Ch. 4 - The Marketing Environment

For successful marketing strategies it is important to understand the External Environment. To understand current customers, what drives their decisions. To identify valuable customers and understand their needs as well as understand the competition. Chanel is an internationally established company that has been around for over a century. Chanel is known to serve wealthy customers, who appreciate luxury goods and can afford to purchase them.  Its target both men and women from 21-65 years of age. Chanel’s products are suitable for both generation y and generation x. The target group, who identifies themselves with the values that Chanel represents. Values like: elegance, simplicity, modern, and class. 

For a long time the French luxury company was keeping a big price different between Asian and European market. The price of a bag was about 60% higher in China. I was always surprised to see most of the time Asian customers in the luxury stores in Paris.

Price is an important part of its identity, as it is for all luxury goods. So this big differential between countries can be problematic. Chanel’s president of fashion, Bruno Pavlovsky, told WWD that aligning the prices ensures that customers are “seduced by the brand and by the products and not just led by these price differentials.”  In the 2014-2015, with the euro’s weakness it has stretched traditional price differential between Europe and China even further. Chanel’s announcement in March that it would increase prices in Europe by 20 percent and drop them a similar amount in China. Korea, Vietnam, Thailand and Russia also saw prices drop, while prices remained stable in Japan, the U.K., U.S. and Canada. According to a Fortune Character Institute report on the Chinese luxury industry in 2014, Chinese people consumed 46 percent of the world's luxury goods; a value of $106 billion, but 76 percent of the spending took place abroad. As a result, designer stores in China have come to serve as mere showrooms. The brand also wanted to avoid the overseas shoppers, who purchase abroad and resell in China. 

That’s why it is really important to understand changing environment and understand customers. Another example it can be when Chanel show took place in Shanghai in 2009. The show starts with a short film directed by Karl Lagerfeld, “Paris Shanghai: a fantasy” in which he imagines Coco Chanel travelling to the city in her dreams, and swapping her couture jacket for a Chairman Mao jacket in the 1960s. As Justine Picaride describes in the UK Telegraph “ Thus the cultural references for the collection that follows are clearly delineated: little red dresses and little red bags (Chanel’s take on Mao’s Little Red Book); black transparent chiffon frocks glittering with red sequins (ready-to-wear for cocktails aboard the Shanghai Express); reinvented Chanel tweed jackets and suits in jade-green or Chinese red, accessorized with thigh-high boots, shiny as Oriental lacquer.”  Less than 48 hours after the opening, the boutique sold out the limited edition of red handbags that Karl Lagerfeld created for Shanghai.  The interesting fact is that the price was 28,800 yuan – about £3,000 where the average monthly wage is 2,000 yuan. The Shanghai boutique wasn’t the first one in China. Chanel opened up in Beijing more than ten years before that. However, Shanghai was christened the “Paris of the East”.