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This report provides an evaluation of the current and future marketing plan of ASOS with regards to their marketing environment, technology and new media and sustainability.
The research draws attention to ASOS current and past performance and how they have managed growth. It shows how ASOS was second to Next in 2008 where they had almost 5% market share and Next leading with 7% and how they continued to grow to become the UK’s largest independent online fashion store. In 2010 both sales in the UK and internal market increased by 22% and 103% respectively.
The report finds that their current marketing plan shows
Recommendations discussed include:
Table of Contents
Marketing Plan of ASOS
ASOS is a virtual fashion retail company that aims to continuously expand their market share and their products already reach international markets. However, there is active competition in the online fashion industry and ASOS has continued to manage growth and the following forms part of their marketing plan;
Current Marketing Situation
Recent forecast by the Interactive Media in Retail Group (IMRG) (Dawinderpal, 2010) shows that the UK’s online retail market is expected to grow by 110% in the next 10 years, reaching £123bn in the year 2020.
As at 2008, ASOS market share of the online fashion retail was almost 5% and Next its competitor was 7% (Steve, 2009). Next began trading in 1982 but only started its online retail store in 1999 which was a year before ASOS launched. Their presence in the market 18 years before ASOS could be seen to account for why they were leading above ASOS as consumers would be more aware of their brand than the ASOS brand. However ASOS does a lot of marketing in order to make consumers aware of their brands through the use of different media ranging from social media to bill board ads. ASOS efforts are seen to have paid off because at present they are ”the UK’s largest independent online fashion and beauty retailer” (ASOS, 2011).
Despite growing competition in the market, ASOS has a number of strengths. First, ASOS target market which is 16 to 34 year olds account for at least 20% of internet shoppers (The Times 100, 2007). Second, their up to date fashion which is inspired by celebrities shows that they have studied their target audience behaviour with relation to their attitude towards fashion. Third, ASOS has also invested a huge amount in their website and technology which ensures that their customers can get what they want (The times 100, 2007); and fourth, ASOS has teamed up with other well know designers that appeal to their target market to encourage more sales.
ASOS when compared to other competitors such as Next, Topshop and Newlook, do not offer shopping credit to their customers. Although this is a strategy that would encourage consumers to purchase more now for payment at a later date, it means ASOS is able to receive payments immediately which would allow them invest more in the company and manage increasing growth. However more competitors are lunching online stores which could mean ASOS could lose some of their customers to these competitors.
Another factor which would affect ASOS performance is the recent increase in VAT which is said would have an impact on consumer spending power, however online sales are expected to continue growing.
Opportunity and Issue Analysis
As ASOS continues to grow they could take advantage of this expected growth by gaining more customer base. However they have to consider if they can maintain their current target market or expand into new markets such as increasing their target age group or including more products in their current range. So far they have been able to cope with growth but they have to consider if future growth would give rise to problems associated with rapid growth such as overtrading.
ASOS Financial Objective is to quadruple the size of the company in five years and increase sales to £1bn within that five year target as stated by The
Yorkshire Post (2010) and to also continue sale of their share on the AIM to raise finance.
Their marketing objectives includes increasing their market share which is already evident as their UK sales increased by 22% and international sales increased by 103% as seen in ASOS 2010 annual report, and continue to introduce more brands to retain their target market.
ASOS target audience are fashion conscious individuals aging form 16 to 34 years old (ASOS, 2011). Their consumers keep up with the latest fashion and ASOS provides a platform which gives them access to these products and they expect their products to be up to date.
Highlights of ASOS Marketing Strategy:
Positioning: ASOS is the leading company behind the idea of providing celebrity fashion to consumers at cheaper prices and thus focuses its products design on the fashion trend.
Product Life Cycle: According to Nigel, Stuart and Robert (2004), this is a model that deals with ”the behaviour of both customers and competitors during the life of a product or service.”
An article by The Times 100 (2009) looks at how ASOS incorporates the product life cycle model. The sequence which is followed is:
Introduction- Where ASOS makes their customers aware through the use of links available on the home page of their website and through ads by other media.
Rapid growth- ASOS allows for availability of stocks to meet the demand and needs of their customers. Due to growth, ASOS is to invest in a new warehouse worth £40 billion in order to meet its growing needs according to The Yorkshire Post (2010). Here the product usually promotes itself as customers become more aware of its existence.
Maturity and Saturation: ASOS would aim to make their customer more aware of the products by featuring them on their website as well as other media. At saturation, the prices or products could be reduced to encourage purchase as well as give room for new products to be ordered in from suppliers.
Decline: At this stage customers are no longer interested in the product as it may have gone out of fashion and new products would have to be introduced and would go through the life cycle phase all over again. ASOS does this by introducing over 1,500 product lines each week (ASOS, 2011).
The article also recognises that ASOS benefits from an extended life cycle due to their international market share as fashions trends in other countries do not always move in similar fashion as with the UK fashion.
Extension Strategies: ASOS collaborates with other designers in other to attract more buyers on its sites. Most of the designers featured are popular on the high street which means ASOS can give their customers more variety on the same platform which is their website.
Boston Matrix Model: The Times 100 (2009) shows how ASOS makes use of this model in order to assess their products as well as manage them. The article shows how ASOS classifies their products as: Dogs (which are products in their decline stages and other products which were not successful after introduction), Question Marks (which are new products that have been introduced and show signs of becoming successful), Stars (these are products are in high demand which could increase sales) and Cash Cows (these are products which are known to steadily sell on the website eg ASOS own label dresses which are popular year on year).
The model would allow them to make decisions such as what products to exit or what products to promote.
Promotion: ASOS participates in a lot of promotions through the use of different media in order to reach out to their target audience. ASOS has become very popular on social media such as facebook and twitter where they keep customers up to date on the latest fashion as well as available products. ASOS also uses guided selling on their website and through the use of email to recommend other products to customers based on their shopping habit on ASOS.com. They also offer discount vouchers, student discounts, free delivery and competitions to their customers.
According to The Times 100 (2009), ASOS sends out emails and newsletters twice a week to over 2.7 million registered customers.
ASOS is already fulfilling its marketing strategy. Their investment in the new warehouse will allow for more capacity and they have signed a lease which covers 530,000 sq ft for their distribution centre according to The Yorkshire Post (2010). ASOS has also invested in HP blade servers to improve efficiency as well as save cost according to the case study by Richardsoneyres (2009). Also they recently selected Merret from Retail Assist which is a supply chain solution in order to replace their main buying and selling systems according to Retail Assist (2010). They have also launched 3 additional websites in other countries in order to gain more market share in the international market.
ASOS has a 5 year target of sales to be £1bn according to The Yorkshire Post (2010). This would mean that ASOS would maintain growth through sales increase and this could be achieved by opening more websites in other countries as well as distribution centres to boost sales, ordering larger quantities from suppliers to reduce cost associated with ordering in smaller quantities and pushing sales through new media such as phone shopping or other innovative ways. The sales projections are based on assumptions and other factors which might affect steady growth would also have to be considered for the target sales to be achieved.
ASOS would have to monitor its projected sales figures and compare it with actual achieved in periods which have already elapsed and adjustments made to accommodate the growth rate. ASOS uses performance measures by comparing growth in previous years to determine their current performance.
ASOS Current Marketing Plan in relation to its Marketing Environment
ASOS has to ensure that their current marketing plan fits into the current marketing environment in order for the plan to be feasible. According to Philip (2002), the marketing environment of a company is made up of the task environment (this deals with actors known as the company, suppliers, distributors, dealers and target market of the company) and the broad environment (this consist of demographic, economic, natural, technological, political-legal and social-cultural environment).
Looking at ASOS as a company, they have managed growth since they came into the industry by reaching out to more customers. They have become popular in their target market due to their marketing approach.
ASOS suppliers include their product suppliers which are mainly in China, Eastern Europe, India and the UK ASOS.com (2011). Labour is usually cheaper in China, India and Eastern Europe but if this circumstances change then cost to the suppliers could go up.
Also ASOS outsources their delivery to independent delivery companies which means close attention has to be paid to ensure prompt arrival of items to their customers. And this is done by allowing customers track their deliveries online.
ASOS sells their products directly to their customers, meaning they have control over their product reaching their required market.
ASOS dealers include the AIM (Alternative Investment Market) where their stocks are traded. Their shares have been responding to their performance in the industry. Relying solely on this medium could cause financial problems as demand and supply plays a key role on the performance of their stocks.
ASOS used Unanimis to handle their sales house and now want to bring this in house according to Marketing Week (2011). This strategy could affect their aim to reach out to more customers as ASOS might not be able to handle the task effectively. However they could save cost and contribute more to their sales ad as they are actively involved in the day to day operations of ASOS.
Many fashion stores also target ASOS target audience which means ASOS has to stand out from the rest of them in order to attract and retain them and their strategy of copying celebrity fashion makes them stand out from their competitors, but this is not to say that their competitors cannot copy this strategy in order to keep up with them.
ASOS has recognised that their target market is technologically advanced which would allow them to shop online as and when compared to older generations who are not technologically advanced or receptive.
A recent article published by The Telegraph (2011) shows how youth unemployment has risen in the UK. Youths which are considered to be between the age range of 16 to 24 form part of ASOS target market. This could have an impact on their spending power as ASOS does not offer credit and might mean they might not achieve their sales target.
An article by The telegraph (2010) shows how the rise in the price of cotton would affect sales price. As ASOS plans to increase sales this means more production would be made which would have an impact on cost and would have to be adjusted for in their prices. The effect could mean that sales and discounts offered to customers may not be so low.
ASOS also provides a platform on their website where customers can recycle the unwanted clothes.
To run a virtual company, the technology in place has to be effective. As ASOS has invested in new severs, this indicates they can keep up with the growth of users on their websites and the server enables them make updates without interrupting activities of their customers.
ASOS follows the consumer protection law as they allow for returns of products if their customers are dissatisfied ASOS.com (2011) and this would instil confidence in their customers as they know they can make returns at no extra cost to them.
Social Cultural Environment
ASOS has recognised that there are different cultures in their target market and this has enable them make brands which feature use of fabrics from different cultures in order to retain a wider market.
How Technology and New Media could impact on ASOS future Marketing Plan
As a virtual company ASOS already adopts a number of new media with relation to their marketing and other operations such as sale on their website and advertising on other websites, contacting customers through emails and mobile shopping. However they haven’t fully maximised the use of technology and new media and as such the impact on ASOS future marketing plan would be;
ASOS currently uses emails and newsletters to communicate with their customers. Some fashion companies use text messages and phone calls to make their customers aware of their products and ASOS could incorporate this into their current system, however they have to consider their customers reaction to this as some customers may find it a bit aggressive. ASOS could deal with this by giving customers an option of what form of communication they would prefer.
ASOS responds to customer queries through emails. They could adopt instant chat facilities which would enable them chat with customers and also promote some products with them. This could increase cost, however most customers would prefer dealing in person than waiting for a response.
Some fashion stores now allow customers to make telephone orders. ASOS could adopt this as their customers might not always have access to the internet. This could lead to them taking on more staff to deal with these orders which would increase cost.
They would have to continuously update their systems to keep up with their technological environment and to compete better, this would have an impact on cost.
Sustainability with regard to ASOS Marketing Strategy
As ASOS aims to continuously grow, their marketing strategy has to be sustainable and this could be achieved through continuous analysis and improvement of their marketing strategy.
Positioning – Some fashion stores are already copying celebrity fashion and selling at lower prices which means ASOS would have more competitors and might struggle to keep their customers. Also some of their customers might go for the actual products which they copy notwithstanding the price.
Product life cycle – The links to new products on their website may not always be followed as customers tend to have a mind of their own and end up purchasing what they want rather than what ASOS suggests. Also their products which have reached maturity may not still be purchased by their customers as they follow recent fashion trends and may feel the products are now out of date.
Price reduction of products in their saturation stage is a strategy that would encourage purchase; however pricing might not be the issue but the product design. ASOS always has sale items on their websites and as they continue to introduce more product line this will increase and could impact on their cost.
Their extended life cycle could go on as they continue to gain more international grounds and this could be feasible by designing products that suit their international customers for example by copying international celebrity fashion.
Extension strategies – Other fashion stores such as Selfridges already team up with popular designers, also ASOS contract with these designers could elapse, however ASOS brands do generate more sales than other designer brands featured on their site.
Boston Matrix Model – This model could help ASOS make decisions but it does not necessarily tell them why some of their products are successful and why others struggle. Regular use of this model could be time consuming and could impact on cost. However, automated systems can gather the information required by the model.
Promotion – Two emails a week from the same company might put off some customers might lead them to ignore such messages. Discounts could increase cost to ASOS as they have even reduced their student discount from 20% to 10%. Also their free delivery option has led to an increase in cost as shown in their 2010 annual report, however it does encourage purchase.
ASOS marketing plan has taken into account most of the factors which affects their marketing environment. Their marketing strategies are not all unique to them as they can be adopted by other online fashion stores; however they have set the trend of selling affordable celebrity style fashion and that has put them ahead of their competitors.
ASOS has so far managed growth since they began trading and this has allowed them take advantage of the growing online retail industry as both their UK and international market share increased by 22% and 103% respectively in 2010.
Although ASOS does a lot of promotions they have not adopted store credit, telephone ordering and instant communication with their customer service teams as most of their competitors already offer. However they have understood that their target market makes use of new media and technology as most of their strategy adopts this eg ASOS mobile which allows customers to shop on their mobile.
ASOS can continue to increase their market share as long as they continue to deal with the problems which relate to growth and improve their marketing strategy through continuous analysis in order to identify strategies which have led to their success and continue to understand their consumer’s behaviour towards their products.
ASOS has adopted a number of strategies in order to place them at their current position, however more could be done to achieve their desired growth and the following are recommended;
Issue store credit to encourage purchase, but this could have an impact on their working capital cycle.
Create phone lines for customer service issues so customers can know who exactly they’re dealing with, but this could increase cost.
Copy celebrity fashion in other countries to boost international sales.
Introduce more international designer labels and extend contracts with designers.
List their website with search engines, this is usually costly.
Continuously study their customer’s behaviour towards their products and services.
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