Case Study of Gucci: Analysis of Luxury Brand Management

Luxury Market in India

Overview

Luxury adds to pleasure and comfort which is more than just necessity. Luxury provides satisfaction at two levels i.e. product and experiential. The products satisfy the functional aspects like craftsmanship, design, exceptional product capabilities, technology, etc while, experiential brings a reward of possessing a coveted item, association with hierarchical brand and status.

Currently, the luxury market in India is valued at $18.5 billion which is expected to grow to $100 billion in next the 7-8 years. As per reports, the economic growth leads to urbanization and high disposable income which has helped drive the growth of the luxury market.

The Tier I and Tier II cities account for 45% of the luxury market in India. The market which was earlier restricted to the top of the pyramid is witnessing a change in its consumer base – traveled and most informed middle class. The penetration of luxury brands in these markets is also because of the growing usage of internet and easy access to information with increasing Smartphone users.

The biggest change in the consumer trend is that because of travel and penetration of media, the people are becoming more aware and conscious and they want to consume the best of global brands. Also, there has been a significant increase in the aspirational class which adds to the number of consumers in the city.

Challenges faced by luxury brands

1. Lack of infrastructure
2. Counterfeit products
3. High tax rates
4. Rental costs

Top five trends in Luxury Market

1. Growth of Luxury in Non-Metro cities. While Mumbai and Delhi have the highest numbers of UHNWI, there are specific super rich segments such as diamond merchants in Surat, machine tool exporter in Punjab, etc that are the key growth drivers of the luxury market in India.
2. Growth of Affordable Luxury segment in India. With increasing internet penetration there has been an emergence of a new segment of first-time luxury buyers which has been exploited by the luxury car makers at the fullest by launching the entry-level models backed with attractive financial schemes. This segment has a taste and uses luxury goods to flaunt their success.
3. Innovation in premium Electronics gadgets & appliances. There has been an increase in the usage of wearable tech gadgets for leisure and health such as smartwatches, fitness bands, etc. Also, there has been an increase in the demand of high-end panel TV’s, multi-door refrigerator, etc
4. New age luxury Indian consumer. In additional to the traditional luxury buyers, there is an increase in the younger HNIs with high disposable income and high spenders in non-traditional avenues. Today luxury is shifting from ‘having’ to ‘being’ – from owning a luxury to experiencing a luxury. Today the young HNIs are looking for novel experience instead of owning a product.
5. Regulatory Mechanism. The opening of FDI in single brand retail and roll out of GST has minimized the traditional deterrents to certain extent

Consumer Trends

1. The consumer is more traveled hence more informed and aware of the brands
2. Demand for experience is more
3. Pertaining to the Indian culture, brands are launching tailor-made designs
4. Demand for customization is increasing
5. Consumers are moving towards self-indulgence
6. Today consumers are not logo driven, they give more preference to experiential value and product authenticity
7. Digitalization has brought a big change in the way consumers shop. Now, consumers explore products online hence it has become important for brands to provide experience value at online platforms also
8. Earlier consumers were influenced by what bollywood or Hollywood celebrities are wearing, but today they are more influenced by the social influencer. They follow the fashion bloggers to see new trends.
9. Mumbai and Delhi has the highest HNWI but tier 2 and tier costumers are outpacing their counterparts

Bags Luxury Market in India

The Brand Story

Customer Profile

Gucci’s target market has primarily included celebrities, fashionistas, the wealthy, and the upper class. The target audience has now been expanded to include upper-middle-class women. Their current customers are both male and female having age in 25-50. They have added a new target market with children's collection. It distributes its products through owned stores, websites, distributors, and retailers. As of December 2016, it has 520 company-owned stores globally which is helping the company in generating 34% revenue from Asia Pacific and 21 % revenue from Western Europe. In the first three quarters of 2017, around 55 percent of Gucci’s sales were made to consumers younger than 35, according to a report by consultancy firm Bain & Company last October indicating that the wabi-sabi is obsessed with Gucci. Reflecting on their clothing choices it is believed that a typical Gucci customer is fond of bright colours and prints, with a retro/vintage feel

Brand Story and Inception

The first Gucci shop was founded in Florence in 1921, and it is from here that the legendary history of its founder Guccio Gucci and his company earned fame. Their designs were inspired by horseracing, and his company swiftly became known for its incredible level of craftsmanship. In 1932 Guccio created the first loafer shoe with a gilded snaffle, as well as a wonderful selection of luggage and the famous handbags with a bamboo handle, was seen mostly in the arms of high profile people. Boutiques started to gain attention everywhere, and the glamorous ‘GG’ symbol which is still being used, was created in the 1960

Business Strategy

Business Level strategy is an integrated and coordinated set of commitments, actions, used to gain a competitive advantage by exploiting core competencies in specific product markets. When the firm is able to satisfy a group of customers by using its competitive advantages to compete in markets we can say that Strategic competitiveness has given results. Therefore, Gucci’s management creates an effective relationship with customers by answering questions related to the issues of ‘who’, ‘what’, and ‘how’.

By considering the factors such as demographic factors (age and income), social economy (high- income), psychological (lifestyle, personality), and consumption pattern (heavy, moderate), Gucci tends to identify “who” the target customer is that it will be serving.

After deciding who it will serve, Gucci identifies the needs (“what”) of the targeted customer that is luxury goods. Gucci determines which of its products will have benefit on prestige and esteem of the consumers with the very best product features from the raw materials. That’s why; people who are Gucci’s loyal customers are willing to pay premium prices to get the value of Gucci’s products.

Gucci also uses its core competencies (“how”) to implement value-creating strategies and thereby satisfy customers’ needs. Gucci created sophisticated store consumption experience that was dramatic and highly recognizable and they ensured that all the products are presented to customers in a way that it capitalizes on the exclusivity and ultimate allure of the brand.

Focused differentiation strategy is chosen by Gucci group which helps them in differentiating their products in many ways. Gucci is also able to complete various primary and support activities of each brand consolidated in a competitively superior manner to develop and sustain a competitive advantage also to earn premium returns. The activities required used by Gucci are the six key dimensions that defined their brand stabilization strategy, which are:

• Re-established control of Gucci product design and manufacture
• Re-established control over Gucci product distribution
• Create a balanced product portfolio for a luxury brand
• Establish a luxury marketing communications platform
• Create a luxury brand consumption experience
• Hiring Tom Ford as a creative director – to design direction and control

Furthermore, this strategy also has the purpose of creating difference between the firm’s position and those of its competitors, by performing activity differently or performing different activities.

Brand Strategy

Gucci has been linked to ‘Made in Italy’ by customers which is a synonym of art & fashion and has for performance Gucci was high-quality craftsmanship with a unique design.

1. Expand Target Audience. To appeal to the younger audience and be regarded as a brand that has matured with aristocratic lines, in early 90’s Gucci incorporated a trendy brand in addition to its mature line. This strategy helped Gucci to accelerate its international appeal and reach out to wider audience.
2. Care about customers. The brand tailored its lines of products to ensure that it perfectly matches the taste and preferences of the customer. To achieve it, they performed in-depth market research about the client base to establish their ambitions, taste, and needs.
3. Adopt a range of marketing technique. Unlike other brands, Gucci has embraced all the technological changes and has been seen across a wide range of marketing platforms like social media, online ads, offline promotions, etc. While adopting all the techniques, Gucci ensured that traditional approaches remain effective.
4. Focus on brand positioning and strategic orientation. Focusing on the message and image the brand is creating in front of its customer, the brand has strategically oriented itself to appeal to its customers’ self-worth, prestige, status, and image.

In addition to the above, Marco Bizzarri, CEO and Alessandro Michele, the creative director decided that talking to millennial’ is important while preserving its loyal customer base. They created strong communities that indirectly and strongly promote the brand (Brand Resonance). They used influencers and celebrities to promote the renewal of the brand and its iconic logo (Brand Imagery and Salience).

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Technology has been efficiently used by Gucci to make e-shop better which includes fastening the delivery and creating affordable products adorned with newly launched logo.

Brand Communication

Retail Strategy

Worldwide Boutique Network

Online Strategy

For Gucci, its digital strategy reflects:

• Gucci has a Brand First channel second mentality with a visually engaging, fully functioning e-commerce store with full product offerings on sale. Their social media strategy is to do what it needs to do without overreaching. The e-commerce store aims to put its most recent ready-to-wear collections on sale alongside its lower-priced items.
• Shopping Gucci online is an experience that reflects its runways: the ready-to-wear look is sold as pieces of the outfit that appeared on the catwalk. The site manages to sell the Gucci brand — through visually rich imagery, some video and its content page ‘The Agenda’ — where it doesn’t sacrifice its functionality while respecting quality.
• The site is designed to represent the life of a Gucci woman in a smart and subtle way.
• The website offers different benefits like free returns, find-in-store options, product information and gift wrapping. Gucci also places customer services options on each product page, so that customers can easily get in touch with salespersons- thus increasing customer convenience online.
• The visually rich imagery of Gucci has always projected an aura of elitism and luxury. The website features a plethora of high quality visual content which features the collection and campaigns of the brand. This is combined with features like viewing in multiple angles, zooming photos for further convenience.
• Gucci’s media include their website, Facebook, Twitter, Instagram, Youtube, Google+ and Pinterest. Their website allows customers to shop the latest seasons and also has a feature called ‘stories’. This is essentially an online magazine entirely for Gucci; it is updated every few days with Gucci news such as new fragrance launches, new collection shoots or products and celebrities wearing Gucci. Gucci shoots its different bag products are taken fairly frequently so there are lots of different campaigns that are uploaded very often.

Gucci promotes its products exhaustively online while focusing on providing the information and lineage that the product carries with it.

Competition

Louis Vuitton

Louis Vuitton established in 1984, headquartered in Paris, France is considered one of the most luxury brands in the world and has a brand value of $28.4 billion. Their products are majorly into the category of handbags, accessories, leather goods, ready to wear and fragrances. They operate in approximately 50 countries and products are sold through main chains of stores, retailers and online stores. Customers are fond of the luggage of LV as it has a great brand image. The design teams involved in the production of Louis Vuitton products are the top class in the world. Due to their strong connection with quality and their brand value, Louis Vuitton is one of the most liked brands in the world.

Prada

Prada is a luxury fashion company that is based out of Italy. This company produces various products that fall into categories like cosmetics, clothing, fashion, jewellery, leather handbags and many more. Their products are available both through various retail stores and online. It has about 620 stores worldwide so that they are easily available to their customers. It is a brand which lays great attention on luxury and is considered one of the most recognized brands worldwide. Each of their products is unique and produced with great quality. Prada is actively involved in various shows to market their products to widen the scope of the audience.

Versace

Versace is an Italian fashion company established in the year 1978 and headquartered in Milan, Italy. Their main collection of products is leather accessories and ready to wear. The logo of Versace is the head of a Greek mythological figure, Medusa which symbolises elegance. Versace sells their products through 200 retail outlets. The brand has great loyal customers as it provides great quality and designs

Chanel

Chanel is a private fashion company headquartered in France, established in the year 1909 by Coco Chanel. Its main production includes manufacturing of luxury goods, fashion accessories and ready to wear. This brand is majorly famous in countries like America, Asia, Europe, and the Middle East. Their products are sold in about 120 boutiques, both through department stores and through online. The company’s brand value is approximately estimated $7 billion. They try to achieve customer satisfaction through their unique designs and quality

Yves Saint Laurent

Yves Saint Laurent (YSL), founded in Paris in 1961, is known as an incredibly popular luxury fashion brand. They are known for timeless handbag designs that spell luxury as no other brand would do. Some of their most beloved pieces include the Muse Bag, costing $18,990 and is available in two sizes; the Classic Duffle 24 retailing for $2,990; and the Monogram SL Chain Wallet sold for $1,490. In their recent transformation, they gave up their first name “Yves”. YSL symbolises the confidence and elegance for feminine, self-assured and strong-minded woman.

Perceptual Mapping

Brand Prism

Gucci has a very strong brand identity and they communicate a perception of high-quality craftsmanship along with innovative and bold design. The brand’s personality is reflected in their customers who are eclectic, contemporary and romantic. Gucci through every communication portrays that its users get a feeling of confidence and internal pride while the brand also focuses on high quality, comfort and support. The Gucci brand of today is eclectic, romantic and above all contemporary.

They also very clearly depict their country of origin i.e. Italy in their identity, by evoking the feelings amongst customers that Gucci products represent the pinnacle of Italian craftsmanship. Today more than ever, Gucci’s brand value is reflected in the perfect balance between its Florentine and Italian heritage and its reputation as a fashion leader.

This strong identity is the reason why their relationship with their customers is highly personal. When a customer looks in the mirror and sees Gucci they see that the brand is reflected back in them because of which the stereotypical consumer will feel influential, innovative and progressive- much like the brand itself.

The brand identity of prism can be analysed as:

Thus we can see that Gucci as a brand has reinvented itself by disrupting the fashion industry with its bold, eccentric, printed and embroidered collection of bags. The brand image shows the receiver to be a fashionable, modern, glamorous one only belonging to the ‘privileged’ few. The consumers get an image of being confident and successful while belonging to the modern world when they purchase the product of the brand.

Brand Report Card

Traditionally luxury has been associated with exclusivity, status and quality. But in present times, this definition of luxury has changed with ‘New Luxury’ been defined as products/services that possess high levels of quality, taste, and aspirations. They are not as out of reach to the new age consumer segments. Luxury today is the experience gathered from the ‘Intangibles’ rather than possessing a set of tangibles. The brand identity of Gucci bags is about: Hype, luxury, essence, Youth, ethics.

On analysis of Gucci on the different elements that a luxury brand must possess the following observations were noticed:

• Brand Values: Gucci values are deeply embedded in ethics. Quality remains the main priority but they try to elaborate upon this in lines of Sustainability: People and environment are a part of their Quality concept. The brand operates in a transparent, ethical manner and encourages its supply chain to adopt similar responsible business patterns.
• Brand Personality: Gucci through its bags has always focused to provide individualistic experience that empowers its users. They talk about how their customers are ‘fiery’ and successful just like their products. They have brought different range of products in their bag category and attached specific ‘empowering’ adjectives to each one that defines the user uniquely.
• Brand Image: On a survey conducted, Gucci bags were perceived by the users as products for the ‘exclusive young adults’. Gucci gives high importance to maintain its aura of exclusivity which is well embedded within the public. Gucci bags are known to represent the luxury, trendy, young and hype. It is perceived that Gucci is the brand celebrities use for their bags and hence is the ‘trend to follow’
• Brand Positioning: Gucci competes with LV, Prada, Versace, and Chanel with similar products and more or less similar target market. Gucci gives high focus on premium pricing as well as prominently displaying its brand logo and promote exclusivity.
• Brand Lineage: Gucci gives high importance to its brand story, where the consumers are given a feel of belonging to an age old lineage while at the same time consuming something ‘modern’. They have a well woven brand story and continue to take their legacy forward with every product in their bag category
• Use of technology: Gucci’s media include their website, Facebook, Twitter, Instagram, YouTube, Google+ and Pinterest. Their website allows customers to shop the latest seasons and also has a feature called ‘stories’. This is essentially an online magazine entirely for Gucci; it is updated every few days with Gucci news such as new fragrance launches, new collection shoots or products and celebrities wearing Gucci. Gucci shoots its different bag products are taken fairly frequently so there are lots of different campaigns that are uploaded very often.
• Brand Relevance and Consistency: Gucci has kept their famous GG logo and font for a long time marking consistency. However, the creative directors have used their personal ideas to structure the product design and ad campaigns to reflect the consumers at that time.

Road Map

References:

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