Company Case 9

Coach: Riding the Wave of Premium Pricing

171114

Questions for Discussion

1. What challenges does Coach face in pricing its vast product line?

The main challenge that Coach faces is that there is a rapid increase in competitions, such as
Michael Kors and Kate Spade. Because of their competition they would’ve needed to expand
their product line which is becoming increasingly more complex. The challenges that Coach
faced in pricing its vast product line was the fact it was so cheap in outlet stores. People were
enticed by the expensive luxury bag, and when it because so accessible in outlet stores and
retailers like TJ Maxx, the bags lost their value. From personal experience when Coach was
popular, I was in Middle School. Everyone had Coach shoes, Coach bags, and I'm talking middle
schoolers. The bags just became super cheap and Coach wasn’t making any money. People are
not going to buy the latest line if in the next few months it is going to be in TJ Maxx 50% off.
Eventually Coach also became oversaturated and people did not want to buy it anymore since
everyone had a Coach bag.

2. Based on principles from the chapter, explain how price affects customer perceptions of
the Coach brand.

Price absolutely effects customer perceptions of any brand. I feel as my generation starts to take
over, this perception is changing more to small businesses, however high end expensive products
are enticing to people. I cannot relate to this, since I would rather purchase something handmade
then from a huge corporation like Gucci or Coach, but I can see why when someone is walking
through the mall and sees a leather bag for $500, it is a status symbol. The funny thing about it is
even middle to low end classes find money to spend on luxury status symbols. Perception of
price is all about how psychology. People usually assume that the higher the price the higher the
quality of the product and the same with the lower the price the lower the quality. But that is not
always true. But in Coach’s case, they always had their prices set in a way that its higher than its
competitors but still reachable for more consumers, giving them a luxuries feel when they
purchase Coach’s products.

3. How has increased competition at Coach’s price points affected the brand’s
performance?

It has effected Coach's performance because with completive pricing, they are forced to compete
and lower the profit margin. Coach is a brand that was brought up by class; their products were
more expensive than those around them giving them that reputation. Because of the price it lead
people to think it was something only for the ‘rich’ thus their products would’ve been the most
sought after.

4. Will the plan proposed by current Coach’s leadership be successful in reversing the
brand’s slide in market share? Why or why not?

This is a hard question to answer, because form an outsider looking in Coach is not really trendy
anymore. I am sure creating a lifestyle brand could help and increasing prices on bags, but what
would really help is getting out of outlets and TJ Maxx. They should really up the quality and
advertise super luxurious bags priced at $500-$800, even if its three or four bags and I think
people would turn their heads again. They should also hire new designers, their style hasn’t
changed much since, given that the fashion industry has weekly changes they should go a
different route. Introduce a different line of products just for low quality and price products; this
will still help their sales.

5. What recommendations would you make to Coach?

Recommendations I answered in the previous question, but furthermore if they could also gather
the cash to have a big celebrity promote their products, they would see an increase in revenue.
I've seen Kendall Jenner advertise for a small watch brand called DW. They are doing so well
right now because they are targeting young people who worship those Jenner kids. The problem
is that Coach wants to maintain their image as a luxury brand but they sales are only coming
from the discounts that they give in their outlet stores. In order for them continue maintaining
that image they should cut down the discount sales and focus internationally.