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What would be the effects on its markets in

general and individual consumers in particular,

of a temporary withdrawal of all media

advertising by Chanel?

Charlie P Marples MAR 07070172

BA (Hons) Advertising and Marketing Level 3

Developing Brands through Advertising ADV 3014M

Alison Cheeseman

11th April 2011

Word Count: 3,197

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What would be the effects on its markets in general and individual consumers in

particular, of a temporary withdrawal of all media advertising by Chanel?

According to Somma, M (2010), “Chanel is a brand known by everybody, aspired to by nearly

all, and yet worn and experienced by very, very few.” Cohen (2008) reiterates Somma in

“Take one C, interlock it with another C, and what you have is priceless.” However from an

economic perspective the idea of a priceless Chanel brand can be seen as rather ironic, as

according to 2008 market figures Duttge (2008) states the estimated worth of the Chanel

brand to stand at $10.3 billion to $14.8 billion. However, Chanel is a brand split in two,

Fashion and Cosmetics, Harrison and Andrea (2008) of fashion investment firm Financo

estimate the financial split stands at cosmetics been worth $3.1 billion to $4.1 billion and

fashion at $5.6 billion to $7.7 billion. They go on to reinforce however that both markets are

of an oligopolistic nature with major cosmetic competitors such as L’Oreal having a value of

$18.89 billion and major fashion competitors such as Hermès valuing at $8.46 billion, both

competitors showcasing significantly higher financial value than Chanel. Rokeach (1973) yet

believes that emotive value is of much higher importance to the individual consumer than

financial worth and share prices in:

“Chanel remains to be a brand of longevity and has a confident and unflappable presence.

Its inspirational values of luxury, elitism, glamour, and sophistication are just a few of the

many emotional values that make this brand so desirable.”

Kardon (1998) builds on Rokeach stating that this “Emotional Safety Net” with the brand

values removes perceived risk from purchase decision, optimizing the brands position as the

consumer’s brand of choice, in the words of White (1999) becoming part of their “mental

furniture”.

Ehrenberg and Jones (2000) liken this oligopolistic competition in Chanel’s market place to a

game, the game in question being media advertising, declaring:

“If one competitor should decide not to play the game or if he or she should weaken, his

position could become immediately vulnerable. The paradox of the competition is that there

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is generally little reward for energy; but in most circumstances a terrible penalty for lack of

energy”.

Waterson’s level of impact model considers Ehrenberg and Jones’ game analogy to be

credible, but believes it only has maximum impact on a micro level. For example, in the case

of Chanel advertising the umbrella brand would be ineffective, whereas advertising a line

brand or product such as Chanel No.5 has impact as the heuristic processing and message is

much more focused, therefore internalised more effectively by the consumer. Examples

such as the Mariyln Monroe and Audrey Tatou No.5 campaigns have spanned 92 years

(1919-2011) and evidenced high levels of success throughout, see below.

Kellar (1998) evidences this in his rankings of product categories where Chanel No.5 hit the

top spot in the fragrance range, and again in 2008 the NPD group stated that revenue had

increased by 14.5% in just one year (2007-2008). Sarhan (2009) credits Kellar and NPD

further in: “Aggressive advertising campaigns over the years have been critical for the brand

to stay current and keep its image young and fresh.” This is reiterated in the words of

Duttge (2008) in that this “revolutionizing and democratizing fashion” of advertising is what

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has kept Chanel its strong and consistent brand equity, for example a move from Mariyln

Monroe, a fashion icon in the 1920’s to Audrey Tatou, a modern icon for French Style in the

2000’s.

However Freeman (1996) believes the contrary to Waterston believes all layers of the

market need to be hit to have a comprehensive and all-encompassing effect, stating you

should “Cast your net wider rather than narrower- think confectionary, not chocolate: think

hot beverages not coffee. The market is multi layered- reflecting a variety of needs and

segmentation.” This can be seen for more youthful products in the Chanel line range, both

in terms of brand age and target markets. Chanel Mademoiselle from 2008-2011 has taken

on this multi-layered IMC (integrated marketing communications campaign) featuring Kiera

Knightley playing a temptress teasing men, due the story of the campaign been quite risqué

for Chanel it is evident portraying the message across varying Channels would come across

differently due to the lack/amount of sound, speech etc. The multi-channel campaign is

shown below, ranging from TV to outdoor to print. The message of each channels subtle

difference would appeal to various ages across the 18-34 year old range (New York Times

2002).

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Jones (1990) argues that larger brands, such as Chanel could afford to under-advertise as

they are well established, and, as previously mentioned over almost a century old hence the

aggressive advertising is not necessarily needed. He illustrates this in his SOV/SOM model

(Share of Voice vs. Share of Market), shown below:

As Jones’ model shows a brand can have a higher share of market than share of voice and

still succeed due to the prolonged effects of previous advertising. An example of this is

Chanel’s handbag ranges, including the new 2011 Mademoiselle Handbag range, endorsed

by Blake Lively, only shown on the corporate website, below:

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With no external media used for advertising, yet still showing promising success in European

fashion markets. Hanft (2009) credits this to Brand Harmonisation where “new brands

without a quality or equity difference” are welcomed by current brand users as the brand

experience from other Chanel brands share their essence and equity to the new brand,

creating a transferable credibility.

The Steiner Effect (1973) supports Jones’ theory that advertising is not consistently

necessary as it could have a negative potential impact on both brand earnings and brand

valuation due to its effect on competitive pricing in a saturated market such as cosmetics or

fashion. In a saturated market such as cosmetics demand is affected by large amounts of

competing brands, constantly bouncing off one another’s campaigns. For example, Chanel

Chance is a line brand fragrance targeted at younger consumers advertised in glossy print

magazines, alongside other brands such as Vera Wang Princess:

Both brands have similar target markets and similar advertising styles, creating high brand

parity, leaving a main distinguishing factor between choices reliant on price. This has led to

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both brands in the heat of competition reducing prices down to an average RRP of £20-25

per 50mls, from £35-40 per 50mls, the former of which is not reflective of the umbrella

brands valuation, and since price has significantly lowered this would also have a knock on

effect on brand earnings by the diminishing of profit.

This is further evidenced by both brands in the less lucrative market of male fragrances

where advertising is comparably minimal. Similar male line brands such as Chanel Bleu and

Vera Wang Men are selling for an approximately 50% higher price of £33-35 per 50mls,

indicating the potential negative effects on brand valuation procured by advertising.

However Broadbent (1979), through the Adstock Model would suggest the opposite, that

lack of advertising negatively effects brand valuation, along with brand equity, as after a 2

week time period he theorises the prevalence of the advertising message in the consumers

mind is halved, therefore waning brand value salience, shown below:

This illustrates that a short term withdrawal would have a detrimental effect on Chanel, as

the salience of its brand values would be reduced to near nothing over an extensive period.

Chanel Chance prove Adstock to be correct in terms of their limited editon summer

fragrances for seasonal release, Chance eau Fraiche and Chance Eau Tendre, both are

available throughout the year yet are only advertised seasonally to maintain their brand

values which are linked to seasonal values such as soft floral scents been linked with

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summer weather. Outside the months in which the limited edition fragrances are advertised

sales drop by over 40% (Belson 2000), this is due to the ill-fitting juxtaposition of brand

values to seasonal trends and values, such as the TV advertisement below using colours

such as Lime Green and Pink, Likened by semiologists Drew and Meyer (2008) with values

such as Cheerful, Fruity, Sweet and Stimulating, quite opposite values which consumers

liken with Winter months.

Ingall (2002)sees the example of Chance Fraiche/Tendre as a positive example of protecting

the brand experiences by limiting advertising exposure seasonally as customer experience is

“too defined by mood and circumstance”, circumstances such as seasons been beyond the

advertisers control. Reichheld (1996) supports Ingall further in that “customer satisfaction is

greater if the customer has had a problem and it has been satisfactorily solved, then if they

had had no problems at all”. In Chances case advertising a summer fragrance in the winter

months would be attempting to solve a non-existent problem.

However Ehrenberg (1974) in his leaky bucket theory would support Broadbent and Belson

in the metaphor of a consumer market for a product been likened to a leaky bucket where

new “trialists” need to be continuously recruited through advertising to replace consumers

lost through the cracks, the role of advertised coined by Ehrenberg as “Proactive Brand

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Maintenance”. This can be seen in the Chanel portfolio, through the Proactive Brand

Maintenance of their Handbag lines, through strategic celebrity endorsement. Lily Allen was

the face of Chanel fashion in 2009, as she was very much a media favourite and likened to

many of Coco Chanel’s values such as, “luxury must be comfortable, otherwise it is not

luxury,” As Lily was famed for wearing comfortable fashion over boutique fashion (image

shown overleaf).

However the cracks in the bucket may have started to show when Lily Allen faded from the

public eye in late 2010 due to personal problems, and her consumer influence reduced.

Plugging the cracks became a necessity for the leaky bucket of Chanel handbags through the

need of a new brand ambassador, Namely Blake Lively (Previously mentioned and shown

above), as she is in a popular drama show, which is mainly located around a fashion focused

group of girls (Gossip Girl), hence her brand association with handbag lines, people begin to

identify the values of Blake Lively with that of Chanel and the cracks become plugged.

Broadbent supports Ehrenberg in the Leaky Bucket theory equating the removal of

advertising to an idea of a Plane. Broadbent proposes that Advertising spend is the fuel of

the Plane, the plane been the brands market prevalence. Advertising spend gets the plane in

the air, and is needed constantly to keep it there, the less the fuel is provided the more the

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plane will descend. This analogy can be seen in Chanel’s repertoire in the brand descent of

Chanel no.19, first advertised in 1971, last advertised in the 1990 TV advertisement shown

overleaf:

Regardless to the fact no advertisement had taken place for over a decade, no.19 launched

a brand rejuvenation in 2000, with no advertising again, and in the words of Goutall (2009)

“Chanel had drastically reduced the products available”. And in late 2000, all EDT and EDP

traditional bottles and refills had been discontinued, whereas sister lines that were once

exact to no.5 now only include shower gel and body lotion. This is strong evidence of how

not giving a brand “fuel” can rapidly lead to its descent.

Sutherland (2000) believes lack of advertising leads to lower sales due to higher brand parity

hence leading to an increase in “habitual buyers” and “brand loyals”. NFO Market Mind

(2000) state with the absence of advertising over a period of two months habitual buying

increases by 16%, but brand loyalty lowers by 13% leading to an overall decrease in brand

purchase of 29%. Sutherland Distinguishes this by:

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“Habitual buyers repeat buy the brand for reasons of inertia rather than loyalty. With the

cessation of advertising, the brand loyals diminish in the market increase and the habitual

buyers increase.”

This shows some reasoning and rationale behind Goutall’s quote:

“The perfume is a settled scent, a very complex fragrance for settled women, searching her

own way between the too many floral and sweet juices. The scent Chanel n° 19 is certainly

unknown by the younger generation and with his very special character, deserves to find his

way in the "30 something" generation.”

Ehrenberg and Barnard (1997) state this split of habitual and loyals during a period of brand

parity due to market saturation has led to “idiosyncratic repertoires of one or more habitual

brands”. Ehrenberg’s “N”- Nudging of ATRN (Weak Theory of Advertising”) is therefore seen

to be the key driver of advertising messages, constant nudging is needed to keep within the

repertoire and contest brand parity. Ehrenberg and Banard summarise this in:

“Brands advertising to such multi-brand buyers does not have to be strongly persuasive, not

trying to convert them whole-heatedly to that single brand”.

Petty and Cappicio’s Elaboration Likelihood Model (ELM) (1986) with application to the

Chanel no.5 Estella Warren TV campaign can be used to illustrate this further:

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The peripheral route would be taken for nudging by Chanel, as cognitive processing has

already taken place, if part of a repertoire. The peripheral route focuses on quality and

attractiveness of the message conveyance, in this instance the idea of a high security safe

and the heavy use of gold represent quality and attractiveness. The visually catchy slogan of

a red riding hood theme will also create attractive appeal.

However from an econometrics perspective the idea of using nudging advertisements can

only be deemed credible through mathematical figuring and not aesthetic likeability alone,

Roberts, Jones and Broadbent propose that in order to truly evidence advertising’s

credentials you must be able to prove its worth, through its elasticity, within their research

they found a 10% increase in advertising spend equates to a 2% sales increase, showing that

the average sales increase is 4 times lower than the percentage increase in spend, meaning

an AED of 0.2, a relatively inelastic score. Showing nudging advertisements do not have a

high effect on choice within repertoires and according to Ehrenberg (1997) “While sales

might not change immediately, the major brands in the market become more vulnerable and

more open to attack.”

Such an inelastic score of 0.2 strike a chord with theorists such as Doyle (2000) stating “The

primary task of management is to maximise returns to shareholders… value strategies and

companies in the same way investors do.” This is explained in the SVA (Shareholder Value

Analysis) made up of two parts: Cash flow pre campaign relative to cash flow post campaign,

monitoring effects in very much the same method of elasticity but focused on share prices

and premiums. This idea would however support the role of advertising as Doyle states:

“Strong brands have price premiums, at 40% above regular brands. Strong brands also tend

to possess higher advertising and promotional elasticity’s”.

Meaning a cessation of advertising, contrary to Steiner effects would reduce price

premiums. Doyle (2000) reiterates, “If managers neglect to invest in marketing assets and

suffer a loss of brand premium as a result, the share price can be expected to drop

dramatically.” This would not only affecting the external valuation of the brand but incur

internal financial and management crisis. This can be seen plainly in the earlier example of

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Chanel no.19, where marketing assets were neglected and the brand range dropped, as

Ehrenberg (2000) states “Organic growth virtually never happens, not never, but virtually

never.” He builds on this in “Brands on the whole don’t grow; if they do, someone else has

got to lose in terms of market share.” This means that the only way to guarantee SVA

opportunity is to be opportunistic, and when a competitor is losing share competing to take

it. As previously mentioned brand parity has become an issue due to advertising saturation,

in terms of Chanel this could be seen as an opportunity. According to Forbes (2006)

Maybelline now own 7.4 % of the global cosmetics markets, the highest of all cosmetic

brands; however this is a line brand under L’Oreal, meaning its multiple brands with singular

management, suggested by Eagleton to limit the “aesthetics of the perceived commodity”,

with all creative input coming from one umbrella. It has evident that Chanel has played to

this weakness in their 2011 make up campaigns, with a highly creative robotic theme, unlike

any competing brands creative strategies this fashion season. The campaign is titled

“Nowness” (shown below):

This shows that strategic advertising is necessary for good SVA, but the strategic differential

element is of particular high importance, Ehrenberg (2000) metaphorically summarises this

in:

“Basically brand choice is not choosing a brand but buying a product, if something is needed.

I want some coffee, and not only coffee, I want coffee that’s pre roasted, I want a hotel for

the night in a certain price range, but which hotel it is doesn’t matter too much. There is a lot

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of high involvement in buying but not in brand choice; this is why you can influence it by

something as weak as advertising; showing your brand in a 30-second ad”.

Conclusively it is safe to say a removal of advertising would have a negative effect on the

Chanel brand, but its severity is dependant on three key areas for each different line brand

as Sutherland and Sylvester (2000) state “Capturing the mental territory for a brand requires much

more effort and resources than holding it once gained”:

1. The residual or carry over effect current and past advertisements had.

2. Brand Position pre-withdrawal

3. Habitual vs. Loyal Consumers

Jones’ SOV/SOM first introduced the concept of carry over effects from previous

advertising, which brought to light the differences between short term and long term

advertising effects. If advertising strategy was to be long term carry over would be longer,

hence a short term withdrawal would less detrimental. Hanft (2009) credits this to

integrated strategies in where “new brands without a quality or equity difference”. Take

Chanel couture wear which is rarely advertised but due to brand harmonisation is always

recalled by consumers, such as the Iconic Chanel little black dress, Shown below:

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As put forward by Advertising Elasticity Theory and Doyle (2000) analysing Shareholder

Value Analysis, the effects of advertising withdrawal can only be seen if comparatively

analysed to figures pre withdrawal, to get a quantitative econometric view of the effects. As

Ehrenberg (2000) states “Organic growth virtually never happens, not never, but virtually

never,” it seems that advertising is the fertiliser.

The argument between habitual buying and brand loyalty is does advertising encourage and

maintain loyalty, or has elasticity theory shows mainly keep habitual buying at an

equilibrium by keeping repertoires. In the case of Chanel No.19 it is shown habit isn’t always

enough to keep the brand afloat.

All three areas highlight how advertising helps Chanel to both be maintained and grow

further, evidencing on both a micro level with the consumer, with theories such as the

Elaboration likelihood Model and Habitual buying, to Macro theories such as Shareholder

Value Analysis and Steiner. As it is reiterated by Ehrenberg (1997 &2000):

“While sales might not change immediately, the major brands in the market become more

vulnerable and more open to attack. There is a lot of high involvement in buying but not in

brand choice; this is why you can influence it by something as weak as advertising; showing

your brand in a 30-second ad”.

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