Gucci’s Marketing Formula

Gucci has adopted an international marketing strategy of communicating a consistent image to its customers around the world. To uphold the consistency, Gucci has centralized marketing operations to Florence, which provides all creative material, and controls all aspects of marketing.

The main marketing strategy of Gucci is “designed to maintain a high profile and consistent visibility”. This involves constant marketing of its products and image, which keeps the company constantly discernible to customers and the fashion world. To achieve this, Gucci has started increasing communications expenditure in the last 3 years, and is planning on continuing the increase of its marketing budget.

Gucci’s products and marketing methods are not tailored according to national needs or customs. It aims at reaching the growing global market segment of the rich and “newly rich”, among which groups a homogenization of taste for luxury products has been detected. This group is a true example of the emergent phenomena of the global marketplace, where needs and perceived benefits are common from the USA to Europe to Japan. This global market segment’s price elasticity is low, meaning that they are not affected by changes in prices. They see price as an irrelevant factor, and shop for luxurious, high quality brand names. I once read a report that quoted the CEO of a luxury goods company, as he stated that it is simpler to increase prices of luxury goods than to lower them, as this is what consumers expect.

Marketing Communications

Since Gucci has several rival firms on a global scale, it coordinates its marketing activities with careful timing and placement to achieve maximal penetration of its core message: the luxurious and fashionable image of all Gucci products.

Advertising

Gucci advertises in national and international fashion, lifestyle and business magazines. Advertisements are timed to appear at the start of buying seasons, where customers will be looking for fashion items to purchase for the coming season. This is effective use of advertising, since the ads appear at times of the year when customers are open to receive such messages.

Direct Marketing

Gucci publishes product catalogues and makes them available to existing and potential customers. These catalogues should be sent out via mail to the companies customers, and be reachable by potential customers at e.g. prestigious hair saloons, etc. Direct mail should also be sent to the wealthier people in each of the countries where Gucci pursues business activities, thereby making it convenient for the potential customers to familiarize themselves with Gucci products and even order through the order sheets provided in the catalogues.

PR

Gucci has set up PR offices in the fashion capitals of the world. Their job it to make local and international fashion press deal with Gucci as much as possible. This is also backed by holding 4 seasonal fashion shows yearly, where the newest Gucci models are unveiled. These shows are also good opportunities to appear in fashion press and other magazines (hopefully free of charge).

Image

Tom Ford, the creative director of Gucci has been molding the company’s image at his will. Gucci sells an attitude, as does all fashion today. Fashion is all about beauty, desire and sex and this is why Gucci’s image is so successful. Tom Ford has succeeded in combining the classical image of Gucci with a modern, trendy image, which is apparently a great recipe for success.

Models in Gucci advertisements are portrayed as standing out of the crowd, as being individuals (we can observe that the Gucci model in most Gucci advertisements is above everybody else in the ad). This reinforces the image of superiority and uniqueness.

Growth Markets

Seeking out and entering new markets is imperative for a global company. The world is constantly changing, presenting new business opportunities. Gucci should set up a separate division within its marketing framework to seek out potential markets. Environmental scanning models should be utilized, such as the model by Hodgetts and Luthans. Once a general scan has ruled out markets that are impenetrable because they are either closed or insignificant, the remaining markets must be analyzed in greater detail. Markets that would be ideal to penetrate by Gucci have rapidly growing GDP per capita, socially and culturally not extreme, competition is acceptable, and already have, or will soon have a relevant portion of the population that can afford Gucci products (high disposable income), and are apparently looking for benefits provided by such luxurious items.

As we already know, market segments for luxurious goods are close to homogeneous around the world, so modification of the products will not be needed. Deciding on the product lines to enter the market with may be a more interesting question, since for example, entering the Arab Emirates with women’s clothing may not be sufficiently profitable. Once relevant markets have been identified, entry planning must commence. Gucci’s present strategy of distribution should be utilized, the form depending on the perceived risk. If the entry would have lower risk factors, Gucci could start off business activities in the given country by opening a directly operated store at a suitable location. If the risks of entry are higher, franchisees should be sought out. Entering a market through placing Gucci products in department stores would be inadvisable, since this method would not truly communicate the luxurious, unique image of Gucci.

Gucci is already present in many countries around the world, all of which have shown increasing sales in the past years. The most striking growth in revenue can be seen in the Far Eastern countries, especially Japan. Gucci must take advantage of this by deepening its penetration in these markets, e.g. by opening up more directly operated stores.

Other than Gucci’s existing business rivals, a serious form of ‘competition’ must be handled in the Far Eastern countries: that of counterfeits.

Studies have been conducted on the purchasing habits of wealthy people. These studies showed, that truly upper class individuals do prefer high quality, luxurious clothing and fashion apparels, but they prefer not to have brand names or logos visible on what they purchase. However, the lower classes of society are exactly the opposite. They want to be thought of as possible more than what they are, and prefer clothing with the brand names visible to other people. Counterfeits make use of exactly this, by making low quality look-alikes of the originals, with the difference of having the counterfeited brand name very visible on the clothing. These low quality copies hurt the Gucci image, and should be dealt with aggressively. This is especially true for the Far East, where the population is very large, but only a small percentage can afford real Gucci apparel. People who cannot pay for real Gucci clothing chose to purchase imitations.

Central and Eastern European countries may show potential as well, since they are rapidly developing countries, with the newer generations having been strongly influenced by the ‘modern’, capitalist Western culture. The government has lessening influence in most of these countries, and the new wave of wealthy population will be open to the image conveyed by Gucci.

The Middle East (Gulf Region) will show high growth in demand for luxury goods. Many well-to-do people live there with very high levels of disposable income. This market must be analyzed!

Latin American countries should be monitored, but decisions to enter should be made only after very thorough analyses of the given markets.

Standardization of the Marketing of Luxury Goods

I believe that when it comes to global luxury brands, the messages need to be uniform across all markets. Purchasers of luxury products will be well-travelled, having been to some of the most prominent fashion capitals of the world. They must be communicated a consistent brand image. Strong luxury brands send a clear message, are consistent in delivering and often lead consumer trends. That is why brands represent the most valuable asset of luxury goods companies.

However, the means of communicating the brand image may differ from country to country. Gucci should set up regional marketing centers, which should provide marketing services to retail outlets, be it a directly operated store or a franchisee store. This regional marketing center should be responsible for developing the tools, which the local representative is free, or in some instances, compelled, to use. Gucci should develop a comprehensive, global marketing strategy with clearly defined above-the-line, below-the-line and in-store activities. These are critical elements that should be provided to retail outlets, being especially important in department stores. It should be the right of the local franchise holder to adapt those materials to suit the prevailing environment, taking into account culture, traditions, language, etc. The local retailer must make certain that the message they are sending is consistent with Gucci’s global communications strategies and it is also the franchisee’s responsibility to select the most appropriate means of delivering the brand message, since the bottom line is that they are the ones that will be the most familiar with the culture of the specific market.

Standalone stores play a major role in the marketing of a brand. People want to be seen shopping at Gucci, where they can expect a higher quality of service. Standalone boutiques are important in order to show the image of Gucci, while giving the true sensibility of the brand. As Gucci is in the luxury segment, the overall environment of the store is very important, the location of the shop, position of the display and who your neighbours are is also significant. Luxury has to remain luxurious. This is a fact and does not differ by country or religion.

Product lines need tailoring as deemed fit. As I said, revealing women’s clothing would not be desirable in the Persian Gulf, but $10,000 watches would be. The regional marketing center must have thorough knowledge of the customs of the given country, and adapt the product line and marketing methods accordingly. Climate is also an important factor for the clothing section of Gucci. Humid and hot regions, such as the Far-East, will not take in as many winter-coats or scarves as a Northern European country. All the variables must be kept in mind when designing the product line to be sold in a market.

It will also be the job of the regional marketing center to be aware of the legislative issues/restrictions regarding marketing communications in any given market that belongs to the specific center. The Gucci images of luxury, quality, uniqueness, beauty and desire should be consistently communicated where legislation/culture allows.

Generalizations Relating to the Global Luxury Goods Industry

The first generalization we can draw is on the market segment of consumers of luxury goods. They are the well-off individuals, with high disposable income who purchase luxury goods not only because of their quality, but also to uphold their personal image. Therefore we can say that this segment has homogeneous needs across the globe and is one of the very few truly global market segments.

However, producers of luxury goods must be careful. The more successful they become in terms of increased visibility, sales volume and profits, the more the power of their brand equity diminishes. Mass availability has diminishing effects on desirability. Luxury goods producers have this difficult task of balancing the growth expectations of shareholders with a weakened image.

Counterfeiting is also a key issue. Put a luxury name on items that do not support expected levels of craftsmanship, design, quality and style, and the atmosphere around a luxury brand immediately fades.

Most companies producing luxury goods offer similar standards of quality. What differentiates them from one-another is their brand image, product design and assortment. This is where the market share of any given luxury goods provider can be increased. The designers and marketers must identify the needs of the upper class, and sell products offering benefits that attend to those needs. For a fashion apparel provider like Gucci, trend setting lineups should be designed.

Of course, volume must be balanced with brand equity. A luxury goods provider cannot sell too many products, since its luxurious essence will diminish. If demand is high, the prices of Gucci products should be raised. This increases profitability, and does not weaken the image of Gucci.

The luxury goods industry is unique from all other industries. When we compare global luxury brands like Gucci or Porsche with e.g. Coca-Cola, which is also a global brand, we find striking differences. In the example of Coca-Cola, the brand’s success is based on conveying the American image. This will not be a good selling point in countries like Afghanistan. However, Gucci and Porsche, being luxury products, are known for quality and tradition, which is accepted all over the world. The segments of the population in Afghanistan that would accept Gucci as a global brand and perhaps buy its products will not buy Coca-Cola. The difference is in the general brand identities of luxurious goods and commercial goods. Luxury products are globally accepted for the quality they provide (and thereby the upper-class image), while more commercial goods will have a USP that will not be favored globally.

Another generalization we can draw is that the luxury goods industry is in general less cyclical than are comparable products in the mass market. This is mainly due to the fact that, the buying power of luxury goods consumers is good even in difficult economic times. In times of recession, the middle class will accumulate savings, while the upper class individuals still have their image to uphold, therefore keep on spending.

Sources

·http://www.theage.com.au/articles/2003/02/16/1045330468567.html

·http://www.alwen.com/scripts/gen/4_contexte/b_veille/4b_veille1.asp?L=uk&LG=uk

·Interad

·Course notes

·Terpstra – Sarathy, Interna