27 Jul Consumer Buying Behaviour of Luxury Goods
Worldwide demand for luxury goods is strong and ever growing despite the pandemic after-effects, with over $200 billion in sales each year.
For some people, buying a luxury handbag is just as common as buying a bag from a thrift store is for many people. While the attraction of luxury items is irrefutable—the quality is top-notch, the logo is prestigious—the price tag can be off-putting. Unless you belong to the higher income brackets or you have unlimited generational wealth, buying luxury consumer goods can be impossible (or can create a credit card balance that isn’t easy to pay off).
So why do consumers that can’t afford it save up their money or sometimes even take a loan to buy that one Hermes bag? In this blog, we are going to highlight the factors that influence consumer behaviour and lead them to seek luxury branding goods.
As we covered in our previous blog, some consumers do not act rationally all of the time.
An absolutely rational person would always act with reason or logic; in other words, in accordance with their own best interest (particularly financial interest).
However, numerous modern behavioural psychology studies have revealed that humans don’t always act rationally. Interestingly, many consumers who buy luxury goods are those that are not in a financial position to afford them! This point is correlated to the high rates of consumer debt in developed nations. Depending on how you look at it, this phenomenon may be evidence that many consumers don’t always act in their best financial interest.
While a high-quality, durable handbag can be purchased for around 5,000-10,000 rupees, some people opt instead to spend lacs of rupees on a luxury branded handbag with a recognisable logo, that performs the same function and is of the same relative quality.
What draws consumers to luxury at the fundamental level?
Well, luxury makes us feel ‘pride’ – two types of pride, as research shows.
We looked closely into the recent research done on the social psychology of pride.
In a recent paper by Karl Aquino and Jessica Tracy who are both from the University of British Columbia, the two types ( or “facets”) of pride in consumerism are studied in depth.
Interestingly, we see that the feeling which motivates a desire for luxury purchases (accomplishment, or what is termed “authentic pride”) is very different from the feeling that one derives from displaying those same products (snobbery, or what is called “hubristic pride”). In other words, the same emotion (pride) operates in two different ways. These findings shed new light on why consumers purchase luxury brands, highlighting a paradox: these purchases are sought out of heightened feelings of accomplishment (and not arrogance), but they instead signal arrogance to others (rather than accomplishment). Further, we can see that these effects are generally more pronounced for those low in narcissism.
These conclusions were based on the results of seven experiments. In some, participants were asked to recall a luxury brand or a non-luxury brand they own, and they were assessed on how much of each facet of pride they felt. Those who recalled luxury goods felt snobbier (hubristic pride), but not more accomplished (authentic pride), showing the former facet of pride stems from luxury consumption. Another version of the study had other people rate a luxury brand user (or a non-luxury one). People judged the luxury brand consumer as more snobbish, but not more accomplished.
However, in other studies, the participants were given a task designed to make them feel authentic or hubristic pride as a control task. Their desire to purchase luxury and non-luxury branded items was then assessed. This time, those who felt accomplished had a higher desire to purchase luxury goods than those who felt hubristic pride, suggesting that feelings of accomplishment are a stronger motivator of luxury consumption than feeling snobbish. In another variant, how accomplished and snobbish participants chronically felt was measured; higher levels of accomplishment were associated with a higher desire for luxury goods.
This research has implications for companies selling luxury goods or wishing to market products as such. Luxury brands are sometimes positioned in a manner associating them with snobbery, for instance, contrasting their wearers with labourers of lower-status professions. Others, such as Rolex’s “A crown for every achievement,” suggests its product is a marker of accomplishment. Research shows that although consumers indeed associate luxury goods with both accomplishment and snobbery, the former is more motivating in creating consumer desire.
Noticeably, perhaps due to social media and mass access to luxury, there is a growing obsession among consumers to acquire luxury brands, particularly when they cannot afford them.
In a study on Asian society, the social status conferred by expensive fashion wear motivated consumers to spend on luxury brands even if their discretionary income was limited. Potential guilt in doing so was alleviated by rationalising that the quality was good and the purchase would be long-lasting. Marketers targeting this valuable segment should communicate appeals to an aspirational lifestyle in traditional and social media, effective at reaching younger consumers. Women tend to be more prone to be influenced by this kind of marketing.
So, let us outline what are the central factors that influence young consumers’ buying behaviour toward luxury goods (which happens to be opposite to the traditional laws of marketing). While 4 P’s in marketing theory represent regular goods, luxury goods have a more extensive theory of 8 P’s which is essential to discuss when analysing the consumer buying behaviour of luxury goods.
8 Ps of luxury:
Performance refers to the delivery of superior experience of a luxury brand at two levels – first, at a product level and, second, at an experiential level. At a product level, fundamentally it must satisfy the functional and utilitarian characteristics as well as deliver on its practical physical attributes – a recipe of quality or design excellence ingredients such as craftsmanship, precision, materials, high quality, unique design, extraordinary product capabilities, technology, and innovation. A luxury brand must perform at an experiential level as well, i.e., the emotional value of the brand the consumers buy into – beyond what the product is to what it represents.
For example, Rolex stands for the symbol of heroic achievement, and Tiffany & Co. is a symbol of love and beauty.
Many luxury brands have a rich pedigree and remarkable history that turn into an integral part of the brand’s mystique. This mystique is generally built around the exceptional legendary founder character of the past, making up an integral part of the brand story and brand personality.
So, when consumers buy, say, a Cartier or a Chanel product, it is not only because of the product performance factor but subconsciously they are also influenced by the brand’s rich lineage, heritage and years of mastery.
Over-revelation and distribution of luxury brands can cause dilution of luxury character. Hence, many brands try to maintain the perception that the goods are scarce. A case in point is Burberry, which diluted its brand image in Britain in the early 2000s by over-licensing its brand, thus reducing its image as a brand whose products were consumed only by the elite. Gucci is now primarily sold in directly-owned stores following a nearly crippling attempt to widely licence its brand in the 1970s and ’80s. Broadly, there is natural paucity – the actual scarcity – as well as technology-led paucity and tactical-driven paucity. Natural scarcity is triggered by scarce ingredients such as platinum, diamonds, or those goods that require exceptional human expertise such as handcrafted quality that constrains mass production. Tactical-driven paucity is more promotional, such as the limited editions or the special series to generate artificial desire and demand. Another deviation within this is the customization of luxury goods.
For example, Garson USA custom-made a diamond-encrusted Mercedes SL600 for Prince Al-Waleed bin Talal of Saudi Arabia in 2007.
The persona of a luxury brand is largely a result of, first, its distinctive projection plus coherence of its applications across consumer touch points and, second, the brand communication through its advertising. The visual brand identity captures the brand’s personality, mystique, and emotional values in a nutshell. The distinct and consistent orchestration of the identity is central to establishing visibility, familiarity, and familiar identifiable brand imagery. The visual brand orchestration can manifest by way of the consistent application of its identity, brand colours, other design elements such as icons, uniquely identifiable design, branded environment, and even the tone of voice. While the luxury brand’s visual identity is a reasonably stable factor, luxury brand advertising is a more dynamic and versatile marketing vehicle. While the pedigree of the brand has its role, keeping up the contemporary appeal and the newness factor is crucial for enduring brand relevance. Therefore, luxury advertising not only needs to generate the desire for the seasonal collection but at the same time, it must also enhance the brand’s cool quotient, thereby making it continuously desirable and aspirational. At an overall level, luxury advertising messages can be observed as:
• More emotional and sensual to distance it from mass-premium brands
• Create a world and an aura that is truly exceptional to their brand signature
• Generate significant differentiation in its production and execution
One of the relatively new trends within luxury brand communication is the use of long-form commercials or short-film videos to generate the interest of the online audience. It is a pursuit where luxury brands are looking to bridge the gap between the familiar world of print and the fast-evolving world of online. It has also proved impactful as in a matter of a few minutes, the viewer can have a clear understanding of the brand image or the story that the brand is trying to convey or merely the promotion of the new collection. Apart from these, with the intent of enhancing the “emotional connections” with discerning mindsets, luxury brands have been exploring the digital space by engaging them in their activation programs. The objective is to generate a genuine affinity with the brand that transcends beyond the product to an extent where the consumers feel that they have found a soul mate.
For example, intending to strengthen the brand’s association with love and romance, Tiffany launched whatmakeslovetrue.com and an iPhone app as a guide to those who want to take their romantic relationship forward. The Web site also showcases select true love stories of real people to give that personal touch. Some luxury brands have also used social media. The objective may not necessarily be engaging the audience in their storytelling, but it has been mainly done to generate the desire or the lust for the brand or the product. It is also a useful tool to keep up the contemporary appeal and the newness factor by having a continuous dialogue.
Public figures or celebrities have traditionally been employed as one of the marketing mixes in luxury brand advertising, and they continue to garner attention, credibility, and impact. Public figures can span from film stars to music personalities, from sports personalities to royal families and even the designer themselves. But because celebrity endorsements are no longer exclusive to the luxury space and extensively used and abused across mass categories, they take a different meaning when it comes to luxury brand endorsement. Not only does the public figure’s associated values and personality have to resonate with that of the luxury brand’s aura, but there is a distinct difference in the way celebrity roles are crafted, executed and strategically used. Beyond traditional advertising – mostly print in selected media – less in-your-face advertising tools are employed such as accessorising or dressing celebrities for their walk down the red carpet, product placements within movies and television programs and invites to special events. This strategy attempts to remove the appearance of “selling” while still promoting the product by making it seem like a part of the celebrity’s life, thereby positively affecting the consumer’s attitudes, brand value and purchase intention. For example, Chopard has been an official partner of the Cannes Film Festival for the last 14 years, showcasing and premiering its collection by accessorising celebrities on the red carpet. Long-form commercials or short films have also used the celebrity factor.
Chanel, for instance, created a three-minute film with actress Keira Knightley who replaced Kate Moss in its ads for its Coco Mademoiselle fragrance. Other previous faces of Chanel have included French star Catherine Deneuve and Nicole Kidman, who represented Chanel No. 5. Similarly, as a part of its “core values” campaign, Louis Vuitton used its Web site as the online medium to showcase its celebrity endorser’s journey and his or her story to bring to life how the brand has been promoting the art of travel and inspiring legendary journeys.
The retail branded environment in luxury branding is all about heightening the consumer’s brand experience and amplifying the brand aura. Hence, the branded environment and the movement of truth is where it must “live” the brand by orchestrating immaculate detailing that engages all senses of the discerning audience. Starting from the choice of store location, the chain of touch points that consumers interact with, the salesperson’s presentation, and the impact of each touch point is critical in creating a unique indulging experience. That said, today’s evolving luxury consumers are increasingly looking beyond the typical sophisticated, over-the-top, cosmetically elegant presentation, or even the exclusive invites, and free previews. With the increasing democratization of luxury brands and the rapid emergence of masstige brands, luxury consumers have become more discriminating and demanding. These consumers seek more knowledgeable and professional assistance and a trusted and reliable collaboration helping them to manage their stature and lifestyle. Not only has this led to new business offerings, but luxury brands are also increasingly investing in training and empowering their sales staff. Another critical point to note within the placement factor is that it is not limited to the physical environment where the brand retails, but it extends to all of the environments or consumer touch points with which that brand associates itself. This subject spans from the extremely selective niche media where it advertises to the sports, events, art, and conversations with which it identifies.
For example, Rolex associates itself with more than 150 events in golf, sailing, tennis, motorsport, arts and equestrian tournaments rather than with sports such as football or cricket that have more of a mass following.
Public relations in luxury branding plays an enormous role in the image proliferation of the brand, thereby subtly influencing public opinion. PR is also employed to convey other supporting messages and attributes of the brand that cannot be explicitly captured in advertising, but are by no means less important to create a brand’s personality, mystique and emotional values – whether it is via the pedigree factor or public-figure any of the previous seven P’s mentioned. It is also a sophisticated branding machine for maintaining ongoing relevance and dialogue with the luxury consumer, especially in fashion, technology, and seasonal trends-driven categories. At a tactical level, PR is used to generate buzz and convey brand news, points of view of inspirers and influencers including celebrity talk or designer speak and crucial support for brand activation such as the fashion weeks, sports events and themed previews.
Pricing plays quite a big role in the way that consumers perceive luxury brands. Consciously or subconsciously, consumers tend to generate a mental luxury stature or image with the price range that the brand operates. Therefore, luxury brands need to price themselves right as setting the price lower than consumer expectation and willingness to pay can potentially harm the brand value, whereas the reverse cannot give enough justification for consumers to go ahead and buy. The pricing strategy in luxury brands gained the spotlight recently not only because of the challenging economic environment but because of more informed-and-exposed consumers who are more discriminating and demanding and for whom premium pricing without substance does not imply luxury. Recent research suggests that affluent shoppers will not spend ten times more for something only three times better. Luxury brands must, therefore, justify their price through the interplay of the seven P’s mentioned above, thereby keeping up and maintaining a higher perceived value. Sales promotions also tend to be handled differently by luxury marketers. While few have resorted to sales and discounts, most others play it by adding more value to the purchase such as gift with purchase, gift certificates or rebates for the next purchase, multiple item discounts, online or email exclusives, more loyalty points, and no shipping and handling charges by online retailers. Luxury brands also channel luxury retailers such as Harvey Nichols and Saks Fifth Avenue that offer annual sales at slightly lower prices. Another strategy employed by luxury brands is creating an extension into a secondary line with relatively lower price points such as Giorgio Armani’s Armani Exchange, Roberto Cavalli’s Just Cavalli, Prada’s Miu Miu, and Alexander McQueen’s McQ lines.
In conclusion, the key to luxury brand marketing boils down to the following three points:
Product excellence, by itself, is not enough. The luxury brand must perform at an experiential level as well. As luxury consumers evolve, not only does product quality act as a point of differentiation, but it also performs as a substance to justify a premium value and pricing.
While the pedigree factor is essential to celebrate the years of mastery or lineage, it is crucial to generate ongoing relevance and dynamism through the persona, PR, and public-figure element.
Luxury brands must continue to maintain a certain degree of exclusivity and stature with the paucity factor and the placement factor – from the retail experience to the touch points with which it associates itself.
The 8 P’s of luxury brand marketing can provide a holistic framework to luxury marketers. They may not be a universal methodology, but they present a robust analytical toolbox to audit and leverage the brand potential.
That said, a pragmatic approach must be stressed, as the situation and challenges will differ from brand to brand and market to market. Aeon Research has more than a decade of experience in providing reliable and accurate market research across India. Developing an understanding of your consumer requires careful, rigorous and reliable research along with immaculate execution. Aeon Research provides you with one of these crucial aspects: the research. Leave the data to us and you will have more time to execute and strategize with perfection. Contact us for personalised research services.
McFerran, Brent, Karl Aquino, and Jessica L. Tracy (in press, 2014), “Evidence For Two Facets of Pride In Consumption: Findings From Luxury Brands”, Journal of Consumer Psychology.