Chanel – inside Chanel – Chapter 10
Chanel – inside Chanel – Chapter 9
Chanel – inside Chanel – Chapter 8
Decision making-process
Nothing is more difficult than to evoke the scent of a perfume. The bottle can provide a visual on a shelf or on screens. But the essence itself? How to make people dream, and create desire?
The image that industry will give to a perfume is determined primarily from two questions: What motivates a person to use or buy a perfume? What is the decision-making process?
The major part of the decision-making process for the purchase is happened out of the store without any contact with the olfactory scent. We can notice this case when the person is mainly attracted by advertising and the image of the brand. How can it be possible that advertising is as effective as the contents of the messages are so far from the same intrinsic characteristic of perfumes: their smell?
A characteristic of perfumes’ memories is that it is often associated with elements of life: the scent is associated with a memory, a scene or a place emotionally charged, sometimes with a person.
Mental images associated with fragrance play a key role in the decision making process among several brands.
In a first step, advertising must trigger the desire to go to the outlet to try the product. But advertising also predispose consumers to favourably assess the scent. The value of the product is thus almost entirely given by the positioning and the message of the advertising.
Finally, the second part of decision-making process occurs when the person goes to the point of sale without having already made his choice. With the ability to feel the fragrance and see the bottle, people will evaluate different brands to have an opinion on each of them. This can concern the price, appearance of the bottle, current promotions.
This is why the appearance and name are significant elements for the development of the brand image. The truth is that many perfumes have similar smells or contain similar ingredients. The marketing tools are very useful to setting one brand apart from the others. The perfume chosen will allow the buyer to strengthen his personality. The choice of the smell is of course depending on the personality, but the look and design of the product will also appeal depend on the personality of each others: colourful packaging, refine and classic styles …
In a future article we will see what elements fragrance brands rely to arouse emotions in the potential buyer.
Key figures:
For the french market, a customer spends on average 7 minutes on a point of sale like Sephora. Which makes difficult to establish a relationship with the customer and tell him the history of the perfume. This also makes the advertising very important to attract the customer. Moreover, in general, the customer is interested in its history and origin of ingredients. It’s on the Internet, that is will be able to find these information. Because he likes knows the « olfactory » speech and the aspirational and emotional speech.
In 2009, French women’s perfumes Top 3 , J’Adore, La Petite Robe Noire and La Vie est Belle * have all earned their stripes with campaigns where the juice is not mentioned. * Source: The NPD Group / panel BeautyTrends®
Perfume industry microenvironment analysis
We will expose trough this article the microenvironment for the perfume industry, thanks to Mr Michael Porter and his 5 competitive forces. Let’s first clearly define our product segment: the luxury perfume.
We will start with the rivalry among existing competitors. Competition is intense in the perfume industry: around 60-perfume brands on the market. All those perfumes are usually associated to the Brand image but with another core of business. For instance, Chanel N°5 with Chanel haute Couture or Manifesto an Yves Saint Laurent perfume associated with the ready-to-wear collection Saint Laurent. The perfume is following the clothes collection; each season has its own perfume. Even if we can see several brands on the shelf, we must be aware of the brand ownership. Same groups such as LVMH, Kering, Estée Lauder group, own those perfumes… We have to consider that it’s a matter of only few players. We have to ask our self: Is there a brand cannibalisation?
To grow, brands must deal with prestige, image advertising presence and symbolic communication.
Then the threat of new entry: In such industry new entrants need to think twice: facing huge brands which are in the business for decades. One the stake will be the brand loyalty. Competitors on this market have a strong brand image in the “consumer eyes” and it will be hard to catch up the train. Imposing a new brand perfume has to deal with differentiation regarding the fragrance, the design and the advertising strategy. A solution might be to focus on a niche market or an oddball positioning.
Moreover, putting a perfume on the marketplace is link to substantial costs such as communication, marketing and HR budgets. Therefore market requirement is essential. The brand loyalty, the strong competition and the costs are a significant barrier to entry.
Let’s now focus on threat of substitutes
We can’t really see any alternative products regarding perfume and a pressure of substitution between segments do not exist (different targets, different budgets, etc.). Soaps and other hygiene products contain fragrances, which are added for differentiation, but are not substitutes for perfumes.
However the threat come from counterfeit perfume. It represents profit lost and a real danger to the final consumer due to the quality of the perfume and the chemical in it.
Suppliers’ bargaining power:
There are three main types of providers for a perfume:
- Fragrance producers
- Perfume bottle producers
- Packaging specialists producers….
These suppliers have low bargaining power toward large luxury group, due to their large size even if the « raw materials » are critical to the quality and the potential sale of the final product.
Moreover, the time period given by the perfume group is becoming shorter.
At least but not last, the buyers bargaining power.
Within the selective distribution, we first distinguish all integrated channels (Douglas Parfumerie Marionnaud, Nocibé, Sephora), the franchising chains and department stores (BHV, Galeries Lafayette, Le Bon Marché, Printemps). The concentration of the selective distribution around a small number of brands, such as the size and purchasing power increased significantly strengthens the bargaining power of distributors.
In the context of the concentration distribution, manufacturers carry out restructuring (pruning the portfolio of brands, specialization of production sites) to achieve economies of scale. They also have massive use of advertising, which plays a crucial role in customer loyalty. To this end, companies’ communication and marketing campaigns are regularly launched with celebrities (k Keira Knightley and Gisele Bündchen for Chanel and Natalie Portman for Dior) to attract consumers.
Manufacturers are making new acquisitions to achieve a critical mass sufficient to counterbalance the weight distribution, complete their portfolio of activities or expand their markets.
A presence in the distribution channel can be a secure outlet and a more direct knowledge of the markets. LVMH owns Sephora, the company’s selective distribution of perfumes and cosmetics. As well as, Guerlain leverages its network of own shops.
The perfume industry is huge but owned by few groups, which are spreading their brand portfolio. The perfume such a rare fragrance by the past is nowadays a common “luxury” product. Brand image and loyalty have a strong impact on consumer choice.
Written by Sophia Capo
Literature: http://toastairligne.free.fr/index2/S%E9phora/parfumsCD-givenchy.pdf http://www.euromonitor.com/fragrances http://www.exed.hbs.edu/assets/documents/hbr-shape-strategy.pdf
CHANEL N°5 market segmentation
Introduction to CHANEL NO.5
Chanel No. 5 was the first perfume launched by French couturier Gabrielle « Coco » Chanel. The chemical formula for the fragrance was compounded by Russian-French chemist and perfumer Ernest Beaux. Chanel perfume has six series, of which t No5 is the most classic perfume. Chanel No.5 is the first bottle of perfume, coalescing luxury and elegance, and demonstrating encourage and daring of women, totally broke the traditional spirit of perfume.
Market segmentation and target market
Market Segmentation means to divide the marketplace into parts, or segments, which are definable, accessible, actionable, and profitable and have a growth potential. In other words, a company would find it impossible to target the entire market, because of time, cost and effort restrictions. Chanel products have been all over the world, to become ladies chasing top brands, in which Chanel NO.5 is one of the biggest brands.
Depend on gender and age, Chanel No5 is specially built for women. Those women over 30 age have high income become the main target groups. They need to smell good and need to attract attention by others. They want to appear youthful and fresh. Chanel No5 provide a special smell which bring more spontaneous confidence and chance to women. Based on the report, a large number of young people prefer to purchase luxury which lead to Chanel to relax the age of the target market in the future marketing. Those women between 18 and 25 are playful and sparkling and romantic. They want to be distinctly youthful, with classic undertone. Men perfume market cannot be ignored. Bleu de Chanel is design for those who want to be more Freshness, energy, confidence and dominance over other men. Bleu de Chanel means“unexpected masculine spirit”. It is for high income earners like corporate climbers and symbol of driven, motivated for success.
Chanel market from single to multiple meet needs of different people. Every piece of merchandise is more like a work of art and reflect the distinctive taste.
Literature:
https://prezi.com/mnmh4elbxvma/market-segmentation-of-chanel/
http://economictimes.indiatimes.com/definition/segmentation
Written by : Jiawei XU
Cosmetics, the art of making money with beauty
« A woman without paint is like food without salt » said Plautus, a Roman philosopher. Old from more than 21 centuries, this quote still keeps all its meaning these days, where beauty and personal care products take up an important place in our day life. If today, cosmetics can be easily associated with body cream, shampoo, make up or fragrances… few of us could say that this market appear 12,000 years ago when Ancient Egyptians discovered healing abilities of scented oils.
Indeed, cosmetics have made a long journey through civilizations to become an industry generating €180 billion in 2012. If in 10,000 BC men and women in Ancient Egypt used cosmetics as an integral part of hygiene and health conditions, they also used plants such as rosemary, cedar, rose… in order to perform religious rituals. If first apparition of makeup in Egypt can be found in 4,000 BC, its spread reached the Chinese and Greek civilizations in a first time, and continued to expand through Roman, Indian or North African civilizations. Often cosmetics’ introduction in civilizations was viewed in a first time as extravagant and unneeded by many, as shown in the European Dark Ages time, when cosmetics almost disappeared from public knowledge.
However, change finally happened after European soldiers returned from the Crusades in the Middle East, bringing home new exotic products and knowledge. For the first time, perfumes were imported in Europe, knowing a huge success among the different aristocracies. From this point, Italy and France emerged as the main centers of cosmetics manufacturing thanks to the evolution of medicine, industry or chemistry. The modern notion of complex scent-making evolved in France, producing powerful perfumes to hide the pervasive stench. It’s only in 18TH century, with the Age of Enlightenment, that perfumes became more delicate, revealing a return to the natural. Finally, the apparition of modern chemistry bringing through the blooming of modern industry in 19th century knows an important revolution, changing the know-how and manufacturing process of the industry. Today, perfume industry is linked to the notion of dream, and artistic creation. People use it not only as a fragrance but for the enhancing image it confers to the individual.
The global cosmetics market can be divided in 6 product categories:
Concerning the Fragrance market, the market is expected to reach $43.6 billion by 2021 driven by emerging countries growth sales. Market growth is, however, inconsistent across various geographic zones, depending of living standards, consumer purchase power and economic situation of the country. Brazil is the most important market for 2013 with more than $6 billion with high consumption rate per inhabitant (Brazilian are using 3 times more perfumes in volume than USA consumers).
Finally, this growing market presents many actors owning several brands for some of them. Main companies listed below are the key players on this market, but are also well involved in cosmetic industry. Among these companies, major ones are: LVMH, Coty Inc, Chanel SA, L’Oreal Group, Procter & Gamble, Avon Products or Estée Lauder, sharing an important part of the cake. One can only imagine how those numbers will increase in the years to come and how the market will evolve through time and tendencies.
In our next post, we will present you the segmentation of the perfume market and will go deeper on its analysis.
Written by Sylvain Bougnoux
literature:
Dior
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Dior vs Chanel 