MARKETING TERM

PAPER

on

LUXURY BRANDING

Table of Contents

INTRODUCTION.......................................................................................................................................3

Characteristics of the luxury industry..........................................................................................................4

What is so different about luxury goods industry?......................................................................................6

The 6P’s of luxury Marketing......................................................................................................................7

PEOPLE: THEY BUY FROM PEOPLE.................................................................................................8

PRODUCT: THE SIX KEY CHARACTERISTICS OF LUXURIES.....................................................9

PASSION: CONNOISSEURSHIP IN AND VIRTUAL COMMUNITIES...........................................10

PLEASURE: LUXURY IS EXPERIENTIAL.......................................................................................11

PURPOSE: LUXURY MAY HAVE AN ELEMENT OF SUPERFLUITY,.........................................11

BUT IT CAN ALSO BE PRACTICAL.................................................................................................11

PRICE: THE RISE OF FRACTIONAL OWNERSHIP........................................................................11

Luxury in India..........................................................................................................................................12

MARKET LUXURIFICATION................................................................................................................13

New affluence: the booming economy..................................................................................................13

Luxury Accessibility: the world at your doorsteps................................................................................14

Market regulation..................................................................................................................................14

THE CHANGING FACE OF THE INDIAN LUXURY CONSUMER....................................................14

Strategies for Luxury Marketing in India..................................................................................................15

Why do consumers buy Counterfeit Luxury Brands?................................................................................16

CONCLUSION.........................................................................................................................................18

REFERENCES:.........................................................................................................................................19

INTRODUCTION

A luxury brand or prestige brand is a brand for which a majority of its products are luxury goods.

It may also include certain brands whose names are associated with luxury, high price, or high

quality, though few, if any, of their goods are currently considered luxury goods.

A luxury brand, a brand must: Sit within a tier of a consumer-facing category that seemingly

demonstrates price insensitivity. 2. Show that being expensive is of neutral or even positive

impact to their image. 3. Demonstrate that perceived price has a low role among drivers of

purchase.

Luxury brands have often been associated with the core competences of creativity, exclusivity,

craftsmanship, precision, high quality, innovation and premium pricing. These product attributes

give the consumers the satisfaction of not only owning expensive items but the extra-added

psychological benefits like esteem, prestige and a sense of a high status that reminds them and

others that they belong to an exclusive group of only a select few, who can afford these pricey

items.

The luxury sector targets its products and services at consumers on the top-end of the wealth

spectrum. These self-selected elite are more or less price insensitive and choose to spend their

time and money on objects that are plainly opulence rather than necessities. For these reasons,

luxury and prestige brands have for centuries commanded an unwavering and often illogical

customer loyalty.

Luxury has never been something easy to define, yet this mystery concept is something highly

desired by one and all alike. We look at delving deeper into this mystery and aura of luxury goods

by way of comparing them against ‘regular goods’ as well as highlighting the characteristics of

the luxury industry. But before beginning with that, lets first attempt to understand some common

terms associated in the world of high-end goods

Luxury and prestige brands such as Rolex, Louis Vuitton and Cartier represent the highest form

of craftsmanship and command a staunch consumer loyalty that is not affected by trends. These

brands create and set the seasonal trends and are also capable to pulling all of their consumers

with them wherever they go.

Premium brands are those brands like Polo Ralph Lauren, Calvin Klein and Tommy Hilfiger that

aspire to be luxury and prestige brands but their marketing mix strategies are more attuned to a

mass market, albeit a luxury mass market. They are also termed as mass-premium brands or mass-

luxury brands.

Fashion brands on the other hand are those that address the masses.

What is so different about luxury goods industry?

The three main differences between luxury industry and non luxury industry

1) Company Size

2) Financial Characteristics

3) Time Factor

1) COMPANY SIZE:

Generally in any business firm size is a major factor in comparing with other firms but this is not

the case with luxury industry i.e. size doesn’t seem to matter much for luxury industry because in

general luxury businesses are small but they are respected for their brand and their

reputation .Brand awareness factor is very high in luxury industry . Consumers tend to read about

them in magazines and want to know more about them .So, despite their prestige image and

advertising presence all over the world luxury companies are generally small to medium sized

enterprises .

2) LIMITED NUMBER OF STAFF:

The fact that most luxury goods companies are small or medium sized enterprises so an obvious

consequence is that they have limited number of staff .Firstly some companies are just not small ,

they can be very small in a sense they may operate with just small studio initially that monitors

trends and design products and may subcontract all other activities to licenses and distributors .

This tendency to subcontract production activities is second important aspect of luxury

industry .Often luxury good companies have just one or more prototype and some product lines

rest is done by sub contractors. For example consider luxury brand watches the various

components of watches are produced by different companies before the final item is assembled in

home country.

So, the average luxury goods company is small .Its sales figures include elements

that are difficult to assess and compare .Most of the activity at manufacturing and distribution is

subcontracted and staff no’s are very limited .

3) TIME FACTOR:

Unlike other industry like FMCG where a new product can be launched in six months , luxury

world often takes much more time and investment . For example to launch a new perfume it is

necessary to come up with complete line and for each item there is need for a costly glass bottle

mold and a plastic cap mold . Such molds can take up to 12 months to make .Then a large

quantity of product has to be manufactured so the lead time for a launch can be anything from 18

months to 2 years and it often takes 3 to 4 years to start making money.

The 6P’s of luxury MarketingAs we start to define the dimensions of the 6P’s of Luxury Marketing—people, product, passion,

pleasure, purpose, and price—it’s good to keep in mind two key points about marketing. These

points were noted by Dell Computer’s Keith Kozac who, at a recent market research conference,

reminded the audience of two prerequisites for successful marketing (whether it’s luxury

marketing or, as in the case of Dell, mass marketing). Kazac’s points:

• Listen to the customer

• You are not the customer!

In other word’s, it’s not up to marketers to define what the key characteristics of a luxury

product are, or what is pleasurable and what is not. It’s for the consumer to say and for the

marketer to listen. Listening to the customer has led the author to define six key areas that luxury

marketing must pay attention to. These areas which fully cover what matters most to luxury

consumers have been identified based on author’s years of experience in observing and

communicating with high net worth individuals at work, at play, at home and all the places in

between. Seriously considering the 6P’s as an integrated framework, and understanding the

reciprocity of the “P’s” within this framework, will greatly impact the way luxury marketers

approach their customers and allow them to create unique relationships throughout the buyer’s

journey.

PEOPLE: THEY BUY FROM PEOPLEOne often says (and as often forgets) that ‘people buy from people.’ After years of one-way

monologue communication to customers, marketers now have recognized the need for a dialogue

with them. Specifically, in the luxury sector, we refer to this give/get model as “image through

action.”

Image through action is a two-part equation: how the brand marketer tells its story, and how well

your story is told by others. Both are equally important. The former is, of course, the beginning of

the buyer’s journey with the responsibility resting solely on the brand’s ability to begin a personal

relationship and execute with excellence; the latter is the value of consumer’s peer-to-peer

communications. Whether someone is selling a product through a channel or using a direct sales

model, the value of people in the buying process is critical to the success of business transaction.

And that is just the start of the fruitful journey of building brand loyalty. The most successful

luxury brand organizations have built best practices for the proper training of their brand

ambassadors who directly/indirectly touch the consumer (e.g. sales people, customer service,

phone operators, etc.).

But many luxury brands tend to be passive, overlooking this fact, and typically take the least path

of resistance relying heavily on past brand equity, image, and heritage to do most of the implied

or explicit “talking.” They often express why their brand is different/better with “our quality

speaks for itself,” or “it’s handmade from only the finest materials” or “because it’s from

Switzerland it is made with precision.” There is also a trend towards greater social responsibility

on the part of those with high wealth.

PRODUCT: THE SIX KEY CHARACTERISTICS OF LUXURIESWithin the 6P’s of luxury marketing, product quite naturally plays a central role. Through

extensive inter-views with luxury goods consumers, French marketing professor Bernard Dubois

identified six key characteristics of luxury that are inherent in a product and/or its brand.

First, luxury is synonymous with excellent quality. The components are of an exceptional

nature and manufacturing the product involves high level of expertise. Second, a luxury brand

will typically have a history, a heritage that gives it an authentic aspect and helps give the brand a

unique identity. Creating authenticity may mean building a compelling story that blends many

aspects of a product’s heritage (who has used the product, during what era, where the product is

made, etc.) Obviously, new products from new companies will lack long histories, but there may

be ways in which marketing can subtly convey lineage. Maintaining integrity is also essential for

luxury brands. This can be demonstrated by ensuring stylistic consistency, committing to

traditional production practices or by using history and culture as referents in branding.

A fourth luxury attribute is price. The price of a luxury product is assumed to be very high,

especially in comparison to its utilitarian counterpart. Indeed, research shows that the perception

of quality is positively linked to price of the product or ser vice (i.e., a higher price can confer a

quality “halo effect”), with consumers often judging the quality of a product according to its

price when choosing between different brands. Consumers who believe the price is an indicator

of quality also associate high price with prestige. Fifth, luxury products are expected to be scarce.

Clearly, ‘items that are in limited supply have high value, while those readily available are less

desirable. Rare items command respect and prestige.’ Finally, luxury can to some extent be

superfluous, even useless. This does not mean that the product is innately superfluous. More

likely, it is the extravagant, the indulgent, aspects of the product that are not strictly Necessary.

Because of their means, the affluent are often able to move beyond meeting needs in their

purchases, and move toward indulging their wants.

PASSION: CONNOISSEURSHIP IN AND VIRTUAL COMMUNITIESThe pursuit of luxury is often a passionate endeavor and the affluent can be very passionate

consumers. In many instances, it is their passionate nature that has put them in the position to

access the luxuries that comprise their lifestyle. In the United States today, in particular, the lion’s

share of wealth is accumulated through business ownership (or sale) and employment

compensation; the passion for success in business and professional life is mirrored by passion for

the lifestyle choices their wealth enables them to make. Whether they are collectors, connoisseurs

or communities of like-minded individuals, passionate consumers are brand advocates respected

by their peers and brand marketers best allies.

Collectors are a prime example of passionate consumers. They might devote years to researching

every model produced by a watchmaker or car manufacturer. They may know more about the

brand than almost anyone else. In fact, the only people who can teach things to a true collector are

other collectors and (hope-fully) the brand itself.

PLEASURE: LUXURY IS EXPERIENTIALOrdinary product purchases—like trash bags and paper clips—are based on processing

information, with the aim of solving a problem or meeting a clear need. In contrast, luxur y

products are experiential. They provide a sensor y fulfillment beyond the functional attributes of

the item or service. This sensory fulfillment may come through the selection process, the purchase

itself, through use of the product, or through fond recollection.

Luxury marketers need to understand the sensory markers that their different customer’s best

respond to, and determine how to convey those markers. And no matter how complete the sensory

appeal of a product is, the products in themselves are seldom enough. Luxury products need

emotional marketing to give them that ‘extra’ dimension.

PURPOSE: LUXURY MAY HAVE AN ELEMENT OF SUPERFLUITY,

BUT IT CAN ALSO BE PRACTICAL People often equate luxury with superfluity, useful only as a means to display wealth. This is

borne out by the inclusion of superfluousness in Dubois’ listing of the attributes of luxury goods.

But this assumption is incomplete. While the luxuriousness of a good may be a superfluous aspect

giving pure pleasure alone, as often as not, luxuries hold a strong utilitarian aspect as well. The

pleasure vs. the purpose aspect may be more or less important to different individuals. Typically,

they’re both present in a luxury consumer’s thinking, but in different weights. In short, luxury

must be both exemplary in function and form.

Luxury marketers need to keep in mind that the product appeal and the balance between

practicality and pleasure will be different for different customers. Marketers must be prepared

with the information or with opportunities for direct sensory engagement that can be employed,

as needed, in right combination.

PRICE: THE RISE OF FRACTIONAL OWNERSHIPPrice is an important attribute of luxury goods, conferring an aura of quality and prestige. But

Hollywood style extravaganza aside, most affluent consumers are well aware of what money is

worth and how hard it is to make. Even for the wealthiest consumers, maintaining private jets,

luxury yachts and multiple mansions is costly, and may well feel more expensive than it’s worth.

Luxury toys may depreciate rapidly. You can only live in one place at a time. Luxury spending

ties up capital that could be used for making money. “Trading off” is more important than

“trading up.” One alternative would be to buy something cheaper, or forego a purchase entirely.

But neither of those options is much fun. Fractional owner ship of luxury goods has now been

introduced, enabling the affluent to share the cost of an acquisition they enjoy only a few days a

year. It is inspired by the time-share model, but is more exclusive and often comes with an equity

stake. These ‘partsumers’ share cars, yachts, houses, planes, and even handbags.

Luxury in India

To be successful in India, it is both necessary to gauge the financial potential as well as the mind

set of the Indian luxury consumer. This will help in bringing forth the right product offerings to

the Indian consumer as well as targeting them better.

Qualitative Insights

Even the Asian region is not uniform in its preference for luxury in terms of need fulfillment

Therefore, it becomes important to delineate the needs of the Indian consumer from the other

Asian regions to target them better this agenda gains importance because many Indians look at

acquiring luxury from places such as Hong Kong, Tokyo, China etc. Eg. It is interesting to note

that Singapore consumers are more of connoisseurs compared to Hong Kong consumers who

want Talk-Value from their luxury goods

Hindustan Times has been at the forefront of driving the luxury revolution in India by organizing

two Indian luxury conferences in the last 4 years. To add to it, it also brings out a monthly

supplement of luxury goods available in India, thereby creating awareness for the luxury brands.

Quantitative Insights

As far as quantitative estimates are concerned, there will be 135,000 millions (in US dollar terms)

in India by 2009.The affluent market is set to grow at a rate of 13% in India, and by 2009. there

will be approximately 1.1 million affluent here. The wealth potential of India’s affluent was to the

tune of US$ 203 billion as of 2005.

MARKET LUXURIFICATION

The accelerating pace of economic and social change is transforming the Indian luxury

landscape. The so-called luxurification of society is a phenomenon that can be attributed to the

following dynamics.

New affluence: the booming economy

According to the McKinsey Global Institute, consumers earning more than 1,000,000 rupees a

year will total 24 million by 2025 – larger than China’s comparable segment. It is however the

emergence of ‘mass affluence’ combined with aspirational mindsets and lifestyles that are

helping to stimulate consumer demand. The rapid growth of the Indian middle class means that a

larger number of consumers are able to afford luxury goods than ever before.

Media exposure: luxury is now mainstream

The media-cultural phenomenon is however, not restricted to the pages of glossy magazines.

Mainstream media are taking a greater interest in luxury brands, fashion trends and consumer

lifestyles. Weekend supplements in national newspapers devote pages to fashion features and

product reviews. Increased product knowledge and brand awareness are translating into greater

consumer confidence – an important catalyst for luxury consumption in a fast-emerging market.

Luxury Accessibility: the world at your doorsteps

Luxury brands are now following the Indian consumer, expanding their sales operations not only

in Delhi and Mumbai, but to smaller cities or metrocities such as Pune and Hyderabad. Luxury

boutiques which were traditionally confined to the secure but often inaccessible surroundings of

exclusive hotels have been thrown open to the masses thanks to the shopping mall boom.

Market regulation

Although high import duties on luxury goods continue to prevail, India’s policy of liberalisation

and deregulation has improved its image as an attractive destination for foreign investment.

THE CHANGING FACE OF THE INDIAN LUXURY CONSUMER

The luxury market has traditionally been segmented according to two very separate and distinct

customer groups – namely the ‘affluents’ and the ‘non-affluents’. The transition towards a

consumer society has changed the profile of the luxury consumer. Luxury is no longer reserved

for the English-speaking elite. Priyanka,a BPO employee, loves shopping, worships brands and

is typical of a new generation of luxury consumers – the ‘because I’m worth it’ generation.

Today’s luxury shopper could be a broker, an entrepreneur, an IT specialist or a student.

Strategies for Luxury Marketing in IndiaThere are conventional foundations for ensuring success of a brand and they are listed below in

brief :

1. The brand must be “expansive”

Which means it should be full of innovation opportunities for the marketer and in terms of

satisfying the Divergent needs of the luxury consumer.

2. The brand must tell a story

It is this story, of either heritage or performance or other aspects that goes on to build the aura of a

brand over time. The story always accentuates the identity of the brand.

3. The brand must be relevant to the consumers’ needs

Depending upon the mindset of the luxury class, it is imperative for a brand to satisfy those needs,

whether they be for recognition or functional use etc.

4. The brand must align with consumers’ values

A brand that does not concur with the basic values of a consumer’s society has a small chance of

succeeding because luxury items are forms of expression or identification for a luxury consumer.

This makes it difficult for the consumer to adopt the brand in such cases.

5. The brand must perform

Irrespective of which category the brand belongs to, a performance assurance is a must for the

brand if it wishes to be in the evoked set of luxury consumers, considering the price being paid for

luxury.

Why do consumers buy Counterfeit Luxury Brands?

Counterfeit goods are illegal, low-priced and often lower-quality replicas of products that

typically possess high brand value. The ethical case against counterfeit aside, its adverse effects

on business are well documented. Counterfeiting has also been linked to the growing global

threats of narcotics, weapons, human trafficking and terrorism.

The anti counterfeiting forces seem to be fighting a loosing battle, particularly in luxury goods

markets, in which consumers often knowingly purchase counterfeits. Despite the efforts of most

brand marketers, the international chamber of commerce estimates that this industry is loosing as

much as 12 million dollars every year in counterfeiting. A clear and actionable understanding of

the motivations underlying consumer’s purchase of counterfeit luxury brands remains elusive.

The market for counterfeit brands relies on consumer’s desire for real luxury brands insights in

to why people purchase luxury brands in the first place are particularly relevant in understanding

the motives underlying counterfeit brand purchases.

Counterfeit products can be defined as illegal products that resemble the genuine products but

are typically of lower quality in terms of performance, reliability, or durability. From the

consumers perspective counterfeiting can either be deceptive or non deceptive. Deceptive

counterfeiting involves in which consumers are aware that the product they are buying is the

counterfeit product. E.g.; Automotive parts, Pharmaceuticals and consumer electronics. The Non

deceptive counterfeit tells that consumers are aware of the counterfeiting which is the focus of

research and they can even distinguish counterfeits and genuine products on the basis of

differences in pricing, distribution channels and the inferior quality of the product.

Based partly on consumer surveys the research argues that in certain cultural, social, and market

contexts, counterfeit can enhance the demand for real brands. Counterfeit mainly depends on

social functions that underlying the luxury brand attitudes. Consumers attitudes serve as the

social adjustive function, self-presentation related goals are likely to be salient.

The counterfeit brand does not satisfy the important goals, it is unlikely the consumers will

perceive counterfeit brands as being similar to the luxury brands.

Luxury brands vary in the extent to which their brands emblem or logo is conspicuous, in easy

sight of the user and more important relevant to social others.

The social motives underlying the counterfeit luxury brand consumption points to several

theoretically and managerially important research directions. The symbolic and the social

functions served by brands vary with consumers self views and socialization.

CONCLUSION

These luxury consumers can be better approached through taking into occasions variables based on their individual needs, wants and values as opposed to a ‘one size fits all’ template. For luxury products, the variables, or dimensions, that matters are People, Product, Passion, Pleasure, Purpose and Price. Each of these dimensions will impact different consumers in different ways. And none of these are static or isolated. The importance of these dimensions will shift over time as individual circumstances change, and, at the macro level, key cultural, social or economic trends will have significant impact. Luxury marketers have to take all this into consideration when determining present and future brand management, product offerings and marketing campaigns.

Companies in the business of luxury are facing some very serious challenges. Customers are getting more demanding and knowledgeable. Competition is getting sharper. Even class leading luxury names are taking a hard look at the very fundamentals of how they manage their businesses and achieve sustainable growth. Private Equity Houses are becoming more interested in luxury companies and this is likely to have major implications for the marketplace.

The starting point for identifying successful luxury brand strategies in India has been established by identifying certain salient aspects of luxury brands that remain constant as well as identifying the stage of mindset of the Indian consumer towards these brands.

The focus is now towards ‘how soon’ luxury brands will enter the market to gain a first mover advantage, which is of significant importance in India. Apart from how soon, we primarily focus on ‘how will’ luxury brands cater to the mainly aspirational needs of the Indian consumer.

A word of caution that goes for luxury marketers, irrespective of their brands and geographical presence – The luxury consumer is always looking for newer ways to satisfy his continuously changing needs. Hence, the need to keep a close tab through insightful research is of prime importance.

As far as India is concerned, given the rapidly accelerating affluence of the masses, the scenario is set to witness a boom. The ones who will be riding the wave will be the ones who’ve kept their ears open to each and every word of their each and every customer. After all, in the luxury business, no marketer can afford the luxury of treating its consumers as a loosely bunched segment.

REFERENCES:

ARTICLES

1. Eight Things That Every Marketer Needs to Know about the New Luxury Market; Pam Danziger.

2. Why do consumers buy counterfiet luxury brands: Keith Wilcox, Hyeong Min Kim and Sankar Sen.

3. The Changing Face of Luxury; Patricia Graham and Marcus Matthews.

BOOKS

1. Luxury brand management- michel chevalier, gerald mazzalovo.2. The 6p’s of luxury marketing-a new model for considering consumer’s buying behavior

for luxury brands3. The cult of luxury brand – radha chadan ,paul husband

WEBSITES1. unitymarketing.com 2. hindustantimes.com 3. brandchannel.com 4. britishluxurycouncil.com 5. brandnoise.com