Swiss Army: Diversifying into the Fragrance Business

This is my marketing case study and the purpose of this case study was to analyse and find out the best marketing decisions for Victorinox (the owner of swiss army brand).
-Saeed

Introduction

In 2005, Victorinox, the manufacturer of the famous Swiss Army Knives acquired its main competitor, Wenger S.A. The acquisition also included Wenger’s watches, luggage and its fragrance label. The head of marketing at Victorinox is asked to present a plan to the CEO about how best to deal with the newly acquired fragrance business unit. The fragrance has enormous market potential with $23.5 billion dollar sales. Victorinox has experienced several successful diversifications in the past and we recommend the management team to take actions to diversify into the fragrance business.  The Company global brand awareness,  already established chain of shop-in-shop stores and the recently acquired fragrance section of Wagner will pave the way for Victorinox to have and smooth and successful transition to this market.

Swiss-Army

Situation Analysis

The fragrances market is driven by factors such as increasing disposable income of consumers, product diversification offered by the companies, increasing product visibility through online retailing, and others. In addition, increasing visibility of natural and organic products is anticipated to fuel the demand for fragrances market during the forecast period. However, high prices of these products restrict the adoption among mass consumers which is restricting the market growth.

market-segmentation

Customer Analysis by Category:

There are six different Fragrance categories:

Premium men’s and women’s fragrances: These categories shares same attributes as other Victorinox premium products do. The premium fragrance market is based on the quality, luxury brand and iconic design.  In one hand the current company customer base is a good marketing target for these premium fragrances. On the other hand the profit margin in these two categories are higher than other categories.

Mass men’s , women’s and unisex fragrances: Although these two categories represent one third of the market share, but producing Mass fragrances usually with low price and less quality will harm the Victorinox brand reputations and Victorinox should avoid entering this market.

Premium unisex Fragrances: This category has one percent of the market share and due to the highly capital required for introducing a new fragrance, this segment most likely won’t be profitable market.

 

 

Market Segment Geography:

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Thanks to good quality of Victorinox products, the brand awareness of the company is high worldwide, but since the fragrance market is a mature market, it would be though to compete with market big players in some parts of the world, we will go analyses the attributes of each region in detail:

  • Latin America: This region has the biggest market share around 28% and Brazil one of the BRIC countries exists here. Positive industrial forecast and growing middle classes here will provide a good opportunity to market Victorinox fragrance products. New young generation has good brand-consciousness, and global Victorinox brand-awareness can result in a good fragrance sale in this region.

In these region mostly we have under development countries and it is predictable that these countries don’t have a restricted fragrance regulation which can be a positive point for Victorinox since the company doesn’t have lots of experience in fragrance industry and a flexible regulation will be desirable at beginning.

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  • Western Europe: This region has the second biggest market share among other regions, since the region consists of highly developed countries, the market is most likely dominated by the key players such as L’Oréal, Coty, Porter & Gamble and others. Victorinox highly brand-awareness and also having the head quarter located in this region can pave the way for opening the fragrance market in this region but still it would a tough job to do that.

 

  • North America: This region fragrance market share is about 19%, and it has the strongest economy in the world. Terrorist attack in 2001 had declined the US and Canada economies but both these countries are recovering and rebuilding their economy. Swiss army watch brand awareness can help the Victorinox to sell fragrances in this region.

 

  • Eastern Euro: The region market share is about 9% and Russia one of the emerging Brick economies belongs to this group. After fall of Soviet Union, Russia is more welcoming to international brands. The presence of key market players are not as strong as other regions and it will give Victorinox good opportunity to market its fragrance products in this region.

 

  • Africa: The region market share is 9%. Because of the diversity in language and cultures in the region it might be easier to start with South Africa since the official language is English and also the brand awareness is higher than other countries in the region.

 

  • Asia: The region share market is 8% and Japan, India and China are part of these group.

Asia Pacific region is expected to witness tremendous potential in terms of growth. Factors such as increasing disposable income, rising middle class population, shifting consumer preferences for premium products and rising product availability are expected to drive the demand for fragrances in this region. Due to fast economic growth of China and increasing number of middle classes which tend to spend more money on luxury products, we would recommend Victorinox to invest in this region and especially in these two countries. Also the Middle East countries are enjoying the rising profit of oil which make them a good target for luxury products.

  • Australia: has 1% of fragrance market, we would suggest Victorinox to not enter actively in this region, since the operation overhead doesn’t worth the benefit.

perfumes

Competitor Analysis:

Direct Competitors:

  • Key Market Players: Fragrance Market is a mature market and it is dominated by Key market players such as L’Oréal, Coty, Porter & Gamble, Avon and LVMH. Which they had captured almost 40 percent of the global market. These are the most serious competitive threats for Victorinox to enter the fragrance market because they already have their brand awareness for fragrance products and customer loyalty. A Good thing about fragrance market is that people tend to try new and fresh smells and it will give Victorinox this opportunity to enter the market with a new high quality product.

These market giants already set a premium price for their products, Victorinox can start sending a bold message to their competitors by introducing a very iconic and unique perfume container, with a reasonable price.

  • Niche market players: there are also many small niche market players such as Liz Claiborne, Mary Kay, Revlon and Bulgari. The diversity in this group implies that always there is room for one more player in the market.

Indirect Competitors:

Beauty product makers can compete with fragrance market in form of marketing beauty products with a fresh smell such as skin protection creams, moisturizers and aftershaves.

Market Segments by Age and Life style:

  • We would recommend Victorinox to primary target 18-30 years old, single and married working women, who work full time. They are heaviest users of fragrance and most valuable groups for fragrance industry.
  • Secondary Target: Young men buying perfumes as a gift on occasion for their girlfriends or wives.
  • Third Target: young men and women with active and outgoing lifestyle, which they already have Swiss army brand awareness.

Psychographic Segmentation:

Activities-interests-and-opinions

Customers for Premium perfume product usually has classic life style but yet adventurous. Talking about their personality usually they are charming and elegant.

Market Segments by Ingredients: The different types of fragrances include perfumes, deodorants, and others. Perfumes are usually more expensive than other types while deodorants are more suitable for active lifestyles.

Behavioral Segmentation:

  • Occasion segmentation: men buying perfumes as a gift
  • User Status: ex-users, potential users and regular users
  • Loyalty status: highly and potentially loyal customers
  • Feminine: use normal perfume daily, Feminine on occasions.

SWOT Analysis:

Strengths Weaknesses
 

·   History shows that Victorinox has the ability to successfully transfer brand attribute to other product categories

·   Victorinox has a large number of shop-in-shop retail locations

·   Existing strong brand name

·   Existing loyal customers

 

 

·   No prior experience in fragrance industry

Opportunities Threats
 

·   Enormous market potential ($23.5 billion) of which 65% in the premium market (in line with Victorinox position)

·   -Positive Industrial forecasts

 

 

 

·   Varying local rules (product, components, labelling and packaging)

·   Wide range of chemicals needed

·   Substantial startup funds needed

 

Evaluation of Alternatives

One Alternative solution would be to not enter the fragrance market worldwide. By avoiding to enter to a new market the company management and operation team can focus more on already established product lines and keep and improve their market share in those areas. After 2001 and during the declined worldwide economy, one of the main survival attribute of the Victorinox was its diversity in different markets. And like other new markets Victorinox discovered during the years like, timepieces, fashion and luggage it is essential for company to always search for developing new markets.

Another Alternative would be to just keep the fragrance market in north America, with already established brand awareness by Wenger S.A. this will insure the minimal operational and management overhead with already established operational and production ecosystem. The negative point would be that the company cannot increase its fragrance market share globally.

The Decision: Marketing Objectives / Target Market / Positioning

STP

There are too many factors suggest that it can be a successful diversification for Victorinox. The company can make use of following advantages to achieve this goal:

  • Make use of what customer will associate with Switzerland such as beauty of mountains, fresh air
  • Make use of current Victorinox customer base which they are familiar with high quality product of this company
  • Make use of existing Wenger employees which they know the industry and its operation
  • Make use the key values of Victorinox brand
  • Make use of already established supplier relationship of Wagner

Like what Victorinox had done in for other diversification before, the company should transfer it key values to the newly established fragrance section.

We suggest that company starts with creating one perfume for men’s and one perfume for women’s. Using its craftsman ship Victorinox can build an iconic container, which is durable and suitable for outdoor activities.

Like Swiss army knives which have innovative ideas, company should try to embed an innovative feature in its fragrance products. For example the container can have multiple functionality to hold other beauty product accessories. Or the company can introduce innovative refillable bottles.

As for the branding, Since Both “Victorinox” and “Swiss Army” brands have good reputations and worldwide awareness, we would suggest to use a combined name for new fragrance brand like “Swiss Army Fresh” or “Victorinox Perfume”.

 

Marketing MixMarketingMix

Victorinox already has been known for their quality products, innovations and iconic designs. In term of completion we would recommend Victorinox to peruse a differentiation strategy. Create a Fragrance that is unique and also reminds customers of beautiful nature of the Switzerland.

For example they can start with a perfume and using the Switzerland fresh mountain air as a marketing slogan.

Since most of the company products are attributed as high quality and durable outdoor products, we would suggest that the perfume marketing should focus on outdoor activities like mountain climbing and use beautiful Switzerland mountains picture in background of the marketing posters.

 

Product:

Limit The Perfume Releases, Considering high start-up fund needed in fragrance industry and also the fact that the company is new to this industry we would suggest that they limit the Perfume releases to once or twice a year, especially since the public isn’t extremely familiar with Victorinox fragrance brand. This gives customers time to smell the fragrance several times before making a purchase. Limited perfume releases also make product appear refined and sophisticated and give the impression that Victorinox has created a classic scent that will stand the test of time.

 

Price:

Price should be premium like other Victorinox products, to keep the public image of the company brand consistent.

Distribution:

Company should make use of current large number of the shop-in-shop retail locations.

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Promotion:

In order to curb the rising prices, Victorinox can adopt various marketing techniques such as gift hampers, introduction of eco-friendly products, and other techniques to penetrate the untapped markets.

·         Give out Free Samples:

Everyone likes to receive free gifts, Victorinox can provide a free sample of its newest fragrance every time a customer makes a purchase. Or, hold a contest online and give a free bottle of cologne or perfume to the first few customers who correctly answer a trivia question about Victorinox Company. If the customer likes the sample, it’s much more likely they will buy that fragrance the next time they’re shopping for perfume.

  • By Participating in Fashion Show: Celebrities, Launching events, Tv (like fashion tv), Magazines (Elle, Vogue), Times
  • Offer Loyal customers a trip to Switzerland to join a part like a ‘beauty gathering’ including celebrities at the perfume house

·         By keeping a celebrities endorsements

·         Add a Campaign

  • Providing discount on women’s day, and birthday of the customers
  • Public relations: Special events, blogs, forums, website, media relations.

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