A market driven strategy

Premium products are products which the price is always on the high end and only limited few have the capacity to buy and experience. A market-driven strategy allows a company to truly understand its market and the customers that are the basis for this market. This effort allows for a more effective integration of all activities that may impact customer value, which in turn affects both return-on-investment and profitability. (Richard C. Leventhal,2005) A product is anything that can be offered to a market to fulfil a need or want. There are 4 main factors that invovled in marketing,that is, product,price,place,and promotion. Pricing strategy is important in marketing because it shows how a company or organisation going to position the product by setting the price. The premium product that had been chosen to be discuss in this report is Chanel classic flap bag. Chanel, founded by the late couturier Gabrielle Coco Chanel,recognized as one of the most established in haute couture,specializing in luxury goods (haute couture,ready-to-wear,handbags,perfumery,and cosmetics among others).(Wikipedia,2011) Chanel is also knowned for its quitted fabric and leather which also has a ‘secret’ quitting pattern sewn at the back to keep the material strong. This is why it is being high price product by applying the product concept.

A marketer has to interact with a customer by identifying or satisfying customer needs and wants in such a way as to achieve the organisation’s objectives for profitability,survival or growth. Ultimately people have narrow and basic needs for food but almost unlimited wants with limited resources. Thus, choosing products that provide the most satisfaction for money is very important. Needs are states of felt deprivation (Kotler,P. & Armstrong,G.,2006) or something that is necessary for one to have to live a life. Marketers did not invent needs but trying to become a part of human make-up by satisfying needs. Women usually have lots of stuffs to bring along and this is what makes handbags the necessary need of women. There is a varitey of bags in the market. Every women need a spacious and utilizable bag that can fit in everything to hold these little stuffs. Chanel classic flap bag has lots of finishes,colours and sizes for a woman to choose. Most importantly, Chanel’s products are quality guaranteed and everlasting.

Wants are the form human needs take as they are shaped by culture and inividual personality. (Kotler,P. & Armstrong,G.,2006) Handbags nowadays are not only basic need of women but had become something that is highly desired. Women do now want only a handy but also fashion handbag that work brilliantly for every occasion. Chanel classic flap bag brings out the professional feel of a lady when going to a client. It can as well shows a casual elegance look of a lady who attends party with a Chanel classic flap bag. In this case, owning and investing in a classic handbag that will never go out of fashion is important.

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay writing service is here to help!
Find out more about our Essay Writing Service

DECISION MAKING PROCESS

Apparently, decision making process is important as a good decision making skills is the foundation for life to time management skills. People have to make decisions of varying importance everyday. It is necessary to apply common sense on decision making. Common sense will come naturally with experience and with the experience one gained from past it may substantially helps to affect buyers from making a right decision when purchasing a new product. Consumer is advised to pass through all 6 stages with every first time purchase,that is,

Need recognition → Information search → Formation of criteria list ↓ Postpurchase behavior ← Purchase decision ← Evaluation of alternatives

Figure 2.0 Buyer Decision Process

From the graph,it is clearly telling that the decision making process takes a long period time to complete as it starts earlier before actual purchase occurs and continues long after one done the purchase.

2.1 CONSUMER BEHAVIOR

Consumer behavior mentions the part of the buying behavior of final buyers-individuals and households who buy goods and services for personal consumption. There are 2 main market involved which is consumer market,commonly known as business to consumer (B2C) and business market,also known as business to business (B2B). At a word It is very important for a company or organisation to study on consumer behavior as this may be useful to make some changes and improvements on one’s marketing strategies by understanding and analysing the reasons and factors why people do or do not buy the product.

Consumer Behavior

┌─────────┬────────┴────┬─────────────┐

Cultural factors Social factors Personal factors Psychological factors

Figure 2.1 Characteristics Affecting Consumer Behavior

2.1.1 CULTURAL FACTORS

Consumer behavior is deeply influenced by cultural factors such as: buyer culture, subculture, and social class (Asifo Shah,2010) Generally people’s culture is influenced and impacted by parents and elders from a family. For example, one growing up in family with higher income will most likely to affect a person’s consumer beahvior and this makes the buyer choose Chanel handbag.

2.1.2 SOCIAL FACTORS

Social factors also impact the buying behavior of consumers. The important social factors are: reference groups, family, role and status. (Asifo Shah,2010) As for role and status,everyone will be playing the character and role accordingly due to the different situation facing. Hence, a buyer could be a teacher,student,businesswoman or salesgirl. One will be involve in a specific buying behavior by depending on the role playing. Status refers to a person’s position in society. For example, a person who self-defined the status as the businesswoman may choose to use a elegant and professional Chanel bag in a certain way. So it is important for a marketer to understand this factor to satisfy the demand of buyers.

2.1.3 PERSONAL FACTORS

Personal factor has different affects which is vary with age and lifecycle stage,occupation,economic situation and also personality. It is evidently that everyone has to go through different life-cycle stages and not everyone shares the same lifestyle. For example, a successful businesswoman may choose to buy a Chanel designer handbag but a low paid blue-collar may choose to own a normal purse. In this factor, a person’s economic situation is vital and should be taking into account as it shows the great difference on everyone’s spending ability. In short not everyone have the ability to own and buy a Chanel handbag which will definitely cost one’s pocket a boom.

2.2 TYPES OF BUYING – DECISION BEHAVIOR

Buying Decision differs from person to person. Deepening upon the need of the person, the decision gets change; Even if the product is small. There are different factors which influences the nature of buying. Hence buying decision has been classified into four different categories such as Complex buying behavior, Dissonance Reducing buying behavior, Habitual buying behavior and Variety seeking buying behavior. (Raja Vikram,2010) The category that had been chosen is complex buying behavior. This situation requires highly involvement of consumers and perceive vital differences among the different brands. Besides, the price of the product is expensive or slightly higher,risky,and also highly self-expressive to shows the highly involvement of consumers. In this case, Chanel may needs to help buyers going through the learning process by differentiate the company’s brand’s features, by introducing buyers the company’s products benefits using advertising method .

2.3 BUYER DECISION PROCESS

With the understanding and analysing at the influences that may affects buyers, every buyers are suggests to carry on 6 stages of the buyer decision process in every new purchase.

2.3.1 NEED RECOGNITION

The buying process starts with need recognition which means a buyer recognizes a problem or need. The need can come from either an internal stimuli or an external stimuli. For example, the buyer needs a handbag and was attracted by the advertisement in fashion magazines or billboard of Chanel classic flap bag. From here the needs arise and brought the buyer into next step of purchasing this product.

2.3.2 INFORMATION SEARCH

This step is important to the buyer who is first time purchase. After the buyer realises the needs of the praticular product. It is time for this buyer to search for more details information about that particular product from any of th sources such as personal sources,commercial sources,public sources and experiential sources. For example, if this buyer is interested in Chanel’s handbag, information gathering can easily be done by browsing through the net, get branding information from magazines or some famous designer handbags forum to get useful feedbacks,reviews and recommendations from Chanel handbags users.

2.3.3 FORMATION OF A CRITERIA LIST

After the buyer gathered all the information that is related to the particular product, it is a best bet to list down the criteria or specification the buyer seeks in the product. For example, this buyer compares a few types of Chanel handbags, which are tote bag,evening bag,shopping bag and classic flap bag. This buyer wants a timeless and iconic designer handbag with useful exterior pocket that can be able to carry all the personal items. In this stage, sizes,materials using and colours of the product should have been listing down for further refers and comparison.

2.3.4 EVALUATION OF ALTERNATIVES

This step shows how a consumer choose among the alternatives brands. The consumer will puts the various brands of the product on which had been analysed from the criteria list. For example, this buyer will compares Chanel to three other luxury brands like Louis Vuitton,Gucci and Prada. By this time, this buyer should have probably formed beliefs about how each brand rates on each attribute and made final decision.

2.3.5 PURCHASE DECISION

This is when the consumer ranks brands and forms purchase intentions. Generally, the consumer will make decision on the brand that is believes has all the criterias that is seeking for. For example, after a great think over and comparing, this buyer will be buying the most preferred brand of all the alternative brands which is Chanel classic flap bag.

2.3.6 POST-PURCHASE BEHAVIOR

This stage shows that the marketer’s job does not end when the product is brought, which consumers take further action after purchase,based on their satisfaction or dissastisfaction. (Kotler,P. & Armstrong,G.,2006) Usually there are 2 situations most likely occur, that is feeling of satisfaction and feelings of disssastifaction. For example, this buyer is satisfied with the high expectations of Chanel classic flap bag and happy with the high maintain quality of this product. A good review from this buyer will helps to enhance the good name of Chanel’s brand and products.

3.0 MARKETING MIX

The marketing mix is the most popular marketing term. Basically, the marketing mix elements that involved in marketing management decisions can be classified into 4 main categories,which are commonly known as 4P’s :

Product

Price

Place

Promotion

These four P’s are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P’s on the customers in the target market in order to create perceived value and generate a positive response. (The Marketing Mix(The 4 P’s of Marketing),no date) Besides, three additional P’s have been added to this four basic marketing mix, also known as extended marketing mix,that is, People,Process and Physical Evidence.

3.1 PRODUCT

The product is what is being sold. It is more than a simple set of tangible features, it is a complex bundle of benefits that satisfy customer needs. ( Jonathan Ivy,2008 ) A product can be in tangible form which customers can see and touch or intangible from which most to services offering.

3.1.1 THE ANATOMY OF A PRODUCT

A product is a physical good, service, idea, person, or place that is capable of offering tangible and intangible attributes that individuals or organisations regard as so necessary, worthwhile or satisfying that they are prepared to exchange money, patronage or some other unit of value to acquire it (Blythe,2007 ) A basic anatomy of a product as a series of four concentric rings representing the core benefit, the actual product and the augmented product. (Brassington,F. & Pettitt,S.,2007) 

Augmented Product                                 

Actual Product

Core Benefit

Figure 3.1 The Anatomy of A Product

3.1.1.1 CORE BENEFIT

This is the first and also most basic level, where marketers must define what the core benefits of the product, problem-solving benefits or services that consumers seek in this stage before proceed to the second level. For example, Chanel’s designers have to have a radical rethink of the way in which the core benefit of a handbag is delivered. It is important to design a handy and fashion handbag that can suits every outfit and to bring out different look of the buyer in different occasions. A handbag should always give consumers the perception of ‘fashion and convenient’.

3.1.1.2 ACTUAL PRODUCT

This is the level where core benefit turn into an anctual product taken place. In this stage, the company has to develop the product and service features,design, a quality level, a brand name and packaging. For example, Chanel classic flap bag is an actual product. The designers have to combine carefully all the aspects such as the product name, fashion,colours, sizes, design to deliver the core benefit – a trendy, superior quality and convenient way to place women’s stuffs.

3.1.1.3 AUGMENTED PRODUCT

At this final level of product planning, product planners have to bulid an augmented product around the core benefit and actual product by offering additional consumers services and benefits. (Brassington,F. & Pettitt,S.,2007) When consumers buy a Chanel classic flap bag, Chanel will give the buyers a lifetime warranty on the chains and workmanship, a free anti-dust bag and also well-trained staffs to give buyers clear informations on how to take good care of the leather bag.

3.2 PRICE

In the narrowest sense, price is the amount of money charged for a product or service. More broadly, price is the sum of all the values that consumers exchange for the benefits of having or using the product or service. Historically, price has been the major factor affecting buyer choice. However, in recent decades, nonprice factors have become more important in buyer-choice behavior. ( Philip Kotler and Gary Armstrong,2006 ) Pricing is an very important element because this is the only element that brings money to the company .This also shows how a company going to set the product’s price and positioning.

3.2.1 PREMIUM PRICING STRATEGIES

Pricing affects other marketing mix elements such as product features, channel decisions, and promotion. In this case of a premium product, pricing strategy that the company had adopted is premium pricing strategies, that is, charging a high price on specific product or service of the company and this is common for luxuries like Louis Vuitton, Rolex, Porshce etc. Chanel charges severalfold from other products in market for its quitted fabric and leather handbags based on superior product and service quality. In addition, consumers will never asked how much it costs to make a Chanel handbag and how expensive the materials using might cost. People normally buy the product based on how unique the product is and of the brand name of Chanel.

3.3 PLACE

In the marketing mix model the place issue is equal with handling a distribution channel that brings the given product to its potential users, and the main task is to link an existing supply with an existing demand. ( Hakan Hakansson and Alexandra Waluszewski,2005 ) This is important to the organization because one of the main characteristic of luxury brands is about a tightly controlled distribution channels.

3.3.1 DISTRIBUTION CHANNELS

Distribution channels refers to the network made up of the company, suppliers, distributors and ultimately the customers who “partner” with each other to improve the performance of the entire system. (Kotler,P & Armstrong,G.,2006) Primarily, there are four main channels that most common used in consumer market,

Producer → Consumer

Producer → Retailer → Consumer

Producer → Wholesaler → Retailer → Consumer

Producer → Agent → Wholesaler → Retailer → Consumer

Figure 3.3 Channel Structures For Consumer Goods

In this case, the company adopted the producer – retailer – consumer route, also known as short channel. This route is typically used by large supermarket chains and is most appropriate for large manufacturers and large retailers who deal in such huge quantities that a direct relationship is efficient. (Brassington,F. & Pettitt,S.,2007) For example, Chanel as a superior clothing brand in market, this company has own designers and producer. Unlike most other products , Chanel need not any significant support in the supply section and also expertise in the sales and service process. Usually the products will be produced according to the designs and send to the own factory to produce. After the production stage, products will be send to all the Chanel’s boutique all over the world for retailing.

3.4 PROMOTION

The promotion issue is, in the marketing model’s interpretation, a question of how to send a message about a given product to potential users. (Hakan Hakansson. & Alexandra Waluszewski.,2005) Promotion decisions involve five elements, that is,

Promotion Mix Elements

┌────────┬───────────┼───────────┬────────────┐

Advertising Personal selling Sales promotion Public relations Direct marketing

Figure 3.4 Promotion Mix Elements

3.4.1 ADVERTISING

Advertising refers to any paid form of non-personal presentation and promotion of ideas,goods,or services by an identified sponsor. (Kotler,P & Armstrong,G.,2006) Advertising is often defined to be a way of reaching a mass market because it utilizes the mass media. (Uché Okonkwo.,2007) Advertisements are highly important for Chanel, as this is a way of communicating the brands’ story and also development to the company’s image,products and services. In addition, this company has had many famous celebrities as spokemodels which directly helps to boost and increase the status of this brand in market and also reflect the brand essence. To emphasize the premium status of this brand, advertisements of Chanel are only featured in famous luxury fashion magazines, airline in-flight magazines and other high-end publications. This is because these publications are most widely read by the target customers.

3.4.2 PUBLIC RELATIONS

Public relations is about building good relations with the company’s various publics by obtaining favourable publicity, building up a good corporate image, and handling or heading off unfavourable rumors, stories, and events. (Kotler,P & Armstrong,G.,2006) Apparently, Chanel’s PR professionals had used th event sponsorship tools as a foundation to build the company’s name and reputation. This is because Chanel often sponsered famous celebrities on apparels and also handbags during grand ceremony or celebration.This is believed to be a good way of exposed the products to potential buyers. To reach the potential buyers,Chanel also organised fashion campaigns and published a magazine, “Stiletto” with a journalistic eye style about Chanel’s products. The organization also achieved the publicity through the right media such as using web site publicity.

4.0 CONCLUSION

In conclusion, Chanel classic flap bags are premium products because Chanel flap bags still way more expensive than the average woman with the ability to own one. The high maintain quality of the bags and the uniqueness of the products have undoubtedly attracted more potential buyers with the belief in quality and appeal. Basically, there are three factors that affecting the consumer to choose Chanel bags,which is, cultural factors,social factors and also personal factors. Generally, every buyer has to pass through 6 stages of decision making process,that is,need recognition,information search,formation of criteria list,evaluation of alternatives, purchase decision and lastly, postpurchase behavior with every first time purchase to make sure the buyer get the desirable Chanel handbags. The buyer will first has to determine the own need, then collect and gather information about the product. Information gathering is important to help a first time buyer to understand the product more. Up next, the buyer will has to compare all the specification of various types of Chanel handbags to make the final decision on which product to choose.And finally, post-purchase behavior to identify the satisfaction or dissastisfaction of consumer towards the Chanel handbags. Branding and pricing are both important as this may helps the company to differentiate from competitors by increase the brands’ strengths and appropriate brand positioning.Chanel had decided to set the price at slightly costly price to reflects the superb quality of Chanel handbags. In this stage, it shows that consumer is satisfied with all the services provided by the company .However, there is still space of improvement needed. It is advised so that the company improve the distribution channels in order to make the products exposed to more potential buyers and also provided the consumers a more convenient way to get the product easily. Lastly, prromotional mix is one of the involvements in Chanel handbags.The marketer of Chanel handbags are mainly focuses on advertising and public relations to achieve the publicity.

REFERENCES

Brassington,F. & Pettitt,S. (2007) Essentials Of Marketing, 2nd edn. England, Pearson Education Limited

Kotler,P & Armstrong,G. (2006) Principles Of Marketing, 11th edn. Prentice Hall

Richard C. Leventhal. (2005) The importance of marketing. Journal of Consumer Marketing, [Online] 21(6), 3-4 Available from : www.emeraldinsight.com [Accessed : 16th November 2010]

Wikipedia. (no date) Chanel. Available at: http://en.wikipedia.org/wiki/Chanel [Retrieved : 16th November 2010]

Asifo Shah. (2010) Factors Affecting Consumer Behavior. [Online] Available from : http://ezinearticles.com/?Factors-Affecting-Consumer-Behavior&id=4602848 [Retrieved : 16th November 2010]

Raja Vikram. (2010) Types of Buying Decision Behavior. [Online] Available from : http://www.saching.com/Articles/Types-of-Buying-Decision-Behavior-1708.html [Retrieved : 16th November 2010]

NetMBA. (no date) The Marketing Mix(The 4 P’s of Marketing). [Online] Available from : http://www.netmba.com/marketing/mix/ [Retrieved : 16th November 2010]

Blythe. (2007) Anatomy of A Product Model. [Online] Available from : http://marketing64.com/ [Retrieved : 13th December 2010]

Jonathan Ivy. (2008) A new higher education marketing mix: the 7Ps for MBA

Marketing. International Journal of Educational Management, [Online] 22(4), 288-299 Available from : www.emeraldinsight.com/0951-354X.htm [Accessed : 13th December 2010]

Hakan Hakansson. & Alexandra Waluszewski. (2005) Developing a new under understanding of markets: reinterpreting the 4Ps. Journal of Business & Industrial Marketing,[Online] 20(3), 110-117 Available from : www.emeraldinsight.com/0885-8624.htm [Accessed : 13th December 2010]

Promotion – introduction to the promotional mix. [Online] Available from : http://tutor2u.net/business/marketing/promotion_mix.asp [Retrieved : 13th December 2010]

Uché Okonkwo.(2007) Luxury fashion branding: trends, tactics, techniques [e-book] New York, Palgrave Macmillan. Available from : http://books.google.com.my/books?id=a_6CublRtYwC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false [Accessed : 8th January 2011]