The Gucci brand is an Italian based luxury company which provides a wide range of products such as Men’s and Woman’s clothes, shoes, backpacks, wallets, purses and many other accessories (Gucci, 2016). Currently Gucci offers many different types of backpacks as well as a huge number of backpacks for both Men and woman.
The tree diagram illustrates the scope of the industry in which Gucci operates in:
As shown by the tree diagram Gucci belongs to the fashion industry as it is defined by the style of clothing and accessories worn by a group of people or individuals (Steele,2019).
The Fashion industry is a multibillion-dollar industry which is dedicated to the marketing and selling of clothes (Steele,2019). The fashion industry consists of four levels which one is the production of raw materials, secondly the production of fashion industry, thirdly retail sales and various forms of advertising and promotion (Steele,2019). The fashion industry as a bright portrait which a worldwide revenue expected to rise from $481.2 billion in 2018 to $712.9 billion by 2022 (Orendorff 2019). There are many factors that are driving this growth which include expanding their global markets. Furthermore, increase in technological advances such online access and smartphones. Many middle classes having disposable incomes which allows them to make such purchases. The Fashion consumers will have more buying power, an estimate has been made that customer growth is projected to grow from 1.2 billion by 2020, furthermore majority of the customers are within the 16-24 and 25-34 age groups (Orendorff 2019). However, there are many threats to the fashion which include things such as the cost of raw materials. Cotton, silk, wool and leather are things which all need to be farmed. A NASA lead study shows that many of the worlds freshwater sources are being drained faster than they can be replenished (Marshall 2017). Additionally, rising labor costs is something that will have an effect on the industry. If the labor force is changed to a different area or country, this again will have a knock-on effect raising the prices across the globe (Marshall 2017).
In terms of our product the Gucci Print leather backpack, the statistics show that bags are still growing at aa stronger rate which will see a double-digit growth- 15% in 2018 which will dip into the single digits by 2022: 8.7% (Orendorff 2019). The projection makes it the strongest healthiest segment of ecommerce fashion, despite the numbers being the smallest. (Orendorff 2019). The features that Gucci’s competitors in common have is that most of the products offer the same range of designs and backpacks. The backpacks are all prices in the same range showing their true stylish nature which adds to an individual’s status.
Ultimately, it can be seen that many competitor companies in the fashion industry are owned by other brands which can be a subsidiary, business unit and division of a parent company.
Louis Vuitton is the third most popular luxury brand and offers products that is similar to Gucci, however Gucci is ranked as the most popular luxury brand. Louis Vuitton is owned by LVHM which own other brands such as Givenchy, Marc Jacobs and Fendi. Louis Vuitton is a member of the Better cotton initiative, which aims to transform the cotton production by reducing it environmental impact (Gucci 2019).
Versace, just like Gucci, produces similar products which all have the same price range as that of Gucci and Louis Vuitton. Versace is owned by Michael Kors which produce backpack themselves.
The Product comparison that is shown below shows how both Louis Vuitton and Versace. Are placed in Gucci’s strategic group.
|P||Our Brand + Sub-Brand||Strategic Group Competitor 1||Strategic Group Competitor 2|
|Brand + Sub-Brand||Gucci Print leather Backpack||Louis Vuitton JOSH signature damier||Versace Barocco Embossed Palazzo Backpack|
|Brand Positioning||A high luxury product that shows both status and wealth. This increases the way a person is perceived in public. Furthermore, it is also positioned as being the Trend in the fashion industry.||It is a symbol of modern style. Creates an elegant, stylish and value for money product.||A luxury item that is affordable and enhances a individual’s high-class status.|
|Place||Gucci Showroom||Louis Vuitton showroom||Versace showrooms, Boutiques and Luxury items store|
|Promotion||Television advertising, newspapers, Holdings, celebrity ambassadors||Television advertising, newspaper ads, Celebrity ambassadors, fashion shows that show the backpack||Television advertising, newspapers, Holdings, celebrity ambassadors, Ad’s on Public Transport|
|Advantages & Disadvantages c/w our Brand and Sub-Brand||The advantages are that it has good reputation in the market, the number of stores and being easy to access the locations. Furthermore, there is premium packaging, and genuine soft to touch leather. Also, the backpack is waterproof.|
The disadvantages are that it sacrifices necessaires. There are a more wastage of resources in creating high end luxury products.
|The advantages are that it makes individuals classier and more elegant. There are easy number of locations to get access to. The backpacks have adjustable straps and are made with genuine leather. The fact that the backpack is also waterproof and fireproof.|
The disadvantages are the price of the product, similar alternatives available in the market.
|The advantages are it that it has a good reputation in the market. They use genuine leather. The backpack also a feature a gold-tone.|
The disadvantages are that are not enough showrooms for Versace. The backpack does not offer any extra features. There Is no premium packaging and the backpack is not water-proof.
|Other factors important to prospective buyers||Reviews from other people|
What other individuals are using at that given moment
Brand Trustworthiness and familiarity
|Reviews of the product|
Recommendation from other sources
Social media. Influence on the buyer
Current financial conditions
|Data was current as of (28th April 2019).|
Sources; (Gucci 2019, Louis Vuitton 2019, Versace 2019).
Louis Vuitton objectives as a company are that to be creative and innovative, also to aim for product excellence. Their overall goal is to represent luxury life with elegance and creativity. They are already members of the better cotton initiative which aims to transform cotton production by reducing its environmental impact and improve livelihoods. Also, its Parent company LVHM, has set a target to reduce carbon emissions generated from its own operations by 25% (Rauturier 2018).
Versace’s objectives are similar as Louis Vuitton which involves being creative and innovative. As a brand Versace does to incest to environmentally friendly products as well as implement a sustainability program. Gucci has already invested in a 10-year sustainability plan (Gucci 2019). Hence, it can be seen that both Louis Vuitton and Gucci are moving towards more environmentally friendly products which shows their marketing strategy and where they are heading in the future. This is threating to Versace has they have not made a move to creating products that are more environmentally friendly. The Gucci Print leather backpack is the most expensive backpacks out of the other competitors however there is not much difference between the other products. As a brand Gucci is going to be more sustainable but they have not introduced those plans to their backpacks.
Other Micro-Environment Players
All of Gucci’ leather comes from a workshop in Florence. They work with Gucci in order to use their leather which allows for the manufacturing of all Gucci’s leather products. This can be seen in our Gucci Print- leather Backpack. All of the leather is sent out so that it can be manufactured into products. As the workshops in Florence are responsible for the manufacturing of leather for their products, any breakdown in relationship can cause problems for their manufacturing. Until they find a new leather source all the production will be halted. Without their leather workshops they will be lack of production, as well as many of their products will halted. Product supplies will also be halted. Additionally, there could be problems regarding the relationship between the supplier and the company. The use of this leather can be leveraged by adding it to provide better quality in the product and also use leather that will allow for the durability of the product. There is reduced costs as having a good relationship means that the suppliers and the company can work for a longer period and churn is kept to a low. Without having a good relationship with suppliers there will be a huge loss in profit.
The Macro-Environment: Other environmental factors influencing the company
|Factor/Area||In what direction is the trend||Why is this trend happening?||What does this mean for our current strategy? How might we change our strategies in order to anticipate this Trend?|
|Income changes||Many homes have more income which means that they are able to spend more.||This means that consumers are willing to spend more on luxury brand products. Increase the Target Market as many Individuals are able to spend more money.|
|Rising Affluence||Many consumers may feel happy in buying luxury goods.||This means that more consumers are feeling are willing to spend more money on luxury items to find happiness. This trend represents that fact it makes them feel good about themselves and also impress people in society.|
|Shortage of Raw Materials||As a society we are using up all the raw materials that are available to us. (Steele,2019)||Promote the fact that the product is made of environmentally friendly products which Gucci is already doing|
|Cost of Energy||As we use all our natural resources the cost for them goes up. (Steele,2019)||Promote the fact that the product is made of environmentally friendly products which Gucci is already doing|
|Global Pollution level||It is rising which is causing problems such as climate change((Steele,2019)||Promote the fact that products are being created in ways that don’t affect the environment.|
|Average Population Age||The average population age is increasing due to the baby boomers||Increase the target market of the backpack and target it at more individuals|
|Decline in size of household||The family sizes are declining due to divorce, having kids and deciding to marry later||Shift the focus from having kids and families by investing into luxury brand items so they can still enjoy themselves.|
The risks that income changes may cause is that for some individuals they may not be able to afford these high-end luxury products. However, the opportunities it may cause it that they may save their money and then purchase the product. However, individuals who earn enough income can easily purchase this product. A strategy could be to increase the target the market and also create products that are more affordable to the working-class consumer. The risks that occur with rising affluence is that consumers may buy the product, but they don’t feel satisfied while buying the product. The opportunities it creates is that buy more of these high-end luxury items in the hope it provides them with happiness. A strategy that Gucci could use is how buying the product can cause a higher status in society.
The risks that occur with environmental impacts is that society is using all the raw materials, increasing pollution as well as energy prices going up. This has a massive effect on climate change. The opportunities that it creates is the Gucci can create more environmentally friendly products to combat this issue.
The risks that occur with average population age is that many consumers would not want to buy this product as they may not believe it is their target age. The opportunities that this creates is that Gucci can increase their target market and appeal to consumers of different ages. The risks that occur with decline in household is that many consumers may be saving up or planning to have kids which requires a financial commitment. The opportunities this causes it that they can be target and persuaded to buy luxury items so they can enjoy themselves.
Upon investigating the market of luxury goods, the decision was made to segment potential consumers based on their income. High income consumers have traditionally been the prime focus of luxury brands’ marketing efforts, but emerging trends show there is an opportunity to increase overall profits by extending marketing efforts to low to middle level income consumers as they are increasingly willing to splurge on luxury products (IBISWorld, 2019).
Table 2: Consumer segmentation table
|Income||Usage-rate base||Age||Benefits sought|
|High||Heaviest users||35-54||Superior quality products, long lasting. Fashion focused|
|Middle||Light or irregular users||15-34||Brand status|
|Low||Medium users||55 and over||Durable and high quality|
Justification of the segmentation base
Measurable, accessible, substantial, differentiable and actionable are the five factors that are used to determine a successful segmentation strategy (Campbell, 2019).
Measurable; Industry reports can provide information to the company about the size and purchasing power of a particular segment. Industry reports contain accurate demographic information about the consumers operating within the market which allows brands to explore what consumers are buying and how often based they are buying the brand’s products based on their level of income.
Accessible; The brand can use social media and data collected from its own website to tailor marketing communications to individual consumers that can be delivered via email in an effort to reach and serve all consumers.
Substantial; High income consumers have consistently proven to be a profitable segment of the luxury goods market as their excessive discretionary income has supported their luxury taste (Ikeda, 2006). Middle to low-level income consumers are growingly purchasing entry-level luxury products showing that they too are a profitable segment to market to and will continue to be in the future.
Differentiable; Depending on how much discretionary income the consumer has; the brand can target products to them accordingly. Entry level products can be targeted towards low-mid level income consumers and high-end products to high level income earners, respectively.
Actionable; An actionable segment is one that can be served effectively by a brands’ marketing communications. Brands can utilise social media to interact with younger, lower-income consumers to deliver product information and create brand preferences (Godey et al., 2015).
Market competition in recent times has escalated to a different level never experienced before. In the modern world, technology has enabled brands of all types and sizes to compete on the same stage to market their products, giving small businesses a chance to bite into the shares previously occupied by the larger ones. For this reason, it is important for brands to design the most competitive strategies to attract consumer segments in the population as we explored in this section.
For our discussion, we looked at the Gucci brand in Australia to gain more insights into their strategies for attracting consumers. The brand offers a wide variety of goods and services in their catalog, including print leather backpacks, jewelry among others. Being the big brand that it is, the Gucci Company has a fast-growing internet presence. Their abundant resources also allow the company to attract customers of a low margin segment with the quality leather men’s backpacks going for 2,855 AUD for instance. Furthermore, the company has enough resources to provide cheap delivery services for their customers anywhere in Australia, and given its popularity is bound to get large sales volumes among the low margin consumer segment. In addition, the friendly marketing terms provided by the company attract the masses due to effective communication, making it easier to do business. Thus, a large and fast-growing segment would be a perfect match for Gucci Company to establish and run their operations in this specific market and accrue substantial profits from their engagement. The strategy would also boost its presence in other markets segments given referrals from satisfied consumers and increasing popularity.
The information that we want to find out is what are the factors that give our product competitive advantage over other competitors and what can be done to further this advantage. Moreover, we want to know how a customer would react if they knew the underlying factors in conscience.
· Would higher import taxes in a certain country influence the customer into buying a local branded luxury bag? (MIMCO in Australia)
· Since reselling has become famous these days with a lot of online trusted markets coming in, would consumers buy a used Gucci bag?
· What additional features in the bag would influence the millennials into buying a Gucci leather backpack?
· Would the demand of the bag increase if there were some discounts?
Data can be acquired using several methods. Data is raw and it can be transformed into information and then to knowledge to help the company to increase the brand recognition and profits in the market. Knowledge would also help develop the strategies in place and create new marketing approaches to attract the target audience.
One way of getting some data on additional features in the backpack could be surveys(online). Surveys are reliable way of getting primary data as it can give use large quantities of data and a lot of perceptions in a short period of time. The main reason online surveys have been selected as data gathering method is because the target audience are the millennials and millennials prefer keyboard over pen and paper.
An online survey would have a large sample size and would give the analysts precise data which would then be analysed and interpreted to help the marketing managers to develop new strategies. By conducting these surveys, we get an idea what the consumers want, and how they will react, which in turn reduces the psychological pressure from the minds of the strategists. It provides pathways to accurately create strategies, it also provides time to allocate resources to attract the target audience and gain advantage over competitors.
Advantages of online surveys:
1. Large amount of data can be collected in a short time.
2. Keeping the surveys anonymous will help provide genuine answers from the targeted audience.
3. As people with different age groups and mind sets can participate, we will get to know the needs of different age groups, that we can use to further enhance the product being created.
4. Little to no investment is required for online surveys.
5. The targeted audience can complete the survey as per their convenience.
Disadvantages of online surveys:
1. Clarification on the provided answers cannot be done.
A questionnaire can be designed containing the list of features that could be added to the backpack. Target audience can be asked to select the top 5 features that they feel are ‘required’ in a bag apart from being classy. Questionnaire will also contain an additional box for mentioning a feature(s) that is not present in the list, but the users feel that it is required. It will also contain a question for choosing the age group of the person participating. As the target audience is mostly students, our company can use the connections that we have with the universities to help us get the audience for the survey. The sample size would be thousands of completed surveys that we can use to get the required information.
In conclusion, it can be noted that the fashion industry is a multibillion-dollar industry and market is highly competitive. Gucci have been smart to update the products from time to time and had a double-digit growth last year. The market has been divided on the basis of income. High income contributors contribute a lot to the company however, it would be smart to target the low-level income earners as research shows. The report shows that that customers in the higher age bracket the most attractive segment. Moreover, online surveys would be one of the best methods to acquire data as it could save time and money and give us accurate data. The above factors give as a clear understanding of Gucci’s rand positioning in the market, which can further be used foundations for marketing strategies.
Gucci Backpacks are an expensive product, so Gucci needs to create Backpacks that are affordable for younger consumers but still price their products, so they remain a luxury product.
Consumers are wanting products that are more environmentally friendly in today’s society, so Gucci needs to tap into the environmentally friendly market by creating backpacks that match the criteria.
Gucci’s users are in the high-age bracket between 35-54 so Gucci can create more products that are made for them which inclines them to purchase more products.
Ultimately Gucci can do more research into the backpack industry to find ways that can help them have competitive advantage over their competitors and increase their brand status.
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