Brand Extensions, Research Paper Example

Louis Vuitton fashion label is owned by LVMH Moet Hennessy Louis Vuitton which is the world’s largest luxury goods company (Hoovers). Louis Vuitton initially became famous for its canvas-covered travel cases which were suited to modern travel via airplanes, trains, and automobiles (Vogue) but now the brand gets most exposure probably through its Louis Vuitton-monogrammed handbags. Even though Louis Vuitton is the world’s most valuable luxury brand (Thompson, 2011), it is still absent from one popular product category which has been embraced by almost every competitor. In fact Louis Vuitton’s parent company owns some of the most valuable fragrance brands including Guerlain and Christian Dior (Hoovers).

I am mindful of the brand value of Louis Vuitton as well as the fact that overexposure can hurt brands. Some of the luxury brands that have been hurt by overexposure in my opinion include Tommy Hilfiger, Calvin Klein, and Perry Ellis. If it were up to me to create brand extension for Louis Vuitton, I will branch the brand into prestige fragrances market. As Wall Street Journal’s article shows, Louis Vuitton has low price elasticity of demand as can be expected from one of the most exclusive luxury brands. Louis Vuitton has increased prices of its products in numerous markets including France and Japan but the higher prices have done little to hurt its sales (Passariello, 2013). Thus, introducing a line of premium fragrances under the Louis Vuitton brand will create another revenue stream and higher price points will also help protect the brand’s prestige.

My focus will be as much on protecting the brand’s prestige as it will be on creating another valuable revenue stream. Thus, my whole marketing strategy will be designed around the idea of maintaining exclusivity. I will take some notes from the brand’s competitors including Chanel and Hermes as well as sister brands owned by LVMH itself such as Guerlain and Christian Dior. The common theme among all these four brands is that they have a line of mainstream fragrance lines which is aimed at mass market while also have premium fragrance line which is more exclusive, priced at niche levels, and only available through select distribution channels including company-owned retail stores. Louis Vuitton will not introduce any fragrances aimed at mass market but only limited-distribution premium fragrance line priced in the $300-$500 range. The price will also reflect the exclusive packaging that announces Louis Vuitton’s commitment to artistic creativity.

The company will introduce three fragrances each year out of which only one will join the company’s permanent product line. The company will only determine the candidate for permanent collection on the basis of sales figures. Since no one will know which two may be discontinued, this will help create strong sales for all new introductions. This strategy will also help the company build a strong product line of best sellers over the long run. Louis Vuitton is owned by LVMH which already has the expertise, resources, and the know-how to create fragrances that reflect the tastes of high-income consumer groups. Thus, Louis Vuitton fragrances may be either created by in-house perfumers from brands such as Guerlain and Christian Dior or they may be outsourced to one of the major fragrance companies such as Givaudan, IFF, and Firmenich (Pitman, 2007).

I have included fragrance and particularly niche fragrance category as the brand extension for Louis Vuitton for several reasons. First of all, fragrance industry is going at a tremendous pace and niche fragrances are especially doing well, given the small client base if NPD Group’s report is to be believed. NPD Group reported last year that prestige fragrance industry is now at least worth $1.6 billion in the U.S. and sales of niche fragrances grew at three times the rate of designer fragrances last year. NPD’s Karen Grant particularly noted that fragrance brands being sold in more selective distribution are experiencing tremendous growth (PR Web, 2012) which is positive news if Louis Vuitton enters the premium fragrance market, with selective distribution strategy.

I was trying to think of a product that will help maintain the prestige of the brand, will pose minimum risk of brand over-exposure, and will also help create a stable and attractive revenue stream and premium fragrance category satisfied all conditions. Another benefit of this brand extension is that Louis Vuitton’s parent company already has the expertise and resources, thus, this product line can be introduced relatively quickly and inexpensively. Another benefit of this product line is that fragrances are usually not subject to the same quality standards as other more-tangible products because preference for smell is subjective.

Louis Vuitton is the world’s most valuable luxury brand, thus, any new product line would have to avoid the risk of overexposure while creating a valuable revenue stream. Fragrance industry has been growing at a tremendous rate and niche fragrances are doing even better than designer fragrances. This offers valuable opportunity to Louis Vuitton to enter niche fragrance market and fortunately, it can benefit from the resources of its sister brands such as Guerlain and Christian Dior.

References

Hoovers. (n.d.). LVMH Moët Hennessy Louis Vuitton SA Company Profile. Retrieved April 20, 2013, from http://www.hoovers.com/company-information/cs/company-profile.LVMH_Mo%C3%ABt_Hennessy_Louis_Vuitton_SA.f120d33f05adaa0d.html

Passariello, C. (2013, April 16). Louis Vuitton Sports a Richer Price Tag. Retrieved April 20, 2013, from http://online.wsj.com/article/SB10001424127887324345804578426902194074008.html?mod=googlenews_wsj

Pitman, S. (2007, August 3). Givaudan profits tumble on Quest acquisition costs. Retrieved April 20, 2013, from http://www.cosmeticsdesign-europe.com/Business-Financial/Givaudan-profits-tumble-on-Quest-acquisition-costs

PR Web. (2012, October 18). NPD Group Reports on Prestige Fragrance Performance Year-to-Date – Winners Include Jewelry and Niche Scents. Retrieved April 20, 2013, from http://www.prweb.com/releases/2012/10/prweb10026566.htm

Thompson, D. (2011, May 11). Branding Louis Vuitton: Behind the World’s Most Famous Luxury Label. Retrieved April 20, 2013, from http://www.theatlantic.com/business/archive/2011/05/branding-louis-vuitton-behind-the-worlds-most-famous-luxury-label/238746/

Vogue. (n.d.). Louis Vuitton. Retrieved April 20, 2013, from http://www.vogue.com/voguepedia/Louis_Vuitton