Introduction
The term ‘luxury’ has been diversified within the past few years and more brands are being developed in order to indulge within the category. Louis Vuitton; a brand under LVMH Louis Vuitton Moët Hennessy is one of the brands where the luxury term has instigated and is known to be one of the worlds most renowned company. It currently ranks at top 30 global brands in the world with a brand value of $28,508 Million and tops the list for the most luxurious fashion brand trouncing other rivals such as Hermes and Gucci (Millword Brown and WPP, 2016). Louis Vuitton entered the world of fashion in 1854 from the city of Paris and was diversified to the other parts of the world by its originality, quality, classy designs, exclusivity and posh styles which were intrigued and attracted by high net worth individuals. Most fashion aficionados admired Louis Vuitton’s work because of its uniqueness in the fashion industry and gained fame distinctively by its other competitors. In today’s world, Louis Vuitton has captured the pride of celebrities and socialists while showcasing a range of exquisite goods such as handbags, fashion and leather goods, accessories, suitcases, perfumes, cosmetics, watches and jewellery.
Louis Vuitton made a very distinctive turn in 1896 wherein he introduced its logo, a Japanese-inspired flower motif. The intention of doing so with such a synonymous monogram was to obstruct counterfeiting of its designer wear and was the very first recorded designer label in history (Louis Vuitton Brand WordPress, 2013). This states that as such an early age, the designer was aware that their would be a marketing challenge wherein his products would be fabricated. It’s a pure notice about conspicuous consumption in a prestige market.
Currently, Louis Vuitton has established a brand name for itself with stores over 3700 worldwide (LVMH Annual Report, 2015), they still intend to construct many flagship stores throughout continents especially in India, Japan and China wherein the demand of such products has saturated. They tend to adapt a lot of cultural demands of consumer’s perspective and bring in to life by their own means. This is where the challenge lies. Louis Vuitton not just face a strong marketing completion with its other luxury rivals but also from a counterfeit goods available within those regions. The questions to be asked are; Is Louis Vuitton really authenticating their products? Are their products too commercialised and loosing appeal of exclusivity in the current world? Is Louis Vuitton being consider just any other fashion brand and not a designer wear? Is Louis Vuitton marketing their products to reach their audience in a wider scale such as other luxury brands? Have their products really tend to diversify their pricing and placing strategy to consumers in a very competitive region? These questions raise a very broader image about Louis Vuitton marketing strategy and the following will briefly assist to demonstrate their marketing analysis and how they confront in this competitive world.
The Marketing Environment
Brand Strategy
LVMH Moët Hennessy CEO Mr. Bernard Arnault said: “What interests me is that in 15 years’ time, Louis Vuitton is still the leading luxury brand” (Financial Times, 2013). Louis Vuitton has been strengthening its position with the exclusive end of luxury market and whereby balancing its global manifestation with an aim of maintaining amenity and lavishness. The brand is also limiting its own presence in the market to prevent the risk of overexposure. The flagship monogrammed product that has elevated Louis Vuitton to earn a strong status with its global customers is becoming synonymous with available luxury. Louis Vuitton has also shown an exquisite desire to satisfy their customers’ needs by personal customization and shown enormous success in the rapidly growing timepieces market and jewellery. Louis Vuitton has just announced to launch their fresh new collection of perfumes from Master Perfumer Jacques Cavallier-Belletrud to establish themselves in a very competitive market (Bloomberg, 2016).
Macro environment (PESTLE) (External Analysis)
The following will determine the macroenvironment of Louis Vuitton.
Political and Economic
Political factors play vital roles in the expansion and branding of Louis Vuitton for LVMH. Not just economic factors but certain policies, business rules and regulations has made a fundamental influence for LVMH globally. Though countries such as America, Europe, Japan, Asia-Pacific and rest of the countries has different elements of political views but has stable political environment in recent years. However, in southern Europe the governments’ turmoil indicated a certain reduction in luxury spending by native people. This gap was filled by travellers but certain import duty and VAT also makes a big difference in spending. According to UK government (2011) the VAT has increased from 17.5% to 20% as standard which is a threat to the market as certainly their would be restriction and limitation in consumer spending. Even after Brexit, the decrease rate of sterling has made it tough for local people to purchase luxury items wherein the travellers take an advantage of exchange rate. Louis Vuitton has to adapt certain political paradigm shifts and be certain how it will affect them globally. As its based in Europe, the exchange rate of Euro plays a very important factor for for Louis Vuitton internationally. To prevent the exchange rate influence, it should be measured regularly. According to Reuters (2016) the luxury market growth would be an all time low in 2016 which could be let by several factors; less tourists coming over to Europe, certain militant attacks, weak deman in China as Chinese make a big portion of purchasing luxury goods and desponded US market. Though Bain (2016) predicted the luxury sector to incline in next five years, this turmoil makes a massive impact on Louis Vuitton as a brand and on its consumers.
The recent study also states that there is a substantial increase in the perfumes market (Market Research Report, 2016) which sums up for the brand to initiate their perfumes to gain a certain name and identity in the perfume industry. The economic factors comprise a lot of factors including rate of inflation, unemployment rate and gross domestic products. The inflation has risen in the UK from 0.8% to 1.4% in Quarter 4 of 2016 and plans to increase further on in the coming years (Statita, 2016). This leads to less purchasing power of money people wont be tempted to purchase most of the luxury items as the trend of inflation is increasing substantially. The GDP has been sustained and shown a slight increase in the UK economy which is a good news various luxury industries (Financial Times, 2016). The unemployment rate has also shown a substantial decrease in 2016 from 5.5% to 4.8% (Eurostat, 2016). These factors will certainly help Louis Vuitton to understand and emerge with ideas to undergo their brand’s position and ideally diversify their brand with its clients.
Social factors
Social factors consist of demographics, religious and cultural means and society’s trends. In the luxury market, customers tend to purchase goods which are made in Europe as they tend to be more valuable than Asia and US. (Ref. pls.) This gives a good competitive advantage for European luxury brands though customers in different countries have different purchasing behaviour. For instance; some countries consumers have an idea of moving to exclusive brand than the more common and ideal brand. As people are more likely to travel between different countries they tend to buy most of the luxury brands during their journeys. As a fact, Chinese contributed one third of the sales in Europe and Louis Vuitton should also consider this gaps. They should consider the demand between native people and tourists in European region.
As Louis Vuitton has always targeted people with higher income, the company has created certain social image wherein the brand increases an individual’s self social awareness and identity, builds a certain social image and creates a high sense of social reputation. But according to Business Insider (2015) Louis Vuitton is now a brand of secretaries of receptionist in China. The diversification of the brand in China is so broad that they even people with minimal jobs can wear them. This is a quest for higher income individuals to move on a with a different brand especially in China as Louis Vuitton is becoming to common. Louis Vuitton should make sure their brand is not being mislead in a region such as China where are the most buyers available.
Technological Factors
Various brands advertise massively especially on social media. With online being a very positive trend to advertise products, Louis Vuitton gathers a lot of information about customers’ choices, opinions, attitudes, aptitudes and reviews via social networking websites, forums and blogs. In this way they can improvise their product lines and know which products are most liked.
The online shopping trend has also become immensely popular, most of the luxury shopping brands are initiating online shopping for the convenience of their customers. In this way they can go out to customers who don’t have stores near by. As seeing the trend on handheld devices and smart phones, Louis Vuitton is reckoning its odds and has launched its first smart watch series. (Fashion Times, 2015). Louis Vuitton is also going 3D printed dress wherein the dresses are represented in a 3D way (CNN Style, 2016). They have also started their applications in most of the Android and iOS platform to attain customers’ feedback and designed Apple iPhone 7 covers as well. I believed Louis Vuitton are deemed into technology and being upfront will help them to gain better brand awareness and long term customers.
Legal Factors
A lot of legal factors such as acquisition and mergers have been through by Louis Vuitton but certain elements in French law have prevented it. An another example could be Louis Vuitton suing Darfur Fundraiser in April 2008 (Langley, 2014). In the case Louis Vuitton sued an artist selling T-shirts to raise funds for Darfur for breaching its intellectual rights. It showed and African boy holding on a designer bag which appeared to be influenced by Louis Vuitton. Well Louis Vuitton dropped the case and realized it was for a fund raiser. It made a certain impact on social media which gave a certain boom to Louis Vuitton.
The another big factor about LV’s image is that it has become one of the worlds most counterfeited fashion brands. As its expensive, people cannot afford to buy it. There are several number of products bearing LV initials all over the world. Louis Vuitton has already setup a team to fight against counterfeited products via special investigation agencies and lawyers. But in certain cases people move to manufacture LV products in other countries where in there are poor intellectual property rights. Louis Vuitton should be firm on such acts as it hurts company’s revenues and most importantly its image.
Environmental factors
The luxury goods industry within the eco-friendly aspects will certainly have negative impact if the factories have unsatisfactory environmental facilities. Michael Burke CEO of Louis Vuitton mentions that they continuously innovate strategies to reduce the impact of its activity on the environment. The have stated certain values wherein they would limit the carbon footprint, preserve national resources, reduce waste, create willingness and get organized to guarantee environment performance. According to Siegle (2008) the brand LVMH group was given a C grade in WWF report and was later expelled from the FTSE4Good Index Series which tracks businesses conforming to its environmental matter. Keeping the brand image in mind LV enforced environmental values with an effective management plan and with continuous improvement they achieved the top ranks (Givhan, 2015). To maintain the same pace and achieve high environmental standards, LV should keep improving their management plan and figure out ways to measure their effectiveness whilst maintaining environment performance.
Microenvironment (Internal Analysis)
The microenvironment involves a set of customers, competitors, distributors and suppliers that affects company’s competencies in a chosen market (Jobber and Ellis-Chadwick, 2016). Microenvironment are the factors that are distinct and individual. The following will demonstrate the factors in detail and analyse accordingly.
Customers
Customers play the most vital role for a brand or a service. Without them the business would earn a profit. Louis Vuitton has not managed but engaged their customers to purchase goods continually. They have kept customers the top priority. Louis Vuitton segments its customers by more mature audience within the age group of 22 – 55 and focuses on high net worth rich individuals. To maintain their priorities, and keep the satisfaction level they need to make sure, everything what the customers needs is in place.
Competitors
Competitors analysis the brand in a market and makes wide choices for customers. The brand has to enough versatile to stand out of the brand and meet the customers’ standards. According to Millward Brown (2016) the top global fashion brands which competes with Louis Vuitton with the other fashion giants are Hermes and Gucci. They play a vital threat to Louis Vuitton and with contemporary designs and utmost customer satisfaction they can make a specific market much more challenging. Louis Vuitton need to not just rely on their usual styles but also make sure they have enough vitality to satisfy customers needs with repeat business. They also need to trace the customers mind set which will help them to retain the market share.
Suppliers
Louis Vuitton have mainly over 17 factories wherein all their products are hand crafted. This exclusivity comes with diverse logistics. Louis Vuitton has a very complex supply chain management which they have earned a certification of ISO 14001 in for Environmental Management Systems with a portion in Supply chain (LVMH, 2016). Their supply chain is the centre of the business which they the employees from purchasing raw materials to delivering goods to stores, planning and execution and they just have one motive in mind, to satisfy customers. (Alain Doudard, 2016)
Distributors/Market Intermediaries
Louis Vuitton have channelled most of their products to the flagship stores such as Harrods in London to online retailing such as alibaba in China. On stand, they have over 460 stores worldwide, there are certain areas wherein they can promote their products with its competitors widely. In this way they can give a choice to its customers widely and also offer convenience to its customers when needed.
Porters Five forces model
I am using Porters five forces model in conjunction with Microenvironment to assist the techniques of external environment.
Competitive rivalry within the industry (Moderate): The competition in the industry can be comparatively high, but with the high price bracket for customers, the competition is not on price but rather on the image and quality perception. Given LV has gained many rivals within the years such as Chanel, Prada, Gucci Hermes and many other but the competition is rising on the accessories and handbags market. This gives a close threat for LV in the coming years though LV is more over working building itself in the accessories stage, it will certainly take a bit more time to capture a reasonable market share. Even the private labels in a certain wholesale market increases the competition for LV.
Bargaining power of customers (LOW): LV has mainly 2 channels to sell: direct to customer and wholesale channel. Considering they make most of the earnings and margins from direct sale which makes their whole sales a very minimal margin. This gives them advantage of low bargaining power. LV being an exclusive brand has positioned itself as a strong brand recognition due its extraordinary quality products. I believe that the Bargaining power of customers for LV will remain low even in the near future due to its heritage, timeless design and posh quality.
Threat of new entrants (LOW): To initiate a brand, enough capital is required. Even obdurate brand loyalty and its recognition are main factors which drives the trademark to a high street level. It certainly tough for a new player to reach at a certain level. Louis Vuitton has history, and any other competitive brands like Gucci, Prada, Hermes all have taken quite sometime to reach a level which they are in today. So I believe this factor is low side for Louis Vuitton currently.
Bargaining power of suppliers (LOW): LV does not manufacture its own products but they rather rely on the manufactures located in countries such as China, Italy and US. According to Financial Times (2012) LVMH has recently acquired Les Tanneries Roux, a top giant in leather supply, this will help them to reduce bargaining power in terms of leather goods. Company also purchases raw materials on basis of consignment which alternatively helps to reduce time frame and forms economies of scale.
Threat of substitute products (LOW): LV products are usually purchased by high end customers and to show certain deal of affluence, in those terms the brand will proper. But counterfeit products represent a massive threat to the brand especially in a country like China where there are a lot of potential customers. This is a certain threat to the brand’s image and more counterfeit products are tough to look to differentiate with the original. This is a certain concern and the LV is taking every measure to fight against forgery.
The marketing strategy and SWOT Analysis.
According to Ahuja (2014), the company has a diverse portfolio of customers with the segment in demographics ranging from 22 to 65 years of age and with a monthly income of £4,400 or higher per month. The company measures the customers’ desires and communicates it via advertising. Due to its brands distinctive image, personality and emotional values it has captured the customers’ perception and design elements to make a exclusive product. Their visual branding is broad and dynamic while the pedigree of the brand is always new and versatile.
25.11.2016