Table of Contents

I. Introduction............................................................................................................................................1
II. Metrics Selection...................................................................................................................................1
1. Segmentation...........................................................................................................................1
2. Marketing Mix........................................................................................................................2
3. Proposed metrics.....................................................................................................................3
III. Critical Analysis..................................................................................................................................4
1. Promotion...............................................................................................................................................4
2. Price........................................................................................................................................................6
3. Place........................................................................................................................................................7
4. Product....................................................................................................................................................9
5. Corporate Social Responsibility (CSR)................................................................................................10
IV. Evaluation..........................................................................................................................................11
1. Cost/Benefit analysis.............................................................................................................11
2. SFA Test................................................................................................................................12
a. Sustainability.................................................................................................................................12
b. Feasibility......................................................................................................................................13
c. Acceptability..................................................................................................................................13
3. Relation to the Marketing Mix.............................................................................................15
V. Critical Appraisal...............................................................................................................................16
VI. Conclusion.........................................................................................................................................17
VII. References........................................................................................................................................19
I. Introduction.

Zara (Inditex group) is a pioneering international fast-fashion brand. The strong brand
credibility of Zara is because of its quick response to fashion trends and market orientation
strategy (Mazaira, Gonzalez, and Avendaño, 2003). Zara is available in both major cities in
Vietnam (Hanoi and Saigon). However, it is unavailable in Danang (Stores and Information|
ZARA Vietnam, 2021).

            This report aims to identify and develop a set of metrics that can help Zara achieve its
marketing objectives during its first-year launch. Additionally, it will provide a critical analysis,
evaluation, and appraisal of the pros, cons and nuances of the metrics suggested.

A marketing metric system is pivotal to the financial performance of Zara in Danang.

Gupta and Zeithaml (2006) have found that metrics related to consumers and branding increase
customer performance, while advanced financial metrics improve financial performance. The
metrics structure can enhance the efficiency of collecting customer data, which is a focal point in
the Zara marketing strategy (Micheli and Manzoni, 2010).

II. Metrics Selection.

An overview of the segmentation and marketing mix is essential to determine an
appropriate metric structure that can support the first-year marketing plan of Zara in Danang and
its brand positioning in the long run.
1. Segmentation

Zara’s main target market is women aged 18 to 40 with a middle income who want
stylish clothing at a reasonable price (Mazaira, Gonzalez, and Avendaño, 2003). Although Zara
still targets men and children, 60% of its sales come from women (Zhenxiang and Lijie, 2011).

Type of Segmentation Segmentation

segmentation Criteria

Demographic Age - Mainly 18-45, but also targeting children.

Gender - Mainly women, but also targeting men.

Income - Mid-range income

Psychographic Interests - Medium-quality, trendy, and unique fashion

at an affordable price.
- Shopping and socializing.

Personality - Professional, successful, established,

1|Page
 Traits fashionable, trendy, confident.

Lifestyles - Hectic lifestyle, small – sized and plus-sized

customers

Behavioral Purchasing - Purchase trendy products as soon as they

habits come out.
- Shop frequently.

Benefits sought - Trendy and unique clothing design at an

affordable price.
- Shopping at centered location.
- Perceived as trendy and sophisticated fashion-
conscious people.

Geographical Cities - Major cities.

Area - Front store of shopping malls.

Table 1: Segmentation of Zara in Danang

2. Marketing Mix

The marketing strategy of Zara mostly focuses on identifying market trends and
satisfying the demands of customers with effective logistics, store environment, inventory
management, and operational as well as supply chain management.

2|Page
Marketing General descriptions
Mix

Promotion - Instead of spending money on advertisements, Zara focuses on short processing

time, word-of-mouth, and social media to build a brand image (Zhenxiang and
Lijie, 2011).

Price - Zara applies a market-oriented pricing strategy. The price is set based on how
much the target segments are willing to pay (Mazaira, Gonzalez, and Avendaño,
2003).

- Each store has a professional, and elegant design, to advertise for Zara and
create shopping enjoyment (Lopez and Fan, 2009).
Place

- Zara collects sales data about customer preferences from its own stores and
design and release according to these feedbacks (Mazaira, Gonzalez, and
Product
Avendaño, 2003).
- Zara takes five weeks to design and deliver a product, and the existing model
may only be in store for two weeks, reducing oversupply and increasing
impulsive purchasing (Zhenxiang and Lijie, 2011).

Table 2: Marketing Mix of Zara in Danang

3. Proposed metrics

Based on Table 1 & 2, we can propose a set of metrics for Zara in Danang that focuses on
customer satisfaction, inventory management and store management. The metric structure aims
to be straightforward and coherent to assess marketing activities and allows multiple
comparisons (Ambler, 2000; Seggie, Cavusgil, and Phelan, 2007).
While Zara can apply most of the suggested metrics during its first year, this report
suggests the Customer Retention Rate as a metric that Zara may use after its launch to assess the
success of their marketing plan and prepare the strategy for future years.
a. Promotion

 Customer Retention Rate (CRR) estimates the percentage of customers Zara retained to
the percentage that might leave (Bendle et al., 2016).
 Customer Satisfaction Score (CSAT) uses a scale of 0-100 to score aspects of customer
satisfaction, which suggests areas for improvement and repurchase probability (Bendle et
al., 2016).

3|Page
  Customer Profitability (CP) evaluates the profits earned from a group of customers and
the associated cost of acquiring and maintaining a customer relationship with them over a
certain period (Bendle et al., 2016).
b. Price

 Price Elasticity of Demand examines the responses of customers to a price adjustment

(Bendle et al., 2016).
 Optimal Price estimates the price at which Zara makes the most profit (Bendle et al.,
2016).
c. Place.

 Sales per square foot is a metric for determining the average revenue generated per
square foot of the Zara store. (White and Gray, 1996)
 Inventory turnover is the number of times that Zara has sold and replaced its stock of
goods over a period (Rao and Rao, 2009)
d. Product

 The sell-through rate compares the amount of inventory received from the manufacturer
to the amount of inventory sold to customer in a given period (Flores, Boada and
Moscoso, 2014).
 GMROI measures the rotating speed of inventory and the return on investment to
determine product profitability. (Coronado-Hernandez et al., 2020).
e. Corporate Social Responsibility (CSR)

 Environmental protection is one of the primary CSR strategies of Zara in promoting the
use of renewable energy sources (Inditex: Our commitment to sustainability, 2002)
 Community Involvement: As the target segment of Zara is women, most of its employees
are women. Among its competitors, Zara is the brand that organizes the most training
programs on gender equality (Miotto and Vilajoana-Alejandre, 2018).

III. Critical Analysis.

The critical analysis will examine how Zara has used some of these metrics successfully
in the past and will provide estimated outcomes for the proposed metrics based on data from
competitors and Zara from previous years.

1. Promotion.

a. Customer retention rate (CRR)

4|Page
 Although there is no data that Zara has applied CRR to its metric structure,
as the marketing plan of Zara is oriented towards customer preferences, achieving a high
customer retention rate is advisable for the financial success of Zara.
We can calculate the customer retention rate using the following formula:

Number of customers at thebeginning of a period

CRR = = 65%
Number of those customers that remained at the end of a period

Figure 1.1: Formula for customer retention rate (Marr, 2012)

A retention rate of 63% is the industry average for fashion retailers, which is
lower than other industries due to competitive nature. Zara should strive for an above-
average retention rate of 65% to outperform its competitors (Marr, 2012).
As reported by Naik, Gantasala, and Prabhakar (2010), Zara can increase its
profits by at least 25% by improving its CRR by a few percentage points. In addition, the
cost of retaining an old customer segment is 10 times less than reaching a new target
audience (Gitomer, 1998).
As foreign brands have drawn 15-20 percent of the annual growth of the
Vietnamese fashion market, Zara Danang is in increased competition with other foreign
brands, especially H&M who reported a high first-year revenue after their launch in
Danang (Nguyen et al., 2019). As a result, Zara must compete on both product and
service quality to retain customers and gain leverage.

b. Customer satisfaction score (CSAT)

As a high customer retention rate indicates a high customer satisfaction level and
vice versa, the CSAT can determine which aspects of the service management of Zara
can satisfy customers, and which require improvements (Keiningham et al., 2014).
Zara can collect data from phone interviews with customers to calculate scores
from a 0-100 scale for different satisfaction components (expectation, quality of
product/service, etc.) and measure how these components may impact on one another
(The Science of Customer Satisfaction, 2021)
According to the Benchmarks By Company (2021) conducted by the American
Customer Satisfaction Index, the index for H&M was 76, which is relatively high. The
expected CSAT for Zara should be about 80 to compete with its main competitor in
Danang – H&M (Vuong and Nguyen, 2018).

5|Page
 c. Customer Profitability (CP)
Customer profitability will allow Zara to determine whether their relationship
with each customer segment generates higher and not lower profits (Kaplan, 2005)
Since the customer database of Zara is large, we will sort customers into different
groups from highest to lowest profit contribution and estimate the cumulative percentage
of profits generated by each group (Bendle et al., 2016)
Based on the data collected by Mulhern (2000) we can provide an example of the
cumulative profitability figure of a medium-sized company in the apparel industry.

Customers 0- 10- 20- 30- 40- 50- 60- 70- 80- 90-
Decile by 10% 20% 30% 40% 50% 60% 70% 80% 90% 100
Profitability %
Cumulative 400 750 1075 1375 1575 1725 1825 1775 1650 1300
Profits ($)
Cumulative 30.8 57.7 82.7 105.8 121.2 132.7 140.4 136.5 126.9 100
Profits (%)

Figure 1.2: Cumulative Profitability (Bendle et al., 2016)

There are certain measures that Zara can take to transform an unprofitable
relationship into a profitable one after having identified it. For example, a customer may
purchase a single line of products. Therefore, he/she is contributing a lower profit.
Instead of raising prices, Zara Danang can use customer data to encourage customers to
buy a variety of products to increase their profit margins (Kaplan, 2005).

2. Price
a. Price Elasticity of Demand
Zara sells only 15-20% of their products at full price, while their percentage of
products sold at a discount price is 30% higher than other apparel retailers (Ghemawat,
Nueno, and Dailey, 2003). Therefore, determining a clearance price is important to the
strategy of Zara in Danang.
We can calculate price elasticity by dividing the change in quantity by price:
Change∈Quantity (% )
Price Elasticity (I) = = 65%
Change∈ Price(%)

Figure 1.3: Formula for price elasticity (Bendle et al., 2016)

6|Page
 As stated in Borrasé (2009), Zara has already utilized price elasticity to forecast
how customer demands may react to price changes during both the regular season and the
clearance period. The study has found that the predicted elasticity for the clearance
periods is closely matched with the real elasticity.
Price elasticity provides Zara in Danang with an overview of how much they
should lower or raise their prices to maximize their profits. For instance, an elasticity
value of around -1 indicates a weak market response to price changes, which means a
further discount will not increase unit sales. By contrast, Zara in Danang may lose
revenue by lowering the price (Borrasé, 2009).

Figure 1.4: Price Elasticities for products priced at 49.90-29.90 euros (Borrasé, 2009)

b. Optimal Price
Zara has been applying the linear optimal price metric for their clearance season
pricing since 2009 and has reduced markdowns for 110.000 garments churned out
annually in 96 countries (less than 15%) (Berbiche, Hlyal, and Alami, 2020).
Not only does the optimal price assist Zara during the clearance periods, but it
also forecasts the price to salvage any inventory left after the clearance period for further
profit.
Borrasé (2009) divided the clearance season into four clearance periods. During
the 1 clearance period, the optimal price for the 49.90 euros price tag products is 19.95,
st

which is expected to generate revenue of 8000$ during the first clearance period
(Borrasé, 2009).
Optimal Price for a Linear Demand Function ($) =
Maximum Reservation Price ( $ )+Variable Cost ($)
2

7|Page
 = 19.95$
Figure 1.5: Formula of optimal price (Bendle et al., 2016)
When the price becomes too low, the price difference is lost on every sale, and
when the price becomes too high, overstocks occur. In addition, the younger generations
in Vietnam are eager to link higher price with high quality and value (Vuong and
Nguyen, 2018). Therefore, Zara needs to determine an optimal price that maximizes
contribution without losing its target market and brand image.

3. Place.
a. Sales per square foot
Sales-per-square-foot indicates the strength of the chosen property and the
purchase power of the residents in the area (White and Gray, 1996)
The estimation of the sales per square foot for Zara in Danang in the first year is
based on the data in 2016 from the Zara store in Ho Chi Minh City.
The Zara store in Saigon is located at a two-floor front store location at VINCOM
shopping center, with an area of about 2.400m2 = 25.833 square feet (Vu, 2016). When
Zara first arrived in Vietnam in September 2016, their recorded revenue for the Ho Chi
Minh City location was 321 billion VND = 13.943.662 for four months (Kien, 2019).
Revenue( $) 13.943.662
Sales-per-square-foot = = = 540$/square foot
Store area(square foot) 25.833

Figure 1.6: Formula of Sales per square foot for the 1st year (White and Gray, 1996)
The new Zara store in Danang is expected to generate annual revenue of at least
540 square feet in its first year.
Since Zara only has two stores in Vietnam, this ratio is very high in comparison to
their competitor H&M, who has 12 stores (store area = 2000m2 = 21.527 square feet) in
Vietnam and an annual revenue lower than Zara at 1.114 billion VND = 48.549.824 in
2019 (Diem, 2021).
Higher sales-per-square-foot than competitors could indicate that Zara in Danang
is creating a physical environment in its stores that meets three store environment
components: social environment, design, and ambience (Baker et al., 2002). Store
environment can directly encourage the purchases of customers and convince them to
revisit the store and purchase in the future (Hussain and Ali, 2015).

b. Inventory turnover

8|Page
 Although Zara offers around 50% more items than their competitors each season
(11.000 articles compared to 2.000 to 4.000), they can stock new items in stores within 4
to 5 weeks (Ghemawat, Nueno, and Dailey, 2003). This is reflected in their inventory
turnover rate.
The inventory turnover rate for the apparel industry ranges from 3-4 times.
However, the inventory turnover rate for Zara in 2010 was 5 times, which is considered
relatively high (Cortez et al., 2014).
Annual Product Revenues( $)
Inventory Turns (I) = =5
Average Inventory ( $)

Figure 1.7. Formula of Inventory Turns (Bendle et al., 2016)

Zara can manage its operational and supply chain management by using the
inventory turnover ratio since it measures how management is controlling and delivering
the inventory from suppliers to customers.
Finally, Zara Danang can estimate whether a product line is generating sufficient
ROI and reduce the quantity of unprofitable products imported from suppliers by
calculating inventory turnover separately for each line (Rao and Rao, 2009).

4. Product.
a. Sell-through rate
Zara can calculate the sell-through rate for individual SKUS as well as entire
categories for their stores in Danang (Flores, Boada, and Moscoco, 2014).
Zara has been using and monitoring the sell-through metric to evaluate
operational performance and later updated this metric to determine overstocks since
2006. The metric application resulted in a 3.5% revenue growth in 2007, which is about
$275 million in additional revenue (Caro and Gallien, 2010).
Sales(units)
Sell-through (%) = x 100%= 85%
Initial OnHand Inventory (units)

Figure 1.8. Formula of Sell-through rate (Oomen, 2014)

According to Caro and Gallien (2010), Zara has a sell-through rate of 85%, which
is much higher than most of their competitors in both the fast-fashion and non-fast-
fashion industry (Ghemawat, Nueno, and Dailey, 2003).
This is a valuable metric for Zara in Danang to measure the inventory
performance of their newly introduced products, as it is common in the fashion retail
industry to measure the sell-through rate monthly (Oomen, 2014).
9|Page
 b. Gross margins return on investment (GMROI)
Quick response to demands is one of the strongest advantages in the marketing
plan of Zara, since it reduces markdowns and stockouts, which may result in higher gross
margin and reduce overstocks (Caro and Martinez-de-Albeniz, 2015).
GMROI is a metric that Zara in Danang can employ to measure how efficient they
are in responding to market demands (Bates, 2008).
GMROI was calculated for Zara, H&M, Gap, and Uniqlo over a two-month
period in 2014 (Caro and Martinez-de-Albeniz, 2015). As a result of their high number of
weekly product introductions, Zara and H&M had the highest quick response (highest
GMROI), with Zara at 120 and H&M at 80.
Gross Margin on Product Sales∈ Period( $)
GMROI = = 120
Average Inventory Value at Cost ($ )

Figure 1.9: Formula of GMROI (Bendle et al., 2016)

Furthermore, not only can GMROI compare the product performance between
Zara and its competitors, but it also compares the profit a product line generated to the
investment Zara made in the products in stock. Zara in Danang can determine which
product line contributes the most to their total gross earnings in proportion to their
investment in that stock (Varley, 2006).

5. Corporate Social Responsibility (CSR)

a. Environmental Protection

As reported by Inditex: Our Commitment to Sustainability (2002), the corporation

makes significant efforts to be environmentally friendly by reducing energy consumption.
EcoTool, a software that manages worldwide Zara stores, has reduced 20% of energy and
40% of water consumption in all Zara stores.
Moreover, the logistics centers in Spain consume 100% of their energy from
renewable sources. In addition, all facilities have multiplied the use of electricity from
renewable sources by almost 20 since 2014.
The goal of Zara is to have all its stores, distribution hubs, and offices to have at
least 80% of their energy consumed clean by 2025 (Inditex: Our commitment to
sustainability, 2002).

b. Community Involvement

10 | P a g e
 Over the years, Inditex has implemented several CSR strategies to promote
gender equality in its work environment. Miotto and Vilajoana-Alejandre (2019) found
that Zara (Inditex) is the most frequent among the fast-fashion brands to mention and
advocate for gender equality in its sustainable report, since 76% of their staff are women.

Inditex carried out equality awareness and training activities in 2016 by updating
the contents of their equality plans for all available staff on Inditex's intranet – Inet
(Equality and Diversity | Inditex, 2016).

Furthermore, the rate of employees that returned to work after maternity or

paternity leave in 2016 at Zara in Spain is relatively high among women and men, as well
as among temporary and permanent employees, at 98% of a total of 2,378 Inditex
employees (Equality and Diversity | Inditex, 2016).

IV. Evaluation.
In this section, we will evaluate the possible outcomes of the marketing strategy using
cost and benefit analysis and the SFA test. Plus, we will discuss the connection between the
marketing metrics and marketing mix.
1. Cost/Benefit analysis.
QUANTITATIVE ANALYSIS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL
NON-RECURRING COST
Infrastructure $30,000 $2,000 $2,000 $3,000 $1,000 $38,000
Training of employess (pre-implementation) $5,000 $5,100 $5,200 $5,300 $5,200 $25,800
TOTAL NON- RECURRING COST $35,000 $7,100 $7,200 $8,300 $6,200 $63,800

RECURRING COST
Training of employess $16,200 $16,500 $16,700 $16,900 $17,000 $83,300
Market Research $1,092,000 $1,784,000 $1,755,000 $1,834,000 $1,963,000 $8,428,000
Sales Promotion $450,000 $462,000 $440,000 $477,000 $482,000 $2,311,000
Depreciation expenses $10,000 $10,400 $11,200 $11,000 $10,300 $52,900
Human Resource $300,000 $309,000 $314,000 $323,000 $350,000 $1,596,000
Taxes, fees $5,400,000 $6,300,000 $7,800,000 $8,000,000 $10,400,000 $37,900,000
Store lease $340,000 $345,000 $350,000 $354,000 $360,000 $1,749,000
Office lease $12,000 $12,500 $13,100 $13,900 $14,000 $65,500
Telecommunication $350,000 $375,000 $393,000 $361,000 $384,000 $1,863,000
Transportation $3,450,000 $3,439,000 $3,524,000 $3,428,000 $3,456,000 $17,297,000

TOTAL RECURRING COST $11,420,200 $13,053,400 $14,617,000 $14,818,800 $17,436,300 $71,345,700

TOTAL COST $11,455,200 $13,060,500 $14,624,200 $14,827,100 $17,442,500 $71,409,500

QUANTITATIVE BENEFITS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL

Sales $23,000,000 $30,000,000 $35,000,000 $40,000,000 $47,000,000 $175,000,000
TOTAL REVENUES $23,000,000 $30,000,000 $35,000,000 $40,000,000 $47,000,000 $175,000,000

COST SAVINGS
Tax refund $2,000,000 $2,500,000 $2,800,000 $2,600,000 $3,000,000 $12,900,000
TOTAL COST SAVINGS $2,000,000 $2,500,000 $2,800,000 $2,600,000 $3,000,000 $12,900,000

TOTAL REVENUE $25,000,000 $32,500,000 $37,800,000 $42,600,000 $50,000,000 $187,900,000

TOTAL BENEFIT $13,544,800 $19,439,500 $23,175,800 $27,772,900 $32,557,500 $116,490,500
BENEFIT - COST RATIO 1.18241497311265 1.48841927950691 1.58475677302006 1.87311746734021 1.86656155940949 1.63130255778293

Figure 2: Cost-Benefit for Zara’s first-year launch in Danang

11 | P a g e
 The report proposes a five-year cost and benefit analysis for Zara in Danang. Based on
the successful performance of Zara in Hanoi and Saigon, we can expect that Zara in Danang will
generate increasing economic returns over the five-year course as the 5th year revenue doubles
the 1st year revenue.
According to Homrossukon and Anurathapunt (2007), a benefit-cost ratio higher than 1
will generate positive revenue. Since the total cost-benefit ratio of Zara is 1.63, we can assume
that the project launch will bring high economic returns for Zara.

2. SFA Test.

We will measure the suitability, feasibility and acceptability of the marketing campaign
using SWOT analysis and risk assessment.
a. Sustainability

Strengths Weaknesses

- Unique and high quantity design at an - Lower product quality to maintain

affordable product price (Duoyan, affordable pricing and quick
2021). production (Duoyan, 2021).
- High production speed (Ferdows, - Deep involvement in design
Lewis and Machuca, 2003). plagiarism (Xuejie, Chang and
- Low production cost (Sartal et al., GuangHao, 2019).
2017).
Opportunities Threats

- Increase in resident income in Vietnam - The Vietnamese fashion industry has

(Nguyen et al., 2019). a high level of competition (Lee and Nguyen,
2017).

Figure 3: SWOT analysis for Zara in Danang

The continuing economic growth in Vietnam and the increasing purchase power
of the Vietnamese population have provided an opportunity for Zara to expand and
develop its market in Vietnam. Danang, with a continuously and steadily growing GPD
of 8% on average compared to the whole country, will be a profitable location for Zara to
launch a new store (Nguyen, 2016).
On the other hand, this also poses a threat, since other fast-fashion foreign brands
are also entering the Vietnamese fashion industry, which creates fierce competition (Lee
and Nguyen, 2017).

12 | P a g e
 However, Zara has several advantages in the Vietnamese fashion industry due to
different strengths. First, Zara has been able to produce a high quantity of products
without minimizing profits because of its moderate investment in product quality.
Although Zara's product quality is lower than that of its competitors, Uniqlo and H & M
& M, this strategy allows Zara to maximize profits while maintaining a low production
cost and an affordable price.
Another strength of Zara is its unique and trendy design with different varieties at
a high production speed. Zara has a team of designers who travel around the world for
fashion weeks and send the most updated designs to its headquarters in Spain (Duoyan,
2021).
Nonetheless, this may affect its brand equity in the long run because Zara has to
bear tens of millions of infringement costs each year for its plagiarism of high-end brands
(Duoyan, 2021).

b. Feasibility

Based on the cost and benefit analysis above, it will cost Zara of about $673.000
for their first-year launch in Danang. However, this total cost will decrease in the next
five years as Zara generates further profits and increases its brand equity in Danang.
Furthermore, in the coming years, costs such as building infrastructure will be replaced
by maintenance costs, which will be significantly lower than in the first year of operation.
In terms of people and skills, Zara will conduct training for employees prior to as
well as during their work courses. The labor force of Danang has increased from 318.639
(44.08% of the population) in 2000 to 538.175 (53.6% of the population) in 2014. The
abundant and high-quality human resources of Danang are important in attracting
domestic and foreign investment resources (Nguyen, 2016).
Zara has already established a strong brand preference in Vietnam, with revenues
increasing fivefold since 2016 with the opening of two Zara stores in Hanoi and Saigon
(Nguyen, 2019). Therefore, it is reasonable to expect the revenues of the Zara store in
Danang to at least double over the first five years in our cost-benefit analysis.
Overall, Zara has significant tangible and intangible resources, such as a positive
brand reputation and partnerships with various corporations. Therefore, we can expect the
campaign to be feasible given the financial, technical and research and development
resources of Zara.

13 | P a g e
 c. Acceptability

Inditex, the parent company of Zara, has maintained a return on investment (ROI)
of 20-25% for more than sixteen years with no upward or downward trend. The fashion
industry is constantly growing, and this may lead to decreasing profitability. Therefore, a
stable ROI is an excellent result (Hilmola, Tolli and Panova, 2019). The forecast ROI for
the new Zara store in Dang is expected to be in the same ballpark as the Zara store.
Yet, the campaign entails some risks to different stakeholders, which the report
has provided mitigation plans. We will analyze the risks and their mitigation plans in the
figure below:

Risk Events Liable party Severi Likelih Hidea RPN Mitigation

ty ood bility
Delivery delays Supply chain 8 8 6 384 - Setting clear
from Zara department company policies,
suppliers in Spain capacity and
(Macchion et al., production planning
2015) (Kroese, 2010).
Store building not R&D 7 6 4 168 - Employ Project
ready for launch Department Time Management
(Xiang et al., (Nasir et al., 2016).
2012)
Inaccurate data on Marketing 6 6 6 216 Consumers are
customer and Sales entitled to full-
preferences due to Department refund and return of
impulsive products
purchases (Park et (Verplanken and
al., 2012) Sato, 2010)
Shortage on new Human 6 5 5 150 - Develop a value
employees Resources proposition to
(Wójcik, 2017) Management provide what
employees are
seeking (Phillips-
Wren et al., 2016).
Lack of key sizes Supply chain 6 5 5 150 Research into the
in stores (Martino Department target customer to
et al., 2017). keep customer
happy but still
minimize

14 | P a g e
 overstocks.
(Boardman et al.,
2020).
Inappropriate R&D 6 4 4 96 Conduct field visits
selection of stores Department and observe the site
location (Merino across a range of
and Ramirez- spatial scales and
Nafarrate, 2015) times of day.
(Wood and Tasker,
2008)

Figure 4: Risk analysis for Zara in Danang

Since the products for Zara are overseas, materials need to be transported from
Spain to Vietnam, which is prone to delivery delays (Ferdows, Lewis and Machuca,
2003). Zara may experience low inventory and decreased sales because of this.
Furthermore, Zara is a company that bases its marketing strategy on data rather
than advertisements to determine customer preferences (Ghemawat, Nueno, and Dailey,
2003). Inadequate data collection can deflect the strategy and reduce sales, so Zara
should take precautions against impulsive purchases by offering refunds.
We may infer that Zara has moderate acceptability, considering the high risks in
Figure 4 and the fierce competition in the fashion industry.

* SFA Scoring:
Angles of approach Scores

Sustainability 8

Feasibility 7

Acceptability 6

Total 7/10

3. Relation to the Marketing Mix.

This section will investigate how each of the marketing metrics can support the
overall objectives of each marketing mix.

15 | P a g e
Marketing Metrics Relation to the Marketing Mix Objectives
Mix Marketing Mix

Customer Assists Zara in retaining - Satisfying and retaining valuable

Retention Rate customers after its first- customers.
Promotion
(CRR) year launch.

Customer Improves customer

Satisfaction satisfaction.
Score (CSAT)

Customer Determines customer-

Profitability business relationships
(CP) that bring the highest
financial profits.

Price Helps forecast reactions - Setting a price that the market is

Elasticity of to price changes. willing to pay for the product, which
Price
Demand can minimize production costs and
maximize profits during the
Optimal Price Estimates the price that
clearance and regular seasons.
contribute the most profit
during regular and
clearance period.

Sales per Measures store - Increasing store management and

square foot performance performance.
Place
Inventory Measures the rotating - Managing inventory and increasing
turnover speed of inventory. its rotating speed.

Sell-through Measures new product - Increasing product profitability and

rate and overstock reducing overstocks.
Product
performance.

Gross margins Indicates the response

return on speed to customer
investment demands and measures
(GMROI) product performance.

Figure 5: Relation of metrics structure to marketing mix

16 | P a g e
V. Critical Appraisal.

Metrics Potential Potential risks

drawbacks

Customer Customer satisfaction Customers may have high satisfaction with the service,
Satisfaction cannot predict future but still lean towards other competition solely because
Score customer loyalty the product is more appealing (Marr, 2012). As a result,
(CSAT) without other other metrics for measuring product and store
metrics. performance are critical for indicating Zara's brand
positioning and predicting future customer loyalty.

Customer Customer Customers who have a high customer life-time value

Profitability profitability may generate low revenues at the beginning of their
measures the relationship, but in the long run they can be more loyal
profitability of a towards Zara, which increases their profitability (Marr,
customer during a 2012)
specified period.
* Suggestion:
Therefore, Zara
needs to ensure that CLV is the worth of a customer relationship calculated
they consider other using the present value of anticipated future cash flows
factors before of the customer relationship (Bendle et al., 2016).
regarding a customer
CLV ($) = Margin ($) +
relationship as
Retention Rate (%)
invaluable.
1+ Discount Rate ( % )−Retention Rate( %)

CLV enables Zara to evaluate the long-term health of a

client relationship instead of quarterly earnings (Bendle
et al., 2016).

Gross GMROI measures A high rate of GMROI does not ensure profitability
margins the gross margin rate (Lukić, 2015).
return on based on inventory.
* Suggestion:
investment Nonetheless, sales
(GMROI) may have a bigger The financial outcomes of Zara can be measured using
impact on the gross direct product profit (Saying Goodbye to GMROI,
margin rate than 2014), which is calculated as:
inventory turnover,
Gross margin + procurement discounts = corrected
since it is a critical
margin – direct costs = direct product profit
component of
profitability

17 | P a g e
 (Jagelavicius, 2013).

VI. Conclusion.
In conclusion, the report has selected a metric structure to enhance and evaluate the
marketing plan of Zara in Danang.
Because Zara's marketing strategy revolves around collecting data and identifying
preferences to determine demands, the main goal of the metrics structure is to measure Zara's
efficiency in meeting these demands and outperforming their main competitor in Danang – H &
M. Despite some drawbacks, the report has also proposed some suggestions to minimize the
potential risks for Zara in Danang.
Overall, Zara needs to work further on improving its design originality to retain
customers in the long run. As of now, with the current strong brand positioning that Zara has
established in Vietnam, we can expect the marketing campaign for Zara to launch in Danang to
be feasible and generate increasing profits in the next few years.
(3760 words + 1033 words in tables (29% word count) = 4793 words)

18 | P a g e
VII. References

1. 2002. Inditex: Our commitment to sustainability. Inditex.

2. Ambler, T., 2000. Marketing metrics, Business Strategy Review, 11(2), pp 59–66.
3. Baker, J., Parasuraman, A., Grewal, D., Voss, G. B., 2002. The influence of multiple
store environment cues on perceived merchandise value and patronage
intentions. Journal of marketing, 66(2), 120-141.
4. Bates, A., 2008. Profit myths in wholesale distribution. [Washington, D.C.]: NAW
Institute for Distribution Excellence.
5. Bendle, N., Farris, P., Pfeifer, P. and Reibstein, D., 2016. Marketing metrics. Upper
Saddle River, N.J.: FT Press.
6. Berbiche, N., Hlyal, M., & El Alami, J., 2020. Exponential success through integrated
supply chain optimization, ecomotional intelligence and reputation-based leadership:
Zara model. IOP Conference Series: Materials Science and Engineering, 827(1). IOP
Publishing.
7. Boardman, R., Parker-Strak, R., Henninger, C., 2020. Fashion buying and
merchandising. Routledge.
8. Borrasé, R. C., 2009. Clearance pricing optimization at Zara (Doctoral dissertation,
Massachusetts Institute of Technology).
9. Caro, F., & Gallien, J., 2010. Inventory management of a fast-fashion retail
network. Operations Research, 58(2), 257-273.
10. Caro, F., & Martínez-de-Albéniz, V., 2015. Fast fashion: Business model overview and
research opportunities. Retail supply chain management. Springer, Boston, MA.
11. Coronado-Hernandez, J. R., Ospina-Mateus, H., Baron-Villamizar, J., Vidal-Pacheco, L.,
Piñeres-Castillo, A., Rojas-Millán, R. H., & Silva, J., 2020. A method to rationalize the
product portfolio in retail stores. Advances in Cybernetics, Cognition, and Machine
Learning for Communication Technologies. Springer, Singapore.
12. Cortez, M. A., Tu, N. T., Van Anh, D., Ng, B. Z., & Vegafria, E., 2014. Fast fashion
quadrangle: An analysis. Academy of Marketing Studies Journal, 18(1), 1.
13. Diem, K., 2021. H&M đang thu lợi nghìn tỷ ở Việt Nam ra sao?. [online] Báo điện tử
Dân Trí. Available at: <https://dantri.com.vn/kinh-doanh/hm-dang-thu-loi-nghin-ty-o-
viet-nam-ra-sao-20210403154521672.htm> [Accessed 22 June 2021].

19 | P a g e
14. Duoyan, H., 2021. Research on ZARA Strategy from the Perspective of SWOT Analysis
Method. 2021 6th International Conference on Social Sciences and Economic
Development (ICSSED 2021). Atlantis Press.
15. Ferdows, K., Lewis, M., & Machuca, J. A., 2003. Zara. In Supply Chain Forum: An
International Journal, 4(2). Taylor & Francis.
16. Flores, J. E., Boada, P., & Moscoso, P., 2014. An empirical analysis of sell-through in a
fashion setting. Int. Journal of Supply Chain Management, 3(4), 13-22.
17. Ghemawat, P., Nueno, J. L., Dailey, M., 2003. ZARA: Fast fashion. Harvard Business
School.
18. Gitomer, J., 1998. Customer satisfaction is worthless, customer loyalty is priceless: How
to make customers love you, keep them coming back, and tell everyone they know. Bard
Press.
19. Gupta, S., Zeithaml, V., 2006. Customer metrics and their impact on financial
performance. Marketing science, 25(6), 718-739.
20. Hilmola, O-P., Tolli, A., Panova Y., 2019. Global Corporations and Smaller Actors in
Textile Business: European Perspective. Ekonomika Regiona [Economy of Region],
15(1), 216-230
21. Homrossukon, S., Anurathapunt, A., 2011. Six sigma solutions and its benefit-cost ratio
for quality improvement. International Journal of Economics and Management
Engineering, 5(8), 997-1005.
22. Hussain, R., Ali, M., 2015. Effect of store atmosphere on consumer purchase
intention. International Journal of Marketing Studies, 7(2).
23. Inditex.com. 2016. Equality and Diversity | Inditex. [online] Available at:
<http://static.inditex.com/annual_report_2016/en/our-priorities/people/equality-and-
diversity.php> [Accessed 22 June 2021].
24. Jagelavicius, G., 2013. Gross margin management framework for merchandising
decisions in companies with large assortment of products“, Economics and Management,
18 (1), pp. 6-16.
25. Kaplan, S.R., 2005. A balanced scorecard approach to measure customer profitability,
Working Knowledge, Harvard Business School.
26. Keiningham, T. L., Morgeson III, F. V., Aksoy, L., & Williams, L., 2014. Service failure
severity, customer satisfaction, and market share: An examination of the airline
industry. Journal of Service Research, 17(4), 415-431.
27. Kien, A., 2019. Vào Việt Nam chưa đầy 3 năm, công ty sở hữu thương hiệu Zara đã kiếm
doanh thu ngang ngửa toàn bộ mảng thời trang thuộc tập đoàn của "Vua hàng hiệu"
Hạnh Nguyễn?. [online] cafebiz.vn. Available at: < https://cafebiz.vn/vao-viet-nam-chua-
day-3-nam-cong-ty-so-huu-thuong-hieu-zara-da-kiem-doanh-thu-ngang-ngua-toan-bo-
mang-thoi-trang-thuoc-tap-doan-cua-vua-hang-hieu-hanh-nguyen-
20190604173151266.chn>
28. Kroese, R., 2010. Transport delays in the supply chain of companies with MTO systems.
Supply chain management in international operating companies. Tilburg University
20 | P a g e
29. Lee, J., Nguyen, M. J., 2017. Product attributes and preference for foreign brands among
Vietnamese consumers. Journal of Retailing and Consumer Services, 35, 76-83.
30. Lopez, C., & Fan, Y., 2009,. Internationalisation of the Spanish fashion brand
Zara. Journal of Fashion Marketing and Management: An International Journal.
31. Lukić, R., 2015. The analysis of efficiency of managing inventories in trade in
serbia. Revista de Management Comparat Internațional, 16(2), 222-238.
32. Macchion, L., Moretto, A., Caniato, F., Caridi, M., Danese, P., Vinelli, A., 2015.
Production and supply network strategies within the fashion industry. International
Journal of Production Economics 163, 173–188.
33. Marr, B., 2012. Key Performance Indicators: The 75 Measures Every Manager Needs to
Know. Harlow: Pearson Education.
34. Martino, G., Fera, M., Iannone, R., & Miranda, S., 2017. Supply chain risk assessment in
the fashion retail industry: An analytic network process approach. Int. J. Appl. Eng.
Res, 12, 140-154.
35. Mazaira, A., Gonzalez, E., Avendaño, R., 2003. The role of market orientation on
company performance through the development of sustainable competitive advantage:
the Inditex‐Zara case. Marketing Intelligence & Planning. 21(4), pp 220-229.
36. Merino, M., Ramirez-Nafarrate, A., 2015. Estimation of retail sales under competitive
location in mexico. Journal of Business Research.
37. Micheli, P., Manzoni, J. F., 2010. Strategic performance measurement: benefits,
limitations and paradoxes, Long Range Planning, 43(4), pp465–476.
38. Miotto, G., & Vilajoana-Alejandre, S., 2019. Gender equality: a tool for legitimacy in the
fast fashion industry. Harvard Deusto Business Research, 8(2), 134-147.
39. Mulhern, F. J., 1999. Customer profitability analysis: Measurement, concentration, and
research directions. Journal of interactive marketing, 13(1), 25-40.
40. Naik, C. K., Gantasala, S. B., & Prabhakar, G. V., 2010. Service quality (SERVQUAL)
and its effect on customer satisfaction in retailing. European journal of social
sciences, 16(2), 231-243.
41. Nasir, N., Nawi, M. N. M., Radzuan, K., 2016. Relationship between time management
in construction industry and project management performance. AIP Conference
Proceedings. 1761(1). AIP Publishing LLC.
42. Nguyen, B.M., 2019. Zara và H&M Việt Nam tăng trưởng phi mã, thu về 2.500 tỷ đồng
chỉ trong năm 2018. [online] Trí thức trẻ. Available at <
https://ndh.vn/doanh-nghiep/zara-va-handm-viet-nam-tang-truong-phi-ma-thu-ve-2-500-
ty-ong-chi-trong-nam-2018-1242635.html>
43. Nguyen, T. T. H., 2016. THE ROLE OF LABOR IN THE ECONOMIC GROWTH IN
DANANG CITY. The Journal of Science and Technology of The University of Danang,
2(99).
44. Nguyen, T.Q., Bui, T., Vu, A.T., and Nguyen, H.N., 2019. Some Issues on Vietnam
Economy. Journal of Economics and Business, 2(3), pp 739-748.

21 | P a g e
45. Oomen, L. L. Pro-actively Driving Nike, Inc.’s Close-out Liquidation Process Using Sell-
through Data.
46. Park, E. J., Kim, E. Y., Funches, V. M., Foxx, W., 2012. Apparel product attributes, web
browsing, and e-impulse buying on shopping websites. Journal of Business Research 65,
1583–1589.
47. Phillips-Wren, G., Doran, R., Merrill, K., 2016. Creating a value proposition with a social
media strategy for talent acquisition. Journal of Decision systems, 25(1), 450-462.
48. Rao, M. C., & Rao, K. P., 2009. Inventory turnover ratio as a supply chain performance
measure. Serbian Journal of Management, 4(1), 41-50.
49. Sartal, A., Martínez-Senra, A. I., García, J. M., 2017. Balancing offshoring and agility in
the apparel industry: Lessons from Benetton and Inditex. Fibres & Textiles in Eastern
Europe.
50. Saying Goodbye to GMROI, 2014. Profit Planning Group.
51. Seggie, S. H., Cavusgil, E., Phelan, S. E., 2007. Measurement of return on marketing
investment: evolution of approaches and directions for future. Industrial Marketing
Management, 36, pp 834-841.
52. Theacsi.org. 2021. Benchmarks By Company. [online] Available at:
<https://www.theacsi.org/index.php?
option=com_content&view=article&id=149&catid=&Itemid=214&i=Specialty+Retail+S
tores&c=Abercrombie+%26+Fitch&sort=Y2017> [Accessed 22 June 2021].
53. Theacsi.org. 2021. The Science of Customer Satisfaction. [online] Available at:
<https://www.theacsi.org/about-acsi/the-science-of-customer-satisfaction> [Accessed 22
June 2021].
54. Varley, R., 2006. Retail product management: Buying and Merchandising. 2nd ed.
London: Routledge.
55. Verplanken, B., & Sato, A., 2011. The psychology of impulse buying: An integrative
self-regulation approach. Journal of Consumer Policy, 34(2), 197-210.
56. Vu, Y., 2016. Zara khai trương cửa hàng đầu tiên ở Việt Nam. [online]
thesaigontimes.vn. Available at: < https://www.thesaigontimes.vn/151143/Zara-khai-
truong-cua-hang-dau-tien-o-Viet-Nam.html>
57. Vuong, H. G., & Nguyen, M. T., 2018. Factors Influencing Millennials’ Purchase
Intention towards Fast Fashion Products: A Case Study in Vietnam. International
Journal of Social Science and Humanity, 8(8), 235-240.
58. Walters, D. and White, D., 1989. Retail Marketing Management. London: Macmillan
Education, Limited.
59. White, J. and Gray, K., 1996. Shopping centers and other retail properties: Investment,
Development, Financing, and Management. New York: John Wileys & Sons, Inc.
60. Wójcik, P., 2018. Shortage of Talents–A Challenge for Modern
Organizations. International Journal of Synergy and Research, 6, 123.

22 | P a g e
61. Wood, S., & Tasker, A., 2008. The importance of context in store forecasting: The site
visit in retail location decision-making. Journal of Targeting, Measurement and Analysis
for Marketing, 16(2), 139-155.
62. Xiang, P., Zhou, J., Zhou, X. and Ye, K., 2012. Construction Project Risk Management
Based on the View of Asymmetric Information. Journal of Construction Engineering
and Management, 138(11), pp.1303-1311.
63. Xuejie, C., Chang, Q., GuangHao, Z., 2019. Research on Innovation supply chain
Management in Fast Fashion Industry——A comparative analysis of ZARA and H&M.
International Conference on Education, Culture and Social Development (ICECSD
2019). Atlantis Press.
64. Zara.com. 2021. Stores and Information | ZARA Vietnam. [online] Available at:
<https://www.zara.com/vn/vi/z-stores-st1404.html?v1=11108.> [Accessed 22 June
2021].
65. Zhenxiang, W., & Lijie, Z., 2011. Case study of online retailing fast fashion
industry. International Journal of e-Education, e-Business, e-Management and e-
Learning, 1(3), 195.

23 | P a g e