The Meaning Of Luxury Brands Marketing Essay
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 5435 words||✅ Published: 1st Jan 2015|
A brand for which a greater part of its products are luxury goods is termed as a luxury brand or prestige brand. It may also constitute certain brands whose names are affiliated with luxury, high price, or high quality, though few, if any, of their goods are presently estimated as luxury goods.
For example, in 1970s and 1980s the Gucci brand aimed at widely licensing their brand but unfortunately it was a noxious attempt and it did not do well. But in today’s era the Gucci brand is now majorly sold in directly-owned stores.
In the early 2000s, Burberry over-licensed its brand which led to the deterioration and devaluation of its brand image, thus reducing its cachet as a brand whose products were consumed only by the elite.
Louis Vuitton, the brand with the world’s first designer label comes from LVMH (Louis Vuitton Moet Hennessy) which is the biggest luxury good producer in the world with over fifty brands. The LVMH group made a profit of â‚¬ 2 bn on sales of â‚¬12bn in 2003. Other market leaders include Kering (former PPR) after it purchased the Gucci Group and Richemont.
In order for a brand to be defined and termed as a true and genuine ”luxury” brand, it has to get an endorsement from the members of LVMH, Kering (former PPR) or Richemont.
In economics, a luxury good is a good for which demand increases more than proportionally as income rises, and is a contrast to a “necessity good”, for which demand increases proportionally less than income.
Luxury goods are often equivalent with superior goods. The nature of luxury goods is that they have high income elasticity of demand, which means that as people become bounteous & wealthier, they will indulge profusely in the purchase of luxury goods. This also means, however, that if there is a downfall in the income of the consumers, then its demand will also drop.
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Income elasticity of demand is not consistent with respect to income, and may change sign at various levels of income. This means that a luxury good may become a normal good or even an inferior good based on different income levels. For instance, if a wealthy individual stops purchasing excessive amount of luxury cars for his automobile collection in order to start collecting airplanes instead, then in such a case, the luxury car would be termed as an inferior good.
Based on design, quality, durability or performance, plentiful manufactured products acquire the status of “luxury goods” as they are exceptionally superior to the comparable substitutes. Thus, virtually every section of goods available on the market today includes a subset of similar products whose “luxury” is marked by better-quality parts and materials, solid construction, stylish appearance, increased durability, better performance, advanced features, and so on.
Accordingly, these luxury goods might retain or enhance the fundamental functionality for which all items of a given section are primarily designed. There are also commodities that are perceived as luxurious by people in general because they play a role of status symbols; such goods tend to signify and indicate the purchasing power of those who acquire them. These items, while not necessarily being better (in quality, performance, value or appearance) than their less pricey substitutes, are purchased with the main reason of displaying wealth or income of their owners. These kinds of goods are the objects of a socioeconomic phenomenon called conspicuous consumption and often include luxury vehicles, watches, jewelry, designer clothing, yachts, as well as huge residences, urban chateaus, and country houses.
The advertising expenditure for the average luxury brand is 5-15% of sales revenue and it builds to about 25% with the consideration of other conveyance for example advertising, events, public relations and sponsorships.
In the overall times, the comprehension of a brand has been basically connected with customers and identity orientation. Accordingly, brands are acknowledged as images in the minds of the customers and other target groupss, which are outlined and executed by companies to recognize, build and establish their products.
Luxury brands are enormously linked with their fundamental products .The constitutive characteristics of luxury products leads to the following definition:
“Luxury brands are regarded as images in the minds of the consumers that comprise associations about a high level of price, quality, aesthetics, rarity, extraordinariness and a high degree of non-functional associations.”
1 “Defining luxury: the conundrum of perspectives”. Beta.luxurysociety.com. Retrieved 2010-08-09.
The chief feature of the basis of luxury brands are the highly recognizable brand identity and the superficial
individuality among a strong and substantial customers patronage which leads to accelerated sales.
gold, silk and silver are components that generally are defined as luxury within the fashion
industry. Products that have a high aesthetic appeal and value, exceptional quality and are
identifiable through a special design, logo or a brand name are identified as luxurious items.
Examples of brands that are characterized as luxury brands are Louis Vuitton, Christian
Louboutin, Yves Saint Lauren, Calvin Klein, Hermés, Prada, Mulberry, Chanel, Bottega
Veneta, Burberry and Gucci.9
These brands are those that became transformed from small-sized businesses
into billion dollar brands that are now accessible on main streets in the cities and in the airports.10
common characteristic among luxury brands is that they are exceedingly linked with handcrafted products
by superior artisans, advanced design and exorbitant items, such as leather, watches,
champagne and jewelers. At the end of the 1990s it was evaluated that there were less than
500 luxury clients in the world. Designers were not able to make the necessary profit that
was needed to stay on the market and they disappeared. Some individuals stated that the entire
luxury era was over, but many had faith as they stated that it was the fairytale everybody
Products as perfumes was the starting point in the diversified market and it was accompanied by
other accessories such as, pens, lighters, key rings and watches. High prices, that make the
luxury pieces inaccessible to numerous individuals, went hand in hand with the rarity and the
sophistication. Luxuries remain out of the majority even though it has a wide appeal, but it is
predominantly the super-rich European consumers who are the purchasers of these brands.12 It was
only accessible for the super elite previously, like royal families and other people in the upper
class. In today’s society, In today’s social norms, there is a huge change in the luxury market and the consumers
define luxury in diverse ways.13
The luxury sectors have developed in a remarkable way in terms of
economical facts in the last thirty years. Luxury sales are thriving where there is superior economic growth due to the
emergence of the new-rich people.14
13 Kristy, W. (2008)
14 Kapferer, J-N. (2006)
1.2- Concept of Luxury Brand
The concept of luxury has been present in numerous forms since the starting of civilization. Its role was just as significant in ancient western and eastern empires as it is in modern societies. With the clear differences between social classes in earlier civilizations, the consumption of luxury was basically constrained to the elite classes.
All through the course of history the conceptualization of luxury has shifted as per social infrastructures and budgetary and political factors of a given time. The primary guideline nonetheless, of what has chiefly been acknowledged luxury is that it is beyond everyday necessities, in some ways unnecessary, often exaggerated and superfluous.
Therefore, the demonstration of luxury is often claimed as a pronounced and deliberate contrast to existing social norms and patterns of behavior and it is not amazing that it has often been subject to severe moral and ethical criticism:
“No other moral or social issue is as unclarified as that of luxury, and what behaviour toward it can be considered to be well befit” (Kambli 1890 preface, cit. in Valtin 2008: 248).
Etymologically, the term luxury derives from the Latin luxusandluxuria both referring to the deviation from the normal measure (Valtin 2008: 248).
Classical Christian theology narrowedluxuria, lecheryorlustmainly to the sexual context giving the idea a profoundly negative meaning – even considering it as one of the seven deadly sins (Newhauser 2007: 239)
In Europe in the 17th and 18th century moral and philosophical doctrines underlined the negative connotation of luxury and used the term to describe the immoderate consumption of the dominating social classes.
Nobility was considered to use luxury as a means to express power and to mark the social difference between their class and the rising bourgeoisie.
Luxury was associated to excessiveness, swank and outrageousness despising and condemning it as immoral and indecent (Lasslop 2005: 472).
The industrial revolution of the 18th and 19th centuries brought about the advance of mass production leading eventually to the growing prosperity of a larger part of the population.
Formerly inaccessible products became more affordable, and a gradual change towards a more positive attitude to luxury ensued. The accessibility of luxurygoods entailing the “secularisation of luxury” assured that these goods wereincreasingly valued and associated with good taste, intelligence and elegance
1.3- The History of Luxury Brands
Creativity, exclusivity, craftsmanship, precision, high quality, innovation and premium pricing are the main competences or attributes with which a luxury brand is often associated.
When a consumer owns a product with these mentioned attributes it does not merely give them a satisfaction of owning pricey items but also an extra-added psychological benefits like
esteem, prestige and a sense of a heightened status that reminds them and others that they belong to an exclusive group of only a select few, who can afford these high priced items.
The luxury sector targets its products and services at consumers on the top-end of the wealth spectrum. These self-selected elite are price insensitive and choose invest their time and money on clothes and accessories that are plainly opulence and extravagant rather than necessities. For these reasons, luxury and prestige brands have for centuries commanded an unwavering and often illogical customer loyalty.
Many luxury and prestige brands such as Louis Vuitton, Burberry and Chanel were launched in the nineteenth and early twentieth centuries; this was the period where a system of stringent social class system was followed and the society was governed by the royalty and aristocracy. During this era, designers like Christian Dior, Louis Vuitton and Guccio Gucci designed clothes, luggage and leather goods solely for the honorable men and ladies of social order. Their work was an artistic expression that took several weeks & sometimes months to produce and this was all a part of the “luxury and prestige” experience. During this period, dressing from head-to-toe in one brand was a benchmark and social norm.
In the present 21st century environment, the story is different. The luxury scene has changed due to several factors. Firstly a mass class of wealthy people have emerged throughout. At the beginning of the century, luxury consumers constituted a petit segment of the population who all looked the same. However, in the last three to four decades an enormous amount of wealth has been accumulated by individuals due to various economic, social, and technological advancement.
Secondly, there has developed an ocean of luxury brands and this has affected the high entry barrier that the industry guarded for centuries. Luxury consumers now have the privilege of having more choice as compared to before.
Thirdly, the accelerated growth in the field pertaining to digital, information and communications technology has given consumers more variety in luxury product offering, easier access to view the choices & decisions and lower expenses in particular on the Internet. This has enabled the consumers to become more individualistic, experimental and bold to blend luxury and high-street fashion in one outfit; something that their mothers and grandmothers would have regarded a taboo in the past.
The result of this change has led to the concept of “trading-up and trading-down.” The new wealthy mass class who are enjoying their ability to trade up to acquiring luxury products practice trading-up. Exchanging down is the act of blending the utilization of luxury brands with fashion brands. This practice is also popularly called “the democratization of luxury. Therefore, it is no longer an astonishment to find a wealthy celebrity wearing jeans from H&M, earrings from Chanel, shoes from Coach, a shirt from Zara and a bag from Louis Vuitton.
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Luxury consumers have unconsciously unconsciously structured a platform for fashion brands to stand side by side with luxury brands. The so-called fashion brands such as H&M, Zara, Mango, Gap and TopShop are redefining their branding and promoting techniques to reflect a “luxurious” appeal to the buyer. As a result of this, for the first time in their history, luxury brands are confronting rivalry from the “lesser” mass fashion brands that are progressively edging into the lives of luxury consumers. Luxury brands have always had well-defined territories along which they operate and there has never been any question that they hold the strings in determining their consumers’ behaviors until now.
The mass fashion brands are portraying that they have comprehended the language of individualism and differentiation and have the capacity to offer the luxury customer alternatives to their luxury items or complimentary products at better price. They have additionally improved modern operations systems to rotate off their items in an short time. This has empowered the mass brands to move on from “mass” to “mass-premium” brands, as they like to be referred. While they are still exotic consumer brands, they are no longer low-end or middle-end brands. They have comprehended that it is no longer an issue for a young opulent Duchess to mix and match a £50 some pants from Zara with a £3,000 sack from Vuitton and a £5,000 J12 watch from Chanel, and they are misusing this development. This heads off to state that the luxury bag or watch alone is not solely needed to empower the customer to satisfy their esteem needs.
Another factor that has empowered the fashion brands as premium brands is the control & administration of the marketing mix strategies to be alike to those of the luxury brands. An ordinary example is the introduction of limited edition clothes and accessories by high street brands such as the UK’s Marks and Spencer’s or the recent wave of high advertising expenditure in fashion magazines like Vogue and Harpers & Queen, which were beforehand the sole domains of luxury brands. Viweing a TopShop advertisement next to Chanel or Hermes advertisement in Vogue undoubtedly does something to the mind of the consumer.
Additionally, the mass-premium brands now open in the best areas in fashion capitals of New York, Paris, Milan and London. They now act and talk as though they are truly the high end brands that set the trends. They have gotten aggressive in their way of conveyance and communication to their target customers, who are largely luxury consumers.
Another example is the teaming up of incredible luxury design planner and Designer of the House of Chanel, Karl Lagerfeld with H&M to outline and design a limited edition ladies’ wear collection in November 2004. This collaborative venture might have been unthinkable ten years ago.
The crucial questions are:
Are luxury brands now mass brands like fashion brands?
Are fashion brands becoming luxury brands?
Where can we draw the line between luxury and fashion brands?
According with industry masters, luxury and prestige brands for example Rolex, Louis Vuitton and Cartier represent the most elevated type of craftsmanship and order an staunch consumer loyalty that is not influenced by trends. These brands make and set the seasonal trends and can offer a commodity for £20,000 and another for £200 to diverse customer groups. They are additionally proficient in pulling their customers with them wherever they go.
Premium marks are those marks such as Polo Ralph Lauren, Calvin Klein and Tommy Hilfiger that try to be luxury and prestige brands however their marketing mix strategies are more similar to a mass market, yet a luxury mass market. Certain specialists additionally call this group mass-premium brands while others have termed them mass-luxury brands and yet certain others imply them as high-end brands. This class has perhaps seen the greatest changes from the consumer and aggressive rivalry from worldwide fashion brands like Zara and H&M.
Fashion brands on the other hand are those that dress the masses. A recent evolution brought about by competition has created a meaningful change in the fashion brands category. Brands like Zara, H&M and Gap can no longer be considered as merely fashion brands, in almost the same situation as any high street fashion as they have raised their offerings and strategies. To distinguish themselves from the mass-design brands, they now imply themselves as Premium Fashion marks. They are playing an important role in the trading down phenomenon of the luxury consumer.
The distinction between luxury brands and fashion brands is not only in the aspects of product quality and pricing but also applies to availability and exclusivity of the items. Fashion brands are for the mass market,whether they are of high quality or not. Luxury brands are for an authentic narrow market and are demarcated high quality, differentiation and precision in product design and manufacture. A brand is either a luxury brand or it is not. If a brand does not set out to focus and target on the high end market, then it is not easy to become a luxury brand.
So what brands are the true luxury brands? Heritage and tradition have dependably played an indispensable part in this sector. This is the reason for why that the industry is highlighting the contrasts between luxury and prestige brands, premium brands and fashion brands. The traditional perspective of luxury has been influenced by the recent changes in the consumer landscape. Regardless of this, the true luxury and prestige brands for example Louis Vuitton, Chanel, Hermes, Cartier, Rolex and Gucci, remain unflinching and not bargaining their core values and persistently influencing their consumers’ thinking, albeit a more mass consumer base. These brands have techniques & strategies that address the challenging paradox of the amalgam exclusivity and availability and to appeal to many while appearing to be right for only a special few.
ANATOMY OF MARKET
GROWTH OF LUXURY BRANDS
In the preceding few years the sale of luxury goods has been increasing rapidly throughout the globe. As per counts by corporate advisors Bain &Company, sales of luxury brands in 2006 stood at EUR 159 billion, up EUR 13 billion on the past year. Verdict categorizes the business to some degree differently: according to its study Global Luxury Retailing 2007, the world wide luxury market had an estimated volume of EUR 263 billion.
The maximum market share of the luxury markets accounts for Europe, which is at 38 percent. The history of the most crucial luxury businesses are found in Europe; Italy and France to be more accurate.
However, in the years to come, the countries that will have a major boom and growth of the luxury market will be that of the Asia-Pacific region and Middle East.
There has been a rise in the purchasing power of individuals world-wide.
According to the reports published by World Health Report in 2007, the number of rich (HNWIs âˆ’ high net worth individuals) and their assets have proceeded to grow âˆ’ especially in the newly developing countries. This is the backdrop to the positive prospects in the luxury market.
The big luxury brands are some of the strongest brands world-wide.
There has been a rise in the brand value of luxury brands. The most highly and largest luxury brand is Louis Vuitton. It consolidated its seventeenth place in the global league table of the 100 best brands with a considerable increase of 15 percent in its brand value.
Chanel, Hermès, Cartier, Prada and Burberry also enjoyed double-digit increases in 2007.
Luxury is defined by affluent and wealthy purchasers as something that is the best in design, value, quality, craftsmanship and service – which are all consolidated into a remarkable experience that is truly appropriate, both practically and emotionally.
Most individuals consider luxury items as fine custom tailored suits, clothes, accessories & footwear, however, luxury items might be simply about anything from automobiles, luggage, furniture, watches, vacations and just about anything.
As luxury customers have become more diverse and keen, more brands have started to offer bespoke services.
Accounting 40% of worldwide sales, men’s spending on luxury additionally grew practically twice as quick as women’s’ in 2011 and is continuing to do so. The luxury brands wish to capitalize on that trend.
In the past, small tailors have been known to offer the best bespoke services paying most attention to the customer, however the big brands have been taking note and coming around. Gucci included a broad new made-to-measure service for suits and shoes. Pal Zileri offers made-to-measure bespoke suits. Recently, Brioni revealed that 40% of its sales come from its bespoke items, sewed by hand in the Southern Italian town of Penne. MARK / GIUSTI has a bespoke service committed to designing and manufacturing exceptionally designed packs for their most fixed and recognizing customers, and Prada started customizable eyewear and accessories few years ago to test the bespoke market sector slowly.
While the economy around the globe is still brittle, luxury spending still takes place. For the wealthy, the experience is as vital as the final product – and bespoke services will continue to grow.
The most recent international luxury brands to declare a slower pace in extension of retail are Gucci and Louis Vuitton with fewer stores; in the case of Vuitton even “freezing” expansion in certain markets. Recently, analysts articulated that the reason for Louis Vuitton’s slower growth in 2012 is due to immense brand exposure.
In case of Gucci, the company stated that it will concentrate on mushrooming and renovating existing stores, much like its sister brand within the PPR Group (recently Kering), Bottega Veneta. Both Gucci and Bottega Veneta decided to open in Milan recently which will be their largest store worldwide, and their aim would be to target the solid number of rich tourists from Asia, Russia and South America.
Though not formally confirmed, Prada Group (Prada and Miu Miu) has also dimmed its pace in international expansion.
Additionally, Italian luxury menswear house Ermenegildo Zegna also appears to have tacitly diminish the amount of its new openings planned for 2013.
Geographically, China is no exception with regards to opening new stores, numerous luxury fashion brands taking a more conservative approach. Certain brands for example Gucci and Bottega Veneta have as of recently opened men’s only stores in China -other major brands are likely to follow, especially Dior and Ralph Lauren.
Chanel has likewise taken same approach,concentrating on broadening and refurbishing flagship stores instead of opening new ones. It appears that the more windows a brand would open,the more accesible it would appear to the customers, both in developing and developed markets. Louis Vuitton’s strategy to open two “categories” of stores – Maison ones (larger and with added services) and regular stores appears to have been exceptionally ineffectual, leading to further perplexity among the luxury buyers.
In spite of the recent cash injection from its new Qatari owner, Valentino too is taking a more wary approach, concentrating on expanding more its Red Valentino line, particularly in shopping malls and remaining more preservationist in its main line. The house will additionally concentrate on revamping various stores in the U.S. and Europe, which do not show the new interior design concept of the brand.
The luxury fashion brands which are doing great and are successfully expanding its retail globally with numerous stores lined up to be open in 2013 are viz Michael Kors (who will also be soon launching a beauty collection of color cosmetics and body-care including fragrances), Tod’s Group (Hogan), Tom Ford, Brioni (acquired in 2011 by PPR) and Salvatore Ferragamo..
The growth in the luxury market has greatly expanded the availability of luxury goods to a wider audience of consumers. Luxury goods have also become more affordable to a wider range of consumers than ever before, as personal incomes rise in a number of emerging markets, such as the Middle East, China, Russia, or India and luxury marketers offer up less luxurious product lines at more reasonable prices. Where once an individual had to travel to Paris, London, New York’s 5th Avenue or Rodeo Drive to shop the luxury leaders’ stores, today one can find the same luxury brands in malls across the country. And if its not available at the local mall, one can go online and find an incredibly wide selection of the top luxury brands to shop and have delivered at their door.
Thus luxury “class” today is going more “mass”, as more and more people of moderate means reach up for their personal luxury indulgence. Luxury is no longer confined to just the upper class â”€ as in many emerging markets, everyone feels entitled to luxury.
2.2 2013 Luxury Industry Predictions from the Experts
2012 was another dynamic year for the luxury business. China authoritatively overtook the United States as the world’s largest consumer nation of luxury merchandise for the first time. Rich investors in Asia and the Middle East gobbled up European luxury brands, and reinvigorated inactive heritage brands.
In Argentina, receiving stock was delayed due to the retail sector charging huge amounts of duties, taxes and customs.
Luxury brands are now exiting markets that do not depict growth. There has been a massive vanishing of luxury brands from Argentina due to its unfavorable import taxes and restrictions. Likewise, many luxury brands are delaying entry into India because of its lack of retail space, which limits scalability/demand.
Such barriers which were regarded as small hurdles during optimistic times to gain access to potential new markets, are now cause for many brands to reassess and rationalize their ideas for expansion.
In 2011, the number of outlets of the major luxury brands increased by 21%; in 2012 it shrunk to 9%; and it is expected to fall further in 2013.
MARKET CHARACTERISTICS & MARKET SIZE OF LUXURY BRANDS
Luxury goods are acknowledged to be products at the highest end of the market in terms of quality and cost. Classic luxury merchandise includes haute couture garments, accessories, and luggage. Numerous markets have a luxury segment which includes automobiles, wine, bottled water, tea, watches, jewelery and chocolates.
Luxury does not only imply to products. Luxuries can also be services. Hence, a luxury brand includes both tangible as well as intangible products.
For instance, hotels providing a seven star service to its customers will be categorized as a luxury service.
A luxury brand should have certain characteristics about it. These are briefly mentioned as follows :-
â€¢ Price: The brand offers commodities which belong to the most expensive products of their category.
â€¢ Quality: The brand offers everlasting highest top-of-the-line products, which won’t be discarded even after long usage or deformity, however rather repaired and which frequently even grow in worth as time passes.
â€¢ Aesthetics: The brand is always classy, superior and chic. Whenever and wherever the brand is perceived, it epitomizes a world of elegance and top-notch.
â€¢ Rarity: the luxury brands keep their production limited and try to often not reveal their high sale numbers. The brand plays hard to get and is not available at all times or places.
â€¢ Extra-ordinariness: The brands have a mind and style of its own and its products are usually dignified and peculiar.
â€¢ Symbolism: The brand believes in “the best from the best for the best”; its appeal fills the room and it has its unique representation.
MARKET SIZE -The luxury goods market has been on an upward climb for numerous years. Apart from the setback initiated by the 1997 Asian Financial Crisis, the industry has performed well, especially in 2000. In that year, the world luxury products market – which incorporates drinks, fashion, fragrances, cosmetics, watches, accessories, baggage, handbags – was worth near US$170 billion and grew 7.9 percent.
The greatest segment in this class was luxury drinks, including premium whisky, Champagne, Cognac. This area was the one and only one that suffered a decrease in quality (-0.9 percent). The watches and jewelry segment demonstrated the strongest performance, increasing in worth by 23.3 percent, while the clothing and accessories section grew 11.6 percent between 1996 and 2000, to US$32.8 billion.
North America is the biggest regional market for luxury products: unlike the 2.9 percent development encountered by the Western European market, the North American market achieved growth of just under 10 percent. The top ten markets for luxury goods accounts for 83 percent of the business sector, and incorporate Japan, China, USA, Russia, Germany, Italy, France, UK, Brazil, Spain, and Switzerland.
In 2012, China surpassed Japan as the world’s largest luxury market.
5 ^ “The World Market for Luxury Goods.” Global Market for Luxury Goods. Nov 1, 2001, March 5, 2007.
6 ^ “China bans television ads for bling”. Retrieved February 15, 2013.
MARKET TRENDS OF LUXURY BRANDS
Globalization, consolidation and diversification are the three predominants in the luxury goods market. The reason why globalization happens is due to the rise in the availability of goods, excessive existence of the luxury brands and a boost in tourism.
When there is a growth of enlarged companies and ownership of brands across various segments of the luxury products, its termed as Consolidation.
Examples are LVMH, Richemont, and PPR, which govern the market in areas ranging from luxury beverages to fashion and cosmetics.
The main challenge facing luxury brands in 2013, remains as same as prior years. They have to achieve the right balance between protecting the exclusivity that defines luxury, and making the brand experience accessible open to a wider audience.
Also, luxury brands need to keep up with digital marketing wh
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