Professional Documents
Culture Documents
GROUP 10
Sreejith Narayanan E, 0911054 Nutan Kumari Choudhary, 0911111 Hangsing N David, 0911239 Devi Prakash N, 0911307 Vinod Gaikwad, 0911308
Agenda:
1 2 3 4 5
What is Luxury? Luxury Industry Buying Behaviour Luxury Pricing Value Communication
What is Luxury?
1
Luxur y
2 3 4
As wealth spreads, what drives consumers behaviour is neither subsistence nor comfort but the attainment of esteem and envy of fellow men ~ Thorsten Veblen, 1899 Luxury is no longer the embrace of the kings and queens but the mass marketing phenomenon of everyday life
~ Ian Yeoman and Una McMohon-Beattie
Luxury is increasingly about experience and authenticity rather than monetary value ~
Yeoman et. al. , 2005
The concept of luxury is incredibly fluid, and changes dramatically across time and culture ~ Ian Yeoman
and Una McMohon-Beattie, 2006
making waves: 10% + GDP growth in China & about 9% GDP growth in India yoy Along with Russia and Brazil, the Asian giants became the focus of the worlds attention as the BRIC countries
Swiss watches account almost 100% luxury mkt >50% of gold & diamond is in jewellery market France manufactures 50% of global champagne Europe largest market for luxury goods Japan more than 25% of luxury consumers
Top 5 categories of products in the luxury basket are Jewellery Clothing Time-wear Digital Accessories Cosmetics & Skincare 0%
8.46% 12.95%
15.99%
7.69%
20%
40%
60%
According to Technopaks India Luxury Trends 2006, India had 1 million luxury consumers; 6-7 million very affluent 1.6 million households earning over 70,000 and spending more than 6,000 on luxury; set to grow 14% annually Fastest growing millionaire population
India consumes more than 25% of the gold produced in the world
The number of units sold per luxury good is very minimal Hence it is important to maximize profits per sale
Premium
Price
Economy
Luxury goods need not be technically or functionally superior, like Premium Products
Features
Emotional arguments like brand, uniqueness or prestige are more important than technical features. They give oneself a Social elevation and unmatched pleasure
FEATURES
IMPACT
Unique Selling proposition & brand positioning makes benchmarking difficult No impact
Costs
Costs are high in luxury pricing due to Low volumes of production Raw material, process and design exclusivity Minimal Selective distribution and marketing impact Still, costs do not correlate with the set prices as value provided to customer is different
Emotional value is more important than functional value for pricing. The emotional value perceived by the customer ultimately results in the willingness to pay the price premium. Luxury Good is a Veblen Good - Increasing price of the product increases its Customer Value High Impact perceived value as a luxury item to such an extent that sales can go up, rather than go down hence it has positive price elasticity of demand As people become more wealthy they buy more and more luxury goods thus there exists high income elasticity of demand
Not feasible since capturing emotional factors can be tedious Establishing factors through MR may nullify the ability to surprise the customer and thus may no longer be coveted Due to these factors, MR techniques are less used Predecessor Price data & cost of goods sold Available and provides a good estimate for luxury firms Determined by stalwarts in the firm using gut feeling!
Internal Data
Expert Judgment
Pricing Equation
Money For Quality & Innovation Value For Money
The pricing equation used by luxury industry is: Price= Cost + Customer Value added Customer value added is determined through internal data and expert judgment
Emotional Value
The customer value added = functional + emotional value Emotional value depends on the type of consumer The art of luxury pricing lies in quantifying the value to consumer regardless of costs, competitor or market prices.
Functional Value
Private Label
Brand
Luxury Brand
Current Issues
Due to difference in purchasing power parity Issue since many luxury customers are globetrotters Could also lead to grey marketing More needs and aspirations coupled with willingness to pay more To capture this huge demand, mass brands imitate luxury products Differentiation is lost and confusion among customers!
Value Communication
Rolex Ad
THANK YOU
APPENDIX
SEGMENTATIO N
1 million luxury
6-7 Million Very Affluent 9-10 Million MidAffluent 14-15 Million Upper Middle Class
The conceptual model used by Klaus-Peter Wiedmann, Nadine Hennigs, and Astrid Siebels In finding clusters of consumers on the basis of luxury consumption behavior
Price Value Usability Value Quality Value Uniqueness Value Self-identity Value Hedonic Value Materialistic Value Conspicuousness Value Prestige Value
Financial Value
Social Value
In the research paper Value-based segmentation of luxury consumption behavior, Klaus-Peter Wiedmann, Nadine Hennigs, and Astrid Siebels found 4 types of clusters on the basis of luxury consumption behavior -
The Materialists
They have a lot of luxury in their lives and Click icon to add table wish to owned certain things they dont havethink that their lives would be better if they They had the most positive attitude toward luxury objects They did not strongly perceive the social dimension of luxury consumption as being important for their perception of luxury value They are closely attached to functional value items but do not seem to be greatly excited about the emotional dimensions of luxury consumption They consider the hedonic value aspects as being unimportant They have superior quality standards and differentiate themselves from others with the purchase of exclusive luxury products They perceive social aspects as being most important for their perception of luxury value and had the most positive perception of all prestige items They place much emphasis on prestige over quality assurance and are more concerned about other peoples opinions They buy luxury brand mainly for impressing others rather than for themselves They perceived the hedonic value aspects of self-directed pleasure and life enrichment to be most important for their perception of luxury value Their definition of luxury refers to exclusivity and products that are not for mass consumption They are less likely than other groups to be enthusiastic about luxuries