Running head: MARKETING STRATEGY – COACH, INC. (COH)

Marketing Strategy Coach, Inc. (COH)
Shirl L. Jenkins
Professor: Eddie Alford
Principles of Marketing (MKT100 - 014016)
August 24, 2008

Introduction
Coach is a leading American marketer of fine accessories and gifts for men and women. Their product offerings include handbags, women’s and men’s accessories, footwear, outerwear, business cases, sun wear, watches, travel bags, jewelry and fragrance. Coach has been in existence for sixty-four (64) years maintaining the strongest brand in affordable luxury accessories. Coach operates in two segments: Direct-to-Consumer and Indirect. The Direct-to-Consumer segment includes sales to consumers through Company-operated stores in North America and Japan, the Internet and Coach Catalogs. The Indirect segment includes sales to wholesale customers in the U.S. and Asia. Coach’s business model is based on multi-channel international distribution; therefore their success does not depend solely on the performance of a single channel or geographic area.

Founded in 1941, Coach has grown from a family-run workshop in a Manhattan loft to premier accessories marketer in the United States. Coach developed its initial expertise in the small-scale production of classic, high-quality leather goods constructed from “glove-tanned” leather with close attention to detail. By the 1980s, Coach had entered into it first mover strategy by growing into a niche maker and marketer of traditionally styled, high-quality leather goods with expanding national brand recognition, selling its products through upscale department and specialty stores, its own retail stores and its direct mail catalog. Its initial strategy focused on being the lowest cost provider by setting prices approximately fifty percent lower than more luxurious brands. This strategy was very effective until the mid-1990’s when consumer preferences began to change away from traditional leather bags (Gamble, 2007).
Coach began a restructuring of its approach to sales in 1996 with the introduction of market research to determine consumer demand by the new creative designer, Reed Krakoff.
Through rapid prototyping and new collection releases every month, Coach began to regain market share. Combined with a targeted store campaign and good internal controls, the company was able to increase the appeal to the shopper while reducing internal costs through outsourcing agreements. Low cost combined with good quality attracted more affluent customers to its stores.
Coach’s marketing strategy is to deliver a consistent message every time the consumer comes in contact with the Coach brand through all of its communications and visual merchandising. The Coach image is created and executed internally by the creative marketing, visual merchandising and public relations teams. In the U.S., Coach spent approximately $15 million, or 2% of net sales in fiscal 2001, for national, regional and local advertising, primarily print and outdoor advertising, in support of its major selling seasons. Coach catalogs and coach.com also serve as effective brand communications media, driving store traffic as well as direct to consumer sales. Coach’s co-branding partners, including Lexus, Palm and Motorola, have together spent over $34 million in advertising relating to the Coach brand over the past five years, and through their programs Coach has strengthened its brand reputation. Advertising by the co-branding partners provides important additional exposure of the Coach brand. Coach uses its extensive customer database and consumer knowledge to target specific products and communications to specific consumers to stimulate sales across all distribution channels. Coach also engages in a wide range of direct marketing activities, including catalogs and brochures, targeted to increase sales to consumers in their preferred shopping venue. As part of Coach’s direct marketing strategy, it uses its database consisting of approximately seven million U.S. households. Catalogs are Coach’s principal means of communication and are sent to selected households to stimulate consumer purchases and build brand awareness. In addition, the growing number of visitors to the www.coach.com online store provides an opportunity to increase the size of this database and to communicate with consumers to increase on-line and physical store sales as well as build brand awareness. Coach’s on-line store, as well as its catalogs and brochures, provides an environment where consumers can browse through a designed offering of the Company’s latest styles and colors.
Coach has four different channels that provide it with immediate, controlled access to consumers: retail stores, factory stores, direct mail and e-commerce. The direct to consumer business represented approximately 64% of Coach’s total sales in fiscal year 2001, with the balance generated through the indirect channels.

The company’s retail stores establish, reinforce and capitalize on the image of the Coach brand. Coach operates over one hundred twenty-one retail stores in the United States that are located in upscale regional shopping centers and metropolitan areas. It operates eight flagship stores, which offer the broadest assortment of Coach Products in high-visibility locations such as New York, Chicago and San Francisco. Depending on their size and location, the stores present product lines that include handbags, business cases, wallets, footwear, watches, travel and related accessories.
Coach’s sixty-eight factory stores serve as an efficient means to sell discontinued and irregular inventory outside the retail channels. These stores operate under the Coach Factory name and are geographically positioned in established centers that are usually greater than one hundred (100) miles from major markets. Coach’s factory store design, visual presentations and customer service levels support and reinforce the brand’s image. Prices are discounted from 15% to 50% below full retail prices. Through these factory stores, Coach primarily targets value oriented customers who would not otherwise buy the Coach brand.
Coach mailed its first Coach catalog in 1980. While direct mail sales include a small portion of Coach’s net sales, Coach views its catalogs as a key communications vehicle for the brand that also promotes store traffic. As a vital component of its communications strategy, the graphics, models and photography are upscale and modern and present the product in an environment consistent with the Coach Brand position. The catalogs highlight selected products and serve as a reference for customers, whether ordering through the catalog, making in-store purchases or purchasing over the Internet
Coach launched its e-commerce website in early October 1999 in anticipation of the holiday season. Coach believes it is positioned to support strong near-term growth, with a simple, clean user interface and, based upon Coach direct mail expertise, excellent order fulfillment capabilities. Like Coach Catalogs and brochures, the on-line store provides an environment where consumers can browse through a selected offering of the latest styles and colors.
Also, during the 1980s Coach began expanding internationally. The company opened boutiques in England, London and Tokyo, Japan. With this expansion company sales increased five times as much to $100 million in a four year period.
Coach has a total of sixteen competitors. Top competitors include Dooney & Bourke, Kate Spade and Michael Kors. These companies have been in existence for at least twenty-years compared to Coach’s sixty-four years. These brands are similar to Coach in pricing with price ranging on average $200 to $400 US dollars. Because Coach has such a distinctive brand it differentiates its products from its competitors and gives the company the title of “The strongest brand in affordable luxury” (Gamble, 2007).
Coach has had superior performance; however with competition getting stronger they will have to have aggressive movement into emerging markets in order to maintain first mover advantage. Coach has developed a strong retail network in the US through themed stores and wholesale accounts to major department stores. Additionally, Coach has begun developing a strong network in Japan. Coach Inc. now operates in Japan through a 50% joint venture.
Coach appears to be continuing to follow a strategy that is both low-cost, via its factory stores that typically offered ten to fifty percent discounts on overstocked and discontinued items, and full-price stores which offered the latest product lines without discounts. With little overlap in customers between the stores, the company is able to market to both the discount, price sensitive shopper and the more trend-oriented shoppers who demand the latest fashion and are willing to pay for it.
The premium handbag and accessories industry is highly competitive. The Company mainly competes with European luxury brands as well as private label retailers, including some of Coach’s wholesale customers. Over the last several years this market has grown rapidly, encouraging the entry of new competitors as well as increasing the competition from existing competitors. However, the Company believes that as a market leader they benefit from this increased competition as it drives consumer interest due to brand loyalty.
Coach has built upon its national brand awareness, expanded into international sales, particularly in Japan and East Asia, diversified its product offerings beyond leather handbags, further developed its multi-channel distribution strategy and licensed products with the Coach brand name. The Company believes that there are several factors that differentiate them from their competitors, including but not limited to: distinct newness, innovation and quality of their products, ability to meet consumer’s changing preferences and superior customer service. Coach attributes the reputation of the Coach brand to the unique combination of attitude and design, the tradition of fine leather goods and customer fabrics, the exceptional product quality and durability and their commitment to customer service.

References
Consumer Reports. (2006, May). Outlet stores, Where to shop & how to save big bucks. Retrieved July 15, 2008, from http://www.consumerreports.org/cro/money/shopping/where-to-buy/outlet-stores-506/overview

Gamble, John E. (2007). Coach Inc.: Is Its Advantage in Luxury Handbags Sustainable? In Crafting & Executing Strategy (p. 2). New York, NY: McGraw-Hill Irwin.

Coach Annual Report (10k). (Unknown). Business of Coach, Inc. Retrieved August 16, 2008, from http://sec.edgar-online.com/2006/08/25/0000950136-06-007118/Section3.asp