Channels Target Markets Research Marketing Essay

In the past few years, European and American luxury markets have been weak because of economy risk. But Chinese luxury market has a steady growth and there are some new emerging markets like Brail, Russia, India and so on. As a whole, the luxury market has a good perspective. This report will discuss CHANEL as a well known luxury brands with long history. Firstly the report could simply describe the CHANEL background. Secondly there is a marketing analysis on CHANEL products. The 4P marketing mixes and STP market strategy are used to evaluate CHANEL products. And then the report could give some introductions on China and Brazil markets which are considered as the target markets of CHANEL. Meanwhile the two target markets will be carefully analyzed to identify whether they are appropriate for CHANEL or not. Finally, the report provides some suggestions which can help CHANEL take more shares of China market.

Luxury brand – CHANEL

CHANEL was found in Paris, France in 1913. And Gabrielle Chanel (Coco Chanel) was the founder who also played the role of designer from 1910 to 1971. In 1983, Karl Lagerfeld called genius designer became the successor. CHANEL has managed a lot of products such as clothing, hats, perfume, jewelry, cosmetic, glasses and so on. The design philosophy of CHANEL Brand is elegance, conciseness and beautiful. In addition, double C and stereoscopic rhombus space line are the major signs. As known to all, double C has become the pride of fashion. And women around the world want to have the brand. In 1920s, women’s trappings perfume and image has changed from classical to modern. All this cannot achieve without Chanel contribution. Then after Karl Largerfeld became the chief designer, he was very successful to push Chanel fashion to another peak.

Marketing analysis of CHANEL products

3.1 4P marketing analysis

product

CHANEL products are mainly female products. There are some kinds of series.

Fashion boutique: fashion, bag, shoes, accessory

Glasses series: sunglasses, optical glasses

Wristwatch series: camellia, Premiere, J12,

Top jewelry series: camellia, comet, 1932, baroque

CHANEL perfume series: NO.5, NO.19

Most of CHANEL products are highly luxury. Because of the comfortable design, unique style and elegant lingering charm, CHANEL can bring a kind of fashion and vanity for users.

price

As the international well-known brand, CHANEL adopts the high price strategy based on its high quality image (O’Guinn, 2011). The price strategies are as follows:

Clothing: high price strategy

Fashion boutique: high-middle price strategy

Watch and top jewelry: high price strategy

Glasses: high-middle price strategy

Perfume and makeup: mid-price strategy

place

The CHANEL clothing has spread in 37 countries worldwide and there are 29 countries which hold the points of sale about glasses series. To accord with the position, CHANEL focuses on the senior department stores and prosperous business district. In Taipei, there are four points of sale. Furthermore, in Japan, CHANEL Ginza building has gone into operation. The whole building has ten stories high. The CHANEL boutiques are set up from first floor to third floor. Meanwhile the VIP rooms are also in the third floor. And the fourth floor is the salon show; all CHANEL offices can be found from fifth floor to ninth floor; the tenth floor has a French restaurant. The whole building shows the luxurious grade (Kotler, 2011). Around here, there are some other famous international brands buildings such as Dior, Burberry and Hermes.

promotion

Fashion show: CHANEL holds some kinds of fashion shows for the seasonal clothing in many countries. To show the perfect product and quality, CHANEL chooses the elegant scene and well-known models.

Magazine: what CHANEL chooses is the brand-led magazine such as ELLE and VOGUE. Except the presentation of product in season, these magazines also introduce the product features and the way to distinguish the genuine CHANEL product (Clow, 2011).

Celebrity advertising: there are many celebrities such as Diana Spencer, Jacqueline Kennedy, Elizabeth Taylor, and Ingrid Bergman who always dress CHANEL clothing in public. So the classical and graceful image has greatly enhanced. Hollywood Star Nicole Kidman became the spokesperson because of her unique temperament which can tally with CHANEL image.

Website: there are 12 languages to choose in CHANEL website. Customers can know the product information and watch the recent fashion show.

3.2 STP marketing analysis

CHANEL products have spread all over the world and this brand has been the top brand in woman’s heart. This report will take CHANEL NO.5 as an example to analyze the STP marketing strategy.

Market segmentation

The market segmentation of CHANEL NO.5 is based on the individual performance and consumers pay more attention to the spiritual value. There are some segmentation factors such as mentality, age, geography and behavior (Aaker, 2011). Expect the celebrities, the intellectual women with high income have been main customers and they are about 35 years old. Modern women focus on the life quality and grade. And meanwhile they pursue the social honor and position. So CHANEL NO.5 becomes the first choice.

Target market

CHANEL NO.5 adopts the differentiated targeting strategy on target markets. CHANEL divides the high consumption group into many market segments and works out a range of marketing mixes to satisfy the different consumers (Temporal, 2010).

Market position

CHANEL NO.5 uses a series of market position strategies such as product quality differentiation, product packaging differentiation, brand image differentiation, point-of-sale terminal differentiation and media communication differentiation (Baaghil, 2011).

Two target markets

This report will take two BRIC countries Brazil and China as the targets.

China market

China has become the second largest luxury goods market, although Chinese economy has a slowing growth now. From the graph 1, it can be found that in China luxury market, both consumers and total spending have a steady growth.

Graph 1:

Source: 2011 China luxury market study by BAIN&COMPANY

The report will have an analysis on Chinese luxury market from supply and demand. According to the analysis of supply structure, Chinese luxury goods mainly depend on import. And the China local luxury brands are very limited. Along with the recession of European luxury markets, more and more international luxury brands have crowed into Chinese market. Almost all the luxury brands have own stores. In addition, from the perspective of demand, Chinese consumers are different from other European and American consumers. Chinese consumers pay more attention to the social status and vanity especially some young white collars. And Chinese consumers with high income and advanced degree tend to be younger about 30 to 45 years old. The following graph 2 shows the product category in China luxury market. It is very obvious that watch, cosmetic and perfume account for larger proportion than other products.

Graph 2:

Source: 2011 China Luxury Market Study by BAIN&COMPANY

Brazil market

Because of the appearance of European sovereign debt crisis, European luxury market has been impacted. But luxury goods in Brazil market have a good rise. According to the analysis from Bain Company, Brazil is a fast growing luxury market and the target consumers has been over 100 million (Redazione, 2011). The female consumptions account for about 75 in the luxury market. Luxury cosmetics and perfumes are the most popular and jewel is the third largest category. In addition, there may be about dozens of international luxury brands to foray into the Brazilian market in 2012 such as Fendi, Bottega, Veneta, Yves Saint Laurent¼ŒPrada and so on. Louis Vuitton brand will open three new shops in the next year. Tiffany&Co entered into St.Paul in 2001 and demand has been constantly increased. In the coming year, there will be a few new Tiffany&Co shops.

Evaluation of the two target markets

5.1 analyses on Brazilian marketing environment

political environment

In recent years, Brazilian governments are always struggling to improve social fundamentals and narrow the wealth gap. It led to the expansion of domestic demand. And Brazilian government has also pushed forward some tax preference policies to encourage import. So it is very beneficial for CHANEL to enter Brazil market.

Economic environment

Brazilian economic strength is the strongest in Latin America. In recent years, the Brazilian domestic demand has been very powerful. And 2014 FIFA world cup and 2016 Olympic Games will be hold in Brazil. So the prospect of luxury market will be very well. Brazil is the 11th country in the rankings of HNWIS (Redazione, 2011). Brazil has more high net worth individuals than India and Russia. Therefore, Brazil will become a new emerging market of CHANEL.

Cultural environment

Along with the improvement of education culture level, the residents’ values have changed. They pursue the life quality and want to get respect from others. So it will be a trend to purchase the luxury goods. These changes will be conducive to the sales of CHANEL products.

In short, as a new emerging market Brazilian luxury market will bring great profits for CHANEL.

5.2 analyses on Chinese market

Consumers’ purchase motivation: Chinese consumers’ purchase motivation can be simply summed up two types. The first is social consumer motivation which includes flaunt, social intercourse, conformity and status symbol. At present, some Chinese consumers purchase luxury goods to satisfy the vanity. And some consumers want to keep good social relations. So they always use the luxury good as a gift to other friend. In addition, other consumers think the luxury goods are one of status symbols which can show own social status. The second is individual consumption motivation. Some Chinese consumers purchase luxury goods to pursue life quality and enjoy the happiness what luxury goods can bring.

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Market Characteristics: the consumption of luxury good is based on economy and culture. Comparing with European and American markets, Chinese market has own characteristics (BAIN&COMPANY, 2011). Firstly, the consumption concept has been changed from “waste” to “life attitude”. Now many Chinese consumers use the luxury goods to flaunt their social status. Secondly, the demand growth of luxury goods is very amazing. Now Chinese high income groups are great and their purchase desire will be stronger with the rising incomes. So it leads to the rise in luxury goods demand. Thirdly, the main consumers are young people including some successful young merchants and high income white collars. Of course, there is another kind of people: the children of privileged government officials and the super-rich.

Through the above analysis on Chinese market, it means that the market is very appropriate for CHANEL. And CHANEL should put more energy into Chinese market to take more market shares, because there are many powerful competitors.

Recommendation

Aiming at China luxury market, the report provides some recommendation for CHANEL.

Accelerating expansion of 2/3 cities. Now the tier 2/3 cities have been the important markets for luxury brands. Because luxury goods accessed into the first tier cites early, the attraction of luxury goods has gradually declined and the sales has been weak. The high marketing costs can also lesson the profits of luxury brands. By contrast, the marketing costs are lower. in tier 2/3 cites, some invisible rich who just begin to pursue the luxury brands are the most important consumers.

Graph 3:

Source: 2011 China Luxury Market Study by BAIN&COMPANY

According to the graph 3, it is very clear that CHANEL has no new shops in the tier 2/3 cities. But its competitors such as GUCCI, LV, and Dior have developed the tier 2/3 cities. So CHANEL should rapidly take actions to occupy the tier 2/3 cities.

Using some social medium to increase mindshare.

Graph 4:

Source: 2011 China Luxury Market Study by BAIN&COMPANY

Social media has been the main way for luxury consumers to get information. Comparing with Facebook and twitter, microblog is the most important social media. If some luxury brands have new information, generally speaking, microblog is the fastest channel to release. There is an interesting phenomenon that many luxury consumers like to flaunt own luxury goods to friends and strangers by own microblog. CHANEL can use the magnifying effects of microblog to release own brand resource. It is a trend for some social medium like mciroblog, brands website and video to play together (O’Guinn, 2011). So CHANEL can use the social medium to hold a fashion show live. Of course, microblog will also bring some risks, so CHANEL must carefully analyze the potential risks and work out a coping strategy.

Experience marketing

In China luxury market, many consumers cannot insight into the culture of luxury brands and do not know their brands idea and history. Knowing the brand is the precondition of brand loyalist. And experience marketing is the bridges for communications between consumers and luxury brands (Ferrell, 2010). CHANEL can build a new unique store or upgrade the existing store to give consumers bran-new shopping experience. In addition, some art activities may be held to help luxury consumers better know CHANEL brands’ history, value and culture especially the consumers from tier 2/3 cities.

Customized service

Along with the deep understanding for luxury brands, Chinese luxury consumers cannot satisfy the current design of luxury brands. Consumers’ customize requirements can reflect their fanaticism of brands. The core value of customized products is the uniqueness and exclusivity (Keller, 2007). There will be a customized agitation in China luxury market. So CHANEL should provide the customized service of some products such as dress, jewel, and bags and so on. And the consumers can choose own design, material and accessories. Furthermore, CHANEL can take into about the Chinese elements. The perfect combination between Chinese elements and European fashion maybe become a trend.

Conclusion

As a famous luxury brand, CHANEL has been always insisting the unique brands idea. CHANEL represents a kind of style and double C sign has become the eternal classic. Brands design is the most important factor for CHANEL success. Meanwhile a successful brand cannot do without the optimal marketing strategies. In order to satisfy the existing markets and potential markets, CHANEL constantly adjusts the marketing strategies according to the market demand. Moreover, Along with the recession of European and American economy, luxury brands have taken some developing countries as the target market. China luxury market with a steady growth has become the most attractive luxury market. Most well-known luxury brands have set up own stores in first tier cities and tier 2/3 cities. Chinese luxury market is different from European and American luxury markets. So CHANEL should carefully research the development trend of Chinese luxury market and build some new plans to take more market shares. It can be sure that the competition between CHANEL and other international luxury brands is very fierce. But meanwhile CHANEL should pay attention to Brazil luxury market which is a emerging luxury market.