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For this report, we chose to export the new product of a Italian brand having a world reach, in an Asian country in state of strong demand in this segment: the Gucci perfumes in South Korea. Gucci does not hide its game nor its intentions, its aim is a kind of provocation for the media and the women. South Korea is following Japan in term of cosmetic `s consumption, which is a great opportunity for the luxury Italian brands. We will see how the communication of Gucci perfumes are constituted for the Italian market and how we can realise the communication for these fragrance in South Korea.
World leader in luxury brands, "Louis-Vuitton-Moët et Chandon" owns brands such as Dom Perignon, Château d'Yquem, Hennessy, Kenzo, Givenchy, Christian Lacroix, TAG Heuer, SEPHORA, Le bon marché. With a turnover of nearly 13 billions â‚¬ and more than 56,000 employees, LVMH trades in over 1,500 stores worldwide. (www.lvmh.com)
The Gucci brand is another prestigious part of the LVMH group
I Marketing analysis
- Constitutional republic
- Since 1996: liberalization of distribution network
- Luxury markets policy: fight anti-imitations
- 46.1 millions of citizens
- The South Korean economy has grown fast for the last 30 years; it means a clear increase of standard of living
- 2000: household consumption, +7.1% - economic growth, +8.8%
- Strong inequality concerning salaries; very high and very low incomes
- More than 40% of the population is younger than 30 years. It means that the country becomes very open to the international business and is sensitive to western brands
- "The Korean customer is still influenced by his circle, associates or friends and its purchases allow it to position itself hierarchically in the society".(Hyeun-Suk Oh, Michael Francois, p.4)
- Shopping is a real leisure activity
- This country is strongly open and user of Information Technology
- They have a very good standard of good production in every industrial sector
In order to facilitate exportations, the South Korean government has modified the cosmetic income's law since July 2000. This law allows an easier homologation
B. Strengths / Weakness
- The Gucci image is famous in the fragrance sector, known for its originality, quality and innovation,
- The Gucci product is a new perfume.
- Gucci products have a higher brand cachet and premium image than competitiors.
- The company has a loyal following, in large part due to the strength of its direct sales representatives.
-Personal contact between clients and the network of sales representatives is an advantage, providing valuable feedback.
- The western advertising could be shocking facing Korean culture.
- The company is overly reliant in Italy, which makes it vulnerable to economic downturn in that market.
- Handicapped by heavy reliance on a direct selling technique, Gucci faces a tough competitive environment, especially in South Korea.
-Gucci's market share in the important Asia-Pacific region is weak, since the company was too slow to establish itself in the region. It needs to invest more in South Korea if it is to expand.
- The company's level of consumer awareness is only strong in the fashion market like West Europe, and it remains heavily dependent on consultants in order to drive sales.
B. Opportunities / Threats
- Second Asian cosmetic market after Japan,
- Concerning the fragrance market, the Italian brands are really welcome in Korea,
- Korean people look after the social recognition through the products they buy and they show, so it is a perfect target for this luxury brand,
- Infidelity facing brands,
- Luxury Market insensible to the overall economic situation.
- As consumer spending power in emerging markets increases, Gucci may ultimately lose out as newly affluent customers switch to more luxury shopping experiences.
- This global coverage is becoming increasingly vital to maintain a high profile in the industry.
- Gucci could see marked growth in South Korea. The company has established operations in the country but considerable opportunity for expansion exists, largely pivoting on the planned repeal of the law banning direct selling by the Koran government.
- Niche markets hold the key for mature, developed mature success, with perfume products set to grow steadily in contrast with pedestrian overall market development.
- Gucci's attempt to broaden its consumer base beyond the traditional target market of middle-class women to include children, men, mature women and teenagers could yet pay off, although it could be better off narrowing its scope slightly.
- Continued development of products for a variety of ethnic backgrounds would help the company to establish a niche for itself as well as help to achieve differentiation in developing regions
- Hard competition with other western luxury companies,
- Cultural differences concerning selling and advertising.
- Competition is acute in the direct selling business in fragrance in general from multinationals, and in Asia-Pacific in particular from local businesses.
- Gucci's development in relatively low-income but high-potential regions such as Eastern Europe, Latin America and Asia-Pacific is likely to be curbed due to the high prices of its products.
- Newly affluent consumers could regard catalogue shopping as old fashioned or unglamorous.
- Gucci needs to ensure that its pricing remains competitive in the long term in an increasingly fierce market.
The department stores and chains of perfume stores are the best to sell luxury fragrance in South Korea. The South Korean department stores are similar to the USA big stores, in term of extra activities. They are recreation places and the consumer needs other activities than shopping, like for example hairdressing salon, beauty centresâ€¦
The next chart illustrates distribution network concerning the product positioning.
Source: Hyeun-Suk Oh, Michael François, p.4
Â« The better International brands are almost exclusively presented through 'corners', on department stores' ground floor. They are exclusively luxury products. (â€¦) Hyundai or Shinsegae have increased their turnover by more than 32% between 1998 and 2000. It is the best way to market famous luxury brands." (Translated from Italian: Hyeun-Suk Oh, Michael François, p.5)
II. Communication analysis
A. The Korean Gucci image
Concerning the precedent perfume, Gucci acquired a very good reputation. But the latest western communication campaign must be avoided in South Korea because of the "smart porn" evocation. In order to convince new consumers and to keep last consumers, we must communicate respecting local culture, even if we have to preserve the 'Gucci's original touch'.
B. Persuasive communication
1. Target description
Because the Gucci product is dedicated to a young target and because more than 40% of the population is younger than 30 years, we will clearly choose women between 15 and 30 years old as principal target.
2. Process of message transfer
The western advertising is based on a visual attraction using sensuality. But even if Korean people are far more open mind than others Asian countries, the 'smart porn' attitude Gucci wants to promote is unacceptable in South Korea.
In addition, Korean women take principally care of the brand, the simplicity of the message and the attraction power they will acquire. So we must use these elements in consideration to create a clear and direct message.
For Korean women:
- Purchase is defined by the brand
- They like Italian products
- They buy for their image and not for themselves
- They want a simple design
- They are very impulsive for purchasing
- They are not loyal customers
According to these elements, we must show the name of the brand, the Italian origin of the perfume and set out the customer as a 'star' surrounded by friends.
III. Target analysis
A. Cultural influence
1. Power distance
As we said before, Korean women choose their product according to what their circle of friends thinks. The power distance is really high and we have to take care of it in order to suit to the target.
2. Uncertainly avoidance
Like for the Italian market, South Korean women wants to make sure that they will be admired by their friends. So they have to choose a product with a high brand image and for the fragrance sector, Italian products are particularly appreciated. The uncertainly avoidance is high.
According to the elements we have seen before, we can say that South Korean women use to have a strongly collective attitude for purchasing. "The Korean customer is still influenced by his circle, associates or friends and its purchases allow it to position itself hierarchically in the society". (Hyeun-Suk Oh, Michael Francois, p.4) We can conclude that they have a collective comportment.
The South Korean used to be very masculine. But since a decade, the mentality changed a lot and as Italy, the South Korean citizens tend to become at an average level of masculinity.
C. Nature of her motivation
The nature of South Korean women motivation is clearly social. Like in Italy, they attach importance to their appearance. But the main difference between these two markets is the importance of the group. Where there is individualism in Italy, South Korean women need to win their circle of friends' esteem.
D. Buyer behaviour
On one hand, South Korean woman don't mix expression of emotion with action, because they want to be sure the perfume will have a positive effect on their relationship. On the other hand, they are not loyal customers.
Thus there is an opportunity to communicate on the group's emotion instead of the individual behaviour.
1. Buyer chain
Like in Italy, the target still knows the brand. Korean women also prefer luxury brands. We have to communicate about this new product insisting on the origin of this perfume.
E. Buyer's prior attitude
Korean women, unlike Italian consumers, switch easily from a brand to another. We must adopt a persuasive strategy to get new consumers, but to keep our existing consumers as well.
IV. Communication strategy
The Korean women consider the shopping activity as a real leisure activity and take care to de distribution way of the product to decide what they will buy. According to this state, we will consider that the distribution is an important part of the communication strategy.
A. FCB grid
As we said for the buyer behaviour, we must not communicate for one person, but for both the woman and her friends group, we must transmit a good group feeling. Because the fragrance characterizes the customer, the involvement is of course very high. So we must adopt an affective communication, but without exclude an informative message. The communication way we will adopt is so closed to the Feel-Learn-Do model, like in Italy, adding an informative message.
V. Adverstisement analysis
A. Message settlement
According to what we analysed before, with must not use the same promotion publicity than in Italy for the South Korean market.
So using these elements we will try to give some ideas in order to create a good persuasive communication in South Korea.
B. Nature of the context
In Italy, Gucci tries to convince one woman with one model in the picture, in Korea, we must show a group.
The western campaign presents a 'sensual' advertisement; it could be really shocking and criticized in South Korea.
C. Text analysis
The target wants to see clearly the name of the brand. We will keep the name of the product "Gucci" in a central place, like in the Italian publicity.
Young women between 18 and 30 years old definitely need a western perfume and Korean people like creation and innovation; we will write a the bottom of the publicity: "Gucci: Italian fragrance creator.
"70% of Korean women consider what their circle of friends thinks and uses that as criteria to purchase a product.
80% of Korean women think appearance and possession permits them to be respected by other people". (Hyeun-Suk Oh, Michael François, p.4)
In order to create a link between the customer and her circle of friends, we will add: 'make them Gucci to you'. In addition to the image we will describe just after, this text keeps the spirit of the perfume, excluding the exclusive 'sensual' connotation.
D. Picture analysis
For the picture, we must show a principal character representing and idealizing the customer. This character must not be as provocative as the western advertising, it means without any sexual connotation. But she must really show a non-conformist idea, to confer to the product its real identity: quality, originality, creativity and a bit of provocation.
But we also have to show her circle of friends, Guccied by the customer. The customer must become the centre of her relationships using Gucci Gucci. We can imagine a beautiful woman having a direct link with their friends thanks to fragrance power.
We also must add the perfume itself at the bottom of the picture, because Korean women really take care of the packaging.
In South Korea, the best way to promote luxury clothing of fragrance products is clearly the papers. We can take for example Noblesse, Haute, Elle, Marie-Claire and Woman Sense. In order to confirm this strategy, we should verify if our target reads these papers.
Korean people are aware about information technology. So this advertisement campaign will be also available on Internet.
In South Korea there are a lot of promotions during the year and this very popular.
- End of January/ Beginning of February
- May holydays
- End of September
- End of the year
Of course we have to create specific promotions for these periods, especially for the first period corresponding to the end of the year for students. This is the best way to acquire NCU.
We should for example purpose a special packaging, because Korean woman attach a big importance to the packaging. They principally like glass packaging. We also should add an accessory not expensive for Gucci, but with the brand written in, in order to insist about the luxury message.
Because the Gucci Gucci fragrance is different than the others in term of message, we can purpose a sponsorship with nightclubs, to promote the perfume, this action will touch exactly the target we want to touch and have one more time to increase Gucci's lead over his competitors.
With the elevated income of South Korean, it is better if Gucci try to sell its products with higher price, however, the opportunity cost will be huge because we should expect that these wealthy people will probably travel to Europe and once there, they will be shock with the lower prices of Gucci fragrance. In other words, the prices of the products should be similar to Italy, but by including the prices of logistics, clearance, taxes and profit share of the retail shop.
A network of approximately 1.1 million independent sales representatives distributes Gucci products. There are three levels of Gucci representative: namely, Independent Beauty Consultant, Independent Sales Director and Independent National Sales Director. More than 3,500 employees provide support to the sales force, from the company's international headquarters in Italy, its regional distribution centres and international offices.
Sales representatives and internet growth main drivers behind company's distribution strategy
Internet sales become crucial to the company
Most direct sales companies that have catalogue sales have an online presence and Gucci is no exception. Having an online website has increasingly become necessary, and direct companies have invested in providing convenience to distributors and buyers for easy placement of orders and updating of their accounts.
Gucci has informative and up-to-date websites that list its products and offer a user-friendly system for placement of goods. The company offers an internet-based service to its distributors who can place orders over the internet , thus providing them with much better direct access to the company. The intent is to position this tool essentially as a virtual office to most of the company's distribution network.
The communication technique of Gucci in Italy and in Europe is based on eccentricity. They hurt people's conscience and make the target Gucci to the brand. The main differences in the way of communicate between Italy and South Korea is that the Italian message is more emotional and the Korean message is more formal. LVMH and its luxury products must be present in the new Asian markets such as China and South Korea. Gucci's lack of presence in South Korea may prove to be an increasing handicap in the short term, when it seems global status is set to become ever more important. Whether Gucci has the capacity to fill in this blank remains to be seen, but the high level of competition, uninspiring market conditions and costs involved in climbing the regional industry ladder are formidable barriers and are reasons that believes will deter Gucci in future.
Overall, in light of the difficult market conditions that lie ahead in its key Italian market, it appears essential that Gucci adopts a much tighter strategy at home and invests in expanding its international presence, in particular in key emerging markets like South Korea. Product innovation and an increased advertising spend need to be added into the mix. With the company seemingly dragging its feet in many of these pivotal areas, it is difficult to be optimistic about the short-term future for Gucci.