Luxury Brand Engagement Research Write Up Essay
Luxury Brand Engagement Research Write Up
Brand Management is a function of marketing that uses techniques to increase the perceived value of a product line or brand over time. Effective brand management enables the price of products to go up and builds loyal customers through positive brand associations and images or a strong awareness of the brand. Developing a strategic plan to maintain brand equity or gain brand value requires a comprehensive understanding of the brand, its target market and the company’s overall vision. Brand engagement is a term loosely used to describe the process of forming an attachment (emotional and rational) between a person and a brand.
It comprises one aspect of brand management. What makes the topic complex is that brand engagement is partly created by institutions and organizations, but is equally created by the perceptions, attitudes, beliefs, and behaviours of those with whom these institutions and organizations are communicating or engaging with. Brand engagement between a brand and its consumers/potential consumers is a key objective of a brand marketing effort. In general, the ways a brand connects to its consumer is via a range of “touch points” — that is, a sequence or list of potential ways the brand makes contact with the individual.
Examples include retail environments, advertising, word of mouth, online, and the product/service itself. It can be broadly classified into two areas- Internal and external. Internal refers to the company’s employees, franchisees, etc while external refers to the end consumers. All the consumer behavioural factors like attitudes, beliefs, society, culture and trends are studied and form an interesting part of the study unlike many other areas of research. All these factors are psychological yet emotional and drive consumer behaviour towards brands ultimately leading to sales and higher revenues.
Getting there requires convincing less conscious consumers that they can have their cake and eat it too (drive positive change and indulge their needs), and teaching them to choice-edit for the most personal, planetary and societal impact. Customer involvement starts from the personal basic perspectives of goals, values, and self-awareness. Depending on the relevance of these to individuals, they are reflected in decision-making behaviours. Different product attributes cause different degrees of involvement in consumer minds. These differences of involvement result in differences when consumers make purchase decisions.
Therefore, when consumers perform consuming behaviours, the extent of their involvement affects purchase intention and this is only reflected when a deeper understanding of their psychological and emotional factors is attained. It relates at an emotional level and ensures long term sustainability, revenue and growth for the brand. One of the most significant sectors where brand management plays an even more important role is Luxury. Luxury as a concept is defined within the scope of socio-psychology as a result of its connection to a culture, state of being and lifestyle, whether it is personal or collective.
When linked to brands, it is characterised by a recognisable style, strong identity, high awareness, and enhanced emotional and symbolic associations. It evokes uniqueness and exclusivity, and is interpreted in products through high quality, controlled distribution and premium pricing. These core factors have led to the development of a $180 billion global industry with an uninterrupted growth for over two decades. These elements have also led to the summarisation of luxury as a ‘dream’, leading to justifiable curiosity and interest. Luxury good manufacturers offer high quality products at higher prices.
At times, the quality of the actual product may not actually be very different from the low cost one, however, the brand value attached to it is high. It is for this reason that the branded product still sells at a higher price. The customer, though buys the product, actually pays for the brand. He pays for the emotional/ psychological/ physiological need that he has been able to satiate through this purchase. Also, it is worth noting that building a luxury brand can be a very tough task. It has to have the right value of consumer behavioural/ attitudinal compatibility mix for it to achieve its purpose owing to the high costs.
Brand Managers for luxury products cannot over advertise their product (devalues the image) and not under advertise their product (loss in enquiries/ revenue). This interesting amalgamation of business drivers and human behaviour forms a motivating and challenging topic for research studies. Brand value measures the economic asset value of a company or product brand. It details how much of the company’s operating income and free cash flow is derived from the brand, the influence of the brand within each consumer purchase decision driver, and the associated brand risks.
By linking the brand to the economics of the business at a detailed level, brand value opens the door to a number of useful applications like proving that branding offers real value, justify a proposed marketing budget, align the commercial organization, evaluate acquisition opportunities, optimal royalty rate, optimize the brand relationship to best tell the brand story, focus investments, drive higher prices, leverage brand value to lower taxes, reduce turnover and quantify the damage.
It is very intriguing when we look at the financial output of the brands, grouping the companies into two categories of highly and least engaged in brand engagement. The companies who were highly engaged grew on an average of 18% in revenues over the last 12 months, compared to the least engaged companies who on average saw a decline of 6% in revenue during the same period. The same holds true for two other financial metrics, gross margin and net profit.
Interbrand was recently involved in brand valuation with respect to business and the approach used is as follows:Snapshots of couple of models or indexed used has by different organizations to measure brand engagement has given under the research design section. Consumer buying behavior has changed a tremendously over the last decade and below is the Worldwide Personal Luxury Goods Market Trend (this has been discussed in detail in the industry literature review at the end) to illustrate the fact:Third year in a row of double-digit growth for the personal luxury goods market: over the 200€B threshold!
There are various challenges that brands face over the course of their engagement tactics. The brand’s core thought or value should be in sync with the target audience. If it’s not, then there is no engagement at an emotional level. For a consumer to be engaged with the brand, he has to continuously be bombarded with the brand’s advertising or communication through various mediums. This process is very costly to the organisation as it involves various media channels and every channel (print, digital, TV, etc) has its own rate structure.
The competition in every industry has further caused problems for any brand to create its importance. The consumer mind space is cluttered with messages from different brands making it even more difficult for a particular brand to register itself. Even if a consumer gets engaged, there’s no specific tool to measure the impact of the engagement on the final sales/ profits of the brand. The huge costs therefore become difficult to justify. Competition is fierce in developed economies and consumers are bombarded with offers, many of which are very similar.
In such a setting, differentiation is vital and academic research has revealed that brands can build sustainable competitive advantage by increasing customer loyalty and fostering personal recommendation. However, to achieve such a sustainable competitive advantage, brands need to go beyond their traditional focus on communication and advertising and become the key to integrated client experience management. In such a scenario, it becomes even more important to build a brand that is strong in its values.
It involves designing campaigns to generate intention to purchase and top of the mind awareness, various metrics to measure the effectiveness of brand campaigns, retuning parameters, redesigning the campaign and measuring the metrics again till the time the campaign reaches its desired GRPs (gross rating points). A very interesting real life example of how a brand faces a situation when it’s present engagement measures don’t work and it has to continuously make new efforts to ensure engagement with consumers is illustrated in a research paper titled ‘Luxury Brand Exclusivity Strategies’ which can be visited through this link – URL: http://dx. oi. org/10. 5430/jbar. v1n1p106. It examines how luxury fashion brands renew themselves in order to balance the exclusivity that is associated with luxury goods and with profit maximization. Using consumers’ demand theory it is shown how luxury fashion brands go through different phases to renew the perception of exclusivity.
Subject: Brand management,
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 21 November 2016
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