Friday, May 01, 2009

Luxury brands in recession: Developing a better value proposition and luxury brand strategy

Commenting on my last post on 'luxury value propositions', Mostafa Huga and Thangaraj asked a very pertinent question, 'how should managers' build a better value proposition and a marketing strategy for luxury brands in recession?' Brand management is extremely crucial for luxury industry in customer retention and keeping consumers loyal. Focusing on value propositions can help managers not only in building a better corporate branding strategy but also a good customer relationship management campaign.

As I stated in my earlier blogs (Managing luxury brands in recession) and (Gucci's response) that managers need to continuously focus on and understand customer psychology and customer engagement process to develop a better luxury marketing strategy.

With regard to consumer engagement researchers have identified that consumers focus on several important criteria when engaging with luxury brands. This criteria include:

- Status derived from the luxury brand
- Conspicuosness associated with the luxury brand
- Hedonic (pleasure seeking) orientation of the luxury brand
- Materialistic attitude of the individual
- Uniqueness of the luxury product/brand/organization
- Quality association of the luxury brand
- Functional advantages derived from the luxury brand
- Financial associations with the luxury brand (as consumers become very value conscious when economic environment is tough)

It is very important for luxury brand managers to understand how consumers areengaging with their luxury brand on each of the above mentioned dimensions. Only that understanding can help managers develop a customer oriented luxury brand strategy. For example, consumer may engage with a luxury brand as it may be associated with it a symbol of success and achievement. However, there could be some brands with which consumers associate ostentation and show-off.

Furthermore, managers should also try and profile their consumers on the basis of their personal orientation such as are these consumers predominantly hedonistic or materialists. It is important to understand the difference in this personal orientation.

Similarly many luxury brands are marketed and bought for uniqueness as well as high-quality associated with them. Consuming such goods may provide a social advantage. Moreover, in recessionary times consumers may become price conscious and that may have an increasing effect on the overall consumption decision and value proposition.

Each of these value dimensions would have a distinctly different effect on consumer engagement and resultant consumer behaviour. Managers need to understand the motives of luxury consumption. For example, an Armani suit bought by a consumer may be bought because s/he is attending an important event of importance and therefore it has more of social (status and conspicuous) aspects associated with it. On the other hand, the person may put-on a high-end luxury fregrence which may reflect more of a hedonistic attitude.

Presently we are conducting a study which focuses on the impact various consumer value perceptions (such as social, personal, functional and financial) on the overall luxury consumption. I shall surely share the results... Till then, watch this space!!!

2 comments:

Cass said...

Dr. -

Can you tell us, in general, how do luxury brands perform in a recession relative to non-luxury brands? Are they insulated from risk b/c the target market has significant disposable income, or do customers "trade down" during economic downturns?

Dr. Paurav Shukla said...

Hello Cass,

Pardon me for the dealy in response. My latest blog post on changing face of luxury business (http://pauravshukla.blogspot.com/2009/06/changing-face-of-luxury-business.html) captures the answer you seek. Have a look.