Student ID ________________  

Semester / Year: Semester 2, 2019  

Faculty / Dept: Management and Marketing  

Subject Code: MKTG10001  

Subject Name: Principles of Marketing  

Writing Time: 2 hrs  

Reading Time: 30 minutes  

Open Book Status: No  

Number of Pages (including this page): 6  

Authorised Materials:  
Non-electronic English-other language translation dictionaries  

Instructions to Students:  
This examination contributes 60% to the final subject mark.  
This examination paper includes 1 section.  

Section 1: Contains 6 essay questions. You are required to answer 3 questions only. This section  
accounts for 60 marks. Use the case study provided to help you answer the questions.  

Instructions to Invigilators:  
Student may keep the paper: No  
Student may annotate the paper during reading time: Yes  

Extra Materials Required:  
N/A  


2  

SECTION 1  

Please analyse the case on pages 3 – 6 using the questions below. Answer 3 of the 6 following  
questions. Each question is equally weighted (20% of your total grade). You should spend the same  
amount of time on each question (40 minutes). Ensure that you use evidence from the case and  
relevant Principles of Marketing theories and terminologies when answering the questions. Start  
each question on a separate page. You may use headings to break up your response for each  
question.  

1) What are the steps in the consumer decision-making process? Explain how XFashion’s  
business model has transformed the way fashion consumers go through this process,  
creating value for its customers. In moving forward, how would you advise XFashion to  
further leverage the stages of the decision-making process to improve its value  
proposition? Recommend two actions. (20 marks)  

2) What is the difference between customer satisfaction and customer loyalty? How do  
XFashion’s efforts to collect data about customers influence these customers’ satisfaction  
with the company? In addition to attempting to increase customer satisfaction, what  
would you recommend XFashion to do to build loyalty among its customers? Consider  
both short-term and long-term strategies. (20 marks)  

3) What are the characteristics indicative of an attractive market segment? Considering these  
characteristics, explain why XFashion has refrained from targeting the luxury segment  
and decided to target the male segment. How would you recommend that XFashion  
adjusts its marketing mix if it were to target the luxury segment? Consider all four  
elements of the marketing mix. (20 marks)  
4) What is the difference between brand identity and brand image? Indicate the two key  
benefits of the Elena Marin + XFashion collaboration for each of the brands. What  
strategies would you recommend for XFashion to strengthen its brand image among plus- 
size fashion consumers? Indicate two strategies. (20 marks)  
5) What is meant by marketing ethics? What are the business, moral/ethical, and legal  
implications of the customer information XFashion collects? What recommendations do  
you have for XFashion regarding their short- and long-term plans around using their  
customers’ personal information? Consider both the benefits and limitations of the  
recommended strategy. (20 marks)  
6) What is the difference between products and services? How are these differences  
accounted for in the ways XFashion and Celebrity Rent developed their pricing  
strategies? What pricing strategy would you recommend for XFashion to adopt to  
stimulate adoption of XFashion Men among the men’s apparel segment? (20 marks)  
END OF SECTION  
3  



CASE: XFashion  
XFashion, established in 2016 in San Francisco, has disrupted the fashion retail industry. With input  
from the customer, who completes fashion surveys, and collaboration between artificial intelligence  
(AI) and human stylists, the online styling service eliminates the need for customers to shop for  
clothing or even browse online. XFashion delivers a personalized selection of fashion products right  
to the customer door on a regular schedule, determined by the customer. Customers can keep all the  
products or return what they do not like. Personal stylists and algorithms use this feedback as data to  
get better at determining the preferred style for each customer.  
XFashion CEO Lisa Camwell says that the company is transforming the way people shop. To do  
that, the company employs more than 3,000 stylists and more than 75 data scientists. Camwell says  
that digging through racks of clothing at the mall or trying to find a perfect pair of pants by visiting  
dozens of stores online is crazy. “I just don’t believe that could possibly be the future.”  

Figure 1 – A question on the survey completed by customers who create an account at XFashion  

Different, but not unique  

At the end of the first quarter of 2019, XFashion had more than $400 million in sales and 3.1 million  
active customers. Giant retail competitors such as Amazon and Nordstrom are lining up to mimic its  
style of retail. When it comes to online retail, Amazon is a serious competitor to any company,  
incoming or established. Camwell has responded to concerns about competition from Amazon,  
which have increased since Amazon launched Prime Wardrobe, a "try-before-you-buy" service --  
one that has been compared to XFashion, but notably lacks a stylist. Camwell does not seem to see  
Amazon as a threat, saying its value proposition was "fundamentally different," explaining that  
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Amazon's attraction was in its broad range and choice of clothes available, while XFashion  
essentially offers freedom from choice as it chooses the clothes for you.  
Some other competitors such as Bombfell and Rent the Runway offer different promises to draw in  
new customers. Celebrity Rent has an additional appeal to environmentally conscious consumers:  
clothes are rented, not purchased, so they do not clutter customers’ closets and end up in the landfill  
later.  
Celebrity Rent charges customers a monthly fee of $159 ($109 in the first month), and they can order  
unlimited shipments of items, including clothing from luxury brands such as Celine and Chanel.  
When customers are ready for something new, they choose what to return or buy (at 30% discount  
over the recommended retail price) and start the next shipment. Celebrity Rent offers free dry- 
cleaning services, shipping, and returns. XFashion charges no monthly fee. When customers decide  
to place an order, they will pay a $20 styling fee, which is applied as credit to any item customers  
decide to keep. If they choose not to keep any items, the styling fee is not refunded. Items to  
purchase range in price from $20-$600, with an average cost of $55 per piece. XFashion also offers  
free shipping and returns.  
To continue developing her business in this competitive scenario, Camwell has determined three  
priorities. These are focal points of attention to support XFashion in delivering its value proposition  
to customers and capturing more value in return.  
1) Improving satisfaction rate  
Camwell knows that one of her most complex challenges is trying to increase what the company  
calls its “keep rate.” Algorithms help curators choose five items for each shipment. Ideally,  
customers will love all of them. Often, they do not. The company does not share how many items  
customers keep on average, but a spokesperson says the figure has been going up each year.  
The better the XFashion stylists—human and machines—are at providing their customers with  
products they will love, the better their business runs. As they invest in merchandise they know their  
customers will love, the less they waste on warehouse space, return costs and donating items that  
weren’t sold. As Mark Giest, chief algorithm officer at XFashion, said, “Our business is getting our  
customers satisfied.” If consumers do not like what they receive on their boxes, they will be  
dissatisfied and drop their subscriptions. Subscription businesses depend on their long-term  
relationships to provide predictable revenue growth and deep insights into customer behavior to  
personalize the experience.  

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Figure 2 – XFashion explanation of how its style selection works  
Stylists can also see personal information about each client: their name, their height, their location  
(and the weather there), whether they are a mom or dad. XFashion not only asks customers to fill out  
a demographic survey and a style profile to determine style, size and prize preferences, but also asks  
them to explain why they returned a certain item. “It’s amazing what information clients will offer  
up to our stylists,” says Camwell. Far beyond opinions like “I hate stripes” or “blue just doesn’t look  
good on me,” clients have shared everything from weight loss journeys to pregnancies long before  
family members have been informed. “The bar feels high when clients share so much.”  

Figure 3 – An XFashion box as delivered to a customer  
2) Establishing partnerships with brands  
XFashion has an enormous amount of data about consumer habits and opinions on the fit, price and  
style of clothes. That information is used not just to optimize fixes but also the clothing itself. The  
company works with hundreds of brands, and some are changing their specs because of the  
aggregated feedback that XFashion shares. Camwell says that the data shared by XFashion is  
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infinitely better than data brands are getting through any other channel (such as physical stores or  
their own online stores). Although XFashion shares this data with some of the 200 brands it sources  
its clothing from, Camwell emphasizes that the company would never divulge information about  
individual customers.  
For example, in September 2019, well-known high-end fashion designer Elena Marin launched a  
capsule collection that leveraged XFashion’s expertise in data science to help Elena Marin’s  
namesake brand launch plus-sizes for the first time. “It came about because we basically had been  
working together since 2017. They came to me and asked if this is a category I’d like to get into. I  
said I've been dying to get into it, but we have to do this right. They have all the good data and the  
analytics about what this customer wants, and I want to make her feel beautiful, so I was able to  
bring that to life,” Marin shared.  
3) Expanding the business  
XFashion has explored other segments to expand the business, such as luxury, children’s and  
man’s fashion. The company has decided to postpone targeting the luxury segment, because,  
according to Julia Bernstein, Chief Operating Officer of XFashion, “the segment proves not  
to be ideal”. Conversely, the company will launch XFashion Men in December, by adding  
men’s apparel and accessories in response to strong client demand. “Since day one, we’ve  
heard from XFashion husbands, boyfriends, brothers and dads that they would love a  
XFashion service for themselves,” said Bernstein.  
In addition to style services that directly compete with XFashion, such as Nordstrom’s Trunk  
Box, the men’s apparel segment is also targeted by other competitors. Some offer only a  
specific item, such as the Tie Subscription Club or the Socks Society, in which customers  
pay a $45 monthly fee to receive 6 new pairs of socks every three months. Others focus on a  
brand or lifestyle, such as Under Armour’s subscription box ArmourBox , which delivers  
sports gear to customers.  
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Figure 4 – Under Armour Subscription Service  
END OF EXAMINATION PAPER