Empirical analysis of re-branding strategies Of Marks & Spencer

Abstract

The present study aims to investigate the following factors in Marks and Spencer’s overall rebranding strategy by identifying the Marks & Spencer target audience; understanding the competitive environment of the company as a global brand; investigating consumers’ perceptions of its new image; and evaluating the effects of the new image on M & S’s profitability. These have been carried out through the collection of both primary and secondary data. Secondary data consist of revisiting its business strategy through a review of its history and the new challenges.  that it is confronted with and the role of rebranding in facing these.  The food, clothing, home and financials sectors of the business are evaluated along with external considerations such as fashion sub brand preferences and fashion consciousness, laying down the rationale for its rebranding strategy and new pricing structure. Finally, its core competences, market opportunities and threats are revisited. Secondary data have been gathered from  80 respondents who have already made a recent purchase at Marks & Spencer (i.e. within the year), and within the 20-40 year old age range.

The level of store visits and purchases is suggestive that the strong brand affiliation of customers to Marks & Spencer brand. The high percentage of customer visits and purchases suggest that the product placements at the stores are effectively drawing customers to the Marks & Spencer store with its attractive product line up. Recommendations for sustaining the success of its rebranding efforts include the a review its lowest scoring dimensions, and establishing means of improving these, especially those that strongly correlate with consumer patronage and for them to emphasize a very strong culture of service and branding, especially among their store personnel.

CHAPTER 1: INTRODUCTION

According to Brandchannel.com (2007), While many brands such as Vodafone or Volkswagen have faltered when they extended their brands names to other product categories such as lipsticks, running shoes, and overnight, Marks and Spencer (M&S) seems to achieve a phenomenal resiliency in its brand name despite offering a wide variety of product lines under its one brand name. Everything is sold in M&S stores – from food, house wares, women’s fashion, and several other types of merchandise. Unlike many retailers selling products under the manufacturer’s brand, M&S sells these products under one single brand M&S. Unusual? Yes, but consumers don’t seem to mind at all (Brandchannel.com, 2007).

The M&S brand is to be looked up to when it comes to stretching one’s brand name. For years, British consumers did not have difficulty in understanding why M&S sells chicken curry, brassiere’s, and hand towels. In fact, many UK consumers equate M&S brand for the trusted quality they have known for years and M&S brand has been identified with the stately British institution for its stoic and proud British culture. A culture that can be described with “nice manners, grey Sunday afternoons and every gentleman wearing a hat” (Brandchannel.com, 2007). However, this was Britain in 1956. British today are faced with far more numerous choices than before – from shopping at the supermarket or supporting local traders, choosing fresh or processed food, relaxing in branded or independent pubs and bars, etc. Businesses are also offering more sophisticated products and services to entice new customers. As a result, the culture in which M&S has so long been identified with has changed and is continuously evolving (Brandchannel.com, 2007).

Today, consumers are continually expressing their irritation, frustration, and dissatisfaction on an individual case-to-case basis as we witness the growing needs for the retail industry (Christopher, Payne, & Ballantyne, 1991; Dibb, 2000). Most of the cases of these discrete encounters are the services based on the customer’s perception. The current and comprehensive emphasis on service encounter satisfaction and service quality exemplifies both the significance and the complexity of these is­sues that cause unsatisfactory customer service. First and foremost, customer satisfaction is greatly affected by the manage­ment and monitoring of individual retail service encounters (Gordon, 1998; Gronroos, 1990). Managing individual encounters is nested within broader managerial issues of organisational structure, philosophy, and culture that also can influence the cus­tomer’s evaluation of the brand (Guenzi, & Pelloni, 2004; Gummesson, 1987; Johnson & Russo, 1984).

In this dissertation, the writer evaluates the latest re-branding strategies of M&S. The research goal is to understand the shift in the consumer preferences, behaviour and attitudes as the company re-positions M&S brand considering the novel and evolving demands of its target market.

The study investigates the following factors in its marketing communication strategy and overall business strategy:

Identify Marks & Spencer’s target audience
Understand the competitive environment of global retail sales industry
Determine the market positioning of Marks & Spencer as a Global brand
Investigate the consumer’s perception of the new image
Evaluate the effects of the new brand image of Marks & Spencer in overall profitability of the company
These objectives shall be met with the use of both secondary and primary data sources. The secondary sources include books, online references, and journals. On the other hand, secondary sources shall encompass responses from a self-constructed questionnaire which was designed to measure the efficacy of Marks & Spencer’s rebranding strategies.

As M&S experienced a downturn in overall profitability, management started to revisit their branding strategy. As CEO Stuart Rose took over to improve M&S brand image, innovation, and quality in fashion and food, M&S has experienced improving growth in profitability. Moreover, the share prices of M&S have increased to higher levels fending another takeover bid (Marks & Spencer online, 2006).

CHAPTER 2: LITERATURE REVIEW

Company History

Found in 1894 in a partnership between Michael Marks and Tom Spencer, M&S has since grown to a 515-store located throughout the United Kingdom and 200-store worldwide operating in 30 countries (refer to Tables 1 and 2). The beginnings of Marks & Spencer started with a philanthropic act of Isaac Dewhirst, an established local businessman, who has lent Michael Marks 5 pounds and his first opportunity to buy and sell goods in London during the 1880s. Michael Marks soon went into partnership with Tom Spencer, chief clerk at Mr. Dewhirst’s store, and built a chain of market stalls, more popularly known as ‘penny bazaars’. Little did Mr. Dewhirst know that his generous act would soon become one of biggest retailing empire in United Kingdom (Seth & Randall 2001; Marks and Spencer online, 2006).

Marks and Spencer’s phenomenal growth came from the leadership of Michael Mark’s son, Simon. As Michael Marks and Tom Spencer have built a chain of market stalls, Simon Marks developed the Marks and Spencer store brand, created an innovative corporate culture, and set the trading principles that are still used up to today. Simon led the company to go public in 1926. Shortly thereafter under the leadership of Simon Marks, St. Michael, one of the famous brands of M&S, was registered in 1928. In 1956, all merchandise sold in M&S stores were under the St. Michael label. This started a five decade long of trend of extending M&S brand in various product categories (Seth & Randall 2001; Marks and Spencer online, 2006).

New Challenges

A part of the rise of Marks & Spencer profitability is its adoption of strategic branding of its retail stores and product lines such as St. Michael. While Marks & Spencer has enjoyed its brand uncontested and respected for decades, market share, net profit, and share price of M&S has fallen in 1990s. Maklan and Knox (1997) and Luisa (2006) explain that while brand management has been quickly adapted by companies, the experience of consumers on the brand has not been universally satisfactory. They assert that the effectiveness of branding is determined by bridging the gap between brand value and consumer value. Furthermore, traditional branding strategy no longer adds consumer value because it has become inflexible and unresponsive in satisfying the current consumer demands. As a result, many companies are grappling to improve brand equity and re-position its brand name (Maklan & Knox, 1997).

Since 2000, M&S has been on the recovery improving its profitability and margins (see Table 3). For 2006, the company registered an increased of 4.1% in retail sales, 35.1% increase in pre-tax profits, and 63.5% increase in earnings per share. Its food and clothing departments continue to be the large contributors of M&S sales accounting for 46.6% and 42.2% of total revenues. Food recorded a strong growth in 2006, while clothing sales remains flat. Home products and international sales account for 4.5% and 6.7% for total revenues with home products seeing a 0.8% increase (Marks and Spencer online, 2006).

Performance overall has improved progressively throughout the years with operating margin increasing to more than 10% in 2006. Continued tight control of costs, tight management of stock commitments and better procurement process has been the main factors for the improving margins. In addition, customer visits has increased by nearly 350,000 a week to over 15 million in 2006 as compared to 14.7 million in 2005. Christmas season also helped in increasing consumer purchases with a total of 10 million consumers purchasing every week. Marks & Spencer management expects to see this positive trend to continue as M&S offers better products, stores, and customer service to the consumers (Rose, 2006).

The researcher believes that part of improving performance of Marks and Spencer is due to the strategic initiatives the company has embarked on improving its eroded brand equity and re-positioning its store brand to meet current customer needs. In fact, following Maklan and Knox’s (1997) research, Marks & Spencer has embarked on redefining its Unique Selling Proposition (USP) to Unique Organisational Proposition (UOP) to bridge the gap between brand value and consumer value. Maklan and Knox (1997, p. 121-122) argue, “Customer value is increasingly being generated by business processes traditionally outside the remit of brand management… [and] UOP is a tool to integrate a company’s core business process into a visible set of credentials that adds customer value through the supply chain.” This suggests that in order to regain brand equity and restore profitability, companies must focus in understanding the value-added process and focus on the bigger issue of what’s create customer value (Maklan & Knox, 1997).

Marks & Spencer Re-branding Strategy

In order to understand the Marks & Spencer brand, the study first discusses the product or service the brand offers. In defining a product, it is best to start at contemplating what the consumer is thinking of buying it for (Assael, 1987; Jones, 1986). If the question is to be asked from a leading expert on marketing like Theodore Levitt, then he shall answer that if a customer purchases ¼ inch drill they probably are thinking of making ¼ inch holes too (Levitt, 1980). In short, it is more than just the product. Levitt (1980) further asserts that consumer purchases is not as simple as buying something to serve its purpose. It is about buying that will offer the highest utility; an idea that follows whoever consumer may be.

Marks & Spencer offers thousands of product lines under different brand names in its stores. Product segments include food, clothing, home essentials, and financials. However, despite the wide selection of product offerings at Marks & Spencer, what the Marks & Spencer brand ultimately sells are its stores. It is as CEO Stuart Rose notes “the store is biggest tangible asset which customers experience the Marks & Spencer brand.” Holistically, the research looks at how customers experience shopping at Marks & Spencer from its wide variety of selected product offerings to its pricing strategy to the level of customer service it manifests (Marks & Spencer online, 2006).

Food, Clothing, Home, and Financials

In the late 1990s, Marks and Spencer experienced a downturn on its sales. Lomax et al. (1999) explains that when studying the nature of the company with its customers only 20 per cent is cost; the remaining 80 per cent which must significantly be noted is entirely allocated to the impact of marketing. Furthermore, because of the constant change in the marketing environment, companies as big as Marks & Spencer can at times find themselves lost in the woods. Lomax et al. (1999) further assert there are several source of brand confusion that can be seen in product management, advertising, customer service, and sales process. They emphasize that success in selling actually comes from the synergy of the marketing process and the appropriate management of all elements of the marketing mix (Anon, 2003; 2005). By knowing what it is the customer wants, how to create products that will fulfill those wants, how to price correctly and how to deliver it, all before offering the product to the customers, assure the company of getting the patronage they want.

In this section, the writer discusses how Marks and Spencer has re-invented its store brand from managing its different product lines to its advertising campaigns of products to its pricing strategy.

With 3.2% market share in the industry, M&S food, which had been the fastest growing segment, has been successful largely due to M&S focus on excellent quality and innovation backed with its aggressive promotional activities. Marketing communication on the food segment focused on responsibly sourced, healthy foods, which has incredibly increased sales. Its food division is segmented in three categories: (1) Eat Well products, (2) Simply Foods, and (3) Hot Food to Go (Marks and Spencer online, 2006).

As a result of this strategy, M&S food has increased food sales by 3.6% in like-for-like sales. Behind this success in the food segment is the understanding of the current trend on healthy eating among British consumers. As health conscious consumers, the British are more particular with what they eat today. In this regard, M&S has further broadened its product category under the ‘Eat Well’ label from 300 to over 1000, which is approximately 20% of the products offered. ‘Eat Well’ products offer no artificial colours, flavours, or sweeteners, provides naturally healthy, nutritional balanced foods in accordance to government guidelines. Keeping in mind the health consciousness trend among British consumers, M&S has not lost sight of the importance of good taste; accordingly, it employs trained chefs to develop new dishes and improve existing product lines (Marks and Spencer online, 2006).

Another M&S major product category is the clothing and home products. Results for clothing and home products are flat with M&S experiencing intense competition from designer labels and shifting trends in consumer fashion. In addition, with the slowdown in housing in United Kingdom, uptake for new home furnishing has been stalled. M&S has launched several sub-brands for its fashion clothing such as Blue Harbour, Per Una, Autograph, Per Una Due, and SP (Marks and Spencer online, 2006).

Harris Interactive reports, “More than half (58%) of the British do not like any of the Marks and Spencer’s current fashion sub-brands, with declining interest among lower social groupings. Although between a third and a half of women have brought either underwear (46%) or other clothes (40%), this falls to only 23% of men for underwear and 35% of clothes” (Holland & Wong, 2004). The research report of Harris Interactive further adds that much of this fashion failure is due to the incorrect style and target age groups. 73% of British adults, aged 35 to 55 years old, feel that the clothing style offered in M&S is not suitable to their age; 64% of British young adults in the age group 16 to 24 and 51% in the age group 25 to 34 think that Per Una brand is more suitable for people older than themselves. In fact, the survey in 2004 shows overwhelming majority are not impressed with Marks & Spencer offering and clothing styles is incorrectly target to the different age groups (Holland & Wong, 2004; see Tables 4 and 5).

Furthermore, the publication Strategic Direction discusses that the strategic move of Marks & Spencer sub-branding has been intended to target specific age groups, i.e. younger consumer groups, who are not buying Marks & Spencer at all. In addition, the move aims to allow Marks & Spencer to compete with high-street clothing specialists. Unfortunately, Mr. Steven Sharp, director of marketing, store development and design, admits that the strategy created greater brand confusion (Barnes, 2004). The publication also explains that sub-branding only works if the parent or original brand is strong enough, and if it complements and fortifies the original brand (Anon, 2005).

While Marks & Spencer continues to be largest retailer of clothing and footwear in both value and volume (Rose, 2006), the company has had problems on increasing foot traffic and enticing customers to buy its higher margin apparel products. In response, M&S has initiated several improvements in its product offering providing better styling, and more cost competitive prices. In addition, M&S took steps to reduce sub-brands in order to present a clearer offer to its shoppers. In lieu of this, M&S places more new products in its stores more frequently keeping the product ranges fresh every time shoppers visit. As a result, M&S reports an improvement in its market share in terms of volume (9.9%) up by 2 percentage points, but slightly lower in terms of value (10.2%) down by 0.5 percentage point (Rose, 2006).

With fierce competition from new entrants and existing competitors, the flooding of Chinese textiles in the European market, and lower consumer spending, M&S is faced with continuing pressures to lower price. In response to the decreasing margins, M&S has worked through better buying procedures. This lets M&S build better relationships with its full-service vendors while ensuring strict and responsible procurement process (Fournier, 1995). With the support of M&S suppliers, the company is able to offer more competitive prices and product turnover at a faster pace, whilst maintaining quality. This, coupled with tight inventory control, is achieving greater efficiency, higher margins, and better cash flows (Marks and Spencer online, 2006).

New Pricing Structure

With the clothing division posing challenges in the company, M&S has initiated new pricing architecture to entice shoppers to see the value for their money. M&S offers lower prices but ensures quality is maintained. M&S reports, “We reprised ranges across all price points, without compromising our high quality standards. We benchmark prices against our nearest rivals to offer clear, competitive choices at every level with the major focus being on value for money” (Rose, 2006, p. 28). M&S maintains pricing for products in relation to quality three different categories, and maintains 31% of their products at opening price points (Marks and Spencer online, 2006).

Marks and Spencer online (2006) further says that they have also instituted its own financial program offering insurance, discounts and savings, and credit facilities to improve shopping experience for its customers. Marks & Spencer Money features offers flexibility and affordability to many shoppers, thereby enhancing value to many shoppers at their stores (Marks and Spencer online, 2006).

Customer Service

Marks & Spencer acknowledges that it is not in the individual product lines in which the company will ultimately improve its brand image and its profitability, but by offering excellent customer service to its shoppers. It is through the interaction of customers to employees that Marks & Spencer builds customer relationships and creates a shopping experience for customers. As Gummesson (2002a) explains, marketing goes beyond the traditional transaction-based model of doing business and the importance of relationship marketing has become more pronounce today.

Relationship marketing has often been seen as a means of creating value with individual customers (Gordon, 1998), “marketing based on interactions within networks of relationships” (Gummerson, 2002b), interactions stages of development (Stone, Woodcock, & Machtynger, 2000; Sharma, 1994; Yorke, 1990), customer retention (Reichheld, 1993; Reichheld & Sasser, 1990). Scholars suggest that more than single-sale transactions, it is often desirable for companies to establish a longer-term, mutually beneficial (value-creating) relationship between the organisation and its customers (Stone et al, 2000). Blattberg & Deighton (1996) posit that the growth of a business may be viewed as acquiring and retaining customers so as to realize the full potential value of the customer base.

Hence, Marks & Spencer has been training its employees to deliver excellent customer service. Marks & Spencer has been working hard to maintain consistency of delivering excellent customer service in every store. In fact, Marks & Spencer has instituted training and coaching programme, i.e. ‘Our Service Style’ to deliver it results. In addition, Marks & Spencer has been working to improve internal marketing in recognition of the importance of frontline personnel in delivering the relationship and marketing strategy (Marks and Spencer online, 2006).

Marks & Spencer Stores

Marks and Spencer retail stores can be categorized into local and international. In 2006, Marks & Spencer had a face lift and attempted to revolutionise its stores internationally. The refurbishment program has allowed M&S stores to exude a lighter, brighter feel with new equipment and improved store layout. This is in recognition that stores are the biggest tangible assets that customers experience the M&S brand. While the stores have for years been underinvested, M&S has moved to rectify this and bring the stores up to the standards customers expect. At same time, M&S is constantly studying locations in which the company is under-represented to further grow the business and expand its network. Furthermore, Marks & Spencer has developed sub-brands such as ‘Simply Foods’ and ‘Outlet Stores’ to meet customer’s needs. For example, Simply Foods have been developed to be positioned as “neighbourhood” stores where consumers can conveniently buy food (Marketing Week 2003), while Outlet Stores have been created to sell excess inventories all year round to maintain consistency of new product offerings and save space. Lastly, to maintain consistency in its store presentation and to save space, M&S has created ‘Outlet Stores’ to sell excess products separate from the main stores (Rose, 2006; Marks and Spencer online, 2006).

More importantly, international store sales continue to flourish as Marks & Spencer operate wholly-owned stores and franchises around the world. In 2006, international store sales registered £ 522.7 million with £ 65.6 million in operating profit, increasing by 14.68% and 8.6% respectively from last year. With a total of 198 franchise and 19 wholly-owned stores, M&S is able to increase its consolidated operating profit by 9.1%, to enter new markets and to expand its current store chain without significant cost outlay. Table 6 lists the wholly-owned stores and franchises in the different regions of the globe (Rose, 2006; Marks and Spencer 2006).

Competitive Environmental Analysis

In his book Competitive Strategy: Techniques for Analyzing Industries and Competitors, Michael Porter discusses the five forces of competition in an industry. He illustrated the five competitive forces as:

1. (1) Rivalry between competing sellers in an industry,
2. (2) Potential entry of new competitors,
3. (3) The market attempts of companies in other industries to win customers over to their own substitute products,
4. (4) The competitive pressures stemming from supplier-seller collaboration and bargaining, and
5. (5) The competitive pressure stemming from seller-buyer collaboration and bargaining (Porter, 1985).

Porter’s (1985) five forces of competition is a widely used tool to determine the company’s current strengths and competitive position. Having a clear picture of the balance of power in a competitive industry will help in planning for a sustained growth in the industry. Figure 1 analyses and plots the competitive forces in the online auction industry in which Marks & Spencer is competing.

Marks & Spencer’s Competitors

ompetitive rivalry among global retailers is intense. With a wide network of retail chain stores dispersed globally to strategically-placed in populated locations, retailers continually compete for space and foot traffic in their stores. With tapering market growth, fierce price competition is also obvious as retailers frequently offer sales promotion to entice buyers to purchase and increase their volume to cover their increasing costs. With a broad range of products offerings, retailers also look to increase product turnover in keeping their product offering fresh to shoppers and new to shoppers (BRC-KPMG Retail Sales Monitor, 2006; Datamonitor, 2006).

Marks & Spencer competitors are not only local UK retail competitors, but are global players as well. With an army of employees and suppliers at their command, retailers such as Wal-mart and Tesco are constantly competing to protect and increase their market position (Datamonitor, 2006). In addition, with the lucrative markets such India, China and Russia opening up, global retailers are in a race to establish their stores in these emerging markets (Dickinson, 2006b). The key strategy for Marks & Spencer is to defend and protect its retail market share in the UK and slowly expand its international network to increase sales and make the most of the opportunities in the emerging markets.

The Buyer can affect strong pressures to retailers. Buyers dictate what they want and what they need. In the face of various product choices and services, buyers can easily switch stores and buy what they want. Buyers are a large group and places relatively high importance in affordability, taste for food products, and fashion style for clothing and home products (Dickinson, 2006a). Buyers include local consumers and tourists. Aside from the purchasing power, buyers can also pressure retailers in different aspects on how they conduct their business such as responsible procurement practices, health concerns, and sustainable environmental programs. Pressure groups pose as both as a challenge in the business practices of retailers but as an opportunity well in understanding the consumer’s needs and expectations. Moreover, retailers can use this understanding as a marketing tool in promoting their brand and improving corporate image (Dickinson 2006a; Yorke, 1990).

Supplier Power

Marks & Spencer suppliers generally come from the Asian countries with manufacturing costs significant lower than in the United Kingdom. Supplier’s capacity can command a significant pressure to Marks & Spencer as many textile companies outsourcing their manufacturing to them as well. Furthermore, supplier costs both on raw materials and labour costs can have a significant impact the company’s value chain. With rising oil prices affecting costs of raw materials and basic commodities, retailers experience the crunch in their margins. The key to effectively handling the pressure from suppliers, Marks & Spencer partnered with key suppliers in managing the whole value chain and procurement process. With better sourcing process, Marks & Spencer is able to efficiently transfer the right products at the right price from the manufacturer’s warehouses to its retail stores (Marks and Spencer online, 2006).

Threats of New Entrants and Substitutes

Threats of new entrants is very minimal because the high capital investment to set a network of retail chain stores, and the economies of scale required to compete profitability in the industry. However, substitutes such as flee market and wet market are also available for consumers. These substitutes offer significant mark down in prices of product offerings and with price conscious buyers, prices can be a significant criterion for product purchases. However, the drawback of flee markets is its inability to guarantee the quality of their products in the long term and established suppliers to provide the customized product offerings to the buyers. Despite the fact that flee markets can be a strong alternative in shopping in department stores, it is indeed limited to specific geographic location and season (Datamonitor, 2006).

Assessment of Marks & Spencer’s Strategic Capabilities

As the writer has gathered all information which analysed the competing forces that could affect the overall success of Marks & Spencer in the retail industry, he also recognises the need to be able to identify the strength and weakness of M&S as well as external opportunities, and threats. Table 7 illustrates a SWOT analysis of M&S strategic capabilities.

Table 7. SWOT of Marks & Spencer.

Strengths
–          Strong brand recall and market position in the United Kingdom retail industry

–          Improving financial performance and balance sheet

–          Increasing foot traffic and large store network in the United Kingdom
Weaknesses
–          Geographic concentration on the UK market

–          Low return on assets and equity

–          Limited online transactions
Opportunities
–          Follow through with International Expansion

–          Improving online retailing experience

–          Greater collaboration with global suppliers and improving supplier relationships
Threats
–           Intense competition locally and globally

–          Increasing labour wages in United Kingdom

–          Weaker consumer spending

–          New regulation in European Union
Source: Datamonitor (2006). Marks and Spencer Group plc: Company Profile.

The value of the SWOT analysis is its ease of use, its simplicity, and its flexibility. In addition, SWOT analysis allows the synthesis and integration of various types of information, which is generally known but still provides the possibility to organise and synthesise recent information as well (Thompson and Strickland 2003, p. 117).

The insight to be gained in performing the SWOT analysis is the understanding of the core competency of the company that would give it a distinctive competitive advantage over its rival. More importantly, it provides the groundwork on (1) how the company’s strategy can be matched to both its resource capabilities and its market opportunities, and (2) how urgent it is for the company to correct which particular resource deficiency and guard against to particular threats. It also raises questions about what future resource strengths and capabilities the company will need to respond to emerging industry trends and competitive conditions (Thompson & Strickland 2003, p. 118-119)

Marks & Spencer’s Core Competence

Core competence is defined as “the capability of a company to perform a certain task relative to other competitors.”(Thompson & Strickland 2003, p. 127; Kotler, 1997; Kotler & Amstrong, 2003). It gives the company a competitive capability and thus qualifies as a genuine company strength and resource. Marks & Spencer’s key asset has been its brand. Its ability to sell a wide range of product category under one brand name suggests the UK market’s strong identification and affiliation with the Marks & Spencer brand. Its retail chain network across UK and the internationally is also one of the key strengths of the company. Its core competency has always been its strong customer intimacy and its retailing know-how (Rose, 2006). This, coupled with its strong brand name and market position, gives M&S its competitive advantage in the UK Retail industry.

Market Opportunity and Threats

Market opportunity is a big factor in shaping a company’s strategy. Strategically, the market opportunities most relevant to a company are those that offer important avenues for profitable growth, those where a company has the most potential for competitive advantage, and those that match up well with the company’s financial and organisational resource capabilities. Furthermore, it is important to note that not all opportunities are worth pursuing. It is often advised to pass on a particular market opportunity unless the organisation has or can build the resource capabilities to capture it (Thompson & Strickland, 2003).

Strong growth opportunities exist in expanding Marks & Spencer stores in the international market. With robust growth in the Asian markets and growing middle class in these countries, opportunities to take part and cater to the needs of these market as well. However, expansion program should be gradual (Dickinson 2006b). While its focus on UK retail market has been the key in regaining market share and improving overall profitability of the company, the geographic concentration of revenues coming from the UK market makes the company vulnerable to the market conditions and relatively uncompetitive in comparison to global competitors such as Wal-mart (Datamonitor 2006).

-Its refurbishment program is also an opportunity to re-launch the Marks & Spencer brand with a fresh new look that addresses the new market conditions. The increase investments in improving the format and layout in stores are expected to generate more foot traffic. With competitive pricing across a wide product range, M&S can hope not only increase visits from shoppers but greater number of purchases and increased product turnover. Moreover, with the international expansion of Marks & Spencer stores, the new format will revive interest. More importantly, the key is to consistently offer the consistent level of customer service and product offering. However, considering the different markets catered for its international stores, M&S should partner with local operators to understand the trends and the local buyers needs and wants (Marks and Spencer online, 2006; UN Environment Programme, 2002a, b).

Lastly, with the intense competition in the local UK market, increasing labour wages, and weaker consumer spending, M&S should find alternative measures in improving its value chain especially in its procurement process (Datamonitor, 2006). With inventory costs accounting for a large portion of its expense, the retailer’s ability to control stocking levels, increase product turnover, and reduce procurement costs will be ultimately set the tone in achieving the desired profitability.
CHAPTER 3: METHODOLOGY

Data Collection Procedures

A survey is a means of gathering information about the characteristics, actions, or opinions of a large group of people, referred to as a population (Salkind, 2000). There are several ways of collating data; surveys are the primary means through which data is measured and captured. They have varied purposes, and encompass marketing surveys, opinion surveys, and political polls, among others.

Survey questionnaires that have been deployed for research have two specific objectives. One is the quantitatively depict certain facets of the group being investigated. The analysis of the questionnaires may be mainly focused on associations between variables or with making estimates in a descriptive manner to a well defined group of respondents. Next, it is also an effective means of gathering data by soliciting individual evaluations through predetermined items or questions. Their responses, which may pertain to their own views, compose the data set subject for statistical analysis (Easterby-Smith et al, 2002; Salkind 2000).

The familiarity with the subject and to explore initial constructs related to the subject is some of the objectives of undertaking survey research. In the current dissertation, this data gathering technique has been utilized to probe on the broad array of answers which may probably be given in some other similar population. Moreover, it has been used to fine tune the instruments along its psychometric characteristics. The main focal point of the exploratory survey is to assess which constructs to measure and the manner which is best fit for undertaking such measurement.  Finally, it is also utilized to uncover and define new avenues and categories for research of the population under investigation (Salkind 2000).

Numerous units of analyses are utilized in survey research; however, the counts for units in data gathering are conventionally “individuals”. By convention, their answers are cumulated for “larger units of analysis such as role, work group, department or organisation”.  The objectives of the study, it may be adequate to utilize any of these units. Nonetheless, it is usual for numerous respondents to be used since these individuals serve different functional units and occupy various levels of the organisational structure. In effect, they have peculiar views and evaluations on the topic at hand.

Primary data collection is concerned with the gathering of data that is unique to the peculiar requisites of the study. On the basis of the goals of the research and secondary data collection, a questionnaire was drafted to allow the gathering of primary data for this research. Questionnaires are often the only plausible means of covering a big number of respondents that will permit valid statistical outcomes. An effectively crafted tool that is utilized well can yield data beneficial for both the general performance of the test system in addition to data on its particular portions or components. Thus, this is the reason the researcher has selected a questionnaire a data gathering technique, particularly on gathering the demographic profiles of the respondents.

The questionnaire is a pencil-and-paper measurement instrument used when data is collected by means of self-reporting techniques (Chisnall, 1997). They are either mailed to the relative people, or used on physical level with the coordinator being present to aid the person responding with any queries or problems. The information received is limited to the respondent’s written responses to specifically constructed questions, designed prior to the meeting between the two. Questionnaires either describe or measure individual/group characteristics such as values, attitudes, opinions, etc. and contain four types of questions: demographics, behaviour, knowledge and attitude. Finally, they can be classified according to the type of response required, or the type of questionnaire administered (Chisnall, 1997). Other considerations are the resources and time available for the research to be carried out.

Questionnaire Design

The questionnaire has been self-constructed, dealing with the following items: competitive cost, convenience they provide, ambience of the branch, personalized service, promotional offers, varied clothing styles and lines, being a strong global brand, and other reasons.

These close-ended questions had fixed options given for each, and the respondent simply checked which option/s is applicable for him/her. Close-ended questions are questions that the researcher provides, and which may be accomplished by putting a check mark on a box or by encircling a response that corresponds to your choice. Oppenheim (1992) suggests these questions are straightforward and thus easier and quicker to answer; they are very useful in testing specific hypothesis. Most probably, they shall be utilized in the beginning of the investigation, since the unrestricted responses they attract create a better picture of the survey for the researcher. The main advantage of this kind of question is its ability to obtain a summated value.

As Chisnall (1997) suggests that mail questionnaire is a predetermined set of questions that is sent to a predetermined sample. Its advantages over other methods include its low price, reassured anonymity, confidentiality, its large target scope and its ability to keep certain standards. Mail questionnaires are advantageous when responses have to be obtained from a sample that is geographically dispersed, or it is difficult or not possible to conduct telephone interviews to obtain the same data without much expense. Respondents can take more time to respond at convenience. However, the return rates of mail questionnaires are typically low. A 30% response rate is considered acceptable. Another disadvantage of the mail questionnaire is that any doubts the respondents might have cannot be clarified. Another disadvantage is the restriction to verbal behaviour; answers must be accepted as written without the benefit of additional explanations which interviewers could obtain by probing questions, and overall lack of control on the settings of the research (Chisnall, 1997). Because of these constraints, the researcher decided to personally administer the tool to the respondents.

It was finally decided that the self-administered questionnaire would be used for the purposes of this research. This was attributed to limitations in monetary funds and time, as well as the fact the entire preparation, administration and final discussion had to be solely assessed by the researcher.

There are some strong advantages that set out the self-administered questionnaire over other data collection techniques (Bryman 1992; Cohen & Manion, 1989). When compared to the mail questionnaire, the chosen method secures a higher response rate and costs less. The first of these advantages can be attributed to the fact that it is handed out in person, and that the interviewer is present. As a result, the overall atmosphere is warmer, friendlier and less impersonal. Additionally, because of the presence of the interviewer, the participants are accorded a wider scope of clarity. If anything is not clear in the questionnaire, the researcher can clarify a particular question, achieving a higher degree of accuracy and consequently more reliable responses (Burrell & Morgan, 1994; Cavana et al, 2001). With regard to the second advantage, the selected method can be followed at a comparatively low cost, as there is no demand for trained staff but solely the cost of printing the actual questionnaire forms (Bryman, 1992; Burrell & Morgan, 1994).

Location for Primary Research and Sample Selection

In all research work, it is usually impossible to survey the whole population under study. Therefore it is of paramount importance to target correctly and determine a sampling frame and a sampling size that will allow the findings to be generalisable to the whole population. A sampling frame is a representation of the elements for determining the target population (Malhotra and Birks, 1999). “The target population has to be defined in such a manner that it contains information on sampling elements, sampling units, and the area of coverage (Aaker et al, 1995).” The sample in the current study was chosen through purposive sampling choosing respondents who have already made a recent purchase at Marks & Spencer (i.e. within the year), and within the 20-40 year old age range.

The location for primary research is at Marks & Spencer stores and sent out to customers visiting.

Statistical Analysis

Frequency and percentage distributions were used to present the primary data for the study. The frequency is computed by counting the number of times a certain category has occurred. On the other hand, the percentage is computed through the following formula:

% = Frequency of category / Total frequency

These were computed for all of the items in the questionnaire.

Descriptive statistics, including the mean and standard deviation were also used in presenting the results of the study. The mean was computed by summing the scores for the item and dividing by the total number of respondents. It is a measure of central tendency. The formula for the mean is as follows:

M = Sx / N

where SX is the sum of all scores and N is the total number of scores or responses. In addition, a measure of dispersion, the standard deviation, was computed for the items measuring the impact of the Christmas ad of Marks & Spencer. The formula for the standard deviation is as follows:

The standard deviation is computed by taking the difference of the mean from each score, and squaring these differences. The result is then divided by the total number of scores minus 1. The square root of this value is referred to as the standard deviation (Salkind, 2000).
CHAPTER 4: RESULTS AND DISCUSSION

Consumer Demographics

58.75% of respondents and visitors surveyed at Marks & Spencer stores were women, while only 41.25% of respondents were men. 56.25% of respondents were in 26 – 35 age bracket, 15% are in the 36 – 45 age bracket, and 12.50% are in 16 – 25% age bracket.

Brand Recognition and Affiliation

74 of the respondents have visited Marks & Spencer more than twice in the past months, while only 6 have visited M&S store in the past months. Of the 74 respondents, 77.50% have both visited and purchased goods at Marks & Spencer stores, while only 15.00% have only visited Marks & Spencer store but have not purchased goods.

83.75% of respondents have seen Marks & Spencer Christmas TV ad campaign. The research followed through with questions on the emotional responses elicited by the ad campaign.

In viewing the Christmas TV marketing campaign of Marks & Spencer, more than half of the respondents (56.25%) expressed that the campaign elicited strong emotional appeal in attracting respondents to shop at M&S. 32.83% expressed that they agree; and equal percentages of 7.46% said that they disagree or strongly disagree to the statement, respectively. The mean for this item (from a 4-point Likert scale) is 3.30, with a standard deviation of 0.90. The mean suggests that overall, the ad was effective in eliciting strong emotional appeal with its target audience in shopping at M & S.

In viewing the Christmas TV marketing campaign of Marks & Spencer, 52.24% expressed strong agreement that the advertisement reflected the Marks & Spencer brand image; 38.81% said that they agreed; 8.96% disagreed while 0.00% strongly disagreed. For this item, the average is 3.43, with a standard deviation of 0.66. The mean suggests that the Christmas marketing ad of M & S has been effective at reflecting the company’s brand image.

In viewing the Christmas TV marketing campaign of Marks & Spencer, 44.78% expressed strong agreement that the Marks & Spencer advertisement highlights the modern Marks & Spencer brand image; 31.34% said that they agreed; 23.88% disagreed while 0.00% strongly disagreed. The mean for this item is 3.21, with a standard deviation of 0.81. The average for the item suggests that the M & S ad has been successful at projecting a modern image for the company.

Discussion

The level of store visits and purchases is suggestive that the strong brand affiliation of customers to Marks & Spencer brand. The high percentage of customer visits and purchases suggest that the product placements at the stores are effectively drawing customers to the Marks & Spencer store with its attractive product line up.

The interview of respondents indicates brand awareness with Marks and Spencer brand among consumers is very high. The findings suggest the top-of-the-mind share of Marks & Spencer is relatively higher compared to competing brands. This does not only suggest brand recognition for Marks & Spencer, but a high brand recall among consumers. Marks and Spencer attributes to the increased per cent share-of-mind among consumers in its aggressive advertising campaigns (Rose 2006). This is also seen as Marks & Spencer is popular among respondents. The data only denotes that the advertisements have effectively captured the attention of consumers and elicited a brand recall.

In the recent survey on the advertisement recall on Marks & Spencer Christmas TV campaign, the advertisement effectively create strong brand recall on Marks & Spencer brand name, and an emotional appeal in drawing consumers to shop at Marks & Spencer during the holidays. 52.24% of respondents also strongly agree that the new campaign reflected Marks & Spencer modern brand image.

The study objectives are recapped below and are each consequently answered in the succeeding portion:

Identify Marks & Spencer’s target audience
Understand the competitive environment of global retail sales industry
Determine the market positioning of Marks & Spencer as a Global brand
Investigate the consumer’s perception of the new image
Evaluate the effects of the new brand image of Marks & Spencer in overall profitability of the company
Marks & Spencer’s target audience. The review of related literature has shown that the target audience of Marks and Spencer are those aged 35 years old and above. There is a need to revisit the sub-branding initiative of Marks and Spencer which is meant to entice younger age groups to patronise the brand (Anon, 2005).

The competitive environment of the global retail sales industry. The literature review of the present study has shown that the competitive rivalry among global retailers is intense.

Marks & Spencer competitors are not only local UK retail competitors, but are global players as well. The key strategy for Marks & Spencer is to defend and protect its retail market share in the UK and slowly expand its international network to increase sales and make the most of the opportunities in the emerging markets. The buyer can affect strong pressures to retailers. M& S can use their comprehension of the needs of pressure groups as a marketing tool in promoting their brand and improving corporate image (Dickinson 2006a; Yorke, 1990).

Marks & Spencer suppliers generally come from the Asian countries with manufacturing costs significant lower than in the United Kingdom. Supplier’s capacity can command a significant pressure to Marks & Spencer as many textile companies outsourcing their manufacturing to them as well. The key to effectively handling the pressure from suppliers is for Marks & Spencer to partner with key suppliers in managing the whole value chain and procurement process (Marks and Spencer online, 2006). Threats of new entrants is very minimal because the high capital investment to set a network of retail chain stores, and the economies of scale required to compete profitability in the industry. Despite the fact that flee markets can be a strong alternative in shopping in department stores, it is indeed constrained to particular locations and times of the year (Datamonitor, 2006).

Market positioning of Marks and Spencer as a global brand. There are viable growth opportunities for expansion of the M&S global brand. With sustained development in the Asian markets and growing middle class in these countries, opportunities to take part and cater to the needs of these market as well. However, expansion should be gradual (Dickinson 2006b). It must also de-focus from the UK market to lessen its vulnerability to market conditions to protect itself against global competitors such as Wal-mart (Datamonitor 2006).

Perceptions of the consumers on the new M& S image. The results propose that cus­tomers have a very obvious recognition of the overall brand image of Marks & Spencer as a clothing company. More specifically, the company was per­ceived to have a clearly focused position within the UK retail clothing market and to be successful in communicating their brand to customers. The study suggested that there was some distinction in perceptions of the consistency of the service experience offered by, and connected with, the Marks & Spencer brands.

Effects of new image on M&S profitability. The sales of Marks and Spencer have significantly improved since it has undertaken its rebranding efforts. Performance overall has improved progressively throughout the years with operating margin increasing to more than 10% in 2006. Continued tight control of costs, tight management of stock commitments and better procurement process has been the main factors for the improving margins. Customer visits have also increased by nearly 350,000 a week to over 15 million in 2006 as compared to 14.7 million in 2005. Marks & Spencer management expects to see this positive trend to continue as M&S offers better products, stores, and customer service to the consumers (Rose, 2006).
CHAPTER 5: SUMMARY, CONCLUSION, AND RECOMMENDATION

Summary

With the current sample used in the research, it has been shown that majority of the respondents have both visited and purchased goods at Marks & Spencer stores. The most frequently purchased goods include food, financial services products, clothes and drinks. Brand awareness results suggest that 85% of the sample is aware of the M & S brand. The third logo of “Your M & S” has received the highest percentage in terms of brand recall. The sub-brands of Blue Harbour, Per Una, and Autograph have received almost equal percentages in terms of brand recall. There is also very high coverage in terms of the ad awareness of the Marks & Spencer advertisement, with 83.75% expressing that they have seen the Christmas ad of M & S. In viewing the Christmas TV marketing campaign of Marks & Spencer, more than half of the respondents expressed that the campaign elicited strong emotional appeal in attracting respondents to shop at M&S. The mean of 3.30 suggests that overall, the ad was effective in eliciting strong emotional appeal with its target audience in shopping at M & S. There is also 52% who expressed that they strongly agree with the statement that the ad did reflect the M & S brand image. The average of 3.43 suggests that the Christmas marketing ad of M & S has been effective at reflecting the company’s brand image. There is about 44.78% who strongly agreed that the Marks & Spencer advertisement highlights the modern Marks & Spencer brand image. The mean for this item is 3.21, with a standard deviation of 0.81. The average for the item suggests that the M & S ad has been successful at projecting a modern image for the company.  These results from the primary data, along with the secondary data, suggest that M & S is successful in its rebranding strategies and must take measures to sustain its efforts.
Conclusion
The present study has shown that Marks and Spencer caters more specifically to older consumers, at least for the fashion segment of its business. It needs to revisit its sub-branding strategies to be able to target younger consumer groups. Moreover, it needs to understand that a key strategy for protecting its market position is to defend and protect its retail market share in the UK and slowly expand its international network to increase sales and make the most of the opportunities in the emerging markets. It is competitively positioned as a global brand but needs to lessen its focus on the UK market as a way of decreasing its vulnerability to market conditions in this niche. The present survey has demonstrated the strong brand recall of the new logo and its audience appeal. Financial performance has been very encouraging since rebranding efforts have been carried out, and these need to be sustained.

There are numerous reasons for a manufacturer to invest in branding. As long as the manufacturer has successfully registered its trademark, then he obtains a legally-protected right to an exclusive brand name, the capability to establish a unique identity, the right to reinforce through its advertising and the right to increase the opportunity of attracting a large group of repeat purchasers. Opportunities from line extensions attract many organisations especially since creation and development of brands is expensive. This is an illustration of a brand being stretched. Trust and other positive associations can help decrease the cost of new line additions of good brands with strong identities. Nonetheless, marketers must be careful about overstretching the core values of the brands.

Marks & Spencer has been for years enabled the company to build customer relationship and win customer’s trust in its product quality, customer service, and its pricing structure. Branding has been an input factor in influencing consumer perceptions and attitudes in enabling the company to develop profitable relationships. While, researches have emphasized brands as an input factor, evaluating the branding strategy provides insights in how marketing supports the brand and ultimately it is reflected in the improvements of business process of Marks & Spencer. Consumers are now looking holistically on the value-added process of the company that enhances customer value not only on the individual product features.

Nonetheless, the value of the Marks & Spencer brand to the company can be measured more than just its financial value of customer goodwill. It is seen as a strategic asset that offers a differentiating factor in the marketplace and brand as functional device trusted for its quality. Marks & Spencer have long been trusted for its quality of products and continues to adhere to its strict standards in procurement process of quality products. It is strong brand recognition and brand recall among consumers offers a strategic device warding off competitors and effectively enables the company to build relationship among its customers. Overall, the research lends credence to the fact that Marks and Spencer has been effective in its rebranding efforts.

Recommendation

• The researcher puts forth the following recommendations on the basis of the study’s results and their analysis. First, is for Marks & Spencer to review its lowest scoring dimensions on branding, and establish means of improving these, especially those that strongly consumer patronage. They may even have to conduct a similar survey that talks specifically about each sub-brand. This way, the results that may be yielded cater to each of the brands rather than the umbrella M&S brand. A second recommendation would be for the management of Marks & Spencer to build a very strong culture of service and branding, especially among their store personnel. The brand of an organisation is very much reflected in the image projected by its store personnel and employees. The retailing company should also consider institutionalizing a Branding Services Questionnaire to be able to track branding and customer satisfaction trends in the long term. Again, they may consider deploying this for each of the brands of M&S. There should be active strategies that are aimed at enticing younger consumer groups to patronise the M&S brand.  For rigor of future researches, one consideration would be increasing the number of respondents, and getting samples from other outlets to get a more representative view of satisfaction and branding perceptions. Finally, future researchers to adopt more systematic research designs in undertaking similar studies, such as path analysis to discover variables that moderate the relationship between patronage and the branding service dimensions; or analysis of variance to allow comparison of dimensions with 3 or more clothing brands, among others.
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APPENDIX A

Are you Male or Female?

□ Male

□ Female

Which age category do you fit into?

□ 16-24                       □ 25-34                       □ 35-44                       □ 45-54                       □ 55-64                       □ 65+

Have you visited and/or purchased goods from Marks and Spencer in the past months?

□ Yes, I have visited Marks & Spencer in the past months

□ Yes, I have visited and purchased goods from Marks & Spencer in the past months

□ No, I have not visited Marks & Spencer in the past months

How often do you visit Marks & Spencer’s?
□ Never          □ Sales Only

□ 1 – 4 times a month □ 5 – 9 times a month □ more than 10 times a month

Out of the following, which ONE have you bought in a Marks and Spencer store most recently.  (Either for yourself or as a gift)

□ Food                                                                       □ Clothes (non underwear)

□ Drink                                                                      □ Flowers

□ Accessories                                                 □ Home-ware

□ Shoes                                                                     □ Financial services products

□ None of the above

Using the same list in the previous question, what type of goods do you most frequently purchase at Marks & Spencer? Please select one only

Are you aware of Marks & Spencer’s new brand image?

□ Yes   □ No

Which among the logos do you associate Marks & Spencer’s name most with?

□                                            □                                             □

Which of the logos shown in the previous question do you prefer?

□ St Michael                     □ Marks & Spencer                □ Your M&S

Are you aware of Marks & Spencer’s sub brands within the store, i.e.;

1. Blue Harbour

□ Yes   □ No

2. Per Una

□ Yes   □ No

3. Autograph

□ Yes   □ No

Are you aware of Marks & Spencer’s recent Christmas TV Marketing Campaign?

□ Yes   □ No

What is your opinion of it?

“It makes me want to shop at M&S”

□ Strongly Agree      □ Agree      □ Disagree       □ Strongly Disagree

“It reflects the image of M&S”

□ Strongly Agree      □ Agree      □ Disagree       □ Strongly Disagree

“It is modern”

□ Strongly Agree      □ Agree      □ Disagree       □ Strongly Disagree