Case Study

Coach:Riding the Wave of Premium Pricing

Synopsis

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.

Teaching Objectives

The teaching objectives for this case are to:

1.Discuss the different aspects of price.

2.Examine the nature of establishing an image of low price.

3.Evaluate the different ways (and outcomes) for responding to price changes.

4.Consider the role that price plays in the marketing mix.

Discussion Questions

1. What challenges does Coach face relative to pricing its vast product line?
3. Based on principles from the chapter, explain how price affects customer perceptions of the Coach brand.
5. How has increased competition at Coach's price points affected the brand's performance?
7. 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