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Millennials Are Changing the Game for Marketers. How to Best Reach Millennials in Luxury Clothing Industry? by Sofya Mikhailava

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Millennials Are Changing the Game for Marketers. How to Best Reach Millennials in Luxury Clothing Industry? by Sofya Mikhailava European Business Administration Final Project Millennials are Changing the Game for Marketers. How to best reach Millennials in luxury clothing industry? By Sofya Mikhailava 2018 Mentor: Dan Ravick Fiala Acknowledgment First of all, I would like to thank my family for their enormous amount of support during the whole journey of my university studies. I am grateful for their patience in overcoming the issues I have faced while doing this research and throughout my life in general. They are my role models in life. Secondly, I want to express my sincere thanks to my mentor, – Dan Ravick Fiala, for the constructive criticism, enthusiastic guidance, and tremendous advice during my thesis work. Thirdly, I would like to thank my friends who have assisted me with their expertise, for providing with the valuable feedback, and offering new ideas that I have implemented in my research. Lastly, I want to express my thanks to my university for the opportunity to go on an exchange program that greatly affected my life and influenced the choice of my research topic. 2 Statement of Originality I, Sofya Mikhailava hereby certify that the intellectual content in this submission is the original product of my work under the advice and guidance of my mentor Dan Ravick Fiala. Any assistance received in contributing and sources have been acknowledged in the thesis. The work has not been submitted before for any degree or other purposes. Sofya Mikhailava, 30.11.2018 3 Table of Contents Table of figures and tables…………………………………………………………………...…….5 Abstract……………………………………………………………………………………..……...7 Executive Summary…………………………………………………………………………..……8 1. Introduction……………………………………………………………………….….9 1.1 Research Question………………………………………………………………...10 1.2 Methodology……………………………………………………………………...11 1.3 Literature Review…………………………………………………………………13 1.4 Limitations………………………………………………………………………..14 2. Overview……………………………………………………………………………15 2.1 Who are Millennials………………………………………………………………15 2.2 Millennials vs. Older generations…………………………………...……………17 2.3 Generational differences influence purchase behavior…………………………...20 2.4 The idea of luxury………………………………………………………………...21 2.5 Luxury industry for Generation Y………………………………...……………...22 2.6 What do Millennials expect from luxury companies ……………………...……..23 3. External analysis of luxury industry……………………………………………..25 3.1 PESTLE analysis………………………………………………………...….…….25 3.2 Porter’s 5 forces…………………………………………………………………...29 3.3 Scenario planning…………………………………………………………….……32 4. Marketing Audit of the brands chosen…………...……………………..……….35 4.1 Marketing Strategy…………………………………………………...…………...35 4.1.1 Segmentation……………………………………………...........................36 4.1.2 Targeting………………………………………………………….……….40 4.1.3 Positioning………………………………………………………….……..42 4.1.4 Differentiation…….………………………………………........................45 4.2 Marketing Communication…………………………………………………..........48 4.3 Pricing Strategy………………………………………………………….………...58 4.4 Pattern…………………………………………………………..............................60 5. McKinsey's consumer decision journey of Millennials…………………..…………62 6. GAP analysis ………………………………………………………………..………...67 4 7. Conclusion…………………………………………………………..………………...68 Recommendations for further research ………………………………....................................71 Bibliography……………………………………………………………………………………...72 Table of figures Figure 1: Annual income by generation.………………………………………………………....10 Figure 2: Methodology supported by the literature review map by the author…..........................12 Figure 3: Millennial generation by the author………………………………....………………....16 Figure 4: Comparison of the generations by the author.…………………………………….…...19 Figure 5: Scheme of PESTLE analysis by the author.………………………....………………...25 Figure 6: PESTLE analysis of luxury industry by the author……………….………...…………26 Figure 7: Porter’s five forces of the luxury industry by the author.……………………...………30 Figure 8: Scenario planning of luxury industry by the author.………………………....………..33 Figure 9: Louis Vuitton vs. Gucci Brand Value…………………………………………..……..35 Figure 10: Steps to position provided by the author…….…………………………………...…..42 Figure 11: Positioning map.………………………………………………...................................43 Figure 12: Burberry kisses campaign……………………………………....................................47 Figure 13: Social Media of Louis Vuitton……………………………………….………….…...49 Figure 14: Louis Vuitton pop-up store Red Square…………………………...............................50 Figure 15: Louis Vuitton’s Cruise Show 2018…………………………………………..............51 Figure 16: Social Media of Gucci…………………………………….………....………......…..52 Figure 17: Lady Gaga singing the national Anthem at Super Bowl.………….…………..…….53 Figure 18: Social Media of Burberry…………………………………………………....………54 Figure 19: Creation of a personal trench by Burberry………………………..............................55 Figure 20: Creation a personal trench results …………………………………..........................55 Figure 21: Burberry app…………………………………….......................................................56 Figure 22: Social Media of Coach………………………….......................................................57 Figure 23: Selena Gomez for Coach 2018…………………………………….……….….……58 5 Figure 24: McKinsey decision framework by the author ……………………..............................62 Figure 25: The effective approach to reach Millennials by the author …………….………..…...65 List of tables Table 1: Segmentation of the brands by the author………………………………….....…….….36 Table 2: Targeting strategy of the brands by the author….…………………………….…....…..41 Table 3: Gap analysis of luxury brands by the author……………………………………...........67 6 Abstract The analysis of this thesis intends to investigate the ways to focus strategic marketing of the luxury clothing industry. The research concentrates on scanning of the efficiency and effectiveness of the communication as well as interconnection with the Millennials who represent the new challenges and transform the marketing. The author, based on strategic models and analysis of particular luxury brands, provides a roadmap for companies to implement and adapt to the changes Millennials create by exploring and determining the values important to the generation and by building a strong competitive advantage. Keywords Millennials, Generation Y Luxury industry High quality Segmentation, targeting, positioning, differentiation Communication Pricing Strategy High Spending power Reach the generation 7 Executive Summary The ongoing increasing effect of Millennials on any industry is the inspiration for this thesis, and certain aspects of reaching the generation were investigated. Research revealed a complete picture with valuable information that will enable companies to reach Millennials not only today, but also in the future. The conclusions affect the luxury goods industry. The key takeaways: 1. Millennials expect a mutual two-way relationship with the brands. 2. Social media greatly influences the preferences of Millennials. However, having a social media presence is not enough. 3. Transparency is the name of the game. Millennials expect brands to be honest and have values that are important to the generation. 4. Luxury clothing companies should focus on quality and exclusive experiences instead of offering material belongings that show societal status. 5. The shifting tastes of Millennials may destroy the company and in order to prevent the phenomenon, many marketers should reach the generation in different ways. 8 1. Introduction There is discussion regarding the significance of accepting changes, the best ways to proceed and to adapt when confronting challenges throughout everyday life. Both people and companies are affected if there is resistance to admit change. Organizations will only survive today’s evolving environment by recognizing the importance of modification. Millennials, known as generation Y, generation Me, and generation Net, are the cohort that comes after generation X. Researchers use the years of birth, starting from the 1980s to the beginning of the 2000s since there are no exact dates when the generation was started or finished (Howe & Strauss, 2009). Millennials are the largest generation that has existed (1.8 billion). The number of Millennials in the United States is around 80 million, according to the United States Census Bureau. The generation outnumbers not only the previous but the next one as well. The sheer size of the generation explains the huge purchasing power and much greater marketing potential. Nevertheless, there are numerous obstacles from the point of marketing since the cohort is so different. This generation has been requesting more effort and time spent than in past generations. Those who are in the Me generation are the digital natives who are flooded with advertisements since birth and do not trust marketers very easily. Reaching Millennials is becoming harder since representatives of Generation Y select which promotions to see, and some even pay to turn the advertisements off. Nowadays, Millennials have power over more than $600 billion yearly in spending. The generation has officially modified changes in the economic sectors. The World Lab Data predicts Millennials will spend more than any other generation by 2020 and the trend will continue to rise. 9 Figure 1: Annual income by generation (Source: Tilford, 2018) The main goals of the research are to analyze the ways Millennials change marketing and to propose the appropriate steps to efficiently reach Generation Y. A partial goal is to find and describe particular features luxury brands
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