Luxury Brand Management - Coursework Example

Student Tutor Course Date Luxury Brand Management One of the most common domains in marketing that has drawn the attention of brand managers, consultants, scholars and CEO’s in the last four decades is branding ( Dryl, Wioleta, and Robert 63). Companies in the luxury industry are continuously grappling with the idea of how to build successful brands that resonate with customers across age, space, gender and time. The emergence of new Iconic brands in the luxury brand has become more elusive given the challenging task of competing with well-rooted incumbents in the industry that have successfully entrenched deep into the domestic cultural fabric(Atwal, Glyn, and Alistair 340). As competition rapidly increases with the changing trends in the market, companies are keen to develop strong luxury brands that not only expand their revenue base but also strengthen their customer loyalty and improve the brand equity. This article highlights the challenges that luxury brands such as R & S face in an effort to penetrate new markets amidst stiff competition from established brands. The article begins by bringing to light the intensity of competition with which luxury brands compete for consumers in the Chinese market. Competition is increasingly becoming a common norm in the global luxury industry as more companies venture into the already ballooning market. For any company to gain or retain a competitive age, they must adopt strategies that work with the changing times and trends. While R & S is struggling to make sales at their Shanguang store retailer across China, their rival Berlinger is making good sales and launching a new brand of gem accented watches. It also highlights the competition that emerging luxury brands such as Rochat & Schmid faces against deeply rooted companies like Berlinger owned by a conglomerate. Statistics show that conglomerates such as Richemont, Kering, and LVMH with portfolios of over 30 brands across different categories dominate the luxury industry. Secondly, the issue of product diversity is strongly presented. The Vice president of marketing at R & S contemplates adding new designs into their line of brands to counter the competition from the rivals. Developing new designs that are customized exclusively to meet the needs of a particular market segment is a common practice in China with companies like Tutoni coming up with designs specifically for the Chinese market. Offering a wide range of products to customers provides them with the ability to choose various products according to their tastes and preferences. However, a company must not lose the unique value it offers to the market. Thirdly, the article also reveals the impact of government policies on the forces of supply and demand in the luxury market. Government policies have a great influence on the market and depending on the nature of policies, they can affect the market positively or negatively. The article makes specific reference to the Chinese government’s anti-corruption policy that deters gifting luxury watches to officials consequently hindering the sales of R & S products. Finally, marketing strategies come out as the primary focus of the article. Product promotion is essential for any company to boost its sales and realize the return on investment. Choosing the right marketing strategy that appeals to the target audience across age, gender and culture makes the difference on whether a brand becomes successful or not. Berlinger conducts splashy promotions that do the magic in their sale numbers, However, R&S remains glued to the traditional subtle marketing strategy that by far has failed to achieve the intended outcome. A change of marketing strategy is muted to enable the company to adapt to the new environment in the Chinese market. At the same time, the CEO is concerned about retaining the heritage of the company and maintaining a uniform image of Rochat & Schmid products worldwide. The modern luxury brand marketing strategy stipulated in the article is Celebrity endorsement. In the modern era, people give less attention to advertisements while reading through newspapers or watching televisions. However, the glamour of attaching a celebrity to a product never goes unnoticed (Bian, Qin, and Sandra 1447). Celebrities manifest unique culturally significant symbols, values, and images. As the image of the celebrity becomes closely link to certain products through endorsement, the meaning they attach to the commodity is passed on to the consumers through consumptions. With the advances in information technology through the growing influence of the social media, celebrities have gained immense power in the social sphere as they attract followers in the tunes of millions. Celebrities set the trend in the luxury consumption especially amongst the millennial in the modern era. The millennial conform to virtually every trend of consumption exhibited by the celebrities in the social media platform (Khatri 37). The article gives special reference to a Chinese actress and singer Changchang Gao with 30 Million fans on the Chinese social media platform Weibo as a perfect example of the power of influence the celebrities have. When she wears a dress, the follows buys it. R & S hopes to sign a three-year contract with her in order to use her influence to build and promote their brand. Celebrity endorsement is a time-tested strategy that has been used by various top brands wide-wide including Rolex and Burberry to build and expand their product sales. Majority of marketing experts agree to the fact that celebrity endorsement can be an effective strategy in building luxury brands provided it’s done intelligently (Spry et.al 889) . However, the brand managers must ensure both celebrity-product match and celebrity-target audience match if the objectives of the initiative to be realized. The significance of a celebrity-brand match and the various roles they play as brand ambassadors’ shows the drive this strategy has shown in the last decade or so. China is increasingly becoming a (Spry, Amanda, Ravi and T. Bettina 892). A smart luxury brand marketing strategy can leverage this current trend in celebrity appeal to successfully enhance their brand's profit margin, expand the market share and create a longstanding brand image. Despite the potential benefits that come with celebrity endorsements, they pose a risk to marketers and should be handled with aptitude and complete attention to the details. It advisable that a brand exercises caution before contracting celebrities to guarantee believability and the achievement of the intended outcome (Khatri 37). The reputation of a celebrity can deteriorate after product endorsement and in such instances, celebrity endorsers can prove to be a liability to the brands they have endorsed to the detrimental effect on the company. There is also the risk of what is commonly known as the vampire effect. This term refers to the case of a celebrity overshadowing the brand such that the audience ends up having a recollection of the celebrity in place of the brand. Generally, celebrity endorsement has the drawback of being too expensive thus brands must review their budget and financial viability if they are keen to employ this strategy. According to a survey conducted in 2015 by Bain & Company, the global management consultancy firm, there are approximately 350 million consumers of luxury products worldwide and China by far remains the unrivaled market consumer in the Asian markets with a staggering fifty million consumers of luxury items. Additionally, China also emerged top globally by 17% growth in luxury spending in the period ranging from 2014 to 2015 and accounting for 30% of the 2016 luxury purchases (Yeoman 41). In light of these statistical developments, luxury brands pounced on the opportunity to expand their reach in the lucrative Chinese market, attracting the potential consumers with famous logos and glitzy outlets. However, the recent decline in domestic growth rates as results of as a slowing economy has forced the luxury brands to change tact, observe the emerging trends and adopt effective strategies to remain relevant players in the market. Current trends in the Chinese luxury market include the growing sophistication of the nation’s luxury consumers, characterized by the rapid maturity in the tastes of seasonal buyers. There is an observable demand shift from luxury items displaying flashy logos to more underrated and stylish commodities, abandoning prominent brands such as Gucci and Louis Vuitton striving to keep up with earlier year’s growth rate (Chevalier, Michel, and Gerald 77). This trend most is observable in one tier cities like Shenzhen, Beijing, and Shanghai where consumers have been purchasing luxury products for some years and are increasingly becoming conscious about fashion and are curious of what the rest of the world perceives as being stylish. These long-standing consumers are starting to focus on craftsmanship, scarcity and brand heritage in their consumption instead of flamboyant logos apparently displaying wealth. Luxury brands must to these changes accordingly in order to stay on top of their game. Alongside the increasing sophistication, Luxury consumers in China are also beginning to attach value to the luxury experience in addition to just the product itself. There is a growing trend in impulse purchasing making the organization of a flawless in-store experience an indispensable part of a luxury firm’s brand model and business image. Luxury outlets enhancing customer service, organizing VIP events and offering incentives aimed at exclusively communicating and recognizing the status of their most valuable customers. Examples of these unique treatments including giving special notifications regarding new products to individual customers and setting aside an entire floor exclusively for VIP buyers. Incorporating these trends and effectively adjusting to their new face luxury consumers’ preference is invaluable in helping foreign brands penetrate the Chinese market. Another notable trend is the recent surge of interest in Chinese traditional culture amongst millennials in China. This trend has had a far-reaching impact on their consumption behavior, creative expressions, and daily lifestyles. Reliving their heritage and culture in the products they consume is evidently becoming a popular way which the younger generation in China explore their own identities (Faure, Guy, and Tony 199). China cultural industry series index of 2017 reveals that post-90s Chinese consumers have exhibited the most willing to spend on culture. Foreign luxury brands can adapt to this trend by sharing the heritage as well as know-how in a cool but modern way. The fact that Chinese millennials have a yearning for their very own heritage does not hinder them from having interest in diverse stories. A brands story can be inspiring and precious but to resonate with Chinese millennials, these stories must be communicated using the modern distributions channels and digital tools. Foreign luxury brands must also seek in-depth knowledge of history and culture of the Chinese (Husic, Melika, and Muris 248). A casual cultural background will not only fail but is also likely to make millennials mock the brand on online platforms. A more clear-cut knowledge that does not patronize the young generation that helps them in exploring Chinese culture deeper is well accepted. Furthermore, luxury companies can take part in reviving Chinese crafts and arts with the partnership of local designers and experts. Chinese millennials are only beginning to explore their traditional culture and are thirsty to discover more about their roots. Foreign luxury brands can assist this proceeding cultural revival initiative by funding cultural initiatives, creating specific products in collaboration with the domestic artisans, or borrowing from their own distinct expertise (Yeoman 49). Cartier is a perfect of the true spirit of this partnership, in cooperation Chinese artisans, the company worked to restore timepieces of antique from the palace museum of the Forbidden City. A new desire for greener purchases amongst Chinese consumers constantly on the rise. Due to the dire situation of environmental pollution in China, consumers are becoming aware of the significance of green living, not only for egalitarian reasons but for the sake of their happiness as well. According to a report released by Mintel China, consumers more likely than ever to buy ethical brands at premium prices. In the survey, 58 percent of the consumer respondents showed the willingness to pay more for ethical brands and another 58 percent of the respondents acknowledging that purchasing ethical commodities make them happy. Luxury brands like Kering are already aligning their market strategies to conform to this changing development in consumer demands. This fashion giant is leading the green revolution in China. Kering lately introduced a WeChat mini-program known as Environmental Profit and loss (EP&L), a tool for measuring environmental impact associated with producing its products. By selecting the type of material, it’s so source and region of manufacture etc., consumers can have a clear picture of the environmental costs associated with their purchases of fashion brands. The lower the environmental cost of the brand, the more environmentally favorable the brand is (Ko, Eunju, and Carol 1397). As Chinese luxury consumer becomes more green-minded, Kering has applied this strategy to the realization of a magical outcome. The report also unearthed the increasing rate at which social stress is driving millennials in China to demand alternative means of relaxation. The culture in China that emphasizes academic and social success is piling pressure on youths by drawing a comparison between them and their peers (Zhang, Bopeng, and Jung-Hwan 77). Because of this many young Chinese want to escape to a virtual reality to flee the real-life pressures and have a longing for more playing means to interact with the physical surrounding. By innovatively modifying their retail space, luxury brands can provide a platform for young Chinese consumers to take a break from the realities of the world they live in. Luxury brands can sort to enrich traditional concept of retail therapy such as shopping extravaganza, but seek to enhance the customer experience as well. Lululemon, an active athleisure brand is a perfect example exhibited in its rooted services in experiential retailing. This brand attracts consumers to take part in meditation and Yoga activities as a part of a systematic retail strategy to lure loyal clients. As new technological innovation continues to spur change in the luxury industry, brands must also focus their attention on the current trends like interactions on mobile phone arena. Consumers are increasingly relying on the convenience smartphones brings, whether it is viewing live-streams and videos, posting items on social media, or shopping online. Brands with no efficient accessibility to mobile platforms will be viewed as deficient by luxury consumers in China in the near future. A research by Mintel reveals that mobile platforms are where potential consumers spend most of their time. A steady 87 percent of consumers in China made effective use of mobile payments in the year 2017, rising significantly from 69 percent mobile transactions in 2016. Therefore, luxury brands seeking to establish a strong base in China must establish a wide mobile presence in the country (Kapferer, Jean-Noël, and Vincent 177). Chinese consumers developed the habit of doing everything using mobile phones and digital experiences of these consumers will certainly affect their brand’s image. In conclusion, there is a constant growth and evolution in the consumption patterns of Chinese luxury consumers. Therefore, it is crucial that luxury firms in the Chinese market change point of Chinese customers as homogenous, but rather restructure their business models to appeal to the differences within the social class, levels of income and regions in the country (D’arpizio et al 89). Even as the established consumers of luxury seek unique products, the emerging middle still prefers the traditional elegance, Luxury brands must find a middle ground in developing product portfolios that meet the demands of both ends while retaining their traditional heritage and outlook that define their space in the market. Work-Cited Atwal, Glyn, and Alistair Williams. "Luxury brand marketing–the experience is everything!" 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Journal of Retailing and Consumer Services 20.1 (2013): 68-79. Read More