Gucci Brand Analysis - Essay Example

GUCCI BRAND ANALYSIS by Introduction Luxury as a term is ambiguous because it refers to the wide array of consumer products and services, businesses, perceptions and market concepts. In terms of luxury brands, ‘heritage’ is a critical distinctive attribute that distinguishes such brands from mass-market brands. This enables existing luxury brands to build a centre of difference encompassing a specific history. The paper aims at discussing how the brand Gucci has been able (over the years), to leverage on its heritage, thereby being able to create is current brand identity. This will entail the undertaking of a PESTEL model analysis of the luxury goods sector, subsequently analyzing two key issues, which the entity needs to address. This is in terms of its future strategy, vital in enabling its continued growth and competitiveness. A conclusive summary will subsequently recap the analysis, highlighting the critical points of focus and concern. Brand DNA: Conceptual Analysis Brand DNA as a term, is often defined as pertaining to both the perceptions and words of consumers, which are contained in their memory; over a given period of time (Hines & Bruce, 2006:35). As a metaphor, the term describes the existing interaction of a brand’s fundamental elements, which eventually lead to the brand’s evolutionary path. To be noted is that branding is more than just the superficial incorporation of sounds, images or colors, but rather it forms an integral part in a brand’s offers; in terms of products and services (Hines & Bruce, 2006:37). Accordingly, branding is important in order to successfully leverage an entity and/or its products, through sending out of desired signals to the public. This necessitates work, which cannot be out-sourced, but rather the need to look inwards at both the organization and its product/service(s) appeal. Thus, in order to effectively brand an entity and/ or its products and services, branding is vital; instrumental in the creation of an entity’s brand DNA (Hines & Bruce, 2006:40). Brand DNA: A Historical Analysis of Gucci Founded by Guccio Gucci in Florence (1921), the brand’s vision towards the luxury niche’ market domination was deeply grounded in Guccio’s ambition. As Jackson (2015) portrays, this was to not only produce, but also market beautifully handcrafted leather products for the wealth/ elite classes of society. Accordingly, he was able to secure a niche’ market, through offering luxury goods under his brand. This was in terms of benefits delivered to the high-end global consumer market, who often visited Italy and the larger Europe. Key to his gradual realization of this goal, was Guccio’s ability to ‘harness’ and effectively utilize not only the uniquely creative master-craftsmanship, but also manufacturing capacity of local Italian artisans (Jackson, 2015:1). Through this process, the business was able to grow, both in sales volumes and in reputation. Key amongst his varied global clientele, were local and international aristocrats, who being horse-riders, brought about the development of the brand’s unique ‘Horsebit’ icon. This led to the development of the enduring symbol, as the fashion house’s brand identity, as well as its progressively more pioneering design aesthetic (Jackson, 2015:2). This aided in distinguishing the brand from other luxury entities, through appeal to a specific section of society: - the high-end, fashion-conscious elite. By the turn of the 1970s, the brand had evolved into a dominant global luxury designer name, through expansion across the greater Europe, as well as venturing into both Asia and North America. The core value, goal and principle was to expand its market-hold through provision of a wide array of equestrian-inspired product collections i.e. bags, shoes, belts, gloves and trunks; all essential accessories for the international, stylish and fashion-conscious traveler (Jackson, 2015:2). Guccio’s two sons Rodlofo and Aldo Gucci eventually became equal shareholders in 1970, with the enormous growth witnessed and credited to Aldo. He was able to turn the brand into a global luxury fashion entity, in addition to launching the Gucci Ready-to-Wear (RTW) brand segment. By maintaining the level of product quality, targeted at the high-end luxury consumer-base, the entity was able to continue projecting its founder’s intended personality: as a choice-brand for the socially fashion-conscious and delicate luxury-affiliated consumer-base. The inclusion of the RTW brand segment was the entity’s projection of greater understanding, concern and intention of providing the best quality products for this high-end consumer base (Jackson, 2015:2). However, the effects of family feuding over control and ownership, as well as poor strategic management (especially in regard to licensing) is deemed responsible for the decline the brand endured. This was in terms of losing both its reputation and direction for quality production of luxury goods (Jackson, 2015:2). Influential is that the previously projected voice of the brand as one best suited for the high-end niche’ market, was to be subsequently lost, through subsequent influences in terms of corporate management, strategy and goal setting. Accordingly, further worsening the situation was the 1979 launch of a novel diffusion line, the Gucci Accessories Collection (GAC). While this was designed with the aim of broadening the brand’s overall appeal, as well as increasing revenues, it unfortunately marked a critical turning point. This was to however result in overall quality reduction (loss of niche’ value) of different products, vital in sustaining its core target market. Critical to note is that GAC comprised of an estimated 22,000 products, all which carried its brand name. This was despite not being accompanied by the essence of luxury i.e. ‘rarity’ and exceptional (value) quality, which were the values the brand’s most esteemed consumer-base wanted. Furthermore, the sale of these diverse and mostly ‘mass-market’ products, through a very wide range of retail outlets, eventually resulted in the loss of its ‘niche’ market’ reputation. Notable is that issues of counterfeits greatly harmed the brand’s global appeal, thereby resulting in decreased sales volumes (Jackson, 2015:2). It is critical in product or entity branding, to continuously focus on a specific target audience, concentrating on past consumers, influences, the media, distributors/ suppliers and the general public, hence the need for creation of targeted ‘marketing personas’ (Dibbs & Simkin, 2008:87). Ultimately, family tensions were to negatively influence the state of affairs, when Paulo Gucci (Aldo’s son) further diluted the brand. This was through sale of products under his name, which increased internal family-based and management disputes. This subsequently led to Aldo Gucci’s family eventual sale of their 50% stake in the entity to Investcorp. Maurizio ascended to the position of Chairman, of Guccio Gucci S.p.A, subsequently attempting to revitalize the brand. Clear in his mind, was the need to re-affirm the brand’s core values, goals and principles. This was in regard to what the type of products and content the brand offered, founded upon the entity’s distinguishable aspect of high-end niche’ market targeting (Jackson, 2015:2). The Luxury Fashion Sector The ambiguous nature of the term luxury is evident, given its reference to a wide array of market concepts, products, business enterprises, services and consumer brand products. As Kapferer (1996) portrays, it is difficult to ascertain what luxury entails; due to the fact that what may be deemed as luxury for some section of society, may be regarded as just something ordinary by the other population segment. However, the core attributes of exceptional (value) quality and ‘rarity’ are distinguishing factors critical towards categorizing luxury brands, products and services from their mass-market counterparts (Kapferer, 1996:54). Definitively, luxury pertains to a class category or concept, in addition to a polemic term and a subjective impression. However, despite the multiplicity of views, common attributes such as ‘exceptional quality’ and ‘rarity’ are factors that set aside a product(s) or service(s) from others (Kapferer, 1996:57/ West, Ford & Ibrahim, 2010:75). It is upon such key attributes, that Gucci as a brand has been able to (over the years) not only solidify, but also further expand its presence globally. This has been through niche’ market targeting, founded on continued maintenance and improvement of brand quality and value (Wood, 2010:23). By not only cultivating, but also maintaining its brand heritage, Gucci has been able to gradually conquer a niche’ of the global luxury fashion market. Heritage is what enables a luxury product/ brand to cultivate a centre of difference encompassing a specific history and/ or origin (Kapferer & Bastien, 2009:60). This has been mainly grounded in the presence amongst others: a unique set of skills or talent, entrepreneurship, and corporate vision. Furthermore, just like various French and Italian luxury brands i.e. Prada, Hermès, and Louis Vuitton etc, Gucci started from a specific target market – leather goods/ products – subsequently evolving (over the years), into an international luxury fashion brand. Currently, the entity is famous globally for both its Ready-To-Wear (RTW) apparel and leather products (Jackson, 2015:2). Luxury Goods Sector: PESTEL Analysis A PESTEL analysis of the luxury goods sector is critical in better understanding the various influences, effects and impacts that are inherent within the macro-economic environment. This will be focused on the Gucci brand as well the global luxury consumer market. Political Factors In terms of Political factors, it is notable that global economic development often goes hand-in-hand with politics, especially because of the recent economic crises (Wilson & Gilligan, 2003:62). Accordingly, different governments have undertaken various safeguarding measures on their economies, aimed at protecting and nurturing existing industries (Wilson & Gilligan, 2003:62). In foreign trade, the role of politics is vivid, hence its extreme relevance for the existing global luxury market. This is with respect to the fact that most of the brand names and companies in the luxury market are situated in Europe and are largely dependent upon foreign sales (Wilson & Gilligan, 2003:66). The rethought and re-focusing of foreign policy from traditional luxury markets from the North Atlantic and European regions, and towards the Asia-Pacific arena has been a major influence on the luxury goods sector (Wilson & Gilligan, 2003:67). A crucial aspect concerning the U.S. and Europe by extension is the aspect of terrorism. Due to the two region’s global importance in terms of politic and economic influence, they have subsequently been placed amongst the top most-likely regions to be susceptible to attacks. The most influential aspect concerning the luxury goods sector is the fact that this sector is mainly dependent on tourism as its primary avenue of enhanced goods/ products sales (Wilson & Gilligan, 2003:72). Economic Factors Economic factors are also fundamentally intertwined with the prevailing political factors as McDonald (2007) eludes, hence the presence of‘ripple-effect’ dynamism in the global economic sector. Accordingly, economic growth is often anchored on effective legislation and political dispensation, with growth being witnessed in specific nations such as the BRIC nations, and the Asia-Pacific region (McDonald, 2007:111). These two global regions have been the driving force behind the renewed demand for luxury goods, with the year 2010 marking a major rebound for the personal luxury goods market. As Kapferer and Bastien (2009) aver, this is anchored on renewed interest in brand quality, essential in the increase of brand power. However, in recent times, the steep leather price increases have majorly influenced the market, in terms of profit margins. In addition, high tax regimes in the Asia-Pacific region have resulted in price differentiation, as well as lower profit margins (Kapferer & Bastien, 2009:70). Social Factors The luxury goods and fashion sector is influenced by the continued need for sustenance of a specific socio-economic class. This is in terms of signifying both group and individual identities, vital in ensuring sustained brand loyalty (Hill, 2010:46). Through designs and styles of their products, luxury fashion sector plays can be able to convincingly differentiate themselves from others. Informative is that products are usually determined by prevailing sub-cultures and designers; hence their subjectivity to both unpredictable and sharp changes (Hill, 2010:47). A shift of demand towards the ‘absolute luxury’ conveyed by high-end classics, away from consumption-affordable luxury is an influential factor to consider. Increased self-indulgence of an emerging middle class has resulted in their sampling of luxury through entry-level (luxury) products, as a stepping-stone to ‘absolute luxury’ products (Hill, 2010:50). Technology Factors Technology is not a core element in production, since luxury products are based upon craftsmanship. However, as Piercy (2009) observes, potential exists through online platforms i.e. websites, despite premium store settings being fundamental to luxury positioning. Online potential, in terms of e-commerce and e-payment platforms, is influenced by the growing demand of emerging markets, vital in providing accessibility and direct engagement of consumers (Piercy, 2009:112). Environmental Factors It is notable that many luxury products are based upon leatherwork. Leather considerably affects upon the environment, especially through the tanning process. Because luxury goods sector players cannot produce such products without causing environmental harm, the best counteracting option to the damage is through engagement in pertinent corporate social responsibility activities. This is in terms of reducing overall carbon footprint, in addition to protecting critical eco-systems, aimed at ensuring continuous presence of resources (Hines & Bruce, 2006:86). Legislative Factors Lastly, legislative factors that critically influence economic policies need to be pro-business, anchored upon a conducive and well-developed financial regulatory system. This aids in enhancing open competition, especially in the Asia-Pacific region, where the regulation and legal environment are both very strict. This results in limitation of market entry, in addition to increased operation costs. This is critical, especially concerning regulations pertaining to taxation and product/ brand licensing (Piercy, 2009:117). Recommendations Gucci as a luxury brand, which is re-formulating itself, needs to consider very critically, the influence of both economic and social factors in formulation and implementation of future strategy. In terms of economic factors, the entity should consider the emerging new markets, founded on a growing middle and elite class, which is gravitated towards sampling and experiencing luxury. In addition, consideration should be placed on increased pricing of leather, which is a core component of its products. High taxation rates, based upon existing legislation should also be considered, given the critical importance of the Asia-Pacific market. Continuous dynamism and brand differentiation should also enhanced; playing a critical role, essential in curving out its place in the niche’ luxury goods consumer market (Kapferer & Bastien, 2009:97). This is in terms of a younger consumer base that is moneyed and wants to experience the life of luxury In terms of social factors, the brand should consider enhancing its products’ quality as well as practical functionality; aimed at targeting group and/ or individual identities (Hill, 2010:57). In addition, it should critically focus on maintaining brand loyalty, especially at the high-end of the consumer market; anchored on the emotional attachments this clientele has to luxury goods and brands (Hill, 2010:57). In addition, consideration should be focused on responsibly sourced luxury, due to the sensitivity behind sustainable development, environmental preservation and fair-trade. A realization by the entity that it can strongly differentiate itself through classy designs and styles of its brand products would be critical in its grasp on the luxury market. Influential in this regard, is the need to consider both designer input, as well as influences of prevailing sub-cultures (Hill, 2010:60/ West, Ford & Ibrahim, 2010:95). Conclusion The luxury fashion and goods sector is a highly competitive arena, given the critical importance of the twin elements of exceptional (value) quality and ‘rarity’. Gucci as a brand was in the past able to securely dominate the niche’ market it had cultivated based upon its solid heritage under its founder Guccio Gucci. However, internal and external influences were to subsequently distort this niche’ market image, eventually necessitating a rethink of the entity’s strategy. Considerations in terms of PESTEL analysis portray the need for the brand to continuously focus on the two critical elements of social and economic factors, as these are fundamental to its growth, new market venture, operatability and gradual domination of the luxury fashion sector. Critically, the brand needs to re-focus all its energy towards re-establishing itself as a brand that is anchored on exceptional quality and ‘rarity’ of its brand products. Reference List Dibbs, S & Simkin, L 2008, Marketing Planning: A Workbook for Managers. London: Thomson Learning. Hill, D 2010, Emotionomics: Leveraging Emotions for Business Success. London: Kogan Page. Hines, T & Bruce, M 2006, Fashion Marketing: Contemporary Issues. Butterworth-Heinemann. Jackson, T 2015, Gucci Group: A History of Luxury Brand Development. London: Regents’ University. Kapferer, J 1996, The Luxury Strategy: Break the Rules of Marketing to Build Luxury Brands, (2nd Ed.). London: Kogan Page. Kapferer, J & Bastien, B 2009, The Luxury Strategy. London: Kogan Page. McDonald, M 2007, Malcolm McDonald on Marketing Plans: Understanding Marketing Plans and Strategy. London: Kogan Page. Piercy, N 2009, Market-Led Strategic Change: Transforming the process of going to market. Oxford: Elsiver. West, D, Ford, J & Ibrahim, E 2010, Strategic Marketing: Creating Competitive Advantage, (2nd Ed.). Oxford: Oxford University Press. Wilson, R & Gilligan, C 2003, Strategic Marketing & Management. Oxford: Elsevier Butterworth-Heinemann. Wood, M B 2010, The Essential Guide to Marketing Planning. Prentice Hall: Harlow. Appendix Figure 1 Gucci’s global sales projections from 2001-2004, showcasing a gradual increase in overall sales volumes, as well as net profit margins Figure 2 Total Product Offering: This should provide a suitable guideline to Gucci as a brand, aiming at restoring its former glory as a niche’ luxury brand; as well as enhancing its new market penetration. Figure 3 Components of Value Proposition: This should adequately form the basis on which Gucci can effectively progress in terms of increased consumer satisfaction, through enhanced quality assurance. Read More