Recently, I came across an article which focused on “15 reasons [why] luxury brands must be on twitter”¹. When I started reading those 15 reasons, it got me a bit worried. I was unsure as to if any of those reasons really had a merit for a luxury brand. Like most academics, when I read lists like these, I generally tend to do what academics do first. Research – to find out the scientific basis for such list.

Funny enough I came across a recent study carried out by an analytics company in the US, called Pear Analytics². The study was conducted by looking at the content of 2,000 randomly sampled twitter messages from the public stream of Twitter. The analyst then separated these messages into six buckets: (a) news; (b) spam; (c) self-promotion; (d) pointless babble; (e) conversational and (f) pass-along value.

The striking result of this study was that more than 40% of the total twitter posts were put in the category ‘pointless-babble’. Furthermore, some of the top 15 reasons mentioned above suggest the use of twitter for (a) news and (b) self-promotion. However, these two put together had not even a double-digit share of the twits (News – 3.60% and Self-promotion – 5.85%).

The study also revealed some other striking stats which have not been captured in mass-media. For example, 1 percent of the addicts contribute 35% of the total visit to twitter and 72% are just passers-by. These 1% consumers must be those extremely tech-savvy people I believe.

Another report by Gizmodo (one of the highly ranked tech-site) mapped twitter users by asking if only 100 people were on twitter how would it look like.³ It had similar results which demonstrated that there would be 5 loud-mouths in these 100, but more than 50 people would be lazy (not twitting even once a week and therefore hardly visiting) and 20 dead (with empty account). A report from TechCrunch (another highly regarded tech-site), also suggested that facebook has 12X the number of ‘addicts’ compared to twitter and stumbleupon can drive more traffic to your website than twitter.⁴

No doubt twitter is being talked about everywhere, however in light of the above evidence, is it really a place luxury brand or any brand other than technology brands should be?

I wanted to answer this question from a different perspective. This brought me back to some of my earlier posts regarding ‘what is luxury?’ and ‘importance of luxury value perceptions’. Luxury is an intricate web of emotions and can it be captured in 140 characters (and that too with a shortened link of some sort if the company is trying to drive some traffic to a specific webpage or website). Secondly, with 40% babble around the message what value will that message generate and what are the chances that it will stand out? Third, what are the chances that the real consumers will read it and take actions on the basis of these? With all due respect to the original author of the above mentioned 15 reasons, I beg to differ significantly and following are the reasons why I do so.

Looking at the 15 reasons posed by the author, I thought:

1. Will a company be able to convey that it is a dynamic, forward-thinking brand by being on twitter? Or will it be able to convey this by actually innovating and getting promoted by the people who are in the know?
2. Are luxury consumers really on twitter?
3. Have luxury companies made fun of their competitors in any sort of media? Differentiation and uniqueness is what drives luxury, isn’t it?
4. Do Gucci, Hermes, LVMH really need to be found? Hermes’ quarterly profit as announced today has risen by 55%.⁵
5. Are the patricians and parvenu really on twitter? If not, does a brand need to show its supreme desire is to serve these premium clients and customers?
6. With 40% of the twits being pointless babble does a brand need to leverage the massive momentum Twitter has garnered from offline media?
7. After decades of research behind us we are still not very close to understanding the “know, like, trust” reasons behind buying decisions? Will twitter really reveal that for us?
8. With luxury brands having strong signals associated with them, do they need to provide clients and prospects with the kinds of valuable tips and information that could come back to you in the form of more business and good will?
9. Looking at all of the above, will a brand be able to expand its value using twitter?
10. While most luxury brands are struggling to create a web-presence how relevant and manageable will special and time-sensitive offers be?
11. Will any brand really be able to offer useful information via twitter?
12. Will any brand manager be able to respond quickly to any customer care-related questions and issues that may have been aired publicly in a seemingly innocuous tweet or blog post? And doing so quickly may have its own kind of repercussions, isn’t it?
13. Can a brand really give those unfamiliar with the brand a small, delightful taste of what it is by using twitter?
14. Else than a quirky message (which most luxury brands avoid) how one can express the entangled web of o expressions on twitter?
15. Will a brand be able “to stay ahead of the curve” using twitter? Really?

Presently, I see twitter as more of a sensationalization tool, rather than a brand-building tool. It would be good for those brands which are sensation-seeking for sure. However, when your clientèle happens to be patricians and parvenus, do you really wish to focus on sensation-seeking of signalling? Probably in future this situation may change but as of now, the question remains on should luxury brands or for that matter any brand (other than tech brands) be using twitter?

While writing this post, my twitter client suggests that (with the 795 people I am following) I have already got more than 393 twits pending to be read if I refresh and instead of reading them, I have closed the client. Your message was lost if it was among them.

References:

1. The list of 15 items can be found here.

2. The full Pear analytics whitepaper can be downloaded from here.

3. The Gizmodo report is available here.

4. TechCrunch report can be found here.

5. Bloomburg on Hermes results.

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In some of my earlier posts, I have stated that there are two simultaneous paradoxical needs among us consumers with regard to consumption namely, (a) to conform and (b) to demonstrate uniqueness. In sociology and psychology this has led to creation of various terms such as fitting in or standing out, in-group vs. out-group behaviour, associative vs. dissociative group behaviour. All these can be of great help in segmenting consumers.

Segmentation as an idea seems to have cropped up from political ideology of ‘divide and rule’ and it still seems to work in most contexts. In this article, I wish to focus on segmenting luxury brand consumers. Recently, I came across an article in Journal of Marketing focusing on status signalling behaviour among consumers. The article is interesting as it looks at how subtle signals can enhance and trigger consumer consumption decisions.

The authors coin four segments of consumers using the famous four P idea of marketing. They segment the luxury consumers into 4 segments namely: patricians, parvenu, poseurs and proletarians.

The definition of each segment is as follows:
1.Patricians are super-rich who pay a premium for inconspicuously branded products. They do not look for explicit signalling but largely focus on subtlety.
2.Parvenus are probably the nouveau rich who have suddenly amassed big futures and are trying show they have arrived. They love explicit signalling.
3.Poseurs are fakers. They buy fake goods to demonstrate their affinity to the above two groups. They would also use explicit signalling.
4.Proletarians are the left outs in socio-economic status. They do not buy luxury goods and do not signal either.

Attached below is the model provided by the authors in their Journal of Marketing Article.

Source: Han, Y. J., J. C. Nunes, and X. Drèze “Signaling Status with Luxury Goods: The Role of Brand Prominence,” Journal of Marketing, 74 (4), 15-30.

While the segmentation looks really interesting, the question which arises is how can managers actually use this in the marketplace?

For example, can a consumer be a patrician and parvenu at the same time? For example, what if the consumer is actually using a Hermis Berkin (discreet signalling) bag with Christian Laboutin shoes (explicit signalling)? Similarly, can a consumer be a patrician and poseur at the same time. For example, a consumer may use a Seville Row tailored suit with a fake Mont Blanc. What need to be understood is that there are no water-tight compartments when segmenting luxury consumers. Certainly, there will be consumers who will belong to only one category however, that segment may not be the largest segment for any luxury brand.

I believe that meaning luxury segmentation will incorporate situation specificity. I have found strong influence of situation on most consumers’ luxury consumption and therefore that pertinent question of “for what occasion do you wish to use this luxury brand for” can be one of the most important questions segmenting luxury consumers. What do you think?

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When joining the ‘luxury society’ group, one of the interesting questions they asked was to provide your own definition of luxury.

My response to that was “luxury is a state of mind. It is about how you carry yourself and fulfil yours as well as others desires”.

My idea focused on the issue of luxury from the perspective of self and others. One does not consumer luxury for just oneself but it is very much socially oriented consumption. For example, why do wear the best suit (dress) when going for an important meeting or interview? Why do we make sure that we do not use a cheap perfume when going on a date? The aspect of self-indulgence is intertwined with the socially directed motives when it comes to luxury.

However, the questions asked at luxury society really made me think about how we define luxury.

The concept of luxury has been present in various forms since the beginning of civilization. Its role was just as important in ancient western and eastern empires as it is in modern societies. With the clear differences between social classes in earlier civilizations, the consumption of luxury was limited to the elite classes. It also meant the definition of luxury was fairly clear. Whatever the poor cannot have and the elite can was identified as luxury.

With increasing ‘democratization’, several new product categories were created within the luxury market which were aptly called – accessible luxury OR masstige luxury. This kind of luxury specifically targeted the middle class (or what is sometimes termed as aspiring class). As luxury penetrated into the masses, defining luxury has become ever so difficult.

In contemporary marketing usage, Prof. Bernard Dubois defines ‘luxury’ as a specific (i.e. higher-priced) tier of offer in almost any product or service category. However, despite the substantial body of knowledge accumulated during the past decades, researchers still haven’t arrived on a common definition of luxury.

While the word ‘luxury’ is used in daily lives to refer to certain lifestyle, the underlying construct’s definition is consumer and situation specific. If you earn less than $ a day, an ice-cream would be a really big luxury item for you. On the other hand, if you are going to a party with some big-wigs a $100,000 car may not be a luxury. The word luxury originates from the Latin term “luxus” signifying, “soft or extravagant living, indulgence, sumptuousness or opulence”. However, luxury is quite slippery term to define because of the strong involvement of human element and value recognition from others.

Many other attempts have been made to define luxury using the price-quality dimension stating higher priced products in any category is luxury. Similarly, researchers have used the uniqueness aspects of luxury too. However, with increasing quality orientation from lower end brands and massicification of luxury, it is hard to use either of the above dimensions to define luxury.

Prof. Jean-Noel Kapferer, takes an experiential approach and defines luxury as items which provide extra pleasure by flattering all sense at ones. Several other researchers, focus on exclusivity dimension and argue that luxury evokes a sense of belonging to a certain elite group. However, having an LVMH hang bag in central districts of any big city across the world, won’t make you feel that way. Rather in one of the earlier posts when I asked the question ‘if others can have it, is it luxury?’ consumers responded clearly saying that LVMH and Gucci are losing their lustre by the day in their minds.

The discussion above highlights the extremely subjective and multidimensional nature of the luxury construct. The attempts very much define a dimension of luxury such as high price, high quality, uniqueness, exclusivity etc.

However, it is still unclear ‘What is Luxury?’

So what do you think is luxury?

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Recently, I was re-reading the book ‘luxury brand management’ wherein the authors – Chevalier and Mazzalovo – suggest three criteria to classify a luxury item: (a) strong artistic content; (b) unique craftsmanship and (c) international reputation.

While I agree that the artistic content and craftsmanship is what differentiates most luxury product and brands from non-luxury, I somehow struggled with the idea of ‘internationalization’. The authors argue using an interesting point that a significant part of luxury brand’s business relies on consumers who are far from home country. This means that the other consumers in different markets must also realise the brand to be a luxury. This classification point of

Patola from Patan

internationalization misses on two fronts I guess. One, it creates the problem of massification (I have dealt with this issue in two of my earlier posts ‘Massification of Luxury: the Chinese Invasion’ and ‘If most people can have it, is it Luxury’. Secondly, it omits completely the local dimension of luxury. In this post, I wish to focus on the ‘local dimension of luxury’.

To put simply, I define ‘local luxury’ as a luxury product and/or brand which is not internationalised at all however, has a significantly strong association with luxury in its local (regional) catchment area. Examples of such luxuries can be found throughout the world wherein generations of craftsman have been producing luxury.  One striking example is such in an emerging market like India would be the Patola (a kind of a sari wore by woman across the Indian sub-continent) from Patan (http://www.patanpatola.com/).

Among Gujaratis (i.e. people from the state of Gujarat in the Western Zone of India with a population of approximately 50 million or more) patola is something legendary. The popularity of it in the luxury local circles is such that the order book has got a seriously lengthy weighting list. The amazing quality of the Bandhani (the finished textile product) has its origins in a very complex and tricky technique of ‘tie dyeing’ or ‘knot dyeing’ known as “Bandhani Process” on the warp & weft separately before weaving. There is only one family in the city of Patan (in the North Gujarat) which has been producing this quality product for the last ‘seven centuries’.

It is hardly international but it’s clearly a luxury. Every patola is unique in its design (none two are similar) and to do that for 700 years itself is mind-blowing. Moreover, the artistic content and unique craftsmanship is remarkable.  A patola costs probably 100 times or more in comparison to a normal sari.

Similarly, the chocolaterie in Brighton, UK called Choccywoccydoodah (http://www.choccywoccydoodah.com/) for the last 3 generations, has been producing amazingly creative chocolate one-off sculptured fantasies, bespoke wedding cakes and other items from chocolate. While it being a food item, one can imagine it will have a strong local dimension but there is nothing stopping it from becoming ‘international’. Paul from France has been international for quite long while.

I believe, the generic criteria of internationalization in this sense would hardly be able to capture such amazingly beautiful and exceptional artistry and craftsmanship. I am sure such unique examples would be present across the world wherein the luxury brand has got such a strong local dimension and hardly any international presence.

The major point I wish to make here is that in continuously focusing on the ‘international brands’ in our luxury debate, we are mostly missing out on some other substantial dimensions of luxury.

I would really like to learn from you all readers about your own experiences of such unique luxury brands which are hardly international but have got a very strong local dimension. Please share.

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Analysts world over have been writing about luxury consumption among the Chinese consumers. Few have also discussed the issues of Chinese luxury brands aimed at global consumers including ‘Shanghai Tang’ and ‘LaVie’. However, there is little discussion on how slowly but steadily Chinese entrepreneurs are acquiring or taking over Western luxury brands. This post is an attempt to highlight that.

Chinese luxury

For the last three or four centuries the Europeans have led the luxury market. The production and marketing of luxury goods were strongly guarded. This led to the emergence of cities across Europe which became global hubs of fashion and luxury including London, Paris, Milan, Rome and others.

After the World War II, a new segment of luxury consumers emerged. This included successful business people, industrialists, artists and those who found new riches in various markets across the world. This nouveau riche had little idea on how to spend their new-found wealth and how to become fashionable. A new service industry emerged due to this: the fashion stylist who helped this nouveau riche look and feel fashionable.

One of the major impacts of this new luxury consumer was that they created a second rung of aspiring leaders, managers and carrier go-getters at large. These middle-class consumers also wanted to consume luxury however didn’t have the means to purchase such goods.

To get out of this market luxury companies came up with a completely new set of products which later on were defined as accessible luxury. It included handbags, scarves, wallets and purses, belts and such other low-price goods. While the new market was lucrative, most luxury companies realised that the production costs didn’t provide enough margins when produced in the European factories.

To improve their financial bottom-line many luxury companies then looked for markets where these goods can be produced for a cheaper cost. China was one of the most obvious choices, however it was a difficult market to build relationships with local manufacturers. Many Hong Kong based traders took advantage of the situation and started opening factories in China which produced luxury goods for many well known firms.

Luxury gown from China

As they gained knowledge and expertise in producing quality high-priced luxury goods many of his Hong Kong traders and their Chinese counterparts realised that the biggest profit margin lies in the ownership of a luxury firm. In the early part of the new millennium the Chinese invasion in the luxury market started.

The Hong Kong manufacturer Kenneth Fang bought Pringle in 2000. The YGM trading company of Hong Kong purchased a French couture house Guy Laroche in 2004. Moreover, the Taiwanese media mogul Shaw-Lan Wang now owns the couture house Lanvin and the Singaporean businessman Cheng Wai Kung owns that more than two century-old Savile Row tailor Gieves and Hawkes.

One of the most successful stories among these is the Chinese entrepreneurs Silas Chou, the President and CEO of Novel Enterprises Limited, one of the world’s leading vertically-integrated textile and apparel manufacturer. In 1984, he actively helped his family in establishing Dragonair, the award-winning airline from Hong Kong. In 1989, he acquired Tommy Hilfiger Corporation silently. He served as chairman and then a call chairman from 1989 to 2002. Within eight years honest in your as a chairman he turned the company from a US$25 million US based apparel firm to a multinational US$2 billion brand. He also brought Pepe jeans London Corporation in 1991. In 2003, he purchased a majority interest in Michael Kors Corporation at which he still serves as a co-chairman.

The above gives us a little idea of how the Chinese entrepreneurs are now stepping up in the luxury business which was predominantly European few decades ago. As the market presence of Chinese consumers grow in the domain of luxury, the other side of the trend also is going to grow only. Certainly some food for thought for the European luxury manufacturers and marketers.

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In my earlier post ‘Status (luxury) consumption among British and Indian customers’, I discussed the theoretical implications relating to one of my recently published study in the International Marketing Review. In this post, I am going to focus on the managerial implications.

To briefly summarise the study, it focused on three antecedents to status consumption namely: (a) socio-psychological antecedents; (b) brand antecedents and (c) situational antecedents.

Customers buy and use status products/brands to assist them in achieving a particular goal and project a message about their self. The findings of the study show how and why customers engage with status products in different countries and cultures. The findings also demonstrate that several factors which were important predictors of status among the British customers were not significant predictors for the Indians, and vice versa. These findings have noteworthy implications for brand managers in developing a pertinent strategic action plan to engage customers with their brands in both developing markets and developed markets.

The findings suggest that creating an entirely standardized marketing strategy for status products/brands will prove ineffective due to the significant differences among customers between developed and developing markets. There is certainly a prospect to standardize some features of the marketing strategy across countries for status products/brands. However, the differences in consumption and the overall engagement also suggest the need for adaptation. For example, ostentation provides an opportunity to standardization strategic message across markets. However, adaptation is required when associating social gains, esteem indication, brand related features and the choice of situation for the strategic action plan.

Marketing status brands to British customers
For the British market, managers should focus on building a strategic campaign which demonstrates the brand as a way to ‘gain popularity’ and be ‘noticed by others’. Associating the brand with relevant celebrities who are seen as successful and high achievers could be of great help in the British market too. The brand should also focus strongly on developing a symbolism which is familiar and positively in congruence with the customers. To generate positive feelings towards the status brands, managers will have to be very creative in the British markets as the consumers are exposed to such brands for long and so are quite aware of their symbolic meaning. Several extrinsic cues in this regard can play an important role. For example, country of origin can play a substantial role in this regard. In their communication mix many status brands employ occasion specific consumption for the British market.  However, the results of this study suggest that such campaigns will have little effect in the British market. Therefore, managers should look for aforementioned suggestions to improve their standing in the market.

Marketing status brands to Indian customers
To market their status brands to Indian consumers, managers should position their brand solely on ostentation. Moreover, the strategic campaign should also focus on the occasion (situation) specificity. If managers can develop a brand message around occasions and ostentatious behaviour, they will have a higher chance of getting success in the Indian market. The branding efforts will not yield as effective a response in the Indian market in comparison to the British market. Therefore, managers will have to find ingenious ways to engage the Indian customers. For example, in the alcoholic beverage market, major international players such as Absolut and Brown-Forman are associating with vibrant art and music scene. On the other hand, big players like Diageo and United Breweries are focusing on the upwardly mobile population in the metros and mini metros of India by opening lounges. Diageo even plans to open Johnnie Walker Club & Lounge and Smirnoff Cafes in metros such as Mumbai, Delhi and Bangalore and wishes to expand to 10 other cities in near future.

Thus, challenge for managers lies in creating a glocalised strategic action plan which incorporates a balanced mix of standardized as well as customized response to the market reality. This study provides actionable results for managers involved in marketing status products in developing the strategic action plan.

If you wish to read more about it have a look at the original paper available at:

Status Consumption in Cross-national Context: Socio-psychological, Brand and Situational Antecedents

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Recently one of my research papers got published in the ‘International Marketing Review’. It focused on comparing the status consumption tendencies of British and Indian consumers. In this post, I shall focus on the findings of this study.

Firstly, let me define what status consumption is and how it affects our behaviour? Researchers define status consumption as the consumers’ behaviour of seeking to purchase goods and services for the status they confer, regardless of consumer’s objective income or social class. Status consumption generally involved high-end expensive luxury products. They are not consumed by most people regularly but only at the social events of importance. Many consumers use such products to satisfy material needs but also the social needs. In simple words, using status consumption many consumers try to impress the significant others who may include their superiors, social connections, or possibly a future spouse. Status consumption is suggested to be increasing the brand value of the consumer too.

While the importance of status consumption is known historically world-over, earlier studies in the domain of status consumption have looked at a single nation and industry context with regard to status consumption. For example, earlier studies have looked at status consumption from the context of clothing in Australia, woman’s cosmetics in the US, automobiles in the US and the UK. However, status consumption does not have such national boundaries and is found to be prevalent across the globe.

Therefore, to observe the similarities and differences relating to status consumption, I conducted a study focusing on the status consumption practices among the British and Indian consumers. The countries were chosen for their historic association, product category association with status consumption and commonalities of brands available. For example, India was a British colony for a long time (more than 3 centuries) and Indians are one the largest ethnic minorities in the present day Britain. Similarly, India happens to have the second largest English speaking population across the world. While both countries share great economic and cultural ties, they are significantly different from each other on many macro and micro parameters.

The study focused on three important antecedents of status consumption: (a) socio-psychological antecedents; (b) brand antecedents and (c) situational antecedents. The socio-psychological antecedents were further broken into three different categories namely: (a1) social gains; (a2) esteem indication and (a3) ostentation. The brand antecedents were also broken into two categories namely: (b1) management controlled brand features and (b2) market controlled brand features. The figure below represents the model.

Status consumption model

Instead of discussing the methodology and scale equivalence and such other statistical issues, I will now focus on the status consumption tendencies among the British and Indian consumers. If you wish to read more about it, you can surely visit the source provided below or get in touch with me for further details.

It was observed that British consumers utilized status consumption to achieve social gains, indicate esteem and ostentation behaviour. However, in the Indian context consumers engaged in status consumption with mostly ostentation in mind. This demonstrates the differences between Western and Eastern consumers and the impact of culture and markets in their consumption practices. The British consumers, who belong to  individualistic  culture,  focus  on  their  actual  self-concept  (how  the  consumer  views him/herself). However, in comparison with the Indian consumers, from a collectivist culture, focus  on  others  self-concept  (how  a  consumer  thinks  others  see  him/her)  as  they  wish  to signal ostentatious behaviour via status consumption.

With regard to Brand antecedents, it was observed that both, management controlled and market controlled brand features have a significant impact on status consumption. However, British consumers were significantly affected by brand antecedents than the Indian consumers. This can be attributed to the nature of the market and competition. The UK is a highly developed and mature luxury market wherein the masses have been exposed  to  the status (luxury) goods  for  longer  in comparison  to India which opened  its economy  in  the  late 1980s. The longer exposure and higher availability to global brands as well as the higher competition makes the consumer in the UK increasingly aware of the brands and their symbolic association. Impact of these contextual factors make the British consumers use strong brand cues in building social presence.

The findings also suggest that status consumption among Indian consumers is highly dependent on occasions. The result demonstrates the significant differences among collectivist and individualistic consumers and their status consumption practices. Prior research has highlighted that spending money on status consumption in festivities and occasions of importance brings many tangible and intangible rewards in the Indian market include elevated social status for the consumers. However, no such social advantages of occasions exist in the British marketplace. Therefore, in a collectivist society like India, consuming ostentatious products at special occasions can elevate an individual’s intra-group and inter-group social identity and overall presence.

In the next post, I shall focus on the managerial implications of the study findings.

Source: Shukla, Paurav (2010), “Status Consumption in Cross-national Context: Socio-psychological, Brand and Situational Antecedents”, International Marketing Review, 27 (1), forthcoming.

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Commenting on my last post on ‘luxury value propositions‘, Mostafa Huga and Thangaraj asked a very pertinent question, ‘how should managers’ build a better value proposition and a marketing strategy for luxury brands in recession?’ Brand management is extremely crucial for luxury industry in customer retention and keeping consumers loyal. Focusing on value propositions can help managers not only in building a better corporate branding strategy but also a good customer relationship management campaign.

As I stated in my earlier blogs (Managing luxury brands in recession) and (Gucci’s response) that managers need to continuously focus on and understand customer psychology and customer engagement process to develop a better luxury marketing strategy.

With regard to consumer engagement researchers have identified that consumers focus on several important criteria when engaging with luxury brands. This criteria include:

- Status derived from the luxury brand
- Conspicuosness associated with the luxury brand
- Hedonic (pleasure seeking) orientation of the luxury brand
- Materialistic attitude of the individual
- Uniqueness of the luxury product/brand/organization
- Quality association of the luxury brand
- Functional advantages derived from the luxury brand
- Financial associations with the luxury brand (as consumers become very value conscious when economic environment is tough)

It is very important for luxury brand managers to understand how consumers areengaging with their luxury brand on each of the above mentioned dimensions. Only that understanding can help managers develop a customer oriented luxury brand strategy. For example, consumer may engage with a luxury brand as it may be associated with it a symbol of success and achievement. However, there could be some brands with which consumers associate ostentation and show-off.

Furthermore, managers should also try and profile their consumers on the basis of their personal orientation such as are these consumers predominantly hedonistic or materialists. It is important to understand the difference in this personal orientation.

Similarly many luxury brands are marketed and bought for uniqueness as well as high-quality associated with them. Consuming such goods may provide a social advantage. Moreover, in recessionary times consumers may become price conscious and that may have an increasing effect on the overall consumption decision and value proposition.

Each of these value dimensions would have a distinctly different effect on consumer engagement and resultant consumer behaviour. Managers need to understand the motives of luxury consumption. For example, an Armani suit bought by a consumer may be bought because s/he is attending an important event of importance and therefore it has more of social (status and conspicuous) aspects associated with it. On the other hand, the person may put-on a high-end luxury fregrence which may reflect more of a hedonistic attitude.

Presently we are conducting a study which focuses on the impact various consumer value perceptions (such as social, personal, functional and financial) on the overall luxury consumption. I shall surely share the results… Till then, watch this space!!!

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How do you convince a consumer to buy luxury products?

This is one of the very important questions asked by managers involved in marketing luxury goods. Luxury consumption – especially one related to conspicuousness – seem to have changed dramatically in the last few months with consumers clearly avoiding any conscious attempt to signal wealth.

Many observers have pointed to consumers’ attempt of avoidance stating the term ‘discreet consumption’; ‘stealth consumption’ and so on. While the phenomenon is observed all around the important question is ‘why are the luxury consumers behaving in this particular manner?’ In consumer research terms we may ask, ‘what is the underlying motivation for this discreet or stealth luxury consumption among consumers?’

One of the major reasons may lie in the changing socio-psychological context and the value perceptions associated with luxury consumption.

In troubled times we humans have an increasing tendency to become more socially conscious. In such times our tendency to empathize may increase substantially and therefore our consumption may reflect this reality too. This empathizing may lead to consumption of less conspicuous products. This could affect many product categories including luxury automobiles, handbags, glasses etc. where the brand message is directly on display. For example, it has been recently reported that the best-selling luxury car brand sales in the U.S. fell 37% in the first quarter of 2009, led by a drop in demand for the most expensive models. The Lexus sales in the US decreased by 27% over the last year.

While the decreasing sales is a reaility of reduction in luxury consumption, one has to remember that there are two major underlying needs among consumers relating to consumption (including luxury consumption); (1) Need for conformity (i.e. to conform to the existing societal norms) and (2) need for uniqueness (i.e. to be unique enough so one can differentiate from others). These two needs are extremely important when focusing on luxury consumption and luxury marketing.

The first kind is need (conformity) is reflected in this decreasing conspicuous consumption. Consumers in such tougher times would not like to be seen as aggressively snobbish and therefore ostentatious behaviour and conspicuous public display will be avoided. However, the other innate need (uniqueness) behind consumption is what drives luxury consumption in today’s conditions. Luxury products, according to most consumers, are unique from various perspectives including quality, price, brand image, pleasure and so on.

Therefore, managers will have to change their core message and value proposition to reflect the market conditions and consumer motivations. The question which managers need to ask is what is the value proposition in the present circumstances most of my consumers are looking for and how can I develop and convey a message which reflects consumers’ reality rather than brands own reality.

Other interesting blog posts:
http://pauravshukla.blogspot.com/2008/07/luxury-consumption-will-it-really-be.html
http://pauravshukla.blogspot.com/2008/08/managing-luxury-brands-in-recession.html
http://pauravshukla.blogspot.com/2008/03/middle-aged-consumers-conspicuous.html

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1. Status (luxury) consumption in cross-national context: Managerial implications
2. Massification of Luxury: the Chinese Invasion

In past few posts, I have discussed the impact of recession on luxury consumption. In two of these posts (Luxury consumption: will it really be affected by recession? and Luxury Consumption Tendencies in Recession: Early Evidence) looking through an exploratory study, I opined that the overall luxury consumption will not decline as much in this recession due to several factors including, mass consumption trends, tourism trends and the rise of emerging markets.

The mass consumption trends have shown an interesting consumption trend overall which has been termed ‘the lipstick effect’. The effect relates to tougher economic conditions when consumers who are used to buying luxury products tend to consume lesser costly luxury products but the consumption pattern continues. It was first observed by analysts at Estee Lauder who saw a huge jump in Lipstick sales after Sep 11 attacks and Leonard Lauder, Chairman of Estee Lauder promoted it. Later on when analysed, this effect was observed through various recessionary phases world has seen across countries.

There is conclusive trend emerging to support this effect. Rather than changing their overall spending habit and becoming thrifty, consumers are simply trading down (another term quite known in fashion world) to cheaper luxury products to cheer themselves up. The trend is clearly seen from the recent sales figures from the world’s big cosmetic firms including Shiseido, L’Oreal and others. The European personal products index is an excellent proxy for the global cosmetics sector because it is dominated by L’Oréal and Beiersdorf. So far in the downturn, this index has already outperformed the broader market by 45%.

The accessories (or what is called affordable luxury) is a very interesting product category. They involve products such as perfumes, belts, glasses, small ticket jewellary, and so on. The accessible luxury goods, even if they are relatively inexpensive in price (comparing to it true and intermediary counterparts), still function as luxury products as they are ‘creative, sophisticated’ and yet ‘sold through luxury distribution’. Many of these products are used for self-gift giving and also general gift-giving. My last blog on Valentine’s Day as a marketing opportunity highlighted the day as one of the biggest events for consumption of affordable luxury products.

The affordable luxury products provide an interesting comparative research environment to look into. There are several research gaps in our understanding as to: how do other affordable luxury products (else than Lipstick) perform comparatively? how do affordable luxury products perform against exclusive luxury (the real and very high end luxury); how do consumer engage with these affordable luxury products?

We are working on a research project on similar lines. Till those results are made available in public domain, watch this space!!!

Related Posts

1. Status (luxury) consumption in cross-national context: Managerial implications
2. Massification of Luxury: the Chinese Invasion