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Marketing Mix to Bazaaring Blend
The global marketplace is experiencing significant changes and industry leaders are finding that their marketing playbook is no longer valid. Thunderbird alumnus Kai Gyllstrom '05 makes the case that markets are adapting characteristics of a bazaar: margins are squeezed by demanding customers, competitive advantages are quickly replicated and consumers are increasingly immune to marketing efforts. Using examples from the fashion and design industry, Gyllstrom addresses issues, major trends and innovative business models.
Many industries today operate in a bazaar-like environment, cramped with hundreds of sales people pushing the same commodity, products that all look the same and customers moving from stand to stand bargaining. Eventually prices fall until salespeople practically give away their products, hoping to form a lasting customer relationship. This is already the case in cell phones and printer industries, and I foresee such trends spreading to other sectors.
21st Century Descartes
Successful products touch the consumer on an emotional level. Jonas Ridderstrale, the author of Karaoke Capitalism, states that while global consumption has grown by 29%, the sales in pearls, luxury cars and yachts have increased 73%, 74% and143% respectively. Today’s consumers express their individuality through consumption and the phrase “I shop, therefore I am” has replaced the original version of Descartes.
With less free time and more disposable income, consumers appear to spend more on experiences and luxury goods. But while shopoholism spreads like a virus, it is progressively more difficult for marketers to increase their wallet share.
Creating Trends
Consumers are increasingly skeptical of advertising, so marketers need to create awareness and transmit trends in new ways. Victoria’s Secret dominates the lingerie category with a multitude of product introductions each year supported by television advertising, an aggressive Internet presence and active direct marketing. In contrast, Spanish specialty retailer Zara relies solely on word-of-mouth referrals. Victoria’s Secret probably knows that they are wasting half of their marketing budget; they just don’t know which half.
The weight has shifted from mass advertising to creating trends by controlling public opinion. Reference groups, such as celebrities, are perhaps the most influential people. For new clothing items or accessories to become fashionable, they must first be adopted by some group with acknowledged respectability.
“CPR Marketing”
However, celebrities are not the only effective reference groups. As product placements and sponsoring become more evident to the public, consumers crave more personal referrals. “CPR Marketing” refers to when consumers breathe life into a brand by adopting its products and spreading the trend by word-of-mouth. Malcolm Gladwell’s The Tipping Point tells the fascinating story of the comeback of Hush Puppies. The brand was revitalized when some “cool kids” in the East Village started wearing the shoes as a fashion statement. When designer Isaac Mizrahi saw the shoes being worn in NYC hot spots, he used them in his fashion show. Consequently, demand for Hush Puppies skyrocketed. Hush Puppies’ management later admitted that they had never even heard of Mr. Mizrahi.
Disposable Fashion
Mizrahi and others would probably agree that price has never really been an issue in fashion; traditionally design has been the distinguishing factor. Today, companies such as H&M have introduced “disposable fashion” and shortened the product development cycle from 16 months to less than 20 days. As a sketch or drawing finds its way to store shelves in less than 3 weeks, innovative design is no longer a competitive advantage. Rather, replicating trends the fastest is key. With just-in-time design, everyone can afford to be trendy today.
A recent visit to Gap in San Francisco made me wonder how the company will respond to their European competitors’ increased presence in the US. The American retailer, used to a monopolistic status in its domestic market, still has a product development cycle of 54 weeks. Although Gap is slightly more focused on basic clothing, it is a distinct disadvantage to be forced to predict trends a year earlier than the competition.
Interestingly, H&M has consciously deviated from its own business model by using established designers. The Swedish specialty retailer features garments by Karl Lagerfeldt (Chanel) and Stella McCartney (Gucci). Target did, however, start mass producing high-end design well before the Nordics. They “commoditized” creations by Michael Graves and Philippe Starck years ago.
Personality
Yesterday, companies competed on price. Today services might be the key, but tomorrow the focus will be on Personality. That is the only way to avoid the bazaar and remain in the market. Organizations need a genuine story, or corporate personality, that appeals to customers, differentiates them from competitors, and attracts star-class employees.
Companies should adjust their Marketing Mix instead of replicating the “Bazaaring Blends” of industry leaders. Imitation might be the sincerest form of flattery, but it is also the surest way to lose focus. As benchmarking will only achieve mediocrity, companies have to recreate their business models to reflect who they really are.
Kai Gyllstrom 05 (kgyllstrom@global.t-bird.edu) is a citizen of Finland with over 5 years experience in the fashion and apparel industry. Along with his Thunderbird MBA, he holds a masters of science in economics in marketing from the Swedish School of Economics and Business Administration.
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