Launch of New Range of Luxury Handbags in the UK - Essay Example

Launch of new range of Luxury handbags in the UK – A Marketing Overview Every market or country including UK has certain unique or common political, social and economic conditions, along with different clients’ base, consumer behaviour, competitors, etc, etc. These distinct aspects could aid as well as impede the organisations’ entry into that particular market as well as the resultant success. So, understanding and analyzing these aspects particularly consumer behaviour in relation with the product or service, which is going to be launched, is a key necessity. More importantly, based on this analysis only, the marketing strategies need to be formulated or optimally oriented as part of marketing orientation, so that organisation can reach maximum customers, entice them and importantly build long-term relationship, thereby retaining them. As the above mentioned country specific aspects need to be mainly analyzed in relation with the product that is going to be launched, the product’s profile should ‘fit’ with the consumer of that particular market. Although, it applies to all product range, it is of utmost importance to luxury brands including luxury handbags. A luxury brand is a lifestyle concept that is mainly designed for an exclusive consumer base, even while enticing a wider consumer base. Vickers and Renand (2003) observe that luxury goods are adapted versions of base products which are manufactured according to consumer needs and tastes, and there are three dimensions to these products, and it applies to luxury handbags as well. The three levels of luxury products are, first, the inaccessible luxury products, which are only or mainly for the elite or affluent, as the other classes will find it difficult to buy it. Then, comes the intermediate luxury products, which for the professionals who are financially equipped to buy those products and thereby fulfil their desire to attain the status of the affluent. Finally, there are accessible luxury products for the middle class, which will be set in a feasible price range. Prospective customers in each of these levels have to be enticed through level-specific marketing strategies. So, on the whole it is necessary to grasp the consumer behaviour regarding particular products, along with other environmental forces. Fig: 1 Three levels of luxury products and their respective consumers (Vickers and Renand 2003) So, from the above understanding, it is clear that, to launch the new range of luxury handbags in UK, the macro and the micro environment as well as the consumer behaviour in the UK market has to be analyzed, based on which consumer and market oriented relationship marketing strategies can be formulated. Macro and the Micro Environment The luxury handbags business could be controlled by macro factors, which are not in the organisation’s control, as well as by micro-factors, which can be controlled by them. Key trends prevalent in the luxury handbag market are closely related and controlled by the changes in the political and economic sphere as well as in the fashion and luxury market. (reportbuyer.com 2007). Both these macro as well as micro environmental factors can be audited and analyzed in more detailed manner by using analytical tools, with PESTEL aiding apt analysis of Macro environment of UK, while SWOT helping understand the concerned company’s micro environment, which mainly includes its suppliers, intermediaries, competitors and customers. PESTLE Political The ruling government has to be stable and also favourable for businesses. The coalition government of Conservative and Liberal Democrats headed by David Cameron is welcome news, as Business wants to see a stable Government. (telegraph.co.uk 2010). In this globalization era, governments should have open policy to allow as well as facilitate foreign firms’ entry through tax and other benefits. If the government enforces tariffs and business restrictions, it may impede the country from having a complete or relative benefit to having a difficulty in its business activities with various countries. (Dowling 2007). Economic In the current times, the one economic factor that is impacting every business and could impact the luxury handbag business as well is the recession. However, with the worst phase of recession over, UK economy is showing signs of recovery and it could augur well for the businesses. “The British economy has been buoyed by growth, soothing fears of a double-dip recession. The growth of 0.8 of 1 per cent between July and September is double market expectations.” (Brown 2010). Worlds leading luxury goods makers including handbag makers have bounced back from depths of recession to report surging profits and sales on the back of a rebounding world economy. (McCathie 2010). Social As UK is slotted among the financially developed and urbanized societies of the world, luxury items particularly luxury handbags will be treated more of necessity than as status symbols by the target customer base of rich and professional females. This can be seen in how rich customer base are still going for those bags, despite financial crunch. The only people who can afford brands like Valextra or Hermes or Chopard are the people who already had so much money, while they may not flamboyantly spend their way through the recession, the numbers at world’s most expensive brands prove that the plight of the people around them couldn’t keep them from high-end hauls. (Fenner 2010). Technological Entry of advanced technologies has changed people’s lifestyle, including clothes and accessories. Changes in technology will also contribute to lifestyle trends, which in turn influence the clothes we wear. (Thomas). To keep pace with these technological changes, organisations also need to incorporate apt changes in its functioning. For example, the widespread use of mobile phones has necessitated the fashion manufacturers including handbags makers to come up with products that can aptly accommodate the phones. Legal Taking care of the customers and catering to their needs without any grievances is the basic necessity for any organisations, including product manufacturing organisations. Their survival and also growth depends on the number of customers who purchase the product, their return visit and also whether they recommend to other prospective clients. However, if the customer is not satisfied and is aggrieved due to the unsatisfactory product (Luxury handbags maximally fall into this category), they could approach the legal channels or court. Environmental factors Organisations should not damage the environment including the natural resources, in order to develop its business ethically. Handbag manufacturers are viewed negatively in this aspect because of the use and outlet of many detrimental chemicals into the environment during the manufacturing process. So, organisations, which carry out the manufacturing processes without dangerous impacts on the environment could be welcomed and associated by the customers. “I normally prefer to buy from companies which products and services are made to minimize harm to the environment or society.” (luxuryhandbags-fashion.blogspot.com 2007). SWOT Strengths Because of the widespread location of suppliers in UK, luxury handbags are prominently sold in many retail chains, apart from the specialized luxury or fashion stores or boutique. In UK’s social scene, handbags are considered the most desirable and popular fashion items for women, which enable consumers to make their own style statement and actualize their desire to look stylish and suave. (companiesandmarkets.com 2010). Sizable numbers of target customer base of women are on the move frequently, and with technological advancements, they carry a lot of high value products on-person and this is where luxury handbags has good strengths Weaknesses UK market is heavily ‘saturated’ with many heavyweight and popular luxury handbag brands like Valextra, Hermes, Chopard, etc. These brands, having been in the UK market for some or long time, could have launched new collections last seasons, giving the client an idea about their style, quality, etc as well as raising expectations, which will disadvantageous for new players Although, level 1 group of elite people (fig.1) may continuously tend to favour luxury bags irrespective of the financial crunch, the level 2 group of professionals, who aspire to be affluent, may not show that much interest in luxury bags, in this recovery phase. Opportunities After initial launches, luxury handbag manufacturers can go for their own stores. When they open their own stores it would be easier to control their image and because great many shoppers do not venture into a department store (Ammenheuser 2008). With British consumers wanting a wide range of luxury handbags, it would give opportunities to go for more launches. More retail shops are incorporating lifestyle products like luxury handbags. Threat Counterfeit versions of well-known brands are available and appear to be more acceptable to the consumers. (Moutinho and Huarng 2008) With increasing demand for luxury handbags, there will be more threats from new players. With the economy still in the recovery phase, the consumer spending trend also varies Consumer behaviour patterns in the UK, related and apt marketing orientation, and the resultant relationship marketing Organisations including luxury handbag manufacturers will be able to succeed only if it can come up with enticing marketing strategies. To formulate enticing and effective strategies, prospective customers’ behaviour patterns have to be found out. According to consumer behaviour theory, consumer behaviour will be mainly influenced by customer choice and budget constraints, which can be further divided into 4 factors - Rational behaviour, Preferences, Budget constraints and Prices. (welkerswikinomics.wetpaint.com). Thus, these behaviours of the consumer can be analysed to come up with apt marketing strategies, basing it on marketing orientation. Without a focus on marketing orientation, no organisation can attain maximum business performance. It helps an organisation develop marketing strategies as well as other operational strategies by mainly understanding and analysing the customer’s needs and wants. This ensures that the organisation formulates or orients their strategies particularly marketing strategies on consumer behaviour. This is particularly applicable to luxury products, as these products need specialized and more personalized marketing orientation called relationship marketing. So, after the first buy, there is continuing relationship between the consumer and the organisation. Relationship Marketing puts more emphasize on customer satisfaction and how to retain them, rather than focusing on sales transactions. That is, instead of formulating marketing strategies to push for the sale of the product, setting profitable prices, etc, Relationship Marketing recognizes the long term target of maintaining and improving customer relationships. “Effective relationship marketing strategies help marketing managers discover what prospective customers need. They must translate this information into some concepts for products the firm might develop. These concepts must then be converted into a tangible marketing program.” (Kerin et. al 2006). Certain consumer behaviour and trends in the UK market clearly border on these lines, as those behaviours can positively orient the marketing strategies to develop relationship marketing. Fig 2: Relationship Marketing (prismdc.com) Fig 3: Relationship Marketing (prismdc.com) As mentioned above, one of the main factors, which influences the consumer behaviour are the budget constraints or issues. Budget constraints will arise, not only based on the prices of the products but also on the basis of the consumer’s spending power. As discussed above, as the economy is still in the recovery phase, sizable sections of the target consumers are sceptical about spending heavily on products. That is, although, certain sections of the target segment are continuously spending, irrespective of the situation, a sizable population is not that enthusiastic. Earlier, the Britons were spending heavily due to easy credit and low interest rates. However, as the interest rates shot up and credit availability dried out, the purchasing power got reduced and in turn savings increased, which is in contrast to the post or early recession period. This can be seen from the fact that the savings rate was decreasing in the beginning of 2008, but started picking up in the past 2 years (fig.4). Fig 4: Household saving ratio (UK Statistics commission cited in Riley 2009) In addition, the key target segment of professionals in the in the age group of 25 to 35 years also started saving for the eventuality of possible job losses in the future (Hawkins 2009). This consumer behavior pattern was a drastic change because earlier the target segments lived off credit for all their affluent desires including luxury handbags. However, the recession came as a shock for them. Although, this is a common pattern, there are definite and sizable exceptions in the consumer behaviour pattern, with many top players or competitors in the luxury handbag market showing good profits. “Consumers may be worried about spending cuts and the gloomy economic outlook, but that has not stopped them splashing out on Mulberrys trademark leather handbags. The company said sales over the past ten weeks had been stronger than expected, up 57% in its UK shops.” (guardian.co.uk 2010). So, these behavioral patterns of the consumers cannot give a clear picture to the organisations on how to orient their marketing. Although, big name competitors are witnessing good growth, there is also some negative trend, so it should be viable to wait and watch, on whether to heighten the marketing strategies or maintain the normal course. These inconsistent marketing strategies cannot work on the long-term basis, as it would be difficult to maintain relationship, with the organisation-consumer relationship changing according to the financial times, thus making it un-addressable for future applications. Another consumer behaviour, which is influenced by the factor of preferences, is the changing taste of the UK customers. That is, consumers are staying away from last seasons fixation with “classic investment pieces” mainly in black colour, and instead are favouring and buying colourful handbags. This consumer behaviour can be witnessed among other competitors particularly Mulberry. Mulberry has reported a 100 per cent rise in sales particularly its new Alexa satchel. “Rather than customary black and tan leather, Mulberry has a waiting list for the Alexa bag in hot pink, leopard print and electric blue - as customers look to brighten their spring wardrobes.” (Milligan 2010). Likewise, Marc bag in bright purple, and Balenciagas City bag in electric blue, fuchsia and red gives the consumer good choices to choose from. This marketing strategy is working out because there is a 60 per cent increase in luxury handbag sales compared to last year across its stores in Birmingham, Manchester and London. (Milligan 2010). So, it is clear that marketing strategy has to be oriented according to this consumer behaviour of going for colourful bags, which is also a sign of optimism among the consumers in the recovery phase. “Last season was back to black as the classics ruled and this spring accessories have taken a more playful turn as the countrys mood turns more optimistic.,” Sebastian Manes, Selfridges director of accessories explained. (Milligan 2010). The strategy of changing the colour combinations on the bag also falls in line with the relationship marketing. That is, instead of selling handbags with standard colours, the companies need to change colour combinations as well as other style options according to the expectations of the consumer. Through this way of marketing, the interested consumers will believe that the products will be provided according to their expectations in future as well, thereby forming a good association or relationship. The other factor which influences consumer behaviour is the related factor of price. The prices of these luxury handbags are their main unique point or selling point. That is, the consumers go for these products for their high price tag and the resultant heightened status, but it may not work all the time. Although, this consumer behaviour is not a major deterrent, reducing the price within minor margins and marketing accordingly could ‘activate’ the behavior of even more consumers towards the luxury handbags. This is clearly visible among the competitors’ marketing strategies. For the fashionable female still seeking her luxury fix, albeit at a lower price point, Roberto Cavalli SpA and Ferragamo are making less expensive products. (Roberts 2010). However, based on price reduction, marketing has to be oriented in such a way that a message is sent to the consumer that reduction in prices will not have a negative impact on the quality of the bags. The strategy of setting a slightly lower price, may not be feasible for company’s profits, but it is apt for relationship marketing. That is, as the consumers will normally tend to favour companies, who offer lower and competitive prices, they will have repeat visits leading to long-term relationship The other key factor which will influence the consumer’ behaviour and define the pattern is the rational behaviour. Rational behaviour in the sense, although the consumers buy luxury products including handbags for status and mental comforts, it also need to be a rational decision. To fulfil rational behaviour, consumers try to focus not only on the brand value, but also on the quality. This behavioural pattern of focusing on the quality is visible among the UK consumers. They expect that luxury goods have to be manufactured to the highest quality standards. Nowadays, the consumers are also having the mindset that if it is a quality product, then it will be luxury product and on the same lines, if it is a luxury handbag, then it will be a quality one. Gone are the days of extravagant purchases made on a whim. Luxury consumers in 2010 expect both beauty and substance, because there has been a heightened shoppers’ interest in longevity and craftsmanship. (Hughes 2010). This pattern of consumer behaviour will clearly orient the marketing strategies in a particular direction. That is, as the consumers are focusing on quality, organisations need to manufacture quality handbags with the aid of technology and importantly should put in the forefront their quality advantages, during the formulation of marketing strategies. When quality-rich products are sold, it will fulfil consumer’s expectation and help them build a long-standing relationship with organisation, as those products will be working in pristine conditions for a long-term Conclusion From the above analysis, it is clear that among the many departments that constitute an organisation, the role of marketing department is crucial and optimum, as it can only optimize an organisation through various marketing strategies. In this globalization era, organisations are maximally moving into newer markets including UK breaking geographical as well as economical ‘boundaries’, as those markets offer good opportunities. To effectively tap those opportunities particularly in UK’s luxury handbag business market, entering organisations has to analyse the above discussed distinct aspects of the UK’s macro and micro environment, and then importantly need to understand and analyse the behaviour of prospective UK consumers or citizens, thereby formulating optimal marketing strategies bordering on relationship marketing. That is, as discussed above, UK’s macro and micro environment has certain distinct favourable aspects, which can be tapped to make an entry, and at the same time negative aspects, which need to be managed effectively before making the entry. Consumer will take the buying decision on the basis of necessity or need for comfort or as part of their lifestyle, etc. When making that decision, as discussed above, certain factors like spending power or interest of the consumer, their style and colour preferences, flexibility in prices and need to go for quality products, could arise in the mind of the consumers, enticing or pushing them to make that buying decision. So, the bottom line is, the marketing strategies that are formulated or importantly oriented based on these patterns in consumer behaviour, will reach the consumers effectively, making the organisation’s entry a great success and thereby elevating the organisation to the top echelons. 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