Coco Chanel Marketing - Case Study Example

Marketing Plan Chanel S.A Introduction of the company 1. Introduction Chanel S.A. is a privately held company that operates in fashion industry. It offers a broad product assortment including designer apparels, footwear, accessories, beauty care products and perfumes. The French-based company is engaged in operating boutiques and stores in Europe, the Northern and Southern Americas, Middle East and Asia (MarketLine Advantage, 2014). 1.2. Business objectives As the company is a privately held and there is no obligation to report to shareholders and public, Chanel is quite secretive in announcing its strategic plans and business objectives (Amen, 2012). However, there can be outlined few main business objectives pursued by a company. Chanel is a brand with strong identity and reputation for quality and style. Its global vision is to be “the ultimate house of luxury, defining style and creating desire, now and forever” (Nagasawa, 2011, 6). One of the main company’s business objectives is to maintain tight control over its image and ensuring consistency of all products, marketing, and packaging in global scales (Euromonitor 2014; Amen 2012). The company’s management aims to keep traditions of the brand but also to adjust to modern trends. 1.3. Business structure of company Chanel has a global business structure, consisting of the original French-based company Les Parfumes Chanel, the current fashion house Chanel S.A and several other companies involved mainly in sales and manufacturing operations (Nagasawa, 2011). According to Bruno Pavlovsky, the CEO of Chanel, “everything is centralised in one hands”, as thus the company is able to keep consistency between the shows and communication in different regions (Amen, 2012). Therefore, the company has a centralised structure, which allows the management to control and manage the team from one location. Each team member has a specific knowledge and specific role. The company also is highly focused on creativity and quality. The quality control manager reports to the production manager, while quality assurance manager of Chanel reports directly to the top management (Brun and Moretto, 2014). 1.4. Products and Services The key products and activities of Chanel S.A. include the following: fashion products, fragrances, makeup products, skin care products, accessories, watches, and activities (conducting fashion shows and exhibitions) (MarketLine Advantage, 2014). Fashion products offered by the company include the following: ready to wear, handbags, shoes, leather goods, costume, jewelry, eyewear, scarves, belts, hats, gloves (MarketLine Advantage, 2014). 2. Market overview 2.1. Target market Chanel has several different product lines that can target different categories of consumers. It is possible to segment target market for Chanel SA by two major criteria: sex, age, income level and lifestyle. Sex: females and males Gender: The company offers classic and modern models, which means that there is no specific limits to age). This also relates to beauty products and perfumes (there are different lines for different age categories). There can be identified three major categories based on age factor: Generation Y (also known as millennial generation) – 17-33 year olds; Generation X – 34-46 year olds; Baby Boomers: 47-65 (Cococlassic, 2011). Income level: upper level. The company remains at the upper level, its products including accessories and bags are quite expensive. Therefore, the company targets women with high level income (Kapferer & Bastien, 2012). Lifestyle: both working and not working women, who like classic look, quality, and style. 2.2. Customer profile Chanel as any other luxury brand “creates brand value by building a reflection of self offered to others” (Kapferer & Bastien, 2012, 149). Chanel’ brand reflection is an elegant woman of any age, sophisticated, modern, successful, seductive, and loving to attract attention. Therefore, the ideal customer profile will be those women who identify themselves with Chanel and its reflection. 2.3. Competitor profile Competition in the luxury fashion market as well as beauty/perfumes segment is quite fierce and intensive. Major competitors of Chanel are LVMH Moët Hennessy Louis Vuitton, Kering Group (Yves Saint Laurent, Bottega Venera, Gucci), Hermes Group, Prada, and many others. LMVH profile LVMH is the largest luxury group in the world, which offers a wide mix of activities and products (both mass market and top-end luxury). Even though there is mass-market brands such as Sephora the company still mainly operates in premium segment. In terms of strategic planning, the group has been increasingly focusing on emerging markets such as China. The company has shown positive financial performance and continuous growth over the period 2009-2013 in two major segments: fashion and leather goods, and perfumes and cosmetics (Mintel, 2014). Figure 1: LVMH: Group financial performance 2009-2013 (Source: Mintel, 2014). In terms of geographical distribution of revenues, the company’s major revenue-generating region in 2013 was Asia (excluding Japan), followed by US, and Europe (excluding France). Below is presented graphical illustration. Graph 1. Revenue breakdown by regions, LVMH (Mintel, 2014) Kering Group Kering is a global luxury company, which owns several upper premium and high-end luxurybrands including the following: Gucci, Yves Saint Laurent, and Bottega Veneta brands (Mintel, 2014). The company has focused on opening new stores across the globe, thus on development of own distribution network. The company also is strongly focused on business expansion in China and other Asian market. Thus, for example, in the first half of 2014, Asia-Pacific region (excluding Japan) contributed to 32% of the total revenue (Mintel 2014). Below is presented a breakdown of Kerling’ revenue generated by key luxury brands. Graph 2: Kering Luxury: Financial performance, breakdown by key luxury divisions, 2013 (Source: Mintel 2014). While evaluating the competitive position of Chanel SA in the global luxury market, it is possible to compare % of value share of the company against major competitors. Below is presented a graph of top 10 global companies by value share (as of 2013). Chanel is ranked as no.5 after LVMH, Kering SA, Richemont SA, and Ralph Lauren. Graph 3: Luxury Goods: Top 10 Global Companies by Value Share (Source: Euromonitor International, 2015). 2.4. Marketing objectives The company is already globally recognized and there is no necessity to conduct marketing campaigns aimed at brand recognition and awareness. However, as the company continuously introduces new collections, it is important to develop marketing campaign for the next collection. There can be formulated two major objectives of the next marketing campaign: 1) To introduce a new collection of Chanel Fall-Winter 2016 across the globe; 2) To increase market value up to 2,5% by the end of 2016. 2.5. Marketing strategy The company is positioning itself as a global brand. With such a positioning, the company doesn’t apply different marketing strategies for different markets or geographical regions. Chanel adopts global marketing strategy, communicating thus to the whole global community. The company’s marketing communication strategy practically always is based on celebrity endorsement strategy. The company cooperates with different celebrities and make them main heroes of its commercials and short films. Among a list of celebrities working with Chanel are Kate Moss and Keira Knightley (Coco Mademoiselle), Nicole Kidman, Catherine Deneuve, and Brad Pitt (Chanel No. 5.) (Arora and Gulf, 2011). 3. Action plan of marketing 3.1. SWOT analysis Below are summarized key strengths, weaknesses, opportunities, and threat of Chanel brand. Strengths Globally recognized brand and logo; Wide product assortment; The highest brand awareness among luxury brands in China Strong fragrance and beauty business, powered by legendary fragrance, Chanel #5; Strong online presence (The website, the Chanel News blog, the new Coco Chanel website, more than one million followers on Twitter and 7 million fans on Facebook) (Amed, 2012) Availability of VIP service (on home visit to show collections) Strong reputation for style and quality Global brand equity Weaknesses High prices; No sales of clothes online (due to differentiation strategy) Opportunities Luxury market growth in emerging markets especially China China is forecasted to account for 20% of the global luxury market by 2015 (Warc Exclusive, 2010) Online stores and promotions Threats Increasing competition of major luxury brands Threat of counterfeits and illegal use of Chanel logo 4.2. The PROMOTION of product or service In-store promotions is the key element of Chanel’s promotion strategy. As the CEO of the company said: “…we want you to come to the boutique, because we feel that in the boutique we can give you the right understanding of the brand” (Cited in Amed, 2012, n.p.). The company strives to attract potential customers to the store and to offer customers to show, to touch and to try the product in the fitting room. The company views this approach as more than service, but as part of Chanel, part of its differentiation strategy (Amed, 2012). 5. The PRICING strategy As it has been already clearly identified Chanel SA operates in luxury segment and thus pursues premium pricing strategy. The company’s prices are quite similar across the globe, as Chanel strives to standardize its prices. However, quite recently, the company has announced about its plans to raise prices in Europe but to cut prices in China. Thus, in Europe bags 11.12 and 2,55 bags will rise to 4,260euros ($4,517) from 3550 euros , and Le Boy from 3,100 to 3,720 euros. In China, the prices for the same bags will be decreased from 38,000 yuan to 30,000 yuan (4,816). While in Chine the prices will decrease it is interesting to note that they were initially higher than in Europe (Wen, 2015). Such a high-price strategy in China taken by Chanel is viewed to be as an opportunity to gain more from the psychology of Chinese consumers who believe that the higher indicates on better taste and higher quality (Wen, 2015). Even though the projected price fluctuations should not exceed 10%, these relatively small adjustments might positively impact consumer’s behaviour in China (Wen, 2015). On the other hand, this strategy can be viewed as a stimuli to encourage customers to buy Chanel products while the prices are cut down. 6. POSITIONING in the marketplace Chanel is positioning its brand on the market as luxury brand. The company is positioning itself as aspirational brand. Thus, Chanel has an identity, which allows the brand to be different even in the luxury segment (Kapferer & Bastien, 2012). It is important to continue pursuing given positioning strategy, allowing the company to meet it business objectives of brand consistency. 7. Sales and distribution channels Chanel operates its own stores for fashion segment. This is an important element of the overall company’s strategy as own stores and fitting rooms are viewed to be key in-store promotional strategies (Amed, 2012). For selling cosmetics and perfumes, the company cooperates with distribution networks in different countries. 8. Marketing activity As the company is keen on being consistent in everything it does, it is important to ensure that marketing communication strategy is consistent with the previous marketing strategies. In order to achieve the above set marketing communication objectives, it is recommended to pursue celebrity endorsement strategy and use both traditional and digital marketing communication tools, such as Print ads (Vogue), TV ads, and social media (Facebook, Twitter, Youtube). Celebrity endorsement Part of Chanel’s strategy is to invite celebrities to be spokespeople on behalf of the legendary brand. The company continuously changes these spokespeople, by attempting to invite those who are on the edge of popularity. It is a good strategy, as celebrities increase company’s chances to grow awareness, to differentiate from competitors and to increase market share (Kotler and Armstrong, 2012). As of March 2015, the company has made a choice on 24-years old actress, Kristen Stewart (Mizoguchi, 2015). As the company is privately owned and management is free to keep everything in secret including the financial deal and terms of cooperation, it is difficult to suggest who should be the next “muse” of Karl Lagerfeld. However, it is definitely clear that the next Chanel’s collection Fall-Winter 2016 should be advertisement with the involvement of some celebrity. Print Ads: Vogue and Harpersbazaar In order to promote its brand globally, the company utilises some of the most popular printed publications, such as Vogue and Harpersbazaar (Shea, 2013). These two magazines allow the company to reach its target audience in global scales, as practically in every country where the company operates there are published locally adjusted versions of these fashion magazines. TV ads It would be also useful to launch massive TV advertising campaign, with a focus made on the Chinese market as the market with highest growth potential of luxury segment. Again, at the current stage it is difficult to suggest what type of advertisement, what context and what celebrity should be in focus as no information on company’s autumn campaign and strategic plans is available. Social Media Social media is an important marketing communication tool which should not be underestimated by the Chanel’ management. Social media allows the company to target its potential customers globally and engage them in a more effective way. Interactive communication via social networks such as Facebook, Twitter and Youtube should allow the company to increase interest in its brand among millennials segment and to encourage them to visit physical stores of Chanel. 9. Marketing budget While projecting a marketing budget for a proposed marketing communication plan it is difficult to provide exact cost breakdown as there is not enough publicly available information on the company’s contractual agreement with celebrities, the number of countries where TV ads and print ads will be launched, etc. Conclusion Chanel S.A. is a globally recognized brand with great history and positive reputation. The names of two personalities (Coco Chanel and Karl Lagerfield) are enough in order to differentiate the company from its major competitors. Chanel is a luxury brand, targeting woman of different ages from all over the world who have common perception of their style and eagerness to classic and sophistication. Practically everybody knows the brand Chanel, and there is no necessity to put efforts in order to increase this awareness. However, the competition in luxury segment becomes fiercer, especially in prospective markets such as China. Therefore, the company needs to launch effective marketing communication strategy that will remind the potential and existing customers about unique brand in luxury segment. As the company is keen on pursuing consistency in everything it does, it is important to maintain consistency in marketing communication as well. The proposed marketing communication plan is aligned with the overall company’s strategy and implies utilization of both traditional and digital marketing tools. Also, it is important to involve a celebrity for promoting new campaign. Either it will be Kirsten Stewart or other celebrity is not known, but it is definitely clear that Chanel should be associated with successful and popular personalities that inspire people to visit Chanel stores and purchase something. References: Amed, I. (2012). CEO Talk: Bruno Pavlovsky, President of Fashion, Chanel. Retrieved 3 July 2015, from http://www.businessoffashion.com/articles/ceo-talk/ceo-talk-bruno-pavlovsky-president-of-fashion-chanel Arora, R. and Gulf, B. (2011), “The 8Ps of Luxury Marketing”, Warc Exclusive: Bates Pan Gulf, Retrieved 3 July 2015, from www.warc.com Brun, A. and Moretto, A. (2014), “Organisation and supply chain for quality control in luxury companies”, Journal of Fashion Marketing and Management, vol.18, iss.2, pp.206-230. Cococlassics (2011). CHANEL: CH 8- Keeping up with the Target Market. Retrieved 5 July 2015, from http://cococlassics.blogspot.com/2011/05/ch-8-keeping-up-with-target-market.html Forbes, (2015). Chanel on the Forbes Worlds Most Valuable Brands List. Retrieved 3 July 2015, from http://www.forbes.com/companies/chanel/ Euromonitor (2014), Chanel SA in Beauty and Personal Care (World), Retrieved 3 July 2015, from www.warc.com Euromonitor (2015), Ralph Lauren Corp in Luxury Goods, Retrieved 3 July 2015, from www.warc.com Kapferer, J., & Bastien, V. (2012). The luxury strategy. London: Kogan Page. Kotler, P., and Armstrong, G. (2012), Principles of marketing, 14th ed. Boston: Pearson Prentice Hall. MarketLine Advantage (2014), Chanel S.A., Company Profile. Retrieved from www.marketline.com Mintel (2014), Luxury Retailing – China, October 2014. Retrieved from http://academic.mintel.com/display/718631/ Mizoguchi, K. (2015). Kristen Stewart stars in the latest Chanel handbag campaign. Mail Online. Retrieved 5 July 2015, from http://www.dailymail.co.uk/tvshowbiz/article-2976939/Kristen-Stewart-stars-latest-Chanel-handbag-campaign.html Nagasawa, S. (2011), “Managing Organization of Chanel S.A.”, Waseda Business & Economics studies, no.47, pp.47-66. Shea, E. (2013). Chanel stands out among swarm of beauty ads in Vogue - Luxury Daily - Print. Luxurydaily.com. Retrieved 5 July 2015, from http://www.luxurydaily.com/chanel-stands-out-among-swarm-of-beauty-ads-in-vogue/ Warc Exclusive, (2010), “Warc Briefing: Luxury”, Retrieved 3 July 2015, from www.warc.com Wen, W. (2015). French luxury giant Chanel plans to reduce prices|Top News|chinadaily.com.cn. Europe.chinadaily.com.cn. Retrieved 5 July 2015, from http://europe.chinadaily.com.cn/2015-03/19/content_19857292.htm Read More