Coach is the number one seller of handbags in the U.S., selling $5 billion company worth of handbags every year. All financials have grown vigorously in the past four years. Coach has achieved this success through value-added pricing. What makes its products worth more? Quality (materials, workmanship), design/style, and above all, the value of the brand as a status symbol do. The bags are pricey, but they are moderate to even cheap when compared to the higher-end handbags from Prada and Gucci. It’s aspirational, but within reach. The problem the company now faces is that it is losing share in the U.S. (two years in a row). Various factors contribute to this, including increased competition. But there is also criticism that Coach may have overestimated just how high of a price customers are willing to pay. This case examines the challenges a premium-priced brand faces as it becomes popular across demographics.
Discussion Questions
- What challenges does Coach face relative to pricing its vast product line?
- Based on principles from the chapter, explain how price affects customer perceptions of the Coach brand.
- How has increased competition at Coach’s price points affected the brand’s performance?
- Will the plan proposed by current Coach leadership be successful in reversing the brand’s slide in market share? Why or why not?
- What recommendations would you make to Coach?
