Gucci: Fashion Marketing Strategies - Essay Example

? Gucci: Fashion Marketing Strategies By [Insert Presented to [Insert your [Insert Your s ] Table of Contents 1. The House of Gucci Besides being one amongst the world’s most valued fashion brands, the House of Gucci is a conglomerate which product lines include leather goods, shoes, fashion accessories, jewelry, ready-to-wear, ties and scarves, eye wear and fragrances. The brand has approximately more than exclusive 300 stores and more than 60 franchised outlets at prime locations around the globe (Frisa, 2011). The brand is named after its founder Guccio Gucci who started the business with a shop in 1920 in Florence which carried leather goods, primed to elegance and style. The company steadily grew with Aldo and Rodolfo Gucci (Guccio’s sons) in the United States with the same product line. Gucci is uniquely positioned as an elegant, stylish, modern yet trendy brand in the niche high-end market. Gucci’s biggest competitors are Louis Vuitton, Chanel, Prada and Hermes (Forden, 2000). Amongst the competition, Louis Vuitton holds the highest value in the fashion world which is followed by Hermes and then Gucci with a brand value of approximately $ 7.5 billion. Gucci shows a rising trend in its brand value from the past five years which can be accounted to the fact that the Asian markets are growing and prove to be a lucrative opportunity for luxury fashion brands (Branddirectory.com, 2012; Chadha, 2006). With this brand value, Gucci stands at 420th in the top 500 global brand ranking (Branddirectory.com, 2012) 2. Customer Profile Gucci targets the niche market of individuals who belong to the upper class with high incomes. To set itself apart from the competition, the brand of Gucci is positioned for those individuals who prefer a mixture of heritage, modernity, trendy, creativity and sophistication (Gucci.com, 2012). The House of Gucci’s customers are from all over the world. They are the people who prefer quality over price and are brand conscious. Gucci, along with other luxury brands, is bought to flaunt a status symbol. Gucci’s target market is predominantly the middle aged, both genders, high status individuals and most likely to be businesspersons than high-profile employees. Gucci charges a premium price from the customers and this consistent practice has established the brand image of Gucci as exclusive and for the up market (Forden, 2000). 3. S.W.O.T Analysis 3.1 Strength Gucci’s biggest strength is that it has a strong control over its distribution channels. The brand predominantly has its own stores across the globe. Gucci prefers to keep the value added to the group itself rather than let the middlemen and retailers gain the benefit. This enables Gucci to maintain consistency throughout its worldwide operations (Datamonitor). Besides having a strong internal control over its stores, the House of Gucci is itself a conglomerate with about 10 brands in its portfolio. This diversification has expanded the group’s customer base and has given Gucci a strong clientele. Not only it divides the risk of operating a business amongst many ventures, but also ensures steady revenue stream from other sub-categories. This way, the group’s financial standing will not be relying on one single brand (Christopher et al, 2005). Gucci has established its brand over decades together and this thus gives it the strength of high brand awareness. Especially, in the world of fashion, Gucci is a well known brand name amongst its competitors. It is the brand of Gucci which brings a well manufactured product into the elite category (Datamonitor). One amongst Gucci’s strengths is its international presence like its competitors. Coupled with the strength of a strong distribution control over its distribution channels, Gucci has a strong internal chain of operations which is likely to help Gucci grow organically (Datamonitor). 3.2 Weaknesses: The history of Gucci’s organization, management and ownership has always been full of controversies. The pioneers of the business no more have the control of the business. After Guccio Gucci’s death, his sons and grandsons lost the business to a London Investment company owing to the family’s internal conflicts over the business. Since then, the management has been unstable which reflects into the company’s financial situation (Datamonitor; Forden, 2000). Gucci has been going through a financial setback which is mainly because of debt financing. Gucci has a high debt ratio as compared to equity financing. This puts a negative impact directly on the margins. Despite having a strong brand portfolio, Gucci is the only brand which can be considered as a cash cow for the House of Gucci. Other brands record a weak profitability as compared to Gucci which may also be the reason of Gucci’s declining profits (Datamonitor). 3.3 Opportunities: Almost all brands in the fashion industry have grabbed the opportunity of growing Asian markets. Gucci amongst them is also presented with this prospect. Regardless of the fact that Gucci already has international presence, there are still many markets which are untapped and which Gucci can launch its brand. Secondly, the market structure and the attitudes of the people in Asia tend to be more responsive to status symbol brands (Datamonitor; Chadha et al, 2006). Gucci is reported to have problems with the profitability of other brands in its portfolio. It can create synergies between them in order to minimize its costs and save money. These could be in the form of joint marketing and supply chain operations. Gucci however, is to be marketed separately as the rule of marketing clarifies that the benchmark or the premium brand must never be compromised in any way (Datamonitor; Randi, 1997; Christopher et al, 2005). 3.4 Threats Gucci operates in an industry where other giants namely Louis Vuitton, Prada, Hermes, Chanel etc are highly competitive in terms of their brand value. It is highly unlikely that brands of such caliber compete on prices therefore marketing campaigns and consumer expectations are closely being followed by the competitors. This leaves Gucci vulnerable to threats in case if it does not keep a pulse check on the customer’s expectations (Datamonitor). Besides the competition, all the designer labels are prone to imitational products which not only give a blow to the brand’s exclusivity, value and image, but also impose a financial threat. This is because for people who might just buy an original Gucci article from its authentic outlet, would rather but a cheaper first copy of the brand (Datamonitor). 4. Competitor Analysis Gucci mainly faces competition from Louis Vuitton, which is the world’s most valuable brand; Chanel, which is positioned as a smart, elegant and classy; Prada which is an Italian brand and Hermes which is again French brand (Branddirectory, 2012; Frisa, 2011). Gucci’s closest competitor is Prada as it can be gauged form the two brands’ advertising patterns. With the same pricing levels, product lines and homogenous target markets, Gucci and Prada go neck-to-neck in Italy. However, Gucci’s focus in marketing is to promote the heritage and its craftsmanship whereas, Prada is known to have the most advertising spend amongst the international luxury brands (Christopher et al, 2010). Louis Vuitton on the other hand, is a French brand which has the most brand value in the luxury fashion industry. The brand is uniquely positioned as status symbol for the elite and as it is premium priced, it carries exclusivity in its brand persona. Louis Vuitton is experiencing double growth digits (Reuters, 2012). The brand is available through its own boutiques and registered retailers operating in upper-end malls at prime locations worldwide. Chanel, which is another French based brand, has a product range from fashion accessories to shoes, leather goods, fragrances, sunglasses, shoes and even a Prada cell phone which has been provided by LG. Hermes which is also French, is second to Louis Vuitton considering the brand value. It carries a range of leather goods along with fashion accessories and product line similar to Louis Vuitton (Branddirectory, 2012; Christopher et al, 2010; Bott, 2007). As far as the brand ratings are concerned, as mentioned above, Gucci and Prada are on the same level and it can be drawn that the two brands are in fierce competition. The ratings were derived after a comparison of the brands in the industry which was made by Branddirectory.com, (2012), keeping in consideration the financial standing, brand equity and possible return on investment. 5. The 4 Ps: 5.1 The Product: In the year 1999, Gucci repositioned itself from a traditional and classic image to smart, elegant and glamorous feel with the introduction of it new product range of ready-to-wear collection (Jackson et al, 2002). The House of Gucci has about ten brands in its portfolio: “Balenciaga, Stella McCartney, Boucheron, YSL, YSL Beaute, Bottega Veneta, Bedat & Co., and Sergio Rossi” (Frisa, 2011). Gucci has now a diverse range of brands from fashion accessories to the wardrobe. Gucci is more than just a product. It is a luxury which few can afford and the brand name of Gucci carries a status symbol and a certain niche class. For a lady who, for example needs a handbag, can even use a cheap unbranded product to stuff her belongings in however, the same product with the double G’s of the brand Gucci on it, would not just be something in which she would stuff her belongings. It would be a status symbol and an image which she would carry. This is the core product which Gucci has to offer to its market (Levovsky, 1993). Besides the core product, Gucci delivers the values of quality, longevity and the brand image as Actual product and finally, other value added services such as replacement warranty, home delivery along with a good resale value (which comes naturally with a label like Gucci) is the Augmented product with Gucci is offering to its customers (Jackson, 2002). 5.2 The Price Structure: Prices for any low-involvement product must be kept low. However when a luxury brand gets involved, the low-involvement product will automatically become a high-involvement product. For example, for an individual, buying an unbranded wallet may not require as much research and thought process as buying a brand would. Besides a brand, prices play an important role in this transition from low-involvement to high-involvement. Gucci’s prices carry a premium for the brand value and the image which it would give to the customer. Not so easily affordable, Gucci maintains its persona by keeping its prices high and targeted only to the upper segment. (Kapferer et al, 2009). At the time when Gucci was revamped, prices were reduced to almost 30% and positioned with Prada and Loui Vuitton (Jackson, 2002). 5.3 The Place: As noted above, the marketing mix for a luxury brand is entirely different and opposite to that of any low-tier brand. Rather than applying an aggressive push strategy and filling up the market with its products, Gucci is only available through its own outlets and franchises. This gives the brand an exclusivity which otherwise would be lost it the brand could be found almost anywhere. (Kapferer et al, 2009). These stores are strategically places in those prime locations where the up market has most access to. Unlike its competitors like Louis Vuitton which can be found with authorized retail carriers in department stores, Gucci is available only through its exclusive stores. The stores are designed specifically to attract a more hip crowd from amongst the niche target market. The environment the stores carry the brand promise of elegance and modernity mixed with tradition and style (Gucci.com, 2012). With the boom in e-tailing, any business which does not mark its presence online would be committing a suicide. The e-tailing environment on the internet is expected to grow ten folds in the years to come. Gucci, being a global luxury fashion brand itself, also sells its articles through its online store (Erdtman et al, 2010). 5.4 Promotion: In order to promote a luxury brand in the right places, marketers need to keep a pulse check on all the possible promotional vehicles which are accessed by the brand’s target market. Unlike any other common brand behind which, millions of dollars are spent on the marketing budget for promotions, luxury brands need the right tools to promote them through rather than dry up its company’s budgets. Gucci’s promotions are done in a subtle way which has no mention of the prices or any discount schemes as the brand is purely positioned as a luxury brand. Besides this, the promotions primarily focus the elite craftsmanship and its brand mantra (Kapferer et al, 2009). Currently, Gucci engages in experiential marketing which goes beyond the traditional Above the Line marketing. Creating an experience of the product or the brand itself through its store environment, service and packaging is Gucci’s priority. They rightly believe that a potential customer’s exposure to an experience rather than a 5 second hoarding or a print ad is far more effective and is most likely to pay back in terms of a long-term customer. Besides going on print ads and out-of-home, Gucci uses celebrity endorsements to enhance the image of the brand (Christopher et al, 2004). 6. Conclusion Gucci has been consistently sticking to its brand values of providing a unique experience to the target market whether through its store environment, marketing communications, pricing or distribution strategy. Ever since the company came under De Sole and former Art Director Tom Ford it has gone through major revitalization and revamping from 1999. The brand is now established as a premium brand and known for its quality, exclusivity and unique designs. However, the company does not give as good a picture when its financial records are scrutinized. A declining trend can be seen in Gucci’s performance over the last three years. Its ratings have decreased however, the brand’s value continues to rise which can be accounted to favorable market conditions in Asia (Branddirectory.com, 2012; Dubois et al, 1995; Reuters, 2012). 7. Recommendations The utmost important measure which Gucci needs to take is to align its organization under one inspiring mission statement which will steer the workers and the leadership towards one common goal. After the original owners lost control over internal disputes at the cost of effective management of the business, the new management took over but which could not stay for the time long enough to strengthen the management internally (Jackson, 2002). Besides this, Gucci is the only premium brand of the group which is the highest contributor to the profits of the group. Harsh decisions will need to be taken to either discontinue the ones which are not profitable enough or more so add to the costs (Stanley, 1988; Kapferer et al, 2009). The other option which Gucci is has is to club two or more brands together and then promote it accordingly. This would reduce the marketing costs of the brands to a great extent as then more money could be allotted to more profitable ventures (Randi, 1997). Gucci’s decision to keep its distribution exclusive to its own stores has given it a good control over its distribution channel. However, unlike Louis Vuitton, one of Gucci’s closest competitors, Gucci is not as exclusively positioned as Louis Vuitton is. Therefore, to increase its revenue, Gucci must either franchise more stores in different locations (predominantly in Asia where the markets are growing (Chadha et al, 2006) or follow the format of Louis Vuitton and start having authorized retailers to deal in Gucci as well. This is because Louis Vuitton is gaining a competitive advantage by making itself available to retail carriers of high-end luxury brands whereas, Gucci, despite not having exclusivity as its Unique Selling Point, is not getting the exposure there (Kapferer et al, 2009). 8. References BOTT, D. (2007). Chanel: collections and creations. London, Thames & Hudson BRANDDIRECTORY.COM. (2012). Brand Finance Brand Comparison Tool. [Web]. 2012. Available at: [Accessed 14 April 2012] CHADHA, R., & HUSBAND, P. (2006). The cult of the luxury brand: inside Asia's love affair with luxury. London, Nicholas Brealey International. CHRISTOPHER M. MOORE, & GRETE BIRTWISTLE. (2005). The nature of parenting advantage in luxury fashion retailing – the case of Gucci group NV.International Journal of Retail & Distribution Management. 33, 256-270. CHRISTOPHER, MOORE, MARGARET BRUCE, GRETE, BIRTWHISTLE, & JACKSON, TIM. (2004). A Contemporary Analysis of Global Luxury Brands. Elsevier Ltd CHRISTOPHER M. MOORE, & STEPHEN A. DOYLE. (2010). The evolution of a luxury brand: the case of Prada. International Journal of Retail & Distribution Management. 38, 915-927 DATAMONITOR PLC (n.d.). Gucci Group SWOT Analysis. Business Source Complete. Cleveland, Datamonitor Plc. http://proxy.library.carleton.ca/login?url=http://search.ebscohost.com/direct.asp?db=bth&jid=%22ZA5%22&scope=site&site=bsi ERDTMAN, JENNIFER, & HEDINGE, CAMILLA. (2010). Luxury fashion web-shops, a successful distribution channel? University of Boras/Swedish School of Textiles. University of Boras/Swedish School of Textiles. http://hdl.handle.net/2320/6740. FORDEN, S. G. (2000). The house of Gucci. New York, HarperCollins World. FRISA, M. L. (2011). Gucci. New York, USA, Rizzoli New York GUCCI.COM, (2012). The World of Gucci. [Web]. 2012. Available at < http://www.gucci.com/int/home> [Accessed on 15 April 2012] JACKSON, TIM, & HAID, CARMEN. (2002). Gucci Group: The New family of Luxury Brands, A Case Study. KAPFERER, J. N., & BASTIEN, V. (2009). The luxury strategy: Break the rules of marketing to build luxury brands. Philadelphia, Kogan Page. LEVOVSKY, S. B. (1993). Gucci International--a case study of the importance of brand equity in the marketing of luxury goods. Thesis (M.S.)--Massachusetts Institute of Technology, Sloan School of Management, 1993. RANDI PRILUCK GROSSMAN. (1997). Co-branding in advertising: developing effective associations. JOURNAL OF PRODUCT & BRAND MANAGEMENT. 6, 191-201. REUTERS, (2012). UPDATE 2-LVMH profit beats forecasts, sees "excellent" 2012. Reuters U.S. [Web] 2 Feb 2012. Available at [Accessed on 13 April 2012] Learning Journal During this research project, I have broadened my understanding of the luxury fashion industry. I researched the major players operating in the industry, namely Louis Vuitton, Chanel, Hermes and Prada. Their brand value was compared against each other along with their respective brand equity, unique brand positioning and financial position. It has been observed that the marketing principles of the fashion industry and that too for the luxury brands, are different from conventional principles of marketing. All the luxury brands focus on providing a personal experience to the consumers and create a long-term impact on them rather than adding to the advertising clutter in promotional tools in the midst of multiple brands from various different categories. It has also been studied that companies now focus more on Below the Line marketing endeavors as compared to Above the Line promotion on electronic and print media. Besides this, all major players in the market have their own unique positioning statement which is communicated to the consumers in a manner which is integrated in the brand’s operations, theme and the feel of the stores/outlets, marketing communications, after sales service and pricing strategies. Gucci’s strength and comparative advantage over its competitors is that it has a strong centralized control over its distribution strategies. This means that Gucci maintains its brands exclusivity by ensuring that its brands are available exclusively at its stores. Moreover, this reduces the threat of counterfeiting as the consumers will be ensured that they can find an original Gucci only in its exclusive stores and not anywhere else. Gucci not only uses this strength as a strategy to position itself exclusively, but also to minimize the threat imposed by counterfeiting which every brand operating in the luxury fashion industry is facing. After researching on Gucci’s along with its competitor’s strategies, the trend of increasing investment by the fashion industry in the Asian markets was seen. This is mainly because statistics show that ever increasing brands have made heavy investments in Asia, concentrating mainly on India and China which are also two of the world’s most populous countries. European markets along with other Western markets have become stationary and registers little growth. Whereas, developing countries of Asia show increasing growth trends which presents good opportunity for luxury fashion brands to enter and conduct business. For this paper, internet resources, research publications on luxury fashion industry, books, articles and publication on marketing strategies which global luxury brands adopt and journals of fashion marketing were researched and studied. Read More