a lot of money for TV ads, without realizing that consumers can easily change channels or go to the bathroom during commercial breaks. The use of technology in marketing will eliminate this wastage because “advertising content” can be delivered where consumers are sure to focus on the message.
Advantages of Digital Marketing Tools
In a global business environment competition is intense. The only way to survive is to ensure that the Burberry is always one step ahead of its competitors and in order for the firm to do that it has to develop a quick and effective decision-making process.
There is only one way to achieve that and it is to have access to all the pertinent information regarding sales forecast, market conditions, sales, production data and other information that is required by business leaders most especially the CEO to make crucial decisions.
Burberry quickly understood the importance of an information system that will keep leaders well informed. On the other hand it was easy to understand the challenges in moving from one method of doing business to one that is more technology based.
According to experts in the field, “In the past, companies have struggled to make decisions because of the lack of data. But in the current environment, more and more organisations are struggling to overcome ‘information paralysis’ – there is so much data available that it is difficult to determine what is relevant.” 
This clearly explains the need for more intelligent data management systems even if executives are having a hard time adjusting to technological changes. Nevertheless, they have to adapt or perish. On the other hand it is imperative for senior executives to learn how to use IT without having to spend time going through the fundamentals on how to use the PC or learn the intricacies of software and hardware.
The solution that was adapted by the company was to use supply chain management software. This was complemented by digital marketing schemes using Facebook, YouTube, and podcasts. They also launched the social networking website called the Artofthetrench.com. This is where people come to share photos of themselves wearing the Burberry’s trademark trench coat.
They also have their own YouTube channel and developed an iPhone app that allow their customers to buy online. In the short-term the company has already seen a 60% growth in e-commerce. This means that there is tremendous potential but much has to be seen in later years of the company is able to capitalise on new technology and new way of marketing their products using the World-Wide-Web.
Disadvantages of Digital Marketing Tools
The disadvantages of using digital marketing tools is the significant cost that are added to their system. Aside from the expense there is no way of efficiently maximising the fact that there are hundreds of thousands of unique visitors to the site. It may seem like they have created something significant but without the ability to translate these activities and the hype it generated into sales then the company is simply wasting resources for something that does not affect the bottom-line of the company.
The Burberry brand is an icon in the British fashion industry for more than a century. It has suffered setbacks because of mismanagement and the inability of past leaders to properly apply marketing principles. But when perceptive business leaders were hired to correct some of the glaring mistakes the company was able to reverse its fortunes. One of the best strategies used was the segmentation of the market.
This was followed up by the cration of product ranges like the Burberry Prorsum, Burberry London, and the Burberry Brit. This allowed the company to offer a wider set of choices for its clientèle and as a result were also able to penetrate markets that were inaccessible in the past.
The firm has to continue looking into improving the way they delineate their products to be able to take a bigger slice of the fashion industry. This means that when it comes to the Prorsum line they should create luxurious items that will give them the ability to make in roads into the market currently dominated by brands like LVMH and Gucci.
At the same time they should create products that would allow them to improve their casual product lines. There is also a need to take a closer look at their digital marketing and determine if they are converting website visits into actual sales. It is simply too early to celebrate victory in terms of the way they were able to increase awareness of their products. The bottom line is still the measuring stick for success.
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