Executive Summary
Gucci is an Italian fashion firm that was incorporated in 1906 and has grown to become the world’s famous luxury brand. In 2006, Gucci raked in $7 billion in revenues. The company has over 400 stores spread across the globe and has numerous franchisees. Apart from the fashion business, Gucci also incorporated other brands such as Bottega Veneta, Sergio Rossi, and Alexander McQueen among others.
At the heart of any successful company is a strategy that helps it to meet the needs of the customers, while at the same time, beating competitors. Indeed, Gucci, has experienced numerous challenges since its inception. Its European sales are about 40% of the global totals. However, the economic turmoil of 2007 has seen its prospects dwindle in the last 5 years. This has seen the need for the company to reengineer its marketing strategy to reflect the current situation. Moreover, a quick glance at the SWOT analysis will reveals what the company needs to do to overcome the challenges posed by competitors. This will be realized if the company embraces the numerous opportunities available in the market. Indeed, the declining purchasing power among the customers in the developed world is of major concern to the company. The financial crisis of 2007 seriously hampered growth prospects within the Euro Zone as well as in America. However, some Asian countries, like China, have enjoyed continued growth over the years. To enter such markets is not easy because of differences in tastes and preferences between the Chinese and Western consumers. Therefore, Gucci needs to design a strategy that will help steer the company in the right direction in the coming years (Bevan and Wengrow 41).
Company Analysis
Gucci, through leaps and bounds, has grown to become the world’s famous luxury brand. In 2006, the company achieved about $7 billion in sales within the luxury market (Chevalier and Mazzalovo 142). This was boosted by an effective promotional strategy employed by the company. For instance, Gucci hired ZenithOptimedia to deal with the media in most of the markets. This was an effective strategy for Gucci to have the same company handle its products. The company’s strengths include a strong brand name and a well-established presence in the international market (Chevalier and Mazzal 34). In addition, Gucci has numerous diversified brands and controls its own distribution channels. However, Gucci has to fight substitutes that come in form of imitation. The goals of Gucci include maintaining high products and creative designs. This is to be realized through rigorous brand image and effective communication. In addition, an effective distribution channel will be critical in realizing the company objectives and goals.
Customer Analysis
To appeal to the customers, Gucci is focused on embracing vibrant colours that have an appeal to most customers. In addition, the compelling needs among the customers include clothes that reflect personality, sexy looks, and confidence. In addition, customers are motivated by the company’s strong brand and trends in the market. Moreover, clients are motivated by the new looks of Gucci products. The customers of Gucci are people who love fashion. They belong to the highest classes in society and want to show off their position by what they purchase.
Competition Analysis
Gucci operates in an extremely competitive market. Some of the main rivals in the industry include Louis Vuitton, Chanel, Hugo Boss, Giorgio Armani, Lanvin, Fendi, and Prada among others. The major challenger, Louis Vuitton uses the same strategies as Gucci. Louis Vuitton have an exemplary pricing tactics, which focuses on high mark-ups and limited availability (Ireland, Hoskison, and Hitt 211). The company also has a strong image, because it has been in operation since 1854. In addition, Louis Vuitton has similar products like Gucci, which include belts, shoes, and luggage among others. The workers of Louis Vuitton are well-paid, thus embracing personnel differentiation. The motivation is therefore high, which leads workers to produce high quality products.
The Target Market
Although Gucci has numerous product extensions in the market, it has identified one target market that fits into the goals and aspirations of the company. The company sells its products to both women and men. However, markets are not homogenous as there are differences that exist in the market, which calls for market segmentation (Gitman and McDaniel 45). Segmenting a market means splitting it into distinct groups that are almost similar in several ways (McDonald & Dunbar 138). Gucci, in trying to achieve its objectives, has specifically focused on a unique demographic, psychographic, and geographic segmentation criterion.
Demographic Segmentation
Gucci products are purchased by both genders, although there are specific brands for both men and women (McDonald & Dunbar 77). However, the company does not have a specified age group for their products. However, the most targeted categories are those with high purchasing power, around the age of 25 years and above. He company’s products are not cheap, and therefore, the targeted group are those with high incomes.
Psychographic Segmentation
Psychographic segmentation focuses on the intrinsic drivers of consumer behaviours. In psychographic targeting, marketers focus on the lifestyles, social class, activities, and opinions of the targeted group among other factors in devising the promotional strategy (McDonald & Dunbar 98). For instance, customers can be classified into different categories depending on their purchasing power. The purchasing power is a function of several factors such as ones’ background, occupation, or spending habits (Hoffmann and Maniere 81). Customers make certain purchases in order to maintain their social class. Gucci, aware of the psychological factors that influence behaviour, has premium brands that target the high class. The product also appeals to those people who are more predisposed to show their personality. They will purchase Gucci to show off, since the products are glamorous (McDonald & Dunbar 201).
Geographic Segmentation
Geographic segmentation assumes that people in a given locality will behave in a similar way concerning a given offer by a company (McDonald & Dunbar 202). Gucci targets urban centres more than the rural ones. Cities have more people who are affluent and prefer high class living. The company’s products are bought for prestige, and this can work well in urban centres where the concentration of people is high. Indeed, most cities across the world would attract Gucci products on their shops. However, Gucci does not have a remarkable presence in the Far East. In 2009, the company had less than 10 stores in Asia (Ireland, Hoskison, and Hitt 401).
SWOT Analysis
As one of the premium brands in the market, Gucci has to fight for its market share in order to maintain its status in the market. The SWOT analysis is a critical model that helps a company scans its environment to gauge its strengths and weaknesses (). At the same time, the model is indispensible since it will help Gucci understand the threats as well as the opportunities in the market (McDonald & Dunbar 52).
Strengths
Gucci is a strong brand with an international appeal (Ludicke, 2006). In addition, the company has bolstered its image in the minds of the customers by collaborating with UNICEF. The company has the capacity of controlling the distribution channel. Because the company controls its distribution channels, it can defend its dominance by enjoying the benefits that would have gone to suppliers and retailers. Another aspect of its defence strategy is harnessed by operating its stores. The Directly Operated Stores (DOS) helps Gucci manage its distribution process effectively. Additionally, Gucci has an aggressive strategy that is realized through communication and diversification efforts.
Weaknesses
The weaknesses of the company lie in its management policies as well as on the financials of the company. Over the years, Gucci has its long-term debts continue to escalate. In 1998, its debt stood at $17 million, which rose to $ 143million in 2000. In 2003, the long-term debt was $1.43 billion. Currently the figure is about 2.1 billion (Macroaxis.com). In addition, some product lines are not fairing well in the market. Therefore, Gucci must promote and aggressively market those products which are performing poorly to boost its liquidity. This also means the company must invest a lot of money to manage its share and maintain its brand image.
Opportunities
Opportunities for Gucci are numerous, especially in the emerging markets. Some economies, such as India and China are doing well and the company should make its presence in the market known. For instance, the Chinese economy has flourished in the last 5 years, as the country was not affected by the global financial crisis. Indeed, many people in China have amassed a lot of wealth due to strong economic performance. Because of this, many people would be interested in trying the company’s luxurious brands. Moreover, Gucci can embrace consolidation of other products as well. This can be achieved by creating competitive advantages in several of its business units. If the need to expand arises, there are numerous opportunities for Gucci to explore, especially on the youth market.
Threats
Gucci operates in a very competitive market segment. For instance, Zara & Gap are medium level brands that potentially can enter the premium category in the near future. The threat of substitution is extremely high. In 2007, after the global recession set in, most households were severely affected, especially in Europe and the US. Low levels of income led people to shop for substitutes. The substitutes in the premium category include those goods, which have a close semblance to the original ones. There is also the threat of new entrants into the market such the French holding company (PPR) that owns about 70% of the company’s stock (Chevalier and Mazzalovo 29).
The Marketing Mix
Product:
Gucci deals with the production of consumer goods which ranges from clothing, fragrances, watches, jewelry, shoes, household products, and leather products such as wallets, hand bags, belts among others targeting the prestigious class of people in the world. In the last two centuries, Gucci has emerged as one of the best and successful manufacturers of worlds’ renowned luxury related fashion products. Their products have their history way back in the Second World War when they made handbags from cotton canvas other than leather. Nowadays they fabricate leather from pigskin, calf, and imported exotic animal skins. Products such as the “Rolls-Royce” luggage set was brought to the market in 1970s with other products such as watches, ties, jewelry, and eyewear being added to the market. Gucci products are of high class and prestigious. They have a variety of women beauty products such as body lotion, make-ups, women powder among others. On top of the line, there are other products like coats, dresses, jackets and blazers, pants, shorts, tops and skirts among other women body wear. Gucci stocks products that one cannot feel guilty when buying. There are fabulous men’s wear such as coats and jackets, blazers and sport coats, jeans, suits, shoes, sunglasses bags and backpacks.
Gucci products are available or can be viewed in their shops or websites. The website gives the description of all the varieties of products, which are available in the companies shopping outlets worldwide. Any customer willing to shop with Gucci may view the styles, designs, and color of the products according to the taste and prevalence. Purchases may be made either online or by visiting the nearest Gucci store. The online shopping has made Gucci products gain fame in the world market due to the variety in color, design, make, and luxury.
Price
Gucci products vary in price depending on their design and make. The company has taken some sites like the New York Times Web, which advertise and quote products’ price upfront depending on the collections available in the market. This news web is one of the most popular in the US that makes a profitable advertising media for Gucci. By clicking the advertisement of a product, a box opens up that displays the products picture and the price. Gucci is known for their high-end fashions especially for classic and luxury designs that accompanied by high prices to match them. The high prices guarantees customers of genuine products and best value for their money. Most product prices are in dollars and are taxable. Gucci takes it as a responsibility to make sure that the prices displayed on websites are always correct and updated. Most Gucci products are sold through selected distributors worldwide, because of their taste of luxury. Owing in mind that Gucci products are luxurious products, prices are quoted very high, giving them the taste of high-class products for high-class people.
Place
The company’s statutory headquarters is in the Netherlands where the administration centre and human resources department are situated (Ireland, Hoskison and Hitt 111). The company has devised international marketing strategies in an effort to communicate consistent images to its customers globally. Gucci has developed various well-controlled distribution networks throughout the world were its products could be found. Therefore, the presence of the company’s online has been able to reduce the national boundaries globally. In the US, for example, there are about 50 locations, where Gucci products can be found and purchased. Other major destinations of their products are Europe and Asia. However, Gucci locations and stores in the world can be found in social networking sites like twitter, Facebook, eBrogger among other sites. The business areas and locations certified by Gucci are supposed to be under the social accountability internationals SA8000 standard. Gucci controls about 400 store outlets across the globe. In relation to this, Gucci makes sure that its products are available to the customers through four main distribution channels; stores operated directly, franchise stores, boutiques that are duty free and departmental stores. Recently, Gucci has discovered markets in India where it has opened boutiques in Mumbai and New Delhi (Majumdar 302). In summary, place plays a critical role in the marketing effort. For Gucci, knowing the significance of the buying behavior, the company has strengthened all its stores through redesigning and positioning them to attract the younger generation. In addition, the value added by e-commerce will go a long way in strengthening the company’s penetration in the current as well as external markets.
Promotion
The major targets for Gucci are men and women aged between 25 and 55 years with a high standing in society. Gucci products are of premium quality. The products appeal to the affluent people, who look for prestigious goods to enhance their status. Gucci has an attractive advertisement that reflects the status of their products to the targeted group. For instance, its Guilty fragrance is run by a unique advertisement using new technology, bringing special connection and attention form the affluent people. In addition, Gucci uses celebrities to represent their brands. Indeed, the opinions of the celebrities add value to the brand. For instance, Jennifer Lopez currently features on Gucci’s summer collection campaigns (Eiseman and Recker 188). More so, Gucci raises funds for charity organisations to promote their products. Recently, they have assisted in raising funds for UNICEF, which helps in meeting the needs of children across the globe. By involving themselves in busy days of the year like Christmas, they encourage customers to buy their products with a small percentage going to the charity. Through such an approach, the company may end up making bulk sales, since some of the customers will make purchases in the name of contributing to the charity. The company also uses technology methods like print, internet, and media to promote their products. They use a strategy of coming up with different campaigns and collaborating up with a number of organisations all over the world. In essence, Gucci’s promotional efforts have focused on the rebranding of the company and repositioning its products to the affluent. Quality has focused on avoiding the mention of the prices and discounts for the Gucci products.
Recommendations
Gucci should strive to increase its presence in the current market by embracing diverse promotional strategies. Market penetration will increase the company’s overall performance by increasing the sales of brands, which are performing poorly. Besides, Gucci should ensure that their products are consistent with the needs of the customers. In this case, the company needs to make sure that the products get to the customers in the right form and should not mass-produce. In addition, outdated products in terms of designs, prints, color, and styles should be avoided. This will require a balanced portfolio of brand so that the company’s profits can grow and provide opportunities for savings. Maintaining the satisfaction of needs of the target group in the market should be an issue of concern since the company will be assured of fast moving of their products. This can be made effective through production of designs and models that favor that particular group as per the particular season.
Like any other company, Gucci should be able to know what is within their scope in terms of the line of production and interaction of the products in the market. Since the company deals with a variety of body wears, which all of them bear the brand name “Gucci,” then there is a need of analyzing whether the products are profitable when marketed together or when on single units. The company has to take the challenge of recognizing that it not dealing with only a single product, but a variety of products which range from cloths, shoes, and watches among others, hence a need to weigh the business returns out of the several products. This will help Gucci create its diversification strategy in a manner that does not affect its liquidity.
Gucci should also expand into the Asian market and especially China. The Chinese economy has been doing well in the last five years. Indeed, China did not suffer from the financial turmoil that affected the US and most of the European countries. As the economy in China is expected to continue growing by double digits, Gucci can enter the market to harness its full potential. However, there is a need to understand the Chinese market well. This requires investment in research to understand the unique differences between China and the Western consumers. Without a thorough understanding of the market, it will be impossible to have a successful marketing campaign in the country.
Conclusion
A review of the SWOT analysis reveals that Gucci has to confront the serious challenges posed by substitutes, which come in the form of imitations. In addition, the company has to fight for its survival since medium level brands are expected to venture into the luxury segment. Gucci should reveal its brand management strategy. Indeed, there is a need to build an image that is long lasting in the minds of the consumers. The perception of the consumers towards Gucci should be positive to win their loyalty, not only to the product in particular, but also the company or organization in charge of producing the products in general. By winning this, Gucci will be assured of increased in sales, both in the short term as well as in the long-term.
It is hoped that Gucci will explore the recommended set of strategic moves in order to continue maintaining its position in the market. The recommended actions include market penetration, diversification, as well as market development. Through these moves, Gucci will continue to enjoy a favorable lead in the premium market.
Works Cited
Bevan, Ann., and D. Wengrow, Daniel. Cultures of Commodity Branding. London: Left Coast Press, 2010. Print.
Chevalier, M., and . Mazzal, G. Luxury Brand Management: A World of Privilege. Singapore: John Wiley & Sons, 2012. Print.
Chevalier, Michel. & Mazzalovo, Gerald. Luxury Brand Management: a world of privilege. Hoboken, NJ: John Wiley & Sons, 2012. Print.
Eiseman, L. and Recker, Keith. Pantone: The Twentieth Century in Color. London: Chronocle Books, 2011. Print.
Gillespie, K. Jeannet, and Hennessey, D. Harry. Global Marketing. USA: Cengage Learning, , 2010. Print.
Gitman, L. John., and McDaniel, D. Chrales. The Future of Business: The Essentials. USA: Cengage Learning, 2008. Print.
Hoffmann, James., and Maniere, Charles. Global Luxury Trends: Innovative Strategies for Emerging Markets. New York: Palgrave Macmillan, 2013. Print.
Ireland, R. Duane., Hoskison, E. Robert. & Hitt, A. Michael.Understanding Business Strategy Concepts Plus: Concepts and Cases. New York: Cengage Learning
Ludicke, K. Michael. A Theory of Marketing. Frankfurt: Springer, 2006. Print.
Macroaxis.com. (2013). Gucci Total Debt. N.d. Web. 19. March 2013<http://www.macroaxis.com/invest/ratio/GUCG.PK–Total Debt>
Majumdar, Ramanul. Product Management in India, 3rd ed. New Delhi: PHI Learning, 2007. Print.
McDonald, M. & Dunbar, Ian. Market Segmentation: how to do it and how to profit from it. London: John Wiley & Sons, 2012. Print.
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