Chanel No.5

Introduction to Chanel No.5

Created by Ernest Beaux the product was first launched in 1921and was only avaliable in Chanel boutiqies.Expresses liberated spirit of 1920’s

In 1924 the perfume introduced to the world market beginning from the USA.The next target was Europe.

During the World War II the sales increased tenfold as a result of genius marketing strategy.Pocket flacons were sold on military PX’s.

In 1950’s ad campaign with participation of Merlyn Monroe called great success.

During 1980’s allure of the product tended to disappear.Brand name was

re-vitalized. Ad campaign with” Share The Fantasy’ slogan was held.

In the 1990s, more money was reportedly spent advertising Chanel No. 5 than was spent for the promotion of any other fragrance brand..

Marketing Process

Understanding Marketplace Needs-love and belonging,self esteem

Wants-Brand Marketing-creating desire for things that no one really needs and charge premium price for them.

Offerings-product+emotional experince which is hard to be delivered by compatible products

Value and satisfaction-the company sets high level of expectation as of representing scarcity and luxury and satisfies this expectation. As a result company have good number of loyal customers.

Designing strategy

The company successfully employs Marketing Concept:

Learning demand- Legendary designer of brand-Gabrielle Coco Chanel was a learning innovator.For Chanel 5 -she spotted gap in perfume industry. Two perfume types were available by that time-perfume for sexy women , perfume for classy women. Chanel No.5 merges these qualities and reflects liberal spirit of 1920’s.In addition by the time perfume was launched only floral based perfumes were popular but Coco changed this trend—’I want artificial flowers smell natural on women, not natural flowers smell artificial’.

Distinctive ad campaigns-mini-film formatted ads with participation of celebrities

Attempts to build profitable relationship with right customers by delivering satisfaction

Marketing Mix Product- Fashion and Clothing, Fine

Jewellery, Watches and Accessories,Perfumes and Cosmetics

Place-South America, North America,Asia,Europe,Africa,Australia

Price –300$-8000$ Promotion-Fashion Shows,

celebrities,launching events,TV,magazines(Elle,Vogue), exhibition(mobile art,little black jacket)

Public Relations-special events,blogs,forum,website,media relations

Publicity-celebrities,cartoons(The Simpsons),movies(Womenhistory),books(Shophacolic,Undomestic Goddess Sophie Cinsella)

Advertising-mini film formatted ads with celebrity participation,printed ad(magazines),

Chanel-Building Customer Relationships

Like many other luxury brands Chanel invest attention to customer relationships

For high-margin customers attempts to create “membership ”atmosphere. Parties like the Chanel Dinner are held in an attempt to endorse “Chanel Club ”image by participation of celebrities like movie stars or top models.

For it’s low-margin mass market users creates innovative ads with celebrity endorsements-the only company that designs ads in mini film format. Chanel’s target is women who dream to become famous or to live that sort of exciting story with a beautiful young man. Cinema with famous people represents the dream world for young generation and compatible with characteristics of target customer group.

Exclusive Invitations-private sales, boutique openings

Chanel No.5-Value capturing tool

Chanel changes its historical attitude which represented scarcity and luxury and aims to reach younger customer group by it’s youth strategy which was first commenced in 1999.

Treats perfume & cosmetics product line as a way of introducing youth to Chanel family and targets getting potential customer lifetime value by gaining more customer equity.

Chanel No.5 is crucial as it’s bestseller for decades but need some contemporary appeal

Re-formulation- despite the fact that denied by Chanel for it’s possible effect on loyal customers

Celebrity participated ads as of to attract more youth attention

Customer loyalty groups-true friends and butterflies

Chanel in Digital Era

Re-designed website—In France has received the top honors in a study by Keynote Systems that lauds the fashion label for its simple, sleek site that showed its design elegance while remaining completely available to customers.

Mobile applications-available for purchase on itunes. These applications can be uploaded to the iphone or to ipods.

Expanding presence in social networks. On Facebook alone there are also over 500 groups that are based upon Chanel.Users are treated as a part of brand and their vision for company are evaluated.

Fan-first marketing-Coco Shine lipstick was first sold through Facebook before it’s introduced to market.Experiences of users then shared on fan page.

Viral marketing-2012 Brad Chanel campaign wasn’t consistent with previous ads for the for the same product. Criticized parodied and became popular on social

media .Chanel did it intentionally in order to become “talkable”

Marketing Strategy

Company Profile

Chanel expresses it’s mission as-’To be the Ultimate House of Luxury, defining style and creating desire, now and forever.

The objective of company is consisted of paths lead to aforementioned mission. In order to be style defining they should invest on R&D and it should be financed through retained earnings.Creating desire require learning underlying customer need. To retain sustainability company should make profits. Making profit require to keep costs on reasonable level.But reducing costs too much may result in poor quality which is contradicts with being luxury. So all these choices set objectives which lead through company mission.

B.P Analysis-BCG Matrix

Chanel’s Business Portfolio is consisted of fashion & clothing, watches & accessories, cosmetics and perfumery. Each of them constitutes different SBU’s. 5.We will also Chanel No.5 as distinct SBU.

The fragrance and beauty business

alone has been estimated to turn over

more than $1 billion a year, powered

by the world’s first and most famous

modern fragrance, Chanel No.5.As a

Rule perfume industry represent cash

Cow for most luxury brands. So Chanel

No.5 Eu De perfume spray will be placed in Cash Cow Section.

Product Market Expansion Grid

Established product within the market already. Certain promotional tools are used to re-enforce brand and product awareness Market Penetration Strategy.

Offering product in different sizes-For normal users bottle ranges 1,2-3,4 ounce (74-130$).For more affluent users Grand Extrait was released in limited number(2100-4200$)

Special offers-Duo set-bath gel of No.5 series +Chanel No.5 30 ml perfume at lower price. Effective distribution- available more than 100 countries over the world,the use of online

shopping options effectively -Sephora.com,Ebay,Chanel.com,Chanel Boutigie.com etc. note that due to strong brand image Chanel can distribute limited retailers.

Updating image of -2005 Chanel ad starred by Nicole Kidman was an attempt to re-position product in US market to younger generation. Most modern consumers associated the fragrance with the romantic lifestyle of mid-century France. In an effort to stay relevant and up-to-date, avoiding the classic undertones, the commercial is set in NYC instead of Paris, and all dialogue is in English

Innovative ad campaign-Brad Pitt starring Chanel No.5 ad in 2012..

First time a male was spokesman for Chanel perfume Reemphasizing legendary and timeless image of product-2012 two videos was launched in

Inside Chanel.com.The first one was about innovative characteristics of product.

The second one was revealing the voice recording and photos

which contained materials about Merlyn Monroe ‘s confess her actually

using of Chanel No5.In this way they merged timeless image of Merlyn and

Chanel No5.

SWOT Analysis

Strength

Production Quality) Leading Brand Distribution Channels Loyal Customers High R&D Strong brand equity

Opportunities

Economic welfare improvement

New distribution channels and online shopping

New untouched markets and segments

Increased interest in luxury goods formulation

Weaknesses Availability of similar products Lower price by competitors Possible ‘out-of fashion’ perception

Threats Chanel counterfeits especially in Asia Competition&lower cost specially The risk of banning ingredients and re-

formulation

Marketing Environment

Microenvironment The Company-strong organizational culture, flexibility and non-bureaucratic approach

help departments to work efficiently; Suppliers-heavily depends on Amazonian resources for ingredients of product and

cooperates local suppliers especially from Brazil. Marketing Intermediaries-. Sells selectively to number of retailers worldwide, including

among others Harrods,Jenners,The Boots and The Perfume Shop.The company has stores in more than 100 countries of the world and plenty of online retailers.

Competitors-Loreal,Dior,Guerlain Publics- Media publics- Regular merchandise demonstrations for publishing new products invite

media to report. This kind of meetings can also function as a means of building relationship with media;

Local publics-the locals of Brazil accuse company for enormous margin between their wages and price of products consisted of materials they assemble.

General public –being luxury,trust in quality.extravagant, overpriced, exploiting third world suppliers, and wasteful Customers- consumer and international markets

Macroenvironment

Political- Consumer protecting laws-EU require to re-formulate Chanel

No.5 and Miss Dior for the reason of containing allergic ingredients; Piracy regulation laws-preventing fake products especially in Asia Technological-the product was first containing synthetic chemicals.

Due to the increased concern for the environmentally safe products during the 1990’s technological improvements centered on “reformulating products to move away from synthetic chemicals and to rely on natural products.

Natural-sustainable packaging, protecting green resources of Amazon,banning of civet and musk etc;

Economic-globalization and entering into markets like Asia and Latin America. Carefully spending pattern caused decrease only 0,7% growth between 2007-2010.

Social-sustainable packaging,recuparetion waste packages Demographic-change in family structure makes more funds

available for “nuclear families and it leads to more spending on luxury products. With the education level rising young generation has more opportunity to spend on this type of product.

Cultural-in modern world boosts self-indulgent of people and luxury brands offer different tools for this

Consumer Buyer Behaviour

Chanel No.5-Customers are affected

Cultural factors Culture-Hollywood culture helps to boost the

popularity of the products of ‘luxury’ brands. In addition movie stars like Nicole Kidman, Audrey Tatou,Brad Pitt took part in ad campaigns.

Social class-appeals to upper and middle class.

Social factors Membership groups- If one hang around a

social group of well off upper class individuals, by wearing Chanel No.5 she is identifying herself as part of a social group that she wishs to belong

Reference group- Celebrities, older generation

Roles and status-belonging high social class,young,elegant educated women

Chanel No.5-Customers are affected(cont)

Personal factors

Age and life-cycle-single women under the age of 30 Socioeconomic status-wealthy or young professional women Lifestyle-Classic but adventurous at the same time Personality-sophisticated-upper class and charming

Psychological factors Motivation-love and belonging,social and self-esteem status Perception-subliminal messages in movies, books,tv shows etc. Learning-providing high quality reinforces repurchases Beliefs-Chanel No.5 was favorite of grandmas.2005 ad campaign changed that belief Attitude-expensive but provied high quality

Chanel No5.-Buying Behaviour

Two distinct types of Buying Behavior;

Habitual Buying Behavior-the perfume has long history so large loyal customer basis for whom it’s always the first choice .In addition it’s legendary perfume of Chanel and perhaps among the first choices of Chanel loyal customers for perfume.

Complex Buying Behavior-not yet loyal young customer group .Perfume represents personality to some extent and choice require high involvement. Chanel is trying to get retention from these consumers by ad campaigns

Chanel No.5-Decision process

Need recognition-external stimuli

Information search-personal,public,commercial,experiential;

Evaluation of alternatives-lasting longer,high quality,brand image,stylish,famous;

Purchase decision-poor service by salespeople,inconvenient store location, discounted similar products;

Post-purchase Behaviour-satisfaction level

Chanel No.5 from a New Product Perspective

Consumer group in respect to innovativeness-early and late adopters

Product characteristics in respect to rate of adoption;

Relative Advantage- not floral based, longer lasting as synthetic ingredients were used;

Divisibility-as product appeals high and middle income class and price is quite affordable for them

Communicability-after launching the product for long years no active ad campaign was held but anyway product sales was high as result of word-of mouth influence,

Creating Value For Target Customers

Segmentation

Demographic Segmentation Age and life-cycle-18-30 years old,

working singles or young men; Gender-woman; Income-high disposable income to buy

high brands

Psychographic Segmentation Lifestyle-classic but yet adventurous; Personality-charming and elegant;

Segmentation(cont.)

Behavioral segmentation Occasion Segmentation-men buying perfume as a gift; User status-ex-users ,potential users, and regular users; Loyalty status-highly and potentially loyal customers Lady G-use normal perfume daily but Chanel No5 on occasions

Business market segmentation Sector-right place to sell is cosmetics shop; Profitability-the main partners- Boots and The Perfume Shop rules 33% and 20% od

market respectively; Organizational size-Boots has 168 stores across the UK

Segmentation(cont.)Effective Segmentation Dimensions Measurable-information about age,gender

and social class is highly attainable; Accessible-it is again easy to target the

chosen segments as they are all exposed to different but specific mediums;

Substantial- high price and large market share;

Differentiable-men and women respondi differently,socioeconomic groups have different disposable income;

Actionable-there are multiple marketing tools than can be used to reach the chosen segments, but there are not too many segments to make this unattainable.

Targeting

Characteristics of Market Segment High current market share; High possible growth rate; Profitability through new

segments(potential users etc.,)

Primary target-18-30 years old,single women;

Secondary target-young men buying perfume as a gift on occasion;

Targeting strategy-differentiated marketing strategy as different segments are targeted

Differentiation and Positioning

Positioning Attributes-In the Chanel No.5 advert, the voiceover says ‘I’m a

fool to want you’ suggesting that the attributes for the product are romance and power as the woman is in control. Price would be expensive but luxurious in quality.. Product class is the differentiation of Chanel No.5 from other perfumes, in that it is classic and timelessFinally, the emotion in the advert is of seduction, lust, passion and a feeling of beauty

Positioning Map- high quality and high performance(see attc.1)

Positioning Map

• Shalimar By Guerlain-80$

• Armani Code By Giorgio Armani-87$

• No.5 by Chanel

98$

• Ref. Boots.com for 50 ml bottle

Positioning at 3 steps

Differentiating Competitive Advantages

Product differentiation-quality,performance,timeless,stylish;

Image differentiation-well established company image

Choosing the right competitive advantage

How many differences to promote-USP

“No.5 attempts to provide young professional women with a classic and timeless perfume to suit their luxury lifestyle and to enable her to be the beautiful, powerful and classic woman she aspires to be”

Positioning at 3 steps(cont.)

Which differences to promoteo Important and distinctive-boosts self esteem with it’s luxury,timeless and

uniqueness features. Innovative ad campaigns delivers the image clearly more than competitors

o Superior-the nearest perfume Shalimar can’t create the same experience;o Preemptive-the secret formula and successful initial marketing strategies;o Affordable-designed for affluent customers;o Profitable-bestseller for decades

Selecting an overall marketing strategy-More for More

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