Coach – The Leading Consumer-centric Corporation Essay
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Fashion trends are sensitive, and customers are unpredictable. It makes fashion industry become a highly competitive market. To survive and thrive, fashion companies need distinctive strategies. It seems aspiring but not many firms can achieve. As an exception, Coach proves its success in this challenge by not walking through the same way as others rivals (e.g. Gucci, Louis Vuitton, Prada, and Hermes) have done. Coach has created a customer-focused model and a result-driven strategy to lead its business to overcome crisis and expand market.
Even though there still have many challenges in the fashion sector, Coach’s strategy seems to be sustainable.
Coach – The Leading Consumer-centric Corporation
Coach was a family-run company founded by Miles Cahn in 1941 in New York (Coach, 2012). Coach was famous for traditional crafted leather goods, but keeping the classic styles drove it to dramatically lose market share. Based on the excellent management of Chairman Lew Frankfort, Coach shifted from a conventional leather division of Sarah Lee Corp.
to a fashion-oriented brand name and a customer-centric corporation (Boorstin, 2002). Coach has thrived not only in North America but also in Japan, China and other countries (Coach, 2012 & Tsukahara, 2011). Therefore, Coach’s strategy is sustainable. Successful Management in Turbulent Economic Conditions
The secret formula for Coach’s success simply comprises two components. First, it is the perfect collaboration between Lew Frankfort (Chairman and CEO) and Reed Krakoff (President and Executive Creative Director). Since Frankfort took his office, he implemented several typical reforms: created customer database to examine consumer behavior, built multichannel distribution system (retail stores, factory outlets, boutiques, and online store), and hired Reed Krakoff to refresh Coach’s product design (Slywotzky, 2007).
Krakoff made a revolution in Coach conventional product lines by using new materials, shapes, styles, and colors to attract more customers but not abandon its loyal fans (Slywotzky, 2007). Second, consumer-focused strategy makes Coach stand out. Based on customer information that is collected through various angles, Coach can sooner identify problems and quickly adjust. In a nutshell, Coach’s success derives from a blend of “understanding the consumer, being results-driven and at the same time anticipating when fashion is happening” (Karimzadeh, 2004). What Makes Coach Different From its Competitors?
Coach chooses to operate in its own way. First is “selling luxury for the mass” (Gogoi, 2005). Coach sets product prices 50% lower than Gucci or Louis Vuitton to attract cost-conscious customers (Takahara, 2008). Coach’s numerous product lines satisfy diverse market segments based on ages, regions, and cultures. However, product quality must be maintained to be considered as luxury goods (Slywotzky, 2007). Second is the customer-driven operating model. Coach spends around five million U.S. dollars annually on market research to collect customer information through private interviews, telephone surveys, competitive analysis, and in-store product tests (Slywotzky, 2007). By putting customers into operating process from input (what customers desire) to output (product testing), Coach can modify its products to satisfy customers’ requirement or increase production of favorite products (Slywotzky, 2007).
For example, Japanese customers usually commute to work, so they prefer small bags (Tsukahara, 2011). Moreover, database shows that customer usually visits store every month so Coach launches its new products monthly to attract customers and give them more new choices (Slywotzky, 2007 & Tsukahara, 2011). Third is the tight management. The executives check sales operation of each store daily and frequently review each business unit as well as the total business planning (Boorstin, 2002). Lew Frankfort even visits stores a few times a week to check their operations and directly evaluate customer responses (Slywotzky, 2007).
Fourth, Coach has a flexible production process by using 100% outsourcing in 16 countries around the world (e.g. Vietnam and China), which neither Gucci nor Louis Vuitton is interested in (Karimzadeh, 2004 & Tsukahara, 2011). This also helps Coach cut off fixed costs, and reduce time consuming from production to sales operation. Fifth, Coach has a huge multichannel distribution system: 500 stores in U.S and Canada, 300 direct-operated stores in Japan, China, Singapore and the like, a set of boutiques in particular department stores and an online website coach.com (Coach, 2012). This provides more opportunities for Coach to expand business globally. Coach Strategy is Sustainable
In this highly competitive market, Coach has its own weapon to be considered sustainable: understanding customers and building a solid business structure. With a huge database of 9.7 million families from different viewpoints (Slywotzky, 2007), Coach knows how to make its products fit with customer demands or even how to set reasonable prices. For example, a survey before launching the New Hamptons Lap Satchel revealed that customers were willing to pay 328$ for this product, which was 30$ higher than prediction, then Coach immediately reprinted the price tags and sales augmented (Slywotzky, 2007).
Moreover, with the close management as described above, Coach runs its operation sensibly by focusing on any detailed changes in sales and customer behaviors. Besides, Coach has a diversified product category (handbag, wallet, suitcase, accessories, perfume, and clothes) with various designs and an enormous distribution channel to help Coach approach many different market segments. In an interview with Fox Business in 2011, Frankfort was confident that Coach’s strategy was sustainable in that turbulent time, he only concerned about the macro economy: the slowly irregular economic recovery might affect consumer confidence in purchasing decision.
To gain market share, Coach chooses a unique way to operate: Coach’s customer-centric model, together with the perfect combination of logic (represented by Lew Frankfort) and magic (symbolized by Reed Krakoff), help Coach thrive in such a very competitive fashion industry. Even though there might be many forthcoming challenges, Coach’s strategy is sustainable because understanding customers helps Coach identify risks sooner and respond faster.
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