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Overview of the Gucci Group Case


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Gucci’s origins date back to 1921 in Florence Italy. It was started as a leather goods store by a man named Guccio Gucci. For the next fifty years after its creation, the Gucci logo had become a well-known fashion image. It wasn’t until the 1980’s when the company began to struggle due to aggressive branding, a poor licensing strategy, and an array of family altercations about who will be the progeny of Guccio Gucci. Finally, Maurizio Gucci, Guccio’s grandson, took control of the company in 1984 and restored it as a luxury brand. Within the next ten years, business began to plummet once again and Maurizio was compelled to sell his shares to Gucci’s second-largest shareholder, Investcorp. Investcorp’s two newly appointed executives, Tom Ford and Domenico De Sole, transformed Gucci back into a superior fashion brand within five years. The sales raised from $200 million in 1994 to $1 billion in 1999. This success caught the eye of many investors, such as French luxury group LVMH, which acquired 34% of Gucci’s shares by 1999. To protect their company from a takeover, Gucci established a new equity by offering 40% of its shares to PPR, a French global retail and luxury group. The new shareholder helped Gucci create a corporate of multiple luxury brands. There was a total of eight Gucci different brands each with their own management system and designer. Once Gucci became a multi-brand company, its family oriented and centralized business approach began to collide with PPR’s more brand-driven and less-centralized approach. However, by this time, PPr had already owned 53% of Gucci’s shares and began taking more of a dominant managerial role in the company. By 2004, Ford and De Sole left the company and PPR appointed Robert Polet as their new CEO. Polet’s decentralized and empowering management approach brought rise to Gucci’s revenues and profitability. Unfortunately, in 2008, reports were being made that even the wealthiest shoppers were suffering from the recent economic crisis. Most, if not all, of Gucci’s shoppers were part of the wealthier high class population. The Gucci brand began experiencing the heat of this crisis on their financial performance.

The conflict that Gucci Group had was the way their customer service was running. The problem with the customer service department was that the company was not connecting well enough with their customers in the stores in terms of what they would normally buy, and what their taste were. So to try and fix the problem of the lack of relations between customers, Gucci Group came up with a system called the customer relationship management (CRM) which can track what the customer buys so the person viewing it can have an idea what their tastes are. Here is how it works: “If you are a return shopper you are in our register system and we can look you up, pull up your record, and add your transaction. This lets us thank you for your purchase, let you know when something that might be of interest of you comes in, and advise you of sales. We can serve you better with the history of your purchases,” (Mead, 12-13). Even though the CRM helped with customer satisfaction in the stores, it ran the company into another conflict with the sales associates because they “did not have automatic access to customers’ information,”(Jerz, Corsi, and Dessain, 13). The reason for this was because information was not being shared by stores in other locations and the other stores in other regions “were reluctant to share their customer base,”(Jerz, 13).

The idea of customer service was evolving over the years. Therefore, Gucci had to do something about their customer service management strategy also. Cheryl Mead, the person in charge of developing the CRM system for Gucci, stated that, “Our top clients come back because they establish a relationship with the associate. We want clients to have a great retail experience, which should start before they get into the store and continue once they are out.” The CRM system did help to direct the marketing activities, and advise of sales with the history of customers’ purchases. By using the history of purchases, it was possible to look up past purchases and advertise new products depending on the customer’s interest. Additionally, there were instances where people had thefts or fires, and they could provide receipts for the insurance. Even though it had benefits, the system also had downsides and challenges, such as sales associates not having automatic access to this database. Also, there was too much data to manage and use as a useful tool in order to improve customer service.

Therefore, Mead came up with the idea of loyalty cards to help improve the CRM system. However, loyalty cards also have potential benefits and downsides. The benefits were that it would help improve the CRM system by collecting and keeping the contact details up to date. This way the sales associates would have more detail and information about the customers to serve them better. The downsides were that people viewed such cards with suspicion in the fashion world, did not have a good reputation. A lot of people did not want to carry it with them since it seemed tacky. There were also issues with what kind of rewards to give, changing the benefits and the idea of discounting, which was not a good option for the brand since they wanted to keep their luxurious reputation. The discounting option would also end up subsidizing the top clients who would buy the products anyway. Additionally, Gucci already provided some of the most exclusive benefits of loyalty cards to its top customers (top 5% that represent 30% - 35 % of sales), these benefits were sophisticated events at exclusive locations and venues. Finally, loyalty cards could also suffocate creativity. Adapting new collections depending on the tastes of a certain populations could limit the creativity of the designers and damage the DNA of the brand.

When debating the extent of transparency with customer information, it is important to find a balance between the economy and creativity of the fashion industry. As stated previously, branding and the specialization of customer relations drives repeating customers and focus on the incorporation of fashion into lifestyles. Creating the need for a brand to become essential to a timeless lifestyle was reflected upon Robert Polet, stating, “The brand is always more important than the designer because the brand will stay with us, and with our children and children’s children, out into infinity” (Polet 1). In order for the Gucci Group to survive this changing economic climate, it is important for them to understanding the shifts in economic worldwide power. Therefore, the idea to share customer information among brands within the Gucci Group had surfaced. The hope for this exchange would be to better cater products to customer needs, analyze the changing demographics of financial leaders, and specialize marketing campaigns to better match their audience. Currently, customer information collected, includes contact information, age, gender, sizes, and insight into future communication. Through the CRM system, customers are assigned numbers to track their purchases and location of purchases. This information is used for research purposes in order to understand background information for sales associates consulting a returning customer. Future ambitions for this system would include detailed insight into color and style preferences of each individual customer, trends in individual purchases, and desires from their brand. However, with this wealth of information, lines between economy and specialization blur. For example, if there is a freedom to exchange customer color preferences between brands, creativity would be limited and fashion would aim towards selling one specific color than setting future trends. Brands would lose their edge in distinct fashion aims and become unison and monopolized. Therefore, it is best recommended that information solely relating only to economic demographic be shared. This includes: age, gender, national origin, and location of sale. There should not be an inclusion of contact information, sizes, or fashion preferences, in order to help maintain brand specialization.

Finding a solution to the conflict at hand is not the only difficult task that CEO Robert Polet has. After looking over the possible solutions for fixing the customer service experience for Gucci Group’s customers, Polet has to figure out a way to impose those solutions among the managers of each individual brand. The dilemma he runs into here is that Polet has instilled a democratic management style since joining the company in 2004. Polet’s philosophy of “Freedom within the framework” gives his employees the freedom to make their own choices as long as those choices do not disrespect the company’s DNA. The employees are responsible for their choices. Jean Christophe Bedos, Boucheron’s CEO, was quoted in the case study saying, “What’s unique in our group is a highly sophisticated kind of democracy. It’s a discipline and a shared responsibility, and it’s a very difficult system to maintain. This freedom comes from Polet himself, from his philosophy, and from his unassuming way of staying balanced. He welcomes opinions, projects, and out-of-the-box ideas, but he also challenges them” (Corsi, Dessain, Jerez pg. 6). This is where Polet’s dilemma becomes apparent, he has given his managers a say in the way the company is run, so he cannot impose a view on them without consulting them first. If he imposes his view on them, the managers will see this as a break of their psychological contract. Their psychological contract says that they have freedom and the responsibility to do what they believe is right for the company as long as it is within the framework of Gucci Group. By imposing his view without consulting the group, the group will see Polet as not being fair in his procedure. He will be seen as having a negative procedural fairness. This will negatively affect the company and will make his managers distrust him. The right way for Polet to impose any kind of solution to the companies problem, is by involving his managers in the decision making process. Polet has to consult with his team about which course of action he should take since he has implemented a democratic style of leadership within the company. Even if Polet believes a certain course of action is the right course of action, he needs to convince the rest of the brand managers that this course of action is the right one. By consulting with his team about which course of action Polet should take, he will keep intact his psychological contract with his team. The teams’ ideas could also take some of the pressure off of Polet and make his decision making easier. With the team having a say on which course of action he should take, it will make that course of action more reliable since the team is behind it. Gucci Group is and has been successful because they are willing to adapt to their surroundings. When people think of or hear of Gucci, they think of high class and luxurious. Gucci has made a good name for itself and it’s not only because it’s a brand name. Because Gucci actually wants their customers to enjoy their experience and come back for future business, they are successful. There are so many companies that have been in and out since 1921 and that’s because they weren’t able to adapt to the situations around them. When Gucci Group realized that they should focus more on customer intimacy after 9/11 and the SARS breakout, they were able to retain and attain customers. The fact that Gucci Group has started to focus on their customers’ interests has really helped them because they found out which demographic groups liked what. The Russians and the Japanese like different things and Gucci Group found ways to cater to their different needs and wants.Gucci Group had to react quickly to the economic crisis while maintaining their image as a luxury company. This is not an easy task to accomplish but Gucci Group has done it and they are still one of the most successful luxury goods companies in the world.

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