In 1996, the CEO of Coach foresaw this trend of convergence and decided to steer the company toward a faster cycle, demand stimulating fashion industry by appointing Reed Krakoff, from Tommy Hilfiger, as President and Executive Creative Director. Coach tried to change its image as the staid all-leather traditional handbag maker that it had been for its entire existence. Coach's skill of producing high quality bag is prominent for long time. However, the brand was consistent, narrow and deep.
Luckily, Coach's top management deeply appreciated both the shortcomings and the strengths of the leather-good makers. Therefore, they keep this strength while adding more value to Coach's products. Coach started a serial of changing. Coach wanted its designers to" keep Coach relevant when fashion handbags feed frenzy was just beginning. First, they introduced many new styles, and materials to Coach's collection. It unveiled the new "Ergo collection" with new shapes and design, and moved into a mixture of leather and fabrics.
To change the brand image, Coach replaced the old advertisements featuring bag-toting descendants of icons like George Washington with living legends such as Candice Bergen and John Irving to hawk its products and attract the younger buyers Coach yearned for. The strategy Coach has employed to gain competitive advantage was differentiation by updating its brand image from high-end and low end players, improving product designs, refreshing marketing campaigns, expanding and updating distribution channels, and remodeling operation process.
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Coach would not have been successful if these processes were not done successfully. Alignment Coach was a great classic company with a strong heritage in craftsmanship and quality, which is core value of Coach. With changing consumer preferences, it was vital for Coach to evolve without sacrificing its core values. It had one look and the qualities we're known for. Today, it has become more refined, more stylish and interpretive of style, but still incorporates the underlying qualities of the brand.
Coach insists giving customers a distinctive and easily recognizable product made out of excellent materials by skilled craftspeople. In process that the company creates value for the consumers, Coach converts the value from a craftsmanlike handbag to a stylish, fashion name brand by immense marketing efforts and building extensive yet selective distribution channel. Strategies: Expand client base without losing existing clients: The brand is gaining stature from being a sort of one-dimensional brand to appealing to a much wider consumer base. Coach used to occupy the `accessible luxury' segment.
Now it also appeals to consumers in the designer and moderate segment. Changes, though, have not alienated existing customers while bringing in new ones. Over 80 percent of sales come from existing users Five years ago, it was 90 percent. In the year 2002, over 15 percent of our sales came from younger consumer types between 18 and 24. Broaden Coach Brand broadness and maintain consistent information: From 1999, Coach introduced footwear, eyewear, home furnishings, watches and jewelry, each of which encompassed the meaning of the brand from a fashion and design point of view.
Furniture was sleek, modern and dean, while the shoes were classic and often included hardware elements taken from the bags. When Coach moved forward into new categories, it's really important to maintain the same aesthetic. Everything tried to tell one story or else the customer was going to reject it. This story is driven by a team with a shared vision and deep understanding of our brand. Developing a solid and growing customer franchise, they have expanded into international markets and broadened product lines, all with a consistent marketing message, from product to retail environment.
Update the brand image by more intensive advertisements: In 1996, print ads in the "Living Legends" campaign were elegant but had a staid look, with basic product shots on white background set against conservatively lit portraits. The ads described Coach as "an American Legacy. Since 1997, Coach has made great efforts to update its image by gradually increasing ad spending, which reached $17 million in 2002. Three times each year -- spring, fall and holiday -- Coach launches a major ad campaign in support of key selling seasons.
In addition, the same message will be reinforced in the catalog, Internet, store windows and outdoor advertising. Moreover, Coach's retail stores have morphed from dark-paneled wood interiors into airy white spaces. Coach has led the push in-house to invigorate its advertising. Coach ads, once rather stiff and traditional-looking, are now brighter and more colorful with crisp images focused tightly on product, creating a look that--while not quite edgy like Prada's--makes a younger and more modern statement.
Listen to customers and adjust to consumer's behavior: One of the most important strategies of Coach is listening to the consumer to keep the brand relevant. Each year, Coach spends $2M conducting extensive marketing research. This company has a 7 million-household database for communication and research, where it can obtain critical knowledge about how the consumer thinks about the brand, how she goes about making a purchase decision and what roles fashion, price and style play.
Coach analyzes this information by consumer segments and category for its predictive power and for its insight into launching new products. It also has 1 million e-mail addresses, which it uses to communicate with its customers. It develops a communications platform via e-mail and gives customers a preview and talk about fashion and style. In the other word, Coach has changed from manufacturing to market driven company. Realizing that its best customers visit Coach every two months and purchase every seven months, Coach has increased the rate of product flow into the stores.
Every month, Coach introduces an assortment of new products to drive sales in all product categories, create a fresh shopping experience and, most importantly, to encourage consumers to revisit. Operation-wise, Coach updates operational model and technology to improve operational efficiency. In evolving from a manufacturer to a marketer, Coach needed a nimble and flexible operating model that could adapt to changing trends and patterns. The company increased its production flexibility, enabling it to introduce a broad range of new products in a rapid, but controlled fashion.
At the same time, it provided the company with gross-margin improvements. Its operating model includes a globally diverse sourcing base, strict quality control, a centralized, scalable distribution center and an established SAP Technology platform. Adopt multiple Distribution channels: Considering that women's changing shopping patterns have altered the retail landscape, Coach has had to change with the times -- with multiple channels of distribution. Its distribution in multiple shopping venues allows Coach to be wherever the consumer chooses to shop.
Currently only 12 percent of Coach's distribution is to department stores. The rest is divided among Coach's full-price stores (31 percent); its factory stores (29 percent); international (20 percent); other (6 percent); and direct marketing (2 percent). Overall, 62 percent of Coach's business comes from direct-to-consumer channels, primarily its retail stores, with catalog and Internet sales contributing to the remainder. Thirty-eight percent of Coach's business is done through its wholesale operation, which consists of department stores, international and business-to-business.
Expand stores rapidly: As Coach Brand strengthens, stores expansion becomes key growth strategy. It is fundamental to creating a compelling retail experience in accessory industry. The product needs to be heroic. Coach streamlined its format, creating a simpler, brighter and more open store. These stores provide a powerful backdrop to showcase Coach's product. Coach is selective in its distribution, which is to market mostly in better department and specialty stores. Coach's business is growing rapidly through department stores. By adding 100 more stores over the next four to five years, Coach expects to double the market share.
In the year 2002, Coach's market share in the U. S. for handbags and accessories was 12 percent. It's now 20 percent, and they expect to grow to 30 percent of U. S. market share. Coach had 106 retail stores in fiscal year 2000, and estimates to have 158 in 2003 and 200 in 2005. In addition, it has 76 factory stores, which provide a controlled venue for handling disposition requirements. While increasing the number of retail stores in US and overseas every year, Coach improved its current retail stores' look to be more attractive - renovating the stores with white color, changing interior design.
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