Ch. 4 - The Marketing Environment

Chanel SA is a dominate force throughout the fashion and beauty industries, one of the top fashion houses worldwide. Iconic products such as its best-selling perfume, Chanel No 5, handbags adorned with the interlocking C logo, and traditional Chanel colors, black and white, and the concept known as the "little black dress" carry the prestigious Chanel Empire. Earning billions in revenue yearly, Chanel operates standalone boutiques, sells within independent department stores, and provides an online market to sell a vast product range including haste couture, accessories, and beauty treatments. Chanel’s target market has expanded from middle aged upper class women and men (generation X, 30-50), to young women (generation Y, 19-30) The target group is women, who identifies themselves with the values that Chanel represents, which is; elegance, simplicity, modern, and class. 

          To continue to be profitable as a luxury good, Chanel No 5 needed a personal and original take on advertising to impress its traditional customer. Carol Potter, a global business director of J. Walter Thompson said “That is a global trend but it is especially acute when it comes to luxury goods, because with luxury goods you are paying to feel special--you need that personal connection." Chanel continued to spend more on advertising than almost any other perfume company and as a result, reaped the fattest profit margins throughout the industry.

The perfume, Chance, was Chanel's first attempt to attract a younger clientele, the 21- to 29-year-old female. As Chance took off through new advertising portals such as a devoted Web site, the perfume would roll out through the European and Asian markets.

By 2009, even the perennially profitable Chanel was affected by the global economic crisis. Chanel's profits, sales, and customers were not cut severely, but noticeably. Chanel stood to earn an estimated $5 billion in sales in 2009; however, economic changes did occur such as the reduction of 10 percent of the Chanel's production workforce in Paris. In contrast to the European and U.S. markets, which saw an 8 percent decline in the luxury market in 2009, new markets in Asia and the Middle East prompted Chanel to move more of its resources eastward. Couture was a challenging concept to interpret for new customers. Convincing new clients of the necessity of unsurpassed quality and perfection was vital to progress sales.

While Lagerfeld revamped the company's clothing designs, the rest of the company's designers and marketers carefully maintained a conservative, proven image so as not to tamper with the Chanel legend. As a result of Alain Wertheimer's efforts throughout the previous decades, Chanel's performance improved significantly. As the 1990s approached Chanel was considered a global leader in the fragrance industry and a top innovator in fragrance advertising and marketing. Chanel has opened three boutiques in Shanghai, one of the world's most populous cities.  Chanel's president of fashion, Bruno Pavlovsky said, “We try to bring through the boutiques the best value of the brand, our idea is not to open lots of boutiques but be able to give, through the existing one, the best value and the best service to our customers." China, with a population of approximately 1.3 billion people, is a focus for luxury brands due to its expanding middle classes. Its growth comes as consumer spending in Europe and the U.S. dwindles.