Type: Research Essays
Sample donated: Mandy Clayton
Last updated: September 19, 2019
Executive SummaryLVMH Moët Hennessy Louis Vuitton recognized as the global leading luxury products group and has estimated 3,940 retail stores worldwide.
A French conglomerate and European luxury goods company that comprises of a huge collection of iconic luxury brands from across the world, LVMH is keen on maintaining its quality, prestige image and remain top of strongest players in the luxury goods industry with profound fixed costs scale and profit. They also stay true to their corporate values and traditions while innovating and growing in the modern world. LVMH’s efficiency is due to their leadership and management.Their vision has earned them the top spot in the global multi-brand, well-diversified luxury goods company leader steering their company towards its global success. In addition, the use of focus differentiated business strategy together with its premium prices and quality goods has increased the global market share while expanding into new areas.
Also, their focus has made them share knowledge amongst their subsidiaries in order to strengthen the company’s ability to discover new opportunities in the future. Moreover, LVMH marketing plan has remain unique and placed the company in a very upscale, quality-based market on reputable brands, exclusivity, and luxury with the target market that gives room for these strategies to be successful.Company ProfileLVMH is owned by a French conglomerate and European luxury company. It was formed by a merger between Moet & Chandon (a champagne manufacturer), Hennessy (a cognac manufacturer) and Louis Vuitton (a fashion house) in a $4 Billion deal 1971 and headquartered in Paris, France. Moet & Chandon Originally began operation in 1743, and Hennessy in 1765.
Louis Vuitton began later, in 1854. They have a distinctive portfolio of distinguished brands in five sectors such as wines and spirits, perfumes and cosmetics, watches and jewelry, fashion and leather goods, selective retailing and many other activities; each of these sectors runs a wide array of global opulent brands by giving support to specific subsidiary brands in the group. (LVMH, 2017). MissionLVMH’s mission is to represent the most refined qualities of Western “Art de Vivre” around the world, spark their customers’ desire and introduce them to the world of their Houses through their products and our areas of specialization.Market LVMH holds good information about their market, technical know-how to build their image throughout the world and have close relationship with their customers. They identified the star brands that create the most growth potentials, understood who it serves and those it communicates better to.
Target Market Source: Market LineAs established by the target market table above, the consumer for LVMH base is in the US (31%), Asia (22%), Europe (18%), other markets (17%), Japan (6%) and France (6%). But, the key customers are the wealthy and affluent ones in these segmentsMarket DemographicsThe Demographics of LVMH is mainly on age, sex, and disposable income such as wealthy middle-aged women from 35 to 54 years old and affluent young fashionable female adults aged 18 to 34 years old who have disposable income and are brand aspirantsThe Most Promising MarketThe most promising market for LVMH is the market segment of the United Stated where it currently has a consumer of its product concentrated. LVMH’s consumer base in the United States represents almost one third of its global consumer base. Situation Analysis LVMH is renowned, the worldwide manufacturer of luxury goods and positioned as the world’s largest and most profitable player in the category. The main focus is; · To maintain the position as a luxury-goods leader, and customer’s loyalty, strong brand and find new markets worldwide.· To be the leader in the luxury market, continuing to transmit elegance and creativity.
· To obtain a sustainable growth in the mass-market.With the aforementioned, this has helped LVMH to achieve its high dependency in three main nations, France, Japan, and the USA. Notwithstanding its competitors and threat of an economic downturn in any of these countries, it has plan to make provisions for eventualities.Social and Cultural FactorsThe social and cultural factors that might affect the product that LVMH is offering would be that of consumer preference: where some of the consumer might prefer to buy the same product category from another seller, generational biases: where millennials might be more conservative than the boomers who are more extravagant in their spending, and ultra-orthodox religious believers might see purchasing luxury products like the one LVMH produces and being worldly. Demographic ForcesThe Demographic forces that will greatly impact the sales and revenue generation of the product LVMH produces are that of the working age population (18-65), Dependents (above 65 and below 18 years of age). The working class population would have more disposable income at hand to purchase a luxury good when compared to those who are still dependent with regard to their finances.Economic and Business ConditionsThe geographic target of LVMH is the New York, United States, the fashion house of the nation.
New York City’s impact in the fashion world is revealed during the bi-annual fashion week that occurs every February and September of the year. The shows generates about to $900 million in total economic income every year, which includes $532 million in direct spending by visitors. (Maloney) With events like this, the targets for LVMH will be that of the high net worth individuals who attend the shows, and other stores where they shop.
(Maloney, 2015)State of TechnologyOver 200 schools across nationwide have fashion related programs and equip students for competitive jobs in the fashion industry. The programs helps build the necessary skills required in fashion. However, three most prestigious school of designs can be found New York.
They are Pratt Institute, Parsons The New School for Design, and Fashion Institute of Technology (FIT). (Maloney, 2017). Technology in the fashion industry is being championed by New York and it had the best schools that are especially dedicated to the technological development of the fashion industryLaws and regulationsCurrently, there are no laws or pending laws affecting the marketing of the luxury products that LVMH produces.
Financial ClimateThe financial climate for LVMH is very strong in the area of its target market. The Fashion industry is valued at about $1.2 trillion globally, with more than $250 billion spent annually on fashion in the United States, and about ten percent of that is spent in the New York, the target area of LVMH, according to industry analyst Market Trends. (Maloney, 2015)The CompetitionThis includes our segments such as luxury clothing, luxury wines, and spirits, luxury bags, with a major focus on global personal luxury goods market.Increasing Industry Concentration: Tough economic conditions affect retailers, regardless of size, and have resulted in fewer players in many retail segments due to mergers and acquisitions and bankruptcies. Slow retail growth forces many companies to grow through acquisition versus expansion. Purchasing and supply chain efficiencies allow large retailers to sustain low prices at the expense of small retailers. Market contraction and manufacturer efforts to reduce the number of franchises have reduced the number of small new car dealerships.
Increasing Diversity: Ethnic diversity in the United States population continues to increase, challenging retailers about marketing and merchandising. Many ethnic groups have different needs and preferences compared to the general population. Census projections predict that the majority of the US will consist of racial minorities by mid-century.Evolution of Shopping Venues: Changes in consumer shopping behavior have caused an evolution in shopping venues. Time-pressed consumers are shopping at traditional malls less frequently and spending less time per trip.New Delivery Strategy for Retailers: LVMH uses their stores as distribution hubs to advance shipping and better compete with online powerhouses such as Amazon.com. Retailers see the distribution hubs as giving them additional flexibility to assist customers quickly and efficiently, capitalizing on their nationwide footprints.
Market ForecastThe market is expected to grow almost 4% from 2011-2016 Year $ billion € billion % Growth 2011 1,778.50 1,278.40 4.
30% 2012 1,844.10 1,325.50 3.70% 2013 1,915.80 1,377.10 3.90% 2014 1,992.40 1,432.
20 4.00% 2015 2,071.40 1,488.90 4.00% 2016 2,155.10 1,579.10 4.00% CAGR 2011-16 3.
90% Source: Market LineMarket Growth LVMH is envisaging a projection on their market share from 3.7% to 4.3% and believe that as they diversify into other international markets, their market growth will intensify in accordance with our marketing plan. They also, foresee an increase in revenue, all things being equal from 2013 and believe the projection will remain stable as shown in the table.In addition, the new market segments will open more stores for the group to sustain the position in the luxury market.
Also, the expectation from the target geographical segments will match with the market predictions, such as a 31% target revenue from the US, due to the high ethnic diversity and populace Source: Market Line Source: Statista, 2017 Source: Market Line SWOT AnalysisOur SWOT analysis will reveal the expected opportunities and threat as we enter into new market segments, while our strength and weaknesses will be examined to help us build a sustainable status in our new environment. They are listed below:Strengths· A Strong brand with global presence: Our brand has its presence in most of the large shopping hubs and multi-retail brands of the world with profound image and value perception.· High customer loyalty and have strong faith in LVMH quality and service.· Broad line of products.· Extensive consumer target group.· Celebrity endorsement. · Strong global distribution channels.
· Its advertisement and marketing features the worldwide famous celebrities.· Offers custom-made products.Weaknesses· Conflict of interest within the company (fashion vs. wine and spirits).
· Forward and backward integration.· Declining margins despite cost-cutting measures.· Increased debts· Limited production.· It also has restricted retail opportunities compared with other luxury brand.· Imitation of LVMH products affects the sales and the profitOpportunities· Market expansion: The emergence of the new wealthy markets such as China, Brazil, UK, etc. that enables the global market for luxury goods to reach its strong growth with the high concentration net worth individuals who are wealthy and love for luxury brands.
· Strong campaign images using the celebrities and models and actresses· Organizing various campaign and raising brand awareness· LVMH also meets its tastes and preference styles of its potential and changing customer.· Make seasonal offers and occasional wise giving the customers various offers· Frequent exhibitions and events· It also Indulge in the social responsibility by green way of productionThreats· Increased markets for counterfeit products· Very intense and close competitions such as Gucci, Prada, Hermes etc.· Shorts products lifecycle of competition.· Slow economic condition, recession, and financial crises· Frequent changes in customer tastes, likes, and trends.· The numerous cheaper alternatives available especially in the spirit and wine industry.
· CompetitionAlthough we are the world’s leader in luxury labels, and still have some notable competitors. We allow our competitors to activate and push us to our creative limits, in order to create the ultimate luxury merchandise across our entire house of brands. We are able to differentiate ourselves from our competitors by combining innovation with tradition. We value strong brands known for our performance and chic style, therefore we are willing to invest in new product brands that will offer support to our existing luxury brands that are already performing well.
Our main competitors are Kering (PPR/Gucci), Richemont, and Hermes.Marketing Mix StrategyGame PlanThis is to concentrate on the star brands that has the most growth potential and the company’s most profitable brands includes Louis Vuitton and Christian Dior. All they need to do is to define a brand’s identity by mining its history and finding the right designer to express it. In this case, the company should believe in controlling quality, distribution and creating a brand excitement amongst its customers with innovation, which in its view is the ultimate driver of growth and profitability.
Also, this strategy also focus on our leadership position in the world and channel through other international market to gain market share. The procedures are quality-based marketing on our reputable brands, exclusivity, and lifestyle choices, which constantly update our products based on our client’s specific desires and advertisement campaigns using top models. We will constantly inform and updates our customer about our products, the innovations, and changes made, new store venues, etc.
Also, open a forum where they could comment and ask us questions. Customers will be to make their purchase online with ease and keeping their account record private without any interference. They are all expected to sign up for their emails and passwords. We communicate with them through their emails about our latest style and so on. We also send gifts cards for their birthdays.Marketing ObjectivesThe main marketing objective is to be creative, innovative with different ideas that creates the uniqueness of their premium goods in the market and aim for product excellence. Also, to maintain their brand image and strive for the bestPosition StrategyThe position strategy for LVMH will be that of affordable contemporary luxate brands for those in the upper working class of the target market and geography.
It simply will be that of an “affordable Luxury Lifestyle.” LVMH will offer top quality luxury brand at affordable rates in order to gain more consumer base and win the hearts of customers who are still indifferent about their fashion styleThe Marketing MixLVMH as a luxury brand is poised to achieve continue its unique marketing strategy that sets it apart from other brands. It is quality-driven, word of mouth, and top-of-the-line techniques in promotion. It will focus on direct marketing with uncompromising quality and affordable prices, unique craftsmanship, the protection of heritage and placing more value on art. It will also focus the establishment of additional stores in top financial locations in the country and create more promotional programs for celebrity events.1.
Product StrategyThe products of LVMH are to exceptionally serve and fulfill its customer’s need, produce and market its products and services through carefully selected channels that would guarantee our financial growth and success, and establishing close ties with our consumers to know their desires. Also, the company is looking to open a product line extension that would cater for premium beauty supplements and cosmetic surgeries for many of its customers. Since the company has achieved success in creating a brand amongst those in the upper echelon of society, it could extend its product line to these people also and thereby generate more revenue. Also, since the African market is still majorly unexploited, the company should create a series of products like perfumes, wine and drinks, showcasing historic African wealth and civilization.
This would greatly draw the African market to brand loyalty 2. Pricing StrategyLVMH will need to constantly maintain a high markup through its value-based pricing in the marketing mix for our products. Since our customers perceive our company’s products as high-value products, they are willing to pay the amount.
We pay special attention to the quality of our material, the designs and make the products. So, the cost price of the products eventually goes very high. Since the target customers of the brand are elite and upper middle/working class customers, we, therefore, use premium pricing policy to price our products. Also, the brand and product are a style statement and it hence customers to easily pay the exorbitant prices. 3. Place (distribution) StrategyThe products would be available at most of the high end stores around the world and easily accessible to most of our loyal customers.
One of the major locations would also be tourist attractions and sport tours, it has been deduced that the spending impulse of most people triples during vacations in major tourist attractions around the world. The vintage cities around the world also that depict structure, quality and luxury are also places where our stores would be located, the goal is to link the quality times spent in these places to the quality of LVMH products purchased in such places. The places with these features of ancient affluence and civilizations would also be used for various brand photoshoots all in a bid to create a continuous experience between place and product in the minds of our consumers.4.
Promotion StrategyWe develop public relations with celebrities, the faces of the brand, famous musicians, and some of the well-known personalities who have been associated with the brand. Our primary 0source of promotion is print media. In cosmopolitan cities, magazines and billboards work the best for the company. The exclusiveness of the brand is portrayed through fashion magazines that the elite class reads, news round-ups for the sector and its competition, press shoots on a daily basis and participate actively in local and international events organized by the House.
Thus, we reach out to our target audience directly rather than using multiple channels. Marketing ResearchLVMH focuses on major media investments in order to support the new products launched to anticipate the sales, to prepare and strengthen the long-term growth of brands in other countries which helps to evaluate the success and eventually maximize the profits. This is done through gathering all relevant information and ideas that we need to decide whether to take action on a particular subject. It also evaluates the success and eventually helps to maximize the profits. ControlsOur purpose is to make our marketing plan serve as a guide for us and the following implementation will be monitored to measure performance in terms of revenue and expenses incurred quarterly and annuallyImplementationThis program is reversed when there is a change in sales and implemented every year. The milestones identify the key marketing programs (Table 1) whereby managers are informed of their duties in the program and immediate implementation.
It is important to accomplish each one on time and on the budget (Table 2). At every meeting, we will be discussing each of the activities monthly to achieve the quarterly results. Table 2 Milestone start date End Date Budget(in billion) Manager Department Marketing Plan Completion 1/1/2016 2/1/2016 € – Jasmine Marketing Website 1/1/2016 4/1/2016 € 7.00 Ian IT/Digital Online ads 1/1/2016 12/31/2016 € 2.
00 Ian IT/Digital Press Media 1/1/2016 12/31/2016 € 50.00 Jean-Charles Marketing Advertisement Campaign 1 1/1/2016 4/30/2016 € 2,500.00 Emma Marketing Advertisement Campaign 2 5/1/2016 9/30/2016 € 3,500.00 Emma Marketing Advertisement Campaign 3 10/1/2016 12/31/2016 € 3,500.00 Emma Marketing Research & Development 3/1/2016 9/30/2016 € 90.00 Jean R &D € 9,649.00 Source: LVMH, 2016Table 3 Marketing Expense Budget 2014 2015 2016 in billions in billions in billions Research and Development € 79.00 € 97.
00 € 111.00 All Marketing Expenses € 11,744.00 € 13,830.00 € 14,607.00 Total Sales € 30,638.00 € 35,664.
00 € 37,600.00 Percent of Sales 4.% 4% 4% Contribution Margin € 19,837.00 € 23,111.00 € 24,561.
00 Contribution Margin/Sales 65% 65% 65% Source: LVMHMarketing OrganizingThe marketing department, Talent Department and Risk Department will be responsible for the marketing plan activities. Jasmine and Emma will manage these activities and making sure that these marketing programs are implemented and best fit our marketing objectives and strategy.Contingency PlanningThe expected change that could occur is to give out bonuses or discounts on a particular product, increase internet website traffic, more research and development and adverts on celebrity events.