ProfessorDr. Catherine W. Cook
Almosteverybody in the contemporary world is affected in one way or anotherby product promotional activities such as advertising and personalselling carried out by organizations producing and/or selling suchproducts. Studies have shown that the aptitude of public, as well asprivate businesses efficiently and effectively communicating withtheir respective clients about their products and services is vitalfor their survival that is it increases product sales and customerloyalty that in turn provide revenue and support required forcontinued operations. As a result, business organizations arecurrently engaged in marketing/promotional activities of one form ofthe other to enhance their respective competitive advantage overtheir competitors for increased sales, market share, customer loyaltyand success at large. This paper investigates product promotionactivities of Chanel S. A. Company to provide knowledge forunderstanding and mastering advertisement and marketing concepts. Itcovers aspects such as marketing and marketing process, marketingstrategy and marketing mix, advertising environment and business ofadvertising. It winds up by presenting summaries and conclusions ofall the aspects discussed in the main body.
Past and Present Leadership (Board of Directors)
Marketing Strategy and Marketing Mix
What is Marketing Strategy?
What is Marketing Mix?
Consumer Markets – The Larger Marketing Context of Advertising
The Market Segmentation Process, Target Marketing Process
Advertising and the Product, Price, and Distribution (Place) Elements
Advertising and the product, price and place elements
Economic Impact of Advertising
Regulatory Issues Affecting United States Advertisers
Inthe contemporary world, every business organization, whether publicor private, is engaged in one form or the other of marketing andproduct promotion that influences every consumer on the market place(O’Ginnet al. 12).This engagement is backed up by studies that have indicated thatmarketing and product promotional activities are critical for thesuccess and survival of business organizations in this turbulent,dynamic economic environment. For instance, Belchand Belch(3) assert that communication enables organizations createrelationships and brace up their effectiveness that leads toprosperity and growth. Communication with the customers createsproduct awareness to the customers and informs them of the product’sbenefits hence driving the sales up, and interaction with thecustomers through communication help the organization identifycustomers’ needs to target when designing and producing theproducts and/or services. This paper investigates the activities andprocesses accomplished by Chanel S. A. Company under marketing andadvertising in order to foster the understanding and mastery ofadvertising and marketing concepts.
Littleliterature is available as to the conclusive description of Chanel S.A. Company simply because most of the publications about the companydwell more on the company’s brand rather than the company itself.The privately owned company does not report its performance publicly,appear in industry conferences or publicly pronounce its strategiesno single person outside the company knows the precise informationabout the company. Only few common pieces of information are knownthat the company deals with luxury products, operates independentlyas well as in collaboration with other related companies and isprivately owned by the Wetheimer family. Moreover, it is more of aconsumer market rather than a business market company. It hasoperations worldwide.
ChanelSA is among the legendary names in perfumes, and the company hastransformed it high-status brand into a global number-one empire notonly involving perfumes but also other products such as leathergoods, handbags, jewelry and women’s fashion (Nagasawa 49). Thecompany was formed back in 1870 during the era of Bourjois, a Frenchtheatrical makeup company from which Ernest Wertheimer purchased someinterest after his relocation from Alsace to Paris. After thepurchase of interest, the company recorded rapid growth and commencedmanufacturing and supplying skin creams from its Rochester basedplant to the cosmetic industry giant Helena Rubenstein in the earlyparts of the 1920s decade that made it the largest fragrance andcosmetic producer in France. Although the Wertheimer family was incontrol of Chanel’s finances since the company’s inception, itscreative vision and impetus was propelled by Coco Chanel, adepartment introduced to Ernest’s son, Pierre, by the founder ofLafayette- Theophile Bader. After the introduction, for financialassistance, Ernest’s son established Parfums Chanel in which he,Bader and Coco Chanel constituted 70%, 20% and 10% ownership.
ParfumsChanel flourished during 1920s and 1930s adding a new fragrance, Soirde Paris, to its main, famous fragrance, Chanel No. 5 Perfume whileCoco Chanel managed a thriving separate company- fashion studio- inParis though selling the cloths under the name Parfums Chanel.Although the two separate entities were blossoming, the personalrelationship between Pierre and Coco Chanel was degenerating andeventually contributed to their separation. Coco Chanel engagedattorney’s services to have an increased share in Parfums Chanelbut the Wertheimer’s family successfully repealed the move on thegrounds of funding the establishment of Parfums Chanel and thefashion studio operated Coco collapsed on Nazis’ invasion inFrance. As a result of the war, the Wertheimer family fled France toUnited States of America and continued managing Parfums Chanelthrough a proxy. After the war, Coco Chanel surrendered her sharesfor a monthly stipend in return, and after her death in 1971, theWertheimer family assumed total ownership of Parfums Chanel togetherwith Coco Chanels’ rights.
Past and Present leadership
Pierre’sson, Jacques, assumed leadership of the Chanel from his father butwas not fully committed to it because of his involvement inmanagement of the family’s horse breeding and racing stableoperations. In 1975 Jacques was succeeded by his own 25-year old sonby the name Alain a succession the press claimed to be marred byfamily feuds and animosity despite the Chanel’s managementupholding that it was peaceful and friendly. Currently, the companyhas different management structure from the past years to necessitateits running because it has grown into a conglomerate. Such managementcomprises the president, global CEO and managers. This managementteam operates from headquarters situated in Neuilly, Paris, Franceand another strategic headquarters located in New York (Nagasawa 51).
Thepresident who is in charge of the Chanel S. A. operational company isbased in Paris headquarters whereas the global CEO in charge of theChanel Group (conglomerate) is based in New York. The three businessdivisions namely watches/jewelry, fashion and cosmetics/perfumes(Chanel,n.p.) are headed by division managers whereas each region across theglobe namely North America, Europe, Asia and Oceania andCentral/South America is controlled by regional head. The board ofdirectors is made up of the global CEO, the president, the divisionalmanagers and the regional heads. At the helm of the management sitsthe Wertheimer family with Alain Wertheimer as the chairman (Nagasawa51-52).
Marketingis usually considered by the activities making up the marketingprocess hence the likelihood of different definitions being presentedfor the concept. For instance, some group might think of it primarilyinvolving sales, other groups might think of it involving productplanning and pricing or retailing activities and advertising. Inessence, marketing involves diverse activities usually depending onthe objectives and activities of the business organization carryingit out. Hence, a suitable definition integrates all the possibleactivities that fall under the marketing function, for instance theone presented by the American Marketing Association. Marketing isdescribed as the process of developing and implementing theconception, pricing, distribution, and promotion ideas of products-goods and services- to construct exchanges that fulfillorganizational as well as individual objectives Belch and Belch 7).
Fromthe above definition, it is clear that marketing encompasses twoelements namely exchange and relationship building by integratingspecific factors (promotion, price, place and product) together. Forexchange to happen, there ought to be at least two parties eachwilling and able to give another something in return for the itemexchanged and a means to converse with each other. Throughcommunication enables the business organization to inform thecustomers of its product/service and convince them that theproduct/service has the capacity to gratify their wants/needs, on theother hand, communication facilitates the customers to inform thebusiness organizations their need/wants. More so, the exchange oughtto be not in return of tangible product it can involve intangiblebenefits. For instance, donors receive psychological and socialsatisfaction by responding to the marketing done by not-for-profitorganizations.
Underrelationship building element, the involved parties, especially thebusiness, strives to craft, sustain and improve long-termrelationships because they are these relationships that lead tomutual benefits between the involved parties. Chanel values hercustomers as indicated by the dedicated customer service departmentthat deals with purchase decisions and behavior of the customersthis department closely follows personal customer requests to ensurethat the needs of such customers are fully satisfied. This isimportant because customers have different individual needs tosatisfy. The third element, integration of specific factors, definesthe nature and means of interaction between the exchanging parties.Such factors ensure that the terms and conditions of interaction arefavorable to the parties- place (distribution), cost (price),satisfaction (product) and information (promotion).
Themarketing process involves four steps namely discovery, strategy,implementation and review. In the first step, discovery, the businessgathers information about the market to establish the metrics forproceeding with the process. Strategy step involve developing theblueprint of the process. Implementation involves putting theactivities identified in the blueprint into action. Review entailsevaluation of the process and taking appropriate measures.
Marketing strategy and marketing mix
Marketingstrategy refers to the model that permits a business to utilize itslimited resources on finest prospects to increase its sales thusgaining a competitive advantage over its competitors. This modelhelps in understanding competitors, complementors and market growthand size. Marketing mix, on the other hand, refers to the modelaligning the business’ marketing activities to its strategies. Themarketing mix comprises the infamous 4 Ps (Zineldinand Sarah 230).These Ps include price, product, promotion and place.
Theprice component ensures that the cost of the product falls within themarket’s (customers’) affordability bracket without leading thebusiness into losses that is the product does not cost beyond thecustomers’ financial capacity and that the business still makesprofit. The product component ensures that the good/service providedby the business fulfills the customers’ wants or needs whileremaining cost effective to the business. Chanel has a creative teamheaded by Karl Lagerfeld that ensures the company utilizes the latesttechnology to produce products that precisely match and satisfycustomers’ needs. As part of producing products meeting customers’needs the company has embraced industrial revolution introducingstate of art production methods to replace the old-fashionedfabrication techniques. With the production being monitored up to thesmallest detail, the creative team ensures that each new fashionseason starts with new products on the market.
Thepromotion element serves to direct and ensure awareness of thegood/service provided by the business to the customers informing thecustomers of the products benefits and capacity to satisfy needsand/or wants in the most accessible ways. Chanel boasts of a strongadvertising campaign in which it reaches her customers to make themaware of the company’s products- billboards, magazines, fashionshows, YouTube and television adverts. For instance, the companyinvites high-profile bloggers, fashionists and models to arouseinterest in and attract current as well as potential customers forattendance. The place element helps in availing the product at theright location at the correct time using the most appropriate meansfor the customers to have it as and when the need arises. Chanel SAoperates its own stores across the globe as well as collaboratingwith other retail stores such as Harrod’s, Bloomingdales and Macy’sto ensure that her products are at strategic places near hercustomers.
Consumermarket is a term used to refer to a market involving sale andpurchase of services and goods for final consumption and notfacilitating fabrication of other goods. Undernormal circumstance, consumer markets are characterized by changingbrand values and loyalties that make the market very uncertain. Theproducts that dominate consumer market are by and large intended forthe general public and as such business entities in the market haveto devise ways and means of not only attracting new customers butalso maintain the loyalty of ardent clients. Advertising is such oneway through which companies and other business organizations use toamplify their influence in the consumer market and increase theirmarket share. In a consumer market consumersacquire the product at the market for personal use and resale or usein production of other products. This environment characteristicallyexemplifies the type of market that Chanel SA operates in selling itsproducts to consumers for personal use the company’s products arenot used as raw materials for manufacture of other products.
Marketsegmentation refers to the practice of subdividing the market inwhich the business operates into different portions, each portionconsisting consumers having similar needs among them but differentneeds from those in other (Donnelly and Harrison 53). Thefundamentals of market segmentation are that every businessorganization should opt to sell to all consumers in the market or itcan opt to serve a distinct group in the market. This process can becompleted based on different factors such as geographic, behavioral,benefits, demographic and psychographic. Depending on the type ofproduct and goal of the firm, the following strategies can be used:
Mass marketing which entails selling products to all individuals in the market. This is possible in situations where the firms’ sells homogenous products and where every client has the same primary need that can be met in the same fundamental way (Pride &Ferrell 1).
Market segmentation where a large market is subdivides into small clusters of customers who have identical needs and reactions to market programs and activities pursued by the firm.
Globalizationhas made the world a global village, and companies have been exposedto intense competition. Consumers have also been accorded anopportunity to choose from a variety of products, and businessentities have found it necessary to segment their market in order toaddress the needs of consumers adequately (Pride&Ferrell 1). The pattern of customers needs dictates the type of marketingstrategy to b followed by a firm, that is whether to strive to servethe entire market or opt to serve a specific segment.
Target marketing processes
Markettargeting entails evaluating the attractiveness of the portionscreated during market segmentation and deciding on which section toserve (Donnellyand Harrison 54).Target marketing has several ways of accomplishing it namelyconcentrated, differentiated and undifferentiated strategies.Concentrated strategy is applied for solitary market segments thathave unique needs and that call for special approaches (Pride&Ferrell 1).For a firm to cater for this market niche, it is paramount thatproduct offered meets the expectations of the customer.UnDifferentiated strategy is used where there are different marketsegment that are treated in different ways depending on the needs ofeach segment. Finally the differentiated strategy is used to addressa market segment with customers who demand special benefits. In thiscase a business entity must have a distinctive advantage over otherfirms in the market to be able to meet the need of customer (Pride&Ferrell 1).
Marketsegmentation and target market processes can culminate into productpositioning where the business creates and offers its product in amanner that wins consumers’ minds thus separating it fromcompetitors’ products it can be either competitive positioning orconsumer positioning (Pride&Ferrell 1).Market segmentation starts with a commitment to satisfy one or moregroups of customers, requiring a thorough knowledge of both thetargeted customers and the benefits of the goods and services beingoffered. Segmentation strategies also must be consistent with theorganization’s mission, policies, goals, and ability to provide thedesired benefits. Theseprocesses are evident in the marketing operation of Chanel SA. Thebusiness has separated its global market into regions that correspondto segments namely North America, Europe, Asia and Oceania andCentral/South America, and in every region it aims serving femalecustomers aged between 16 and 80 years by offering several productsclothes, jewelry and cosmetics. The company utilizes consumerpositioning as its products are modified to meet the needs of thecustomers, thus the whole process matches geographic segmentation,differentiated target-marketing strategy and consumer positioning.
Advertising and the product, price and place elements
Tobe in a position to effectively market a company’s product in bothdomestic and international market there are four fundamental aspectsthat every firm must get right. These are product, place, promotionand price. As aforementioned these are the primary components of anymarketing mix. The 4Ps should not be viewed in isolation rather theyshould be considered as a single unit, configured to support eachother (Pride&Ferrell 1).The diagram below depicts how the 4Ps are structured to create avibrant marketing mix and achieve the goals of the target market.
Throughadvertising, the business organization communicates the features andbenefits of the product to the customers. Such communication helpscustomers understand the value they will be getting in return oftheir money (price). Also, advertising informs customers of locationswhere the product if found (place) (Sanchezand Jörg).
Economic impact of advertising
Advertisingis used by different firms in different sectors to achieve variousgoals, but in profit making organization the key aim is to increasesales. In this regard advertising is expected to cause sequence ofresponses from the targeted population, and that shall lure them intopurchasing the products being advertised.
Inthe eyes and minds of a potential consumer, advertising plays a hugerole in increasing the value of a product. Even though differentbrands from different companies may not be of the quality, the imagethat is created to the consumers through advertising goes a long wayin creating the value of the brand. Consumers may be willing to pay ahigher value for a product which they are all too familiar with thanpurchase an unknown brand at a low cost (Firestone28). In this respect, advertising expands and increases the awarenessof the product and this is the most crucial aspect of the wholeprocess since it adds the value of the product.
Ina competitive market, advertising prompts a sense of competition andthis helps to control prices in the economy. Competition not onlypushes the prices down but also ensures that consumers are notexploited. When a company sets the price of its product in the marketand informs the target market about it, it is not easy to increasethe price, as this would significantly affect its market share (Firestone28).
Ona bleak side, advertising hamper micro and small businesses fromparticipating in economic activities at the same platform with largefirms. Advertising gives large companies and business organizationsan added advantage over small business that cannot afford the hugebudget of advertising (Firestone28). Studies has shown that many small business can manage to competeat the same level with large companies because of budget constraintsthat cannot permit them to engage in massive advertising to promoteand improve the image of their products. In the same vein sinceadvertising intensifies competition it eliminates some firms from themarket and increases the sales and endurance of other firms (Firestone28).
Advertisingalso has an effect on enterprises because it results to the designand conception of new modification of the products in the market andcreation of others in a bid to fulfil the demands and needs ofcustomers. Though at a given time some firms may boost of a sizablemarket share, whenever a new product is brought to the market that issuperior to existing ones in all respects, then this market share caneasily be wiped out and benefit the firm that is manufacturing such aproduct.
Regulatory Issues Affecting United States Advertisers
Inthe United States the Federal Trade Commission is the body mandate tomanage and regulate advertising. The regulation set by thisgovernment agency is meant to guide the practices of all advertisersin the country. These regulations have tremendous effects ondifferent areas of business, including but not limited to how firmscarry out telemarketing campaign, how companies sticker theirproducts and any environmental declaration that may be made whileadvertising (United States Small Business Administration 1). Some ofthe regulation issues affecting advertising include
Marketing claims: which are regulation designed to ensure that business entities are truthful in their advertisement campaign and do not abuse their freedom of commercial speech to exploit customer by giving misleading and false information about a product. These regulations cover areas such as adverts to young children, endorsement in the promotion, labels made in the United States of America and health issues.
Industry guide: These are conformity guide and rules set for particular sectors and industries such as manufacturing and clothing. Firm operating is such industries must comply with the set rules.
Email SPAM which dictates what emails firms can send to customers
Consumermarket is a term used to refer to a market involving sale andpurchase of services and goods for final consumption and notfacilitating fabrication of other goods. Under normal circumstanceconsumer markets are characterized by changing brand values andloyalties that make the market particularly uncertain. The productsthat dominate consumer market are intended for the general public andas such business entities in the market have to devise ways and meansof not only attracting new customers but also maintain the loyalty ofardent clients. Advertising is such one way through which companiesand other business organizations use to amplify their influence inthe consumer market and increase their market share. To be in aposition to effectively market a company’s product in both domesticand international market there are four fundamental aspects thatevery firm must get right. These are product, place, promotion andprice. As aforementioned these are the primary components of anymarketing mix. The 4Ps should not be viewed in isolation rather theyshould be considered as a single unit, configured to support eachother.
Advertisingis used by different firms in different sectors to achieve variousgoals, but in profit making organization the key aim is to increasesales, improving brand value and restricting competition.Globalizationhas made the world a global village, and companies have been exposedto intense competition. As such many business entities have found itnecessary to segment their market in order to address the needs ofconsumers adequately.  Theclient needs pattern dictates the type of marketing strategy to bfollowed by a firm, that is whether to strive to serve the entiremarket or opt to serve a specific segment. Theconceptssuch as marketing strategy, marketing plan, market segmentation andmarketing mix are integral parts of the process of advertising.ChanelS. A. Company has undertaken advertising in order to foster theunderstanding and augment its sales, but its promotional activitieshave been a subject of regulation formulated by FederalTrade Commission.
Belch,George E., and Belch, A. Michael. Advertisingand promotion: An integrated marketing communications perspective,6thEd. The McGraw-Hill Companies, 2003. Print.
Blattberg,Robert C, Pyŏng-do Kim, and Scott A. Neslin. DatabaseMarketing: Theory and Practice.New York: Springer, 2008. Print.
Chanel.Chanel news. 2014. Online <http://chanel- news.chanel.com/en/home.other.archive.html>
Donnelly,Ray, and Harrison, Graham. CIM course book: Themarketing planning process. Routledge, 2010. Print.
Firestone,J.O.The Economic Implications of Advertising. Routledge, 2013. Print.
Kristie,Lorette. SocialEconomics & Business Importance of Advertising.DemandMedia. 2013.
McDonald,Malcolm, and Ian Dunbar. MarketSegmentation: How to Do It and How to Profit from It.Chichester: John Wiley & Sons, 2012. Print.
Nagasawa,Shin’ya. Managing organization of Chanel S. A. WasedaBusiness and Economic Studies 47(2011): 47-66.
O’Ginn,Thomas, Allen, Chris, Semenik, Richard, and Scheinbaum, C. Angeline.Advertising and integrated brand promotion.Cengage Learning, 2014. Print.
Pride,R& Ferrell,W. Marketing,South-Western.2012.. Retrieved from:http://archive.csustan.edu/market/williams/3410-06-10.htm
Sanchez,Ron, and Jörg Freiling. AFocused Issue on the Marketing Process in Organizational Competence.Amsterdam: Elsevier, 2005. Print.
Steenkamp,Jan-Benedict E. M., and Eric, E. R. Fang. "The Impact ofEconomic Contractions on the Effectiveness of R&D andAdvertising: Evidence from U.S. Companies Spanning ThreeDecades." MarketingScience 30.4(2011): 628-756.
UnitedStates Small Business Administration. Advertising& Marketing Law.2012.Retrievedfrom: https://www.sba.gov/content/advertising-and-marketing-law
Wang,Alex. "The Effects of Firms` Advertising Disclosures as aReflection of CSR Practices on Consumer Responses." SocialResponsibility Journal 7.4(2011): 592-603.
Zineldin,Mosad, and Sarah Philipson. "Kotler and Borden are Not Dead:Myth of Relationship Marketing and Truth of the 4Ps." TheJournal of Consumer Marketing 24.4(2007): 229-41.