LOUIS VUITTON: A CASE STUDY

STRATEGY FOR A POSSIBLE BRAND EXTENSION

Fashion Branding Summative Assessment

MA Fashion Design Management

Ilaria Quintè 14439514

word count: 3101

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CONTENT PAGE

1. INTRODUCTION...........................................................................................4

2. BACKGROUND ...........................................................................................5

3. POSITIONING STRATEGY .........................................................................8

3.1 Value Proposition .......................................................................................8

3.2 Unique Selling Point ...................................................................................8

3.3 Porter Five Forces Analysis ........................................................................9

3.4 Competitors ...............................................................................................12

3.5 Points of Difference and Points of Parity ...................................................14

3.6 Positioning Map .........................................................................................16

3.7 SWOT Analysis .........................................................................................17

3.8 Customer Segmentation ...........................................................................18

4. BRANDING STRATEGY ............................................................................19

4.1 Brand Equity model ..................................................................................19

4.2 Critique of the brand equity model ............................................................24

4.3 Brand Image versus Brand Identity alignment ..........................................24

4.4 Discussion about brand extension ............................................................25

5. RECOMMENDATIONS - BRAND EXTENSION .........................................26

5.1 Extension in the cosmetics market ............................................................26

5.1.2 Cosmetics Market ...................................................................................27

5.2 Brand extension proposal ..........................................................................28

5.2.1 Consumer needs ....................................................................................28

5.2.2 Brand concept and resources ................................................................29

5.2.3 Target market .........................................................................................31

5.2.4 Competitive advantage ..........................................................................32

5.2.5 Competitors ...........................................................................................32

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1. INTRODUCTION

The impact of globalization and the changes in consumers' attitudes and purchase behavior

towards luxury products is changing the luxury industry and require brands to constantly

innovate their strategies (Turner, 2016). Today the market of luxury goods is highly

competitive and brands who are seen available everywhere often lose their luxury value and

therefore their authenticity as being 'true luxury' becomes diluted (Danziger, 2018). In the

past decades Louis Vuitton faced challenges around in the Asian market as consumers

preferred to buy from brands with less over ubiquitous logos and with fresher designs

(Business of Fashion, 2013). This was also due to the fact that the brand's logo was subject

to lot of counterfeit (Danziger, 2018). This resulted in creating problem with its image as the

brand was now being associated with 'accessible luxury' rather than 'exclusive' even though

its prices are the opposite as being accessible (Ferdman, 2013).

However, Louis Vuitton managed to overcome the issue and changed the brand

associations and went for subtler designs by reducing the visibility of its logo both in

products and marketing campaigns, alongside working with designers and artists

collaborations and promoting its travel heritage (Ferdman, 2013; Kornienko, 2017).

Therefore, this report will aim to identify the positioning of Louis Vuitton in order to

understand how the brand differentiates from competitors and its branding strategy to further

evaluate brand image and brand identity. In the last section of this report a brand extension

will be proposed by evaluating the current needs of consumers and the suitability of the

extension according to its brand values.

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2. BACKGROUND

Louis Vuitton is a luxury fashion house that was founded in 1854 by a French craftsman and

trunk maker of the same name (Business of Fashion, n.d).

At the time the company was founded, travelers were using horse drawn carriages, boats

and trains as means of transportation, meaning baggage was often treated with poor care

and travelers were referring to craftsmen in order to protect and pack their items (Louis

Vuitton, n.d). The company quickly became a success as since the beginning it has been

able to differentiate itself and meet the specific requirements of consumers' needs by

adapting its designs and materials to create distinctive products always inspired around the

theme of travel (Holborow, 2012; LMVH, n.d). In fact, through the years it has been able to

extend its product categories behind trunks and include a wide range of products (Forbes,

2019) (See Figure 1 and 2).

Figure 1 : Louis Vuitton's Product Range

PRODUCT RANGE - WOMEN AND MEN

Handbags Fragrances

Wallets Jewelry

Key and card holders Trunks

Phone Cases Travel accessories

Shoes Tech accessories

Furniture Games and collectors’ items

Books and writing Home decor

Sunglasses

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Source: Ilaria Quintè

Figure 2: Louis Vuitton's product portfolio

Source: Ilaria Quintè

Since 1987 the brand is also part of the Fashion and Leather Goods sector of French

multinational luxury goods conglomerate LVMH group, which owns 70 different brands in six

different sectors (LVMH, n.d). LVMH group strives to be a symbol of product and service

excellence, founded on values such as innovation, creativity and entrepreneurship which are

shared among all its brand portfolio (LVMH, 2018).

The Fashion and Leather Goods sector of LVMH includes 17 different brands (See Figure 3)

and made a total of 22, 237 millions of EUR in 2019 (LVMH, n.d). In 2019 the sector has

achieved organic revenue growth of 17% with recurring profit operations of 24% also thanks

to the extraordinary performance of Louis Vuitton (LVMH, 2020).

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Figure 3: LMVH Leather and Goods brands portfolio

Source: LVMH (2020)

Today Louis Vuitton has 19,000 employees over 65 countries around the world and is the

only brand who maintains its exclusivity by selling its products only in stores and never hold

sales or outlets (Business of Fashion, 2019).

After overcoming the fake associations with its brand image, overall the brand has seen a

rapid increase in all its creative areas, especially in the Menswear collections where the new

artistic director Virgil Abloh has invested in developing new technologies and introduce new

designs (LVHM, 2018).

Moreover, Louis Vuitton has been constantly innovating in the past 20 years by maintaining

its core values of savoir faire, innovation, respect for craftmanship and commitment for

sustainable and ethical practices. In fact, in 2018 it was awarded The Butterfly Mark

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sponsored by Positive Luxury for the excellence of innovation and commitment to social and

environmental responsibility, governance and community investment (Positive Luxury.com).

According to Interbrand (2019) based on its financial performance and its ability to influence

consumer choice by maintaining premium prices, Louis Vuitton is the world's most valuable

fashion brand, with a USD $32.22m brand valuation (Alexander, 2017). In its report,

Interbrand stated that this position highlights the end of a traditional brand positioning, but it

reflects the accelerated change of the competitive landscapes due to the attitudes and

purchasing behavior of consumers (Interbrand, 2019).

3. BRAND POSITIONING STRATEGY

3.1 VALUE PROPOSITION

Louis Vuitton offers a "more and more" value proposition which provides high quality and

exclusivity to customers. It aims to create highest brand value and pricing by highlighting all

elements of craftmanship and heritage emboding high standard of living (Kotler, 2016;

Marwah, 2019).

Source: adapted from Kotler (2016)

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3.2 UNIQUE SELLING POINT

By following a differentiation strategy achieved through premium price, high mark ups and

limited availability (Porter, 1985) the brand is able to meet specific consumer' needs by

providing high quality luxury products with a combination of craftmanship, savoire-faire and

continuous technology innovations (Louis Vuitton, 2019). Louis Vuitton is able to differentiate

itself from competitors by providing the best ratio between perceived exclusivity obtained

through its retail distribution strategy and its entry price , where its products are not only

functional but a representation of consumers' desires and dreams communicated through a

spirit of freedom and adventure (Mira, 2016; Mintzberg et al., 2003).

3.3 PORTER'S FIVE FORCES ANALYSIS

Competition in an industry is not only based in fighting for market share. According to Porter

(1979) the state of competition in an industry depends on five forces, which ultimately

determine the profitability of an industry. These forces are diagrammed in Figure n.4a and

4b.

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Figure 4a: Porter's Five Forces diagram

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Figure 4b: Porter's Five Forces Analysis

THREAT OF NEW ENTRANTS - LOW

• The market of Luxury and leather goods is saturated and rapidly growing (Euromonitor,
2020)
• High initial capital investments required in order to enter the market
• Most important players in the market are well known and established luxury giants
such as LMVH, Kering and Hermes (Statista, 2019)
• New entrants are mainly new independent designers which offer products more
affordable than Louis Vuitton but are not a big threat due to the consumers' high brand
loyalty towards the brand (Mulholland, 2019)

THREAT OF SUBSTITUTES - HIGH

• Many other luxury competitor brands such as Hermès, Burberry and Kering in the
market offer the same products with a similar quality and performance of Louis Vuitton
(Statista, 2019)
• Indirect competitors such as Michael Kors offer better value for the price, therefore
there are low switching costs for consumers (Statista, 2019)
• Counterfeit products pose a threat of substitutes as even if fake, consumers can easily
buy the same products for a cheaper price (Danziger, 2018)
• If consumers are well-knowledge and loyal towards the brand, threat of substitutes can
be considered as low.

BARGAINING POWER OF SUPPLIERS - LOW

• The majority of suppliers have only few clients and are mostly exclusive (Gauberti,
2014)
• There is a high number of manufacturers in Asia or India which is able to produce for
lower costs, therefore switching costs for buyers are low and also supplier power is low
(Hope, 2017)
• Louis Vuitton has high control over quality as it owns many factories in Europe and
North America (Williams, 2019)
• Louis Vuitton has acquired Les Tanneries Roux, a leather supplier, which makes
bargaining power of supplier relatively low (Business Wire, 2011)

BARGAINING POWER OF BUYERS - LOW

• There are several luxury brands from where consumers can purchase from with a low
switching cost, therefore buyer power is medium (Statista, 2019)
• Products within the industry are heavily differentiated
• Consumers are not able to backward integrate effectively

INDUSTRY RIVALRY - HIGH

• There are lot of competitors within the market such as Hermès, Burberry and Kering
Group (Statista, 2019)
• The industry is rapidly growing and is expected to grow more in the next few years
(D'Arpizio et al., 2019)
• There is high level of competition in the industry but also high margins. However,
competition in the industry is not on price but mainly on quality and image.

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3.4 COMPETITORS

Louis Vuitton's main competitors are Gucci, Hermès, Burberry and Chanel (Mintel, 2019).

They are all direct competitors as they compete in the same market based their strategy on

providing luxury apparel and accessory products to high end customers based on values of

innovation and craftmanship.

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Figure 5 : Competitors Analysis Matrix

ESTABLISHED 1854 1837 1856 1921

VALUE Superior quality, Elegance, British heritage, Eclectic,

PROPOSITION exclusivity and timelessness and distinctive luxury romantic,
strong heritage tradition (Burberry, 2020) contemporary
(Gucci, 2020)
UNIQUENESS LV brown Duc carriage with Equestrian Knight GG logo, red
monogram horse, Iconic logo, trademark and green
OF IDENTITY orange box. check stripes

PRODUCT Products offering Products offering Products offering Products offering

for Men & Women. for Men & for Men & Women. for Men &
OFFERING Ready to wear, Women. Ready to Ready to wear, Women. Ready
handbags, wear, handbags, handbags, to wear,
fragrances, fragrances, footwear, handbags,
footwear, accessories, accessories, footwear,
accessories, tech footwear, books fragrances, make accessories,
accessories, and writing, make up. Children's fragrances,
trunks, home up, home ready to wear, make up, home
decor, books and furniture, handbags, decor, Children's
writing. equestrian footwear and ready to wear,
equipment accessories accessories and
footwear.
DISTRIBUTION 460 stores 310 stores 475 stores 520 retail stores
worldwide worldwide worldwide with a worldwide
between North between North & network of owned between North &
and Latin America, Latin America, and franchised Latin America,
Europe, Middle Europe, Asia, stores (Statista, Europe, Middle
East, North and Middle East and 2019). Sell through East, Russia,
South Africa, Oceania. wholesale, Asia & Oceania
Oceania (Louis Watches, licensing partners, (Gucci, 2020;
Vuitton, 2020). perfumes and outlets and e- Statista 2020).
Sells through tableware are commerce. Sells through
limited distribution sold also through (Burberry, 2020) wholesale,
channels, doesn't third party sellers licensing
sell through and airports. E- partners, outlets
wholesales or commerce and e-
outlets but only available. commerce.
stores and e-
commerce (Hermès, 2020)

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3.5 POINTS OF DIFFERENCE AND POINTS OF PARITY

According to Keller (2012, p.85-86) once the nature of competition and the target
market have been defined, an analysis of the points of parity and points of difference
can be useful to guide brand positioning.

Figure 6a: Points of Difference

PRODUCT

• Products have high levels of distinguished quality and blend modernity and
tradition (LMVH, no date; LMVH, 2015)
• Meticulous attention to details with specific production facilities for small
components such as luggage handles (White & Denis, 2018)
• They are designed to be sustainable and repaired. Digital models and 3D printing
make prototype easy and without waste (Louis Vuitton, n.d)

PRICE

• Prices are never marked down (Louis Vuitton, n.d)

• Luxury brand with expensive price strategy allowing high mark ups
(Danziger,2018)

PLACEMENT

• The brand maintains its exclusivity by selling only in stores and through its official
website (Louis Vuitton, n.d)
• Stores are only in landmark locations (Mcalpine, 2019)
• Majority of stores replicate art galleries with art installations, sculptures
(Mcalpine,2019)

PROMOTION

• Press is the most preferred and used media channel and allows to maintain
exclusivity. Pop up temporary events hosting have also been introduced to display
innovations worldwide (Mintel, 2019; Mintel 2019)
• Partnerships with sports associations such as NBA, PC games such as League
Legends (LMVH, 2020)
• Louis Vuitton's foundation offers temporary arts exhibitions, concerts and film
projections. They also include family’s activities and workshops for architecture
and arts (Foundation Louis Vuitton, n.d)

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According to Keller (2012) points of parity associations can be unique to the brand or shared

among different brands. There are divided in three types which are analyzed in Figure n.6b.

Figure 6b: Points of Parity

CATEGORY POINTS OF PARITY

• Contemporary and multifunctional luxury handbags and products adapted around the
theme of travel (LMVH, n.d)

COMPETITIVE POINTS OF PARITY

• Responsible sourcing: Preservation of raw materials and carefully monitored

supply chains to ensure suppliers meet environmental standards (Louis Vuitton, n.d)
• Materials: LMVH Eco Material Library is one of the biggest resources that educate
design teams to use eco-friendly materials (Louis Vuitton, n.d)
• Packaging: Gift boxes are made from mixed FSC-certified virgin and recycled
fibers, fragrances can be refilled in selected stores
• Circular creativity: the brand has incorporated a reuse-processing process and
donate to associations such as La Réserve des Arts association and MFTA in New
York materials such as leather, wood, gold and textiles (Louis Vuitton, n.d)
• Expansion: opening new stores in Canada and introduction of a restaurant
inside Louis Vuitton's store in Osaka (Davis, 2020). LMVH is planning to open a
Louis Vuitton's cafè in London (Street, 2019)
• Challenging luxury: partnership with Italic, a platform where designer products are
sold without a label and for a lower price. Consumers can purchase two items every
month (Mintel, 2019).
• Digital strategy:

CORRELATIONAL POINTS OF PARITY

• It is the most valuable luxury brand in the world but according to Mintel (2019)
consumers still not perceive it as a fashion leader (Alexander, 2017)
• Due to counterfeit issues, the brand is available and seen everywhere which
decreases customers' perception of exclusivity and accessibility (Danzinger, 2018)

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3.6 POSITIONING MAP

The positioning map is based on price and exclusivity as shown in figure 3c. Louis Vuitton

position itself among competitors as exclusive and prestigious (Mintel, 2019).

Figure 7: Positioning map

Source: Ilaria Quintè

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3.7 SWOT ANALYSIS

SWOT analysis is conducted below (See Figure n.8) to match the internal strengths of the

company to attractive opportunities in the market, while overcoming weaknesses and

minimizing threats (Kotler, 2012).

Figure 8: SWOT Analysis

STRENGHTS WEAKNESS

• Strong brand heritage (Louis Vuitton, • Saturated market (Euromonitor, 2020)

2010) • Competitors have a strong positioning in
• Product innovation and continuous the market (Mintel, 2019)
collaborations with artists and designers • Disparity of prices in Asia could lead to
(Louis Vuitton, 2010) decreased business (Arnett, 2019)

OPPORTUNITY THREATS

• Growing luxury goods market in Asia, • Proliferation of counterfeit is a big

especially China (Danziger, 2019) challenge for the brand (Flows, 2015)
• Extend target consumers to Gen Z and • All competitors are going fur-free
millennials (Danziger, 2019) (Mintel, 2019)

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3.8 CUSTOMER TARGET MARKET

Figure 9: Customer segmentation analysis

Louis Vuitton target consumers both men and women from 18 to 60

years old. The brand has recently decided to extend its target market
to include Generation Z and millennials due to their growing spending
in luxury goods and their potential to drive the luxury market by 50%
DEMOGRAPHIC by 2025 (Fregne et al.; BCG Altagamma, 2019)

Ethnicity: 68% of consumers come from a white ethinicity (Mintel,

2019)

Income: Earnings between £100k-£150k and under £50k for the

younger segment (Mintel, 2019)
The brand strategically targeting on a global scale (New York Times,
1984). Their target resides mostly in West and Central Europe, US
and Asian countries. The brand is now heavily targeting China due to
a rise of a fashion-savvy middle class highly spending on luxury
goods and accounting for one third of the world's luxury sales
(Financial Times, 2019 ; Deloitte, 2018).
GEOGRAPHICAL
Moreover, India has been a potential focus of target due to the
growing segment of HENRYS (High-Earners-Not–Rich-Yet) and a
growing middle class who has changed traditional views of luxury
products by opening up to innovation and creativity (Deloitte, 2019).
PSYCHOGRAPHIC According to the VALS framework, Louis Vuitton's consumers are in
the high resource group of thinkers and achievers as they are
motivated by achievements and ideals (Mostafa, 2014). They enjoy
travelling in a luxurious way, like fine dining and participate in sports
activities often for social gathering. Their interests are in fashion, arts,
music and entertainment (Louis Vuitton, 2011; Williams, 2019). They
believe spending time with family is important and believe
sustainability is important (Positive luxury, 2020). Furthermore, Louis
Vuitton's consumers are also experiencers, which is the youngest
group segment motivated by self-expression and spend heavily on
clothing and luxury (Mostafa, 2014).
BEHAVIOURAL Occasion: Recognise the need to carry luxury handbags or wear
highly fashionable ready to wear

Benefit: Quality and craftmanship are tangible benefits sought for

initial purchase, but consumers are also willing to pay the premium
price to demonstrate a prestigious status or fulfillment (Hoyer et al.,
2012).

User status: They are regular and heavy users who engage with the
brand and purchase frequently (The Independent, 2004)

Loyal status: highly loyal customer base who continually purchase

the brand to enhance their appearance and status quo and believe
"one Louis Vuitton item in the closet looks too lonely" (The
Independent, 2004)

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