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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As stated in my earlier post ‘antecedents to consumer confusion‘, I shall focus on consequences of consumer confusion in this post. The earlier post focused on three important antecedents to consumer confusion namely; expectations, attribute confusion and information confusion in the context of financial services industry (i.e. banks, insurance. credit card, mortgage and other such investment firms).

In this post I will focus on three consequences of consumer confusion: (1) attribute satisfaction; (b) information satisfaction and (c) overall satisfaction.

consumer confusion

Using quantitative methodology and established scales in the fields of psychology and consumer behaviour, we empirically tested the antecedents and consequences of consumer confusion. The findings suggest that expectations, attribute confusion and information confusion significantly affect overall confusion.

Furthermore, we also found that attribute confusion significantly affects attribute and information satisfaction however expectations do not. It was observed that information confusion significantly affected information satisfaction but did not affect attribute satisfaction. We also found the significant impact of overall confusion; attribute satisfaction and information satisfaction on purchase decision. Our results concur with the earlier research, that consumer confusion is a multi-dimensional phenomenon with significant impact on behavioural intentions. There are several theoretical and managerial implications from the above findings.

Increasing understanding of consumers and decreasing confusion is one of the major aims of any organization. Moreover, in markets like financial services, where many similarities of expectations, attributes and information exist within consumer minds, reduction in consumer confusion can become a source of competitive advantage. The framework for this study provides managers first hand idea of where and how consumer confusion is caused. This will assist managers in optimizing their organizational resources to manage the multi-faceted phenomenon of consumer confusion. Managers treating consumer confusion as a single tier construct may receive undesirable results. For example, just improving the product or service feature may reduce attribute confusion. However, poor communication and highly raised expectations may still elevate the overall confusion. Similarly, a good communication campaign with a less differentiated product or service may also elevate confusion in consumers’ minds.

The findings indicate that information confusion has an impact on information satisfaction and which in turn, has a strong influence on purchase decision. In the context of financial services industry, this issue merits consideration particularly where consumers are faced with wide ranging technical and complex information on the financial products which can create implications for purchase decision.

Managers can also use the study instrument in developing competitive intelligence by comparing the confusion caused by theirs as well as competitors’ products or services. This, we believe will yield rich managerial insights for firms and develop a better and unique campaign in comparison to competitors. The findings highlight the importance of prior expectations in causing confusion. This means that if the company communicates itself via advertisements and other means as a single entity and does not act like one in real-life, there are increased chances that it will make the consumers feel confused. The companies will have to simplify their offer to attract consumers. This is also reflected in the phenomena of attribute and information confusion. To avoid attribute and information confusion, managers will have to differentiate their product and simplify their communication to the consumers. While this might not be easy especially because of the legal requirements associated with FSI products, it is highly desirable.

The impact of confusion on satisfaction and purchase decision also needs further attention. It was observed that expectations did not affect the attribute or information satisfaction. This suggests that consumers do not see their expectations to be affecting their satisfaction, which is contradictory to earlier research in the area. Moreover, the significant impact of attribute confusion on attribute and information satisfaction indicates that the tangible and intangible aspects associated with the service have significant impact on consumer engagement with the service. This requires much close scrutiny by managers as there is little differentiation observed in FSIs with regard to attribute differentiation. If in further studies, this is found to be the case, then managers need serious reconsideration with regards to their branding, positioning and differentiation efforts. The significant impact of attribute confusion on attribute and information satisfaction concurs with earlier studies which focused on technology products. This suggests that the impact of confusion on satisfaction is not just industry specific. Therefore, managers could use our study dimensions to check the impact of confusion within other industries.

The findings also reveal the significant impact of information confusion on information satisfaction. However the impact is non-significant in the case of attribute satisfaction. Therefore, we suggest the use of attribute and information satisfaction as separate constructs in future studies rather than using overall satisfaction as a single construct. Furthermore, the study findings also highlight the complexity of relationship between the constructs. Managers should ensure that they treat these constructs as stand-alone rather than assuming a causal relationship.

Reference:
Paurav Shukla, Madhumita Banerjee, Phani Tej Adidam (2010), “Consumer Confusion in the Financial Services Industry: Antecedents and Consequences”, in Advances in Consumer Research Volume 37, eds. Margaret C. Campbell and Jeff Inman and Rik Pieters, Duluth, MN : Association for Consumer Research.

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Listen to the podcast on the ‘antecedents to consumer confusion’. The original article can be found here:

Antecedents to consumer confusion in financial services industry

This being my first podcast I would really appreciate any feedback on this.

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It is only the later part of the 20th century financial services institutions (FSIs) started morphing into a different shape altogether. Previously, a bank provided only banking services (i.e. mostly a place where you can deposit and withdraw money or similar assets). However, banks changed their role in a short span of time from consumer banking to multiple financial service providers (i.e. banking, mortgages, insurance, credit cards, capital and bond market services, internet banking, phone banking, investment finance, etc.). This new management of consumer credit and consumer debt had interesting implications for their marketing financial services.

First, in trying to cover every corner of the envisaged legal problems, banks already had lengthy contract papers. However, with multiple services consumers were now subjected to a combination of plentiful and conflicting information, an excessive number of brands, and product replications.

Second, this one-stop service philosophy was brought about to create ease in transactions. However, as the number of services increased, the complexity did too. However, on the other hand, it created false confidence within the consumers regarding their financial judgment. Each of the above mentioned financial services require different set of skills to manage them however, a single provide and one-stop-shopping made consumers think that capital and bond markets investments were as easy as banking.

Researchers suggest that product variety can have a significantly positive effect on consumer decision making however, results from empirical studies found that over-choice and overload of information deters customers from engaging with a service provider due to confusion over a product’s value.

The multiplicity of financial services, which created the false confidence, may have similar results relating to consumer confusion and service value judgments as observed in other industries where product proliferations occurred. However, prior studies have not looked at consumer confusion in financial service industries.

In a recent paper, published in the association for consumer research conference, my co-authors and I, attempted to conceptualize and empirically test a model of consumer confusion in financial services industry. I am going to address the first research question in this post focusing on ‘what are the causes of consumer confusion in financial services industry?’

Looking at prior studies we believe that confusion is fuelled by consumers’ general expectations, attribute similarity between products or services (i.e. attribute confusion), and overload, conflict or ambiguity of information (i.e. information confusion).

Expectations
Most researchers share a similar opinion that consumer expectations, prior to a service encounter, impact on customers’ evaluation of service performance. In the service literature the expectations construct has been divided into two parts namely, predictive expectations and evaluative expectations. The predictive expectations construct is associated with the level of performance and evaluative expectations construct is associated with an estimation of performance. For example, a consumer holding all his financial transactions including banking, mortgage, credit cards, and personal loans among others with a single FSI (approximately 40.5% of all FSI customers in the UK belong to this category) calls the customer services department for an emergency situation such as stolen cards or identity fraud. At this juncture, the consumer expects the call to be answered in reasonable time (predictive expectations) and also expects that whoever answers the call is in the right frame of mind and possesses knowledge related to the problem (evaluative expectations). In most of the FSIs, all the service departments operate separately and therefore the consumers will be asked to call each of them separately leaving the consumer angry, anxious and confused as to is he or she dealing with a single FSI or multiple FSIs? Therefore, we believed that expectations have a direct relation with overall consumer confusion.

Attribute confusion
Several researchers suggest that tangible and intangible attributes of products or services such as the similarity of the offer, lead to consumer confusion. For example brand image influences the manner in which consumers perceive a product. Similarity in available tangible and intangible features of products, services and brands in the FSI sector creates the likelihood of consumer confusion. For example, when a consumer looks at a brochure from any FSI with regard to a specific service, the terms of the services or the look and feel may hardly be different. Being a multi-ethnic and multi-cultural team we could observe this phenomenon in more than 1 country and therefore thought about the impact of attribute confusion on overall confusion.

Information confusion
Information relating to a product or service aims not only at informing but also persuading consumers to make a specific choice. We already know that consumers have limitations in their capacity to assimilate and process large amounts of information, which may lead to information confusion. Furthermore, researchers have suggested that information confusion influences the effectiveness of consumer decision making. This impact can be attributed to two phenomena namely; (a) consumers’ inability to locate the relevant information due to the sheer volume of information (overload); (b) oversight in identifying critical insights out of the information presented (ambiguity) and (c) variety of information provided through various information sources (conflict).

In this marketing research study we measured the impact of the above three antecedents on consumer confusion. Without going into the details of measurement, scaling and structural models, I shall now focus on the results.

The findings suggest that the hypothesized antecedents namely; expectations, attribute confusion and information confusion significantly affect overall confusion.

Increasing understanding of consumers and decreasing confusion is one of the major aims of any organization. Moreover, in markets like financial services, where many similarities of expectations, attributes and information exist within consumer minds, reduction in consumer confusion can become a source of competitive advantage. The framework we used for this study provides managers with a first hand idea of where and how consumer confusion is caused. This will assist managers in optimizing their organizational resources to manage the multi-faceted phenomenon of consumer confusion. Managers treating consumer confusion as a single tier construct may receive undesirable results. For example, just improving the product or service feature may reduce attribute confusion. However, poor communication and highly raised expectations may still elevate the overall confusion. Similarly, a good communication campaign with a less differentiated product or service may also elevate confusion in consumers’ minds.

In the next blog post, I shall focus on the second part of this study which relates to the consequences of consumer confusion.

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