“The US is luxury’s largest market. Japan still remains a large luxury market in terms of absolute size. However, China is the true star of the region”

– Claudia D’Arpizio (Bain & Co. Analyst)

China: the luxury market for present and future

While the high-end luxury goods market is stagnant or decelerating for many brands across developed Western markets, the Asian region is accelerating at a breath-taking pace. While many luxury brands focused on European or American market may be recovering from the Christmas bonanza, those within Asia, especially in China cannot rest. The Chinese New Year is around the corner and that is one BIG event in global luxury’s calendar from the past few years.

In one of our observation studies carried out in some top luxury stores in London, we found a large number of clientele to be Asian and a significant number of them happened to be Chinese.

The Chinese luxury tourist is slowly but steadily taking the place of what Japanese tourist did for decades. It is believed that, as much as 50 per cent of total sales of luxury goods in many important European luxury markets including London, Paris and Milan, is associated with the Chinese luxury tourist. Bain & Company estimates merged with the World Luxury Association data suggests that Chinese tourists spent USD 50 billion on luxury goods in Europe itself and when considering the domestic Chinese market, the Chinese consumers in total may account for 15 per cent of the overall global luxury market. It is also believed that in coming decade or so, China will be the second largest luxury market in the world. The leading brokerage and investment group CLSA is even more enthusiastic and optimistic stating that China may become world’s largest luxury market in the by 2020.

Chairman and Chief Researcher at the Hurun Report, Rupert Hoogewerf captured the Chinese luxury sentiment (especially for the Chinese New Year) beautifully when said that “The Chinese love affair with gift giving is one of the key drivers for luxury brands. The money spent on gifting, especially at Chinese New Year, is staggering compared to the West.”

The gift-giving opportunity: Chinese new year

It is believe that 25 per cent of all the luxury goods bought by Chinese are either a form of personal or business gift. This aspect of consciousness towards others self-concept is captured in two of my earlier studies. (Effects of interpersonal influence…  and  Status consumption in cross-national context)

Within the Greater China region, Giorgio Armani Group operates nearly 300 stores. Accordingly to insider estimates, the group wants to open 35 more stores each year within China. Similarly, PPR Group, which had 54 Gucci stores and 27 Bottega Veneta has much larger plans for the region overall.

While there are number of Chinese patrician consumers, most belong to parvenu category (Segmenting the luxury brand consumers). The young Chinese consumers enjoy showing off their luxury-brand logos as symbolism is such a significant factor within Chinese culture.

With all these happening in China, if a company has not got its China strategy sorted, I think it should do so urgently.

What is your Chinese New Year luxury strategy?

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Most luxury brands aspire to become great,

however, the great luxury brands differ from me-too luxury (mostly available in accessible luxury domain) on the value they provide. There are several differences between good and great luxury brands. From my perspective following are the big differences.
(a) Great luxury brands have a very clear idea about what target segment do they serve for each of their product category and sub-category and
(b) Great luxury brands deliver value on more than one dimension.

In one of our recent studies, we identified four major value aspects luxury brands should serve including social, personal, functional and financial value. Social dimension refers to the pride relating to acquisition and display of the product. Personal dimension reflects the individualistic attitude of materialism and pleasure seeking. The financial and functional dimensions refer to the price and quality match and the uniqueness. What differentiates great luxury brands from good brands is that good brands focus mostly on creating uniqueness rather than usefulness at most times. Most good brands are uni-dimensional.

What differentiates great luxury brands?

Luxury Brands: Good to Great

Great luxury brands deliver to their desired target segment all these above mentioned values in far better way than their competitors. For example, Hermes understands that its customer mostly belongs to patrician category who prefer privacy of consumption rather than ostentation. These customers are also interested in subtle signals and therefore from design to marketing Hermes focuses on subtlety. On the other hand, brands such as LVMH or Gucci have large number of customer base from middle to higher middle class and many of these customers intend to show off their acquisition. They are interested in loud signals and that is what these brands provide. This is done through (a) brand prominence in terms of logo placement on the product and (b) marketing campaign which continuously affirms the purchase decision made by the consumer. So, from a marketing perspective, great brands differ on their comprehensive understanding of the target market and the segments they serve and their overall value proposition.

Like I stated above, great brands are multi-dimensional. The advantage they garner over other competing brands is through their superior understanding of market and consumers and their overall value proposition. In this regards, the greatness aspect is repeatable and replicable. If an upcoming luxury brand is ready to understand the market and consumers and match its value delivery to what the consumers desire on the four dimensions of social, personal, functional and financial values a good brand can certainly become a great brand over a period of time. However, it has to be understood that this value delivery has to happen continuously for a long period of time for a luxury brand to achieve greatness.

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Luxury brand value

With the rise of emerging markets, the luxury goods industry has grown substantially across the world in the past two decades. While customer demand in developed Western markets for luxury brands appears to be buckling under pressures of the recessionary trend, craving for luxury has grown substantially in emerging economies such as China, India, Brazil and Russia. The economic expansion in these emerging markets has obviously increased the desire for global luxury brands among customers. For example, according to Bain & Company estimates, in 2009, 85% of all the new luxury stores opened were in emerging markets.

Since the emerging markets are the growth milestone for luxury brands, it becomes critical for luxury brand managers to understand why consumers buy their brand and what value dimensions trigger the purchase. Value dimensions are the material and non-material qualities/attributes that attract consumers towards certain brands or products and compel them to buy/purchase them. The value dimensions are important not only from a marketing perspective but also because most luxury brands charge a premium for their goods and services making it important to understand what value dimensions will increasingly satisfy the customers.

Early evidence from academic literature suggests that customers in different countries differ significantly in the way they associate with various product categories. This may also be true for luxury brands. However, the earlier results lack empirical strength due to sample choice (i.e. use of student sample rather than real consumers) and anecdotal indication which only captures a single academic or practitioner’s views. To provide an answer to this ambiguity, Keyoor Purani at Indian Institute of Management Kozikode from India and I, conducted a research which looked at the impact of various value dimensions on luxury consumption among British and Indian customers.

Luxury brand value model

The luxury brand value dimensions

Taking into account the earlier academic work, my study focused on the following specific value dimensions:
(a)    Self-directed symbolic value: This dimension focuses on the extent to which customers attach or associate psychological meaning to a luxury brand depending on the product or brand name.
(b)    Other-directed symbolic value: This value dimension predicts the extent to which customers focus on and associate value to the social desirability of luxury brands.
(c)    Experiential value: This dimension relates to the sensory, emotive experience of consumption. This is especially important for luxury brands as they evoke unique emotions within customer psyche.
(d)    Financial value: This value dimension measures the financial risk considered by customers while buying and owning luxury brands.

Understanding British and Indian luxury customers, based on these value dimensions, provides a unique contextual comparison between a developed and an emerging market, a mature versus a rapidly developing market, and cultures of individualism and collectivism. In simple terms, the consumption behaviour of the British and the Indian customers may uncover both similarities and differences, and thus provide an appealing setting for researchers and managers regarding the impact of luxury value dimensions.

Findings relating to luxury brand value dimensions

While looking at the findings, it was observed that British customers considered self-directed symbolic values, other-directed symbolic values as well as financial values while consuming luxury. On the other hand, Indian customers relied heavily on other-directed symbolic values and financial values. This proves that customer values differ significantly across markets.

Customers in developing collectivist markets such as India use simpler selection criteria for measuring value of luxury goods than customers in developed markets like UK. They largely focus on societal and monetary value associated with luxury brands. Therefore, managers who generalise every market’s purchasing pattern may overspend resources in developing markets like India where customer focus is on simpler value dimensions.

British customers exhibited higher levels of psychological attachment than Indian customers. However, the study findings revealed the relationship to be weak and with a downward trend. This implies that British customers are increasingly attaching less psychological meaning to luxury goods. The lessening of psychological meaning suggests that luxury brands are losing their lustre in such developing markets. This may largely be assigned to the democratization of luxury brands where many brands, in a bid to increase their penetration, have become so common that consumers have stopped assigning the quality of luxury with them.

The increased market penetration of luxury brands seems to be working against them as it broadens the customer base but reduces exclusivity. With luxury brands being relatively easily available and consumed by many customers, it creates a dilemma for those original luxury consumers who cannot reflect their self-image anymore through that specific luxury brand, and therefore refrain from consuming such brands in future. This finding has important managerial implications. By increasing their penetration, luxury brands may be able to increase their short-term revenue. However, this may have a long-term negative effect. Hence, luxury brand managers need to be wary of this phenomenon.

As one would expect, Indian consumers rely more on other-directed values than their British counterparts. The finding reflects a collectivist psyche where luxury consumption is seen as a means to achieve social recognition.

Overall, the symbolic value dimension provides luxury brand managers an opportunity to standardize their strategy of marketing luxury brands across different types of markets. Emphasizing the increased social acceptance of luxury consumption may bring them lucrative results in global markets.

The experiential value dimension was found to be non-significant in both countries. This finding provides evidence against prevailing wisdom that luxury goods are consumed for the pleasurable experience they offer. This could be attributed to two main reasons – value contraction and recessionary conditions. Researchers have observed that the increased penetration of luxury goods has led to an overall reduction in their value. Moreover, this may be a reflection of the prevailing economic trend where customers are increasingly demonstrating self-restraint and reducing their pleasure-seeking purchases. The non-significance of experiential values among Indian customers may be a reflection of the cultural element of modesty and humility, which is significantly observed in collectivist societies. Luxury brand managers will have to take these aspects into consideration when developing their communication strategy.

The impact that all these value dimensions have on consumers, as  triggers for the intent to purchase certain brands, has not been dealt with in prior studies. The study findings reported here demonstrate that on the whole, luxury value dimensions have significant impact on purchase intentions across markets. However, the British consumers give more credence to their luxury value dimensions in comparison to Indian customers.

Overall, the study findings demonstrate the centrality of value dimensions in influencing customer purchase behaviour regarding luxury brands. However, considerable cross-national variations exist which provide important theoretical insights as well as strategic implications for managers in developing global luxury brand strategy while remaining sensitive to local differences.

Source:

Shukla, P. and K. Purani (2011), “Comparing the Importance of Luxury Value Perceptions in Cross-National Contexts”, Journal of Business Research, Forthcoming.

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Marketing luxury brands is significantly trickier than regularly purchased brands. In this regards, many luxury brands from Europe seem to be stepping up a new kind of luxury marketing activity – exhibitions in prominent museums. For example, “Inspiration Dior” exhibition at the Pushkin Museum, Moscow; “Culture Chanel” at the Museum of Contemporary Art Shanghai; and Louis Vuitton “Voyages” exhibition in the National Museum of China. This exercise bags a question as to can this create a win-win situation for luxury brands and museums? In the following paragraphs, I shall share my views on marketing luxury brands through exhibitions.

A win-win situation for marketing luxury brands and museums

Many luxury brands continuously associate themselves with the local culture, local flavours and local identity in almost all their communications. In my earlier article on luxury marketing and brand origin effects, I specifically highlighted how brand origin connection is used by luxury brand marketers. Exhibitions provide another marketing opportunity to luxury brands to expose and engage those consumers who are less aware or feel psychologically distant from these brands. Many consumers still associate luxury brands with negative value associations such as snobbism or conspicuousness rather than the uniqueness or high quality. The negative association of snobbism or conspicuousness may not bode well for positioning purposes in present recessionary environment. Exhibitions, especially in world-renowned museums provides luxury brand an added benefit of going beyond those negative value associations and associate positively.

On the other hand, museums increasingly look for exposing their visitors to world cultures and sub-cultures. For example, Victoria and Albert museum, a prominent art and heritage museum in London, identifies its purpose as “to enable everyone to enjoy its collections and explore the cultures that created them; and to inspire those who shape contemporary design.”

In this regard, luxury brands which associate themselves with a specific culture tone represent both ‘culture’ and ‘contemporary design’ objectives. Therefore, it creates a win-win situation for both luxury brands and museums. The brands gain stronger cultural tone, wider exposure (as masses may sometimes find some of these brands snobbish) and added prestige of being classic. Many consumers see museums as the most accurate snapshot of a specific culture or a specific event. In a way, many consumers take the museum’s view as the reality. In this regards, marketing the luxury brand via a museum gains a strong positive association due to the exhibition. The museum on the other hand may get more visitors who may be curious in looking at a certain outfit (e.g. Kate Middleton’s wedding dress is already being identified as a museum outfit). Thus, both brands and museums win.

The increasing inclination from museums to host brand-focused exhibitions can be explained from a socio-cultural perspective also.

Firstly, as I stated above V&A museum identify one of the major purpose is to represent ‘contemporary design’. Luxury brands and especially their ready-to-wear business is a buzzing ground of contemporary design. Most luxury brands lead from front in this regards. Recently, I saw a documentary on the house of Valentino (Valentino – The Last Emporer) released by BBC under it’s storyville programme. It shows how much effort goes on behind each of the creations and the substantial detail behind each aspect of design. Furthermore, the amount spent on design aspects in accessories business such as perfume bottles and other packaging is in itself a recognition of the emphasise put by luxury brands on design. It seems that museums have started recognizing this extra effort put by many brands.

Secondly, the contemporary aspect in museums is becoming ever more important. Previously, museums were thought to exist for the historical snapshot they provided to mankind. However, more and more museums across the world are embracing a forward-looking approach by identifying and appreciating contemporary design. This in turn has probably brought a newer segment of consumers (especially young adults) to museums as they enjoy exposure to the what is contemporary more than what is historical.

Thirdly, many luxury brands have become so popular that they have created a cult kind of a cultural identity around them. Our world is full of brands and brand related messages. Furthermore, many luxury brands are old enough to have a strong heritage aspect associated with them. This in turn, fits with the museums’ agenda of being historical and contemporary at the same time.

Added interactions : a major luxury marketing objective

Moreover, brand related exhibition may also bring a kind of visitor who may get curious to know more about a brand s/he is exposed to for years but hardly understand. A regular consumer may not be aware of who is Frida Giannini, however, will be very much aware of what is Gucci. Thus, a brand based exhibition overall may bring (a) normal visitor to the museum who may not have come to the museum before; (b) heighten the reputation of the luxury brand and cement its cultural identity and (c) increase the designer’s reputation overall.

Another important segment who may win in this situation is the budding designers and artists. This segment of visitors can now get time to actually see the works of master designers behind those brands in real rather than just from images in magazines. Therefore, the exhibitions in turn may become an inspiration for the new age of design.

Overall, I believe the luxury marketing efforts geared towards exhibiting luxury brands across the world may lead to a win-win situation for everyone involved.

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When using luxury brands consumers make a subtle claim that they are special, different and at the very forefront of social trends. Therefore, creating a fit between the social trends and keeping up with them is one of the critical strategic issues for all luxury brands. However, with mass-market brands gradually upgrading their appearance, strategic response and approach to marketing their products, many luxury brands are finding it hard to stay ahead of the peck.

In this scenario, many luxury brands have decided to move beyond their niche and diversify very quickly into other market spaces which the consumer may not associate with the specific luxury brand. The idea of brand extension and at times irrelevant diversification (i.e. moving away from one product category to another one) is particularly delicate issue for luxury brands. This is mainly because of the strong brand origin and brand image associations luxury brands have in consumer minds.

Luxury branding: barbie jewellary

While there are some brands who manage to extend their portfolio without any major issues, many luxury brands find it a massive struggle and therefore should think about such extensions carefully. For example, Prada’s move from shoes to handbags and then into ready-to-wear market worked every time. Same was the case with Gucci. However, it took many years for the first Bulgari watch to become a success. In case of smaller and boutique luxury brands, due to financial and marketing resource limitations, the issue of brand extension looks very lucrative but can become a bottleneck very quickly. For example, in 2005, Mattel decided to create Barbie-themed clothing and accessories and involved fashion designers such as Tarina Tarantino and Anna Sui to interpret Barbie’s wardrobe for grownups. However, this extension was identified as one of the worst extension for the year and so its effects on the involved designers may be felt in long-term. Another example of this is Audi in US market. Audi still struggles to crack the US market as consumers remember those sudden unintended acceleration issues and a series of product recalls associated with it nearly 3 decades ago.

Luxury branding and getting back to basics

In this regards, I would urge luxury brand managers to be highly cautious of brand extension and diversification. There are many other routes suggested by marketing experts which can be taken into account. For example, Ansoff’s Product/Market matrix provides good few insights on what other options can be exploited without diversification.

Figure 1: Ansoff product/market matrix for luxury brands

The image above shows interesting strategies for luxury brands too. In the quadrant 1 where a company wishes to expand itself into its present local market, could focus on various ‘market penetration’ strategies by (a) increasing the frequency of usage; (b) increasing the quantity used and (c) identifying new application of the product. I am sure the options a and b are quite feasible in case of most luxury brands which are used occasionally only by consumers as my research has shown. This in itself can lead to higher market share and stronger customer loyalty.

The quadrant 2 which focuses on developing new products for the current markets does not mean diversification but instead looks at ‘product development’ strategies. In this case, luxury brands can focus on product improvements (highlight them in communications carefully) and line extensions (after careful market research rather than an insiders only brainstorming).

The quadrant 3 focuses on ‘market development’ strategies. In this case, luxury brands should focus on (a) geographic expansion and (b) target new segments. For each of these options, specific strategic initiatives are required. Such as, for geographic expansion, cultural proximity and market understanding are a must. Similarly, when targeting new segments, it would be desirable to identify those peripheral groups which take the current luxury brand consumers as their aspirational leaders.

The quadrant 4 relates to diversification. However, remember this is quadrant 4 of 4 and that means it should really be thought of as one of the last options. If growth has not been possible with the first 3 quadrant a luxury brand should focus on diversification. However, in my own experience, I have seen entrepreneurs/managers focusing this as their first option. While if done carefully it can provide significant benefit, it’s quite risky also as seen in earlier examples.

My aim in this article was to offer some alternative strategies for luxury branding rather than just thinking diversification. Going back to basics can always help any luxury branding effort and I hope it would ignite that thought in you.

Image courtesy: BusinessWeek

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Tomorrow is a very important day for British citizens when we shall decide our next voting system – labelled as the Alternative Vote (AV). Presently, we use a simple voting system called ‘First past the post’ (FPTP). In this system, the candidate who has won the most amount of votes is the winner. So, lets say, there were 3 candidates and 1000 voters and candidate A got 401 votes, candidate B got 400 votes and candidate C got 199 votes. In the FPTP candidate A will be called the winner as he has got the most amount of votes, though in reality the difference between candidate A and B may not be significant in reality. This is a nominal measurement system wherein you get to make one choice as a voter. In research world, this is called the assignment property.

The alternative vote (AV)

The FPTP is the norm across most democratic countries. In Australia however, for nearly a century they have been using a different voting system which in the UK right now is being called the Alternative Vote. The system focuses on identifying a candidate who is the first to get more than 50% votes. In this altenative vote system, the voters don’t only put an X next to a specific candidate they like (or least dislike in most cases). Instead, the voters rank the candidate in terms of their order of preference. In research terms, this is called order property and the scalling is called ordinal scale. The order property is little better than assignment property in a way that the assignment (i.e. whoever is 1^st preference) is already built inside but at the same time the order of preference (i.e. whoever is 1^st, 2^nd or 3^rd and so on – who is most favourite and/or least favourite) is also known.

So, in case of ordinal measurement system in voting preferences we may have a different results than FPTP. Taking the example, mentioned earlier wherein candidate A got 401 votes, B got 400 votes and C got 199 votes, I shall now explain how the alternative vote system works. The candidate C will now be eliminated as s/he has got the least amount of votes. In the next step, their 2^nd preference will be now be taken into account. Of those 199 votes, lets say 150 votes went to candidate B and 49 votes to candidate A. In that case, candidate B will have the maximum amount of votes (i.e. 400+150 = 550). Therefore, s/he shall be declared a winner.

BBC has done a wonderful video on this. It is embedded below.

http://www.bbc.co.uk/news/uk-politics-13276178

This in itself is a little better but not a perfect system as in reality it may also happen that both candidate may get similar votes or again the different becomes non-significant. The major problem with both system is that they do not take statistical significance in account and therefore may not be representative system.  There are many other issues associated with both the systems however my focus has been to explain the issues relating to (a) nominal vs. ordinal measures (b) issue of statistical significance and representativeness where both of them fall short. If you wish read a bit more about these issues from research perspective, have a read through my book on marketing research.

We will get to know tomorrow if Alternative vote (AV) gets FPTP tomorrow.

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Influence of prospect payments on pricing OR should you charge more for your iPhone app?

While discussing the issue of how consumers get converted from prospects to customers in one of the MBA classes and later on in the Marketing Research class, a thought occurred in my mind. Should (and do) companies take into account and adjust the pricing of their specific offering according to the customer propensity to purchase on a specific eco-system?

As I read somewhere long ago, Amazon did that till 2001 using cookies but had to stop that practice. However, if a small scale supplier does it, will it actually be noticeable? How ethical would that be?
Let me take an example. We all know that Apple consumers generally pay more for every mainline and peripheral product in comparison to their PC counterparts. I do not wish to dwell on the functionality comparison and such other issues but in reality when you are prepared to pay more for within a particular eco-system, can it be exploited by others who also provide services within that eco-system?
Think about an app provider who supplies his apps to consumers on two competing mobile eco-systems of Apple app-store and Android marketplace. In this case, keeping in mind the propensity to pay higher amount of money from the Apple consumers, should the app provider charge more money for the app than on Android marketplace?

Like many consumers, who hardly compare prices (I know some of us do but most don’t), supermarkets exploit this window of opportunity like anything and supply products at different prices. If that is feasible between two supermarkets, can it not be taken into account by mobile eco-systems? So, should app suppliers take into account the prospect payment psychology in pricing their apps?

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Interpersonal influences and luxury consumption

In one of my earlier research papers¹, I found that due to the highly social nature of luxury consumption, consumers try to gain social advantage following a desired group’s consumption pattern. Moreover, in my earlier posts relating to interpersonal influences, I have suggested the need for researchers to understand the importance of group effects on luxury consumption. To address this, we embarked on a journey focusing on three specific questions:
(a) Do consumers consume luxury goods with a tendency to conform to others expectations (normative interpersonal influences)?
(b) Are consumers accepting others view as reality when it comes to luxury consumption (informational interpersonal influences)? And
(c) Is this behaviour observed in developed and emerging markets consistently or there are differences between consumers in their susceptibility to interpersonal influences?

Using a sample of British and Indian luxury consumers we answered the questions above. The initial study results revealed that interpersonal influences were significantly influential in both developed and emerging markets. However, as we looked deeper, interesting similarities and differences between consumers emerged.

Significant impact of normative interpersonal influences was observed on luxury purchase intentions across both countries. It also demonstrates that consumers across markets use luxury consumption to build a superior image in the eyes of significant others. This can be attributed to the emergence of global lifestyles in the luxury industry, in which manufacturers and retailers are beginning to standardize their messages across the world. In turn, this creates similarities in terms of consumers’ reference point to consumption. While the impact of normative interpersonal influences on luxury purchase intentions was found to be significant across the countries, through mean difference analysis it was observed that Indian consumers were more susceptible to normative interpersonal influences than British consumers. This reflects the influence of collectivist psyche on consumer purchase intentions. Indian consumers being collectivist in nature increasingly look for fitting-in behaviour and therefore their consumption will be highly dependent on social cues and societal acceptance.

Similarly, Indian consumers were found to be more susceptible to informational interpersonal influences than British consumers. However, a surprising element of this finding was the non-significant relationship in terms of the impact of informational interpersonal influences and luxury purchase intentions among British consumers. The finding suggests that when consuming luxury products, consumers in developed markets, like the UK, do not rely on or accept information from others as evidence of reality. This could be due to three main reasons: increasing individualism due to rising individual and national wealth, easy availability of credit, and access to other objective information sources. In the past three decades, developed countries including the US and the UK have experienced a phenomenal rise in national wealth. Prof. Geert Hofstede associates the increase in individualism with an increase in national wealth. Such an increase can lead to higher levels of individualism among consumers and, in turn, affect how consumers in these markets accumulate informational cues. In addition to increased individualism, consumers are exposed to easy credit availability (i.e., through various financial instruments including loans, credit cards, debit cards and so on) which has created a unique consumption oriented culture. Moreover, numerous technological tools (i.e., dedicated Web sites, blogs, reviews, and other informational tools) help consumers gather information related to luxury products and brands. Many of the dedicated websites and blogs are run by the known experts in the luxury industry. These avenues of relevant objective information help consumers rely less on informational interpersonal influences, which can be highly subjective in nature.

Considering these differences in the two market and cultural contexts, managers associated with luxury products and brands should consider the overall significant impact of interpersonal influences in their strategies carefully.

The findings suggest that the impact of normative interpersonal influences is significant across markets. This result has important managerial implications in terms of strategic campaign building. It offers an opportunity to standardize the campaign across both individualist markets and collectivist markets. Thus, when planning their promotional activities and budgets, luxury marketers working with large luxury corporations or specialist niche players need not vary the proportion of interpersonal and impersonal communication activities and budgets across the two groups.

While normative interpersonal influences provide an opportunity to standardize, the findings pertaining to informational interpersonal influences suggest the need for adaptation. Consumers in collectivist markets rely heavily on informational interpersonal influences, and therefore managers should provide further avenues for consumers to engage in sharing information with others. The power of social networking, which has become a new channel for word of mouth in many developing markets, can be exploited in this case to build a stronger informational interpersonal influence. Conversely, consumers in individualist markets refrain from associating themselves with informational interpersonal influences. Therefore, managers would do better to build campaigns that have little reference to informational interpersonal influences in these markets.

Source:
Shukla, Paurav (2011), “Impact of interpersonal influences, brand origin and brand image on luxury purchase intentions: Measuring interfunctional interactions and a cross-national comparison,” Journal of World Business, 46 (2), Forthcoming.

Footnote:
1.    Shukla, Paurav (2010), “Status Consumption in Cross-national Context: Socio-psychological, Brand and Situational Antecedents,” International Marketing Review, 27 (1), 108-29.

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Effects of luxury brand origin and brand image

In today’s marketplace, many brands use strong brand origin cues in their promotions appeals. This is highly prevalent in the case of luxury brands including behemoths like LVMH and Gucci to specialist luxury players like Patek Phillipe and Bremont, which highlight their luxury brand origin in every promotion. For example, specialist luxury watch maker Baume & Mercier highlights its luxury brand origin within their logo itself. Researchers suggest that in markets such as luxury fashions and accessories, a specific country of origin or foreign image in general may carry a prestige connotation. It has also been observed that luxury brands spend a disproportionate amount of their overall budget on brand image building.

Image via Wikipedia

When looking at the country-of-origin literature, one can see that most of the country-of- origin literature has emphasized origin effects at the product level as opposed to brand level. Professor Keller opines that brand related cues act as a crucial competitive advantage element for luxury brands. Moreover, researchers have increasingly called for measuring the impact of luxury brand origin and brand image on purchase intentions. In one of my earlier papers, I found that due to the highly social nature of luxury consumption, consumers try to gain social advantage by following the desired group’s consumption pattern. Focusing on different facets of the independent self, it can be theorized that consumers will demonstrate fitting in behaviour by using brands which match the image of the group they wish to belong to. Furthermore, researchers have emphasized that brand related cues may provide a key to an improved understanding of luxury consumption. Thus, if consumers use branding cues to create a sense of belonging, it would seem logical to study how such branding cues can influence consumers’ purchase decision.

In recent times, the issue of luxury consumption has received a great deal of interest among marketing scholars. However, little is known about how to optimize the market and manage consumer expectations using management controlled factors such as luxury brand origin and brand image.

To find an answer to the issue of how management controlled factors can be used to optimize consumer expectations, we carried out a study focusing on following two questions:
1.    What is the influence of branding cues (i.e. luxury brand origin and brand image) on purchase intentions?
2.    Is the influence same across developing and emerging markets?

The full study has been published in ‘Journal of World Business’ which is available at (http://dx.doi.org/10.1016/j.jwb.2010.11.002)

The answer to question one will help researchers and managers in knowing whether the large amount of money luxury brands spend on brand image is worth it or not. Similarly, the answer to question two highlights what kind of standardization and adaptation is required when promoting luxury brands in different markets.

With this goal in mind, we studied consumers from the UK and India using a structured quantitative survey.

Findings relating to luxury brand origin

Prior studies focusing on regularly consumed products have found a greater influence of luxury brand origin on collectivist consumers. However, contradicting results were observed in the context of luxury purchase intentions. The study results suggest that consumers in individualist developed market rely more on luxury brand origin cues than consumers in collectivist, developing markets. This can be attributed to the nature of the market and competition. British consumers have been exposed to the process of globalization for a longer period than their Indian counterparts. While the elite in the Indian market were as aware and consuming global luxury brands as their developed country counterparts, the masses were not. Furthermore, global luxury brands entered various developing markets including India in the late 1990s and early 2000s. For example, LVMH entered India through a joint venture in 2003, and Armani arrived in India only in mid-2007. The longer exposure of the masses to global luxury products, availability of more brands, and greater competition make British consumers increasingly aware of the luxury brand origin cues associated with the luxury products or brands. Therefore, to differentiate themselves, British consumers use stronger luxury brand origin cues than Indian consumers who only recently have been exposed to global luxury brands in their home markets.

The finding relating to brand image is worthy of attention. The study findings revealed that brand image does not influence consumer purchase intentions directly however it significantly moderates the relationship between normative interpersonal influences and luxury purchase intentions in both countries. This finding gives empirical support to the theorized argument put forward earlier regarding fitting in behaviour and the influence of brand image. The study shows that consumers demonstrate higher self-brand connection when the brand image is consistent with the image of the social group they wish to associate with. Brand image was also found to be an influential moderator for the relationship between informational interpersonal influences and luxury purchase intentions. However, this was only significant in the context of the UK. This finding corroborates the earlier result regarding the use of strong brand cues among the British consumers. It again highlights the importance of brand building.

Managers vying for acceptance of their luxury brands in developed markets like the UK should focus on developing a campaign that highlights the luxury brand origin prominently. The findings highlight the interesting contrasts in consumer behaviour across nations. Indian consumers are highly focused on social acceptability and look for others views of reality to fit in. On the other hand, British consumers associate with a favourable luxury brand origin to fit in. Luxury brand managers need to be aware of consumers’ limited awareness and understanding of luxury brands in developing markets (due to less exposure). Therefore, it may be necessary to opt for meaningful co-branding and joint ventures in such markets to achieve a greater prominence of their brands in consumers’ minds which in turn will build strong loyalty and equity in these markets.

Overall, the findings also highlight a unique contextual association of luxury. Prior researchers observed the importance of luxury brand origin and image in the case of Indian consumers’ consumption decisions for regularly purchase products however, contradicting findings of this study suggest that luxury as a context is quite unique. Therefore, managers should approach generalized findings relating to regularly purchased products with caution when considering it in the context of luxury consumption.

To read the full technical paper with detailed explanations please follow:

Shukla (2011), Impact of interpersonal influences, brand origin and brand image on luxury purchase intentions: Measuring interfunctional interactions and a cross-national comparison, Journal of World Business, (http://dx.doi.org/10.1016/j.jwb.2010.11.002).

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