Tuesday, June 16, 2009

The changing face of luxury business

Luxury market is showing signs of recovery but then experts predicted something at the start of 2008, something different in the middle of 2008, in the late 2008 and in early 2009 too with reality hardly matching with the prediction. However, this time Financial Times has taken good care in bringing about some interesting issues associated with luxury markets. This has been published following the Luxury Summit 2009.

Bernard Arnault, Head of LVMH, the biggest luxury company in the world gave an interview to the Financial Times. He suggests that there will be many more businesses going bust in the luxury industry. Mr. Arnault blames it on over confidence among the industry players and the easy availability of credit which has caused this phenomenon to occur in the luxury industry. Interestingly, he points out a cogent observation that many market players have incomplete knowledge of how to manage in this uniqely challenging market and therefore have lost in this tough times.

Listen/view the interview here

In a similar interview, given to the Financial Times, Angela Arhendts, CEO of Burberry, discusses why market knowledge in luxury industry is extremely important and how Burberry is using its own knowledge in riding out this recession. She also focuses on the unique facet of the industry and how complicated it is for luxury strategists to cut costs as both consumers and suppliers have strong association with the price and the cost.

Listen/view the interview here

The Financial Times, today also provided this highly informative and insightful report on luxury marketing called 'Business of Luxury' which focuses on many important aspects including:

1: How luxury conglomerates are changing themselves in this tough market conditions.
2. Why luxury marketing plays by a different set of rules?
3. How to manage the quality transition in luxury market?
4. How luxury brands are using online marketing tactics?
5. Cost-benefit analysis of brand dilution in luxury market?

The report is available at http://www.pauravshukla.com/extra.htm
(Click on 'FT Business of Luxury report' link)

Sunday, June 07, 2009

If you can't convice them, confuse them...

In the market with umpteen me-too products and brands marketers have few choices with how to develop, maintain and enhance relationships with their customers. The situation is worsened with multiplicity of communication channels including online (internet based) marketing and offline marketing and advertising.

The increasing pace of media innovations is hard to keep up with. Added to that, marketers hardly know what is the ROI on most communication mix (advertising, sales promotions, direct marketing and others) avenues. Therefore it becomes further difficult for marketers to balance and achieve the targets on their communications budget.

When facing such market reality, the marketers are left with two real choices:

1. Convince the consumers; or
2. Confuse the consumers

The convincing part requires increasing effort to develop and maintain because of the market complexities and therefore many marketers are driving their skills and organizational resources in confusion the consumers.

For example, if you wish to buy a mobile phone have a look at what happens?

You have more than:
a) six - ten mobile phone service operators (depending on the country)
b) twenty different mobile phone brands (with increasing numbers every year)
c) thousand different price plans
d) thousand different mobile phones types (with phenomenal number of features)

The marketers claim that this choice provides consumers with the freedom. However, in one of their seminal papers Simonson and Tversky( 1992) claimed that consumers hardly can judge and value the products they choose.

In case of such product choices (i.e. mobile phones) instead of freedom the overchoice creates consumer confusion.

The case of confusion exists in almost every product we purchase in today's marketplace.

So, the revised adage for today's marketplace seems to be Confuse them and confuse them more...

In the coming posts, I shall focus on the concept of consumer confusion and how it affects our choice process. I shall also focus on managerial implications of consumer confusion and how managers can avoid causing confusion.