Benetton group was founded in 1965 by Luciano, Giuliana, Gilberto and Carlo Benetton who are all members of the board of directors, with its Corporate headquarters located in the historical city of Villa Minelli in Ponzano. The company’s main product is fashion goods. (Benetton Group, 2009). The company operates in 120 countries today with more than 5,500 stores around the world with the objective of offering customers with high quality products and services. (Benetton Group, 2009). The Group produces about 160 million garments every year ranging from their casual wear at United Colors of Benetton to the glamour from their Sisley and college style from Playlife making a total turnover of over 2 billion euro (Benetton Group, 2009).
This piece gives an overview of the concept of the market and a brief summary of how the idea of marketing came about. It also gives a theoretical explanation of various marketing strategies and whether Benetton has carried out these strategies successfully or not. We will first identify the company’s target market by looking at market segmentation in theory and the company’s market segment using the two most important types of market segmentation: demographic segmentation and geographic segmentation. Then an examination of the company’s strengths and weakness (internal factors) will be carried out, and a comparison of them with its opportunities and threats (external factors) in an analysis called the SWOT analysis.
By combining the various mixes of product, price, place and promotion we will be looking at how the company can satisfy its target customers (Kotler and Armstrong, 2001, p. 67). We will later look at why marketing is so important for Benetton, and finally give some recommendations
The concept of Marketing
Marketing is a social and managerial process where customers get hold of their needs and wants by exchanging and creating value and products (P. Kotler and G Armstrong, 2003. p. 6). The concept of marketing (at least in its modern sense) arguably emerged in the 1950s when companies decided to change the idea of a ‘Make–and-sell’ philosophy to a customer-focused philosophy; and also from matching customers with their products to making products that match with customers’ needs (Kotler and Keller2006, p. 16).
Many marketers have considered the marketing department to be the most important department in the company, because without customers there is no company and satisfying customers is the focus of every company (Kotler and Keller, 2006, p. 16). Companies later replaced their short term viewpoint with long-term strategies, such as long term customer satisfaction (Federick, 1998. p. 32).
After the 1950s a lot of companies now focusing on customers’ satisfaction developed marketing strategies to keep their customers coming and also to attract new customers. A number of marketing strategies can be identified. These include market segmentation, SWOT analysis, and the marketing mix. (Kotler and Keller, 2006; Baines et al., 2008).
1) Market segmentation
Market segmentation is grouping the market into various groups of customers with similar interests, wants and needs (Kotler and Keller, 2006; Baines et al., 2008). The most important segments are; demographic which includes grouping according to age, family size, gender, income level, generation and education, and geographic segments that include grouping according to states, country other geographic regions (Kotler and Keller, 2006: p. 247-252).
Benetton has not limited its market when is comes to who they wants to sell to. The company has qualified and talented staff who design products from children’s wear, men’s, women’s and even to expected mother’s wear (Benetton Group, 2009). The company has segmented its market by age (children, teenagers and adults), gender (male and female) to style (casual to freestyle). The styles rang from their casual wears at ‘United Colors of Benetton’ to the glamour from their Sisley and college style from Playlife (Benetton Group, 2009). Benetton is no limited just to the Italian market. It operates in 120 countries and has over 5,500 stores world wide making it an international brand (Benetton Group, 2009)
2) SWOT analysis
After identifying a target market, the next thing a company has to do is to identify its strengths and weakness and match then to the environmental threats and opportunities that company can face or take advantage of, to satisfy customer’s needs.
- i) Strengths and opportunities
Strengths are those present internal advantages and factors a company builds up to create strategies based on them (Oxford University Press, 2007). A company’s strengths include research and development, qualified labour, financial ability, quality products, brand name and good management (Oxford University Press, 2007).
Benetton has built up some strengths over the years. They have 300 designers from all over the world to create all the collections and also get involved in the research of new materials, and to create new lines for the different target groups.
The company has also taken the opportunity to embrace advanced technology and made it a strength to carry out innovation by changing their equipment every five years, giving them the opportunity to meet changes in customer demand with a 160million garment production a year (Benetton Group, 2009). The company produces its own products that are sold in their stores (Benetton Group, 2009). Benetton is one of the top Italian brands.
Benetton took the opportunity to invest in regions where they can take advantage of the low cost of production. The company has expanded production to the Mediterranean where about 20 million euro has been invested in a new 15,000 square-meter factory in Tunisia in north Africa for manufacturing cotton-knit fabrics, therefore ensuring greater cost efficiency due to lower costs of labour and other factors.
Weaknesses are those present, internal factors, that are a disadvantage to the company and which they have to protect themselves against (Oxford University Press, 2007). Strengths become weaknesses when they are not functioning properly.
All the founders of Benetton are members of the board. This could be considered a weakness because it is not open to others to bring new and fresh idea into the company and could create ‘group think’ where no independent critique of any policy is made because all the board members think along the same lines.
- ii) Opportunities and Threats
Opportunities are those external factors a company can take advantage of to develop itself (Oxford University Press, 2007). Opportunities can be used to develop strengths in companies according to Kotler and Keller (2006. p. 53). This means that strengths can also change as opportunities change. Opportunities include; technology, a fall in interest rates on loans, excellent targeting for the product to be sold, and favourable government and international trade regulations (Oxford University Press, 2007; . Kotler and K. L. Keller, 2006, p. 52)
Benetton is listed on the stock exchange, giving it the opportunity to attract investors. Investors can buy shares from the company depending on where the company is making profits.
The company has also taken advantage of commercial partners who sell their products in their stores making it available to customers and increasing the channels and market share (Benetton, 2009;
Threats are those external factors that are disadvantageous to the company and can give rise to various negative forces (Oxford University Press, 2007; Kotler and K. L. Keller (2006. p. 52). Such threats include competition, pressure from environmental and/or developing world campaigning groups, high interest rates, and government regulation to protect home based companies making it difficult for other foreign companies to enter the market (Oxford University Press, 2007). The number one threat to Benetton is the competition they have to face from other companies both in the company’s home based Italy and abroad. Competition could be in price, quality, style, and most of all customer service. Competition is not what the company fears because they are confident with their product quality and excellent customer service.
3) Marketing mix
The marketing mix was first created by James Culliton in 1948 to show a combination of marketing variables controlled by a company to appeal to a particular target market represented as the 4Ps of marketing; product, price, place and promotion (Kotler and Armstrong, 2001; Baines et al. 2008);
- i) Product
These are the goods and services offered to customers in a target market and consist of product variety, quality, design, features, brand name and packages (Baines et al., 2008). Companies can use style, service and design to create a good competitive advantage.
Differentiating products is the ability of a company to make its product different from other similar products produced by other competitors (Kotler and Keller, 2006. p. 376). Product differentiations may include differentiation in its physical structure, product features, quality performance, durability, style, and reliability (Baines, et al., 2008).
United Colors of Benetton has created styles and products matching various customer needs. These products range from United United Colors of Benetton that deals with quality, colour and fashion from women’s wear to men’s and children’s wear for both indoors and outdoors (Benetton Group, 2009). There is also the undercolor for Benetton for underwear and sleepwear; the Sisley especially for elegance and seduction and the playlife for sports wear that represent a strong sense of Individuality. All these products are differentiated in style and shape so as to target the right customer (Benetton Group, 2009)
- ii) Price
This is what the customer has to pay for the products and services offered. Companies can decide to set a price level for goods and services. This also comprises discount allowed, credit terms, allowances given and payment periods (Kotler and Armstrong, 2001; Baines et al., 2008)
There is a no royalty payment fee charged on profits or sales by Commercial for establishing a Benetton store or for the use of the Group’s brands to the company. All they do is purchase and sell Benetton’s products according to the company’s guideline and receive commissions on sales in their territories (Benetton group, 2009)
This answers the question as to where customers of the company’s target can get access to the company’s products and services (Kotler and Armstrong, 2001, p. 68).
Benetton has over 5,500 stores world wide in 120 countries from Asia, to Europe and America. The company’s products can be found in both the company’s retail stores and other fashion stores (Benetton group, 2009). 78% of the company’s total sales comes from wholesales while 22% from retail shops (Benetton group, 2009; organisation and know how). Customers can also view their collection online at the company’s website.
- iv) Promotion
This is the final mix where the company communicates the benefits customers will gain from purchasing their products and services (Kotler and Armstrong, 2001, p. 68). This consists of public relations, special promotions offers, advertisement and personal selling.
Most companies need marketing in order to plan their growth strategies. Advertising in recent years has changed with companies using people from different backgrounds and cultures to represent their products making it known that customers from other cultures and races can also purchase their products (Williams et al, 2004, p. 3-5)
The company did a “Fabrica: Les Yeux Ouverts” exhibition in autumn 2006 at one of the world’s foremost cultural bodies and went to be exhibited also in Shanghai and Milan and Tokyo in 2007. This brought the attention of the international media and the high number of visitors. (Benetton Group, 2009)
The magazine COLOR has attracted a lot of attention from different people from all cultures and races. Their campaigns have been known to represent a lot of cultures and situations. Campaigns have attracted both negative and positive reviews.
Figure 1 Figure 2
The three images above can be seen by everyone as a campaign for diversity. Figure 3 was interpreted by other individuals in a different way. Black groups saw this image as a black child with devil horns and an angelic white child (Ganesan, 2003, p. 15)
How ever many of the company’s campaigns have gathered awards and acclaim worldwide. The company also advertise their products using TV commercials. The controversy of many adverts was calculated it seems and achieved the company a great deal of free publicity.
The importance of marketing
Every company today is trying to expand their market and also ways looking for an opportunity to gain a greater market share of their existing market either by improving on their existing products or by creating new products.
Marketing is very important in companies because it helps them to set other strategies that can help them grow. Growth strategies are:
Vertical integration is the ability of a company to acquire greater control and ownership over a successive level of the value chain of its products (Rober, 2005, p. 392). This is the most important integration for Benetton. Most companies gain a lot of advantages from vertical integration. Benetton controls 100% of a textile group called Olimpias that transforms raw materials into fabrics and also does ennobling. When companies integrate they enjoy a lot of advantages such as economies of scale.
Companies try to come out with the best marketing strategy to attract their customers more than their competitors so as to gain a bigger share of the available market. With the right product features, excellent benefits from purchasing the product at a price set by the company, good distribution channels and the right promotion, the company is ready to gain a greater share of the market. (Baines et al., 2008). Having a greater share of the market is one thing and maintaining it is another. Therefore Benetton will have to make sure its marketing strategies are well evaluated and carried out according to present customers’ needs or changes in customer needs.
Every company is out to make profit in order to continue to operate in the market. The marketing department is perhaps the most important department in a company because it involves all aspects that connect the customer with the company and what the company is producing (Kotler and Keller2006, p. 16-17). Marketing identifies customers’ need, segments the market and make sure the products are available to customers at the right price.
I shall now list some recommendations for the future:
- With the economic downturn, companies should focus now on managing the present size of their businesses rather than trying to break in to new markets. Breaking in to a new market would cost companies a lot and in a situation like this the benefits may not be worth the investment. A solid company that is not expanding is better than a vulnerable company growing too quickly and exposing itself to major risk.
- While cutting costs, the company should also cut down prices. The economic downturn has left customers with little money to spend on products that are not basic food stuffs or otherwise essential. Therefore, customers go for what they think they can afford, which may be less expensive brands.
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Benetton Group (2009), Design http://www.benettongroup.com/en/whoweare/design.htm date accessed 21/03/2009
Benetton Group (2009), Industrial flexibility; http://investors.benettongroup.com/phoenix.zhtml?c=114079&p=irol-VCOperationsIndustrialFlexibility 21/03/2009
Benetton Group (2009) Overview; http://www.benettongroup.com/en/whoweare/overview.htm
Date Accessed 21/03/2009
Federick, (1998) The Rediscovery of the Marketing Concept; page 32
Ganesan, S. (2003) Benetton Group: Evolution of Communication Strategy; Knowledge Center, Hyderabad, India
Williams, J. D. Lee, W., Haugtvedt, C. P. (2004). Diversity in advertising: broadening the scope of research directions; Lawrence Erlbaum Associates
Oxford University Press (2007) Developing a Strategy; SWOT Analysis; http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_16.htm . date accessed 21/03/2009
Kotler, P. and Armstrong, G (2001). Principles of Marketing, Ninth Edition, New Jersey, Prentice Hall
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