Value Creation in Luxury Brands Retailing

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Introduction

In a modern competitive environment, it is quite difficult for luxury brands to keep the market position and maintain efficiency. The majority of experts have inclined to the statement that a key factor in the success of the most luxury brands is a loyalty of consumers. Any luxury brand creates a certain impression that appears inevitably as soon as customers learn about the product (Heine 2012). However, this impression needs to be continuously supported. In this regard, the paper aims at the analysis of how luxury brands can create value through brand and retail experiences.

Luxury Brand

First of all, it is essential to specify the term of a brand. It is a kind of perception of the product in the minds of consumers (Chevalier & Mazzalovo 2012). The process of creating and managing the brand is called branding. The latter usually includes the creation, enhancement, repositioning, and renovation stages of brand development (Goodson 2012).

The branding is a special technique for creating experiences that contribute to the overall image and target market maintenance. It should be noted that any luxury brand, be it high-quality jewellery or perfume, has a unique set of associations that currently are in the minds of customers (Hennigs et al. 2013). In their turn, these associations express what the brand means right now.

Brand Experience

Nowadays one might note that the brand experience is steadily changing. If earlier the luxury buying experience was of great significance, now customers tend to value the very product. Adams (2013, para. 3) considers that “luxury consumers value easy shopping and product experience that feels luxurious”. In other words, the luxury brand itself becomes the most pivotal issue. In this regard, the brand experience is one of the keys in creating the brand value that consists of such facets as “distribution, products, services, and communication” (Kapferer 2012, p. 278).

Also, luxury requires years of performance and plenty of investments to become a high-profit brand. It is essential then to focus on the core trade product. For example, Rolex focuses on watches production, Chanel on perfume, and Hermes on high fashion luxury goods (Brand value of the leading ten most valuable luxury brands worldwide in 2016 in million U.S. dollars 2016). Following the above rule, luxury brands can significantly increase their value.

In the framework of the globalization, the next aspect of growing the brand value might be a global expansion. Foreign customers make a great part of the overall profits of luxury companies (Bastien 2013). For example, Gianni Versace, a founder of the fashion empire, pioneered the creation of luxury brand hotels. The first Palazzo Versace Hotel appeared in 2000 in Australia, and the entire fashion empire possesses 16 luxury hotels around the world including in Goa, Paris, London, Rome, and Dubai (Grigorian & Petersen 2014).

These premium-class hotels located all over the world are the most important sources of the brand’s value. However, when choosing a luxury, people prefer to buy a product with a rich culture and ethnic authenticity (Pinkhasov & Nair 2014). Saving production in the country of origin of the luxury brand, according to Aiello et al. (2009), is also significant from the standpoint of creativity.

In their turn, Grigorian and Petersen (2014) state that the luxury brand philosophy is the keystone of the brand experience. In particular, consumers’ beliefs in the brand are usually higher than its value in the market. This is followed by the assertion that, in contrast to the mass brands, the luxury brand should not seek to satisfy everyone and should attract customers with a similar philosophy. As an example, authors pinpoint Louis Vuitton brand, which in historical retrospect replaced chests and suitcase with the round bottom by square shape.

Furthermore, Grigorian and Petersen (2014) offer the Seven Principles of Luxury Experience (Figure 1). The following figure includes patterns concerning brand values, a logo, a product, a point of scale, consumer segments, communication, and categories.

Figure 1. The Seven Principles of Luxury Experience.

If the first three components relate to the brand value, then the others will be considered in the subsequent luxury retail experience section.

Speaking of a logo, it is necessary to mention that when customers reflect about the luxury brand, they tend to consider a full set of visual symbols including the corporate symbols, logos, colours, image, or even the whole concept (Nagasawa 2008). For instance, Bottega Veneta leather goods do not illustrate the name of the brand on the front side, yet the majority of customers easily identify the complex web of leather belts and woven bags.

For such a brand like Chanel, there is a combination of black and white clothes, the logo of interlocking letters “C”, perfume No. 5, pearl necklace, and white camellia – these are visual symbols that continue to work for years. Consequently, luxury brands should actively select their characters and make them icons with the help of constant and consistent recurrence (Shukla 2012). A perfect example is the little black dress of Chanel and its annual new versions.

Thus, there is no positioning of luxury brands as they do not need the comparison with anyone or anything on the market. They have their aesthetics and do not seek direct competition.

Luxury Retail Experience

In conditions of modern brand diversity, luxury brands should take into account how they sell and what innovations and technology can be applied in the process of making a purchase. Even though luxury brands have used the classic shops, today they seek to create multi-functional and fully controlled spaces to design new experiences and strive to talk about the brand through special events, exhibitions, and collaborations that are conducted directly in the shopping area (Andreu, Sanchez & Mele 2012).

Therefore, a new type of stores today operates much like religious temples for the discerning consumer and represents the value co-creation (Edvardsson, Tronvoll & Gruber, 2011). For instance, Prada Company has created an exclusive project collaborating with AMO and Rem Koolhaas, a well-known Dutch architect. As a result of such cooperation, there appeared a large-scale project, which includes a special so-called “Epicenters”.

In other words, Prada brand flagships stores in different countries, which are working on the design of experimental laboratories of the shopping experience. It also comprises several plans to expand the presence of the brand on the Internet (Okonkwo 2010). The “Epicenter” project integrates the concept of combining retail space with an exhibition hall, a cinema, a concert hall, and a lecture hall, which allow providing different events related to the brand.

Fich (2011) reckons that the collaboration with like-minded and stronger brands affects the target audience. For example, Bugaboo trendy strollers for babies position on the territory of art. Hence, the luxury collaborates with the Interview magazine creating a special design for the wheelchairs with the famous Andy Warhol prints. The magazine audience overlaps with the luxury brand consumers (Fich 2011). Consequently, Bugaboo needs to be presented on Interview pages.

Another interesting example is a Maserati brand collaborating with Aqua di Parma cosmetic brand. Both brands are heard in unison with each other: a luxury segment, an Italian manufacturer, and the highest quality of the product. When collaborating, it is essential to remember that the two brands should broadcast the same values to the consumer (Hatch & Schultz 2010). It provides the status and the image.

Art Marketing and Retail Environment

The art of marketing focuses on a variety of segments addressing the way of how marketing principles are utilized by brands. As it was stated before, luxury brands need to remember about the comfort and accessibility of information, consumer awareness of new products and collections, the ease of delivery, and customized approach to a particular service (Tynan, McKechnie & Chhuon 2010). It is of great importance to take into account the innovation and technological effectiveness in service. Today, consumers spend approximately nine hours in a close connection with gadgets (Tesseras 2015).

People use a computer or a notebook at work and a smartphone or a tablet on the road. Almost all the customers with high-income own an average of the two gadgets, and the trend towards the gadget-mania continues to grow (Kleber & Gluck 2014). At the forefront of many luxury brands, there is e-commence. In this regard, brands tend to redistribute advertising budgets to digital technology (Phan, Thomas & Heine 2011). A significant trend is mobile applications that allow making shopping more convenient, learn more, and recognize the client’s needs.

The retail environment searches for ways to optimize and implement creative ideas that connect the brand and complex technology. In particular, the brand image is created by an advertising campaign. However, luxury brands tend to make PR communication wider investing in people: strategists, PR, and digital experts (Jevons et al. 2010). For example, one might note new services of stylist consultation, personal shopper, collections pre-order, and day-to-day delivery in the field of luxury fashion (Choo et al. 2012). Gaining expertise in the premium allows developing the right solutions in tune with each other to combine brands.

Brands are Leveraging Cognitive and Emotional Attributes to Increases Brand Experience

Rohit Arora (2013), an expert on the strategic planning of the communication group at Bates Pan Gulf suggests the model including eight crucial elements that make up the marketing mix for the luxury brands. This strategy seems to be beneficial as it focuses on the emotional and cognitive aspects of customers.

Performance. According to Arora (2013), the result is based on the customer experience from the use of the brand. This experience is considered on two levels:

product level, which is important due to functional and utilitarian characteristics such as high-quality materials, unique design, and technology and innovation;
experiential level, where the core element is the symbolism of a sustainable brand.

Pedigree. The luxury brand is expected to tell its story to the world (Mira & Panahandeh 2014). It might be a history of the origin or historical heritage, which are regarded as an inseparable part of the brand essence.

Paucity. This element includes three types of rarity: natural, technological, and tactical.

Persona. The brand personality aims at the creation of the visual identity of the brand. Moreover, it promotes emotional values, which in turn create visibility, familiarity, and identification (Hennigs et al. 2015).

Public figures. This element presupposes the use of celebrities: film stars, musicians, and athletes. According to Arora (2013), due to the widespread use of celebrity, luxury marketing has more sophisticated communications.

Placement. It refers to three issues: the location of the boutique, the organization of retail space; the behaviour of the sales staff. For instance, “Rolex associates itself with more than 150 events in golf, sailing, tennis, motor-sport, arts, and equestrian tournaments” (Arora 2013, par. 50).

Public relations. PR plays the most crucial role in shaping the brand image and impacting public opinion. The so-called informational support expressed in fashion weeks, sports events, pre-screenings, and others design the luxury desirability.

Pricing. In this element, the author notes a huge impact of prices on the perception of the brand. Therefore, the formation of own discounts strategies such as gift certificates or a discount on subsequent purchases, as well as close cooperation with the luxury retailing on pricing.

Using aesthetics, feelings, and emotions, luxury brands create pleasure for customers. According to Kim and Kim (2014), an artistic and fun marketing strategy can motivate customers even more than traditional measures. In luxury advertising, it is almost impossible to find any appeals or verbal declarations to purchase the product as it contains only the name of the brand.

This is done on purpose. In particular, the task of advertising is only to make the consumer dream of buying. For example, a print ad of Omega watches brand contains photos of stars such as Daniel Craig, George Clooney, and Cindy Crawford, certain watches, and logo image. The customer would never see the listing of technical details: the dial size or the materials used in the production of the mechanism. All this creates a sense of free choice and atmosphere of pleasure.

The luxury brand is essentially a promoter of taste as an art form. It never becomes a follower of anything always finding creative and bold solutions (Fang et al. 2012). That is why the luxury brand should refer to the unpopular art rather than to mass one. It helps to maintain an aura of elitism (Nicholas 2009). For instance, Louis Vuitton has long been sponsoring concerts of contemporary music, in which, the pianist Maurizio Pollini performs works by a little-known composer such as Luigi Nono, but not Mozart or Chopin.

Strong Brand Image Increases Brand Desirability

McKinsey studies show that a successful brand strategy consists of at least two important elements that are associated with traditional issues of the company’s strategy and its business system as well as the key levers of the brand management (Foushee, Remy & Schmidt 2015). Performance and perception are the two principal aspects to create a strong brand image.

A strong brand image has several undoubted advantages, among which there is increasing brand desirability. Even though customers tend to choose brands more elaborately valuing quality, they are still going to spend their money, although more reasonable. Many consumers have switched from mere collectors of luxury brands to creators of their unique style, in which luxury brands are often used in combination with a more affordable option (Duma, Willi & Steinmann 2015).

Therefore, all that is required from luxury brands is to demonstrate the presence of high-quality manufacturing, heritage, and history that stand behind the luxury brand. Thus, they will be able to meet the expectations of consumers and be seen as a good option for investors with a focus on the classics rather than momentary value. Hermes fashion brand might be a bright example of the above strategy (Badenhausen 2013). Hermes is a leader in the art of making the product image unique and exclusive for consumers (Solca 2015). Also, it manages to maintain the image of a unique luxury brand for many years selling its line of products with high margins.

Conclusion

In conclusion, it should be pointed out that the luxury brand stands outside a traditional marketing strategy. To create and maintain customers’ loyalty and brand value, it should apply a set of unique and innovative measures. The latter might include advertising, collaboration with other luxuries, the very image of the product, and plenty of the other issues that are discussed in this paper.

However, the most important point concerns the fact that luxury brands are required to satisfy the requirements of the modern world. Globalization processes, as well as digital technology, make brands change their presentation and retail environment. All in all, the paramount sources of the luxury brand value creation are creativeness and innovativeness in combination with heritage and tradition.

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