Strategic Marketing Management of Moët Hennessy - Louis Vuitton (LVMH)
Category : LVMH Case Studies, Strategic Marketing Planning
Strategic Marketing Management of Moët Hennessy - Louis Vuitton (LVMH)
The current outstanding performance of Moët Hennessy - Louis Vuitton or LVMH in the international marketplace necessitates effective marketing management strategy to maintain its competitive position. Also, the continuous growth in the sales and profits of the Company supported by its existing strengths and competencies needs to be protected from harmful business trends that may affect its constant development. Thus, there is a need to come up with practical and valuable strategies that will sustain market performance. In this report, there are three objectives namely:
Objective 1. To maintain the continuous increase in sales and surpass last year total revenue.
Objective 2. To strengthen social responsibility and environmental protection in terms of design and manufacturing of products.
Objective 3. To uphold the luxurious image of the brand and decrease the cases of counterfeiting.
Provided by these objectives, there are various strategies that are planned to be implemented like: for O1, marketing strategy through increased research and development (R&D) in market research, segmentation, and marketing mix; for o2, marketing communications strategies aside from advertising such as sponsorship and public relations; and for O3, brand development strategy focusing on innovative and hardly imitable product line. The implementations of these strategies are dictated by an individualized action plan. Further, the projected profits are undetermined yet positively established in significant percentage while losses are considered negligible granted that these strategies are properly executed. There are also controlling mechanisms that will regulate the implementation of these strategies such as feedback system, evaluation process, and performance objectives,
Analysis of Current Situation
Considered as world’s leading luxury goods company and home of most expensive and sought after brands, Moët Hennessy - Louis Vuitton or LVMH remarkably established its upscale market position since its was founded in 1987. This French holding company consists of over 60 globally celebrated brands in five key sectors in which their products and services are categorically grouped namely Wines & Spirits, Fashion & Leather Goods, Perfumes & Cosmetics, Watches & Jewelry, and Selective Retailing. In their recently publicised revenue report for the third quarter (Q3) this year, LVMH continuously develop and sustain its global market position particularly in Europe, US and Asia in terms of financial performance. The past three year’s revenue signifies growth and recorded €15, 306 million in 2006, €13, 910 million and €12, 481 million in 2005 and 2004 respectively. During the third quarter of this year, LVMH reached €4, 034 million and added with the two previous quarters with €3, 804 million in Q1 and €3, 608 million in Q2 will result to a total of €11, 446 million. The thriving financial and market performance of LVMH is credited to the 61, 000 employees worldwide and a retail network of more than 1, 800 stores.
In details, the Q3 performance of the Company emphasizes on the following highlights:
Essential to the concept of a luxury product is a degree of scarcity which in turn justifies the high price (2004). Today, LVMH incessantly excel in the chosen field of industry by using its brand development strategy and uninterrupted expansion of its international retail network.
- LVMH with its mission to symbolize the most sophisticated qualities of Western "Art de Vivre" around the world with both creativity and elegance as battle cry, their products and the cultural values they embody combine both tradition and innovation and stimulate dream and fantasy (LVMH 2007).
- In terms of brand identity, LVMH is the world’s largest business firm that caters to luxury items. Exclusivity and degree of scarcity determines LVMH products from the rest of its competitors and justifies its high prices.
- Management wise, Bernard Ault’s leadership and management technique ( 2001) and focus on the fundamental values shared by all Group stakeholders such as (1) Be creative and innovate; (2) Aim for product excellence; (3) Bolster the image of our brands with passionate determination; (4) Act as entrepreneurs; and (5) Strive to be the best in all we do (LVHM 2007) is equated to corporate success.
- The ability of the company to go with technological innovation and outstanding research and development (R&D) efforts in relation to development of new products (e.g. cosmetics) is also considered as strength.
- LVMH distinctively have high prices on its products and brands and also in its raw materials needed.
· Gendered marketing may also serve as a weakness for gender hinders the purchasing decisions of the potential clients (e.g. affluent women as clients).
- A large marketing budget to develop brand awareness in the international markets is at hand.
- The struggle to continually appear to be cutting edge in the chosen industry is a pressing issue.
- The growing international market for LVMH brand suggests the opportunity to expand its business operations yet sticking to the company’s identified corporate competitive advantage.
- With the continuous innovation and the support that it shows to different managerial and environmental, and more importantly societal and humanitarian issues and concerns, LVMH can gain loyalty from their customers to make them more competitive in the marketplace.
- The continuous initiatives of LVMH in diversification of its revenue resources also open new opportunities to make the business become stronger to outgrow all its rival companies.
- The proliferation of counterfeiting poses the biggest challenge to LVMH.
· The increasing advocacy against the use of animal skins in products posed a great risk especially on Fashion & Leather Goods.
· The expansion of its operations to other areas means adjusting to the trade policies and political problems of the locality.
· In terms of production and manufacturing, LVMH may encounter cost inefficiency in its procedures.
· Other threat includes the changes that might occur within the area of operations such as economic changes, varying customer preferences, changing lifestyles, and other relevant factors.
- Competition defined by new brand products and prices is always present.
- To maintain the continuous increase in sales and surpass last year total revenue.
- To strengthen social responsibility and environmental protection in terms of design and manufacturing of products.
- To uphold the luxurious image of the brand and decrease the cases of counterfeiting.
(2000) defined strategy as a plan that combines all the essential elements of an organization including goals, policies, decisions and sequences of action to work as cohesive whole and implemented to any of the functional areas of management such as production, financial, marketing, personnel and corporate sectors. For the given objectives, the following strategies are considered:
The need to innovate and create new products that will cater to the varying needs of the market is among the strategies that are being considered. LVMH is determined for artistic creativity and technological innovation. This is done through the impeccable research and development (R&D) initiatives of the Company and its people. The structured method of marketing research has enabled countless of producers and consumers alike to better understand their relationship (1995;2004). Generally, the role of marketing research in every business environment is to provide information that is necessary in the decision-making processes for the development and benefit of the company. Market analysis focusing on consumer, demographics, and geographic considerations must be established.
Another strategy is market segmentation. The basic idea in marketing is the definition of the target market. In marketing LVMH brands, the management should fully recognizes that buyers of any product or service category need, desire, want and expect different performance characteristics from products or services in the category. Market segmentation recognizes that buyers of any product or service category need, desire, want and expect different performance characteristics from products or services in the category (1998). It helps the company to position the product properly and prepare marketing strategies to satisfy a more focused range of consumer needs and wants (1988). This is a product of market research and an important factor in effectively using limited marketing resources, identifying unique market niches, improving profitability and helping to retain consumer loyalty. The basis for the market categorizations of clients and customers include the demographic characteristics, the geographical location, consumer behavior, and psychographic characterizations (2002) as all these are technically included in market research and development (R&D) actions and initiatives.
Utilizing the marketing mix is also seen of strategic importance. The marketing mix principles is controllable variable that is why it can be adjusted on a frequent basis to meet the changing needs of the target market and other dynamics of marketing environment (1991). For the case of LVMH, they already have strong and competitive product line as well as responsively effective promotional strategies. The management should pay particular attention on the issue of price and place of distribution. LVMH is identified for its high prices on products, granted that it is a luxury brand; there is a need to device an appropriate pricing strategy. In place of distribution, as LVMH continuously increases its retail network, there should be a clear market positioning standards. All these suggestions are inherent to the results of research and development (R&D) efforts.
The social responsibility and environmental protection of LVMH is definite and long-standing one. However, with the increasing advocacy on animal welfare and rights that poses a great danger on one of its products (Fashion & Leader Goods), LVMH needs to strengthen these two important aspects of corporate management. This could be done through a definitive marketing communications strategy. Before the consideration of marketing communications tool to be used, it is recognized that LVMH already uses advertising (traditional or online) as primary marketing communications strategy. Thus, the strategies to be used on these two key issues are no longer advertising.
In social responsibility, the management is recommended to increase participation on relevant socio-cultural activities like art exposition, youth programmes, contests, and humanitarian and public health initiatives. This could be done through sponsorship. Marketing-related sponsorships are closer to advertising than to any other marketing communications instrument. The main objectives of sponsorship are similar to those of advertising (e. to build brand awareness for new and existing products in the short and the long run, to build and improve the brand or company image, and to reinforce brand familiarity and use). Although sponsorship, just like advertising, can be used to serve short-term goals, like product trial and market penetration, its main strength lies in the long-term support of brand awareness and brand image, and other IMC tools are needed to stimulate buying behavior in the short run (1997).
In environmental protection, the management should launch a global campaign that reinforces its long withstanding protection to the environment and life. This is to be done using sponsorship and public relations. Similar with the actions on social responsibility, the sponsorship to relevant environmental activities is simple yet strategically acceptable and yield positive results. Public relations, on the other hand, mostly and directly handle the task of image building. Although advertisers use mediums to instill their planned image to the society, public relation officers literally publicize every good deed the organization did, face to face with the audience. According to Lamb and Mckee (2005, p. 1), it provides the opportunity for the organization to successfully monitor, interact, and react with other key groups within the organizational environment. In response to the issue of animal welfare, the management should convince that audience that the Company is environmentally responsible in the design and manufacturing of products.
In implementing these recommended strategies, (1997) claims that efficient and effective communication must be based on strategy. The firm must look for two outcomes. First, purely economic in nature, is the shifting of economic resources to the direction of the seller. The second outcome is the continued permission to operate. It sustains economic potential through maintaining the company’s reputation with direct influence among social and political forces.
The Louis Viutton brand is also implementing its worldwide battle against counterfeiting. Being the most counterfeited brand, the efforts of its management to prevent such criminal acts increases its worldwide marketing status (1994). As given case, the Wikipedia.org reports that Louis Vuitton fake products accounted for 18% of counterfeit accessories apprehended in the European Union in 2004. With the excellent brand development strategy and the effective application of globalization trends, the Group holds a relatively prestigious and profitable standing. Thus, it is recommended that the Company should engage in innovative and hardly imitable product line. There is also a call for insistent bearing of its trademark signature – the Monogram Canvas.
- Marketing audit and planning is indispensable.
- Identify problems and establish an array of potential solutions.
- Specify major or minor, long-term or short-term goals, target location and the applicable strategies.
- Define financial and human resources to be used.
- Construction of strategic business units that will pay attention to a specific segment of the Company and operations.
- Constant communication and information flow among stakeholders.
- Increased marketing efforts as dictated by the demands of the market.
- Market assessment is crucial.
- Identify the most appropriate channel of communication.
- Present a comprehensive plan with definite period of implementation.
- Define financial and human capital.
- Design effective messages for general audience.
- Upper management approval is sought.
- Evaluation after the introduction of the marketing communications programs should be served without delay.
- Conduct comprehensive market research focusing on how to make or what products should be made to decrease the cases of product counterfeiting in specific geographic locations.
- Focus on resource-based core competencies.
- Provide budgetary allocation for anti-counterfeiting mechanisms.
- Establish linkage with anti-counterfeiting organizations and support international laws or business policies against this issue.
- Maintain constant evaluation of actions that are implemented and to be implemented.
Projected Profit and Loss
With the effective implementation of all the strategies recommended, it is intelligently supposed that LVMH will acquire positive growth in its financial performance. There is no specific amount to be stated yet it hopes to increase in significant percentage. There are no losses indicated, provided that the said strategies are properly executed as it yields potentially beneficial results. Everything is directed towards optimistic achievement of all mentioned objectives and eventual increase in corporate sales and profits.
The company will provide a monitoring team that will ensure the profitability and growth of the Company as this marketing plan has been initiated. The establishment of feedback system, evaluation process and performance objective is essential.
Feedback mechanism could be in the form of consumer suggestions, comments and other information-based inquiry. The website is a potent avenue for consumer feedbacks. Similarly, evaluation process is done by a research team. To further evaluate the reactions and comments of the consumers, LVMH is responsible for the analysis and interpretation of the feedbacks and other performances inside and outside the Company and its operations. The result of the evaluation process should be integrated in strengthening the competitive advantages of the Company. Finally, performance objective must be verified. The quantifiable element that would control and monitor the marketing plan will be the effects on corporate productivity and profitability. With the given positive results, the company is assured that the marketing plan is under control and that the Company will surely become successful.