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Consumer aspirations and luxury brand management

“Human needs or, in this case, consumer needs are the basis of all modern marketing. Needs are the essence of the marketing concept” (Schiffman, 2008). Maslow’s hierarchy of needs is a well-known theory in psychology which can help marketers to understand the consumer needs better. So, what are Maslow’s hierarchy of needs?  Abraham Maslow suggested in his 1943 paper “A Theory of human Motivation”, a triangular diagram showing the hierarchy of needs is divided into five levels: “At the bottom are the basic needs for food, water and air. Then, above them is the need for safety, security and protection. After theses needs have been met, an individual has a need for love, affection and friendship. When these have been satisfied an individual may seek status and self-respect and, finally, at the top of the pyramid is the need for self-actualization or self-fulfillment” (Schiffman, 2008).  Though this explanation we can see that only when the lowest needs are satisfied, people will focus on the higher needs. Differences in need priorities can influence consumer behavior in difference ways. Though Maslow’s hierarchy of needs we can see that when one level is fulfilled, people naturally moves to the next.

In social psychology, these psychological needs are called “aspirations or life goals” (Kasser and Ryan, 1993, 1996). Since aspirations are related to fundamental psychological needs acting as motives for action, they have direct effects on an individual’s behavior which over time tends to be consistent with the goals that she/he pursues (Sheldon et al., 2004; Pyszczynski et al., 2004; Sheldon, 2004; Kasser and Ryan, 1993, 1996; Kim et al., 2003). Two main types of aspirations have been identified and they are: intrinsic and extrinsic. Intrinsic goals are internally oriented and are therefore driven by “autonomous reasons”, meaning that individuals pursue these goals because of the satisfaction, enjoyment, or personal meaning derived from their attainment. People who pursue extrinsic goals tend to be concerned about how they are perceived by others and by a desire to receive their praise and rewards. Aspirations are therefore thought to influence motivation and in turn behavior (Kasser and Ryan, 1996; Kim et al., 2003; Sheldon et al., 2004).

It appears that many people buy goods for what they symbolize. Dubois (1993) claims that purchasing luxury goods represents an extreme form of expressing one’s values. Therefore luxury companies should explore in depth brand values they want to represent and their customers’ value systems to be able to manage their brands more effectively. How do we define a brand? A brand encapsulates identity, origin, specificity, and difference. It evokes this information concentrate in a word or a sign. “A brand is essentially a seller’s promise to deliver a specific set of features, benefits, and services consistently to the buyers. The best brands convey a warranty of quality” (Keller, 2003). Also according to the definitions made by Keller (2003), brand names help to communicate quality and evoke specific knowledge structures associated with the brand. So, by these extrinsic cues “strong brand names can reduce consumer anxiety and simplify the shopping process.”  Many research has shown that brands are the symbolic and expressive component of products; functional benefits are mostly related to product attributes whereas symbolic benefits are mostly related to brand name attributes in consumers’ mind as Kapferer (1997) stated: “Products cannot speak for themselves: the brand is what gives them meaning and speaks for them. It creates a resonance with them that builds and reinforces brand identity”.

Symbolic representation of a brand has reached its peak in luxury goods in a form of status and prestige. Amaldoss and Jain (2005) claim that consumers tend to purchase luxury goods for their symbolic content such as status and prestige rather than functionality. It is also interesting how customers are trading up to aspirational new luxury goods and trading down to products and services that are less important to them (Yeoman and McMahon-Beattie, 2005). To the marketers, it means that communicating a clear brand image and message to the customers are crucial in continuing successful brand management. What qualities does a luxury good encompass? Jackson (2004) 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” (p. 158).

Understanding the dynamics of the served market, marketers can better manage luxury brands. With the abundance of luxury brands on the market, it is significant for a brand to differentiate itself, and has identifiable attributes and recognized identity.  The research suggests that a luxury brand needs to develop nine key elements to build and maintain a successful luxury brand, and they are: 1) Clear brand identity; 2) Luxury communications Strategy; 3) Product integrity: 4) Brand signature: 5) Prestige price: 6) Exclusivity; 7) Luxury heritage; 8) Environment and consumption Experience; 9) Luxury culture (Fionda and Moore, 2008). Table 1 demonstrates all nine key components of a luxury brand. Companies put various levels of emphasis on each of the nine key elements. To maintain luxury status all nine elements need to be operated simultaneously (Fionda and Moore, 2008). 


 

Having clear brand identity and defined brand values communicates a defined message to a consumer. A brand image/identity helps to build brand loyalty. The nature of the relationship can be, according to Keller (2003), described by two dimensions, namely intensity and activity. Intensity refers to the strength of attachment and sense of community experienced by the consumer. Keller (2003) phrases it as how deeply the loyalty towards the product, or organization is felt. Activity, on the other hand, relates to actually acting upon it and executing loyalty. In other words, in what forms is this brand loyalty reflected in everyday consumption situations and consumer behavior. According to Keller (2003) brand loyalty can be defined as “a deeply held commitment to rebuy or repatronize a preferred product or service consistently in the future” and is characterized by a refrain from switching to other alternatives. Delivering a satisfying product that fulfills the expectations is crucial and a basic prerequisite for building loyalty. Brand imagery refers to extrinsic characteristics of a product and aims at the psychological and social needs of clients. It includes more intangible properties, such as personality and values, perceptions of typical user profiles or purchase situations as well as history, heritage and experiences.

 Before implementing an advertising campaign, marketers need to define what values they want represent. For example, consumers who are intrinsically oriented tend to avoid luxury brands. Given that most advertising campaigns promote luxury brands based on purely extrinsic values, luxury marketers may be neglecting consumers who are primarily driven by intrinsic values. Although quality and hedonism are normally associated with intrinsic values whereas exclusivity and prestige are rather identified with extrinsic values, they are not contradictory or incompatible (Vigneron and Johnson, 2004). As a result, when combine both of these values, marketers can gain attention of the two audiences and expand overall intended market size for luxury goods. 

Long-term brand successes have been presented by the three major luxury companies: Gucci, Louis Vuitton and Hermès. The success of these three companies can be attributed to quality of service, brand image, retail environment, management structure, yet above all their ability to combine these factors to create an exclusive experience (Carroll, 2011).  The table below demonstrates the specifics of how these companies became what they are today, while focusing on unique product features and image, their brand imagery, retail environments and channels of distribution. 

Comparison of Gucci, Louis Vuitton and Hermès

 

 

Gucci

Louis Vuitton

Hermès

 

Established

1921

1854

1837

Sector

Fashion and Design

Luxury Goods

Luxury goods

Products

Men and Women’s Wear,

Shoes, Jewelry, Watches,

Perfumes, Eyewear, Home goods, Luggage/Handbags, Baby Wear.

Leather goods, ready-to-wear, shoes, watches, jeweler, textiles, writing instruments & accessories.

Famous for its handbags.

 

leather, scarves, ties, men's wear, women's fashion, perfume, watches, stationery, footwear, gloves, enamel, decorative arts, tableware, and jewelry

Average Pricing

€800 (Handbag)

$600 – $2,000 (Handbag)

€3,000

Typical Locations

Florence, Rome, Paris, New York, London, Palm Beach, Tokyo and Hong Kong.

Paris, New York, Tokyo, Dubai, Las Vegas, Los Angeles.

300 Store Locations

Paris, New York, Hong Kong, Singapore, London, Tokyo, Dubai.

Retail Environment

Provocative window displays, model like salespeople dressed in all black, free flow layout and rich décor.

Products prominently displayed. Stores vary in product stocked.  Uses concessions in department stores such as Harrods and Selfridges. Very contemporary in design and feel.

Stores are designed solely by RDAI, the Parisian architectural agency responsible for the architecture of all Hermès stores worldwide.

Business Strategies

Locate on high street, directly operated stores, online purchasing, backward integration for watch business and expansion of brand.

Located in high street locations or exclusive shopping malls with other designer brands.

Online purchasing in the US only.  Have used Uma Thurman and Jennifer Lopez in ad campaigns.

Located in exclusive shopping malls with other designer brands.

Online purchasing is available

 

 Louis Vuitton records an operating margin of 45%, whilst the industry average is only 25% for luxury accessories (Carroll, 2011). Bernard Arnault, the chief executive officer (CEO) of LVMH, emphasizes the significance of corporate identity, culture and spirit, and furthermore indicates the importance of creative excellence in luxury brand development. Over recent years, the brand has tried to modernize its image by utilizing the talents of young designers and artists in rejuvenating the image of some of their products, whilst maintaining the classic designs. This reinvention has attracted younger buyers into the brand.  However no one designer for Louis Vuitton has eclipsed the powerful brand image of Louis Vuitton itself, unlike other design brands. 

Louis Vuitton stands out from their peers through their relentless focus on product quality.  All products are extensively tested to make sure that they can withstand wear and tear, and that there are no imperfections. A Louis Vuitton bag is never reduced in price, there are no sale periods.  The company offers customized products such as personal engraving on hand luggage pieces, boosting its appeal further.  Furthermore, the company sponsors elite sporting events such as yachting and motorsport events.  This is in effort to match the audience of sponsorship property with the target audience of the brand itself (Carroll, 2011).  

The strength of Gucci is its established, very strong brand image and international presence. Gucci has also the ability to control its distribution channels. This is part of Gucci’s defensive strategy in the chain value to capture the value added instead of giving it to the middlemen such as suppliers and retailers.

The company has also increased the number of their Directly Operated Stores (DOS) as part of the defensive strategy of taking more control of the distribution process. The 2003 figure showed that DOS accounted for 61.3% of revenues compared to a much lower 32.5% in 1999. (SWOT Analysis of Gucci, 2011). 

Its aggressive strategy accomplished through diversification and communication is also another of Gucci’s strengths. Gucci changed its strategy of carrying a single brand to branching out to a multi brand group. This strategy is also adopted by other conglomerates such as Louis Vuitton and Prada.

This strategy is done in order to allow the positioning of the brand in the industry to differ depending on the number of brands and the number of business segments the company wants to compete in. This is the idea behind focus (mono brand) versus diversification (multi-brand). Gucci Group has more than 10 brands, including Gucci, Yves Saint Laurent, YSL Beauté and Sergio Rossi.

Some brands like Hermes, a key rival, create even greater exclusivity by having a three-year waiting list before one of their bags can be obtained.  These bags are handcrafted, adding to the appeal.  Hermes is an exception to the brand consolidation trend. The company generates nearly all of its sales (95%+) from its namesake brand. Hermes has acquired companies at a slower rate than other luxury goods houses; acquisitions are targeted to fill out product offerings (e.g., crystal ware) and often re-branded as Hermes (http://www.wikinvest.com/concept/Luxury_Consumption). 

In the luxury industry nearly every company still counts on Japanese consumers at home and abroad accounted for 24 percent of all luxury goods sales in 2010, according to Deutsche Bank, compared with 22 percent in Europe, 20 percent in North America, 19 percent in China and 15 percent in other markets. In 2010 Hermès, the Gucci Group, and LVMH Moët Hennessey Louis Vuitton, which derived 9 to 19 percent of total sales from Japan last year Alderman, 2011). 

Since Louis Vuitton entered the Japan market in 1968, it became the most popular luxury brand in Japan by having 28 percent share in Japan’s market. The key success of LV in Japan is mainly contributed by the appropriate balance in keeping the brand globalized while localized at certain areas for the Japanese (International Marketing Management, 2011).

 Clearly Gucci, Louis Vuitton and Hermès manage to succeed on the luxury market.  Each of these brands has a clear identity that does not overlap with other existing luxury brands. This brand clarity allows these brands to stay relevant to its consumers’ aspirations, motivating them to stay loyal and continue to purchase despite the economic instabilities. 

 

References:

Dubois, B., Duquesne, P. (1993). The market for luxury goods: Income versus culture. European Journal of Marketing.

Fionda, A.M.,  Moore, C.M (2009). The anatomy of the luxury fashion brand. Journal of Brand Management (2009) 16, 347 – 363. doi: 10.1057/bm.2008.45

Romaniuk, J., Sharp, B., Ehrenberg, A. (2007). Evidence concerning the importance of perceived brand differentiation. Australasian Marketing Journal.

Bruwer, J., and Johnson, R. (2010). Place-based marketing and regional branding strategy perspectives in the California wine Industry. Journal of Consumer Marketing.

Dubois, B., and Duquesne, P. (1993). The market for luxury goods: Income versus culture. European Journal of Marketing 27. 1  

Yeoman, I., and McMahon-Beattie, U. (2006).  Luxury markets and premium pricing. Journal of Revenue and Pricing Management 4. 4 

Keller, K.L. (2003). Strategic brand management: Building, measuring, and managing brand equity. Prentice Hall, Upper Saddle River, NJ

Kapferer, J. (1997). Strategic brand management: Creating and sustaining brand equity long term. London: Kogan Page.

Schiffman,L.G., Bednall,D., O’Cass, A.,Paladino, A.,Ward, S. and Kanuk, L.L. (2008). Consumer Behavior, 4th ed., Pearson Education Australia, Frenchs Forest.

McEnally, M. R. and Chernatony, L. (19990. The Evolving Nature of Branding: Consumer and Managerial Considerations. Academy of Marketing Science Review.

Alderman, L. (2011). Less Appetite for Luxury. Retrieved from highered.mcgraw-hill.com/.../GucciLouisVuitton_Vertu_CaseStudy.

Truong, Y., McColl, R., Kitchen, P.J. (2010). Uncovering the relationships between aspirations and luxury brand preference. The Journal of Product and Brand Management.

WIKI ANALYSIS. Luxury Consumption. Retrieved from http://www.wikinvest.com/concept/Luxury_Consumption

International – Asian Business. (2003). Can the High End Hold Its Own? European luxury brands expand in Japan as the market is starting to ebb. Retrieved from http://www.businessweek.com/magazine/content/03_26/b3839107_mz033.htm

 SWOT Analysis of Gucci. Business profiles. Retrieved from http://gwendolyncuizon.suite101.com/the-marketing-strategies-of-gucci-a100826

Wiki Analysis. Luxury Consumption. Retrieved from http://www.wikinvest.com/concept/Luxury_Consumption

Carroll, C. (2011). Gucci, Louis Vuitton, & Vertu – Marketing Lessons from some of the World’s Most Exclusive Brands.