Diesel Clothing Market Analysis and Marketing Strategy

Industry Overview and Consumer Trends

The clothing and textile industry is currently characterized by a series of factors, including labor intensity, low wages, innovation, and dynamism — driven by how quickly the industry shifts from season to season. However, this describes only the largest segment of the industry. There is another part of the clothing industry — the high-quality fashion market — that relies on modern technology, well-trained designers and workers who are paid accordingly, and a high degree of flexibility (Nordas, 2004).

Competition in the clothing market is fierce and consists of numerous producers with long tradition and experience. The only way to gain a competitive advantage in this market, beyond cost efficiency, is by creating items that adapt to or actively shape customers' needs, desires, and expectations. Latest trends in the clothing market show that "consumers spend a smaller share of their income on clothing than in the past, although consumers shop more frequently and buy a larger number of clothing items than before" (Nordas, 2004). This does not mean that consumers' interest in clothing is decreasing — indeed, the number of items purchased is rising. It more likely means that customers have lost confidence in expensive brands and prefer cheaper clothing that satisfies their fashion tastes for a short time. Given how frequently tastes change, consumers buy clothing they expect to wear for only one season and consider unfashionable after that season has passed. In these conditions, they are unwilling to spend heavily on items with such a short useful life, choosing low price over high quality.

This attitude is reflected in the cost structure of the clothing industry. For the United States in 2001, the cost structure for the clothing industry (as a percentage of gross output) was as follows: 21% unskilled labor, 5.8% skilled labor, 5.8% capital, 32.6% total value added, 67.4% intermediate outputs, and 13.8% imported (Nordas, 2004). The elevated share of unskilled labor and the high total value added are notable, as is the significant import share. Another notable fact is that only 30% of U.S. textile production is used for clothing. U.S. textile exports reach almost 10%, while clothing exports reach approximately 15%. The number of employees in both the U.S. textiles and clothing industry has significantly decreased over the past decade.

When developing a marketing plan, the first essential step is to study the company's targeted customers. A company's success depends directly on its customers; they are the center of attention, and therefore the entire plan revolves around understanding them.

Diesel Clothing is a well-known, innovative, international design company that manufactures jeans, clothing, and accessories. Diesel is much more than a clothing manufacturer — it is part of youth culture worldwide. As the company itself states, "Diesel is a leader in pioneering new styles, fabrics, manufacturing methods and quality control to guarantee an outstanding product" (Diesel, 2007).

Diesel's Target Markets and Customer Behavior

Diesel Clothing's primary target market consists of males and females aged between 18 and 25 years. The 2000 United States Census revealed that of the total U.S. population, 39,184,614 people (13.9%) are aged 18–25 (U.S. Census Bureau, 2000). Of the total population aged 3–25, 21.4% are enrolled in high school and 22.8% are enrolled in college or graduate school.

This customer segment, aged 18–25, is arguably the most difficult one to reach. Needs and tastes within this segment change very rapidly. The factors that influence these customers' buying behavior fall into three categories: personal, psychological, and social. The personal factors relevant to Diesel's customers relate to age, sex, and race. The age range of 18–25 is the most appropriate for the type of clothing Diesel manufactures and sells. At this age, friends play an important role in buying behavior — customers aged 18–25 rely heavily on peer opinion and are strongly influenced by their close social circle. Culture is also a very important factor influencing clothing purchases in this age group. Income is another key consideration: as noted above, people are spending less on clothing, and customers aged 18–25 — who typically have lower incomes — tend to prefer lower-priced items, even if that means lower quality.

Geographically, although Diesel's design headquarters are located in Italy, its largest market is the urban United States, particularly its most important cities. The company also maintains a global presence, opening new stores each year in locations around the world.

The secondary target market consists of people aged between 25 and 35 years, who represent 14.2% of the total U.S. population. This secondary market has certain traits that distinguish it from the primary one. This segment is more sophisticated, and buying decisions are influenced less by friends and more by social status.

Competitive Landscape and Market Entry Barriers

Competition in the jeans sector has grown considerably over the past 15 years. Diesel's most important competitors include AG Jeans, Antik Denim, Blue Cult, Citizens of Humanity, Chip and Pepper, Hudson, Calvin Klein, Guess, and Levi's (Wikipedia, 2007).

Probably the most significant barrier to entry in this market is the number and strength of existing competitors. Gaining a competitive advantage is very difficult in an industry where customers' tastes and preferences shift rapidly. Brand loyalty adds another layer of difficulty: when customers find a brand that satisfies their needs in terms of price and quality, they tend to remain loyal to that brand. This makes it very difficult for new entrants to attract customers away from established companies.

Marketing Mix: Pricing and Promotion Strategies

Regarding the marketing mix, the main focus should be on pricing and promotion. As discussed above, people are spending less on clothing overall, yet the number of clothing items purchased continues to rise. This means that most average customers are gravitating toward cheaper products, even at the cost of lower quality. Consequently, Diesel should consider starting with a low entry price. This is an effective way to attract new customers and retain existing ones. Diesel's primary target market — people aged 18–25 with lower incomes who are not highly quality-oriented — prioritizes price above other considerations.

For the secondary target of customers aged 25–35, the approach differs considerably. This segment is not as price-sensitive as the primary one, so Diesel should place greater emphasis on product strategy. Customers aged 25–35 are not easily swayed by low prices or peer influence. In fact, a low-price strategy would likely be counterproductive for this segment. The secondary target is more fashion-oriented, consisting of people with medium to high incomes, higher education levels, good social standing, and an awareness of the latest fashion trends.

For this customer group, Diesel should develop a distinct product line, separate from the one designed for the primary target. While the central product for primary target customers is jeans, for the secondary target Diesel's designers should combine jeans with other clothing items more appropriate for 25–35-year-olds who hold professional positions and move in higher social circles. The price for this secondary line should be significantly higher than for the primary target, reflecting the additional craftsmanship involved and the status that these customers seek to signal through their clothing choices. Research on premium brand positioning supports the idea that higher price points reinforce perceived exclusivity and social status for aspirational consumers.