Asia has driven the growth for luxury goods internationally. The other key driving force in the luxury goods industry is the changing consumption habits of consumers. The growing segment of consumers in luxury goods earn substantially less than traditional ones (those who earn 300,000 or better), but they still desire products with superior quality and styling. This is due to the effectiveness of television advertising and programming. The other factor being that middle Income household would like to rewards themselves with luxuries for their hard work. Effective pricing strategy also contributed to the Industry.
Big box discounters such as Walter and Target allow consumers to buy necessities at very low prices then spend lavishly on extravagances such as luxury goods. All In all, the combination of these forces had driven the growth in demand in luxury growth. 2. Competitor analysis (1. 5%): What competitors’ actions to capture the opportunities from the changing luxury goods market will be the greatest threat to Coach? The top brands of luxury goods tends to exploit Middle-income consumers by introducing “diffusion lines” that are “affordable” and “accessible” luxury.
What is meant by accessible luxury is when a marquee or designer label such as Giorgio Airman, launches a sub-brand which have a retained quality and styling as the marquee brand, but sold at a much lower price point, usually 40%-50% cheaper. Since Coach Is targeting a similar segment, competitors could further develop these diffusion lines to capture Coach’s market, such as sourcing to low wage countries to skim down the production costs even further to match the competitive pricing In the growing accessible luxury market.
Competitors are also aware of the potential of luxury goods in emerging markets such as Eastern Europe and Asia. Louis Button and Asks Fifth Avenue had opened retail stores in mainland China to establish a first mover advantage. Other than that, many Western designer labels have opened up retail stores in India. Such massive expansion of these designer labels, could build up brand reputation and loyalty. If Coach does not expand in the short-term as well, there may be market saturation for luxury goods. 3. Company analysis (1. %): What are the competitive advantages of Coach? Development operations. Their market research which include conducting extensive reverse and focus groups has allowed them to gain significant competitive advantages in the accessible luxury goods industry. They possess insightful knowledge in the chirography’s and preferences of consumers towards these luxury goods. They then take these data to develop prototypes by a team of designers, merchandisers and sourcing specialists and ask previous customers for their feedback.
Those designs that are in favor are then introduced to the market. This research and develop process have allows Coach to introduce new products every month. Hence they have sustained impressive growth through monthly introductions of fresh new hand bag designs. The second competitive advantage of Coach is their high levels of customer service. Staffs within the store are required attend service training programs and along with scheduled extra personnel during peak shopping periods has allowed consumers to enjoy the optimal customer experience.
Of the of the core values of the company is the refurbishment or replacement of damaged hand-bags and products regardless of age. There is also a special request service, where customers are allowed to order merchandise for home livery if the particular handbag or color wasn’t available during a visit to a Coach store. Along with the aesthetic attractiveness of Coach’s full price stores, the customer service experience is the additional differentiating aspects of the brand. 4. Consumer analysis (1. 5%): What segment(s) of consumers are growing and becoming more important?
In terms of geographic segments, consumers in the emerging markets should be on Coach’s top priority list. This is because of the potential in emerging markets due to increased wealth and incomes of households. The demands for luxury goods in these arrest are projected to have a 10 percent growth annually. Especially the Chinese market, which has accounted for a tent of the sales in 2004 and this figure is predicted to increase to 24 percent by 2014. India is also an important geographic segment as they have a 500 million market in luxury goods and predicted to increase annually.
The other important consumer segment are the millionaires as there would be around 10. 2 million of these type of consumers by 2009. Coach as also identified two types of shoppers through its marketing research, the full-price store shopper and the factory store shopper. The full-price store shopper would be a 35-year-old with university level education who are single or newly married working woman and factory store shopper are 45 -year-old with university level education who are married professional woman with children.
With the correct tweaks in each of the marketing mix, and the extensive use of research and development operations the company has, Coach can sustain sales and profits from these two groups alone. 5. Identify all possible growth options of Coach using “the Product/Market Expansion Grid “. What should be the top 3 growth options? Explain your choices. (6%) Coach could utilize the Product-Market Expansion Grid to identify the possible growth current products are in a current market with room to grow. Coach could use a number of strategies to increase its market share in existing markets.
Firstly, they could encourage customers to buy more. Second, they could attract customers from other designer labels to buy its products. Last of all they could draw in new customers who are originally non-users to buy their products. Market development strategy: This occurs when the current product is launched in a new market. Coach could increase market share through expanding its distribution channels to meet demands of customers. Secondly, they could sell in new regional or geographic locations and finally identify the potential end-users of luxury goods in the market.
Product development strategy: This occurs when a new product is launched in the current market. Coach could this strategy to develop new products, develop different quality levels and even improve the current technological level or knowledge. Diversification strategy: This occurs when firms decide to introduce new products in a new market. There are three types. First being the concentric diversification strategy, which is to develop new products with earlier technology or knowledge for new segments.
Second is the horizontal diversification strategy which is adding a new product to the line for old customers which is not related to Coach’s current products. Third being the conglomerate diversification strategy where Coach could market new products that have no synergies with current products but may attract new segments of customers. As for Coach, the most important growth option would be product development strategy. Much of its current success is coming from this strategy.
As explained above, Coach have utilized the new product development process to develop new products and test marketed these products. This strategy has enabled Coach to introduce new products every month and capture the costumer who wants the newest items and fashions and according to the 2006 sales records, seventy percent of sales comes from within the fiscal year. The second most important growth option would be the market development strategy. Coach should introduce its current products into emerging markets and make use of the first- over advantage.
As explained above, emerging markets have the most potential in the growth of luxury markets, it would be wise to apply Coach’s new product development process for these new markets as well as there may be a slight difference in preference for the luxury goods. The third most important growth option would be market penetration. Developing the existing products for existing markets has also been the contributing factor to Coach’s success. Strategic alliances with Lutz & Pathos and Estes Lauder Company has allowed them to further improve he quality of their products at hand and satisfy existing customers.
The product development strategy could help Coach grip on its earlier successes over competitors and with its existing customers by launching new products from the company. The expansion of new distributional channels and introduction of stores into emerging markets could also capture market shares in those respective markets. And finally, market penetration strategy could solidify Coach’s reputable brand status in existing customers’ minds. Hence, Coach would be able to sustain its successes in the luxury goods market.
