LTM DAMP Final

8/7/2019 LTM DAMP Final

1/31


2/31

TABLE OF CONTENTS

ABSTRACT [ 3 ]

THE LUXURY BRAND [ 4 ]

WHO IS THE LUXURY CONSUMER? [ 5 ]

THE LUXURY CONSUMER BEHAVIOR [ 5 ]

BRANDING BENEFITS [ 11 ]

BRAND SIGNATURE [ 12 ]

PRODUCT INTEGRITY [13 ]

EXCLUSIVITY [ 13 ]

LUXURY ENVIRONMENT AND EXPERIENCE [ 14 ]

MARKETING OF LUXURY BRANDS [ 15 ]

ARTICLE: THE GLOBALIZATION OF LUXE [ 22 ]

CASE STUDY - GIORGIO ARMANI [ 23 ]


3/31

ABSTRACT


4/31

The Luxury Brand

Luxury as a concept is defined within the scope of socio-psychology as a result of its connection

to a culture, state of being and lifestyle, whether it is personal or collective. When linked to

brands, it is characterized by a recognizable style, strong identity, high awareness, and enhanced

emotional and symbolic associations.

It evokes uniqueness and exclusivity, and is interpreted in products through high quality,

controlled distribution and premium pricing. These core factors have led to the development of a

$ 180 billion global industry with an uninterrupted growth for over two decades. These elements

have also led to the summarization of luxury as a dream, leading to justifiable curiosity and

interest (Okonkwo, 2009)

Conceptualizations of luxury are typically derived from either a consumption perspective

(Vickers & Renand, 2003) (Vigneron & Johnson, 1999) or from an application as a product

branding device (Jackson, 2001). There has emerged a strong strand of literature that seeks to

explain luxury consumption, particularly in terms of having a symbolic function that operates at

the individual and collective level. As such, luxury is identied in terms of its psychological

value, its function as a status symbol (Chadha & Husband, 2006) (Nia & Zaichkowsky, 2000).

and as a highly involved consumption experience that is strongly congruent to a persons self-

concept. From a product perspective, luxury brands are frequently dened in terms of their

excellent quality, high transaction value, distinctiveness, exclusivity and craftsmanship (Fionda,

2008). Jackson proposes the following as the core characteristics of the luxury product:

exclusivity, premium prices, image and status which combine to make them more desirable for

reasons other than function (Jackson, 2004).


5/31

Within the luxury offer, there is an ever expanding offer of luxury categories. There are four

principal categories of luxury goods: fashion (couture, ready-to-wear and accessories), perfumes

and cosmetics, wines and spirits and watches and jewelry (Jackson, 2004). More recently, the

categories of luxury automobiles, hotels, tourism, private banking, home furnishing and airlines

have been added (Chevalier & Mazzalovo, 2008). The focus of this study is the luxury fashion

goods category. Firstly, this focus is justified on the basis that it accounts for the largest

proportion of luxury goods sales, with a 42 per cent share in 2003, (The Economist, 2002). and

the strongest product category growth in 2007. Secondly, previous studies have suggested that

the branding of luxury fashion goods is more complex than other sectors by virtue of the speed

of change within the sector (the majority of luxury fashion goods are dormant at the end of the

fashion season), (Okonkwo, 2007) (Moore & Birtwistle, 2005) as well as the scale and number of

fashion items that are marketed using a single luxury brand name. Thirdly, the marketing of

fashion goods is typically more complex and costly as a result of differences in product numbers,

operating scale and the tendency for luxury fashion companies to take direct control of the

distribution of their goods within markets. As such, these costs and the complexity of managingthe marketing of this category of luxury goods have previously been shown to exceed those of

the other luxury brand categories. 8,12,14,15


6/31

Who is the Luxury Consumer?

When we say luxury consumer, we dont mean only female fashion victims whose purses are

stashed with endless cash and unlimited credit cards. Although women are highly influential in

luxury buying decisions and constitute a large proportion of the luxury consumer market, men

and children are also important luxury consumers. Todays luxury consumer is different from the

wealthy consumer of the past. Unlike in the past when wealthy consumers were easy to

understand and satisfy, it is difficult to place the current luxury consumers in a box of definite

descriptive characteristics. As one luxury brand manager rightly said, todays luxury consumer

cannot be segmented. This is because the luxury consumer has evolved beyond the head-to-toe

designer-clad single-brand loyalist to a smart and savvy discerning consumer. The current

luxury consumer is highly sophisticated and brand literate. They are fashionable and aware of

their tastes and preferences. Their choices of luxury products are based more on an

understanding of their own style needs and less on the brand-name factor. They also have an

attitude that is a personification of youth, assertion and adventure, irrespective of their age. This

attitude is reflected in the fact that todays parents and their children dress alike. Also older

consumers can now look years younger through advanced cosmetics, giving them the freedom to

appear like youths. The consumer market has consequently become loosened and diluted. For

example, consumers of all ages including those in their forties, fifties and sixties, can be found at

the payment queue for roller blades at Decathlon in Paris. Also the fitness and well-being craze

now means that grandmothers, mothers and daughters can be found wearing the same clothes

and accessories, and shopping in the same stores. These factors make understanding todays

luxury consumer imperative and is responsible for the current huge market of Trend Trackers

and Analysts (Okonkwo, 2007).


7/31

Luxury Consumer Behavior

The reason for the purchase of goods, regardless of category, is to fulfil consumer needs. When

people pay for products or services, they are actually looking for solutions to problems and

needs, and luxury goods form a part of those solutions. They are objects of desire that consumers

view as a means to solving multiple problems and fulfilling multiple needs. Some of these needs

are related to the consumers real or aspirational identity, personality and lifestyle. Luxury

brands help consumers define and accentuate the type of person they are or who they would like

to be and also assist in communicating this definition to others. This is one of the roles of brand

association in the luxury sector.

The concept of branding begins and ends with the consumer. The relationship between

consumers and a strong brand is a type of bond or pact that starts with a psychological process in

the mind of the consumer and is manifested through product purchases. This relationship is

highlighted even more between luxury brands and consumers because of the profound role of the

branding factor in the development of luxury goods. The source of the attachment of consumers

to luxury goods is the role of luxury brands as symbols of personal and social identity.

Consumers offer their trust and loyalty to luxury brands with the understanding that the brand

will deliver its promises and exceed their expectations. These expectations include the

fulfillment of both functional and symbolic needs. The functional needs are the tangible and

practical benefits of a product such as the time-keeping function of a wristwatch. The symbolic

needs involve intangible benefits linked with the emotional and psychological dimensions of the

consumer. These include fulfilling ego and self-esteem needs, reinforcing social status and

projecting a self-image. The self-image extends from the consumers true-self, that is who they

truly are; their ideal self, that is who they would like to be and their social-self, that is who they

would like others to think they are. Although both tangible and intangible benefits are derived

from luxury brands, the principal value of luxury brands to consumers is the intangible benefit.

The intangible level brings the branding aspect of luxury goods into prominence and is reflected

in consumer preferences and the decision-making process. It is also on the intangible level that

the relationship between consumers and luxury brands moves from logic and

functionality to what has been interpreted as irrationality.


8/31

This analysis can be applied to any category of goods, but since this book is concerned with

luxury goods, it will be related to the luxury goods sector. Each of the points above is further

expanded according to the requirements of luxury goods:

1) What consumers buy: Luxury consumers buy more than luxury products and services. They

buy a complete package of experiences, feelings and identities made up of the product, the

service and the brands characteristics.

2) When consumers buy: Luxury consumers purchase luxury goods whenever the opportunity

arises. Luxury goods purchases often dont result from convenience as they are constantly

desired and often fall within the priority of luxury consumers.

3) Why consumers buy: Luxury consumers do not buy luxury fashion goods when they are

required because the desire for luxury goods is not fuelled by basic needs. Luxury products are

cravings and sometimes wishes, rather than functional needs, therefore there is a continuous

yearning to possess them. Luxury goods are objects of desire and desires exist on a continuous

basis.

4) Where consumers buy: Luxury consumers buy their products mainly in major fashion

centres of the world where luxury fashion is prominent in consumer lifestyles.

5) How consumers buy: The majority of luxury consumers prefer to shop in the physical stores

in order to benefit from a complete product selection and also enjoy the luxury retail atmosphere.

However, other shopping channels such as the Internet and Mobile shopping are gaining

increasing influence in the luxury arena and consumers are continuously shopping through these

channels.

6) How often consumers buy: Luxury consumers buy luxury goods as frequently as is

practically and financially possible for them. They often do not evaluate the buying decision of

luxury goods on a logical basis. As previously indicated, luxury goods are objects of desire,

meaning that if consumers can help it, they would fulfil this desire on a continuous basis.


9/31

7) How often consumers use the products: Luxury goods are highly relevant to consumers as a

stamp of their personalities and lifestyles. As a result, the products are used frequently.

8) How consumers evaluate the products: The post-purchase evaluation of luxury products is

almost a non-representational occurrence. This is because the appreciation of luxury goods

extends beyond the products functional attributes to include abstract and symbolic benefits. As a

result, the evaluation focus is on the role of the luxury product in the life of the consumer and the

satisfaction that it provides. Since the symbolic role of luxury products is continuous, their post

purchase evaluation remains

9) How consumers dispose of the products: Luxury goods traditionally last for a lifetime and

are rarely disposed of. However, an interesting occurrence has developed in the luxury goods

sector in the last five years that has made luxury goods disposable. This occurrence is called the

fast-fashion phenomenon later discussed in Chapter 7 of this book. Fast fashion means that the

design turnover of luxury products has become higher and the product lifecycles have become

shorter. As a result, the It fashion items change every few weeks. Consumers in a bid to keep

up have also become smart and savvy in their luxury goods purchase cycle. They now sell their

used or semi-used products for substantial amounts (sometimes close to the original price tag)

in order to purchase new ones. Several second-hand dealers who trade in these items are

cropping up in different global markets. This factor, however, does not diminish the value of the

products or their brands.

10) How consumers decide on future purchases: The decision for the future purchase of

luxury goods has already been made. The future is now! To further illustrate the decision-making

process of consumers, Schiffman and Kanuk (2004) identified three main levels of influence

which is illustrated in Figure 3.2.


10/31

The Input stage is mainly influenced by the strategies behind the marketing mix such as the

product, pricing, retail channels and promotions. Other influencing factors are branding elements

like the brand personality, brand image and brand awareness; and social groups like family,

friends and colleagues.

The Process stage operates on a more intangible level, characterized by psychological and

emotional elements such as perception, personality, attitude, and motivation. The Output stage

involves the use, evaluation and disposal of the goods.

]]]]]

Uche Okonkwo, Luxury Fashion Branding(page 61-62-63)

Branding benefits

[[[[[Brands are assets to the companies that own them. This asset comes in an intangible form

and results in added financial and social benefits for businesses. To get a clear picture of the

asset worth of brands for companies, lets take a look at the following illustration. In 2006,

Interbrand placed a brand value of US$17.6 billion on Louis Vuitton, making it the most

valuable brand in the luxury goods industry and the seventeenth most valuable brand in any

product category in the world. This figure is exclusively attributable to the brand and excludes

the companys assets, earnings and revenues. This means that if Louis Vuitton ever decides to

sell its brand (which is highly unlikely, by the way), its brand name and associations alone could

fetch the company more than its book price (its balance sheet worth). The case is similar with


11/31

other highly valued luxury fashion brands like Gucci, Armani and Rolex. In some cases,

companies with strong brands are sold at up to 600 percent of their balance sheet worth.

Luxury fashion branding strategy development

A true luxury brand exhibits 10 core characteristics as indicated below:

1. Innovative, creative, unique and appealing products;2. Consistent delivery of premium quality;3. Exclusivity in goods production;4. Tightly controlled distribution;5. A heritage of craftsmanship;6. A distinct brand identity;7. A global reputation;8. Emotional appeal;9. Premium pricing;10. High visibility.

Other important elements of a luxury brand are an indelible impression, a recognizable style, fast

and high fashion design turnover, a strong country-oforigin link, especially a country with a


12/31

strong reputation as a source of excellence in luxury fashion (such as France and Italy). The key

tools of luxury fashion branding are differentiation and emotional appeal. For example, when

you see a woven luxury leather bag or shoe, youll likely think of Bottega Veneta. In the same

manner, tweed or pearls on a product is likely to evoke a Chanel image. This is because these

brands have differentiated themselves through these specific product attributes that also serve as

a signature for the brands. However, product differentiation forms a part of the tangible aspect of

branding which is a complement to the intangible aspects of branding as explained further in the

chapter. The intangible aspects of luxury branding include the psychological responses that

consumers exhibit towards luxury fashion that leads to an emotional attachment to specific

brands and their products and services. Emotional appeal connects with the consumers sub-

conscious, sensitivity, intelligence and personality. This implies an intimate relationship and a

special bond between brands and their consumers. ]]]]]

Uche Okonkwo, Luxury Fashion Branding(page 103-106)

Brand signature

[[[[Each of the companies recognises the importance of the brand signature and iconic products,

referring to them as the designers style , handwriting or the brand DNA . Each

considered these inherent to the luxury fashion brand. All of the brands produce or sell numerous

productcategories that need to be internal, consistent and coherent, which will minimise the

damage of confusing the consumer ( Table 4 , Q12). Each of the brands ensured that the whole

collection had a clear signature through comprehensible managerial direction initially, and then

repeated meetings to nalise the products ( Table 4 , Q14). The iconic product epitomises the

brand signature

( Table 3 , Q12). In a number of the cases, the iconic products have close connections to their

heritage. The design is extended to the packaging and livery ( Table 4 , Q13). Each company

considered it vital that the packaging cohered with the brand image. All of the case companies

identied the importance of a design team ( Table 4 , Q15) and invested in eminent designers to

work on various products of their collections to raise and punctuate the fashion element of

the brand (Company D).

Product integrity


13/31

This key theme emerged as signicant in the case companies, and within each there

were several sub-categories, which included product quality ( Table 4 , Q8)

craftsmanshipof developing the luxury status of the brand. The price not only re ected the

handmade

product and quality attribute associated with luxury, but also suggested the element

of exclusivity of a product, as high price creates a barrier of entry ( Table 4 , Q16). A

number of the cases employed strategies to increase exclusivity, including limited edition

products and ranges, and through strategic alliances.

Exclusivity

Exclusivity is inherent to luxury brand positioning ( Table 4 , Q17) as dened by the literature.

Each of the case companies strictly controls the distribution and accessibility of the brands to

ensure exclusivity (Table 4 , Q18). Furthermore, the ndings revealed that exclusivity can be

controlled

through limited production runs and the number and typology of distributors in each of the cases.


14/31

Luxury environment and experience

All the representatives identi ed the signi cance of both the store environment and superior

service to brand luxury creation. Firstly, the store environment is typi ed by the agship store,

which was considerednies recognise the importance of the right people working internally to

create the

brand, from management to the staff on the shop oor. Furthermore, within the organisation

there is a need for honesty, integrity, morality and teamwork, as without these the message

created would be false. In conclusion, each of these aforementioned components is considered

important

in the creation of a luxury fashion brand, as each add to the luxury brand image and positioning.

The research ndings identied the interrelated components of a luxury brand through an

examination of the actions undertaken with each of the representatives of the case studies. This

builds on the ndings of the literature, which either discussed luxury brands on a surface level or

considered the concept from a generic perspective rather than speci cally to the luxury fashion

market.]]]]]

Antoinette M. Fionda, Christopher M. Moore; The anatomy of the luxury fashion

brand(page 11-12/18).

There is no continuous movement from premium to luxury

[[[[[[[There are plentiful examples of attempts to achieve luxury status through continuity

with the premium, by increasing the prices without changing the strategy... and the failures are

equally plentiful. Another strategy for entry into luxury entails the acquisition of a luxury

company that you believe you can manage better than the current owners. These two types of

strategy, while they generally work well in the world of industry and mass consumption goods,

generally lead to painful defeats when applied to the field of luxury. We will take a recent and

clear example, since all the figures are public, and the sector and actors are known to all: the case

of Ford. In the late 1980s and early 1990s (the purchase of Jaguar took place in November 1989

for N2.2 billion), the Ford motor group decided to develop into luxury, creating a pole known

as Premier Automotive Group (PAG), through the acquisition of prestigious (Jaguar, Aston

Martin) or premium(Volvo, Land Rover) brands, and applying Ford methods to make it a

profitable group.


15/31

In spite of several years of massive investment, PAG remained immovably in the red; Ford

decided to throw in the towel and divest itself of its luxury subsidiary in 2007. While Aston

Martin was sold at a good price (around $1 billion) to a fan of the brand, Jaguar losing money

heavily had to seek out the Indian Tata group as a purchaser. In contrast, the Volvo and Land

Rover brands (LR was bought for N2.4 billion in 2000) suffered less: pompously renamed

luxury brands upon their acquisition by Ford, they are in fact premium brands; a Ford

management strategy was therefore able to improve their results, whereas Jaguar and Aston

Martin, being genuine luxury brands, could only be seriously damaged by this kind of strategy.

Luxury is not premium at its best]]]]]]]

J.N. KAPFERER AND V. BASTIEN, LUXURY STRATEGY BREAK THE RULES

OF MARKETING TO BUILD LUXURY BRANDS (page 55/337)

MARKETING OF LUXURY BRANDS

1. Forget about positioning, luxury is not comparative

In consumer marketing, at the heart of every brand strategy you will find the concept of

positioning, of the unique selling proposition (USP), and unique and convincing competitive

advantage (UCCA). Every classic brand has to specify its positioning, and then convey it

through its products, its services, its price, its distribution and its communication. Positioning is

the difference that creates the preference for a given brand over the one that it has decided to

target as a source of new business and whose clients it is going to try to win over. When it comes

to luxury, being unique is what counts, not any comparison with a competitor. Luxury is the

expression of a taste, of a creative identity, of the intrinsic passion of a creator; luxury makes the

bald statement this is what I am, not that depends which is what positioning implies.

2. Does your product have enough flaws?

This is a provocative statement. For most people, luxury is the last word in hand-crafted or

craftsman-built products. It is true that in surveys into the perception of luxury, consumers from

all over the world were interviewed and the consensus was that product excellence is the

primary prerequisite of luxury. It would suffice to imagine a bisecting line between two axes


16/31

price and functional quality: at the very top right would be luxury. Now, in our view, nothing

could be further from reality. The aim of an upper-premium brand is to deliver a perfect product,

to relentlessly pursue perfection. But it would take a touch of madness for it to be counted a

luxury. Functionally, a Seiko watch is superior to many luxury watches it is more accurate

(because its a quartz watch) and shows the time directly and in a perfectly legible manner

(because it is displayed on a digital face). If you were to buy some of the famous brands of a

luxury watch, you would probably be warned that it loses two minutes every year. The flaw is

not only known, it is assumed one could say that that is both its charm and its guarantee of

authenticity. It is the specific and singular nature of their movement that is responsible for that.

For luxury watchmakers like adding complications, indeed seek them out in their endless quest

of art for arts sake. This is the madness touch that goes beyond perfection and make people

collect them.

3. Dont pander to your customers wishes

One of the most respected brands in the world is BMW. This ever-growing brand has been

successful in creating a cult, a body of owners that are extremely faithful, devoted and

committed to their brand. It is in fact, according to the Luxury Institute, one of the the most

admired car companies in the world. What are the factors behind BMWs success ?

A clear brand identity, observed to the letter since 1962, summarized in a slogan never

challenged since then, translated into every language Sheer driving pleasure.

A stable, family shareholding. Since 1959 the brand has been owned by the Quandt family. It

believes in letting things take their time and accepts that it may lose clients in the short term to

increase the value.

A very German enterprise culture, characterized by its engineering and its product cult.

Moreover, being descended from pioneers of aviation, there is a tremendous pride in this

company.


17/31

4. Keep non-enthusiasts out

When it comes to luxury, trying to make a brand more relevant is to dilute its value, because not

only does the brand lose some of its unique features, but also its wider availability erodes the

dream potential among the elite, among leaders of opinion. BMW is typical of a brand that is

able to grow without cutting back on its rugged features, which are in any event highly exclusive.

The Bavarian management has calculated that BMWs target accounts for 20 per cent of the

premium segment of the population only one person in five. This means that 80 per cent are

not at all attracted by BMWs values. The brand has preferred to exclude these 80 per cent and

base its growth on its true target, those who wholeheartedly share its values. Brand growth is

achieved by penetrating new countries, not new customer segments. In order to grow, the BMW

Group preferred to buy two other brands which on their own, like BMW, define a segment

Mini and Rolls-Royce; having taken good care to keep Rolls-Royces identity separate from

BMWs.

5. Dont respond to rising demand

The prime objective of traditional marketing is volume growth. At Ferrari, production is

deliberately kept to fewer than 6,000 vehicles a year rarity value sells. So long, that is, as the

customer understands why the product is rare and is prepared to wait. Rarity can be managed just

like the relationship with the clientele; so it is not a matter here of poor sales forecasting but of a

deliberate strategy of resisting demand in order to be master of it.

6. Dominate the client

Luxury is a consequence of meritocracy. Once the exclusive privilege of the aristocracy, luxury

today is what rest ratifies our so-called classless societies, but on the basis of merit, no longer

simply on birth. So everyone is looking for ways to haul themselves up luxury brands are at the

same time a reward and a token of gradual elevation. To preserve this status, the brand must

always dominate its client. This is not the same as saying dont respect them: parents dominate

their children, but that does not mean that they dont respect them; on the other hand, if they treat

them as best buddies, making themselves out to be their equals, they lose their aura and

profoundly disturb their offspring.


18/31

Luxury is the domain of culture and taste. Even if many well-off buyers do not actually have the

codes themselves, they deduce from the limitless consumption of a luxury brand the fact that it

must be coded as a luxury. The luxury brand should be ready to play this role of advisor,

educator and sociological

guide. On this account it simply has to dominate.

7. Make it difficult for clients to buy

The luxury brand is something that has to be earned. The greater the inaccessibility whether

actual or virtual the greater the desire. As everyone knows, with luxury there is a built-in time

factor: its the time spent searching, waiting, longing so far removed from traditional

marketing logic, which does everything to facilitate quick access to the product through mass

distribution, with its self-service stores, self-checkout systems, the internet, call centres and

introductory offers. Luxury has to know how to set

up the necessary obstacles to the straining of desire, and keep them in place. People do

eventually get to enjoy the luxury after passing through a series of obstacles financial

obstacles, needless to say, but more particularly cultural (they have to know how to appreciate

the product, wear it, consume it), logistical

(find the shops) and time obstacles (wait two years for a Ferrari or a Mikimoto pearl necklace).

Luxury needs to excel in the practice of distributing rarity, so long as there are no real shortages.

Its quite natural: just as actual shortages stand in the way of growth, so the absence of rarity

leads to the immediate dissipation of desire, and so to the disappearance of the very waiting time

that sustains luxury. To create this obstacle to immediate consumption, it should always be

necessary to wait for a luxury product time is a key dimension of luxury, as with all desire.

8. Protect clients from non-clients, the big from the small

Modern luxury works on the openclose principle. Too much open is harmful to the brands

social function. In practice that meant that the brand became segregationist and forgot all

societys democratic principles. In stores, for example, it is necessary subtly to introduce a

measure of social segregation: ground floor for some, first floor for others. Armani set up

specialist stores for each of his product lines. Advertising and promotion is for all, but public


19/31

relations are ultra-carefully targeted, like the CRM for the privileged (personal invitations to

meet the designer, the brand perfume nose, or the head wine buyer).

9. The role of advertising is not to sell

Nothing is more alien to traditional marketing than this declaration; in traditional marketing the

first thing to be done is to come up with a sales proposal, to have a unique selling proposition

the text is there to make the sales pitch. In luxury, the dream comes first. The explanations of the

salesmen are simply post-rationalizations. If you go to a Tag Heuer shop you are handed a thick

brochure the size of a book, which says everything there is to say about the Tag Heuer brand, its

origins, its finely tuned processes, respectful of a unique design, etc. Then it goes on to talk

about the various models, one by one

The dream must always be recreated and sustained, for reality kills the dream. Every time a

flesh-and-blood human being buys a luxury product they destroy a little bit of the equity, they

increase the products visibility and contribute to its vulgarization by putting it in the public

eye. The opposite applies when marketing everyday goods: there is an advantage for the market

leader, for the dominant market share, and therefore for maximum visibility it becomes a

reassuring purchase.

10. Communicate to those whom you are not targeting

Luxury has two value facets luxury for oneself and luxury for others. To sustain the latter facet

it is essential that there should be many more people that are familiar with the brand than those

who could possibly afford to buy it for themselves. In traditional marketing, the keyword is

efficiency, but over and above efficiency there has to be a return on investment. In advertising

for example, the media plan must concentrate on the target consumers and nothing but the target

consumers every person reached beyond the target is a waste of investment money. In luxury,

if somebody is looking at somebody else and fails to recognize the brand, part of its value is lost.

It is essential to spread brand awareness beyond the target group.

11. The presumed price should always seem higher than the actual price


20/31


21/31

company in their own way is constantly trying to find new ways of creating more value for the

customer. Its all a matter of living up to the price.

14. Keep raising the average price of the product range

In traditional marketing, you launch a product at a skimming price, then when competition

comes onto the scene, you drop the price. In luxury it is precisely the opposite. A luxury brand

must always be seen to be restoring the gap, restratifying, and as such it is acting as a visible

agent of meritocracy. A brand that cannot grow in volume and profitability other than by

launching accessible products shows that it is no longer part of the luxury market.

For instance, the fact that Mercedes has launched its super top-of-therange under a different

brand name (Maybach) reveals its presumed change of strategy: Mercedes from now on will be

the maker of regular and premium automobiles, and the luxury range now goes under the

Maybach brand, not Mercedes any more.

15. Do not sell

The luxury strategy is the very opposite of the volume strategy. If you pursue the strategy of

systematically raising all your prices, as illustrated by Krug, you have to be prepared to lose sales

and to lose customers. Most brands dont dare risk it, or else go running after customers; when

you get to that point youre no longer talking luxury but mass consumption which of course

can be extremely profitable as everyone knows.

16. Keep stars out of your advertising

Using stars to promote luxury products is extremely dangerous. A luxury brand is courted by the

stars, in the same way as those stars are courted by journalists and paparazzi. As we already

mentioned when speaking earlier about the luxury brands typical relationship with its

customers, it must respect them, but it also has to dominate them. Even the most famous ones.

Calling on the services of a star is tantamount to saying that the brand needs some of this stars

status just to survive, and admitting that it has none of its own. For the luxury brand, this is a

gross error of strategy, for it turns the relationship on its head. Only brand domination, standing

above everything like a god, is acceptable, not simply behaving like any ordinary mortal. If

celebrities are used to promote the luxury product, the status of the latter is reduced to that of a

mere accessory.


22/31

17. Cultivate closeness to the arts for initiates

the brand seeks to appeal and to create an affective relationship. For that it often uses music,

music that is as popular as possible, or at least appreciated by its target audience. The brand

follows peoples tastes. The luxury brand is a promoter of taste, like art. It maintains close links

with art. But luxury is not a follower: it is creative, it is bold. That is why it is best for luxury to

remain close to the unpopular arts or rather the non-popular arts those that are emerging and

have yet to appeal to the majority, if they ever will.

18. Dont relocate your factories

Not relocating factories is as much a question of creativity as of production. When you no longer

have a manufacturing workshop near you, creativity takes a nose-dive, because you lose the

contact with the raw material and the way of working to be able to sublimate it into a luxury

product. Once prt--porters

production facilities were moved abroad, French haute couture gradually went into decline; but,

on the other hand, locating manufacture in China is going to lead to the emergence of haute

couture in that country, especially as China has a history of luxury clothing for the emperors

court going back several thousand years, and of producing very high-quality fabrics, silk in

particular.]]]]]]]]

(page no 75-88/337)Jean-Nol Kapferer and Vincent BastienLUXURY STRATEGY

Article: THE GLOBALIZATION OF LUXE; LEADING LUXURY BRANDS ARE

ADOPTING A NEW MANTRA: SELL GLOBALLY, MARKET LOCALLY.

[[[[[[Luxury is a universal language. No translation is needed. A consumer understands Louis

Vuitton whether he comes from Dubai, New Delhi or New York.

But like any language, luxury comes in distinct dialects, reflecting the culture of a country, a

city or even a particular store -- and understanding such subtleties is essential to the future of the

$160.3 billionluxury market, according to industry executives and analysts.

"A luxury brand today has to be global but serve a local client," says Claudia D'Arpizio, partner

at Bain & Co. here. "A Chinese consumer may appreciate Made in Italy more than an American


23/31

one, while an American consumer may value a certain kind of service. What each consumer

equates as value is very . ]]]]]]]

Author:

Colavita, Courtney

Article from:

Daily News Record

Article date:

October 24, 2005

Case study

Giorgio Armani - the ultimate fashion brand

[[[[[[[[The Giorgio Armani brand owned and run by the founder designer Giorgio Armani has

earned the much hallowed space in the fashion industry through its superior design, relevant

themes and trends. It maintains the aura of a real luxury brand. Not only has Giorgio Armani

become one of the most respected and known brand names in the fashion and luxury brand

industry, it is also one of the most highly valued fashion companies in the world with a value of

nearly 3 billion Euros.

The Giorgio Armani brand strategy

The mention of the Annual Academy Awards ceremony brings to mind the glittering ritual, the

red carpet, and the galaxy of Hollywood stars. The Academy awards have become as much an

event about films and awards as it has about the celebrities and their fashion statements. One of

the regulars at the Annual Academy Awards event along with the stars and the glamour has been

the ultra premium and exclusive fashion wear from the Giorgio Armani stable - the Armani suits

donned by the leading Hollywood men and the Armani evening gowns and other haute couture

dresses worn by the celestial Hollywood beauties.

The Giorgio Armani company owned and run by the founder designer Giorgio Armani has

earned the much hallowed space in the fashion industry through its superior design, relevant


24/31

themes and trends appealing to the current crop of customers and by maintaining the aura of a

real luxury brand.

Introduction

Giorgio Armani started the company of his namesake back in 1975. Being a designer himself, he

made apparel with his sense of aesthetics, beauty and luxury, a sense that appealed to the elite of

the society that today includes the royalty of Belgium, the royal families of many Asian countries

and even the opulent women from the Middle East and the high and mighty stars from

Hollywood among many other prominent customers. For almost 30 years now, Armani has been

a privately held company with the founder Giorgio Armani being the sole shareholder.

With many sub-brands designed under the parent umbrella brand of Giorgio Armani to cater to

the specific needs of different market segments, it has become one of the strongest fashion and

luxury brands in the world. Not only has Giorgio Armani become one of the most respected and

known brand names in the fashion industry, it is also one of the most highly valued fashion

companies in the world with a value of nearly 3 billion Euros.

Giorgio Armani is also very expansive in Asia Pacific with its multiple future growth markets for

luxury brands. For example, China is embracing premium fashion and luxury goods at an

increasing pace, and Giorgio Armani has been one of the forerunners to exploit the market

potential. There are approximately around 10-13 million Chinese luxury brand customers.

Giorgio Armani opened its Emporio Armani store next to Shanghai's historic "The Bund" in

2004 and plans on opening nearly 30 stores by the end of 2008.

The Brand Philosophy

Unlike the usual practices of branding that are normally seen in the consumer goods industry, the

branding philosophy in the fashion and luxury goods industry is quite unique and personality

based. Most of the famous fashion houses like Christian Dior, Yves Saint-Laurent, Gucci,

Versace, Giorgio Armani and many others were built on the personality of the founders. As

design is the most important ingredient of fashion and luxury apparel, the individual style of

these designers becomes crucial to creating and sustaining the fashion brand strategy. It is these


25/31

unique designs and patterns that reflect the personality of their creator that gives an identity to

the brand and helps to differentiate it from the crowd.

The Giorgio Armani fashion house, like many other fashion houses, has been built primarily on

the unique personality and identity of Giorgio Armani himself. The brand takes on the identity of

the founder through the designs created.

Though this aspect of the fashion industry provides fashion houses with a strong sense of

differentiation that can be conveyed in a tangible and visual form, it also poses a serious threat.

When an entire brand and fashion house are built on the basis of the founders' personality and

identity, it becomes a major challenge to keep the brand going after the demise of the founder,

something many of the fashion houses have realized in the recent past.

The Giorgio Armani Brand Architecture

Whenever a brand gains popularity and acceptance from its target customers in its core business,

the next obvious step for the brand is to charter a new course by venturing into different product

lines, different segments, and ever different markets. This phenomenon seems common across

industry sectors.

Giorgio Armani with its iconic popularity amongst the elite of the society and the fashion literate

segment of the market has followed similar steps by extending the brand. Today the Armani

brand architecture encompasses one corporate brand and five sub-brands, each catering to

different sets of target customers and at different price levels.

The signature Giorgio Armani line: This is the main collection of apparel that consists of the

signature Armani suits, Oscar gowns and so on, which are of the ultra-premium price points and

essentially targeting consumers in the 35-50 year old age group.

Armani Collezioni: This is Armani's venture into a slightly lower market segment. This

basically caters to the segment of people who aspire to wear Armani apparel but cannot afford

the ultimate signature line, or to those who crave to add extra products to their existing


26/31

portfolios. The Armani Collezioni brand, with a price point of almost 20% lower than the main

line, provides an excellent line of affordable fashion.

Emporio Armani: Targeted especially at the young professional segment in the 25-35 year old

age group, the Emporio Armani brand provides contemporary designs that are relevant to the

target customers.

Armani Jeans: This is the lowest range of Armani apparel. This is to the value segment what the

signature line is to the premium segment. Catering necessarily to the young adults in the 18 to 30

year old age group, the Armani Jeans collection provides a trendy yet fashionable and luxurious

line of apparel.

A/X Armani Exchange: This is the licensed brand of chain of retail outlets of Armani fashion

house. This serves as the ultimate testimony to the power of the brand. By providing the entire

range of its apparels and accessories, Armani Exchange provides customers with the complete

feel of the luxurious fashion of Giorgio Armani.

However, the Giorgio Armani brand architecture can be misinterpreted by the prospect. For

instance, the differences between Emporio Armani and Armani Collezioni are often quite

insignificant. Furthermore, in January 2005 the Armani group launched Armani Prive to stands

for its haute couture collection. Giorgio Armani and Armani Prive can cross borders creating

confusion in the mind of the buyer.

These sub-brands help Giorgio Armani to operate in many segments of the fashion apparel

market. But this is not all. Not only does Armani straddle many segments of the same product

category, but also many different product categories.

Leveraging its strong brand equity in the fashion apparel market, Giorgio Armani has ventured

into other related categories like eye wear, watches and cosmetics. These are made available in

each of the above-mentioned brand categories to ensure that it is available to the different

segments of the market. It is usually argued that eye wear, perfumes, watches and cosmetics are

strongly related to fashion and luxury and thus it is natural for fashion houses to extend their

brands into these categories. Giorgio Armani is a very strong example for this argument. By


27/31

leveraging its expert knowledge of the fashion and luxury industry, Armani has been able to

come up with winning concepts in the other product lines of cosmetics, watches, jewelry and eye

wear.

But Armani has not stopped at just these product categories: Armani has extended the brand into

multiple other categories such as Armani Casa (up-market furniture), Armani-branded Dolci

(confectionary), and Armani-branded Fiori (Flowers). And to add to this wide portfolio of

brands, Armani very recently struck a deal with a Dubai-based property group Emaar to come up

with a chain of 14 Armani branded hotels and resorts by 2011.

As is the trend in the fashion industry to operate in the entire spectrum from apparel, jewellery,

cosmetics, watches, perfumes and luxury hotels, Armani has been able to leverage its brand

equity to be present in most of these lucrative sectors.

Today, Armani group has a retail network of 60 Giorgio Armani boutiques, 11 Collezioni, 122

Emporio Armani, 94 A/X Armani exchange, 13 Armani Junior , 1 Giorgio Armani Accessori and

16 Armani casa spread over 37 different countries.

With so many things going on in the Armani stable, it might seem a pretty picture at the outset.

But this huge portfolio of brands and product lines creates a much bigger set of challenges to the

Giorgio Armani brand strategy in the future.

Giorgio Armani's future brand challenges

The founders' dilemma: This phenomenon is classic and occurs for any company that is built

on the basis of a strong and charismatic founder and leader. As the main competitive advantage

for the company is the founder/leader himself, neither the founder nor the company would think

of life after the founder. Moreover, whenever the companies' success and survival depends very

heavily on the existence of a single person, such companies and its leaders should take proper

action from an early stage so that proper leaders can be nurtured within the organization.

The Giorgio Armani company is a classic case of founders' dilemma: Giorgio Armani, the CEO

and owner of the Armani brand is in his early 70s. However, the company seems not to have


28/31

made any plans for life after Giorgio Armani. In a recent interview, Giorgio Armani was quoted

as saying that the search for a corporate partner and a successor was "not for the today, not for

tomorrow but perhaps for after tomorrow". Though there have been cases where companies after

much effort have been able to stand up and live after the demise of their founders, those are the

rarities. Armani should formulate a structure in his company along with his key management

people to put in place a definite structure that identifies and nurtures future and upcoming leaders

who can carry on the business even after the demise of any single individual. This aspect gains a

bit more importance in the fashion industry as the personality, concept and ideas of individual

designers prove to be real competitive advantages. Keeping this in mind, Giorgio Armani should

tackle this challenge when there is still a considerable amount of leeway to play with.

Brand dilution due to over-stretch: The primary objectives of businesses are to earn profitsand to enhance shareholder value by maximizing ROI. One of the main reasons that businesses

invest in branding and brand management is for the same reasons. Strong brands, as is well

known, provide companies with a very powerful tool to enter newer markets with limited

investments by leveraging their strong brand equity. It gives companies numerous revenue

streams. Given this simple but strong fact, it is not a surprise that most of the strong brands in the

world have leveraged their brand equity and extended their brands into newer product categories,

newer markets and even newer market segments.

Armani, when analyzed in this light, has extended its strong brand equity a bit too far. Though

the core business of Armani is in fashion apparel business, it has extended its brand into

categories as different as luxury hotels and even confectionaries. The examples that immediately

come to mind are those of Calvin Klein and Pierre Cardin. One of the many reasons that these

brands diluted their brand equity was because they used their brand names on a very wide range

of products. One of the main factors that make fashion houses and their products premium are

their exclusivity. By franchising their brand names to literally everything, these brands lost a

significant portion of their strong brand equity.

Though Armani might have extended its brand to hotels because luxury travel is catching up fast

as a fad with elite travelers, managing the brand along these different dimensions could be a

massive challenge.


29/31

Managing brand architecture: Given Armani's portfolio of brands within the fashion segment,

as in many of the other markets that it operates in, effectively managing this portfolio of brands

will prove to be the biggest challenge in the future. As the brand moves into different territories,

interacts with different sets of customers, and represents different personalities, it becomes quite

a task for maintaining consistency across all of its marketing communications and other

activities. Though Armani has been using the corporate brand name in all its sub-brands, and

across all its offerings, it is indeed a double-edged sword. On one hand, this gives Armani a great

opportunity to build a very strong corporate brand but on the other, it gives rise to a huge risk of

diluting the brand equity. Given this strategic dilemma, Armani has to tread carefully in the

future. Armani should also realize that its existence is mainly due to its strength in the fashion

apparel business. As the brand extends through different landscapes, Armani should not lose

focus as new pressures on resources build up.

Maintaining financial independence: Armani is a rarity from a financial perspective as well.

Giorgio Armani has been the only shareholder of the company from its inception till now.

Armani has not taken any bank loans either. It has been one of those rare companies which has

managed to have very healthy operating profits and ploughed back almost 700 million Euros into

the business since 1999. Having this financial independence has helped Armani immensely as

the company tests newer territories. With no pressures from shareholders and without having to

bother about meeting quarterly targets, Armani has been able to operate quite successfully. As is

commonly known in the fashion industry, it takes a considerable time for the concept and

products to take root in the market. For any company to sustain this gestation period, it needs to

operate in an environment where there are no day-to-day financial pressures. Having this kind of

financial independence to operate in has been one of the key success factors for Armani.

But to continue as a one man company in the future could be quite difficult. With consolidation

happening in many industries, it might just be a matter of time that it catches up with the fashion

industry as well. When such a thing happens, it could pose a big challenge to the working style

of Armani and its continued success. In this light, Armani might want to think of other options

when it has a choice and before something is thrust upon it.


30/31

Sustaining consistent brand personality: One of the main aspects of a fashion brand is its

personality and its identity in the marketplace. Building and sustaining a personality that is

relevant and one that resonates with the customer base is one of the most difficult aspects of

building a strong brand. Armani, with its presence in diverse markets, a very wide brand

portfolio, and interacting with diverse set of customers, faces this huge challenge of building a

relevant and resonant personality. With the ever growing competition in the fashion industry and

ever growing brand portfolio, building and nurturing this personality will prove to be a very big

challenge for Armani in the future.]]]]]]]] Martin Roll, article: business & brand strategy,

http://www.venturerepublic.com/resources/Giorgio_Armani_-_the_ultimate_fashion_brand.asp

Uch Okonkwo,Guest Editorial, The luxury brand strategy challenge,Journal of Brand

Management(2009) 16, 287 289

Vickers, J.S. and Renand, F. (2003) The Marketing of luxury goods, The Marketing Review 3:

459 478

Vigneron, F. and Johnson, L.W. (1999) Review and a conceptual framework of prestige-seeking

consumer behavior, Academy of Marketing Science Review 1,

http.//www.amsreview.org/articles/vigneron01- 1999.pdf

Jackson, T. (2001) International HeraldTribune Fashion 2001 a conference review, The

Journal of Fashion Marketing 6(4)

Chadha , R. and Husband, P. (2006) The Cult of the Luxury Brand: Inside Asias Love Affair

with Luxury, Finland: WS Bookwell

Nia A. and Zaichkowsky, J.L. (2000) Do counterfeit devalue the ownership of luxury brands?,

Journal of Product and Brand Management 9 (7): 485 497

Antoinette M. Fionda and Christopher M. Moore (2008) The anatomy of the luxury fashion

brand, pg. 3, 18

Jackson, T. B. (2004) International Retail Marketing, Oxford: Elsevier Butterworth-Heinemann


31/31

Chevalier, M. and Mazzalovo, G. (2008) Luxury Brand Management: A World of Privilege,

Singapore: Wiley and Sons

The Economist (2002) Special Report: Luxury Goods . 23 March, pp. 61 63

Moore , C.M. and Birtwistle, G. (2005)Th

e Burberry business model: Creating an internationalluxury fashion brand, International Journal of Retail & Distribution Management 32 (8): 412

422

Chevalier, M. and Mazzalovo, G. (2008) Luxury Brand Management: A World of Privilege .

Singapore: Wiley and Sons

Uch Okonkwo (2007) Luxury Fashion Branding, Hampshire: Palgrave Macmillan, pg. 65

LTM DAMP Final

Documents

Transcript of LTM DAMP Final