Ch. 7 - Business Marketing

Business marketing, also called industrial marketing, is the marketing of goods and services to individuals and organizations for purposes other than personal consumption. Chanel’s objective of marketing their products is clearly for personal consumption. However, individuals and organizations are frequently purchase Chanel’s products for business purpose. For example, individuals, act as purchasing agents, purchase Chanel’s products to sell on their online store. Also, some companies frequently launch a campaign to give Chanel products as a gift to their lucky customers.

Strategic Alliances

A strategic alliances, sometime called a strategic partnership, is a cooperative agreement between business firms. Chanel has strategic partnership with retailers, like Macy’s and Bloomingdale’s, to authorize some of Chanel’s products available in Macy’s and Bloomingdale’s. Chanel has a counter of fragrances and cosmetic products in Macy’s and Bloomingdale’s.

Business versus Consumer Markets

The basic philosophy and practice of marketing are the same whether the customer is a business organization or a consumer. However, business do have characteristics different from consumer markets. Chanel focuses on the consumer markets. Let’s assume that Chanel focuses on business markets, what are the differences?

ð  Consumer marketing, sales are made to individuals who are the final decision makers, yet they may be influenced by family members or friends. Business marketing, sale is made to a business or firm.

·         Demand- Chanel produces reasonable amount of their products, but Chanel also put limit on some of its products to remain exclusive. It produces based on their consumers and itself.  Assume that Chanel focus on business market, the demand for Chanel will be called derived demand. Derived demand is a demand for a commodity, service, etc., that is a consequence of the demand for something else.

·         Purchase Volume- If Chanel is a business marketing company, it will sell much more products than of a consume product company. Business consumer buy in much larger quantities than consumer.

·         Number of Customers-If Chanel as a business marketer usually have far fewer customers than consumer marketers. Chanel currently have a lot of loyal customers because of its exclusivity.

·         Location of Buyers-Business customers tend to be much more geographically concentrated than consumers. If Chanel is business marketer, its focus will be in California, Illinois, Michigan, New Jersey, New York, Ohio, and Pennsylvania. Chanel currently operates its retail stores only in New York, New Jersey, Connecticut, and Pennsylvania because its objective is to be upscale.

·         Distribution Structure-Chanel’s distribution structure is quite simple. Chanel adopt both direct and dual distribution on certain products. In business marketing, Chanel’s channel of distribution will be shorter. It only has to adopt the direct channels, where manufacturers market directly to users.

·         Nature of Buying- Chanel, as of consumer marketing company, the nature of buying of its customers are based upon their customers’ needs or wants and the ability and willingness to buy. If Chanel as the business marketing company, its consumer will be professionally trained purchasing buyers who spend their entire career purchasing products.

·         Primary Promotional Method-Chanel has adopted personal selling, public relations, and advertising for sales promotion. On other hand, if Chanel as business marketing company, it will tend to emphasize personal selling in their promotion efforts. 

Ch. 8 - Segmenting and Targeting Markets

Market is people or organizations with needs or wants and the ability and willingness to buy. A group of people or organization that lacks any one of these characteristic is not a market. Within a market, a market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs.  

Market Segmentation

Market segmentation is the process of dividing a market into meaningful, relatively similar, and identifiable segments or groups. Chanel offers widely products line and deeply product line to target diverse market segment, such as: Haute Couture line, ready to wear, men’s and children’s collections, fragrances, accessories, footwear, and cosmetic products. Chanel’s target segments are mostly all age women, so their products are focus on women.

Bases for segmenting consumer markets

Marketers use segmentation bases, or variables, which are characteristics of individuals, groups, or organizations, to divide a total market into segments. Consumer goods marketers commonly use one or more of the following characteristics to segment markets:

©      Geographic Segmentation-refers to segmenting markets by region of a country or the world, market size, market density, or climate. Chanel geographically segments by country. For example, compare Chanel handbags designs in United Stated to China. In China, people do not prefer white color because it is a bad luck sign according to the tradition. Chanel retail store in China, they have more black color of handbags than the white. In United States, white color is the meaning of purity, innocence, and virginity and people will favor white color.

©      Demographic Segmentation-Marketers often segment markets on the basis of demographic information because it is often related to consumers’ buying and consumption behavior. Some common bases of demographic segmentation are age, gender, income, ethnic background, and family life cycle. Chanel often adopts this segmentation its prices are not affordable to most working class. Also, Chanel concentrates mostly on women, so this segmentation will help to design different product for women at different ages.

©      Psychographic Segmentation-segmentation markets on the basis of personality, motives, lifestyles, and geodemographics. Many of Chanel’s customers purchase its products because they appreciate luxury goods, and see Chanel as a symbol of elegance, simplicity, modern, and class.

Repositioning

Repositioning is changing consumers' perceptions of a brand in relation to competing brands. An example of Chanel product line is the No.5 Perfume series.  Chanel has repositioned the N^。5 fragrance from classic elder to sexy allure. The advertising of the products become less informative and focus on attracting consumers’ emotions. The advertisements of No.5 perfume series in the old days are vintage style that present its theme of classical that intended to attract customers. Recently, Chanel adds on the idea of sexy to its advertisement of No.5 fragrance series in order to compete with its competitors. 

Ch. 11 - Developing and Managing Products

New product is important to sustain growth, increase revenues, and profits, and replace obsolete items. It is a product new to the world, the market, the producer, the seller, or some combination of these. There are six categories of new products, Chanel has established three categories of new products:

Ø  New products lines- Chanel’s first product was jersey haut couture, the little black dress. Since, then, Chanel has expanded into fragrances, watches, glasses, cosmetic products, jewelries, luxury bags, and accessories.

Ø  Additions to existing product lines- Chanel frequently produce new product item to its existing product lines. Recently, Chanel introduced its new series of Spring-Summer 2014 handbags. Also, Chanel introduces its new fragrances in the N^。5 and Coco fragrance series.

Ø  Repositioned products- Chanel has repositioned the N^。5 fragrance from classic elder to sexy allure. Back in the old days, N^。5 were to attract over 40 years old. Its advertisings were women dressed in formal ways. Recently, the target market of N^。5 is customer over 25 years old not just over 40 year old. The advertisings are sexy women wear little clothing.

Ø  Lower-Priced products- Chanel are upscale and exclusive product. It does not offer lower price products.

Product Life Cycles

Product life cycle (PLC) is a concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death).

v  Introductory stage:

The introductory stage of the Product Life Cycle represent the full-scale launch of a new product into the marketplace. In this stage, the rate of failure is high, not many competition, frequently needs product modification, and limited distribution. Chanel’s brand new style backpack fall in this stage. The style with graffiti is new design that Chanel has never had before; that may cause high failure rate. This product has less competition because Chanel competitors do not have this style.

v  Growth stage:

The growth stage is after surviving from the introductory stage. In this stage, the sales grow at an increasing rate and profit reaches the peak, now there are more competitors, and large companies may start to acquire small pioneering firms. Chanel No.5 perfume series fall in this stage, where they face more competitors. In this stage, the aggressive branding advertising is needed. The advertising of the products become less informative and focus on attracting consumers’ emotions. The advertisements of No.5 perfume series are vintage style that present its theme of classical that intended to attract customers and differentiable from its competitors.

v  Maturity stage:

A period during which sales increase at a decreasing rate signals the beginning of the maturity stage of the life cycle. Normally, this is the longest stage of the product life cycle. Some of Chanel’s dresses are in this stage. According to the Bloomberg news, Chanel had sold-out Dresses.

v    Decline stage:

     When Chanel’s product is long-run drop in sales signals the beginning of the decline stage. This means that the product is going to be removed from the market.

Ch. 12 - Services and Nonprofit Organization Marketing

Chanel is the product company, its main focus is on the product; however, they also offer high levels of service. Service is the result of applying human or mechanical efforts to people or objects. 

Service Quality

The service quality is more difficult to define and measure than the quality of tangible goods. The improvement of service quality is one of the most critical challenges that business executives face today. Research found that customers evaluate service quality by the following five components:

©      Reliability: the ability to perform the service dependably, accurately, and consistently. This component has been found to be the most important to consumers. Chanel’s website provides reliable service. The website frequently updates their information and price, and newest styles up to date. The ordering process on Chanel’s website is dependably and secure. The checkout system in store and online are also secure.

©      Responsiveness: the ability to provide prompt service. Chanel's customer service line offers seven days a week. They are available 10 hours during the weekdays and 6 hours during the weekends, and they are very efficient to serve the customers. Also, if you have any question you can also submit on Chanel's website, the customer service agents will answer it professionally and quick.

©      Assurance: the knowledge and courtesy of employees and their ability to convey trust. Chanel employees are well trained with knowledge and respectful. They have the ability to provide customers with useful information, and they also have the ability to inform the customers with the knowledge of every products that they interested in.

©      Empathy: Caring, individualized attention to customers. Chanel personnel provide highly services.They have a person next to door to open the door for the customers and welcome them. They give individualized attention to every customers if the customers needed. 

©      Tangibles: the physical evidence of the service include the physical facilities, tools, and equipment used to provide the service, as well as the appearance of the personnel. Chanel provide secure and organized check-out system. Their employees are properly dressed.

Ch. 10 - Product Concepts

The product offering, the essential element of an organization’s marketing program, is generally the foundation when constructing a marketing mix. Product consists of everything, favorable and unfavorable, that a person receives in an exchange.

Types of consumer products

Products can be classified as either business (industrial) or consumer products, depending on the buyer’s intentions. Chanel products are consumer products that are bought to satisfy an individual’s personal wants. There are several ways to classify consumer products according to how much effort is normally used to shop for them. The most popular approach includes these four types: convenience products, shopping products, specialty products, and unsought products. Chanel products classify in to shopping products, specialty products, and unsought products. Chanel glasses, fragrances, and cosmetic products are considered as shopping products, which requires comparison shopping.  Those products are more expensive then the convenience products and are found in only Chanel retail stores and few department stores. Some of Chanel products, like clothing, handbags, fragrances, are specialty products because some Chanel consumers see Chanel products as symbol of their identity; they are reluctant to accept substitutes. Chanel’s new products fall into the category of unsought products until Chanel advertise and promote them.

Product items, lines, and mixes

Product line is a group of closely related product items, and the product item is a specific version of a product that can be designed as a distinct offering among an organization’s products. Chanel has deep product line; for example, the fragrance, Chanel has variety of product items such as: N^。5, N^。Eau Premiere, Coco, Coco Mademoiselle, Chance, N^。19, N^。19 Poudre and etc. Chanel product mix width is also broad, which is the number of product lines an organization offers; they offer clothing, handbags, glasses, watches, jewelries, fragrances, and cosmetic products.

Branding

Marketer uses of branding is vital in distinguishing their products from those of the competitions. A brand is a name, term, symbol, design, or combination thereof that identifies a seller’s products and differentiates them from competitors’ products. A brand name is the part that can be spoken, including letters, words, and numbers. Chanel is a brand name. The brand mark is the elements of a brand that cannot be spoken. Chanel’s brand mark comprises of two interlocked and opposing letters “c”. The benefits of branding are product identification, repeat sales, and new product sales. Branding allows Chanel to distinguish its products from all others. Branding also helps Chanel's consumers to identify its products that they wish to buy again. Lastly, branding is extremely useful to Chanel when introducing new products.

Ch. 17 - Personal Selling and Sales Management

Chanel are exclusive stores that offer high levels of service. Personal selling, which is a purchase situation involving a personal, paid-for communication between two people in an attempt to influence each other; is a vital form of promotion that Chanel adopted. Personal selling offers several advantages over other forms of promotion. Chanel primary objective of personal selling is to provide customers with well train knowledge that customers will not be in a doubt or uncertain. Chanel stuffs also provide varied information according to the interests of each prospective customer. This will help customers to choose the right products for them.

Relationship Selling

Relationship selling is a sales practice that involves building, maintaining, and enhancing interactions with customers in order to develop long-term satisfaction through mutually beneficial partnerships. Chanel practices well on building, maintaining, and enhancing interactions with their customers. Chanel personnel take care of their customer very well. They provide the information that their customers need, and they communicate to their customer and answer the question to their questions. After every purchase, Chanel send the “thank you” letter to their customers through email; then they make their customer a member t of Chanel. They send birthday greeting to their customer through email and birthday card through mail. Chanel also notify their exclusive customers when they have promotion sales.

Customer Relationship Management and Personal Selling

Customer relationship management is the ultimate goal of a new trend in marketing that focuses on understanding customers as individuals instead of as part of a group.

·         Identify Customer Relationships

Chanel has the FAQ service on its website, which is to provide feedback to customers’ question regarding Chanel’s product. This information could be used for learning in the CRM. Learning is an informal process of collecting customer data through customer comments and feedback on product or service performance. Chanel customer services are an example of interaction, which occurs when a customer and a company representation exchange information and develop learning relationships. Chanel customer services always gather the customers’ information at the first, then taking care of their problem. Chanel often use those information that they gather from their customers to design product and service around customers’ desired experiences.

·         Understand Interactions of the Current Customer Base

The interaction between the customer and the organization is foundation on which a CRM system is built because only through effective interactions can organization learn about the expectations of their customers, generate and manage knowledge about them, negotiate mutually satisfying commitments, and build long-term relationships. Chanel gather information from various touch points, which is area of a business where customers have contact with company and data might be gathered. Those touch points are:

ð  Retail store Salespeople- when customer interact with its salespeople, Chanel is able to collect the customers’ name, contact number, address, email, maybe their style, and their approximately age.

ð  Customer Service-when customer call Chanel’s customer service, the representative is able to collect their name, phone number, address, and their opinion.

ð  Web registration- when customers sign up on its website, Chanel is able to collect the users’ names, email addresses, and their locations.

·         Capture Customer Data

In a CRM system, capture customer data is not depend on how much data can be acquired, but rather, focus on the types of data should be obtained and how the data can effectively be used for relationship enhancement. For example, Chanel uses the information that they collected to send customers their booklet of its seasonal newest style.

·         Leverage Customer Information

Data mining identifies the most profitable customers and prospects. Chanel do accomplish in doing leverage customer information. In doing this, Chanel will be able to identify its best consumers which is useful for Chanel to maintain and increase their loyal customers.

Ch.16 - Advertising, Public Relations and Sales Promotion

Advertising

Advertising is bringing a product or service to the attention of potential and current customers. Advertising can affect consumers’ daily lives, influences their attitudes, beliefs, and ultimately their purchase decisions. Chanel is world known company. The brand is exclusive and has strong equity and loyalty. As a result, Chanel primarily focus on product advertising, which is used to enhance the sales of a specific good or service. The product’s stage in its life cycle often determines which type of product advertising is used. The pioneering advertising is used during the introductory stage of the product life cycle. Chanel recently introduces a new collection of cosmetic products for spring 2014.  They created a video on their website which provides consumers with deep information about those products and how to use each product. They specified each product that is used in the video next to the video. The competitive advertising is used during the growth phase of the product life cycle. Chanel uses competitive advertising on No. 5 perfume series. The advertisings of the products become less informative and focus on attracting consumers’ emotions. The advertisements of No.5 perfume series are vintage style that present its theme of classical that intended to attract customers and differentiable from its competitors. The comparative advertising is used when products experience slow growth or those entering the marketplace against strong competitors. Chanel did not adopt the comparative advertising because its unique styles are different to its competitors. Those advertising strategies are organized around an advertising campaign. Chanel has extensive variety of advertising campaign that are featured in advertising media. The six major advertising media are newspapers, magazines, radio, television, the internet, and outdoor media. Chanel spends around $140 million on advertising media. 

Public Relations

The significant objective of a company’s marketing communication mix is to maintain a positive image of the corporation in the eyes of the public. The public relations is the element in the promotional mix that evaluates public attitudes, identifies issues that may elicit public concern, and executes programs to gain public understanding and acceptance. Corporation donations and sponsorships are supportive in creating satisfying publicity. Chanel has done many donations and have been sponsors frequently. Chanel participates in the charity of “The world’s best-dressed dolls” every year.  Last year, Chanel designed doll’s price was raised approximately around 300,000 USD in a UNICEF auction. Many other luxury fashion houses such as Dior, Louis Vuitton, and Gucci, also the competitors of Chanel, were participated in this Charity of designing one-off doll with the finest fashion. Chanel designed doll successfully presented its theme and being the unique one. Chanel’s participation in this charity not only benefit in maintaining a positive image, but also capture the media attention. Chanel sponsors many events, the popular one is the Metropolitan Museum of Art’s current Costume Institute exhibition. Since Metropolitan Museum of Art is the world’s largest and finest art museum, it helps Chanel in capturing attention and also benefit in maintaining a positive image. Chanel web site is a useful way of gaining understanding and acceptance of the public. Its website is worldwide and provided with various languages. Chanel uses its website to introduce new product, promote existing products, provides the information of products and instruction for using the products, release financial information, interact with consumers, and showcase upcoming event.  

Sales Promotion

Sales promotion is the marketing communication activities, other than advertising, personal selling, and public relations, in which a short term incentive motivates consumers or members of the distribution channel to purchase a good or service immediately, either by lowering the price or by adding value. Chanel is an expensive and exclusive brand that does not offer sales frequently to the public. Since some of Chanel products are sold in certain department store, the promotion sales of products like fragrances, cosmetic products, glasses, and watches are available there. Chanel gives out samples and bonus packs of fragrances and cosmetic products to their current customers and loyal customers to increase consumption. Chanel also produces some limited edition products which will motivate the customers to buy their favorite products immediately.