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Introduction
A French Multinational corporation, Kering, is struggling to maintain its position in the dynamic market. This luxury corporation has several subsidiaries through which it sells its variety of fashion products. Founded in 1963, it has been persistent in its marketing strategies and expands its market continuously. It commenced as a retail company as Pinault S.A. and turned into a luxury fashion group under the brand name, Kering in 2013. Through its various subsidiaries, it sells luxury goods like apparel, perfumes, handbags, shoes, eyewear, watches, and jewelry. One of the most renowned subsidiaries, Gucci, has been with the luxury conglomerate since 1999. Other famous brand names include Yves Saint Laurent, Brioni, Bottega Veneta, Ulysse Nardin, and Boucheron. Marketing of these brands is based on sustainability and therefore the company promotes and undertakes measures to reduce the impact of manufacturing and other operations on the environment (Pavione et al., 2016). Brand communication is not effective and delivering value proposition across all its brands is a major challenge for the marketing department of the company. Brand equity and strengthening position in the market are two major challenges faced by the company. Gucci has been adding to the conglomerate's profit but balancing the sales and promoting each brand judiciously is a major task to be carried out by the company.
Environment Analysis
Following is a SWOT analysis to communicate internal and external factors that will help marketers to work on areas of weaknesses and use its competencies and opportunities from the market.
SWOT analysis
Internal Strengths
It has addressed to environment's degradation and pollution by formulating environmental profit and loss accounts and has been persistent in reducing pollution and innovating means for the same.
The financial position has been resilient and the group has been proactive in yielding consistent revenues.
Vertical integration of a variety of luxury brands providing several products has been supported by the multi-brand model.
Worldwide operations have been adding value to the marketing strategies and expanding market presence in the world.
Channels of distribution have been meticulously planned out and the supply chain has been resilient in meeting demand and assessing the need for collaboration and partnerships.
Internal Weaknesses
Brand image has been adversely impacted by racists advertisements and has faltered the brand image in the market.
Tax evasion investigations have put a question mark on the brand equity and brand positioning in the market.
Ineffective communication among different brands and inclination towards the mass advertisement.
The marketing strategy is focused on product quality and sustainability rather than consumers' demand.
External Opportunities
Digital platforms to promote the brands are both opportunistic and cost-effective methods as simple but innovative ads can be created by digital tools to increase the visibility of brands and the product range. The traffic on these platforms has been increased considerably in the past decade and the advancements in e-commerce have made it a lucrative means to market the products (Kernstock, Brexendorf, and Powell, 2017).
Addressing environmental issues like global warming, pollution, and degradation of natural resources has made the youth more responsible and informed about the global environmental crisis. The sustainability strategy adopted by Kering has been effective in drawing attention towards the brands (Pavione et al., 2016).
Redefining the brand's motive to suit the demand and experience of the customer base is a potential in the market (Payne et al., 2017).
External threats
The strategy adopted by Kering to launch Gucci in China by opening multiple stores has been ineffective as the demand grew rapidly and the stores were unable to meet this surging demand. Its overall presence has been ineffective to beat the luxury market players in China (Le Xuan, 2019).
Competition from Louis Vuitton and other emerging brands have made Kering reconsider its marketing strategy to attract consumers.
Covid-19 has hurt the sales more than forecasted by analysts and regaining market position is becoming difficult for the company.
Cheap counterfeits are also threatening the brand and the sales and have severely impacted the marketing of these brands.
By the above analysis, we can discern the need to amend the marketing strategies and objectives to make communication effective among the various brands and shift the strategies from the launching phase and retarget the focus on the implementation phase (Kernstock, Brexendorf, and Powell, 2017). The effects of COVID-19 must be considered to choose the right platform and innovative means that will suit the marketing strategy.
Segmentation of market
A geographic segment of the market- The largest market share comprises of Asia-Pacific region followed by Western Europe and North America respectively. It can be discerned that the value proposition in Asia-Pacific and Western Europe regions is more concentrated than in other regions of the world (Ozdamar-Ertekin, 2019).
A demographic segment of the market: an upper-class segment of the society comprises the customer base. Millennials and Generation Z are the major stakeholders in the market.
A psychographic segment of the market: Customer base includes self-conscious and brand-oriented people. people who are inclined towards luxury and comfortable lifestyles prefer Kering's products to suit their lifestyle. These people are driven by status and image in the society a, therefore, do not compromise on brands (Franco et al., 2019).
Behavioral Segment of the Market: people with a high level of income constitute potential buyers. These people tend to spend on their apparel and accessories more than regular people.
Kering has undertaken numerous acquisitions like Brioni, Christopher Kane, and Nardin to add value to its portfolio and expand its operations in new markets. In the medium term, the company aims at the luxury segment of the market. it has segmented the divisions under Luxury and Sports & lifestyle. It has focused on tapping a new market with every acquisition. It has also undertaken an E-commerce platform through third-party vendors but has been quite inefficient to provide its diversified product range and attract the customer base. It has collaborated with LVMH for a cause aimed at 'wellness of models' to enhance working relations and a healthy environment for the models (Phau et al., 2014).
The company has to put in efforts to communicate its brands and value to the customer base. Acquisition of brands has been profitable to some extent and the company must develop new means to integrate these brands under one umbrella in such a way so that it becomes cost-effective to market the products. Marketing communication is one of the elements that must be considered by the marketing team. Optimization of Marketing communication among the brands is necessary as every brand is known as an individual entity rather than a subsidiary of Kering. Shallow integration has made people recognize these brands as an individual entity (Fernandes 2019). Indirect communication through promoting the brands has put Kering's presence in the back and these brands in front. Kering can optimize communication by integrating these brands in such a way that it looks more resilient and attractive as one unit rather than individual entities. It is time for Kering to use different platforms and communicate its value proposition created by these brands to develop stronger brand recognition in the market. It has worked incredibly to let each brand create its value by innovative means and design its communication strategies. Now, these brands have become mature in their market segmentation and are ready to compete by integrating their forces and aligning the strategies to increase the consumer base (Rud).
Competitive positioning
Gucci and Puma have added major value to the market share of the company. The brands are placed higher than the other luxury brands. Kering's position is of the second-largest luxury group after LVMH. The majority of the value is driven by Gucci and Puma. The company desires to beat its biggest competitor to be in the number one position and therefore, has taken several initiatives like acquisitions and partnering with Cannes. Competing with LVMH requires a resilient marketing strategy and stronger brand recall. Digital platforms must be used to forecast, assess, and create demand that complements the marketing target perfectly (Fernandes, 2019). Gucci has realized the importance of experience attached to the product and is developing digital means to personalize the merchandise. The saturation of market demand will lead to sluggish growth and may end up in decline if the company does not align its strategies with the contemporary trend and attitude of customers towards luxury brands. Generation Z adds more pressure on these brands as they never settle for less. Optimizing communication, therefore, becomes necessary. To communicate the connectivity of the brand with people through innovative means and new channels is empirical to marketing (Rud).
Kering's Marketing Strategy and Model
The company has a multi-brand business model strategy under which it delegates much of the decision power to subsidiaries. The core of the strategy lies in the acquisitions of well-established brands and adopting a free-reign leadership style to allow them to work independently. The model promotes diversification and at the same time assembles all the brands under the same umbrella. This family-owned structure assures a swift decision-making process and changes are duly adopted without wasting time. Digitalization and using virtual platforms were decided by Gucci to promote its products to generation Z but at the same time, a limited number of stores in China resulted in an uneven demand and supply of the products (Le Xuan, 2019).
It has segmented the subsidiaries and brands into two categories, that is, luxury and Sports and Lifestyle. With PUMA, COBRA, and Volcom, it handles demand for fitness, sports, and lifestyle products such as sports shoes, tracksuits, etc. However, the approach is mirrored with that of LVMH. This approach has been successful in facilitating rapid growth rate and acquire agility, alignment, and accountability across the brands in LVMH (Phau et al., 2014).
The infrastructure of the company allows each brand to operate smoothly and innovate at their levels individually. A synergistic effect is also a factor earned by this model as the competency created by any of the brands is delivered to all other brands to balance the performance of the company as a whole.
The distribution network of the company helps the company to acquire economies of scale by expanding operations in multiple countries and serving its customers worldwide. Sharing innovation through effective channels among brands is also adopted by the company (Franco et al., 2019).
The company's core pillars to establish resilient marketing are agility, balance, and responsibility. Agility aims at promoting exploiting full potential by the subsidiaries by supporting them with a flexible organizational structure. Balance aims at optimizing the operations to mint consistent profits (Sun, 2018). The core objectives of this model are to promote innovation, efficient sales, achieve above-average performance in the industry, enhance customer satisfaction and utilize an omnichannel approach to its full extent (Payne et al., 2017).
Vertical integration has been adopted by the company to build internal competencies and make quality primary sources to attract customers. With stringent control over activities of acquiring raw material and processing them into finished goods is advantageous to maintain quality and accelerate innovation.
The company needs to focus on integration and communication of value proposition to achieve its core objective, balance. Gucci is a highly renowned and marketed brand in comparison with other brands. The company can promote Gucci under Kering's name to establish strong brand recognition as 'Kering' and not merely 'Gucci'. After it has achieved good brand recognition in the market, it can integrate other brands under the same head. Efficient management of communication to maintain sustainability among these brands can be achieved by effective integration and coordination. When brands will focus on customer satisfaction, demand, and preferences collaboratively, it will increase the market presence of each brand. Media exposure is an innate aspect of luxury fashion companies. By collaborating with fashion shows and festivals Kering can advertise all the brands under one roof (Sun, 2018).
Kering has devoted its marketing strategies to suit all of its marketing mixes. It has emphasized products and promotion. However, there still lies potential to enhance communication strategy by the company.
Product mix- Product does not merely comprise tangible goods but the value attached with each product. Brand equity and loyalty are a result of effective product management. Kering has been very specific about the products it offers in the market. now, people attach a brand to their experiences and the company needs to deliver to their demands by innovating and creating trending and comfortable luxury goods. Quality assurance and assistance by staff about the pre-primary purchase of goods add value to the product mix. Marketing managers of each brand have been successful in adding value to their products through innovative means and create a value proposition to compete in the market.
Pricing Mix - pricing for luxury goods is a complex task as it has to compete with powerful players at the same time ascertain value price and brand price distinctively. Ascertaining the manufacturing goods is including in cost base pricing but it will not be fruitful in the luxury market as it includes pricing for the value creation and brand's worth in the market. Therefore, value base pricing has been used by the company. Understanding price elasticity is very important while dealing with luxury goods because ascertaining the goodwill of the brand in monetary terms is quite impossible. To know how much people are willing to pay for the brand's name is vital to set the price. Market skimming pricing is beneficial if the products include innovation and distinctively recognized creativity. High brand awareness and innovation affect the pricing of Kering (Jung and Yim 2018).
Place Mix- Place mix is specifically the networking channel Kering has adopted to deliver its products across the global market. each brand has its distribution network that complements the market share each brand enjoys. Channels used by Kering include both direct and indirect modes to reach its customer base. Bargaining power lies mostly with the company as it enjoys the brand's goodwill but at the same time it knows to compete with LVMH, it has to negotiate a win-win deal for both the company and the distributors. Vertical integration has already rose the cost of manufacturing and therefore effective management of distributes and wholesalers is necessary for the company. Channel selection is also dependent on the brand awareness of Kering's subsidiaries. Including partners who are experts in distribution and networking for the products is essential to expand the market segment by Kering.
Promotion Mix- This is the most crucial mix to connect with the customer base. Kering has devoted much of its strategies to build a value proposition and brand awareness in the market to attract potential buyers. Advertising, sales promotion, PR, direct marketing, and Personal selling are used on different levels by the company's brand. However, well-established brands can do well with advertising and PR alone. Digital platforms are invincible to add to marketing strategies in the contemporary world.
6M model for enhancing communication strategy by Kering
Market- It consists of evaluating current as well as potential buyers and communicating the value proposition to them about all the brands.
Mission- Mission depicts the goals and objectives and players of the company. Like integrating the value proposition of Gucci to influence sales in other brands.
Message- The message must be clear and attractive to lure customers to buy the company's products. Brand awareness, features, and other vital aspects must be defined clearly in the message (Pangarkar et al., 2021).
Media- choosing right platform to connect with the customer base is vital for ach brand.
Money- determining the cost is crucial to make advertisements and promotional tools effective.
Measurement- measuring the performance of each strategy, tool, and plan is vital to the company's achievement of goals.
Recommendation
The company has been successful in its value proposition creation and expanding the market overseas, but at the same time, it needs to draw appropriate contingency plans as the environment is changing rapidly and demand for luxury goods is subject to prevailing trends and innovation.
The company must use digital platforms to market its product range and also use analytical tools to assess the traffic and demand on these channels. Instagram and YouTube ads are beneficial to draw the attention of customers towards brands (Jung and Yim 2018). Vlogs, social media influencers are becoming increasingly popular. Celebrities can advertise brands on their accounts and this drives the highest numbers of potential customers to the company. Selena Gomez has advertised LVMH bag in one of her posts and the following of the celebrity is more than 200 million. This is an expensive deal but at the same time ROI is high from such posts (Ozdamar-Ertekin, 2019).
The company needs to communicate value proposition among all subsidiary brands. For this, it can advertise the different brands in a single advertisement. It needs to shift the brands from the launching phase to the implementation phase and integrate the forces created by each brand to accelerate growth and achieve balance (Pangarkar et al., 2021).
Marketing communication can be optimized by aligning the message with the latest trends and emphasizing experience related to the value provided by the products.
Conclusion
The above report helps us to discern the need for change in the marketing strategy to communicate the value proposition and make necessary amendments to effectively manage demand and supply in the overseas market. The above report also discusses the multi-brand model that the company has adopted mirroring its biggest rival in the industry. The benefits of vertical integration and strategies adopted for marketing mix have been elaborated in the above discussion. In a nutshell, Marketing communication must be optimized to combat the effects of pandemic and surpass the market share of the competitors. Kering has been largely benefitted by Gucci and now it needs to integrate the value created by the brand to promote other brands overseas and achieve balance and agility. Optimization of operations through innovative and creative means has been duly achieved by the company.
References
Fernandes, C.C.M.S., 2019. Kering: a path towards sustainable luxury (Doctoral dissertation).
Franco, J.C., Hussain, D. and McColl, R., 2019. Luxury fashion and sustainability: looking good together. Journal of Business Strategy.
Jung, J. and Yim, E., 2018. Art Marketing Practice Result of Luxury Fashion Brands. Journal of the Korean Society of Clothing and Textiles, 42(2), pp.278-297.
Kernstock, J., Brexendorf, T.O. and Powell, S.M., 2017. Introduction: Luxury brand management insights and opportunities. In Advances in luxury brand management (pp. 1-24). Palgrave Macmillan, Cham.
Le Xuan, T., 2019. Digital marketing strategies of luxury fashion brands in China: the Gucci brand.
Ozdamar-Ertekin, Z., 2019. Can Luxury Fashion Provide a Roadmap for Sustainability?. Markets, Globalization & Development Review, 4(1).
Pangarkar, A., Shukla, P. and Charles, R., 2021. Minimalism in consumption: A typology and brand engagement strategies. Journal of Business Research, 127, pp.167-178.
Pavione, E., Pezzetti, R. and Matteo, D.A., 2016. Emerging competitive strategies in the global luxury industry in the perspective of sustainable development: The case of Kering Group. Management dynamics in the knowledge economy, 4(2), pp.241-261.
Payne, A., Frow, P. and Eggert, A., 2017. The customer value proposition: evolution, development, and application in marketing. Journal of the Academy of Marketing Science, 45(4), pp.467-489.
Phau, I., Teah, M., Cavender, R. and Kincade, D.H., 2014. Management of a luxury brand: Dimensions and sub-variables from a case study of LVMH. Journal of Fashion Marketing and Management.
Rud, K., What are the differences of International Luxury brands' operations in China and India?.
Sun, O., 2018. Sustainability Strategies and Challenges in the Luxury Apparel Industry. Diplomski rad. Pennsylvania: University of Pennsylvania.
