Industry Reasons Of Consumption And Luxury Family Businesses Marketing Essay
Nowadays, the luxury industry is more and more successful and luxury consumption continues to experience a strong growth in demand. But luxury consumption may be originated and motivated by different reasons in consumers' mind. Different profiles of luxury consumers can be identified and it is important for companies to be sure to be targeting the right consumers. In the first part, this paper intends to understand and to discuss the main socio-economic reasons that guide consumers to engage in conspicuous luxury consumption.
But the luxury industry is also characterised by the strong presence of family firms being really successful. This may not be casual because a lot of family features are essential to compete in the luxury industry. In particular, in the second part, this paper intends to focus on the process of creation of new products which is analysed from two different perspectives. From the family firm perspective, it is fundamental to develop new products being consistent with their history, values and tradition. From the consumer perspective, this process is also important and, through the field study, it has been possible to understand that consumers perceive a difference when acquiring luxury goods produced by family firms vs non - family firms.
Luxury has always been present in diverse forms of consumption practices, from the beginning of the human history (Dubois, Czellar, Laurent, 2005). Luxury, in fact played an important role in the great societies of the past, such as the Ancient Egypt, Greece and Rome.
Time passed, societies evolved, but luxury has always been there playing its main function, being recreating the social distance. At the beginning, as stated by Kapferer (2009), luxury was "the visible result - deliberately conspicuous and ostentatious - of hereditary social stratification". The kings, the priests and the aristocrats had to differentiate themselves from the crowds and to show off their wellbeing, preserving the social distance.
Then, in the eighteenth century, the Enlightment philosophy caused the gradual disappearance of this social structure, leading to our present-day society based on meritocracy and not on aristocracy (Kapferer, 2009). What did not change is the man's need for social stratification. Luxury has always characterised our society in order to recreate the desired social distance and still nowadays it is a key component of the modern consumption patterns.
Clearly, luxury is a social marker; in a democracy, people are free to use any of its components in order to define themselves socially as they wish (Kapferer, 2009), being the main purpose to communicate one's social position to other people. The limit is constituted by people's financial means, but money is not enough to define luxury goods. The key aspect to be considered in the consumption of luxury goods is the social distinction, meaning the symbolic desire to belong to a superior class (Veblen, 1899). It is a collective pleasure motivated by ostentation that only gains validity under the scrutiny of others (Casaburi, 2011). Therefore, the concepts of "transmission of taste" and of "conspicuous consumption" are strongly related with this dimension, giving rise to what is called "Veblen effect" (Vigneron & Johnson, 2004).
In addition, luxury has a very strong personal and hedonistic component. In fact, when it comes to luxury, hedonism is more important than functionality because the consumption of luxury goods is completely superfluous. Individual luxury is "an intimate and self-indulgent experience linked to the aspiration of refinement and satisfying one's tastes" (Casaburi, 2011). People may buy luxury goods in order to differentiate themselves from the mass ("Snob effect") or to be part of a community/group ("Bandwagon effect"). Furthermore, the purchase might be driven by a strong internal desire for Hedonism or Perfectionism (Vigneron & Johnson, 2004), aspiring to enjoy the special qualities of a product for oneself rather than to show it off.
To sum up, the purchase of luxury goods can be attributed to two main groups of socio-economic reasons. On one hand, there is the luxury for self, meaning indulging in one's pleasure. On the other hand, there is the luxury for others, meaning demonstrating wellbeing and success (Casaburi, 2011).
This paper is composed by two main parts; in the first, after a brief explanation of the main keywords, I am going to present the luxury industry with its recent trends and evolutions in order to introduce the context of this study. Then, a review of the existing literature is proposed, recalling mainly Veblen's and Bourdieu's theories. In addition, the main frameworks developed will be analysed in order to better understand all the important aspects of luxury consumption. Finally, in the field study, I will develop my model in order to evaluate different brands and to understand the main socio-economic reasons guiding consumers to engage in luxury consumption.
The second part, instead, is dedicated to the analysis of family luxury businesses. After an overview of family firms and their characteristics, the analysis is focused on the luxury industry, where there is a strong percentage of family luxury firms being really successful. The focus of this paper is on the process of creation of new products, a key aspect to determine the survival of this kind of companies; it is important to understand how the family values and tradition are controlled and transmitted to their products. A model is proposed in order to help family firms to combine their mission as well as their core values with their strategies and to be sure that their new products are consistent with their heritage and history. Finally, I will develop my model in order to evaluate the process of creation of new products from the consumer perspective; the model is applied to different companies and, from the results, it is possible to state that consumers appear to perceive a difference when buying luxury goods produced by family firms vs non-family firms.
FIRST PART: Keywords analysis
It is important to initially define the main keywords I am going to discuss throughout this paper in order to guide the reader to a better understanding of the subject, in all its dimensions.
The concept of luxury
The notion of luxury is particularly difficult to define, mainly because it is a subjective and multidimensional construct. Key components are "a strong element of human involvement, very limited supply and the recognition of value by others" (Cornell, 2002). Research regarding the definition of luxury is limited and previous studies have demonstrated a lack of clarity with regards to what are the key attributes of a luxury product (Casaburi, 2011).
The word "luxury" derives from the Latin word "luxus" which means "soft or extravagant living, (over-)indulgence and sumptuousness, luxuriousness, opulence" (Oxford Latin Dictionary, 1992). Considering its etymology, it implies difference or distance. These meanings are particularly consistent with the belief that consumers can distance and differentiate themselves from one another through the purchase of luxury goods, due to the emotional value that such a purchase conveys (Catry, 2003). The Latin etymology also suggests that the concept of luxury is always relative to a specific context in terms of space and time; therefore, the perception of what luxury is can differ among different cultures or societies, being dependent on the context and on the people concerned (Casaburi, 2011).
As stated by Dubois and Czellar (2002), it is important to distinguish between the word "luxury" and the word "prestige". They are often used as synonyms, but in reality they cover different domains in the consumers' mind. On one hand, prestige is "a positive evaluative judgement that consumer form towards products or brands; it can be influenced by accomplishment inherent to the brand or by prestige symbols associated with the brand". On the other hand, luxury "is linked to perceptions of comfort, beauty and a sumptuous lifestyle; at a symbolic level, consumers can interpret luxury as the prestige symbol of the brand". Therefore, "prestige" involves purchasing a higher-priced product to embellish one's ego, whereas "luxury" involves purchasing a product that represents value to both the individual and the significant others (Vigneron & Johnson, 2004).
Kapferer (1997) studied the semiotics of the word luxury. According to him, "luxury defines beauty, it is art applied to functional items. Like light, luxury is enlightening. Luxury items provide extra pleasure and flatter all senses at onceâ€¦Luxury is the appendage of the ruling classes". Luxury products can be considered as objects of desire that provide pleasure and flatter all senses at once. Luxury goods are goods for which the simple use or display of a particular branded product brings esteem on the owner, apart from any functional utility (Vigneron & Johnson, 2004).
Luxury products allow consumers to satisfy their functional, but especially their psychological needs, being that its primary value. These psychological benefits are considered to be the main factor allowing to distinguish luxury brands from non-luxury brands or counterfeits. As stated by Nueno and Quelch (1998), "luxury brands are those whose ratio of functional utility to price is low, while the ratio of intangible and situational utility to price is high"; luxury brands are those whose price and quality ratios are the highest of the market (McKinsey, 1990). Therefore, they compete on the ability to "evoke exclusivity, brand identity, brand awareness and perceived quality in the consumers' perspective" (Phau and Prendergast, 2000).
The economists define luxury goods as "goods for which demand rises either in proportion with income or in greater proportion than income" - where the income elasticity of demand is equal to or greater than 1 (Tynan et al, 2009) - but, clearly, the purchase of luxury goods is not only governed by economic factors, as income is a necessary but not sufficient condition to explain the purchase.
Vickers & Renand (2003) agree on the fact that luxury products are symbols of both personal and social identity and that their consumption is dependent upon personal, social and individual cues. According to them, "luxury products can be distinguished from non-luxury products by the extent to which they exhibit a distinctive mix of three important dimensions, being them functionalism, experientialism and symbolic interactionism".
To sum up, from a consumer perspective, luxury has a social meaning and it encompasses the symbolic dimension of consumption (Casaburi, 2011). The consumer is highly involved in the purchase of goods characterised by a very limited supply; these goods serve as status symbols and convey psychological benefits that play a key role in distinguishing them from non-luxury products. From a product perspective, instead, luxury is often associated with attributes such as excellent quality, distinctiveness, craftsmanship, exclusivity and premium prices.
The recent trends and evolutions that have characterised the luxury consumption in the last decades will be discussed and presented in the second part.
Status and conspicuous consumption
In the past, luxury was used by kings and aristocrats in order to distinguish themselves from the crowds; they wanted to preserve the social distance from the middle-classes and to show off their wealth and wellbeing. This type of society based on aristocracy has gradually disappeared, but, still nowadays, the man has a strong need for social stratification and luxury serves its main function, being recreating the social distance.
As stated previously, luxury goods can provide two types of satisfaction, called the "individual luxury" and the "social luxury" (Casaburi, 2011). The latter is what matters in this context because social luxury is motivated by ostentation and by social differentiation. Luxury products, in fact, are able to add intangible excellence to their tangible qualities so that they can express both social status and financial success. In the "social luxury", when owning a valuable object, it is fundamental to have others recognize, appreciate and admire it. The exhibition of a luxury product is considered as a form of communication with other people and it allows to show a person's social status and/or his/her position in society (Casaburi, 2011).
The "social luxury" corresponds to what has been defined as "conspicuous consumption"; in 1899, Thorstein Veblen defined it as "the wasteful and lavish spending on goods and services acquired mainly for the purpose of displaying income or wealth". For a conspicuous consumer, the display and the ostentation are key aspects because they are a mean to attain and/or to maintain social status. In particular, the human propensity for ostentation depends on the legitimacy of wealth as well as on the standards of social recognition and valorisation (Casaburi, 2011).
According to Mason (2001), the purely conspicuous consumer derives satisfaction from the audience reaction to the wealth displayed and not from the value of the product itself. O'Cass and Frost (2004) define conspicuous consumption as "the evident display of expensive possession".
Moreover, conspicuous consumption indicates that possessing luxury goods serves for the mere ostentatious display of wealth and for indicating social status (Mason, 1998). But nowadays, status is conveyed in more subtle and sophisticated ways, shifting from waste to taste (Shipman, 2004).
The main theories about status and conspicuous consumption as well as the recent evolutions of conspicuous consumption will be presented and discussed in the third part.
Veblen, Snob and Bandwagon effect
At the beginning, according to the utilitarian theory (Marshall, 1980), economists considered consumption to be determined by the law of supply and demand and ignored the existence of symbolic consumption; they argued that consumers' spending decisions were taken in isolation and independently of those of other consumers in the market (Kastanakis, 2011). In contrast, Veblen (1899) defined the concept of "conspicuous consumption" and claimed that, as wealth increased and spread over society, consumer behaviour was not driven by the desire to satisfy subsistence needs, but by the desire to gain power, status, esteem and envy of fellow men; people tried to emulate the consumption patterns of the higher social classes (Kastanakis, 2011). Moreover, absolute spending is not what really matters because the key aspect is the relative spending, meaning compared with that of other people (Duesenberry, 1949).
Many authors have developed different frameworks in order to try to understand the main socio-economic reasons guiding consumers to consume luxury goods. It is important to understand why consumers buy luxury goods, what they believe luxury is, but especially how their perception of luxury value affects their purchasing behaviour (Wiedmann, Hennings and Siebels, 2009). One of the most important frameworks is the prestige-seeking consumer behaviour framework developed by Vigneron & Johnson in 1999; the authors started from the work of Mason (1992) and Leibenstein (1950) who had identified the three most important interpersonal effects influencing luxury consumption, being the Veblen effect, the Snob effect and the Bandwagon effect. But they went further, identifying that not only interpersonal effects matter; inspired from the work of Dubois and Laurent (1994), they found out that also some personal effects, such as the Hedonist effect and the Perfectionist effect, are responsible for influencing luxury goods' consumption.
According to Leibenstein (1950), the demand for consumers' goods and services may be classified according to motivation. Therefore, an important distinction is between functional and non- functional demand. The former indicates that part of the demand for a good due to some qualities inherent in the good itself, whereas the latter means that part of the demand for a good due to other factors rather than the simple qualities of the product. The most important type of non-functional demand is due to external effects on utility, meaning that "the utility derived from the use of a product is increased or decreased owing to the fact that other people are purchasing and consuming the same good" (Leibenstein, 1950).
Therefore, it is possible to differentiate the non-functional demand into the Veblen effect, the Snob effect and the Bandwagon effect. The Veblen effect refers to the phenomenon of conspicuous consumption, as defined by Veblen (1899); it is a function of price and refers "to the extent to which the demand for a consumer good is increased because it bears a higher rather than a lower price" (Leibenstein, 1950). The Snob effect, instead, is a function of the consumption of others and refers "to the extent to which the demand for a consumer good is decreased owing to the fact that others are also consuming the same commodity" (Leibenstein, 1950); this behaviour reflects people's desire to be perceived as different and unique and to dissociate themselves from the "common herd". Finally, the Bandwagon effect is the opposite to the Snob effect and refers "to the extent to which the demand for a consumer good is increased due to the fact that others are also consuming the same commodity" (Leibenstein, 1950); this behaviour reflects individuals' desire to get "into the swim of things" and to conform with the people they wish to be associated with.
For completeness, Leibenstein (1950) identified also two other types of demand besides the distinction between functional and non-functional demand. In particular, he defined "speculative demand" as the fact that "people will often lay in a supply of a commodity because they expect its price to rise". Finally, he defined "irrational demand" as "those purchases that are neither planned nor calculated, but are due to sudden urges and whims, and that serve no rational purpose, but that of satisfying sudden whims and desires" (Leibenstein, 1950).
The main frameworks as well as the interpersonal and personal effects that influence luxury consumption will be analysed in more details in the fourth part of this paper.
SECOND PART: The main trends and evolutions of luxury consumption
In the last two decades, the luxury sector has been experiencing a steady and uninterrupted growth from $20 billion in 1985 (Okonkwo, 2009) to the current value of $173 billion worldwide (Business Week, 2010). It is an industry that continues to surge and to expand, not suffering from the global financial crisis. Even in 2011, the luxury market has continued to grow; this phenomenon is due, on one hand, to the resurgence of growth in Europe, in the U.S.A. and in Japan and, on the other hand, to the great performances of emerging countries, such as China, Russia, the Middle East and Latin America. What are the main factors at the origin of this incredible growth?
The main drivers of growth
In the last few years, the global luxury market has experienced a strong growing demand. Two major factors can explain this unprecedented growth; on one hand, the improvement of global macroeconomic factors worldwide has contributed in creating a more favourable environment. We can consider elements such as increasing disposable incomes, lower unemployment rates, lower production costs, globalization, but also the international travel expansion and the appearance of digital communication (Truong, 2010). If Western Europe is recovering economically, it is fundamental not to forget the growing wealthy class in emerging economies, such as China, Russia, the Middle East and Latin America. It is estimated that, in the next decade, the joint revenues of emerging affluent market segments will surpass those of more established markets (Okonkwo, 2009).
On the other hand, there is an increasing number of new luxury goods made available by the improving of productivity and quality management (Truong, 2008), resulting in a rise of offerings and competition in the entire luxury industry (Okonkwo, 2009). As entry barriers to the industry lowered, the luxury sector is facing an expansion of the client base. The consumption of luxury goods has, in fact, reached lower classes of society in most countries. It is becoming a mass market, not only including the wealthiest social class, but also those who belong to more modest classes (Truong, 2009). This phenomenon called "the democratization of luxury" will be described in more details in the next section.
Old luxury versus new luxury
As society becomes wealthier, the definition of luxury changes and evolves. Nowadays, luxury is not only an exclusivity of the elites; more and more people get richer and, therefore, luxury has become the mass marketing phenomenon of everyday life (Yeoman, 2011). Luxury is no longer the preserve of kings, priests and aristocrats; a lot of consumers are trading up, they are enjoying much more material comfort than previous generations. In western societies, changes in consumer behaviours have led to the emergence of a new meaning and perception of luxury (Yeoman, 2011).
"New luxury" has been defined as "products and services that possess higher levels of quality, taste and aspiration than other goods in the category, but are not so expensive to be out of reach" (Silverstein & Fiske, 2003). New luxury goods already represent about $350 billion (19%) of the combined $1.8 trillion in annual sales of twenty-three consumer goods categories; it is a segment growing from 10% to 15% annually and the trading-up phenomenon already affects a lot of categories of goods - both consumables and durables - and services (Silverstein & Fiske, 2003). The appearance of new luxury products has also caused the polarisation of the categories in which they are present; in particular, consumers tend to trade up to the premium products in those categories that are meaningful to them. Conversely, they are trading down, by purchasing a low-priced item or a private label or by not purchasing anything, in those categories that are less meaningful to them. Stuck in the middle, there are the mid-priced items that are unable to distinguish themselves in any of the dimensions important to consumers. Therefore, it seems that consumers' shopping habits do not correspond to their income levels (Silverstein & Fiske, 2003).
Instead, in the emerging countries, the old world of luxury consumption and elitism is still prevalent (Yeoman, 2011), meaning that luxury consumption is still motivated by status-seeking and appearance. These emerging affluent markets are still characterised by the "conspicuous consumption" defined as "motivated by a desire to impress others, with the ability to pay particularly high prices, this form of consumption is primarily concerned with the ostentatious display of wealth" (Dubois & Duquesne, 1993). Conspicuous consumption, therefore, regards individuals in search for social status and representation.
Furthermore, the recent global financial crisis has led consumers to re-prioritise their needs, causing changes in attitudes and behaviours towards luxury. More and more consumers search out for bargains or discounts and they are increasingly consuming luxury products in a more socially aware manner.
In addition, nowadays a lot of consumers desire to "access goods, treats and experiences that would normally not feature in one's day to day consumption" (Yeoman, 2011). As a result of this, we assist at the rise of the appeal of "luxury for rent", a phenomenon particularly common among the youngest age groups who are the most aspirational and who are fascinated by the idea of renting luxury products instead of buying them. Renting luxury goods is a way to "access the inaccessible" because in this way they are able to "sporadically dip into the luxury lifestyle without paying the full - unaffordable for most - price for the privilege" (Yeoman, 2011). They can be more glamorous and stylish for a short period of time or indulge in a celebrity lifestyle, but always with a limited budget.
Finally, consumers would prefer to own one luxury good rather than a lot of cheap products and they really care about excellent quality. These trends seem to confirm the weakening appeal of materialistic wealth and the appearance of "inconspicuous consumption", a less noisy and ostentatious nature of luxury consumption.
Democratisation of luxury
In the last decades, the concept of luxury has evolved, transforming itself from materialism to time and aspiration and making luxury more reachable and democratised. There is an increasing strong appeal of small, affordable luxuries because consumers continue to satisfy their need for regular treats and indulgences in their lives (Yeoman, 2011). In fact, all the people who "trade-up" are motivated mainly by self-directed pleasure, meaning that even if they are not rich, they like spending their money on hedonic goods and services. These consumers go beyond the mere superior quality of the product because they are interested in other emotional benefits (Yeoman, 2011).
Nowadays luxury is no longer a preserve of the elites; the elitists' beliefs are now being replaced by the democrats' beliefs. The elitists believed that only few people should possess and access luxury products because these goods are for refined people; in addition, they claimed that luxury implies good taste and enables its users to differentiate themselves from the others. Luxury goods are expensive products that should not be mass produced (Dubois, Czellar and Laurent, 2005). But nowadays, we assist at the "democratization of luxury" (Kapferer, 2006). Democrats have a more open-minded attitude towards luxury products; they claim that many people own luxury products and everyone should have access to them. Luxury is not only for refined people, it does not imply good taste and it is not an instrument of differentiation from others. Luxury items should not be necessarily expensive and can be mass produced (Dubois, Czellar and Laurent, 2005).
In addition, according to Dubois and Laurent (1995), the population can be segmented in two groups, the "affluent" and the "excluded". The "affluent" are those consumers who have always had access to luxury and include both the rich and "the newly rich"; for them, luxury is an "art de vivre" and they are often engaged in conspicuous consumption. The "excluded" are those consumers who have not access to luxury products. But, according to the scholars, the most important group is the one defined as "the excursionists", indicating those consumers with an intermittent access to luxury linked to special occasions or circumstances; this is the group collocated in the middle between the "affluent" and the "excluded" and it has emerged thanks to the democratization of luxury. It is a difficult segment to estimate, but it has experienced a spectacular growth and nowadays it represents an important part of the population in developed countries (Dubois and Laurent, 1995).
The democratisation of luxury is the result of both demand-led forces and supply-led forces; these forces will be examined in more details in the following sections.
Democratisation of luxury - the demand-led forces
The demand-side forces have surely contributed to the "democratisation of luxury" and the trading up of consumers. These forces include the main cultural and demographic shifts that have characterised our society in the last decades (Silverstein & Fiske, 2003).
First of all, consumers in western countries have been experiencing a steady growth in their real incomes, leading to an increased consumers' purchasing power. The growing middle classes have higher disposable incomes in order to consume hedonic and status products (Silverstein & Fiske, 2003). Low interest rates and cheap credit have allowed people to increase their spending, whereas the "everyday low prices" of a lot of discount retailers have reduced the cost of living in many categories (Silverstein & Fiske, 2003). The standard of living has doubled and this has caused the rise of spending on leisure and on all those products offering an emotional engagement (Yeoman, 2005).
Secondly, it is important to consider the changing family structure. People marry later and, therefore, they spend more time and money in order to experience the world and to create an identity for themselves. Moreover, lots of people choose not to marry at all; there is an increasing amount of singles, people living alone and accumulating increasing amounts of discretionary cash. In addition, lots of women work, earning high salaries and postponing the becoming mothers later in life. Finally, the divorce rate has never been so high and it constitutes an important indicator given the fact that, when couples split up, their consumption patterns change dramatically (Silverstein & Fiske, 2003).
Thirdly, consumers are becoming more educated and more sophisticated in their taste; they aspire to a better life and they demand products that engage their curiosity and imagination. They are more aspirational and spend more money on things that make them feel good. They look for goods that make positive statements about who they are and what they would like to be (Silverstein & Fiske, 2003); personal development is becoming increasingly important, with luxury products responding to the desire for experiences and self-fulfilment (Yeoman, 2005). Consumers are also more materialistic, placing greater value on status possessions (Eastman, 1997).
To sum up, more and more consumers are now willing and able to pay a price premium for higher quality, higher status products. A lot of consumers previously excluded from luxury started to be interested in purchasing luxury items and new luxury brands have emerged in order to satisfy those new consumer needs (Truong, 2008).
Democratisation of luxury - the supply-led forces
The supply-side forces have equally contributed to the "democratisation of luxury"; they include mainly aspects regarding the production and distribution processes.
First of all, substantial gains in productivity as well as the emergence of low labour cost countries have allowed the mass production of high quality products with decreasing costs and therefore prices (Truong, 2008). Nowadays, companies can construct and manage complex global networks for sourcing, manufacturing, assembling and distributing their goods all over the world; the globalisation and the internalisation have contributed to the lowering of international trade barriers (Silverstein & Fiske, 2003). Companies can produce more quickly and more cost-effectively.
Secondly, the entrepreneurs are better educated and more sophisticated; they know deeply their customers and their needs. They wish to create innovative products and they often create new luxury products, being inspired from their personal lives (Silverstein & Fiske, 2003).
Thirdly, as well as the middle market, the retailing environment is polarising. On one hand, the premium specialty retailers have expanded quickly and have included the new luxury goods in their offer. On the other hand, the cost-focused mass merchandisers started offering the best products at the lowest prices. Stuck in the middle there are the traditional department stores that are unable to offer the lowest prices or a gratifying shopping experience (Silverstein & Fiske, 2003).
As a result, luxury goods companies started widening their range, launching new lines of more affordable products, making them accessible to a much wider public. These offers have been called "masstige brands" (Silverstein & Fiske, 2003) or "mass-affluence brands" (Nunes, Johnson and Breene, 2004). These brands enjoy a higher degree of perceived prestige as traditional luxury brands do, differentiating them from middle-range products, but at the same time they are sold at prices only slight above those of comparable middle-range products, in order to reach a broader target (Truong, 2009). Therefore, these new luxury products "command a premium over conventional products, but are priced well below conventional luxury goods" (Kastanakis, 2011). These "between the mass and the class" luxury brands are subject to the bandwagon effect that will be described in more details in the fourth part of this paper.
Source: Truong, 2009
This image illustrates the definition of "masstige brands" and shows that the line delimiting and differentiating traditional luxury brands from middle-range products has become blurred by the emergency of "masstige brands".
Pursuing this strategy implies some risks, such as brand dilution and the trade-off between rarity and volume. In order to be successful, this strategy should be based on the equilibrium between prestige differentiation and a reasonable price premium. Regarding the former, resources should be invested in order to create a prestigious environment around the brand so that it appears as an aspirational brand. Regarding the latter, adequate price premiums should be established in order to ensure limited accessibility to the brand for the mass market; ideally, middle-class consumers should have access to the brand only on an occasional basis (Truong, 2009).
It is really important to adopt the right strategy because "masstige products" are candidates for what it is called the "death in the middle". In fact, they can easily be replaced by products that offer similar benefits at a lower price or by premium products that offer more benefits for a smaller price increment (Silverstein & Fiske, 2003).
Real luxury versus mass luxury - The rarity principle
The real big challenge luxury brands face is brand dilution, meaning that, by appealing to the masses and increasing their offer, they risk being perceived as too accessible and losing their exclusive appeal. It is important to "continually enhance the brand at the high end and avoid diluting its essence at the low end" (Silverstein & Fiske, 2003). As previously stated, luxury goods companies should implement the right strategy in order to prevent that purchases from middle-class consumers tend to become relatively habitual or frequent. Luxury brands have always been scarce and out of reach; for a lot of scholars, the true nature of luxury resides in its uniqueness, rarity and exclusivity so the notion of widely sold luxury can be considered as an oxymoron. Moreover, a trade-off exists between rarity and volume (Catry, 2003, Phau & Prendergast, 2000).
The growing disposable incomes, the globalization and the convergence of tastes all around the word have resulted in a lot of people consuming luxury products previously considered out of reach. The temptation of meeting this new demand is really strong, but expanding in the mass market can be risky. Companies face a dilemma; on one hand, they can choose not to meet this new demand, pursuing their differentiation or niche strategy. On the other hand they can launch more accessible lines in order to increase their potential sales volume, but there is the risk that these more affordable lines may jeopardise their exclusive image (Catry, 2003).
According to Catry (2003), luxury goods companies are not selling rare products, but they are giving us the illusion of doing so; "actual scarcity results to be replaced by perceived rarity". The author identified four main types of rarity. First of all, luxury goods' sense of scarcity can be based on "natural rarity" caused by the limited availability of raw materials, components or production capacity; natural shortages are the historical source of competitive advantage, if a company can secure its supplies, but there is the risk that they can prevent a strong increase of sales volumes (Catry, 2003). Secondly, scarcity can be "techno-rarity", meaning continuous investments in research and development in terms of innovative product features. It is a rarity not physically constrained, but that must be protected by patents because there is the risk that if the innovation satisfies the market, the competitors will soon follow, annihilating the advantage (Catry, 2003). Moreover, it is not only important to be excellent at finding innovations, but also at work at the efficiency/cost relationship. Thirdly, scarcity may be achieved through limited editions or special series; this can be in the form of a voluntary limitation of the designer or the customisation of luxury products (Catry, 2003). Finally, there is the "information-based rarity" that relies on the information communicated to customers and that is the virtual rarity most used nowadays. Price can be a signal because of the relationship higher the price, higher the prestige and the exclusivity; another signal can be the distribution in terms of selective distribution or the selling environment. Other means can be advertising, PR, special events or even the "starification" of designers or products (Catry, 2003).
To sum up, nowadays it seems that a lot of luxury firms are trying to balance two seemingly incompatible goals; on one hand, "maintain their perceived exclusivity and sense of rarity, on the other hand, create high level of awareness and grow their revenues on their market share" (Kastanakis, 2011). It is really important for luxury brands to find ways to maintain their luxury credentials and to redefine "real luxury" from "mass luxury". They have to defend their exclusivity and perception of uniqueness through premium pricing and authenticity (Yeoman, 2011) and through limited accessibility in both geographical and socio-demographic terms (Truong, 2009).
Given the dynamic growth of the luxury market and the increased availability of luxury goods to a wider range of consumers, "the luxury sector have transformed from its traditional conspicuous consumption model to a new experiential luxury sensibility marked by a change in the way consumers define luxury" (Wiedmann, Hennings and Siebels, 2007, 2009). Recently, the marketing of luxury goods has become increasingly complex because it is not only important to convey an image of authenticity, exclusivity and excellent quality, but also to sell an "experience" (Atwal & Williams, 2009). Luxury is no longer about the special features, qualities or attributes intrinsic to a product. Personal aspirations and fulfilment are key aspects of consumption and luxury is increasingly about experience, indulgence and authenticity because consumers want to improve their lives (Yeoman, 2011).
Experiential marketing is a global trend that characterises not only the western economies, but also the emerging countries. It is opposed to traditional marketing which is based on the fact that consumers are rational decision-makers only interested in evaluating the features and benefits of the products. Experiential marketing, instead, considers the central role that emotions play in the decision-making process and the fact that consumers aspire to achieve pleasurable experiences and life-styles. Therefore, it should be centred on connectivity and inter-activity, meaning that consumers are increasingly involved in the processes of definition and creation of value.
Firms, in fact, do not create and deliver value to the passive customer anymore; consumers are active and they take part in the process of co-creation of value. Interactions occur at multiple points, but it is important to consider that, in the luxury sector, they are very complex; they do not include only the firm and the customer, but also other actors, such as other luxury brand owners, opinion leaders, trend setters or the brand communities. Customers seem to prefer interactions with high status individuals because this offers them privileged access to information. The key aspect is the co-creation of experiences that take place during the entire life of the service and not only at the point of exchange. Prahalad and Ramaswamy (2004) consider the experience to be the brand and identify the co-creation as taking place and evolving throughout personalised experiences in which the customer is an active partner. Therefore, experiential marketing can deliver sensory, emotional, cognitive, behavioural as well as relational value to customers (Schmitt, 2003).
Pine and Gilmore (1999) define experiential marketing as "it is about taking the essence of a product and amplifying it into a set of tangible, physical and interactive experiences that reinforce the offer"; these experiences are useful in order to give consumers enough information to make a purchase decision.
Luxury is evolving from its traditional old conspicuous consumption to a new and individualistic type of consumption driven by new needs and desires for experiences (Atwal & Williams, 2009). According to the authors, the development of experiential marketing has been influenced by the postmodernism which has been defined as "a break in thinking away from the modern, functional and rational" (Williams, 2006). Two aspects of postmodernism are important. The first one is the hyper-reality, "the blurring out of distinction between what is real and what it is unreal"; "when the real environment is no longer a given, but is reproduced by a simulated environment, it does not become unreal, but realer than real" (Atwal & Williams, 2009). The second one is image, meaning that people are fascinated by signs and, therefore, images have become more important than what they mean or represent; people consume imagery and they are not interested in what these images stand for (Atwal & Williams, 2009).
In order to conclude this overview on the main trends that have characterised the luxury industry in the last decades, one important topic to face is counterfeiting. It is estimated that the global market for counterfeits exceeds $600 billion (World Custom Organization, 2004) and they constitute a significant and growing element in international trade (Grossman and Shapiro, 1988).
Lai and Zaichkowsky (1999) define counterfeits as "illegally made products that resemble the genuine goods but are typically of lower quality in terms of performance, reliability or durability". The market of fake goods relies on the consumers' desire for real luxury goods and, in fact, the purchase of counterfeits is motivated by the same reasons that guide people to consume luxury goods. Generally, we can say that "consumers are willing to pay more for counterfeits than for generic merchandise of similar quality because they value the prestige associated with brand name trademarks" (Grossman and Shapiro, 1988).
There are two main types of counterfeiting; the first one is called "deceptive counterfeiting" and indicates those consumers who do not know that they are buying counterfeits products because they do not observe the goods' quality and they are not able to distinguish copies from authentic merchandises, for example in sectors such as pharmaceuticals and electronics. The second one is called "non-deceptive counterfeiting" and indicates that consumers are aware of the fact that they are buying a counterfeit product; this is the case of luxury goods (Grossman and Shapiro, 1988).
What are the main reasons for consumers to knowingly purchase counterfeits? According to Eisend and Schuchert-Guler (2006), the purchase can be motivated by four main reasons. The first one includes psychographic and demographic variables, as well as attitudes towards counterfeiting; people who buy fake products are often of lower social status and have a positive attitude toward counterfeiting. The second one focuses on the characteristics of the products in terms of price, uniqueness, availability. The third and the fourth ones refer to the cultural and social goals that can influence this type of purchase, such as the desire to show off the purchase to others, to impress others, meaning that logos and labels are themselves of value to consumers. By acquiring counterfeits, consumers can enjoy the "status" of displaying a luxury product, but they are unable to purchase both status and higher quality at the same time at a higher price. This behaviour results in negative consequences for all those consumers buying authentic merchandises because their status is "degraded by the presence of imitations" (Grossman and Shapiro, 1988).
The purchase of counterfeits is also influenced by the different functions served by attitudes (Katz, 1960). What really matters in this context is not the utilitarian function or the ego-defensive function or the knowledge function, but the social functions that attitudes serve. There are two important social functions, the value-expressive one and the social-adjustive one. The former helps people to communicate their values, beliefs and attitudes to others, meaning that they are likely to consume a product as a form of self-expression, caring about product quality and its durability and reliability (Snyder and DeBono, 1985). The latter helps people maintain relationships, meaning that they are likely to consume a product for image-related reasons or to gain approval in social situations (DeBono, 1987). Therefore, social-adjustive attitudes may be associated with a higher degree of preference for counterfeit products because they are designed to look like luxury products and image is a key aspect for those consumers.
Furthermore, the purchase of counterfeit products results to be influenced also by consumers' values and beliefs regarding the morality of counterfeiting consumption (Hoe, Hogg and Hart, 2003). Previous studies showed that if consumers' attitudes serve a value-expressive function, their preference for fake products will be moderated by their beliefs regarding counterfeit consumption; in particular, consumers who perceive this behaviour as not necessarily immoral will be more likely to purchase counterfeits than consumers who see it as an immoral behaviour. If consumers' attitudes serve a social-adjustive function, instead, their purchase will be less influenced by their moral beliefs because they do not rely too much on their internal values in making such decisions (Hoe, Hogg and Hart, 2003).
Finally, authors such as Nia and Zaichkwosky (2000) studied the relationship between the availability of counterfeits and the demand for real luxury products. It is always been assumed that the more available counterfeits are, the less demand for authentic products exists. But this is not always the case because, in certain cultural and social contexts, the presence of counterfeit products can even enhance the demand for real products. In particular, when consumers' attitudes serve a value-expressive function, self-expression is relevant; but, given the fact that a counterfeit does not satisfy these personal goals, consumers will not perceive it to be similar to a real luxury good and will not compare the two products. Therefore, the exposure to counterfeits will not influence too much the preference for an authentic product. If consumers' attitudes serve a social-adjustive function, instead, self-presentation is relevant; but, given the fact that both the counterfeit product and the real one can fulfil these goals, it is likely that the two products will be perceived as similar. Therefore, the presence of counterfeits will cause less preference for the authentic good which is more expensive.
THIRD PART: Status and conspicuous consumption
When Veblen wrote "The theory of the leisure class" (1899), luxury goods were the result of excellent craftsmanship; they were really expensive and, therefore, affordable only by the richest and most affluent. A person could gain status by displaying his/her wealth because this was the basis for social emulation; the members of the upper classes wanted to differentiate themselves from other people by acquiring, displaying and consuming conspicuous goods. Nowadays, instead, the "democratisation of luxury" allows the modest people to imitate and emulate the rich; the existence of new less expensive luxury products allows them to consume previously unaffordable luxury goods. If the affluent consume luxury goods in order to assert status and membership to the elite class, the modest might consume the same goods to gain status with a purely conspicuous intention (Truong, 2008). The appearance of new luxury goods as well as of "masstige brands" brings higher quality and value products to the masses; consumers no longer merely consume products, they consume the symbolic meaning of them, their image.
In this context, status is conveyed in more subtle and sophisticated ways through education, culture and knowledge (Shipman, 2004) and it is not always displayed in public. In fact, "when consumption moves to the symbolic realm, distinctive display can be made even with less expensive material possession, by something which still communicates the symbol of distinctiveness" (Chaudhuri & Majumdar, 2006). This led to the emergence of what has been defined as "inconspicuous consumption" because consumers are better educated and they do not consider anymore the outrageous and extravagant spending as the main symbols of status. According to Mason (1981), "conspicuous consumption can be done more through educated or tasteful expenditures than through flagrant exhibitions of wealth". The emphasis is no longer on the acquisition and the display of physical items, but on experiences and image.
It is important to distinguish between status and conspicuousness. Status brands are characterised by high perceived quality, luxury and class; they can be purchased both for internal reasons, such as improving self-esteem and self-reward, or for external reasons, such as gaining others' approval; therefore, they are not always displayed in public (O'Cass and Frost, 2004). Conspicuous brands, instead, are the brands that are purchased for purely external reasons, such as signalling wealth, and are always displayed in public (Amaldoss & Jain, 2005); for conspicuous consumers, the purchase of luxury brands is more a matter of image and appearance.
Veblen's theory of conspicuous consumption
When writing "The theory of the leisure class" (1899), Veblen decided to focus on the behaviour of the rich American people who were spending a significant portion of their time and money on unnecessary and unproductive leisure expenditures. The members of this "leisure class" did not work, but enjoyed the surplus produced by the working classes. According to the author, when a society starts producing surpluses, "it becomes indispensable to accumulate and to acquire property in order to retain one's good name" (Veblen, 1899). The relationship between private property and status becomes increasingly important because a social hierarchy based on property started developing. This hierarchy aimed to differentiate those who own property from those who do not own property. Clearly, people who own property are estimated and have status and honour, whereas those who do not own property have no status at all (Trigg, 2001). Therefore, the acquisition and the accumulation of property are key aspects for understanding if a person has been efficient and productive, but, according to Veblen, it is not enough.
The most important aspect to be considered is inherited wealth because it confers even more status than wealth acquired through efficiency. The massive sums of money of aristocrats confer them the most important status because they allow to establish the biggest distance from the work required for its accumulation (Veblen, 1899). But how this wealth can be transformed in status?
Veblen claims that wealth is transformed into status through the social performances of the members of the leisure class. In fact, when a person's position in society is judged by other people, status derives from these judgements; in addition, for establishing a position in the society, there must be a display of wealth (Trigg, 2001). The author identified two main ways for displaying wealth. The first one is "through extensive leisure activities", whereas the second one is "through lavish and wasteful expenditure on consumption and services". At the beginning, people could choose between the two methods, but as societies develop, the latter prevails because people are less well informed on other people's leisure activities (Trigg, 2001). Therefore, "the display of wealth through consumption of goods becomes more important than the display of leisure" (Veblen, 1899). It is a purposive behaviour in which status consideration predominates because people make a lot of efforts to achieve their objective of status enhancement.
This behaviour constitutes what Veblen called "conspicuous consumption": people spend their money on goods and services in order to give an indication of their wealth to other people. According to him, it is the main factor influencing the behaviours of all social classes, from the richest to the poor because every social class tries to emulate the consumption patterns of the social class immediately above it (Trigg, 2001). As Veblen (1899) stated, "the members of each stratum accept as their ideal of decency the scheme of life in vogue in the next higher stratum, and bend their energies to live up to that ideal". In particular, the upper classes are characterised by the "invidious comparison", meaning that they consume conspicuously in order to dissociate themselves from the lower classes. The lower classes, instead, are characterised by the "pecuniary emulation", meaning that they consume conspicuously in order to associate with and be perceived as members of the upper classes (Veblen, 1899).
The social norms that govern such emulation change as the economy and the social context evolve over time. In addition, the search for status is a never-ending process because the thing, that at the beginning could confer status, may be later possessed by everyone and confers no status at all. Therefore, people should always search to acquire new goods in order to distinguish themselves from others (Trigg, 2001). Finally, it is important to consider that what matters is not how much money you spend, but how you spend it; this leads to the theories of cultural capital and to Bourdieu's work.
Bourdieu and the transmission of taste
In his main work, "A social critique of the judgment of taste" (1984), Bourdieu claims that tastes are "the manifest cultural preferences of individuals, groups and social classes", but they cannot be understood without considering social hierarchies and class relations. In fact, societies are divided both in class ("strata") and in fields ("competitive arenas") and the precise social position of individuals in this hierarchy is determined by the amounts and types of capital they possess. The economic capital refers to the financial resources available to an individual, such as income, wealth or access to financing. The social capital refers to the relationships and social networks influencing people's behaviour, such as the value created though the access to powerful social networks, whereas the cultural capital is "the knowledge accumulated through upbringing and education", such as skills, knowledge, education and manners (Bourdieu, 1984). But in all fields, the acceptance of dominion by the subordinated requires the possession of a fourth type of capital, being the symbolic capital, in the form of "desirable possessions, privileged pursuits, honours and titles" (Bourdieu, 1984).
According to Bourdieu (1984), capital is deployed in order to reinforce the social distinctions and social processes are "driven by the struggle waged implicitly between the classes". But it is also true that a lot of human behaviours are unconscious and they conceal this struggle. The unconscious human behaviours constitute what he defined as "habitus". Habitus is "the ingrained dispositions that lead actors to make choices and definitions that reproduce existing social structures and status distinctions" (Business History Review 85, summer 2011). It is what conditions and guides individuals' choices, explaining them how to act and how to respond in society, orienting their actions with respect to what is appropriate in the present circumstances (Business History Review 85, summer 2011). The "habitus" constitutes the binding force between various factions within the same class and leads to common actions. In fact, if homologies between fields exist, this leads dominant actors to share similar dispositions across domains. In this way, it is possible to preserve the social order and to maintain the acceptance of domination by the subordinated (Business History Review 85, summer 2011).
Furthermore, cultural practices reflect the underlying social distinctions because they are subtle, but powerful forms of social distinction. Lifestyles are the practical expression of class identity; tastes do not originate from internal aesthetic preferences, but from the conditioning effect of habitus and the availability of economic and cultural capital (Business History Review 85, summer 2011). Clearly, each social class has its own habitus and cultural practices. As a consequence, the upper classes, who are free from material constraints, affirm the supremacy of their lifestyles and of form over function, whereas the working classes prefer substance over form, the informal over the formal and the immediate over the deferred (Business History Review 85, summer 2011). In this way, upper classes succeed in distinguishing themselves from the lower classes, affirming a sense of social distinction; "the exercise of taste thus serves to reinforce the right to rule" (Bourdieu, 1984). Social domination is no longer only about tastes, but it encompasses also lifestyles.
The taste formation
Bourdieu (1984) used the concept of homology in order to identify the interactions between the economic world (the fields of production) and the social world (consumption). These two fields are linked because tastes depend on the state of the system of goods offered; if there is a change in the system of goods, there is also a change in tastes. But, conversely, " every change in tastes resulting from a transformation in the conditions of existence and of the corresponding disposition will induce a transformation in the field of production, by favouring the success of the producers best able to meet the needs corresponding to the new disposition" (Business History Review 85, summer 2011). As a consequence, taste is not a function of production.
Bourdieu identified four possible processes of taste formation, each of which involves a series of interactions between the fields of production and consumption. Generally, taste formation regards the processes thanks to which "culturally significant goods become accepted as expressive of good taste within a section of the ruling classes, forming the kernel of a new community of taste" (Business History Review 85, summer 2011). The processes of taste formation are illustrated in the table below.
Source: Business History Review 85, summer 2011
The first process of taste formation is the "objectification" and refers to the translation of abstract ideas into new products. Consumers are willing to try new things and producers respond by creating new products able to satisfy the consumers' new needs and aspirations (Business History Review 85, summer 2011). The second one is the "legitimisation" and regards the production and the marketing of new products; producers aim to create a market for those new products, whereas consumers have the cultural and social capital to form a community of taste. Therefore, the collaboration between creative producers and leading-edge consumers is essential for bringing to market prestigious cultural products serving as status symbols and markers of social distinction (Business History Review 85, summer 2011). The third one is the "transmission" and regards the extension of the range of products in order to include "lesser emblems of distinction", such as copies or imitations; in this way, the community of taste widens across different social strata, but it always preserves the status distinctions between consumers (Business History Review 85, summer 2011). For the transmission of tastes to be successful, a strong degree of cultural literacy is necessary. Finally, the fourth one is the "institutionalisation" and regards the renewal of the community of taste across generations through cultural reproduction. In fact, the intergenerational transmission of tastes depends on the behaviour of cultural actors and institutions whose function is to consecrate products as emblematic of enduring good taste (Business History Review 85, summer 2011).
To sum up, cultural leadership is a crucial factor in all the processes of taste formation. "The dynamics of taste are directed through the interaction of economic and social processes and are driven through the exercise of cultural leadership" (Business History Review 85, summer 2011).
The main critics to Veblen's theory of conspicuous consumption
Veblen's theory has been formulated more than a century ago and it does not reflect all the changes occurred in society recently. Andrew Trigg (2001) in his paper identifies three main critics to Veblen's theory of conspicuous consumption that are linked to Bourdieu's work (1984) on taste and its transmission.
Trickle-down model of taste versus Trickle-round model of taste
The first critic regards the fact that Veblen's theory is too restrictive because it considers only the one-directional "trickle-down model" of tastes, in which tastes are transmitted from the upper classes through the middle and the lower classes. A "trickle-up model" of tastes is also possible from the bottom of the social hierarchy and this will be explained in more details in the next paragraph. The key factor to be considered is the cultural capital that can be acquired in the social hierarchy. Bourdieu (1984) defined cultural capital as "the accumulated stock of knowledge about the products of artistic and intellectual traditions, which is learned through educational training and through social upbringing". Therefore, "the taste of individuals with high cultural capital is used in order to secure positions of status in the social hierarchy through exercising a mark of distinction" (Bourdieu, 1984).
Source: Trigg (2001)
According to Veblen (1899), the upper classes consume status symbols because they confer social distinction on their owners and associate good taste with the members of the upper classes. The members of the lower classes, instead, try to emulate the upper and middle classes, caus
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