Competing in the mass-market is challenging for any company. As the saying goes, you cannot be everything to everyone, you need to pick a niche. Businesses, in fact, start developing their businesses by understanding who is the category of users they are wishing to serve. Without having a clear customer in mind every strategic decision can become very difficult to make.
The importance of understanding who ‘your business is talking to’ is echoed by the Business Model Canvas, which pushed entrepreneurs to continually question the ‘internal logic’ of their business. More about this topic can be found in this article: Understanding the Business Model Canvas.
The traditional business theory uses the so-called STP (Segmentation, Targeting, Positioning) framework to identify the ‘space’ that a brand wants to take up in their customer’s mind.
But before looking at the market, we need to focus on the fashion industry itself, in order to understand what are the different roles served by different companies in this industry. This is essential to identify who is a firm’s competitors and what are the criteria that set competitors apart.
The starting point in developing a firm’s value proposition, therefore, relies on analysing the fashion industry and breaking down its ‘players’ into ‘chunks’ with similar characteristics, behaviours and value offerings.
In this post we are going to address the following topics:
Segmentation relies on the set of variables we choose in order to create user groups. We are going to discuss 3 of the most relevant segmentation criteria and what kind of opportunities they provide to the final user. Each segmentation criteria will provide us with a set variable which we’ll need to address through our business model.
Fashion industry segmentation allows to compare brands, rather than products, and potentially identify what kind of value proposition is at the centre of your business model. Price and benefits, in particular, can be compared easily by breaking them down in these 5 statements:
Pricing, according to our framework, is one of the most influential elements to inform a positioning strategy, and it should be addressed in further detail, in the next section of this post.
According to the price segmentation of the fashion industry, we can identify 5 segments of pricing in fashion apparel:
If fashion apparel provides a high degree of complexity, the same can be said about the luxury industry. In this article we focus on the concept of luxury to clarify how it relates to the concept of fashion: The Value of Luxury in the Fashion Industry.
Segmentation of luxury products calls for a very articulate marketing strategy. Luxury as a concept can in itself be differentiated in several tiers:
The last category of luxury provides additional subdivisions, which we’ll look into with more detail in the next section. Masstige is in fact short for Mass-Prestige and is a unique product category which strives to hit a perfect balance between a lower-quality product and a luxury experience markup.
In a society with wide-spread well-being, the desire for luxury crosses the borders of people who can actually afford a Hermés bag. Customers tend to seek self-gratification by indulging in daily pleasures, but in order to be experienced ‘daily’ price points need to stay fairly low. This sense of short-term gratification allowed for the development of products, which despite being comparable to commodities are perceived as luxury goods. This category of products is called Masstige as they share a list of similar characteristics:
This category of luxury, in fact, was created by studying the behaviour of rocketing consumers. Rocketing consumers trade off the purchase of lower-end products in order to buy top-tier products in other categories.
Masstige, therefore, is a product category which was created as a response to the complex relationship which is being developed between the mass market and the luxury category. Further sub-segments can be identified in the Masstige category, based on how these products interplay with customer motivations.
As a result, the mass market is no longer a monolithic category. This category fulfils the need of customers to ‘reward’ themselves with an ordinary product is presented in a more appealing way.
As compared to true luxury, however, masstige brands compete primarily on communication. This is achieved by elevating the perceived value of a product by associating it with celebrities and testimonial campaigns, creating (artificially) limited editions.
Masstige does not engage with the real jet society which instead looks for an opportunity for true differentiation from any form of mass experience.
Because of what we have discussed, we can better understand how companies make use of this information to adopt an STP (segmentation, targeting, positioning) framework and deliver a unique value proposition to its customers.
Thanks to segmentation analysis fashion firms can:
All in all, firms need to understand and map the associations of their brands and relate it to their market customer behaviour to inform their strategic decision-making processes.
The creation of segments allows clarifying who a firm is trying to reach, and how a fashion firm is capable to satisfy their customer personas.
Segmentation and persona-creation are a standard approach to defining a marketing strategy, however, there are also some alternative schools of thought that instead of identifying customer characteristics try to focus on their purchase behaviour. This approach is called ‘ Jobs to Be Done ‘ and is addressed in this further source: Why Jobs to Be Done Matters for your Business.
Now that we’ve identified our customer, we need to build a business model around him\her and determine the business logic our firm is going to pursue. To move ahead, here’s the next stage in our journey: Identifying Business Models in the Fashion Industry.
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