Marketing - Chanel

CHANEL PERFUME

INTRODUCTION

The success of Chanel Perfume traces its roots back to 1870, when Ernest Wertheimer moved from Alsace, France to Paris during the Franco Prussian War. Shortly, after his arrival he purchased an interest in a French theatrical makeup company called Bourjois. Bourjois successfully introduced dry rough to the European market in the 1890’s. The company grew rapidly, and by the early 1920’s Bourjois had begun making and distributing skin creams from his Rochester, New York, plant for cosmetic industry giant Helena Rubenstein. Through the Wertheimer family would control the finances of Chanel from its inception, the impetus and creative vision for the company came from Coco Chanel. Theophile Bader, founder of the successful French department store chain Galeries Lafayette, introduced Coco Chanel to Ernest Wertheimer’s son, Pierre, in 1922. Coco Chanel sought financial help from Pierre Wertheimer to market a fragrance she had developed in 1921. Coco Chanel had an admirer, Pierre Wertheimer who wanted to assist her in succeeding and, two years after their introduction, he founded Parfums Chanel to make and sell her upscale perfume, named Chanel No. 5.

HISTORY OF THE BRAND

Chanel No. 5 perfume was created in the 1920�s, by Coco Chanel this creation was the beginning of one of the legendary names in perfumes. This brand name has parlayed into a world leading retail empire. Chanel No. 5 has been the world’s top-selling perfume. Chanel expanded its line to include women’s fashions, jewelry and accessories, handbags, leather goods, and other products. Chanel has added new fragrances such as: Allure, Chanel Coco, Chanel Chance, and Chanel Chance Lafriche’. Chanel stepped up its purchases in the luxury sector, acquiring A. Michel et. Cie, exclusive hat maker. The company originally marketed the Chanel No. 5 perfume product in local drug stores around the globe.

PRODUCT LIFE CYCLE

In the 21 century , Chanel was still a global perfume leader when Alain Wertheimer took over the company. The Chanel company was mismanaged for several years thereby only 4 percent of the pivotal $875 million U.S. market, its dominance was fading and was viewed by many Americans as a second-rate fragrance that appealed to out-of-style women. Chanel was removed from drugstore shelves in an effort to create a greater sense of scarcity and exclusivity. After, the decline of U.S. outlets carrying Chanel No. 5 plummeted from 18,000 to 12,000, millions of dollars was pumped into advertising Chanel’s fragrances and cosmetics which increased profits. In the 80’s Chanel opened up more than 40 Chanel boutiques worldwide. By the late 1980s those shops sold everything from $200-per-ounce perfume and $225 ballerine slippers to $11,000 dresses and $2,000 leather handbags. As a result of early efforts during the 80’s and 90’s Chanel’s performance improved significantly. In fact, Chanel was considered a global leader in the fragrance industry and a top innovator in fragrance advertising and marketing. Chanel spend more on advertising than almost any other perfume company and as a result was reaping the fattest profit margins in the industry. Today, consumers rated Chanel the leading women’s luxury fragrance brand in the 2007 Luxury Brand Market Analysis (LBMA) survey.

Marketplace/Competitive Analysis

Today, Chanel is rated 4 in the industry of prestigious perfumes and its market share is 4.40 percent. The leading cosmetic company is L’Oreal Groupe who dominates the market share by 31.50 percent of the cosmetic industry. While Chanel market segments are for the wealthy consumers. L’Oreal caters to more of the low to middle income individuals therefore, there share of the market is greater. Although , Chanel yields $2.5 billions in sales a year L’Oreal still segments the market to the low to moderate income persons. Chanel has been attempting to break into the skin care segment, launching its own line under the precision brand.

“The life cycle of fragrances has shortened dramatically in recent years” said Karen Grant, NPD market research. “ A few year ago, it used to be that fragrance would come out, slowly build up sales, and perhaps after three or five years you would start seeing some attrition. Now a fragrance comes out and often by the second year its either off the shelves or posting double-digit declines in sales.”

To make things worse, the perfume market is also suffering from slower growth than some other segments of the beauty industry. L’Oreal’s fragrance division was its slowest-growing cosmetics’ business