Chanel is a privately owned fashion company that is based in Paris, France. The enterprise was established in 1909 by Gabrielle Bonheur Chanel, who is popularly known as Coco Chanel. Currently, Alain Wertheimer and Gerard Wertheimer are co-owners of the company. Correspondingly, Virginie Viard is the creative director, and Philippe Blondiaux is the chief executive officer. The phenomenal leadership of the organization has enabled it to operate successfully for approximately 110 years (Chanel, 2019). In effect, the fashion house has managed to establish physical stores in approximately 310 locations worldwide as well as employ nearly 20,000 employees. The mobilization of those resources facilitated the commercial entity to realize revenues of roughly $11 billion during the financial year ending 2018. In this light, the fundamental intent of this particular paper is to examine the operations of Chanel S.A. from a marketing perspective. The implementation of a top-notch marketing plan has enabled the organization to operate competitively despite the comparatively high levels of competition that characterize the fashion sector.
Audit of Brand Performance
In 2018, the total sales generated by Chanel rose by 10.5% to $11.5 billion (Chanel, 2019). Similarly, the net profits of the fashion house also increased by 16.4% to $2.17 billion during the same year. Notably, the highest fraction of the growth realized by Chanel is attributable to the Asia-pacific market because its sales increased by 19.9%. In contrast, the Americas and Europe rose by 7.4% and 7.8%, respectively.
Perceptual Map
Prestige
Mass Market Exclusivity
Affordability
The perceptual map displayed above reveals that Chanel’s management team has positioned its brand as prestigious and exclusive. In effect, all the products offered by the fashion house retail at premium prices (Bendixen & Abratt, 2018). The implementation of that particular pricing strategy gears towards minimizing the number of people who can afford the items it offers. Similarly, Chanel’s physical stores ooze luxury and sophistication. Most importantly, Chanel’s physical stores are usually situated in some of the most prestigious addresses in different cities throughout the globe (Chanel, 2019). As a result, all the individuals who visit Chanel stores appreciate that the company is selling luxurious items. Thus, a substantive number of people end up buying Chanel products because they are Veblen goods (Ferrell & Pride, 2016). Correspondingly, Chanel’s marketing team has positioned its brand in a manner that ensures the general public believes that the organization offers top-notch products. The perceived quality of Chanel’s products is one of the primary factors that justifies the premium prices that they command (Gbadamosi, 2013). In particular, a huge portion of the individuals who procure Chanel products to do so because they are not only acquiring luxurious items but also high-quality ones (Fowler & Burrow, 2016). Due to that aspect, the customers believe they receive good value for their money when they acquire Chanel products because they are trendy, exclusive, and durable.
Audit of External Environment
Indeed, the United States, China, and France account for a third of the total sales generated by Chanel (Chanel, 2019). Unfortunately, the governments of the three countries are involved in negotiations pertaining to protectionist market policies. The diplomatic row between the United States and China has resulted in a scenario whereby the governments of the two countries have imposed tariffs against each other. Similarly, Britain has decided to exit the European Union, and that means the country might put in place tariffs against products imported from France. Fortunately, the operations of Chanel have not yet been adversely affected by the geopolitics above described. However, its management team needs to monitor those two situations closely in order to ensure that they respond effectively to any geopolitical changes which are likely to have adverse implications on the performance of Chanel (Godfrey, 2016).
For the past few years, the global economy has been comparatively stable. In effect, the prevalence of that particular scenario has made the population of the middle class in many countries throughout the world to increase. Indeed, the products offered by Chanel are usually targeted at the rich and wealthy (Chanel, 2019). However, the middle class and members of the Higher Earners, Not Yet Rich category, are the primary buyers of Chanel’s products. Perhaps, those products appeal to those two segments because they are symbols of success. In this light, it is critical for Chanel to enhance their proficiency at catering to the needs of the members of those two categories because it is highly likely that their population will continue increasing over the foreseeable future if the global economy remains stable (Fowler & Burrow, 2016). The implementation of that particular strategy is likely to boost the overall sales of the fashion house as well as enable it to diversify its customer base (Bendixen & Abratt, 2018). Besides, the move will also help the commercial entity to minimize its vulnerability to geopolitical risk.
In addition, Chanel needs to increase the range of products that it offers to Asians because a substantive fraction of them value luxury brands. In effect, the fashion house should develop products that will be specifically offered to the Japanese, Malaysian, Chinese, Singaporean, and Indian markets (Chanel, 2019). By so doing, the company is likely to improve its market share in those respective countries, considering that most of the fashion houses hardly develop specialized products for each one of them (Bendixen & Abratt, 2018). The competitiveness of the new products will be highly influenced by the standard of sociocultural research that the fashion house conducts (Thompson, 2017). Thus, it is in the best interest of the enterprise to ensure that they conduct top-notch research that will enable the product development team to design items that are in line with the preferences and tastes of those target markets.
Technological advancements are taking place at a relatively high rate, and they are affecting the manner in which businesses operate (Ward & Peppard, 2016). As a result, Chanel’s management team needs to ensure that the fashion house is able to effectively adapt to the technological changes in order for it to operate competitively (Thompson, 2017). Notably, the general rate of internet penetration has been rising throughout the world. In effect, the popularity of online shopping has been rising steadily throughout the world. Due to this aspect, it is critical for Chanel’s management team to formulate and implement strategies that will facilitate it to enhance the competitiveness of its online stores. Arguably, failure to develop and implement such a strategy is likely to have adverse ramifications on the overall competitiveness of the fashion over the long term considering that electronic commerce is democratizing markets globally.
At the moment, the world is experiencing relatively high rates of global warming. Thus, governments across the globe have invested heavily in programs that sensitize communities on matters pertaining to environmental sustainability (Fowler & Burrow, 2016). Due to that aspect, there has been a substantive increase in the number of people who are examining the performance of commercial entities from the vantage point of environmental sustainability as they make their purchase decisions (Thompson, et al., 2017). Accordingly, it is critical for the management team of Chanel to review its operations with the aim of ensuring that it is being run in a sustainable fashion in order to boost the competitiveness of the organization. Similarly, the organization needs to ensure that it maintains a diverse workforce in order to develop a positive brand image globally, especially amongst the millennials and Generation Z (Soundaian, 2012).
Currently, Chanel has a physical presence in approximately 310 locations across the world. In consequence, it is vital for the management team to develop a legal team that will advise it on the legal aspects pertaining to the decisions they make on behalf of the organization on a day to day basis. Countries such as China and Saudi Arabia tend to be extremely harsh when punishing international companies that contravene their laws. As a result, the management team needs to ensure that the marketing strategies employed by the organization are in line with the laws of every country where Chanel has a physical presence.
SWOT Analysis
Chanel is a fashion house that has strong brand equities, a factor that enables it to operate competitively in a highly competitive sector. In particular, the brand is approximately 110 years old, and it is ranked amongst the top a hundred luxury brands throughout the world. As a result, the company can leverage its brand equities in order to popularize as well as introduce new products effectively (Levinson & Lautenslager, 2014). Similarly, the brand equities of the enterprise enable it to venture into new markets effectively. In effect, the fashion house can gradually grow its customer base, thereby diversifying its sources of revenue as well as boosting its total sales. Indeed, diversification will play a vital role in terms of facilitating the fashion house to continue operating profitably in the long term despite the changes that are taking place in the geopolitical front of the advanced economies.
Karl Lagerfeld was one of the primary designers for Chanel, and his death means that the fashion house needs to reorganize its operations because he was an iconic figure. Indeed, it will be next to impossible for the organization to replace Karl Lagerfeld. Thus, it is advisable for Chanel to identify another great designer who can develop world-class products for the organization. (Ward & Peppard, 2016) The process of choosing the main designer is risk and challenging, given that errors will have direct adverse implications on the overall competitiveness of the fashion house. Besides, the competitiveness of Chanel is adversely affected by the ever-increasing costs of production (Lancaste & Reynolds, 2011). Due to that aspect, the company realizes a lower profit margin per unit of sale. As a result, it is critical for the organization to revise its pricing strategy in order to ensure that its products are affordable to the highest portion of its target market.
The general demand for Chanel products has been rising throughout the world due to the increase in the number of people who can be categorized as High Earners, Not Rich Yet. Due to this aspect, Chanel’s marketing team should concentrate on catering to the needs of this particular segment of the market (Thompson, 2017). Arguably, it is because the largest fraction of the members of that category have large amounts of disposable income even though they are not yet rich. As a result, they are capable of acquiring the various products rendered by the organization. Perhaps, one of the ways that the fashion house can achieve that objective is by increasing the number of advertisements aired on the most popular television channels throughout the world (Gbadamosi, 2013). By so doing, the organization is likely to make Chanel to be amongst the luxury brands that are first in the minds of the individuals who are part of its target market. In consequence, the fashion is likely to boost its sales over the foreseeable future.
Additionally, Chanel should also introduce new products because the move is likely to facilitate the fashion house to increase its customer base. Indeed, the preferences and tastes of customers change on a periodic basis because fashion tends to be highly perishable. Thus, it is essential for Chanel’s marketing team to conduct extensive market research that gears towards understanding the preferences and tastes of contemporary customers. In particular, marketing research ought to focus on understanding the needs of Generation Z and Millennials (Arora & Sanni, 2019). Arguably, it is because such individuals are likely to join the High Earners, Not Rich Yet category in approximately a decade’s time. As a result, the in-depth understanding of their preferences and tastes in likely to facilitate Chanel to develop products that can introduce them to the brand (Tesar, 2013). Consequently, the marketing team should devise strategies that will facilitate the organization to retain those customers in order for the fashion house to reap big returns once they join the High Earners, Not Rich Yet category.
The rising popularity of luxury brands such as Chanel has resulted in a scenario whereby the number of counterfeit products has also increased. As a result, it has become increasingly challenging for customers to discern counterfeit and original products effectively. In this light, it is critical for Chanel’s marketing team to create infomercials that gear towards equipping the general public with skills that will facilitate them to identify the original products effectively (Sweezey, 2014). By so doing, the organization will minimize the overall amount of revenues that it loses due to counterfeiting. Most importantly, the fashion house will safeguard its brand image, which is likely to be tarnished by counterfeit products because they tend to be of inferior quality.
Moreover, the luxury fashion sector is characterized by a comparatively high degree of competition, which means that Chanel’s marketing team has to develop innovative techniques for promoting the various products offered by the fashion house. Accordingly, it is advisable for Chanel’s marketing to encourage the management team to increase its investment in content marketing. Perhaps, one of the through which the organization can realize that objective is by increasing the number of films it sponsors (Molenaar, 2012). Product placement in film facilitates fashion houses to position their products and brands effectively. As a result, the fashion house can leverage the brand equities of different influencers in order to enhance its competitiveness in the sector. Content marketing is highly recommended because it will enable the fashion house to subtlety market its products (Simakova, 2013). In effect, the customers are likely to enjoy the marketing, which is a factor that often results in a situation whereby the individuals who watched the film will have a positive image of the brand.
Marketing Plan
The population of the middle class has been growing the developing economies such as India, China, Singapore, and the Middle Eastern countries. As a result, it is critical for Chanel to employ a marketing strategy that will facilitate it to grow its market share by approximately 8% percent in those countries. By so doing, Chanel’s revenues will increase, considering that the United States, China, and France generate nearly a third of its total revenue (Chanel, 2019). Besides, the growth in market share will facilitate Chanel to effectively diversify its revenue base, which is highly essential, considering the geopolitics of the contemporary world (Fill & Baines, 2012). The economic growth of the developing countries is expected to be positive over the foreseeable future, which means they can facilitate Channel to cushion itself from the adverse implications of the protectionist market policies being employed in the United States and the United Kingdom.
Social media marketing is the most suitable Chanel for promoting the different products offered by Chanel (Kurtz & Boone, 2015). Arguably, it is because social media facilitates companies to target a particular fraction of society specifically. In effect, social media marketing offers a comparatively high return on investment. Due to this aspect, it is critical to appreciate that the effectiveness of the advertising campaigns which run of social media will be influenced by the quality of content presented. As a result, Chanel should hire models that hail from the countries that constitute its target market. The implementation of this particular strategy will make the target audience to effectively relate to the products that are being advertised because they identify with the models. All the advertisements should issue calls to action that direct customers to the websites and stores where they can procure Chanel products (Arora & Sanni, 2019). The effectiveness of the advertisements should be measured based on the number of likes, comments, views, and impressions generated by each post. Above all, the company should commission a market survey at the end of the year in order to ascertain whether its market share has increased.
Currently, the prevailing degree of internet penetration has been rising throughout the world. In effect, fashions houses need to employ an Omni-channel strategic in order for them to operate competitively. As a result, it is advisable for Chanel’s marketing team to invest in search engine optimization for the fashion house to enhance the competitiveness of its electronic commerce platform (Sweezey, 2014). The move will ensure that Chanel’s online store pop-ups in the first page of most search engines whenever people search for some of the products offered by the fashion house. Arguably, the individuals who decide to shop from their online stores should receive discounts on the cost of delivery as opposed to the price of the products they purchase. The application of that particular strategy strives to ensure the organization does not comprise the perceived quality of the products its offers. The provision of luxury products at discounted prices might have adverse implications on their appeal (Ansoff, 2016). Perhaps, it is because luxury products are supposed to be exclusive in order for people to aspire to own them. The issuance of discounts on delivery gears towards reassuring the online shoppers that the products displayed on Chanel’s e-commerce store are top-notch, and the competitive prices stem from the reduced operational costs courtesy of the savings made rent.
Conclusion
In conclusion, the use of a world-class marketing plan has been pivotal in ensuring that Chanel operates successfully. The audit of the brand performance reveals that the enterprise has strong brand equities, which it leverages in order to realize a competitive edge in the market. Similarly, the audit of the external environment reveals that political, economic, technological, and environmental factors primarily influence the competitiveness of the enterprise. The directors need to realign the operations of the company according to the variations that are taking place in the critical markets. Similarly, the SWOT analysis reveals that the enterprise should also focus on improving marketing, especially in developing economies. Arguably, it is because those markets are less competitive, and their middle is growing at comparatively high rates that the demand for the wide variety of products rendered by the organization is highly likely to increase over time gradually. To that effect, the marketing plan employed by the organization should leverage the power of digital media in order to enhance its brand equities, especially in the developing world. Most importantly, the marketing plan should focus on parents and young people between 25 and 40 years old. It is because the company sells its products at a premium, and a substantive fraction of the people in the age bracket indicated above have jobs, which means they can choose to buy some of the items it offers because they are perceived as symbols of success. Similarly, advertisements that are geared towards encouraging parents to procure the products offered by the fashion house are likely to be effective because most of them want the best for their children.
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Appendix
Marketing Budget
| $ | |
| Marketing Research | 540,200,000 |
| Traditional Media | 394,200,000 |
| Digital Media | 306,600,000 |
| Promotions | 219,000,000 |
| Total | 1,460,000,000 |
Sales Growth