Marketing Luxury Products to Affluent Ethnic Consumers - Research Paper Example

Marketing Research By Andrea Hoffman 11/21/06 Marketing Research Proposal Draft Title Marketing Luxury Products/Services to Affluent Ethnic Consumers Introduction As the American landscape is changing, so is the wealth among consumers of all ages and ethnic demographics. Given the increase in wealth and consumption of luxury goods and services, Luxury Marketing has become a growing business. Many luxury brands and related services that cater to affluent consumers are developing products and services to meet the demands of their customers, keep up with the competition and attract new prospects. However, no one-luxury brand has mastered the art of marketing to the affluent ethnic consumer. Due to a general lack of research, marketing directors, brand managers and CEO’s generally lack an understanding of how to target and engage these viable consumers in ways that are relevant and meaningful. It is on this foundation that consumer research seeks to understand the consumer’s hedonic luxury brand purchases based not only on income, but also on the consumer’s ethnicity, gender, and demographics. Background and Significance Brand Marketing Clifton (2002) reported that three factors make brands marketable. These are (i) clarity of vision and values (ii) consistency in the manner in which the brand is applied and (iii) leadership in the way the brand renews itself and exceeds customer expectations. The clarity of what their brands stand for and their foci embodied in their visions, missions and goals constitute the first of the three-pronged brand building process. With this approach, employees and customers alike are adequately informed of what the brand is seeking to achieve and benefits that shall accrue to them if they are successfully accomplished. Such an approach garners employee commitment and also offer customers opportunity where to place their loyalty in the long term. A hallmark associated with all of these companies is their insistence on quality service. This standard is true of them irrespective of where their facility is located. Helliel et al. (2002) have enumerated factors that affect the buying intentions of customers as quality of services, equity, perceived value, satisfaction, past loyalty, perceived cost of changing supplier and brand perception. Most of them variables are inter-related and they impinge upon customer purchase behaviour cumulatively. High quality products can be created without input from marketing. However, in practice, it has been established that products that make market success received market or customer research support. There are several determinants that contribute to the success of a brand. Quality and quality perceptions in the mind of the customer are just but two of them. The importance of these factors has earlier been stressed. A brand can be successful in the short term with a quality that is not exceptionally high. However, continued market success requires continuous renewal to be able to meet customer expectations and values. Concerted efforts should also be made to influence customer perceptions towards the brand using appropriate marketing communication media and channels (Shimp, 1998). The ideas of brand marketing lead to the recognition of the research as being based on consumer perception. This leads to the question if different ethnic backgrounds impact the consumer perception of the brand strategies as identified by Clifton and Helliel. The Luxury Brand The luxury brand is one of high marketability, upper level pricing, and strong brand names. Luxury brands are generally identified as upscale extensions of a brand product that have a favourable impact on the consumer perception (Heath and McCarthy). The upscale view of a luxury product is highly evolved from the customer’s association with brand name reputation and pricing (Heath and McCarthy 2005). Brand equity increases as the product prestige increases (Randall, Ulrich and Reibstein 1999). The greater product diffusion and viability, the stronger the customer’s favourable perception and therefore the customer is willing to pay a higher price. The luxury brand is also ‘above’ the utilitarian (or functional) brand. This is because the luxury brand can be viewed as having a stronger price and quality level (Kim, Lavack and Smith 2001). The symbolism of the luxury brand as a hedonic (rather than utilitarian) purchase enables the customer to place a value on the purchase that develops a higher self-image, and, as the branding segment suggests, gives the customer a sense of prestige (Chaiken et. al. 1996). The prestige customer differentiates their personality from the utilitarian and necessity purchaser by buying brand items, which have some inherent value because of the brand name and consumer’s perception (Chaiken et al. 1996). Therefore, luxury brand marketing is generally one of upscale symbolism, pricing strategy is in the higher range, and product placement is on the ‘high street.’ This establishes that luxury brand marketing is succinctly differentiated from mass-market brand strategy. The luxury brand plays on the symbol of the brand, product placement, and price strategy in a different manner than other brand market strategies. Based on this, further research into the ethnic consumer’s purchasing habits of luxury brands. Furthermore, since luxury brands can be identified as hedonic purchases rather than utilitarian, this leads to a question of the hedonic purchasing behaviour of ethnic-based consumers. Hedonic Purchasing Behaviour in the Luxury Market Babin and Darden's article "Work and/or Fun: Measuring Hedonic and Utilitarian Shopping Value" focuses on the dimensions of hedonic and utilitarian consumer purchases, with the "shopping as work" and the "shopping as fun" consumer experiences. The shopping experience is an activity in which both the utilitarian based need and the hedonic based desire are important dimensions of the consumer's shopping experience because shopping involves more than the economics of supply and demand, there is also the social and psychological aspect. These dual dimensions are scaleable to recognize "formally that a shopping experience can be valuable, or valueless, in more than one way" (Babin and Darden p 644 1994). The statement 'in more than one way,' as it approaches the valuation of consumption is the theoretical view that consumers have scaleable utilitarian and hedonic desires in a psychological and physical sense, as well as the fact that customers have behavioral responses to these senses. The standard economics of supply and demand where the consumers experience is exclusively based on the products quality and price evaluations to control consumption choices and demands, and yet this does not define the reasoning of consumers emotional connections, where "A fourth definition equates value with an overall assessment of subjective worth considering all relevant evaluative criteria" (Babin and Darden p 645 1994), in a sense the overall assessment is the consumers emotional constructs, the sociological and psychological desire to feel rewarded in more than the physical sense of achievement. Babin and Darden also explain that in the hedonic orchestration, the purchase itself "may serve as the climax" of the experience, where the item is of less consequence as far as "tangible attributes," but in the case of impulse purchases, there is a need to purchase rather than a need to use a purchase (p 646 1994). This raises an important concept in hedonic theory, Babin and Darden note that in gaining an intrinsic value of a purchase, there is a presence of self-enhancement, a justification of the emotional factors, such as when a shopper 'wins' a good bargain. This leads to the research as identifying that the consumer’s perception of a brand as luxurious leads to the inherited emotional value the consumer gains by making a hedonic (rather than low-cost utilitarian) purchase. Therefore, the research asks if the consumer’s perception is affected by their ethnic and cultural heritage, and to what extent the ethnicity affects the hedonic purchase. Relating Luxury Brands and Ethnic Marketing America is a diversified land, and the global world is becoming a melting pot of different ethnic backgrounds. While many companies can take pride in their current ability to maintain a strong ethical and gender diversification in the workforce, there is the consideration of marketing towards a specific ethnic consumer. "Identifications that transcend class, for example, in emphasizing the commonality of ethnic identity, can serve not only to obscure intra-group class divisions under the veil of cultural closure, but also to foreclose the potential for inter-group class identification" (Rowely and Bhopal 2006). It becomes increasingly important for marketing strategies to ensure that their diversification is ethnical, cultural and gender based because of the transcending classifications throughout national and multi-national businesses. Diversity within businesses is outlined by De Vries and Kets (2006) in their secondary research as having these concerns, adapted for marketing leader to consumer strategy : There is a gap between expectations of leadership delivering to consumers. Despite growing unification and standardization, vast cultural, political and educational differences still exist. It is impossible to apply a universal set of principles to leadership. Leaders must break the status quo and experiment with new ideas. They have a responsibility to encourage diversity within their corporations. Specifically to consumers, the above framework signifies the concerns with diversification on multi-national scale. This outline significantly influences the building blocks of the problem analysis. Using De Vries and Kets ideology, the following inferences can be concluded as the problem analysis's primary research: Ensuring leadership training lessens gap between management and diversified consumer’s by delivering enthusiastic expectations. Establish the continuation of diversification with special consideration to the universal set noted above with specific time lines and goals. Maintain responsibility to diversification marketing and core competencies of staff and management. Perpetuate a diversified learning ground with special consideration to language barriers, ethnic and cultural barriers, and consumer’s luxury to hedonic purchasing desires. Justification of Research From the above literature, it can be stated that marketing in general is based on the consumer’s perception of the brand. The perceived quality, emotional constructs, and justification of the purchase impact the customer’s decision to purchase a brand. Being a culturally and socially conscious marketing consultant, working for Mercedes-Benz and BMW led me to realize the disparity in the marketing dollars being spent with the general market vs. emerging non-traditional consumers. It became apparent to me that these two highly regarded brands were missing opportunities to increase their sales and it was highly likely that other luxury purveyors were doing the same. Moreover, I would hear consistent complaints from my affluent ethnic friends and colleagues about how they were being ignored by luxury brands. In researching this phenomenon, my conversation with agencies, consultants and brands all turned up with similar responses. The net being 1) Little information exists for marketing directors to fight for this initiative, 2) Misinformed marketing directors don’t see the big picture and 3) Research is needed to substantiate allocating marketing dollars and resources towards these consumers. From the Luxury Institute to Simmons Research, no one organization has taken the time to report on this viable consumer group based on ethnicity. It’s no wonder why decision makers can’t see the opportunity. However, a significant amount of money, time and resources have been placed behind marketing to the ethnic (or minority) “masses” and that was many years on the making (when I advocated for that initiative 8 years ago, that too was looked upon as radical). Coming off the heels of that accomplishment, painting the picture of a viable affluent ethnic consumer might be easier. Ultimately, relevant, comprehensive and actionable insight will lead to informed business decisions and the implementation of marketing best practices. If the world has changed so must a brands attitude and actions towards marketing to new target audiences. Procedures The quantitative method will be used because of the need to gather new information in the consumer purchase habits. Furthermore, there is a need to gain an understanding of the values customers’ place on price and brand. To this, the quantitative research methodology answers the generalisation concern noted in the case study method. The quantitative method includes the Likert Scale Questionnaire survey that quantifies responses to a survey on a scale of 1-5. The Likert Scale is used to identify consumer responses to the questionnaire. The primary cause for a lack of information on this subject is a lack of understanding of the entire landscape of opportunity. An alternative course of action, based on the thought that consumer questionaires can not be distributed based on ethnic backround, includes a focus group from personal referrals and research organizations that have affluent ethnic databases of willing survey participants. The underlying causes of the situation are the lack of ethnic based research specifically in luxury brand marketing. It can be identified that distinctive ethnic backgrounds may have an impact on the luxury brand purchase, based on the idea that a consumer’s perception of a brand is based on their emotional connection to said brand. Participants Participants should include consumers who purchase luxury brands more so than consumers who purchase mid-market or mass-market brands. This research hopes to find ethnic consumers in the Asian-American, Hispanic-American, and African-American markets. Participants may be selected based on their geographic location, purchase history if available, and income. The research hopes to survey at least 25, but not more than 100, participants. This is a wide gap between low and high participants, however I have not yet been able to research exactly how many participants I will have access to. Further information in the participant selection strategy is also necessary to fully develop the proposed focus groups. Questionnaire Survey Method The survey questionnaire was chosen for its cost effectiveness. The telephone questionnaire allows for a sample population to be easily reached with responses documented and easily dissected using data entry and statistical analyzing methods. Because of their widespread use, questionnaires are non-confrontational to the sample population and do not force opinions or options, allowing for accurate and viable responses to be gathered with little bias or influence from the researchers or complicated research equipment. The questionnaire development will take into consideration possible defects in the question distribution and has made all attempts to use common language and word organisation that is not technical or industry based with the hopes to remove the larger concerns in relation to comprehension and cognition. However, it is important to note that in any research methodology that is dealing with human responses to qualitative or quantitative questions remains the possibility of language bias. Likert Scale The Likert Scale is used to identify consumer responses to the above questionnaire. This is done in the common format of a numerical five point scale where one shows a strong disagreement; two is a disagreement; three is a neutral response; four is an agreement; five is a strong agreement to the statements in the questionnaire. The benefit of this scaled method is that it allows for easy quantitative analysis to be made from qualitative questions because it defines respondents' opinions with numerical responses. The disadvantage of the Likert scale is that it 'boxes' the consumer opinions into specific categories, thus it does not allow for explanation or definition of the responses made. The quantitative data will be statistically analysed based on the survey questionnaire, response matrices, the flow of the consumer’s values from brand to price, and the relationship between customer demographics against brand choice and price choice. This will also include standard statistics: ANOVA, mean, median and mode ran in Microsoft Excel. This research proposes to define the associations between various metrics of consumers' perceptions in the realm of brand, quality, service, trust and loyalty based on participant’s ethnicity. A positive correlation between these categories would be indicative that consumers are aware of the implications of each defined category towards their personal values and shopping choices, while a negative correlation would indicate that there is not a link between these categories as far as how consumers perceive them. Customer Survey The following customer survey establishes the consumer’s background and demographics as well as income. The five-point likert scale questionnaire focuses on the types of purchases made and customer’s perception of brand names. Customer Questionnaire Gender Male Female Age 15-25 25-35 35-45 45-55 55 + Income per year Under 20,000 20,000 to 30,000 30, 000 to 40,000 40,000 to 50,000 Over 50,000 Are you the primary purchaser of good in your home? Yes No Other Please circle your ethnic background Asian African Hispanic How often do you purchase the following Never Occasionally Unsure Often Always Luxury brand items Generic brand items Both How often do you consider the following in your purchases? Never Occasionally Unsure Often Always Price Value Brand name Company How much do you agree with the following statements: Strongly Disagree Slightly Disagree Neutral Slightly Agree Strongly Agree Brand names are indicators of quality, A brand of product is more important price. Price is more important than brand Higher price is an indicator of quality Marketing influences my purchase habits I purchase mostly name brand items How much do you agree with the following statements: Strongly Disagree Slightly Disagree Neutral Slightly Agree Strongly Agree Purchasing brand name items lets me feel better about myself I gain personal satisfaction from purchasing luxury brand names I enjoy making impulse purchases I am willing to pay higher prices for luxury items I gain personal value when I purchase luxury brand names. Assumptions There are several assumptions made in this research. Primarily, this research assumes, based on theories from the preliminary literature review, that brand and marketing are impacted by the product category as luxurious and hedonic. Secondly, as far as companies are concerned, this research assumes that there is a relationship in the company product/brand category to the marketing strategy and consumer’s perception based on their ethnic history. This research assumes that, based on the preliminary literature review, the consumer being surveyed at random is the average customer with a knowledge or care towards brand and price. This is because most literature points to consumers being more educated about the brand name, and price for value. However, this is an assumption because the research is based on consumer survey participants being knowledgeable about brand and product type in comparison to product value domains. Results and Expectations A well-rounded study will enable brands to understand and effectively engage affluent ethnic consumers in a more meaningful and relevant ways. It will help marketing managers better allocate budgets or re-purpose money towards affluent ethnic consumers in a cost effective manner that delivers stronger results. It will also enable advocates of this initiative to present upper management with a sound business case in order to implement a shift in business planning and execution. Best practices for brand experiences, marketing platforms, web content and retail experiences will be included in the research. The final goal of this proposal is to initiate a stronger marketing plan for companies that are within the luxury brand market. This will help fill the gap between customer expectations and product viability, as well as prepare luxury and hedonic purchase oriented product companies for development of stronger, more customer-focused marketing plans. The final recommendation is highly relative to a stronger marketing plan. Furthermore, the recommendation can also be used to market towards the ideals of global diversity of the company. References Babin, Barry J. Darden, William R.(1994) Work And/Or Fun: Measuring Hedonic And Utilitarian Shopping Value. Journal Of Consumer Research; Vol. 20 Issue 4, P644 Chaiken, Shelly, Wendy Wood, And Alice Eagly (1996) Principles Of Persuasion. In Social Psychology: Handbook Of Basic Principles, Ed. E. T. Higgins And Arie W. Kruglanski, New York: The Guilford Press, 702-742. Clifton, R. (2000). Brands And Their Importance In Growing A Business. Interbrand Great Britain. De Vries, And Kets, M (2006) The Future Of European Business Leadership. European Business Forum Volume Spring 2006 Issue 24, P36-42, 7p Retrieved December 19, 2006 From Proquest Database Heath T. B. Et Mccarthy M. S. (2005), Extending Brand Names Up And Down In Quality: Immediate And Downstream Effects On Choice, 32nd International Research Seminar In Marketing, La Londe Les Maures, France, Volume 52 Issue 65 7p Retrieved December 19, 2006 from Proquest Database. Hellier, P.K., Geursen, G.M. , Carr, R.A. And Rickard, J.A. (2003). The Customer Repurchase Intention: A General Structural Equation Model. European Journal Of Marketing, Volume 37 Issue 11/12 pp. 1762-1800. Retrieved December 19, 2006 from Proquest Database. Kim K. Et Chhajed D. (2001), An Experimental Investigation Of Valuation Change Due To Commonality In Vertical Product Line Extension, Journal Of Product Innovation Management Volume 18 Issue 4 pp 219-230. Retrieved December 19, 2006 from Proquest Database. Randall T., Ulrich K. Et Reibstein D. (1999), Capital Marque Et Étendue Verticale De La Ligne De Produits, Recherche Et Applications En Marketing, (English Version) Volume 14 Issue 3 pp 79-106. Retrieved December 19, 2006 from Proquest Database. Rowely, Chris And Bhopal Mhinder (2006) The Ethnic Factor In State-Labour Relations: The Case Of Malaysia. Capital & Class; Mar2006 Issue 88, P87-115, 29p Retrieved December 19, 2006 from Proquest Database. Shimp, T.A. (1999). Advertising Promotion- Supplemental Aspects Of Integrated Marketing Communications, 5th Edition. The Dryden Press, USA. Read More