Marketing Strategy Report for NEXT PLC

1. Introduction

In the following report the marketing strategies of Next PLC, a British based clothing and home products retailer will be researched and analysed before recommendations for possible improvements are provided. This report will analyse the company marketing strategy by assessing the marketing mix or the “4 Ps” of product, price, place, and promotion as well as the environment in which the company operates. Once this is completed, an analysis of the strengths and weaknesses of the strategy will be conducted followed by recommendations on future strategy to ensure further growth.

The Next brand was established in 1982 and now has over 500 stores in the UK while also operating internationally with over 180 overseas stores (Financial Times, 2015). Additional sales channels were added with the launch of Next Directory in 1988 before expanding to include online shopping in 1999 (Next PLC, 2015). This points to an early implementation of a multi-channel retailing strategy which has been a key factor in their growth and success, and they have established themselves as the most advanced multi-channel retailer in the country (Mintel, 2013).

The main target market for Next has long been the middle class in 25-45 age range for both genders interested in mainstream fashion, although there may be a slight increased focus on women’s fashion continuing on from the brand’s early strategy (Next PLC, 2015). The needs of customers are ever-changing and retailers such as Next must ensure their marketing and sales strategies are appropriate to the needs of the market (Chaffey and Ellis-Chadwick, 2012).

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2. Market Evaluation

The market is the location where merchandise can be bought and sold while marketing is the process of identifying target markets and setting strategies for product development, pricing, promotion and distribution (Armstrong et al, 2012). Therefore, to effectively analyse the company’s marketing strategy it is important to understand the state of the current environment of the intended target market.

The current economic climate has improved in recent years following the downturn of 2008, however, it is still fresh in the memory of consumers and conservative spending habits will remain for some time.

However, despite constraints on disposable income, clothing purchases continued to be the preferred choice for excess income for consumers prioritising spending. This saw market growth throughout the year with sales increasing by 4.5% bringing annual consumer spend on clothing and accessories to £49.8 billion in 2013 (Mintel, 2013). This is due to consumer confidence increasing throughout 2013 as the economy recovered and consumers feeling more financially stable (Elliot, 2013).

Since its launch, Next has established itself at the top of the UK clothing market and accounted for 7.2% of all clothing retail sales in 2012, making them the second largest clothing retailer in the UK (Mintel, 2013). Following this success, they surpassed main competitor Marks & Spencer and forecast higher annual profits for the first time (Ruddick, 2014). In a growing market that is in a strong position, Next is in a healthy position due to successful a Christmas period and superior sales and marketing strategies.

3. Marketing Strategy Analysis

The marketing mix is a tool that can be used to easily prepare, on in this case, assess a marketing strategy and it consists of “4 P’s” which are product, price, place, and promotion. Product and price relate to the product or service itself, whereas place and promotion relate to how the company’s offering is delivered and made available to the consumer (Pride and Ferrell, 2012).

Product

This is what the business offers to customers to meet their needs or requirements. As mentioned, Next’s product is primarily mainstream fashion targeting the middle class of both genders in the 25-45 age range. As per the mission statement, the focus is to ensure high quality and fashionable designs for the customer (Next PLC, 2015). This also applies to the other departments and their focus on quality has been a major factor in their establishment as a brand and recent success in growth and gaining ground on competitors.

Price

This relates to the pricing strategy employed by the company and has a major impact on the whole strategy. As a result, pricing must be carefully considered to ensure it is in line with the customer expectations and perception of quality as well as the company’s intended targets and branding. Next’s pricing strategy, just like the target market, occupies a middle ground that is neither market skimming nor penetration pricing. Rather, it occupies a neutral zone and portrays the image of quality and design at a suitable price for the target consumer.

Penetration pricing is often used by new start ups seeking to gain sales and spread awareness by undercutting competitors, whereas skimming has the same target but aims to beat the competition through higher prices that imply better quality (Pride and Ferrell, 2012). While Next may have used such tactics in the past, it now has an established brand and more neutral pricing strategy.

Being a mid-market retailer, this current neutral pricing strategy offers their established customer base continuity and familiarity as they know what to expect and helps to maintain the customer’s perception of quality. It also offers Next flexibility in pricing for promotional or seasonal purposes and allows the retailer to remain competitive across all its sales channels.

Place

This refers to the strategy put in place to allow the product to be put in front of or made available to the customer in a way which is appropriate and convenient.

Next runs a clear multi-channel retailing strategy with various avenues whereby a customer can browse and purchase products. Next now has over 500 stores throughout the United Kingdom and Ireland (Next PLC, 2015) and this was the original channel the brand was built on and remains a crucial part of their strategy. Having several stores around the country allows Next to “cast their net” wide as well as increase convenience for the customers and enable the most important part of clothes shopping, the ability to touch and try them on (Spies et al, 1997).

Stores add the human element to the company through sales advisors, customer service, and general shopping experience. A positive experience shopping in stores can turn an occasional shopper to a loyal customer (Shaw, 2013).

Next’s other channels include the directory, a catalogue through which customer can order and receive their purchase by post, and the online channels through the website, mobile app and social media which allow Next to sell products as well as maintain communication with customers.

These channels offer more choice to the consumer and allow Next to market their products more effectively to a larger target market. Ordering by catalogue or online gives the customer more options on how to shop and with fast turnaround from order to delivery it will suit customers with busy lifestyles (Cherry, 2008). The development and acceptance of new technology such as the internet and the smartphone has made these additional sales channel essential to meet the expectations of customers (Baker and Hart, 2007). Lifestyle changes have lead to changes in how customers wish to shop (Watson, 2012) and the busier social and working lives of potential customers means there is a greater need and demand for convenience (Weiss, 2009).

Promotion

This refers to the methods employed by the company to provide information and make potential customers aware of its products (Bates, 2012). Next’s promotion through advertising has been limited in recent years and often more focused on smaller campaigns, rather than large-scale advertising conducted by retailers such as John Lewis who are known for their television adverts.

Next’s promotions appear to have shifted to focus online with communication, advertising and promotional offers all displayed on the official website. However, the online strategy is not solely reliant on their website and the increasing use of social media such as Facebook and Twitter has attracted much attention from the retailing world (Forbes and Vespoli, 2013). Next has fully utilised the potential social media offers with regular updates on Facebook, Twitter, YouTube and photo sharing sites such as Instagram. By promoting offers and advertising their products to the millions of followers on their pages, often through the use of celebrities sporting their products, Next has bolstered its sales, profits and growth substantially.

4. Assessment

The main strength for Next and their marketing strategy is their established brand, as evidenced by their recent successes. This means brand awareness is already present and their clear design philosophy that is both fashionable and affordable has allowed them to build a customer base of loyal, regular customers. This combined with their use of a multi-channel retailing strategy and effective utilisation of online sales and promotion has allowed them to gain a firm foothold at the top of the UK clothing market.

Their products and pricing strategy is effective at targeting their target market and is current with the trends and needs of the customers. Next ensures it stays current with market requirements due to constant communication with customers through its multi-channel system while also providing more choice to the customer and ensuring customer loyalty (Loftus et al, 2008). Customers who use multiple channels are also more likely to spend more than those that don’t (Shankar & Winer, 2005) and this can only benefit Next’s accounts.

A possible weakness in Next’s strategy is that while a target market is established and targeted effectively, the target market itself is rather broad. The customer specification covers a large age range in the middle market of the middle class. This can be seen as quite vague and can make it difficult to design, produce, and price products without a clear customer specification (Keillor, 2007).

This may also explain another possible weakness, the lack of clear celebrity ambassador. With no clear customer image in mind, the company cannot recruit a well known individual to model and promote their products to the appropriate target market who seek to replicate the celebrity.

5. Recommendations

With the rise of online shopping, most opportunities for Next will revolve around optimising and expanding their service to suit digital marketing.

Next could use the data gathered through its multiple channels and social media to optimise store space to ensure that displayed products are those which are most popular, whilst the less-purchased items are saved for their online sites that require lower running costs. This will allow the store space to be optimised and used more efficiently, with less clutter and more in-demand items the stores will be more cost effective and should have a positive reaction from customers who find the items they seek to be clearly displayed, in stock and available in store.

As mentioned in the assessment, Next may benefit from narrowing their target market to be more precise in their target customer specification. With a clearer target in mind, products can be produced that are more appropriate for the customer and this should result in an improvement in efficiency and profitability. It will also benefit the company’s branding and promotions as they can recruit a brand ambassador that the target customer can relate to and seek to replicate (Lamb et al, 2010).

While Next already has a large and successful online presence, these changes could allow them to better target their online demographic with appropriate imagery, advertisements and promotions which will help in strengthening their brand image, increasing sales, and attracting new customers.

6. Conclusion

Next holds a strong market position in a marketplace that is steady and shows growth. Their marketing strategy has been consistent since its launch, targeting the same target market with quality, fashionable products at a reasonable price. Having always been an ambassador for positive change, embracing new sales channels and technologies, Next now has an established brand and customer base which shows the success of its marketing strategy.

However, there is always room for improvement and while their current strategy has served them well, it can benefit from some optimisation that should ensure they remain at the top of the clothing market and remain ahead of competition that may threaten their position through more precise marketing strategies.

7. Bibliography

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Baker, M. and Hart, S. (2007). The Marketing Book (Sixth Edition). Abingdon: Routledge.

Bates, S. (2012). Brand recognition—what do people say about you? Leader to Leader, 2012(65), 27-32.

Chaffey, D. and Ellis-Chadwick, F. (2012). Internet Marketing: Strategy, Implementation and Practice (Fifth Edition). Cambridge: Pearson Education.

Cherry, R. (2008). Catalog: The illustrated history of mail-order shopping. New York: Princeton Architectural Press.

Elliot, L. (2013). Consumer confidence edges up as triple-dip recession fears recede. The Guardian. Available: http://www.theguardian.com/business/2013/may/31/consumer-confidence-edges-up

Financial Times (2015). Next PLC Business Profile. Financial Times. Available: http://markets.ft.com/research/Markets/Tearsheets/Business-profile?s=NXT:LSE

Forbes, L. P. and Vespoli, E. M. (2013). Does social media influence consumer buying behavior?: An investigation of recommendations and purchases. Journal of Business & Economics Research, 11(2), 107-111.

Keillor, B. D. (2007). Marketing in the 21st Century. West Port, CT: Praeger.

Lamb, C.W., Hair, J. F. and McDaniel, C. (2010), Essentials of Marketing. Boston: Cengage Learning.

Loftus, B., Mulliken, J. and Sharp, J. (2008) The Multichannel Imperative. Boston: Boston Consulting Group.

Mintel. (2013). Clothing Retailing –UK October 2013-Next Group. London: Mintel International.

Next PLC (2015) Our History. Next PLC. Available: http://www.nextplc.co.uk/about-next/our-history.aspx

Pride, W. M. and Ferrell, O. C. (2012). Marketing. Boston: Cengage Learning

Ruddick. G. (2014) Next Profits to Overtake Marks & Spencer after Christmas Sale Surge, The Telegraph. Available: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10548020/Next-profits-to-overtake-Marks-and-Spencer-after-Christmas-sales-surge.html

Shankar, V. and Winer, R. S. (2005). Interactive Marketing goes Multi-Channel. Journal of Interactive Marketing, 19(2), 2-3.

Shaw, J. (2013). Shopping (First Edition). Cambridge: Polity Press.

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Weiss, Y. (2009). Work and leisure: A history of ideas. Journal of Labor Economics, 27(1), 1-20.