MARKETING OF LUXURY BRANDS

Table of Contents

INTRODUCTION...........................................................................................................................................3
EMERGENCE OF LUXURY BRANDS...............................................................................................................3
MARKETING MIX OF THE LUXURY BRANDS.................................................................................................3
CASE STUDY OF A LUXURY BRAND’S GLOBAL MARKETING STRATEGY........................................................3
CASE STUDY OF LUXURY BRANDS’ MARKETING STRATEGIES IN INDIA........................................................3
 Case Study 1: Louis Vitton Moët Hennessy (LVMH).............................................................................3
Case Study 2 : GUCCI.............................................................................................................................3
CURRENT CHALLENGES FOR LUXURY BRANDS DURING GLOBAL RECESSION..............................................3
FUTURE OF LUXURY BRANDS.......................................................................................................................3
CONCLUSION...............................................................................................................................................3
REFERENCES
INTRODUCTION

"Why do I need to know how the watch market is doing? I’m in the business of luxury”, said
Partick Heiniger, CEO, Rolex.

Luxury, derived from the Latin word luxus, means indulgence of the senses, regardless of cost.
Luxury brands are associated with core competences of creativity, exclusivity, craftsmanship,
precision, high quality, innovation and premium pricing. These are prestige products
characterized by high-involvement decision-making that is strongly related to an individual’s
self-concept, sensory gratification and social approval.

Emergence of Luxury Brands

High luxury has only one taste worldwide. Luxury brands position themselves in the direction of
what the customer wants. Globally, there are between 75 and 100 million people who fall into
the super-rich category. Despite the economic downturn this segment still continues to grow. The
global luxury market is worth around $400 billion, but is growing at a rate of approximately 24
per cent.

Emergence of Luxury Brands in India :

Luxury is no stranger to India. The erstwhile maharajas and princes led a life of splendor. The
only way to be a part of the elite was to be born into it. The liberalization process brought more
than high economic growth rates. An increasingly open economy has created new business
opportunities, which has resulted in the growth of new, extremely successful first generation
businessmen. The IT revolution, and the consequent demand for Indian brainpower, created a
whole new breed of wealthy global Indians. According to an NCAER Household Income
Survey, in 2001-02, there were 20,000 families in India with annual incomes of more than Rs 1
crore. By 2010, India will have some 1,40,000 crorepatis. It is expected to grow at a rate of
approximately 12% on an average across both the mass affluent and high networth individual
segments over the next several years. Retail management company KSA Technopak estimates
the market for luxury and high-end clothing in India at Rs 1,000 crore and for accessories at
another Rs 1,000 crore.
Below is a snapshot of the rich Indian families.

The top purchases of the affluent Indian Consumers

are
 Jewellery
 Clothing
 Digital accessories
 Cosmetics and skincare

An average affluent Indian family spends around $8,900 per annum on luxury goods, compared
to $29,000 in US , in the same category. The new generation affluent Indian consumer market
comprises of :
 CEOs and other senior professionals mainly from IT/ITES sector
 Entrepreneurs in new businesses
 Returning "prodigal children"

MARKETING MIX OF THE LUXURY BRANDS

Luxury industry, invariably emphasizes on the importance of their history and values as a
legitimacy driver and a point of differentiation. These are considered as "classic" luxury items as
opposed to the "fast fashion" items lasting only a season. For example, possessing a Rolls Royce
Car is a classic luxury, whereas designer clothes are fast fashion luxury items.
Product: Luxury brands offer highly customized and limited products. In case of services, luxury
brands are highly personalized.
Price: Luxury brands generally are priced at a premium level.
Place: Luxury brands are placed at selected stores and exclusive showrooms at very high end
locations. Making a luxury product too easily available might reduce the perceived value of the
brand.
Promotion: Luxury brands are promoted using above the line media.

CASE STUDY OF A LUXURY BRAND’S GLOBAL MARKETING STRATEGY

Ben Sherman is a globally recognized designer wear brand. Their target customers are the
youngsters who want to be on par with the latest trends and flaunt it to the world. The growth of
the brand can be traced through changes in musical taste and this is a key part of Ben Sherman’s
marketing strategy.

Fashion products tend to have a short life cycle. This means the time between the launch of a
product and the point at which that product is ‘mature’ is very quick. Products need refreshing to
avoid the dip in sales during the saturation stage. The additions and changes help sales rise again,
earning extra sales revenue and profit, as well as maintaining the Ben Sherman brand in the
market.

PRICE

Ben Sherman adopted market-oriented pricing.

Market oriented pricing covers several different approaches:

 Market penetration, where a new product is priced low to attract a high volume of sales.
  Market skimming, where a new product has premium pricing to give high revenues
whilst the product is unique in the market.
 Premium pricing, where there is a uniqueness and exclusiveness about the product so that
it can command a high price.
 Economy pricing, which tends to be for no-frills, basic products, where the cost of
manufacture and marketing are kept to a minimum.

Ben’s customers were willing to pay more for 'aspirational' products like designer wear. Its
products are of high quality and uniquely styled and customized .These brands are not price
sensitive, as customers are willing to pay premium prices for individuality or for the latest styles.
Hence Ben Sherman adopted premium pricing.

PLACE

Ben Sherman used three traditional distribution channels.

 It opened exclusive showrooms.

 Independent fashion stores while offering a unique or more specialized sales channel
these outlets carry limited amounts of stock.
 Department stores that will buy centrally but may want discount ,if they order in bulk,
reducing Ben Sherman’s profitability.

Ben Sherman works in close partnership with department stores, creating ‘shop-in-shops’ – a
unique concept where the customer feels that they are in a Ben Sherman store. This creates a
unique Ben Sherman experience wherever customers buy its products.The store shares its
marketing information about what types of customers are purchasing and which products are
most in demand. This enables Ben Sherman and the department store to provide the relevant
stock to maximize revenue.

Ben Sherman also uses newer channels of distribution. It re-launched its website
www.bensherman.com to provide a more interactive experience for customers to encourage them
to spend more time on the site and shop. Ben Sherman used the guitar auction online to link the
physical worldwide stores to the Internet. The company transmitted news of the auctions and
bids via the Internet and gained online, national and regional press. The company sees its online
services as particularly important in reaching customers now and in the future.

Promotional activities
 Ben Sherman uses major fashion shows to launch its collections to the press.
 It uses direct mail, for example, catalogues, newsletters which were sent by post or email.
  Ben Sherman sponsored a series of live gigs to support new British music in
collaboration with Gibson guitars and music channel MTV.
 It offered sales promotions, such as discounts, money-off coupons or competitions for its
off season products.
 Public relations through press conferences or by participating in charitable events, such
as the Gibson Guitar auction for Nordoff Robbins charity
 Ben Sherman sponsored the ‘Best Breakthrough Artist’ category at the 2007 Q Awards
 Ben Sherman creates publicity through celebrities. This is seen as an endorsement for the
product.
 Ben Sherman creates brand value by decorating the stores with layout change, adding
music, point-of-sale displays and advertising campaigns.

Ben Sherman is a brand that appeals to the youth market. Its responsiveness to changing tastes in
fashion and music throughout the years has provided it with a unique heritage.

CASE STUDY OF LUXURY BRANDS’ MARKETING STRATEGIES IN INDIA

Case Study 1: Louis Vitton Moët Hennessy (LVMH)

Below were the Marketing Strategies used by LVMH in India.

PRODUCT

Three different range of watches were introduced by LVMH to serve different categories of
luxury customers. They are

 Fendi
 Ebel and
 Zenith

All these three watches identify different price segments. Some of these brands offer warranty up
to two years and some even longer. Their features varied in the number of diamonds embedded,
the type of strap, the thickness of dials .

PRICING

Since different watches were identified for different segments, they followed varied pricing
strategy. Fendi being the cheapest of the three comes in price ranges of 10000-50000 rupees.
Ebel comes in price ranges of 50000-250000. Zenith comes in price ranges of 250000-40 lakh
rupees.

Even among the luxury brand customers one can see four categories
 1. The connoisseur
2. Status seeker
3. Young and fashionable
4. Functionalist

The first two categories of customers are those who are on a social climb and want to be seen
associated with a luxury brand, the young and fashionable are looking for something different
and the functionalist is looking for a lasting and durable product .LVMH offers zero percent
finance schemes for Tag-Heuer range of watches and they are entering into tie-ups with banks so
that the pay-back can be increased.

PROMOTION

LVMH had used Shahrukh Khan as its brand ambassador for its Tag-Heuer brand. Tag-Heuer
watches will also be promoted through in-film advertising. Almost ten crores was spent in the
promotion of Tag-Heuer brand.

PLACE

It has showcased its products in exclusive showrooms. For example, it has opened its premium
showroom in Hotel Oberoi in New Delhi where it show cases all of its wide variety of products
starting from its leather products to watches.

Different products in the Fendi brand take different positions apart from the “luxury product “
position. Some are positioned as brands for men and others as brand for women wherein the
brands for men emphasize on durability and toughness like the water resistance, feminine brands
emphasize on color and ornamental issues like the number of diamonds embedded in it and the
colour of the dial , etc.

Marketing Strategy of LVMH across the globe:

Louis Vuitton sells its products only through a global network of company-owned stores across
the globe. This helps to keep margins high and allows the company to maintain control of its
products through every step in the channel. LVMH has pursued a consistent luxury pricing
strategy, through limited availability and high markups.

Bernard Arnault, Chairman & CEO, LVMH quoted, "If you control your factory, you control
your quality; if you control your distribution, you control your image."

Case Study 2 : GUCCI

Initially, Gucci started with selling luxury leather goods. It became popular among international
and affluent clientele and named a bag after Jackie kennedy. It opened its first store in US at
New York. It became a truly global luxury brand. Gucci expanded its range of products to shoes,
watches, jewellery, clothes, perfumes, eyewear, baby wear, home goods (including furniture,
bedding and wallpaper), luggage, handbags and gifts (even including gadgets for pets).

Gucci has a GAC (GUCCI Accessories collection) that included the Gucci perfumes sector. In
the 1980’s though the Accessories division was well received among all the customers it brought
down the brand image of Gucci with the fashionable customers. In the 1960’s and 1970’s Gucci
had been in the pinnacle of chic, but by the 1980’s, Gucci had lost its appeal becoming a tacky
airport brand.

Mr. De Sole repositioned Gucci’s exclusive image by focusing on core leather products and
investing heavily in advertising and other marketing communications activities.

TARGET

Gucci had set its target audience as Women in their 20’s and 30’s who aspired to be a
part of the jet set lifestyle.

PRODUCT

 Men and Women’s Wear

 Shoes
 Jewellery
 Watches
 Perfumes
 Eyewear
 Home goods
 Luggage/Handbags
 Baby Wear

PLACE

 The stores were located in expensive streets, thus attracting affluent customers.
PRICING

Average price of a leather bag , which was its major Product, was €800

PROMOTION

 It used proactive window displays and free flow layout in the interior.
 It has a classic and rich decor to add to the atmosphere of the store.
 It deployed smartly dressed sales person who were ready to assist the consumers in any
way.
 The security guards were suitably dressed to suit the atmosphere.
 Gucci used distinctive packing.
 It also had its own directly operated stores.
 Online purchase of Gucci products were also made feasible.

Marketing Strategy of Gucci across the globe:

Gucci follows same marketing strategies as in any other part of the world. It currently has two
exclusive outlets - in Mumbai and Delhi (Oberoi hotel in Delhi). It also has plans to open two
new stores - one in Delhi and another in Bangalore. It follows same pricing strategy as in global
markets but varies due to local taxes.

CURRENT CHALLENGES FOR LUXURY BRANDS DURING GLOBAL RECESSION

The major challenges faced by luxury brands are:

 To remain relevant to their consumers
 Understand how the crisis has changed their buying behavior
 Ensure their message is positioned accordingly
 Engaging their clients

Remaining ahead of the curve by getting to know customers' habits and needs while they go
through these changes is the biggest challenge.
 Each luxury brand has their own strategy. The counter measures taken during recession can
be divided into following kinds :
1. Gorgeously motionless - These brands follow the fundamental principle – “be
expensive, do not offer discounts”. Let alone one financial crisis, ten financial crises
won’t affect their brands .For example ,Louis Vuitton and Chanel.
2. Politeness and sympathy - These brands do not alter the price , but the design is
restraint, more simple and less exaggerate. For example, Prada, Dior and Chloe.
These are not blatant or overly aggressive in appearance. The Chloe’s great lock and
ultra big zipper have been displaced by practical usable design.
3. Slight adjustment - These brands maintain completely the design and style, but
increase the inexpensive material used. For example, some added non-leather design
handbags quietly, and offered consumers “rational choices” like Fendi, Marc Jacobs
and Tod' s. T. The non-leather handbag is originally cheaper than the leather handbag,
therefore is relatively inexpensive and cannot affect the brand image.
As customers identify what is important to them and the way they should act, their attitudes
and aspirations are going back to values of authenticity and heritage in this period of
instability. This is an opportunity for new brands that are able to convey those values, to
appear in the market.

FUTURE OF LUXURY BRANDS

Brands should develop by strengthening their focus and investments in four key areas :

 Loyalty and value

 Targeted marketing
 Creativity and Innovation
 Enhanced shopping experience of the customer

They need to focus on gathering knowledge by running in-depth sales analysis, gathering in-store
feedback and (qualitative and quantitative) consumer research on usage and attitudes of the
customers. The other opportunity lies in researching ever changing customer habits. Brands that
remain visible and communicate effectively with their consumers can stand to gain market share
from other brands that fall by the wayside.
Creating value and developing loyalty schemes to leverage them through customer relationship
management (CRM) analyses is another priority. Only the brands that have created real brand
equity and forged a strong bond with the consumer will survive. For targeted marketing and
creativity, brands need to choose few activities and customize these according to changing
consumer habits and tastes, while continuing to foster innovation and creativity. Also, in line
with consumer research findings, brands should further develop staff etiquette and customer
service expertise. In-store experience can be enhanced through sensorial marketing techniques,
and by emphasizing on individuality and exclusivity. While luxury goods will never lose their
appeal, the crisis has meant that consumers are more discerning and conscious about their
demand for exclusivity. A crisis situation is an exception. The industry is positive about the
future and the luxury sector can remain relevant even through this downturn. Keeping the focus
on long-term strategy and not giving into the temptation of abandoning long-term plans for the
short term is the key to success.

CONCLUSION
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 to
luxury brands. Identifying successful luxury brand strategies in India is established by
identifying certain salient aspects of luxury brands that remain constant as well as by identifying
the stage of mindset of the Indian consumer towards these brands.
REFERENCES
1) http://www.thehindubusinessline.com/
2)http://indiatoday.intoday.in/
3) http://mashable.com/2009/07/02/luxury-brands/
4)http://www.icmrindia.org/casestudies/catalogue/Marketing1/LVMH-5) Marketing%20Case
%20Studies.htm
5) http://www.ibef.org/download/luxury_june06.pdf