Marketing Management Report PDF

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Analysing the customer relationship management strategies adopted by Chanel...

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TABLE OF CONTENTS

1.0 INTRODUCTION..................................................................................................................2 1.1 History of Chanel.................................................................................................................2 1.2 Chanel’s Products................................................................................................................3 2.0 CUSTOMER RELATIONSHIP MANAGEMENT OF CHANEL....................................4 2.1 Customer Relationship Management Strategies of Chanel.................................................4 2.1.1 Electronic Customer Relationship Management..........................................................4 2.1.2 Omni-channel marketing..............................................................................................5 2.1.3 Utilization of social media as communication tool......................................................6 2.2 Advantages of CRM to Chanel............................................................................................8 2.2.1 Remain competitive in the market...............................................................................8 2.2.2 Customer retention & brand loyalty.............................................................................9 2.2.3 Important learning tool for Chanel...............................................................................9 2.3 Disadvantages of CRM to Chanel.....................................................................................10 2.3.1 Impaired brand’s exclusivity and individuality..........................................................10 2.3.2 Further blurring the frontiers between luxury and mass-prestige brands...................11 2.3.3 Data security concern associated with centralized data.............................................12 3.0 SUMMARY...........................................................................................................................13 4.0 LIST OF REFERENCES.....................................................................................................15

1.0 INTRODUCTION The brand that is chosen for the purpose of this report is a French luxury fashion retailer brand famously known as Chanel. In 2019, the Chanel brand was valued at approximately 11.5 billion U.S. dollars. In comparison, the brand's valuation was 5.88 billion U.S. dollars in 2018 (O’Connell, 2019). Chanel started its success with the introduction of Chanel No. 5 perfume, which continued to be a top selling perfume into the 1990s. The company has since diversified its offerings beyond perfumes to include designer clothes and accessories, which are sold in department stores and Chanel boutiques around the world with headquarters located in Neuillysur-Seine, France and London, United Kingdom. Worldwide, Chanel operates around 310 Chanel boutiques; 94 in Asia, 70 in Europe, 10 in the Middle East, 128 in North America, 1 in Central America, 2 in South America, and 6 in Oceania. 1.1

History of Chanel

The founding of Chanel goes back to the year 1910 when Gabrielle “Coco” Chanel opened her first shop under the sign “Chanel Modes” in Paris. Since than it has grown to be one of the world’s most prestigious luxury brands for fashion, fragrances, beauty and skincare. As a fashion designer, Coco Chanel catered to women's taste for elegance in dress, with blouses and suits, trousers and dresses, and jewelries (gemstone and bijouterie) of simple design, that replaced the opulent, over-designed, and constrictive clothes and accessories of 19th-century fashion. The House of Chanel originated in 1909 when Gabrielle Chanel open a hat-making shop at 160 Boulevard Malesherbes. The First World War (1914–18) affected European fashion through scarcity of materials, and the mobilisation of women. By that time, Chanel had opened a large dress shop at 31 rue Cambon, near the Hôtel Ritz, in Paris; among the clothes for sale were flannel blazers, straight-line skirts of linen, sailor blouses, long sweaters made of jersey fabric, and skirt-and-jacket suits. In 1921, to complement the suit of clothes, Coco Chanel commissioned the perfumer Ernest Beaux to create a perfume for the House of Chanel. His perfumes included the perfume No.5, named after the number of the sample Chanel liked best. Originally, a bottle of No. 5 de Chanel was a gift to clients of Chanel. The popularity of the perfume prompted the House of Chanel to offer it for retail sale in 1922. The success of the No. 5 encouraged Coco Chanel to expand perfume sales beyond France and Europe and to develop other perfumes which she 2

required investment capital, business acumen, and access to the North American market. This was when Pierre Wertheimer came into the picture by providing Coco Chanel with the required investment capital for the expansion. In 1953, Chanel collaborated with jeweler Robert Goossens; he was to design jewelry (bijouterie and gemstone) to complement the fashions of the House of Chanel; notably, long-strand necklaces of black pearls and of white pearls, which high contrast softened the severe design of the knitted-wool Chanel Suit (skirt and cardigan jacket) (Martin, 1995). In 1994, Chanel had a net profit equivalent to €67 million on the sale of €570 million in ready-to-wear clothes and was the most profitable French fashion house (Chevalier & Mazzalovo, 2012). 1.2

Chanel’s Products

Chanel is a premium French fashion label that is recognized in the international market as a brand that specializes in fashionable accessories, luxury goods and expensive ready-to-wear clothes. The House of Chanel offers various luxury fashion products which include, amongst others the following: i.

Daywear and evening clothing for both men and women: The elegant day wear and the sophisticated chic evening wear is completed with exquisite proficiency and style to make it fashionable. The dresses add value to the brand’s reputation of offering its customers clothing that dictates class and a color pallete of sophisticated colors like pastels, neutrals, greys and black.

ii.

Suits: The woolen Chanel suit includes a skirt that is of knee length and a jacket that is cardigan styled with golden buttons and black embroidery. The accessories are complimentary and include pump shoes, a leather purse and a pearl necklace.

iii.

Exquisite jewelries: All the products are prepared from beautiful and sparkling diamonds and white gold of 18 carat. The products include Comete, Camelia, Baroque, Ultra and Bridal Watches.

iv.

Exclusive bags for men and women

v.

Designer watches

vi.

Makeup products

vii.

Fragrances which include No. 5 de Chanel, Cristalle, Coco Mademoiselle, No. 19 and Les Exclusifs 3

viii.

Designer shoes for both men and women

2.0 CUSTOMER RELATIONSHIP MANAGEMENT OF CHANEL Customer Satisfaction has been in the spotlight amongst marketing, behavioral writers and researchers for long. It is one of the most basic and inevitably a very significant business element that cannot be avoided by organizations in modern times. The growing importance of customer satisfaction, customer retention, changes in market demand, and competitive intensity has led to a paradigm shift from transactional marketing to relationship marketing (Payne, 2009). In order for luxury brands including Chanel to be perceived as more than a symbol by its customers, brands have to establish long-term relationship with their customers through customer relationship management (CRM) (Kapferer & Bastien, 2009). A closer relationship with the customer will lead to increased satisfaction, trust, and loyalty among other things. A strong relationship with the customer is a key success factor for luxury brands (Choo et. al., 2012). The success and longevity of luxury brands are typically based on values of craftsmanship, innovation, exclusivity driven by premium pricing and social prescription. Modern luxury brands such as Chanel have built their initial success within a close community of fans. Although from a popular origin, Coco Chanel built her initial success by developing close ties with the Paris fashion community. Most creators still today have built their initial success by building strong relationships with a small community of clients in the show biz or fashion industry. In a word, relationships have always been key to the success of luxury brands. The subsequent part of this report will therefore discuss on the CRM strategies for Chanel as well as the advantages and disadvantages of CRM to the brand. 1.3

Customer Relationship Management Strategies of Chanel

2.1.1 Electronic Customer Relationship Management The concept of electronic customer relationship management (e-CRM) has evolved through traditional CRM. The concept however has no universally recognized definition considering that it is described differently by different authors and scholars. Kumar and Reinatz (2005) for example described e-CRM as the focus of acquiring, retaining and enhancing relationship with high net worth through the Internet. Kennedy (2006) on the other hand argued that e-CRM 4

concentrated on how companies can interact with consumers with little or no human contact at all. E-CRM implementation varies significantly depending on the outcome wished to be achieved. Some systems are purely informational, non-interactive web-based customer services while others are operational systems where the consumers make product purchases and financial transaction (Chen & Chen, 2004). Previously, e-CRM has been implemented as a software tool consisting of a database with the handling of online purchase information and web traffic. The development of e-CRM has led to e-CRM being seen as more than a software; it has been acknowledged as a strategy (Pan & Lee, 2003). E-CRM should be incorporated in all aspects of the business processes, in order maintain a synchronized interaction with customers throughout each channel. In other words, eCRM used as a software is not enough for achieving successful outcomes. E-CRM should therefore be adopted as part of business CRM’s strategy that has to be implemented and managed well (Chen & Chen, 2004). E-CRM application can offer brands a stronger relationship with their customer, through its collection of data and its use. To conduct a wide-ranging software platform that enables the answers to “who, what, when, where, and how” of marketing and sales can create significant customer value (Pan & Lee, 2003). In the case of Chanel, the use of e-CRM can be seen to have been applied in the operation of the company. For instance, the company sends out postcards that entitle customers who have purchased Chanel products worth a certain amount to a complimentary gift once a year. A customer bringing the postcard to any Chanel counter can receive a gift without buying anything. To make the best use of such visits, Chanel checks the customer’s purchase history using a customer relationship management system (e-CRM) and recommends the most appropriate products to her. By creating this mechanism, Chanel has seen the percentage of customers who buy a Chanel product when bringing the postcard to the counter increase to 70 per cent from 54 per cent before the e-CRM system was introduced. However, the application of e-CRM in the company should be further improved to cover various aspects of the company’s operation. The full capability of the system should be utilized in driving the marketing efforts and strategies of the brand in reaching to its customers. As such, the adoption of a more comprehensive e-CRM system would help Chanel to offer better personalization and customization in its services to its customers. 5

2.1.2 Omni-channel marketing Omni-channel marketing is a brand experience that is consistent both in-store and online: creating a seamless journey from one channel to another. A customer interacting with a brand using omni-channel strategies should experience the same feelings and associations with the brand online as they would in-store with a consistent and on-brand message (Okonkwo, 2009). A very effective example of omni-channel marketing is the ability to train staff to know each customer personally by accessing data from online shopping behaviors. Usually, staff members or customer service representatives are not aware of interaction customers have with a retail brand, such as purchasing products. But, with an omni-channel approach, physical store staff can get to know a customer by using online data before they walk into the store. Representatives in high street stores will now be able to greet customers accordingly. Making policy for staff to use readily available customer data to familiarize themselves daily with upcoming interactions. This can turn a fumbled customer experience into a great one, encouraging the customer to interact with the brand again in the future. Omni-channel marketing also will require luxury brand including Chanel to adopt electronic marketing(e-marketing) which enables luxury retailers to establish, maintain, preserve their glitzy image, market products/services globally and mainly enhance relationships with customers. E-marketing through the use of electronic communications technology such as the Internet, e-mail, databases and mobile devices improves customer loyalty (Smith & Chaffey, 2001). Companies can better target communications that match the individual needs of the customers. Modifications in the marketing mix were eminent and necessary, since the scope of businesses had changed remarkably. The word shopping for customers has changed. As contested by Constantinides (2002), the traditional marketing mix paradigm is incompatible with ecommerce. There was a need to identify the elements that would give customers the desired shopping experience online, similar to offline elements, for e.g. the shop’s atmosphere, staff friendliness, customer service, shop layout, presentation, and high class feeling. 2.1.3 Utilization of social media as communication tool Luxury brands tend to show a degree of hesitance with regard to their adoption of social media (Hughes et. al., 2016; Jin, 2012) due to the fact that luxury brands have been built around the image of exclusivity and individuality whereas social media is readily available to the masses 6

and can, in turn, generate a sense of brand overexposure (Okonkwo, 2009). Moreover, social media has facilitated the formation of online communities and social platforms that can simultaneously serve as virtual brand and anti-brand communities, thereby possibly leading to the creation of either positive or negative consumer sentiments (Ramadan & Farah, 2017). Competing for fans and likes was not an obvious fit for many and they started adopting the leading social media platforms only when they realized they could be used just as a new media on which they could broadcast their institutional campaigns. Luxury brands including Chanel, however, cannot ignore social media as a conversational platform between individuals. A digital revolution has been shaping the marketing world, making it highly entrenched in the social media platforms and dependent on the online social relationship between consumers and a given brand (Hughes et al., 2016; Ramadan, 2017). The latter can be attributed to the fact that social media has become an inseparable element from the daily lives of consumers. As a result, today’s social media plays a major role in the branding and communication strategies of companies, ranging from fast-moving consumer goods (FMCG) to luxury brands. The internet has become an important tool in facilitating information-sharing and communication to the extent that the daily reach of online platforms has greatly surpassed that of traditional offline media channels (Dimmick, Chen, & Li, 2004). Moreover, with differentiation becoming the main aim of every marketer in light of the growing competition, the most precious asset of any company becomes its relationship with its consumers. Interestingly, social media facilitates this relationship by providing a means for more effective two-way communication, a deeper understanding, as well as a sustainable and trustworthy interaction (Ramadan, Farah, & Mrad, 2017). Social media allows users to move from being passive observers of content to becoming active participants in the conversation, both creating and influencing content (Jin, 2012). This has remarkably augmented the popularity of social media, with more than 2.789 billion individuals actively using it on a daily basis, showcasing an approximate growth rate of 21 percent between 2016 and 2017 (Chaffey, 2017). In fact, modern-day consumers are becoming highly dependent on social media, increasingly utilizing the various platforms of this ecosystem (Hanna, Rohm, & Crittenden, 2011), which enable them to gather information about brands and subsequently shape their purchase intentions (Sharma & Sheth, 2010). 7

In fact, it has become impossible to ignore the influence of social media on brandconsumer relationships (Ramadan, 2017). Statistics indicate that only 14 percent of consumers trust traditional brand advertisements, with only 18 percent of traditional TV campaigns resulting in a positive return on investment (Qualman, 2010). Also, approximately 68 percent of consumers exhibit trust in online reviews and information, which results in positive behavioral intentions (Nielsen Global Company, 2013). In addition, Fisher (2009) advanced the idea that approximately 70 percent of consumers visit a brand’s social media pages to receive more information about a product, of which roughly 49 percent will make a purchase decision based on the online information, while 60 percent will share the content they find with others (Miller & Lammas, 2010). 1.4

Advantages of CRM to Chanel

2.2.1 Remain competitive in the market

Competition has got stronger and more complex. Premium brands have worked on their products and image, and have given birth to ‘ new luxury ’ – w h i c h now threatens traditional luxury ’ s image 8

and legitimacy, or at least blurs its boundaries. Competition has got stronger and more complex. Premium brands have worked on their products and image, and have given birth to “new luxury” which now threatens traditional luxury’s image and legitimacy, or at least blurs its boundaries. New business models are evolving that will continue to disrupt the luxury goods industry. As tech and social media brands and companies increasingly enter in the luxury retailing segment, more aggressive competition will be seen across all distribution channels in the industry (Euromonitor, 2018). Endowed with a very high brand equity luxury brands including Chanel cannot just wait for customers to visit their shops or websites, but instead, they have to compete for their share of wallet even among well-off women who do not hesitate to mix and match luxury, new luxury, mass-prestige and mass-market products. With the increase in competition, Chanel now has to find a way to show its difference and legitimacy by offering customers with something exceptional. To this end, CRM appears to be a capital weapon in this battle for market share (or for customers’ share of wallet). In fact, surveys show that most of the companies in the luxury world are now willing to develop ambitious, result-oriented CRM policies (Cailleux, Mignot & Kapferer, 2008). Refusal to adopt an appropriate CRM strategy will therefore make Chanel to lag behind its closest competitors who have adopted aggressive CRM strategies in their operations. In the ultra-competitive world of luxury goods, deeper insight on its consumers is an essential component to creating value, and protecting the brand heritage. Luxury consumers have increasingly high expectations of what their experience with the brand should be like. Whilst previously the quality and lure of Chanel’s products alone could tempt buyers, today’s customers expect more. Developing an emotional...