Kering Group’s Gucci: The Potential of Luxury Brand

Introduction

Kering Group’s Gucci is a luxury brand selling elastic personal luxury products in a highly competitive market since 1921. It implements a selective target strategy of high-income social groups who appreciate quality, sophisticated fashion. Following their ‘three consecutive quarters of decline’ and the loss of two major executives by the end of 2014, Gucci’s positioning and direction needed to be revitalized to make a comeback in the luxury brand market. The environment, repositioning, pricing, target segment, and multi-channel market are core marketing aptitudes that must be employed to determine and analyze how to best rejuvenate and strengthen Gucci’s success.

Two Most Important Marketing Environmental Factors Affecting Gucci

The marketing environment is an internal and external factor that affects the marketing operations of a business and their ability to serve their consumers. In the macro-environment, technological advances mean that Gucci has to modernize their marketing strategy to stay competitive. With over 50% of U.S. adult citizens using social media regularly by 2013, it is a mass and growing marketing opportunity that must be utilized to reach utmost success. Through the technological environment, Gucci can reach a greater segment as well as increase brand awareness, particularly to millennials, the demographic that is three times more trend motivated than previous generations. With the upcoming generations becoming increasingly dependent on the internet and social media, there is no choice but to increase Gucci’s investments on e-commerce and focus on online presence/image in their decision-making processes (particularly within marketing).

The immediate environment of company capabilities was greatly affected with 2014 with key executives resigned from Gucci, leaving the company with financial and strategic direction issues. The new CEO, Marco Bizzari, was left to choose on the new creative director in 2014. This opened an attractive opportunity within the SWOT analysis scheme as although it initially left the business at a creative direction loss, it also meant Gucci was forced to decide on a new creative direction strategy that would rejuvenate the company. This decision, however, was crucial as it would decide whether Gucci would succeed and shareholders' relationships would be maintained. Candidate Alessandro Michele, as a member of the Gucci creative department for over 10 years, would be the most suitable choice as he not only recognizes the brand image but knows how Gucci operates. His unique designs would fit perfectly with the route in which Gucci’s future success is dependent on; trendiness and modernity. It is essential that the company's capabilities improve as the firm itself is the first-factor affecting consumer choice. Therefore, Gucci’s focus must be on satisfying customer needs that match their business’s core competencies.

Turnaround Gucci’s Performance

To turn around Gucci’s performance operational costs need to be cut and revenue must increase. Bizzari needs to revamp the brand through renewing products, their social media presence, and decreasing price.

Through social media, Gucci will be able to enhance their relationship with consumers by getting customers involved in ‘Instagram story’ votes, showing exclusive sneak peeks into their new products, and ‘giveaways’. This marketing platform could be enhanced by partnering with celebrities that have a great social media platform themselves. This will augment the popularity of the brand and create a trend but maybe a risk if the values of the brand are presented differently to what Gucci wants. In addition, it opens the dialogue between customers and Gucci, insight knowledge of customers' wants, their behavior, and opinions on products. By including consumers into the decision-making process, Gucci can build customer loyalty. Bizzari needs to be aware of the possibility of bad word of mouth and have an action plan to deal with it as over 84% of consumers rely on what they read on social media. A wide digital approach is necessary to increase performance.

Younger generations are more socially and environmentally conscious. To stay relevant, sustainability would be the “key to win new customer generations’ hearts”. As a product-focused company, product quality is essential. By re-interpreting their celebrated pieces and integrating them/into sustainable products, innovative brand image can be restored and trends met. Particular care should be taken in order to avoid the risk of increased production costs.

Although Gucci pricing adds to the prestige value of the brand, Bizzari/must consider other ways to maintain luxury standing so prices can be reduced. The price reduction would make the products affordable to younger generations and a greater segment of consumers who are interested in brand association. Dilution of exclusivity can be compensated by offering the personalization of items. Although not haute couture, it implements the feeling of uniqueness nonetheless for all of the target segments.

Gucci Pricing And Ethicality

Consumers pay premium prices for Gucci products rather than cheaper alternatives as they want to hold the exclusivity of owning a ‘real’ Gucci product which gives them the feeling of achievement that they are successful enough to afford it. The Gucci target segment values quality and design, sustainability, ethical codes of practice throughout their supply chain and business process; meaning no sweatshops and support of good artesian. Millennial consumers expect their brands to reflect their values, particularly in regard to the current trend of environmentally friendly goods/services. The premium price is ethical if Gucci is providing consumers with what they are expecting; meaning good quality, design, service, transparency, sustainability as well as shared ethical and moral values.

Current And Future Target Market

Choosing the right target segment is crucial for a business’s success. The current customer described in the case (2013-2015) are from the demographic of middle-aged consumers who are interested in high-end fashion trends. They are within the upper-income social segment. This concentrated market is not generating enough revenue as evident with the steady decline over the years. In order to succeed, they must create, deliver and capture value by incorporating new lines appealing to different demographics and social standing groups.

The target market for the future of Gucci would be to expand to younger generations particularly millennials, globally. The expansion will reignite global awareness and curiosity of the brand. It will allow the brand to increase its sales promptly as it will appeal to a larger segment of consumers. The introduction of a modernized brand line, with products linking to social trends, will give a dynamic and rejuvenated image. The new production lines will enable Gucci to execute its value proposition and the business model of creating, delivering, and capturing value. With the expansion of the market segment, their production costs will be lower than what it the products are worth to a consumer as additional excellent customer service and packaging, invite more consumers as they acquire not only the product but the full luxury experience. Consequently, the current target segment is not large enough to keep Gucci's profits afloat.

Benefits And Effects Of Multi-Channel MarketSpace For Luxury Brands

The multi-channel Marketspace is where brands like Gucci can communicate with their target segment through different channels including retail, websites, and email. The benefits and possible pitfalls of this market space include:

Benefits of Multi-Channel MarketSpace

Possible Pitfalls of Multi-Channel Space

• Multi-channel marketing enables luxury brand products reach appropriate channels/stores with the right quantities to meet consumer demands – through use of integrated CRM
• More convenient for consumers as they can choose which channel their prefer e.g. browse, purchase and get the products delivered in the comfort of their own home
• Allows marketers to personalise recommendations to fit liking and preferences of consumers. This can be attained through customer data from online shopping offering consumer behaviour insight.
• Keeps brand and company competitive by increasing market presence • Luxury brand consumers have high expectations for the product and service, delivery and packaging of the good. These high standards offered in store must be transmitted to online shopping and other retailers, otherwise brand image may be damaged.
• Consumers may not be able to get the full experience they get in-store where they can be fully immersed in the brand through atmospherics, highly professional and trained staff and presentation.
• Stock and location of products must never be compromised otherwise can cause major customer dissatisfaction
• If a brand does not keep up with technological and social advances they lose competitiveness and loyalty of consumers
• Pricing may not be kept consistent – loses the prestige of the product

Through the implementation of multi-channel market space, customer decisions journey and marketing strategies of luxury brands are affected. Four basic marketing strategies include the four p’s: product, price, place, and promotion. With a multi-channel market the company needs to ensure that all channels, retailers, and eCommerce sales don’t compromise the coherence of the p’s. The Gucci high-class experience must be transmittable to all channels to ensure that brand name, image, and distinctiveness is maintained. Within the decision-making process of consumers, they recognize their wants, search, compare, product select and evaluate their decision. Through the consumer decision journey, consumers decipher the product they desire and where they will purchase the product. This decision process is very much influenced on brand recognition which can be attained through brand awareness on multiple different platforms. By providing a multi-channel space Gucci consumers can research, compare and make decisions on what best satisfies their wants through online and physical stores.

Conclusion

Gucci has the potential to become number one in the luxury brand industry. However, CEO, Marco Bizzari, should revitalize the brand through technological marketing expansion, innovative products, pricing, and personalization to preserve the prestige of the brand within the current consumer trends, needs, and wants. If they continue to retain their high prices and the limited target market they will have no possibility of attaining competitiveness and it will threaten their ethical image. Through expansion online, they can reach their target segment more economically and their operational costs can be cut through entering the multi-channel market. Hence, if Bizzari doesn’t decrease its price and find other ways in which to demonstrate their stature, Gucci will not surpass its financial issues.