Marketing Strategy of Gucci - Essay Example

? Marketing Strategy: A Case Study of Gucci due] Marketing Strategy: A Case Study of Gucci Part A:Question one Gucci Fashion Company is experiencing drop in sales for some of its products which then CEO thinks can be mitigated and therefore proposes to the marketing manager the possible of using other strong brands in the chain to market the others. Seemingly, Pollet realizes the challenge that belies such a move since most of the company outlets have traditional characteristic of using independent ideas and products from the others. This is the problem since the product managers would want to promote their products independently just like the stores would prefer to use independent ideas amid the cut throat competition. Most brands products of Gucci group of companies suffered a drop in sales in the wake of the 2008 economic crisis except the two strong brands whose sales increased even in the most extreme of circumstances. Due to the circumstances involving the general drop in sales volume and the traditional beliefs and sales concepts, it is important that Gucci explores the best marketing model or mix to employ so as to revamp the market. One of the popular marketing strategy/model is the Ansoff Growth marketing mix. This describes the growth of a business in its attempt to market new or regular products in a new market or previously existing market. It therefore brings together growth in the market and growth or increase in brand of an organization. Ansoff can be achieved through various strategies such as market penetration, market development, product development and product diversification (Pickton & Broderick 2005). Market penetration involves the marketing of the products or the specific brand in existing market with an aim of increasing the market proportion for the product which can be achieved through the 7 P’s of marketing. It also undertakes to ensure dominance of the market by the product or brand by outcompeting the other brands or products. Market penetration will also try to restructure the product market by driving out competitors and increasing the consumer usage of the product. This is a strategy that Gucci can employ in trying to retain the market for their fashion wear whose sales have dropped since they are neither producing new brands nor investing in a new market but trying to retain their market share amid a crisis. Under the Ansoff mix, marketing development is also a strategy which involves seeking new markets for an existing product. The methods used can include exploiting new geographical markets through exporting or setting up of outlets where they originally did not exist. The company can also adopt a new distribution channel which will ensure the product penetrates into the markets it did not attract. In this case, other methods such as differential pricing can be used to attract consumers of different economic or social status (Mao and Krishnan 2006). Since Gucci might have limited their market in terms of size, the company should consider increasing the market size for the product whose sales volume is on the decline so as to ensure a balance. Ansoff also includes product development where a company undertakes to introduce a new product into the market and will require new competencies and modified products. Gucci is more concerned about its products which are on the decline but could choose to restructure their brands so as to produce more acceptable brands into the market and therefore avoid declining sales. Apart from all this strategies under Ansoff, the company may also opt for market diversification. This is a marketing strategy of exploiting totally new markets without prior experience or knowledge of the market. It is a risk venture which might result into unprecedented losses if not carefully approached but should be taken if circumstances demand. In the middle of the economic crisis, Gucci should not take this approach since it might result into more losses, especially the costs involved in promotion so as to capture the market or introduce the product. Apart from the Ansoff marketing models, there are other marketing mixes that can be incorporated that will help improve the market dominance of the product. Product line marketing through brand extension or stretching can also be used. This strategy is where a firm uses a more dominant product or one with a well developed image to market a different category of products. The renowned brand is useful in establishing the brand equity that will last and will serve as launch pad for the other new or weak products. Pollet has suggested the firm uses the methods as well as the brand of the products that have remained dominant in the wake of the financial crisis (Deborah McCabe, Rosenbaum & Yurchisin 2007). This will help promote the other brands with reported decline in sales to benefit from the strong brand equity developed by these two products. This is seemingly met with opposition from other brand managers who feels it is contrary to the firm’s marketing policy where each brand is product on an individual framework. The danger, they explain could be loss of sales for the other strong brands due to negative publicity associated with the underperforming products which are to be associated with them. The method will increase brand awareness which might increase sales for the other products with weak brand names. Though not practical in the case at hand with Gucci, product extension could also be used where variety of a given product are produced under the product name. Since consumers would be conversant with the parent product, they will be tempted to try and associate with the extended product. This will enhance the sale of the extended product while also making the original product popular. In the case of Gucci, the majority of products decline are brands that cannot be an extension of the two highly performing brands. They are total different fashion ware from the rest and so product extension becomes impractical. It can be explained through the categorization theory that consumers will tend to use their memory on the category of the product to compare the brand extension (Cook, Macaulay & Coldicott 2004). Therefore, if consumers perceive a relationship in the brand extension then they will be able to embrace the extension and use the product. This is an advantage that Gucci enjoys and will be able utilize if they extended their brands. The challenge, therefore, is the fact that the underperforming brands cannot be categorized as related to the performing brands and thus limits the extent to which this method can be used. The marketing of the underperforming brands as extension of the performing ones may result into brand equity dilution leading to a rippling effect, whose consequence might affect the all firm and its products for a long time. International Expansion Apart from their market in the U.S and UK, Gucci should consider more international market expansion to provide stronger brand equity for their products. The business should expand its market to more foreign geographical niches so as to be able to attract more sales for the underperforming products. Gucci can consider, as a method, the use of franchise business to expand into new geographical markets. This will help by identifying businesses in various countries and using them to launch or sell their underperforming products. The method can only be effective if the businesses so identified are performing in the markets. Diversification (Related, Unrelated, Horizon, Vertical), Diversification is a marketing strategy that can help increase sales and profitability of the firm. This involves considering new markets and new products for the company. Gucci as a corporate entity can involve in corporate diversification apart from just concentrating on the business unit. Diversification as a marketing matrix merges the concept of new markets and new products to realize effective sales output. According Ansoff, diversification requires new and independent resources unlike other strategies which employ the original resources used. New markets and new products considered as diversification should be based on the opinion of the consumers and not managers. Diversification can be classified as concentric, conglomerate, horizontal or vertical. Diversification is based on what the firm intends to achieve and will include development of new products, acquisition of new firms and business alliances with firms that produce complementary products (Cheverton 2007). This will depend on how much resources Gucci have which in this case is sufficient enough. In the case where the companies under Gucci have technological similarity especially in the products they handle, they can diversify in a concentric mode. The products can be sold by retailers. Horizontal diversification can be used where products that are unrelated can be produced to increase sales. This is not applicable in Gucci’s case since most of their products are related and in fashion design. Strategic alliance is a marketing strategy that optimizes efficiency of an organization in promoting its products. Through this method, the company which is in fashion design can unite with other companies to market their products strategies. Part B: Question one Brand equity is the impact or influence that a given brand has in the market. It is critical in the marketing of a product by any given firm and is always the main concern of a business. Brand equity is determined by the core brand, similarity between the core brand and the extension brand which is always affected by the consumer’s perception. It depends on the congruency of the core product and the extension product. It is measured on how well the product being used as core brand is recognized and favoured by consumers. Akers’s model is an example of brand equity model which bases on the number consumers who use the product as well as their distribution. Gucci has developed brands that are key in their market dominance which can be used in marketing the now defunct products. Cultural models Apart from the already discussed brand equity models, there are other traditional models that firms use over a period of time. This are called cultural marketing strategies where the firm uses its cultural products rather than dominate products to market their new products. Gucci can use its traditional products like jeans which are doing well in the market to revamp the market for their declining goods (Zhang & Sood 2002). Buyer behavioral model can also be used to determine how buyers will respond to the product as well as the core product used for marketing. This is important since it is the buyers who determine the significance of each product in the market. It is not the managers who can define the dominance of the product or brand but the consumers who rate the projects. Servqual is a framework that is used to the aspects of quality in a product. It puts into consideration the aspects of quality and service such as competence, security and reliability as considered by the customer. The Gucci products that are on the decline might not be able to meet some of these qualities to the consumer leading to the decline. Before proceeding with the sales, Pollet should consider a Servqual analysis to establish how well the consumer rates the products and how significant it could be to use the pother core products to promote them. Part B: Question two PESTEL will be considered by Gucci since the problems facing the products are economical, which is one of the factors that prompt the use of PESTEL. There is a change in consumer use of some products under the product range of Gucci which has led to other managers, analysts and other stakeholders to demand for forecast when the company will break even. Long PESTEL can be used in the analysis of Gucci to determine the kind of marketing structure for the products. Part B: Question Six The seven P’s of marketing include pricing, product, promotion, packaging, place and position of the business. Gucci can do a revaluation on the seven P concepts to revamp the products. Good pricing, promotion through discounts on the products, positioning the products at the right level as well as improved packaging can enhance the image of the products. References Cheverton, P, 2007, Key marketing skills strategies, tools, and techniques for marketing success (2nd ed.). Farmington Hills, Mich.: Thomson Gale. Cook, S., Macaulay, S., & Coldicott, H, 2004, Change management excellence: using the four intelligences for successful organizational change. London: Kogan Page. Deborah McCabe, Mark S. Rosenbaum & Yurchisin, J, 2007, “Perceived Service Quality and Shopping Motivations: A Dynamic Relationship,” Services Marketing Quarterly, 29 (1), 1-21. James D. O, 2006, “Extension to alliance: Aaker and Keller’s model revisited”, Journal of Product & Brand Management, 15(1), pp. 4–13 Keller, K.L, 2001, “Building customer-based brand equity”. Marketing Management, 10(2), 14-19. Krane, J.A, 2006, “Flutes and Suits: The Case against Veuve Cliquot Ponsardin and Its Claim to Brand Extension ", University of Toronto Faculty of Law Review, 64, pp. 129–164. Luis Filipe Lages & Joana Cosme Fernandes, 2005, "The SERPVAL scale: A multi-item instrument for measuring service personal values", Journal of Business Research, Vol.58, Issue 11, pp. 1562–1572. Mao, H. and Krishnan, S, 2006, “Effects of Prototype and Exemplar Fit on Brand Extension Evaluations: A Two-Process Contingency Model.”, Journal of Consumer Research, 33 (1), 41-49. Martinez, Eva and de Chernatony, Leslie, 2004, The effect of brand extension strategies upon brand image, Journal of Consumer Marketing, Vol. 21 Iss: 1, p. 39-50. Nyeck, S., Morales, M., Ladhari, R., & Pons, F, 2002. "10 years of service quality measurement: reviewing the use of the SERVQUAL instrument." Cuadernos de Diffusion, 7(13), 101-107. Retrieved July 8, 2007, from EBSCOhost database. Pickton, D. & Broderick, A, 2005, Integrated Marketing Communications. England: Pearson Education. Reast, J. D, 2005, “Brand trust and brand extension acceptance: the relationship”, Journal of Product & Brand Management, 14(1), pp. 4–13 Shimp, T.A, 2003, Advertising, promotion, and supplemental aspects of integrated marketing communications. Mason: South-Western. Sjodin, H and Torn, F, 2006, “When communication challenges brand associations: a framework for understanding consumer responses to brand image incongruity”Journal of Consumer Behaviour, 5(1), pp. 32-42. Zhang, S. and Sood, S, 2002, “"Deep" and "surface" cues: Brand extension evaluations by children and adults”, Journal of Consumer Research, 29(1), pp. 129–41. Read More