Executive summary
This report is basically about how does a company conducted its market segmentation, targeting and positioning strategies in the industry and marketing mix strategy. I have chose Louis Vuitton(LV) as my topic to continue my research and report. The market size, market segmentation, positioning strategy and macro environment analysis of LVMH is discussed in the report.
The SWOT analysis of LVMH is also being discussed briefly. Besides, the marketing mix strategy of LVMH which is 4Ps is also being further discussed in this report. The product line and product mix of LVMH, new product that being suggested, the pricing strategy of LVMH and the price of new products are also being discussed. Furthermore, the channel of distribution and the way of promotion of LVMH products are being discussed in this report too.
Introduction
The company that I chose to analyze is Louis Vuitton. Louis Vuitton is the founder of Louis Vuitton company. He opened his first shop in Paris at the year of 1854, Louis Vuitton is manufacturing trunks in the beginning and the first luggage that Louis Vuitton manufactured was in 1858 .
After that, in 1895, Louis Vuitton undergoes expansion. In 1985, the first store of Louis Vuitton is opened in London. The company’s products undergo a series of innovation with creativity. In 1892, George Vuitton, which is Louis Vuitton son, had taken over the company. He created the monogram logo of Louis Vuitton .
In 1987, Moët Hennessy. Louis Vuitton SA (LVMH) was then created by merging, through $4 billions . Nowadays, Louis Vuitton has 16 outlets and 456 stores worldwide. Louis Vuitton has approximately 77,087 thousand of employees, including both full time and part time employees, where there are 12,161 are part-time employees.. In addition, Louis Vuitton is always generally referred as LVMH by public.
The main products sell by Louis Vuitton are leather bags and wallets such as handbag, luggage and cosmetic bag. Besides, the other products that also being sells by LV are jewelry, perfumes, sunglasses, accessories and so on . The internal strength that LVMH has is that LVMH is a well known largest luxury brand in the world . Products of LVMH are stress on quality, thus their products are very expensive but are definitely high in quality .
Moreover, the rich history and culture is also one of the internal strength that LVMH had. It is one of the oldest fashion houses in the world with more than 150 years of history . The internal weaknesses that LVMH encounter are such as the limitation in customer. As we know, LVMH is a well known luxury brand. LVMH’s products are luxury goods. Most of their customers are of the elite and super rich . Furthermore, the brand is only available in its exclusive store, making people hard to seek for it . And so, the fake imitation with cheaper price is sells in the market, which will affects the brand and sales of LVMH . Next, in year 2011, LVMH had made €3.5 billion profit.
Size of the market
The market size of LVMH is small. Niche market is very specific. LVMH is targeting a niche of wealthy people or upper class society. Again, LVMH is a luxury brand, therefore, the products of LVMH are expensive, and so, the market that LVMH targeted definitely is rich people. LVHM has divided to into various niche markets. 2.2 Competitors
LVMH has quite a number of competitors such as Gucci, Hermes, Prada, Chanel. Somehow, LVMH key competitor is Gucci. Gucci is a famous luxury brand in the world. According to the 14th Best Global Brand ranking, LVMH and Gucci are in top 100 ranking. LVMH is at the rank 17th whereas Gucci is at the rank 38th . The brand value of LVMH in 2013 is higher than Gucci which is $24.893 billion, while Gucci is $10.151 billion .
LVMH and Gucci are both luxury brand, and the products that they sell are of similar too. Gucci has very strong brand image and high bargaining power of supplier. Gucci has the ability to control its distribution channel . The products that sell by Gucci are various in types, such as jewelry, watches, shoes and perfumes. The products that sell by Gucci and LVMH are very similar.
Their products are both high in price, and good in quality. So, their customer royalty will not be affected by lower price, their customer stress on the product quality. In addition, the brand image is extremely important for them to hold their customer royalty.
Market segmentation
LVMH target both men and women, at the age of 18 to 65 years old. Besides, some brand lovers will choose to buy LVMH products rather than other brand’s products. LVHM products are sells exclusively and are fashionable. Therefore, LVMH products are very suitable for brand lovers and stylish. Besides, LVHM products are good in quality and have a long product life. The most important thing is LVHM products are extremely fit into high-class society. Besides, the variety product line of LVHM attracts different styled customer in high class society. The income of customers of LVMH is in around $5,500 and above. So, LVMH customer does not have any financial problem to purchase a LVMH product.
Macro environmental issues
Macro environment of a company can be analyzes by using PEST analysis. PEST stands for Political, Economical, Sociocultural and Technology. PEST analysis is to find out the opportunities and threats of a company. LVMH is a big company which has a lot of employees. Thus, it needs a lot more effort than other smaller company to manage its workforce.
As we know, LVMH is a global company and most of its employees are from outside of France, so, it should not only be careful of the undue political influence from inside of France but be extra cautious of these issues from other countries where they work as well . In addition, the reason for LVMH to manage their employees well is to remain competitive economically. Finding a workforce is hard, retain a workforce is harder, retain the workforce at the right price is even more hard.
Therefore, LVMH must have a strategy to decrease the rate of recession and the matters that deal with workforce. The opportunities of LVMH are it has strong brand image and has variety of product line. The various product lines enable LVMH to target different niche market. LVMH keep expanding its product line and create new niche market for his own.
The strong brand image ensures the customer loyalty. The biggest threat that face by LVMH is imitation of real LVMH products. This is because counterfeiting can affects the brand image of LVMH. Consumer will think that, why am I buying the LVMH products with high price, but others buy pirated goods with extremely low price as compare with the real LVMH products. Not many people can distinguish between the real and imitation
products of LVMH.
Marketing Mix Strategy
Marketing Mix is a marketing plan which also known as 4Ps. It is made up of four elements, which are products, price, place and promotion. This four elements help in promoting a product or brand and set strategic position of a service or a product in a market. To market their products, a firm must have to create a successful mix of a right product, to sold at a right price, in the right place and using the most suitable promotion .
The image above shows the three levels of products of LVMH. (The anatomy of LVMH product.) As shown in the image above, products of LVMH is generally divided into three levels. Its core products are luxury which means consumer buy LVMH products is because of its luxurious. LVMH products are high in quality, branded, have long durability, fashionable and have various lines of products. Somehow, the reason for some customers to buy a LVMH product is not only the luxurious of its product or the brands and quality.
A customer also emphasizes on the non-physical part of the products such as services provided by LVMH, the warranties, customer care and gift wrapping. LMMH handbags are very durable because of the high class fabric and materials in used. LVMH handbag is preferable by public because of its quality and durability. Furthermore, LVMH founded in 19th century, its products such as luggage and shoes are hand made by skilled craftsmen. LVMH products not only stress on innovation, it also emphasizes strongly on tradition.
Thus, every LVMH products comes with a story behind it. So, the loyalty of customers who expected for the tradition quality products and latest fashion trends are maintained . Besides the leather handbag and wallet with monogram, LVMH had expanded its product line. The variety of products type increased such as jewelry, sunglasses, timepieces and accessories. All products are labeled with the brand name. Somehow nowadays, eco-friendly products are very popular. So, the production of nature bag is very feasible.
The materials used to produce nature bag are eco-friendly materials such as hemp and organic cotton. If the leather products are continue to produce, some of the animals such as calf and crocodiles will be threatens by extinction. Therefore, new product such as natural bag is very important indeed. In addition, a leathered bag is hard to clean. As a company that is consumer caring, LVMH should produce products which made of cotton such as cotton handbag. A cotton handbag is more easily to clean. So, this type of products definitely can bring convenience to customers.
Price
The price of LVMH products is very high. So, the target market of LVMH is from rich to middle class group. They have disposable income and hold the same attitudes towards luxurious products. As we know, LVMH is using skimming pricing strategy, which the products of LVMH are set very high, and are not easily affordable to everyone. LVMH does not offer any discounts or bargaining in price. This is because of its brand name, quality of the products and the services provided. LVMH products are design by famous designer, which also made its products high in price. In addition, every design of LVMH products is also limited in quantity.
LVMH only stress on absolute quality of the products, but not price. This is further supported and developed by Kyojiro Hata, the president of Louis Vuitton Japan whose principle of philosophy is “Every products of LV are Money” . The skimming pricing strategy is to ensure that LVMH can make maximum profit before any substitutes enter the market. The price of the LVMH handbags and wallets are among $550 to $3,700 and $200 to $700 respectively. So, the price of the new products, cotton and natural handbag should be set at $1,000 to $5,000, whereas cotton and nature wallet should set at $500 to $1,200, according to its size and design.
The price is getting higher. This is because these type products are first time to be sold in LVMH. So, the skimming pricing strategy should be carry on. Furthermore, the products made of eco-friendly materials are complicated in process. The huge amount of materials needed is hard to find too. In addition, the handbag and wallet are handmade by expert craftsmen, thus, the quality is definitely high and is worth the price.
Place
Every product needs channels to be distributed to customers. Intermediary such as wholesalers, franchisees, agents and brokers, retailers and distribution and dealers is the channel used move products from manufacturer to customers.
Image above shows the types of channel of distribution. The channels of distribution selected by LVMH are channel of distribution 1 and 2. LVMH use retailers as distribution channels. LVMH products only offered in limited distribution channels such as its own stores and a series of high end departmental stores throughout the world . Besides, its products also displayed at the official website, LV authentic boutique and national borders .
By this way, LVMH can ensure that the price, products quality and stores are under its control. For your acknowledgement, LVMH had opened its stores in more than 60 countries. The new products should be offered at its official website and its own outlets. This can prevent pirated goods from penetrating the market. Besides, the quality of the products and the quantity of the products to be sold can be controlled too.
Promotion
Every company needs to promote their products or brand. There are many types of promotion such as advertising, press and discount. Somehow, LVMH do not believe discount can increase their sales, and therefore they never offer any discount. As a result, the brand image of LV is strong still and can maintain the brand luxury reputation. Furthermore, the products value can be maintained.
Moreover, LVMH has the world largest luxury goods advertiser group. LV advertises its products in high quality printing advertising such as high fashion and upscale magazine like Vogue and Elle. Besides, LV products also advertise on billboard in major cities, television and cinema . In addition, LV also used some famous celebrities and models such as Girls Generation and Catherine Deneuve in advertising their products. The new products must be advertised on the magazine and television by those famous celebrities.
The benefits of using nature and cotton bag that newly introduced to customers should be emphasized in the advertisement. Furthermore, the new concept of the bag such as eco-friendly and encourage go-green campaign should be listed out. This is to tell the customers that LV not only is a luxury brand, but a luxury and caring brand, caring towards mother of nature. The price and the materials used must be listed in detail too.
Conclusion
As a conclusion, even though is LVMH, the world largest luxury brand, marketing mix is a part of the marketing plan which cannot be ignore. When a new product is to introduce to market, company must clearly know that the product is targeted to who, where to sell, how to sell and get the detailed information of the products. This marketing mix strategy helps to promote and sells the product. Besides, it also helps to maximize the revenue. In addition, the macro environment helps to find out the opportunities and the threats encounter. So, all in all, all of this strategy and analysis help a business to be successful.
Reference
- A Brief History of Louis Vuitton. (2013, July 17). Retrieved from Savior Flair: http://savoirflair.com/magazine/louis-vuitton-brand-history
- Allison, J. (2012, October 31). LVMH decision making assignment. Retrieved from slideshare: http://www.slideshare.net/JessicaAllison/lvmh-decision-making-assignment
- Beltzer, L. (2013, September 30). INTERBRAND RELEASES 14TH ANNUAL BEST GLOBAL BRANDS REPORT. Retrieved from interbrand : http://www.interbrand.com/en/news-room/press-releases/2013-09-30-d355afc.aspx
- Cuizon, G. (2009, March 7). Marketing Strategy of Gucci. Retrieved from suite101: http://suite101.com/a/the-marketing-strategies-of-gucci-a100826
- Importance of international recruiting in LVMH. (2012). Retrieved from UK essays: http://www.ukessays.com/essays/human-resources/importance-of-international-recruiting-in-lvmh.php
