PUBLISHING A BUSINESS CASE FOR LOUIS VUITTON TO EMPOWER TRIUMPH

AND IGNITE INNOVATION

In partial fulfillment
of the requirements in the subject Pricing Strategy

College of Accountancy, Business, Economics and International

Hospitality Management

BATANGAS STATE UNIVERSITY TNEU ARASOF-

NASUGBU
Nasugbu, Batangas

By:
Ramon Armenta Jr.
Jerry-lyn Cabag
Agnes D. De Los Reyes
Shaira P. Rodriguez
Joey Ann D. Templanza
Executive Summary

The well-known luxury company Louis Vuitton was founded in 1854 by Louis Vuitton and
specializes in luxury items. It is most recognized for its excellent leather goods, upscale clothing,
and recognizable monogrammed luggage and handbags. The business has developed into a major
force in the world, recognized for its inventive design, fine craftsmanship, and capacity to exude
exclusivity. And the identified deficiency in the industry is the lack of diversity and inclusivity.
Louis Vuitton has faced criticism for their lack of representation and inclusivity in marketing,
advertising, and product offerings. And the proposed pricing strategies are first value- based
pricing and it will benefit the company by assisting in creating products of greater quality, raising
the value of the brand, and encouraging a steadfast clientele. Second is the Premium Pricing
strategy, and this will create a moat to protect the brand, enhance the value and perception of the
brand, and increase the profitability margins. And last is the skimming pricing strategy, and this
will benefit the company by acquiring a substantial return on investment, sustaining customer
engagement, and building a high-end brand.

Introduction

Louis Vuitton is a world-renowned luxury fashion brand that has solidified its position in
the industry with its iconic designs, high-quality craftsmanship, and global presence. The brand
has achieved significant success in the luxury market, offering a wide range of luxury products
and accessories that cater to a discerning and affluent clientele. However, despite its notable
strengths, the luxury fashion industry, including Louis Vuitton, faces several identified
deficiencies and challenges that affect its operations and reputation.

One of the identified deficiencies in the industry is the lack of diversity and inclusivity.
Louis Vuitton has faced criticism for their lack of representation and inclusivity in marketing,
advertising, and product offerings. There is a need for the industry to embrace diversity in its
workforce, leadership, and brand representation to better reflect the global population and cater to
a more diverse customer base. Louis Vuitton, as a prominent luxury brand, has an opportunity to
lead by example and promote inclusivity and diversity in the fashion industry.

Furthermore, the luxury fashion industry, including Louis Vuitton, faces challenges related
to the rise of digitalization and e-commerce. The shift towards online retail and digital marketing
has disrupted traditional luxury retail models, presenting a need for brands to adapt and innovate
in the digital while space. Luxury brands must navigate the balance between exclusivity and
accessibility in the online sphere maintaining the brand's allure and prestige. Louis helps and
assists them in making purchasing decisions. Customers are becoming more aware of the items
they buy and the services they use, and it is an eye-opener for businesses to present them with
relevant and transparent information. Because of this, customers will be better informed, more
aware, and more likely to purchase.

Overview of the Business

A prominent figure in the luxury fashion industry since its founding in 1854, Louis Vuitton
has become a global icon known for its craftsmanship and commitment to exclusivity. Founded
by Louis Vuitton himself, the brand initially became famous in French luxury fashion, specializing
in luxury suitcases, leather goods, haute couture, and ready-to-wear collections. At the heart of
Louis Vuitton's business model is an unwavering commitment to quality. Originally introduced to
prevent counterfeiting, the distinctive monogram now symbolizes prestige and sophistication.

Louis Vuitton's products are targeted at upper-class customers and are valued as symbols
of status, further cementing its worldwide reputation. The brand strategically maintains an
extensive network of boutiques around the world, selecting prime locations to enhance its luxury
appeal. Louis Vuitton has deftly adapted to the digital age, with a strong online presence in addition
to its physical retail space.

Innovation is a key element of the brand's strategy and is expressed through collaborations
with renowned artists and designers, giving traditional images a contemporary touch. Despite its
stellar reputation, Louis Vuitton faces challenges unique to the luxury goods industry, including
counterfeit products, brand dilution, and the delicate balance between exclusivity and accessibility.
In marketing, Louis Vuitton carefully designs campaigns that convey a sophisticated lifestyle,
often using celebrities and influencers as brand ambassadors. Financially, the brand is an integral
part of the LVMH Moët Hennessy Louis Vuitton Group, one of the world's largest luxury goods
groups. Researchers believe it would be useful to examine the complex power relationships that
go into running luxury brands within such conglomerates.

In summary, Louis Vuitton is more than just a supplier of luxury goods. It is a cultural
phenomenon that embodies timeless elegance and craftsmanship. Researchers studying Louis
Vuitton can gain insight into the evolving landscape of luxury retail, the interplay of tradition and
innovation, and the delicate balance between exclusivity and global access in the modern fashion
industry.

Significance of the Study

Specifically, this study will be beneficial to the following:

1. Students - Essentially, learners will be able to comprehend what it is like to be in a real-world

business situation. Marketing students will know what to expect and will predict what will occur
in terms of how business processes work. Most significantly, they will receive sufficient
knowledge and understanding that will undoubtedly be beneficial to their development as students
who will be working in the mentioned field of work.

2. Customers - As customers, they will be able to find useful and relevant information in this study
that will aid and assist them in making purchasing decisions. Customers are becoming more aware
of the items they buy and the services they use, and it is an eye-opener for businesses to present
them with relevant and transparent information. Because of this, customers will be better informed,
more aware, and more likely to purchase.

3. Competitors - In this day and age, competitors in the business industry are becoming more
aggressive. They meticulously research their company competitors, learning a lot that will be
useful in their own brands. Through this research, rivals will learn how to think beyond the box,
maximize their potential, and provide more value to their clients and consumers.

4. Future researchers - The subsequent information offered in this study will be useful to future
researchers who will be conducting related studies. This will be their reference and guideline
throughout their studies.

Option presentation and evaluation of new chosen pricing strategy to apply.

A firm needs a variety of strategies in order to prosper and meet its objectives. An effective
growth tool that has the ability to either boost or demolish a company's operating margins is its
pricing strategy. The methods and procedures used by companies to establish the price at which
they will charge for goods and services are known as pricing strategies. They provide guidance on
how to value a market, a brand, and consumers. The industry and a company's particular goals
determine the strategy. A well-executed pricing plan facilitates consumer trust-building and helps
a corporation reach its financial objectives.

The Louis Vuitton Company is well-known in the industry, and if they stick to their value-
based, premium, and price-skimming strategies, their business will become even more prosperous.
The company's growth will be aided by these price initiatives.

Value-based pricing lets the business set the highest price for your products according to
what customers deem worthwhile. Customers already view the Louis Vuitton Company as
valuable, therefore this price plan will assist in increasing the company's profitability. Its timeless,
stylish style is well-known and adds to its appeal. Within the world of fashion, the recognizable
LV logo still connotes luxury, status, and prosperity. Customers will always recognize the worth
of the Louis Vuitton Company's products, allowing for a high value-based pricing strategy and
increased profits.
 Implementing a premium pricing strategy will help the business be seen as having high
standards. Consumers will assume that goods with premium prices are likewise of premium
quality. Although Louis Vuitton items are expensive, consumers consistently believe that their
great quality makes them worthwhile. It is advantageous to cultivate the perception that the market
for your products is somewhat better than the competition. Consumers seek superior goods and
services, and in this case, cost plays a crucial role. Even in cases where a firm reduces its expenses,
customers still want a feeling of elegance and exclusivity. The Louis Vuitton Company may charge
a premium price for their items since they have already established their brand.

Skimming price will contribute to the product’s elevated perception and image. When
launching a new product, the business can establish a high price until there is market demand, at
which point it can progressively lower the price as demand changes. It is beneficial to put a
premium price on any Louis Vuitton products because they are all always in style.

Pricing strategies are vital for business. It helps to attract customers because price makes
an initial impression and might persuade them to buy from your company. Offering competitive
pricing persuades customers to select your goods over rivals. This also portray value because
Cheap products might be viewed by some consumers as being of inferior quality. Alternatively, a
premium price might indicate superior quality, but it can also turn away buyers. It helps to satisfy
the expectations of the customer because companies that do extensive research to satisfy
expectations are able to predict how customers and rivals will respond to a new pricing.
Determining sales revenue and profitability in marketing requires careful consideration of pricing.
It increases client loyalty and boosts sales.

Benefits

1. Value-based Pricing
Some of the benefits of this kind of pricing approach are as follows:

a. It assists you in creating products of greater quality. The customers' ongoing input
assists you in determining what new products to produce in order to meet market demands.
Value-based pricing is dependent on how much your customers think you are worth, and
that worth is determined by a number of things, including quality. This offers a plethora of
knowledge on price as well as ways to enhance your company.

b. It raises the value of a brand. Value-based pricing elevates the value of your brand by
demonstrating that your company is committed to serving consumers' needs and making
sure the products that the company offers are excellent. The higher quality of the products
you sell and the consumer experience that your brand offers justify your premium costs.
 c. It encourages a steadfast clientele. Customer loyalty is fostered by offering distinctive
experiences, outstanding customer service, and pleasure to customers. Undoubtedly, this
entails offering high-quality products that live up to the value your clients believe they are
worth.

2. Premium Pricing Strategy

Some of the benefits of this kind of pricing approach are as follows:

a. Create a moat to protect your brand. Higher entry barriers in your sector may result
from a successful premium pricing strategy. If your product does not match the quality and
price points of competitors' offerings, they will not be able to compete. A well-
implemented premium pricing plan can help you solidify a competitive edge quickly.

b. Enhances value & perception of the brand. Premium pricing increases the value of your
brand and the reputation of your business. A high-end product not only builds its own
reputation for excellence, but it also enhances the perception of the other products in your
line.

c. Increasing profitability margins. If you can successfully implement premium pricing,

your business will inevitably see larger profit margins. Simple math shows that higher unit
pricing will result in a bigger profit for every unit sold.

3. Skimming Pricing Strategy

Some of the benefits of this kind of pricing approach are as follows:

a. Acquiring a substantial return on investment. When introducing a product, price

skimming may increase your return on investment. Offering prospective customers at a
premium enables the business to boost the profit margin on the first batch of units while
demand is strong. A corporation can charge extra to customers who are willing to pay more
to be the first to acquire a product or who will not wait to profit from it.

b. Sustaining customer engagement. Reducing a product's price might be a good strategy

to maintain customers' attention. When a corporation introduces a product utilizing a price-
skimming strategy, it frequently comes across groups of potential customers who think the
product is too expensive. People in this group get more interested as you reduce your costs.
This may enable you to provide a consistent flow of revenue, with each reduction in price
contributing to the product's market resurgence.
 c. Building a high-end brand. Establishing branding for your business and differentiating
your product as a premium offering may be achieved by using a price-skimming strategy
for new releases. When you charge more for your items at launch, you are communicating
to customers that they are high-quality as well. Developing a reputation as a maker of high-
quality items could enable you to set greater rates for both your present and upcoming
offerings.

Risks

1. Value-Based Pricing
Here are some of the risks associated with this type of pricing strategy:

a. Difficulty Justifying the Added Value for Products - In a business world where
competition is spreading rapidly, it is a difficult challenge for companies like Louis Vuitton
to defend and vindicate the added value for the products they offer, especially if there is
nothing special about them unless they have a unique quality and attributes in comparison
to their market competitors.

b. Instability of the Perceived Value - Change is the only one constant in the corporate
world, just as it is in life. Everything continues to shift especially when these changes are
caused by unpredictable cultural, social, economic, and technical reasons. Furthermore,
there are many competitors surrounding Louis Vuitton, and they may offer higher product
value, and customers may see more value in the products of other companies.
c. Price May Be More Challenging to Set - To be honest, different customers have different
perspectives, making it difficult for businesses to determine a price range that works best
for every customer.

2. Premium Price Points under Competition-Based Pricing

Here are some of the risks associated with this type of pricing strategy:

a. Increase in Customer Expectations - Customers tend to demand more when they pay
more in a company like Louis Vuitton, where the prices of their products are set high. It is
only natural for customers to ask for more from the goods they receive when they pay a
higher price than competitors. However, Louis Vuitton has demonstrated over the years
that their items are indeed deserving of their high pricing.

b. Increase in Product Development Costs - As a well-established brand all over the world,
the reputation of Louis Vuitton should therefore be preserved. As a result, the costs of
 sustaining and improving their products are higher because they must provide the same or
even better quality than before.

c. Limits Customer Base - Because Louis Vuitton only caters to high-income businessmen
and women, their customer base is limited. Thus, the market share of the corporation
declines.

3. Skimming Pricing Strategy

Here are some of the risks associated with this type of pricing strategy:

a. Disappointment to Price Decreases After Initial Purchase - Customers might be

dismayed and turned off by price decreases after purchasing on its initial offering because
skimming pricing offers high prices during its initial offering and tends to lower when
faced with competition. Most customers are price-sensitive, and many appreciate discounts
and freebies.

b. The Use of Similar Technologies by Competitors - Skimming pricing may be

disadvantageous if competitors use the same technologies and are likely to offer lower
prices for the products. They may choose the competitor over the company because they
believe the products are similar and of equal quality, only that the competitor has a lower
price when compared to the company.

c. Quality Must Match the Price - Companies that charge much higher prices for their
products, such as Louis Vuitton, must be able to justify that the price matches the product's
quality. It is critical that the company be able to persuade their customers that the products
they purchase are an investment in the future because their quality is long-lasting and worth
the price.

Resources Required

▪ Design and Creative Talent: Highly skilled designers, creative directors, and artisans who
can develop and produce luxury fashion and accessories.

▪ Raw Materials: High-quality materials such as leather, fabric, and metals used in crafting
their products.

▪ Manufacturing Facilities: State-of-the-art production facilities, often located in countries

with a tradition of craftsmanship.
 ▪ Skilled Artisans: Expert craftsmen and craftswomen who create and assemble Louis
Vuitton products by hand.

RESOURCES REQUIRED COST

Design and Creative Talent $60,000 - $150,000 per year
Raw Materials $170
Manufacturing facilities
Skilled Artisans $60,000 - $150,000 per year

References

Ferguson, A. (2022, November 21). What are the Advantages and Disadvantages of Value Based
Pricing? Annette & Co. https://www.annetteandco.co.uk/advantages-and-disadvantages-
of-value-based-pricing/

Premium Pricing strategy: Pros & Cons [+Examples]. (n.d.).

https://www.profitwell.com/recur/all/premium-pricing

Shendruk, A., & Bain, M. (2022, September 21). An analysis of 27,000 Instagram images show
that fashion’s BLM reckoning was mostly bluster. Quartz.
https://qz.com/1971689/fashion-brands-arent-keeping-their-instagram-diversity-promises

What are pricing strategies and why are they important? (2023, September). Indeed.
https://uk.indeed.com/career-advice/career-development/pricing-strategies

What Is Price Skimming? (With Definition, Pros and Cons). (2023, February). Indeed.
https://www.indeed.com/career-advice/career-development/what-is-price-skimming