Marketing Management Critical Analysis
Introduction CrossRoads, a brand of Forest Sweaters was launched in the winter of 2002, in the wake of the September 11th attacks which led to a collapse in the textile export market of Pakistan.As a result, Azhar Paracha a partner, with his team including Imran Ghani as a general manager and Misha Paracha as the marketing director, decided to launch another brand which would cater to the needs of the local market in terms of casual wear meeting international standards.
One of the reasons why the management felt it was possible to launch such a brand was because of the cheap labor and availability of good quality raw material produced locally.CrossRoads currently has 27 outlets in 10 different cities expanding to almost 34 within the next six months with new stores coming up in both Karachi and Islamabad.
All of their outlets are franchised except one at the Xinhua Mall in Lahore which is owned by the management. Mission Statement “We are the first to provide customers with international styling and up to date fashion; adapted to the culture prevailing in Pakistan, at reasonable prices. Products offered T – Shirts Formal Shirts Handbags Slippers Slippers and shoes Jeans TARGET MARKET PROFILE: CrossRoads realized that in the market there was a need for fashionable western clothing that at the same time didn’t compromise the eastern values. When CrossRoads started operations it was the only company targeting such a market. There was demand that wasn’t catered to, and CrossRoads decided to narrow down the gap between supply and demand with the following target market profile in mind. |Age 18 to 30 years old | |Fashion awareness |Fashion forward | |Region |Urban setting, across Pakistan | |Gender |Both male and female | |Income group |Parent’s income, or just started earning | |Social class |Upper and upper middle classes | |Lifestyle |Trendy, brand conscious | |Personality |Outgoing | |Orientation |Casual | |Occasion |Regular | |Culture |Combination of east and west | |Market coverage strategy |Niche | |Projected loyalty to profitability |True friends |
Marketing Research: For the purposes of this project, questionnaires were placed at three outlets of CrossRoads, Pace, Xinhua Mall and H block Defence with the sample size being around 60 in all three branches. Interviews were also conducted on campus at LUMS to get an idea of how their customers actually felt and any complaints or suggestions that they may have Competitors Hang ten: Since HangTen is an international brand, people often prefer buying clothes from them due to higher quality avoiding local brands altogether. However the designs offered here are fairly simple and do not really cater to the fashion forward segment. Outfitters: Spends more money on advertising, and is price oriented offering products which are also similar in design and fashion. Pricing strategy is inclined more towards penetration.
Its locations are also generally opposite that of CrossRoads like the in H block, or the Xinhua Mall outlets or the Saddar market in Peshawar. Leisure Club: Even though Leisure Club has been in the market for quite some time, it has still not been able to establish an image amongst the teenagers. While conducting interviews most responded that their designs were neither up to date with the fashion trends nor very innovative. Competitive advantages ? CrossRoads has a very skilled labor force with its designers being graduates from the Pakistan School of Fashion and Design. ? The company also has a lot of international exposure by exporting its sweaters to places like U.
K which have given them an idea of international quality standards and also of the various products available there. ? The company has a first mover advantage since other brands like Outfitters and Rica Lewis entered the market after CrossRoads had started operations. ? Innovative designs which differentiate the company from others in the market, tapping a much selected segment. ? Since the company produces lower quantities of an item in a season, it creates an artificial sense of scarcity amongst the . consumers to encourage impulse buying. The company changes its product theme every season, which provides the customers with updated fashion trends in clothing. Marketing Research Methodology
For the purposes of this project, questionnaires were placed at three outlets of CrossRoads, Pace, Xinhua Mall and H block Defence with the sample size being around 60 in all three branches. Interviews were also conducted on campus at LUMS to get an idea of how their customers actually felt and any complaints or suggestions that they may have. Environmental Analysis Operating in the dynamic environment of the fashion industry is not easy. As CrossRoads’ primary marketing strategy is to remain a fashion forward company, the impact of the respective environment is magnified significantly. We now try to conduct the environmental analysis of the company, in order to get a deeper picture of the company’s environment. Political Environment
In the current scenario, one of the major areas of concern for CrossRoads is the prevailing political instability, general security condition & the country risk which can best be explained as the adverse impacts of the uncertain political situation on the operating profits of the company. Additionally, intermittent strikes and terrorist activities have resulted in factory downtime and loss of merchandizing due to outlets shutdown. The law-making process in the country has also largely remained inconsistent. Regulatory (impending and prospective) changes and other potential events further contribute to the company’s operational risks. Economic Environment
The major impediment impacting CrossRoads is the current inflation rate of Pakistan. The rising prices of fuel and raw material make it very hard for the company to strike a reasonable balance between its costs and revenues. According to Daily times, around 25-30 percent increase has been seen in the cost of production during this year mainly due to rising prices of cotton (by 25%) and gas (by 12%). Also, there has been increase in the prices of other inputs like dyes and chemicals during the year. The target market of the company makes the problem a lot more difficult to handle. The company primarily wants to cater to the 18-30 age bracket customers, who are highly sensitive to rising prices.
This sensitivity is due to fact that this age group has either just started earning or is dependent upon their parents for money, which makes their budget highly inflexible and prone to price fluctuations. This result was further corroborated by our survey research, which prompted 90% of the customers to respond by rating price as one of the most critical decision factor. They further said that they would stop purchasing from CrossRoads, were its prices to rise by 15% (corresponding to the prevailing inflation rate of 11%). Social Environment The socio-cultural environment of the entire world has gotten through a dramatic phase over the past two decades.
This change can be attributed to various factors, of which media is arguably the front-end player. The extension of the media reach in every part of the world has pretty much localized the world everywhere. Both electronic and print media’s ready presence everywhere has revolutionized the world of fashion. At the same time, the customers in every part of the world have now become radically cognizant of the fashion styles and trends. The Pakistani customer is not to be seen in isolation of the above analysis either. The fashion awareness created by the advanced reach of the media has also had dense implications on the buying behaviour of the Pakistani customers.
This is especially true for the target market of CrossRoads which is becoming increasingly fashion conscious and shows preferences for new trends. This was confirmed by our survey as 70 % people who considered design to be the most important factor in their purchase decision. The wave of globalization has also impacted the Pakistani society in another way, by which the Pakistani publics have come to greatly recognize success with Western way of living. The developed state of life in the West has prompted the typical Pakistani to recognize the Western world with idealism. This can be apparently perceived in almost every facet of the local prevailing culture, of which fashion and lifestyles are the two most prominent variables.
The association of success with the Western style of living has dramatically increased the size of the people who potentially constitute the target market of CrossRoads. The recent education of ‘enlightened moderation’ by the government has also contributed to the fashion consciousness of the Pakistani people. As a result of which a number of fashion channels have opened, creating further awareness and providing extensive education to the ever-growing fashion driven Pakistani community. Fashion magazines have also grown in circulation as well as their quality of publication. In addition to this, the strength of fashion schools and fashion designers have also risen, which in all have bolstered the target market of fashion-driven companies like CrossRoads.
Another important socio-cultural factor that is recently on the rise in Pakistan is the growth in the number of working women. The women workforce, thus, in turn enjoy a greater degree of financial leverage as their non-working counterparts. This relative degree of financial independence has enabled the working woman of Pakistan to spend freely on apparel, inspired by the already discussed media influence. CrossRoads, thus can tap this market out by widening its product line for women. While the other factors have played their roles in educating the masses about fashion, the level of education in the Pakistani public itself has also risen over the past few years.
This rise in the educated middle class in the Pakistani society, which is also relentlessly targeted by the fashion-educating agents, the lifestyle of the Pakistani society has been transformed within itself, thereby placing further emphasis on fashion more than ever before. Marketing Objectives As mentioned earlier one of the major threats facing CrossRoads is the economic instability that prevails across the country. Inflation rates have been on the rise and the price sensitive consumers may opt for cheaper competitors. Even though our competitor has decreased its prices to tap a larger marketing by not really differentiating its products either, we believe that CrossRoads should not decrease its prices and not enter into some sort of price war.
Secondly, by keeping its products higher and maintaining a relatively better quality, we plan to signal to the market that our brand is finer. Our challenge at this point, is more inclined towards countering current and future inflation through customer loyalty. The company, however, currently uses a mixture of cost based and value based pricing based on its historical records and their perception of how the customers value their products. Some respondents have even claimed that the quality to price comparison is just on the borderline of being appropriate and any increases would result them in being equal to maybe Levi’s or HangTen, which offer better quality.
As a result, we decided to take this situation as a challenge and devise a strategy which could essentially lead to lower costs in the long run for our company. As a result our marketing objective is: Create loyalty amongst current customers bydifferentiating the brand image of CrossRoads from our competitors . ” Ladder of Customer loyalty As a result, based on our objectives we plan to target the customers and clients segment of the loyalty ladders who will in turn, through word of mouth bring the suspects and prospects to our outlets. Advantages of this strategy Long term customers tend to be less inclined to switch and also tend to be less price sensitive.
This can result in stable unit sales volume and increases in dollar-sales volume. They may initiate free word of mouth promotions and referrals and are more likely to purchase ancillary products and high-margin supplemental products. Loyal customers tend to be satisfied with their relationship with the company and are less likely to switch to competitors, making market entry or competitors’ market share gains difficult. According to__________ it costs almost five times more to acquire a new customer than to retain an existing one Product: For CrossRoads to be in line with their marketing objective of creating and maintaining customer loyalty, they have to have a zero defect approach in quality of clothing.
During our interviews, it was found that some people had problems like color fading away or the clothes getting distorted after the first wash. These customers then shifted to CrossRoads’ competitors like Outfitters. To avoid this from happening, CrossRoads should provide washing instructions to every customer for the purchased clothing. Barutti was a new brand of formal clothing that CrossRoads had launched. Barutti failed to make the desired sales and soon it had to be closed down. Customers felt that this was another brand at CrossRoads and did not have any link to it. As a result, the same formal clothing was brought again and this time under the label of CrossRoads.
In our opinion, CrossRoads should focus on its distinct image of casual wear so that when ever a person wants to buy casual clothing, CrossRoads is the first brand that comes to his mind. We feel that there is already untapped market in the casual wear where it should focus rather than diversifying into formal wear. For example, by extending their product lines to caps, belts, and wallets. This way CrossRoads will offer a more complete casual experience. Offering formal clothes is a completely different market and many stores are already catering to it. For example, Shirt and Tie focuses solely on formal clothing and hence provides a complete formal solution. CrossRoads should aim to do the same thing in casual wear.
This can lead to more focused salesmanship amongst employees who can concentrate and provide better assistance to customers in choosing a combination of various products. Place: One of the major issues that we found during our research was that many of their franchises are placed very close to each other. For example, the outlets at Xinhua Mall, MM ALAM, Liberty round about and Pace are all located within a ten minute drives from each other. Given that a very large store has already opened up in Xinhua Mall, it does not really make sense to open four stores close to each other. The franchises located in Karachi offer another example of poor location selection.
Branches in Forum and Zamzama Street are no more than 5 minutes away from each other, and another is scheduled to open at sea view, which is also in close proximity. CrossRoads should have an exclusive outlet in every area rather than having few small outlets all catering to the same area since fewer stores often create more value in the minds of the customers. Store size: In our opinion, consistency in the store size and decor will have to be maintained to provide the right environment for shopping to create customer loyalty. The Xinhua Mall outlet is bigger and brighter as compared to the one at H block or even Pace, affecting the overall image of the company. Hence, taking forward our earlier argument, few stores with bigger izes should be opened rather than what currently has been the strategy. Smaller stores also affect the display, since there is lesser space for each product and hence the entire place seems to be a mess and provides less breathing space. With increasing products in the pipe, a long term strategy focusing on sizes and decor will have to be focused upon. Furthermore, to improve we suggest that a television be set up where the company’s fashion shows be played assisting the consumer in the decision making process. Dummies could be placed with in the stores rather than just at the windows for better display. Price: Was nominated for the best retail brand in the Lux Style Awards 2007 last year.
The company could actually capitalize on this and let people know of its reputation in the market. It should make its target market realize that it was voted ahead of many other local brands like leisure club, textillion Outfitters itself etc. The awards in itself have become fairly popular given that they were first held in 2002 and since then have continued every year. Advertising objectives: The major objective of our advertising campaign is to persuade people to choose CrossRoads over the other brands available in the market; essentially building brand preference encouraging customers to switch to our brand and change their perception about CrossRoads.
The company currently uses an affordable method approach while allocating budgets for advertising however given our strategy; we feel that it will have to switch to a more objective and task oriented approach. Even though our costs will increase in the short run, our objective is to increase sales in the long run and cut down on advertising in terms of billboards etc. For example, Bareeze rarely advertises on billboards or in newspapers and has now moved to the word of mouth stage. Rational appeal will be used by advertising based on our competitive advantages like innovative designs each season based on a new theme. Public relations: Their public relations has been appropriate with various articles appearing primarily in Daily Times talking about a new CrossRoads store or any fashion shows that they may have organized. However CrossRoads as stopped advertising in Dawn because it feels its more expensive but we recommend that they print them through other media as well like more fashions magazines with greater frequency. Events will have to be sponsored outside the realm of fashion shows like for example Rica Lewis sponsoring events at LUMS which is their target market. Our media types will primarily include the images section of Dawn, or the Sunday magazine delivered by the Daily Times etc. Our strategy may increase costs in the short run, by advertising through PR, or by increasing costs to ensure quality, however in the long run once customers are loyal, the company will no longer have to resort to mass media to either gain market share or tap newer markets.
Infact, our loyal customers itself, will by word of mouth become our partners and help us generate greater sales. So a slightly lower profit margin could be compensated in terms of a greater turnover. Furthermore, once the customer base is loyal, minor changes in prices, especially in terms of increases, will not significantly affect our market share. Customer feedback is a very important aspect in most businesses and CrossRoads could get a lot of ideas of new products and designs by interacting with the buyers and recording their responses. No efforts are currently being made in this regard and only when a customer complains at the counter is the management informed. Customer relationship management is the tool that needs to be introduced.
Catalogue is out advertised but we propose that rather than the customer actually asking them for the catalogue, they should try and provide it to them. Secondly the company will have to introduce loyalty cards which would be offered over a certain amount of purchases from the store. Secondly, once you have information stored this way, different segments could be made and higher purchases amounts could be rewarded with a higher discount rate. Furthermore, once information is stored this way, the customers could be sent emails with links to their website informing them of the latest collection like the summer or winter collection. This would help them in curtailing costs of sending catalogues to some of the customers they currently send to.
Infact only customers who personally ask for the catalogues are sent, which is not a very consumer centric approach. We propose that details of customers be taken every time they shop so that they could just be informed via email even if they don’t qualify for the loyalty card. Email is sent on every purchase. Gift cards could be one of the best ways to increase revenue. http://www. dawn. com/weekly///images/archive/070415/images8. htm http://www. learnmarketing. co. uk/servicemarketingmix. htm http://www. dawn. com/weekly/images/archive/070708/images8. htm http://jang. com. pk/thenews/apr2007-weekly/nos-22-04-2007/instep/article3. htm[pic][pic][pic]