MARKETING RESEARCH
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MARKETING RESEARCH ON PRADA
Marketing research involves applying scientific methods such as identifying market opportunities, assessing market ideas and understanding market processes, and researching a certain market. Assessing a company’s position in the global market is important, especially when the management is planning on expanding the business (Babin and Zikmund, 2015). Marketing research helps provide information about a specific market and helps in solving challenges facing a particular industry.
History of Prada Company
Prada company began as a store selling bags, trunks, and travel accessories in 1913 in Milan, Italy. The store was opened by Mario Prada, who ran the shop with his brother Martino (Visconti and Giuli, 2014). The business got the award of the Italian Royal House’s official supplier, an event that allowed them to display its trademark logo as a symbol of Italian aristocracy. The company added footwear into their products in 1979 and also introduced women’s line wear in the late 80s. However, Prada has lost its global position in the luxury goods industry due to competition from other brands that perform better, such as Louis Vuitton and Chanel.
Luxury Goods Market
The luxury goods market is well established, mostly in Italy and some parts of Europe. The industry predicts that the market might hit around 324.5 billion by 2025, with a compound annual growth rate of 2.92% in the forecast period (Yiasoumi, 2020). The major boost for the industry’s success is tourists who tend to buy luxury goods from abroad. There is a prestige associated with buying goods from popular cities such as Los Angeles, Paris, New York, and Dubai, among others. Travelers, therefore, account for one-third of the sales of luxury goods globally.
Easy availability and access to luxury goods through E-Commerce has also contributed to the global expansion of the market (Codignola and Rancati 2016). The current technology allows most companies to advertise and sell their products online. The companies are working together with multi-brand sites or creating their platforms or both. Video advertising and teaser of the products increases the desire for potential consumers to buy the products. Additionally, global research indicates that most young consumers, especially from China, are new to the market, thus providing a great opportunity for the brands to stay in the market.
In the past, Prada has been slow to adapt to the online luxury market since it made its first penetration to the market only four years ago (Yiasoumi, 2020). Since then, it has grown to deal with other online retailers such as Matchesfashion.com and Mytheresa.com. However, its efforts have not matched its competitors in the industry, such as Louis Vuitton and Gucci, who has recorded continuous growth, hence being labeled as underperforming in the industry.
Size of the Market
The size of the luxury goods market continues to grow, especially due to the increasing number of high net worth individuals in most nations and increased disposable income among the upper-middle-class population. In 2018, the luxury goods had a slower growth rate than sales in the review period in Italy, which were favored by the results of the 2015 Expo in Milan (D’Arpizio, 2015). Estimations show that the market situation might most favor Latin America through an increase of 42 percent of millionaires by the year 2025. Therefore, the region has witnessed many luxurious international brands setting up shops in the region.
The revenue for Prada in 2018 was around 1 percent, which was below the analyst’s predictions while the profits came at 14%, which was below expectations. Additionally, the company’s shares plunged at 11% in Hong Kong, China, in 2019. The research shows that Prada has been underperforming globally compared to its competitors. Although the company had reported an 8% increase in China sales, the management claimed to have experienced a slowdown in the half of the year 2019. Research shows that Prada has fallen behind its competitors since they have failed to invest in creating a unique experience for its clients.
https://www.koamnewsnow.com/prada-slips-in-china-as-louis-vuitton-and-gucci-power-ahead/
Retrieved from https://www.consultancy.eu/news/2901/spending-on-personal-luxury-goods-to-top-270-billion-this-year
Market Segmentation
The luxury industry market can be segmented by consumer demands ranging from exclusivity, virtual shopper, and indulgent traveler. The exclusivity segment contains customers who deal with high-end quality products since they have huge amounts of disposable income. The consumers love spending on luxury cosmetics and are most likely to spend on travel.
The indulgent traveler segment consists of consumers who buy luxury goods at airports or at the towns they travel to. The segment mostly involves socialites who love elevating their social status by buying luxurious products. They mostly spend more money on jewelry and luxury bags. The virtual shopper segment consists of shoppers who make their purchases of luxury goods online, most especially due to their high quality and uniqueness. The segment consists of mostly young people whose fashion pieces are labeled from top brands.
Comparison of Prada with Competitors
Recently, Prada has been struggling to keep up with its global competitors such as Louis Vuitton and Dior, who seem to be doing much better. Early 2019, the management of Louis Vuitton posted its annual record sales for 2018 and raised its dividends by 20%. The LVHMS company that owns around 70 brands witnessed the sales increase by 10% in 2019 to 53.5 billion dollars, thus meeting the analyst predictions (Kottasova, 2019). The company seems to have escaped the slowdown that was witnessed by Prada.
Gucci brand is also a competitor of the Prada brand, and has been doing well in the market. Towards the end of the year 2019, Gucci sales increased by 10.7% to 2.37 euros, which exceeded analyst predictions (Mulholland, 2019). Despite the fall in demand from china, Asia pacific turn over for China increased by 16.6%. The growth helped to eliminate the fears of investors of a great decline in Gucci sales. Prada has witnessed a great decline in sales due to the pandemic’s coronavirus, which makes it had to keep up with its competitors.
Competitors Success
The top competitors of Prada outdo them due to their marketing and operation strategies, such as innovation. For example, instead of placing much effort on marketing, Louis Vuitton focuses on creating products with very unique designs and exceptional craftsmanship. Additionally, they focus on exclusivity, which ensures that most customers will not own the same products. The customers that get a limited edition of a Louis Vuitton bag gets to enjoy exclusivity. The strategy helps in making quick sales compared to other competitors.
For Gucci, the secret behind its continuous success in recent years lies behind its new target market, the millennials. Research labeled the millennials as the most powerful consumers, which makes most companies want to meet their demands (Primo, 2018). Gucci, however, approached the market differently through the new generation of millennials. Gucci’s name has been used in lyrics by hip hop artists such as T Chainz and Pusha T. Besides its focus on quality, the company also introduced an environmentally progressive program that grants the brand transparency, accountability and authenticity that most consumers seek.
Instead of focusing on its consumers’ demands like other competitors, Prada main focus has been on opening more stores. When the company experienced the slowdown in China’s market, it kept increasing the prices of its products without giving its customers a good reason. The move placed it at a competition with top brands since Prada’s products were viewed as overpriced.
Recommendations for Prada
The key measures for any underperforming to get back on its feet is to identify the factors pulling them behind. For Prada, the management should focus more on attracting, satisfying and maintain customers before expanding their business. Additionally, based on the competition in the industry and the emergence of new customers, the company needs to establish customer loyalty by placing customer needs as their main focus. The process of customer satisfaction should involve reasonably pricing the products, despite their high quality.
Additionally, the company should make sure that they do not lose their current customers while expanding, since acquiring new customers is much harder than retaining current ones. Besides quality, Prada also needs to be more innovative in its products by producing goods that will make its brand stand out in the market. Innovation will also help attract more customers and increase the sales and recover losses. After establishing a firm ground for customer satisfaction and loyalty, Prada can go ahead to set up more stores in other locations since the brand will have established its position in the market.
Conclusion
Marketing research is very important as it gives a clear picture on where a company or business stands in the market. The research is responsible for predicting future success or failure of the business as compared to its competitors. In the luxury goods industry, several brands hold top positions globally mostly due to their exceptional quality and uniqueness, among other factors. Prada has in the past been ranked as a top brand in the industry, but have faced a major decline in sales. However, through research analysis and recommendations, the company can easily retain and attract more customers who will increase sales and help it regain its position at the top.
Bibliography
Babin, B. and Zikmund, W., 2015. Exploring Marketing Research. 11th ed. ISBN: 978-1-305-26380-2, pp.4-10.
Codignola, F. and Rancati, E., 2016. The blending of luxury fashion brands and contemporary art: A global strategy for value creation. In Handbook of Research on Global Fashion Management and Merchandising (pp. 50-76). IGI Global.
D’Arpizio, C., 2015. Worldwide luxury markets monitor 2015 spring update. Bain & Company.
Kottasova, I., 2019. China Slowdown Isn’t Hurting LVMH. [online] CNN. Available at: <https://edition.cnn.com/business/live-news/dow-today-1-29-2019/h_1a1c3ff48ab3421e27c623fe3c02bc9f> [Accessed 5 August 2020].
Mulholland, S., 2019. Prada Slips In China As Louis Vuitton And Gucci Power Ahead – KOAM. [online] KOAM. Available at: <https://www.koamnewsnow.com/prada-slips-in-china-as-louis-vuitton-and-gucci-power-ahead/> [Accessed 5 August 2020].
Primo, D., 2018. Council Post: What Can Luxury Brands Learn From Gucci About Millennials?. [online] Forbes. Available at: <https://www.forbes.com/sites/forbesagencycouncil/2018/11/02/what-can-luxury-brands-learn-from-gucci-about-millennials/#387705a55e5b> [Accessed 5 August 2020].
Visconti, L.M. and Di Giuli, A., 2014. Principles and levels of Mediterranean connectivity: Evidence from Prada’s “Made in Worlds” brand strategy. Journal of Consumer Behaviour, 13(3), pp.164-175.
Yiasoumi, N., 2019. How Prada Is Transforming Itself For The Digital Age. [online] Luxury Society. Available at: <https://www.luxurysociety.com/en/articles/2019/07/how-prada-transforming-itself-digital-age/> [Accessed 5 August 2020].