Market Orientation as a Branding Strategy Charina Montemar Hägglund Supervisor: Olivia Kang Bachelor’s Thesis – Företagsekonomi C Autumn Semester 2007 Department of Business Studies ABSTRACT This paper studied the impact of market orientation strategy on brand awareness. Zara, a Spanish leading fashion retailer and an example of a brand using the above mentioned strat- egy, is being compared with three other multinational brands operating in Stockholm, Swe- den, namely; Topshop, Mango and United Colours of Benetton. The latter brands are known to be using advertisement to create brand awareness. Fashion magazine’s attention were used as a measure of brand awareness. Data on the brand awareness were gathered by browsing three leading Swedish fashion magazines - Elle, Glam- our and Damernas Värld - and the fashion section of the biggest Swedish tabloid, Aftonbladet. It was found out that market orientation can compete with advertising as a marketing strategy to create brand awareness, but only in some parts of the market segment. This was concluded from the fact that Zara was featured in some of the magazines, but not all of them. 2 ACKNOWLEDGEMENTS First, I would like to thank our thesis adviser, Ms. Olivia Kang, who gave me unconditional support and understanding to complete this paper. Second, I would like to thank my loving family and friends for continuous trust and support in my capacity. Lastly, I would like to thank my classmates for sharing to me their constructive criticisms and comments to improve more this paper. CHARINA MONTEMAR HÄGGLUND 3 TABLE OF CONTENTS INTRODUCTION .......................................................................................................................................... 5 THEORETICAL FRAMEWORK ................................................................................................................. 7 BRAND AWARENESS ........................................................................................................................... 7 FASHION JOURNALISM / MEDIA........................................................................................................ 8 ADVERTISING ....................................................................................................................................... 9 MARKET ORIENTATION STRATEGY ............................................................................................... 11 CUSTOMER FOCUS ....................................................................................................................................... 12 COMPETITOR FOCUS .................................................................................................................................... 13 INTERFUNCTIONAL COORDINATION ................................................................................................................. 14 MARKET ORIENTATION AND BRANDING............................................................................................................. 15 MODEL ................................................................................................................................................. 15 METHODOLOGY ....................................................................................................................................... 16 MARKET ORIENTATION STRATEGY ............................................................................................... 16 ZARA ........................................................................................................................................................ 16 ADVERTISING STRATEGY ................................................................................................................ 19 BENETTON ................................................................................................................................................. 19 MANGO .................................................................................................................................................... 19 TOPSHOP ................................................................................................................................................... 20 METHOD .............................................................................................................................................. 21 FASHION MEDIA ......................................................................................................................................... 21 DATA GATHERING ........................................................................................................................................ 22 ANALYSIS OF DATA.................................................................................................................................. 22 DIFFERENT TYPES OF MEDIA........................................................................................................... 23 DIFFERENT TYPES OF EXPOSURE ................................................................................................... 25 ADVERTISEMENTS............................................................................................................................. 27 CONCLUSIONS........................................................................................................................................... 29 SUGGESTIONS FOR FURTHER RESEARCH ......................................................................................... 30 LIST OF REFERENCES ............................................................................................................................. 31 APPENDICES............................................................................................................................................... 33 4 INTRODUCTION The fashion industry has evolved noticeably over the past few decades. Fashion products that used to be luxury items are now considered as basic commodity products and bought by al- most all segments of the society.1 Factors that may contribute to this growing demand for fashion products is the continuous low prices that may be brought about by an increasing number of target markets2 and transferring the production sites to developing countries. Due to the booming numbers of customers, more and more stores sell fashion items, leading to stiffer competition. Consumers are also more conscious of fashion trends. Furthermore, they are not only conscious of the style but also the quality and the price attached to it. Be- cause of these factors, it is getting harder and more difficult for the sectors involved in fash- ion to stand out in the industry. Nowadays, it is very vital to create value for a product by using successfully proven marketing tools. Moreover, it is now also equally important for the customer to recognize the existence and availability of a company’s product or service. This is called brand awareness. Creating brand awareness is one of the key steps in promoting a product. The product that promotes the high- est brand awareness compared to its competitors usually get the highest sales.3 Advertising is one of the basic ways of promoting a brand. Many companies spend millions in advertisement just to introduce a new product or even to remain competitive in the business industry. In fact, it is the primary way of communicating a new product/brand/concept in the market. United Colours of Benetton, MANGO & Topshop are the few examples of fashion retailers which focus a lot on advertising. This paper will also cite one marketing strategy that can be an alternative to advertising. It is the market orientation strategy, popularly used by leading fashion retailer Zara (Inditex). 1 Mazaira, González & Avendaño (2003) 2 Ibid. 3 Brand Awareness n.d. 5 Zara is one of the world’s top leading clothing companies in terms of sales, profits and lead time. Despite this success, Zara claims not to have a formal marketing department, and does not use advertising to promote its products. To maintain its sustainable competitive advantage in the retail clothing industry, Zara uses the “market orientation” strategy instead.4 Market orientation refers to “the organization-wide generation of market intelligence, dis- semination of intelligence across the departments and organization-wide responsiveness to it” according to Jaworski and Kohli (1993, p. 2). It is also when the aim of the organization is focused to the continuous creation of superior customer value.5 The strategy is not just a mar- keting strategy but it involves the organization of both the company and its customers.6 In the Zara case, market orientation is not only used as the most important strategy to gain competitive advantage, but also as a branding strategy. We want to investigate whether mar- ket orientation as a branding strategy works as well as advertising in creating awareness of the brand. Our research question will be: “Can market orientation as a marketing strategy evoke the same amount of brand awareness as advertising?”. Media attention will be gathered from three Swedish fashion magazines, Elle, Damernas Värld and Glamour, and the fashion division of the leading Swedish tabloid, Aftonbladet, as a measure of brand awareness. Then as a reference, Zara will be compared to three other multi- national clothes retailers which have few stores in Sweden and which use advertising to create brand awareness, namely; United Colours of Benetton, MANGO and Topshop. To get a better understanding of the whole paper, the