ADDITIONAL CASE STUDY

CHAPTER 07: COMPETITIVE ANALYSIS AND THE DEVELOPMENT OF A

BRAND

COMPLACENCY CAN BE THE BIGGEST ENEMY OF RETAILERS

"There's no need to ask the price - it's a penny" was the proud claim of Marks and
Spencer a hundred years ago. From the start, it had developed a unique position in
its market - an emphasis on low price, wide range and good quality. Over time, the
Marks and Spencer position has been steadily developed, along with its profitability.
By the 1990s it looked unstoppable as a retailer, as it progressively expanded its
product range from clothing to food, furnishings and financial services. The world
seemed to be waiting for M&S to exploit, and despite disappointing starts in the US
and Canada, it developed steadily throughout Europe and the Far East. Then, just
like any star who has been put on a pedestal, the media began to savage the
company. After a sudden drop in profits and sales during 1998, critics claimed that
the company had lost its position in the market place. It appeared to be like a super
tanker, ploughing straight ahead with a management that had become much less
adaptable to change than its nimbler competitors.

Many observers had commented on the fact that the company did not have a
marketing department until 1998. Marketing, at least in terms of advertising the
brand, had become so important to its competitors, but had never been high on
Marks & Spencer's agenda. According to Media Monitoring Services, M&S's total
media spending between Dec 1997-Nov 1998 was just £4.7 million, almost a drop in
the ocean compared to the spending of Sainsburys (£42.1m); Tesco (£27.5m); and
Woolworths (£21.5m). While other retailers had worked hard on building a brand
image, M&S has relied on the quality of its stock to do the talking. The argument
was that everyone knew what they were getting with M&S underwear or shirts -
good quality at fair, but not cheap, prices. Similarly with food, M&S's offering was
about quality rather than price. M&S believed its customers knew what the brand
stood for and advertising was much less important than ensuring that it could obtain
the right products at the right price.

Exam Module CMA. 1012.1212.1266.1415 Certified Marketing AnalystTM

In 1998, M&S looked to marketing to help turn around its performance, describing its
new marketing division for UK retail as "a significant development in our retailing
philosophy". Many suspected that M&S's conversion to marketing had been
encouraged by the example set by the star of modern retailing, Tesco. There are
many similarities between the problems facing M&S and those which Tesco faced a
decade previously. In the early 1990s Tesco was a brand which looked like it had
seen better days. The retailer's format was tired, its stores poorly laid out and the
positioning of the company was still based on its founder's principle of 'pile it high
and sell it cheap'. Its arch-rival, Sainsbury's, was regarded as the more upmarket
store for the middle classes, who shopped for quality food in a more pleasant
environment. Since then, Tesco had innovated with improved store designs, petrol
stations, coffee shops, a new fascia, the Tesco Clubcard and 24-hour store opening.
The list of Tesco's marketing initiatives seemed to be unstoppable, in an attempt to
keep one step ahead of its competitors.

In contrast, M&S had failed to keep pace with customer service. In many issues of
retail development, such as out-of-town shopping centres, Sunday opening and
loyalty cards, it had lagged behind its main competitors. While it has stood still, the
likes of Tesco and Sainsbury's marched ahead until there was no longer much that
felt exceptional about the M&S shopping experience. Analysts argued that M&S had
failed to make its store layouts help shoppers bring clothing together to make outfits.
In a typical M&S store, all jackets would be located in one area and all cardigans in
another, for example. Its competitors had made much greater progress in bringing
together co-ordinated sets of clothing which would encourage shoppers to spend
more. M&S has also been criticized for making things difficult for customers by not
accepting payment by major credit cards.

In response to its current troubles, the newly created marketing department of M&S
launched its first national campaign for retail towards the end of 1998. The ads
followed an initial attempt at regional TV advertising earlier in the year, which the
company was said to be very pleased with. The newly appointed Chief Executive
claimed "It's not that people don't like what we're selling, but that we haven't got the
message across. There are an awful lot of people who love us for our knickers, but
they don't love our home furnishings because they don't even know they are there."
Many critics thought the problems were much more deep-seated and blamed the

Exam Module CMA. 1012.1212.1266.1415 Certified Marketing AnalystTM

store's problems on the fact that its autumn fashions were seen as dull and
uninspiring, and out of touch with consumers' preferences. Greater authority was
pledged to the marketing department when it came to new product design.

In response to its pledge to listen to what its customers wanted, new designers were
brought in to try and give the company's ranges more sparkle. The company even
thought the previously unthinkable by proposing to stock manufacturers' own
branded products, instead of relying entirely on M&S's own label products. If
customers wanted to obtain variety at M&S, the new thinking was that the company
must adapt and offer it. Another area identified for development was direct
marketing of fashion products - an area where the company had begun to lag
behind its rivals who had developed interactive web sites.

Serious questions remained about the company. How quickly could it change in
response to its changed environment? The company had not been known for
speedy decision making, so probably a major structural overhaul was essential
before it could get down to the serious business of adapting to customers' changing
needs. Also, there was a great danger of changing the company's position too far
and too fast, thereby alienating its traditional customers without gaining sufficient
new ones. As a warning of how not to change, M&S's rival Laura Ashley had
repositioned itself so radically from its original format that it now failed to gain the
support of any major group. M&S had itself tried to become more fashion conscious
during the mid-1980s with similar effect, and had to make a hasty retreat to its
traditional, more staid image.

CASE STUDY REVIEW QUESTIONS

1. What do you understand by positioning, and what tools are available to Marks
and Spencer to give it a positioning advantage?
2. There has been a lot of debate bout whether the existence of a marketing
department can actually be harmful to services companies because it absolves
everybody else of marketing responsibilities. What then, do you make of M&S's
decision to introduce a marketing department?
3. What are the dangers to M&S of moving its market position too far and too
fast? How can it try to alleviate these problems?

Exam Module CMA. 1012.1212.1266.1415 Certified Marketing AnalystTM