Marketing Mix for Coco Chanel - Case Study Example

Table of Contents Item Page # Introduction 1 Background Information 1 Key competitors 2 Market situation 2 Other product lines 3 What customer needs does it meet 4 Target market 5 Needs analysis 6 Market research; market segmentation 6 Product positioning 7 Market advertising 7 Promoting brand image 8 Maintaining brand loyalty 8 Market growth 9 Strategy for celebrity choice and launches 9 Positioning analysis 10 Positioning grid 10 Key benefits 11 Present brand strategy 12 Bibliography 1 Introduction 1921 saw the introduction of Chanel No.5. It was internationally popular with women of high society in particular.. The signature scent was a result of Coco Chanel’s superstitions. She believed that the number five bore a special form of good luck for her. She commissioned Ernest Beaux to create some fragrances, which she would feature at a show which she scheduled on the fifth day of the fifth month. Beaux produced two series of scents, one numbered 1 to 5, and the other 20 to 24. In keeping with her superstitious leanings, Coco selected scent No.5.The name Chanel is synonymous with elegance, wealth, and elitism, as well as the ultimate sign of French high class. The image of the brand in the core market is a strict adherence to the five essentials: Audacious, perfectionist, unique, passionate and visionary. Background Info The House of Chanel, commonly known as Chanel, is a Parisian fashion house in France founded by Coco Chanel. According to Forbes magazine, “the privately held house of Chanel is jointly owned by Alan Wertheimer and Gerald Wertheimer, who are grandchildren of the earliest Chanel partner Pierre Weitheimer”(Forbes 2007). The company was founded in 1910, as is of course headquartered in Paris, France, and has business locations in Europe; Italy, Spain, United Kingdom, Russia, and of course France. In North America; the United States, and both French and English Canada. In Asia, there are locations in China, Hong Kong, Japan, Australia and the Philippines. And in many countries in Latin America. Chanel No.5, the company has total sales in excess of $1.2 billion. The key point 2 of Chanel’s competitiveness is that all of its fragrances are created in-house. Chanel has its own perfume laboratory. Additionally, Chanel also “operates its own network of more than 80 company-owned retail stores worldwide. There are also more than 120 Chanel shop-in-shop boutiques in leading department stores around the world”(Chanel S.A.) Key Competitors Bulgari S.p.A.; Cartier SA; Christian Dior SA; Gianfrance Ferre S.p.A.; Gianni Versace S.p.A.; Gucci Group N.V.; Hermes international; I.Pellettier id Italia S.p.A.; LVMH Inc (U.S.); LVMH Moet Hennessy Louis Vuitton SA; Montres Rolex SA; Puig Beauty & Fashion Group; Compagnie Financiere Richemont AG;; S.T. Dupont SA; Tiffany & Co. Market Situation When fragrances were first introduced, only the very wealthy were able to afford them. This historical fact lent the industry and its fragrances the image of being elitist, and having snob appeal. In spite of the many transformations and the increase of the market base, this appeal is still prevalent, and lends much to the brand loyalty, which any given fragrance product enjoys. The source of materials were botanical or animal origin, with synthetics used to accentuate the dimensions of the naturals.. In 1921 Chanel No.5 was introduced. It was the first class of perfumes which was dominated by the use of synthetic aidehydes. Chanel No.5, was the first class of perfumes which was called floral aidehydes. After WW II a proliferation of new synthetics appeared in the market. As this plethora of synthetics became incorporated into fragrances, the naturals were then used to soften the 3 synthetics. This huge supply of synthetics was accompanied by modest prices. However, the synthetics were naturally harsh, so the naturals were not eliminated from the process because of their softness. With the advent of mass spectrometry and gas chromatography the secret formula concept was all but lost. Any fragrance chemist with a reasonable skill level and equipped with the latest technology, was able to dissect a perfume and produce a reasonable fac-simile. This introduced a crinkle in the market because expensive fragrances could now be copied, and offered on the mass market, diluting their images of luxury and exclusivity, as they were usually sold at lower prices. The market became more saturated with producers, and ultimately became more competitive. The character of the industry brought about a paradigm shift, which resulted in much more attention, emphasis and money was then earmarked towards marketing and advertising, which now account for a lions share of the cost of fragrances. The outgrowth of this paradigm was that fragrance companies were compelled to develop and promote a specific brand image, as a selling feature of their perfume. The perfume industry is now driven by its marketing efforts, where this important variable determines whether the product will be successful. Other Product Lines Coco Chanel’s sojourn into the world of business was her opening of her Rue Cambon boutique, where she revolutionized haute couture fashion by introducing simplicity and comfort when she promoted simple suits and long, lean dresses. Coco introduced wealthy women to her signature cardigan jacket, and the Chanel suit. The House of Chanel is also known for its quilted fabric, which was inspired by the jockey 4 jacket. The fashion and accessories lines are currently headed by Karl Lagerfeld. There is also millinery which Coco established in 1909, under the name of Chanel Modes.Then in 1913, she introduced women’s sportswear. In 1924 Chanel introduced a collection of costume jewelery, and in 1926 Coco introduced the little black dress. In 1955 Coco Chanel introduced the quilted bag, which featured the shoulder strap; in keeping with her superstition, the bag was name in accordance with the date of its launch, 2/55. Also in 1955, she launched her premier toiletry Pour Monsieur for men. A collaboration with watch makers which commenced in 1987, led to the debut of the first Chanel watch. In 1999 Chanel launched its first skin care line, also during the same year the House of Chanel introduced a line of sunglasses and eyeglass frames. “ The House of Chanel founded the Paraffection company that gathered the five Ateliers d’ Art. Desrues for ornamation, Lemarie for feathers and camellias, Lesage for embroiderer, Massaro for shoemaker, and Michael for millinery. A pert-aporter collection proposing their know-how was designed by K:arl Lagefeld”(Widipedia 2008). What customer needs does it meet? Maslow (1950) in describing the different needs of human beings says, “there is a hierarchical order. “At the bottom of the pyramid physiological needs such as hunger and thirst are of primary concern to the individual, almost at the exclusion of anything else”(Lancaster). “People have the need to belong and being a part of a group is one way of the harnassing the opportunity to give and receive love. Marketers capitalize on an individuals social needs in the promotion of items like fragrances”(Lancaster 1998) 5 “…People are looking for a lifestyle, whether its sunglasses or a car or a bottle of perfume, and celebrity endorsements are part of that lifestyle that’s being offered. In part, its being aware of who people aspire to want to be like”(Curtis 2003) Target Market According to Everett Rogers, “Certain people derive a great deal of pleasure from acquiring products and being a member in the market. Such people have a low level of perceived risk and in fact they positively link the risk and excitement associated with the purchase of new innovative products. These people are referred to as innovators and they account for about 25% of the population. The next group of people displaying a tendency to buy new products are known as “early adopters” and account for approximately 13.5% of the market. These are still highly adventurous purchasers and the possession of innovative new products gives them a high present value. They still have a low level of perceived risk but are slightly more risk adverse than the innovative category. The groups which dominate the bulk of the potential market, early majority and late majority account for 64% of the market”(Rogers 1998). “…The market for women’s fragrance has grown by 15% between 2000 and 2004. Growth has been confined mainly to the fine fragrance sector, which grew by 18%, while the much smaller mass fragrance sector is up 6% since 2000”(Women’s fragrances UK 2008). “…Women between the ages of 45-64 use three different fragrances, whereas many under 34 will stick with just one or two. Fragrance is a very individual purchase, with 41% of women saying they wear it for themselves. Just 8% of women say they never 6 wear any fragrance”(Minet UK 2005). “…53% of women claim to use premium fragrance as a part of their daily grooming routine. A further 31% of women claim ti use fragrance ‘occassionally’(Market Research 2005) “…Usage can be segmented according to variety and frequency, with daily usage among women divided between the high interest group termed ‘fragrance sensualists’ (17%) and the high frequency brand loyal group of ‘fragrance loyalists’ (36%). The fragrance sensualists wear a wide range of fine fragrances, adopt a wardrobe of fragrances and are eager to try new premium products. They can further be subdivided by motivation and frequency of use into aspiring sensualists and the fragrance aficionados, the internet chat room group of early adopters who treat fragrance as a hobby rather like wine tasting. Female usage is highest in the 15-19 and 45-54 age ranges, C1 and C2 demographic groups, the East and west midlands, the North of England and in Scotland”(Ayres 2005). Needs Analysis Market Research; market segmentation Product Positioning Planning; marketing and advertising Promoting brand image Maintaining brand loyalty Market growth Strategy for celebrity choice and launches Market Research; market segmentation Whenever a company is in need of the information which it needs to make its all important decisions, according to Riles and Trout, 7 “…companies will often commission segmentation research when they want to scope their market strategy, investigate a declining brand, launch a new product, or restructure their pricing policy. Companies such as those involved in the fragrance industry conduct segmentation research at regular intervals, to keep in touch with changes in the market place”(Riles & Trout 1998) Product Positioning “…The concept of “fragrance layering” implies the choice of matching body care products that complement the chosen premium fragrance, in order to enhance the fragrance effect and feeling of personal confidence and well-being”(Mintel 2004). It can not be denied that there is the presence of psycholoanalytic posturing present in the promotional strategy of advertisers.,”the use of symbols and flights of fantasy to propel consumers to buy their products. All symbols that exist in Psychoanalytic Theory are being used, such as phallic and ovarian symbols, for instance, to release sexual energy or libido”(CSD1998). According to Ries and Trout, in their article,” Market Segmentation and Positioning”; “positioning is not what you do to a product, it is what you do to the mind of a prospect”(Reis et al1998) Marketing and Advertising “…More than 200 new perfumes were launched in the UK last year, and more than 300 worldwide, since 1990, each year has witnessed an additional 20-30 new launches on the previous years figures. The success or failure of these products is relative. It depends on the company’s business objectives”(Ayres 2005) 8 “…Many experts in the fragrance field agree that the success or failure of the launch is dependent upon the marketing and advertising”(Ayres 2005). Promoting Brand Image David Ogilvy is an advertising practitioner who believes that non-verbal modes of communicating is a viable and time tested means of communication. This concept is very prominent in the fragrance industry, and has taken on several manifestations. Fragrance houses maintain the stance that it is critical to the survival of their trademark that they inculcate the image of luxury, exclusivity and cost. This posture has led to the establishment of specific standards (it has been found that none of the fragrance houses’ possess the same criteria for evaluation. However, the bar for approval of authorized distributor for each fragrance house is high), to determine which retailers will be authorized to receive their product. One of the standards which is uniform is, ambience. An authorized retailer must be in the position to present an environment to the consumer which suggest both luxury and exclusivity, which in turn will ostensibly justify the value added prices, which are suggestive of opulence. Fragrance houses also employ both below the line and above the line sales promotions to advance their brand image. Maintaining Brand Loyalty “…Certain products have a self-image/product ­image congruence. Example: Automobiles, health products, cleaning products, grooming products, leisure products, clothing, retail store patronage, food products, cigarettes, home appliances, magazines, and home furnishings. All products that consumers use to communicate themselves to 9 others act as symbols and have three characteristics. 1. They must have visibility in use ­ their purchase, consumption, and disposition are readily apparent to others 2.The product must show variability ­ some consumers have the resources to own the product and some do not. 3.The product must have its 'personalisability' ­ the extent to which a product denotes a stereotypical image to the average user”(CSD 1998) “…For products where conspicuous price is apparent, consumers attach at least as much importance to the products price as to its inherent qualities.Buying the product demonstrates opulence and status, and the consumer derives psychological benefits from this conspicuous consumption”(CC 1992). “…In analyzing the consequences of this it is possible to think of the product as having two prices, its real price (ie. What the consumer actually pays for it) and its conspicuous price (ie. What the consumer thinks other people think the price is). While actual demand is dependent on both the real and the conspicuous price. In certain price ranges the demand curve may therefore be positively inclined, showing (for example) that in that price range a price cut will lead to a fall in demand rather than, as usual, to an increase in demand(CC 1992). Market Growth According to Reis and Trout, “…It is incumbent upon the company to examine and identify growth opportunities in the market through the identification of new customers, growth segments, or new product uses”(Reis et al 1998) Strategy for celebrity choice and launches A promotional technique which is effective is known as vicarious conditioning – 10 “… where one’s behavoiur is influenced by observing the actions of others and by modeling or imitating those actions. Many advertisers make use of appealing models, using a product or experiencing its positive outcomes in the hopes the consumer will imitate the behaviour. The effectiveness of the model increases in the following instances: (1) the model is physically attractive, (2) the model is successful, (3) the model is shown overcoming difficulties and then succeeding”(Jones 2006) “…The more dependant, and the lower the self-esteem of the consumer the more prone he/she will be to model the behaviour of successful models. The advertisers use vicarious learning for three purposes: Models actions can be used to create entirely new types of consumer behaviours. Models can be used to decrease the likelihood that an undesired consumer behaviour will occur. Models can be used to facilitate the occurrence of a previously learned consumer behaviour”(Jones 2006) Positioning Analysis Market growth vs Market share Price vs Quality Positioning Grid Market Growth; at Chanel in its female fragrance line saw an increase of 16% in the year ending 2007. Market Share; at Chanel’s female fragrance commands 3.2% of the market. Price; continues to be at the level where the aire of opulence, and luxury has a special appeal to its 11 brand loyal consumers. Quality; Chanel No.5 has a blend of 85 ingredients including Aldehydes, may rose & jasmine. It was the first perfume not intended to represent the essence of one single flower. Key Benefits According to Herlihy. “the Chanel brand as a whole has been bolstered by the popularity of its trademark tweed clothing this season, an effect which could feed through into the profile of its fragrances. Whatever the long-term effect of the current campaign, the shelves in Boots are still likely to be bereft of No 5 come 25 December; the brand is notorious among fragrance retailers for being the first choice for 'panicky men hurtling around stores on Christmas Eve”(Herlihy) “…Chanel does most of its own testing,” McHale emphasized. “We have three PhD’s on staff in the cellular lab here. The CE.R.I.E.S. does pure research, then our labs here and in France find practical applications for their findings. At Chanel, the stress is on long term vision and long term success(McHale) New products and shades are launched four times a year corresponding to the four seasons. Each new collection takes approximately one year to develop. “We introduce a Star product with each collection,” Mankin noted. For Spring 2005, Ruban Perlé, is the Star product, a limited edition that rolled out in January 2005. Ruban Perlé is a creamy, radiant face powder that draws its inspiration from the fabrics, beautiful ribbon work and 12 pastel shades of Chanel couture. Presented in a gleaming black compact, with subtle concave curved rather than straight sides, Ruban Perlé is available in two shades—Moonlight (White Rose) and Sunlight (Golden Apricot)—that are presented in delicate ribbon basketweave textured surfaces. “Our customers watch for these Star products each season and they are often sold out before the season is half over”(Mankin) “…The corporate objective is to have consistency in every aspect of the Chanel brand,” “from advertising, to counter displays to package design. The U.S. Creative Services department assures that everything is faithful to the international image of Chanel”(Herlihy) “…Commitment to Brand Brings Business Success Chanel’s beauty business has had back-to-back years of double-digit growth (2002 and 2003), as its Chance became one of the top five best-selling fragrances in the world in 2003 even while Chanel No. 5 continued to be the Number one, according to the company’(Herlihy). Because quality is so essential to Chanel, the company deals with a pool of preferred, qualified suppliers that have proven that they will provide components that meet the company’s high standards. Present Brand Strategy. “…The principle behind packaging is simple geometric shapes. The fragrance bottles started with No. 5 and a square, then evolved into various rectangles and now, with Chance, it has moved to a circle. All of the bottles look simple and are beautifully executed. They may look simple but can be very complicated. And Chanel standards 13 are very high for quality”(Herlihy). “…For Chanel, fragrances are not launched for the short term, but rather become part of the line on a virtually permanent basis. But as formulas stay the same, packaging is refreshed as needed. Chanel No. 5 had a spray EDT that was a refillable glass bottle held in a black plastic sheath topped with a large gleaming gold cap. That package was redesigned in 2003 and is now a glass bottle with a spray-through cap. The smallest detail is given attention and a quality execution, such as the copy and decoration on the bottom of the bottle, which is silk-screened. The color of each fragrance formula has been chosen to appeal to its audience and to support the personality of the particular fragrance”(Herlihy) Bibliography Ayres, J (2005) UK fine fragrance Industry, Market research, executive summary and interpretation, May 2005. Retrieved on line on April 30,2008, at www.fragrancefoundation,org.uk Birney C, Chanel No.5 Turns to Hollywood Chanel S.A. 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