Luxury and the Montblanc brand


The purpose of this research paper is to investigate if and how a specialised luxury brand can extend its perception of “luxury brand” to other products categories. Being the luxury industry so wide of dimensions, the researcher decided to focus on one specific brand: Montblanc.

This choice permitted to closer define the pitch of the analysis in order to carry out a reliable and feasible research that might prove the success of the diversification strategy pursued by the Montblanc brand. Montblanc represents, indeed, an interesting case study to show how the diversification strategy can be an effective tool to increase the luxury brand perception among the final customers.

Montblanc, market leader for what concerns the writing instruments, has been striving during the last few years to definitively become a global luxury brand. To do so, Montblanc entered many different segments of the luxury world, such as leather, watches, fragrance and eyewear in the last ‘90s and the silver jewellery at the beginning of the 21st century. Moreover, a couple of years ago, Montblanc stepped forward into the fine jewellery business which is seen as “the critical step” in its strategic development to attain the full status of global luxury brand.

In order to verify how the Montblanc brand is viewed and perceived in its competitive environment, the researcher adopted both a quantitative and a qualitative research method.

On one hand, a customer survey consisted of XXX questions was developed. This survey submitted to actual and potential customers had the objective to impartially investigate the customer perception of the Montblanc brand.

On the other hand, in-depth interviews with some Montblanc's managers were carried out. The interviewed, who represented different levels of the Montblanc's management, allowed the researcher to gain a full picture of the Montblanc brand and its strategic movements. Moreover the direct comparison with the Montblanc's management was important to identify on which resources and competences the final recommendations could be based.

For practical purposes, this study can be divided in five major parts:

1. the first part outlines the theme and the key question of the research paper;

2. the second part concerns the review of the literature as regards the following points: the definition of luxury and of luxury brands, some approaches to measure the brand perception / the reasons why people buy luxury goods (status-laden or conspicuousness-laden), and the diversification strategy. This part will be concluded with an in-depth analysis of the Montblanc brand;

3. the third part gives a fulfilling view of the undertaken research with particular attention to the objective, the hypothesis and the research method;

4. the fourth part covers the relevant findings coming from the analysis of the research results;

5. the last part presents the conclusions of the study and the researcher's final recommendations to the brand.

The theme of the study

The theme of the research paper “Luxury and the Montblanc brand” gives an important insight of the key constructs at the core of the work.

In first position one finds the term “luxury” whose meaning and definition are almost fuzzy. It is the reason why, this work will examine some important findings coming up from the literature so wide in this respect, at the end of which some major traits of the definition of luxury will be underlined. Especially, the literature review will cover the evolution of the definition of luxury all along the “recent” history. To be noticed that, the construct of luxury will be also investigated in the survey submitted to the final customers and also in the interviews to the Montblanc's management and other practitioners of the luxury industry. This research, carried out by exploring both the customers' and the professionals' point of view, enriches the research itself and helps to get a good understanding of the major characteristics emerging nowadays about this fascinating concept. To be clarified that this study, focusing on the Montblanc brand, is related to a part of the luxury market such as the accessories, jewellery and watches segments.

The second part of the theme of this study is represented by three words: “the Montblanc brand”. This recalls two topics. The first one refers to the term “brand”. By revising the literature, a definition of brand will be proposed. In this respect, there are not important doubts and we will briefly comment the definition of brand recently provided by Jevons (2007). Nevertheless, some issues may arise for the definition of “luxury brand” which is obviously related to the construct of luxury. The expression “the Montblanc brand” as a whole, moreover, puts the attention on the leader German brand whose unmistakable star logo is worldwide the icon of quality and excellence. As previously said, the researcher chose a specific brand to be able to concretely study the fundamental question of his research paper that will be clarified in the next lines.

To be noticed that the two parts of the theme title “luxury” and “the Montblanc brand” are tied up by the conjunction “and” that underlines the strict link between luxury and the Montblanc brand. Nevertheless, this link requires a further consideration because it can be misleading if not misunderstood.

Which is the real mean of this linkage? There are no doubts that Montblanc is a luxury brand; but is it a specialised luxury brand or a global luxury brand?

This question is strictly connected to the core issue of this master thesis. More precisely, the driver question is if a specialised luxury brand can extend its perception of “luxury brand” to other product categories.

In order to answer this key issue, the researcher chose to study a well-known brand which has been pursuing a diversification strategy to become a global luxury brand. The construct of diversification strategy will be explained from a literature point of view. Moreover, an in-depth analysis of the Montblanc brand and its strategic business areas will be undertaken by applying some tools learned during the studies at the ESCP Europe especially during the modules of strategy and of strategic diagnostic. This becomes fundamental to better understand in which kind of diversification strategy Montblanc is engaged and to give a wide knowledge to the reader about the brand itself.

To conclude, herein the reasons why the student chose this theme for his master thesis. There are three major reasons bringing to this choice.

The first one refers to the luxury world. The construct of luxury, albeit widely analysed in the literature, remains somehow mysterious. Today, the definition of luxury is strongly evolving mainly due to the economic uncertainty mostly caused by the financial crisis of 2008. Therefore, although the probability to uniquely define luxury is very low if not nil, the challenge to better understand what luxury is/means/represents/is perceived nowadays represents to the researcher a great topic of interest. His interest in luxury is also nourished by the will to work in this sector in the upcoming future. This surely stems from the professional experiences made by the student as part of his studies within companies (Montblanc and Concord) operating in the jewellery, watches and accessories segments. Indeed, during these experiences, the student was impressed by this world rather mysterious where the care of the smallest detail makes a huge difference.

The second reason concerns the Montblanc brand. The researcher had the chance to work for five months at Montblanc International, at the Headquarter in Hamburg within the Jewellery Category Department, and for three months at Montblanc UK, in London within the Retail Department. During this extremely positive experience, the student discovered in-depth this fascinating brand, from its tradition to its vision, from a strategic and more operational point of view. Surely the experience personally gained at Montblanc became highly useful in the development of the research and mainly in the analysis of the brand and of its strategy. Moreover the ongoing meetings/interviews with the Montblanc's management had a double advantage. On one hand, it enriched the content of the study and on the other hand helped the student maintain the contacts with a firm that is at the top of his personal ranking of his employment research.

The third reason concerns the strategic aspect behind this theme. Indeed, the diversification strategy pursued by Montblanc offered to the student the possibility to develop this construct often used/abused by luxury brands to extend their perception of luxury and, as a consequence, to finally increase their revenues. The diversification strategy has often been the object of strong discussions, mainly for what regards the results of pursuing this strategy and the ways of implementing it. This work has got the objective to rationalise the different types of diversification strategy and to investigate this theoretical concept on a concrete case study, thanks to the study of the Montblanc brand. This research will focus on the key factors of success or failure standing from the analysis of the diversification strategy pursued by Montblanc.

The key question of the study

“Did Montblanc, a specialised luxury brand in the writing instrument segment, extend its perception of “luxury brand” to its other product categories?”

This key question gives a stricter view on the content of this research paper. This study will focus on the strategic development of a specialised luxury brand as Montblanc was/is in the writing instrument segment since its origin. In detail, the research has got the purpose to investigate how the Montblanc brand is nowadays perceived from the final customers. The findings coming up from the customer survey will help the researcher evaluate if the Montblanc brand is still perceived as a specialised luxury brand or if its image has developed to the status of a global luxury brand. The customers' responses represent indeed the most reliable feedback to assess the degree of success of the diversification strategy pursed by Montblanc in the last years which has brought the brand to operate in relevant luxury segments such as leather, watches, fragrance, eyewear and jewellery next to the historical business area of writing instruments.

At a second stage, the customers' responses will be compared with the Montblanc management's point of view in order to verify if some discrepancies exist. This step is important to get a full picture of the Montblanc brand's standing.

Then, after an accurate presentation of the research, the student will point out the major findings in order to draw his conclusions about his study. The conclusions will include the major factors of the diversification strategy pursed by Montblanc to extend its perception of “luxury brand” to other segments in the luxury industry, in addition to the fields of improvement coming out of the research.

Finally this research paper will present the student's recommendations which will take into account the strategic objectives standing out from the interviews with the Montblanc's management and also the Montblanc brand perception outlined by the customer survey.

In the next pages, the student will study, by starting from the literature review, some key concepts at the core of this research paper which include:

* the definition of luxury and its evolution;

* the definition of luxury goods;

* the definition of brand and of luxury brands;

* briefly the different approaches to measure the brand perception among the final customers.--> the reasons why people buy luxury goods (status or conspicuousness);

* and the presentation of the diversification strategy: the objectives, the different types, the advantages and the drawbacks, the risks, and the key success factors.

The literature review, as said, will be completed by the contextualisation of these constructs to the Montblanc brand. At this stage the Montblanc brand will be studied in order to give all the required basics to launch the following research.

Literature review

In order to better define the constructs at the core of this research paper that will give the background of the following research, an in-depth literature review will be made. Four major concepts will be discussed thanks to the support of different literature material which includes insights from books, articles, management and fashion websites and personal references in terms of power point presentations, excel documents and excel files.

The activity of research consisted mainly in going through the databases accessible from the Intranet at ESCP Europe in order to directly access to a wide range of reference material.

The definition of luxury

The first part of the literature review regards the construct of “luxury”. Luxury has always been a central field of research. Indeed its specific characteristics have attracted the interest of the researchers all along the history. However, albeit the meaning of luxury is widely discussed in the literature, researchers did not come up with a commonly accepted definition of this construct. For sure, it is not possible to uniquely define luxury. Simply, the words do not seem to be able to describe what luxury means. In this respect, the literature leaves this concept shrouded in mystery.

This research paper will face the definition of luxury by going through different steps. At the beginning some different definitions of luxury will be put forward by touching its literal and economic meaning, and also by exploring some philosophical and social interpretations. Then, an interesting brief explanation of the etymology of the term “luxury” will be presented. Afterwards, the “history” of luxury will be outlined before entering in more detailed considerations regarding the notions of old and new luxury. At the end of this first part, the student will show the latest development of the “luxury” construct by getting important insights from the practitioners' point of view founded in articles related to the luxury world.

Literal definition of luxury

Webster's Revised Unabridged Dictionary (1913): “Anything which pleases the senses, and is also costly, or difficult to obtain; an expensive rarity.”[1]

Babylon: “Something which is unnecessary and often expensive, something which contributes to one's pleasure or comfort; indulgence in expensive and unnecessary items; costly and magnificent living.”[2]

Economic definition of luxury

Mason (81): “Un produit est considéré comme luxueux si l'élasticité de la demande par rapport au revenu est supérieure à 1.”

Philosophers' definition of luxury

Paul Iribe (1932): “Luxe: besoin qui commence où finit la nécessité.”[3]

Voltaire (1694-1778): “Superflu chose très nécessaire. J'aime le luxe et même la mollesse.”

Rousseau: “Le luxe doit être rejeté car il est contraire aux exigences de la nature.”

Sociology researchers' definition of luxury

Bourdieu (79,84): “Comme tout acte de consommation, l'achat d'une marque de luxe est un moyen d'affirmer sa position sociale, de faire croire à un changement de position ou prouver un changement de position sociale. Tout dépend du rôle que l'individu joue ou pense jouer au sein de son groupe de référence.”

Baudrillard (68): “L'accès au luxe est déterminé par une volonté sociale de se distinguer, de se démarquer ou bien encore de s'affilier à un groupe. Suivant le groupe social auquel la personne se réfère, le luxe aura une signification différente.”

Maffesoli (96): “L'analyse du luxe par le prisme des classes ne prend pas en compte le resserrement des individus autour de groupes restreints, de tribus. La consommation devient alors un plaisir personnel et intime, sans volonté ostentatoire.”

Management researchers' definition of luxury

Gutsatz M. (96): “Le luxe comprend deux niveaux de représentation. Le premier niveau est matériel, il comprend le produit et la marque (son histoire, son identité, son savoir faire unique, le talent). Le second niveau est psychologique. Il s'agit de représentations qui nous sont propres, influencés par notre milieu social et les valeurs de la marque.”

Roux E. (91): “La marque de luxe se caractérise par une valeur ajoutée symbolique, imaginaire ou sociale qui la différencie des autres. La marque de luxe correspond ainsi aux besoins symboliques que le consommateur peut ressentir (par opposition aux besoins fonctionnels ou de variété).”

Laurent G., Dubois B. (95): “Le luxe est subjectif, personnel et perceptuel. Si l'on cherche à déterminer les attributs caractérisant un produit de luxe, 6 dimensions apparaissent : Une qualité supérieure et perçue, un prix élevé, une sélectivité et une rareté des produits et de la distribution, un pouvoir attractif important un savoir faire certain et la non nécessité.”

Practitioners' definition of luxury

Coco Chanel: “Le luxe est le contraire de la vulgarité.”

Boucheron A.: “Le luxe est une « mayonnaise » constituée de différents ingrédients. Si l'un d'entre-eux manque ou est mal dosé, la mayonnaise tourne. Le luxe est un concept et non un produit”.[4]

Jean-Louis Dumas-Hermès, historic Chairman and CEO of Hermès: “Le luxe, c'est créer un rêve qui perdure.”[5]

Just by analysing these few definitions of luxury, one can notice the absolute subjectivity of this concept. It stands out that luxury has got a close linkage with pleasure, rarity, exclusivity, quality, high price tag. Economists define luxury as something which is unnecessary, statement which would be probably argued by some studies on the consumers' reasons to buy luxury. For someone (Rousseau) luxury should even be avoided because it is not a primary need of the human being.

Luxury is something that belongs to the inner part of each individual but it can be also highly other-oriented. By wearing or experiencing luxury items, an individual expresses his own personality and can show his social status and position in the community.

The fact is that luxury is probably a bit of everything, a perfect trade off of opposite concepts. This makes luxury a kind of mystery.

After this round-up, the study will briefly present the etymology of the term “luxury” before briefing touching the historical evolution of luxury.

Etymology of word luxury

According to Dubois, Czellar and Laurent (2005) the English term[6] “luxury” is derived from the Latin “luxus”, which, according to the Oxford Latin Dictionary, it signifies “soft or extravagant living, (over-)indulgence” and “sumptuousness, luxuriousness, opulence”; “luxus” also means sensuality, splendour - and its derivative “luxuria” is extravagance, riot etc. Merriam-Webster's Dictionary defines “luxuriance” as something characterized by richness and extravagance, often tending to excess.

The word “luxury” is also often semantically associated with “lux” the Latin word for light; therefore, luxury carries connotations of brightness. It is glittering and, in addition, it is something visible.

The evolution of luxury

Until the Middle Ages the writings point out that luxury was the reflection of the religious mystery that drives the human being to go beyond himself driven by an offer or a sign.

But the heyday of luxury is without any doubt the Renaissance (15th and 16th century), flourishing period for literature, art and science. This period reflects the explosion of luxury, vogue of the ostentatious architecture coming from Italy. At that time, luxuries are exclusive items belonging to the aristocracy and the court. During the Renaissance luxury becomes the prerogative of the bourgeoisie.

During the 18th and 19th century luxury remains exclusive of the “élite”. The 20th century signs an important step in the evolution of luxury. Mainly after the Second World War luxury becomes almost conformist, not extravagant or eccentric. In the ‘80s, the focus is on the luxury consumer; in this time, younger period discover luxury thanks to the accessories. At the end of this decade, there is the boom of luxury for what concerns the distribution channel development. The major players widen their reach by exploiting the markets where they are present and even by entering new markets. At the beginning of the ‘90s, the crisis that hit also the luxury industry, pushed to rethink the concept of luxury that gained a higher spiritual/moral meaning in addition to the impeccable quality.[7]

Old-luxury vs New-luxury

With the 21st century, new definitions of luxury are emerging in the practitioners' literature. For the purpose of this research paper, in the next few lines some considerations will be made about the expression of “old luxury” in opposition to “new luxury” in order to clarify their meaning.

Some practitioners argue that “old luxury” is about the good itself and is defined by the company, in opposition to “new luxury” which is experiential and is defined by the consumer (Florin et al., 2007).[8] This seems to trace a clear line between the two concepts: “old luxury” is about the material thing, it is about stuff. Instead, “new luxury” is about experiencing.

Nowadays, it seems evident that the concept of “old luxury” is passed. The high quality of luxury products is assumed by consumers who are looking forward for something more. In our time, luxury is increasingly defined as those special qualities, features and attributes intrinsic to a product and that go beyond the product itself. According to Ms. Danziger (2008)[9], the product itself does not anymore create personal fulfilment.

New luxury goods are “products and services that possess higher levels of quality, taste, and aspiration than other goods in the category but are not so expensive as to be out of reach”[10]. In other words new luxury goods differ from traditional luxury ones by being more affordable, more accessible, and by targeting new customers. According to Twitchell[11] (2002, p. 272), these consumers are “younger than clients of the old luxury used to be, they are far more numerous, they make their money far sooner, and they are far more flexible in financing and fickle in choice”. This shift to the new luxury may be referred to as the democratization of luxury.

Today, luxury is in the eye of the beholder and the consumers' perceptions are not anymore, exclusively depending on the exceptional quality of luxury products and on the high price tag. This does not mean that the materialism is not important but only that consumers are eager of experiences. Therefore, as a consequence, a shift from "product-centric" to "consumer-centric" point of view becomes inevitable to attract luxury consumers.

The distinction between “old luxury” and “new luxury” will be helpful along this work in the sections related to (evolution of) the reasons why people buy luxury goods and mainly in the research of the consumers' perception of the Montblanc brand which will lead to the student's recommendations at the end of this research paper.

At this point, it becomes interesting to see how the today's definition of luxury has evolved in the light of the recent events occurred in autumn 2008 which had an important impact on the entire economy and, therefore, also on the luxury industry.

Today's definition of luxury ppt vale, crisis, bling bling, tradition,

According to Yeoman and McMahon (2005), luxury is “incredibly fluid, and changes dramatically across time and culture”[12]. This opinion becomes very much clear by thinking if the meaning of today's definition of luxury is the same definition of luxury of just eighteen months ago.

Today it is even harder to give an accurate definition of luxury. After the financial crisis, culminated with the bankruptcy of some key players in the real estate and banking industry which caused a chain reaction hitting all the other sectors, the perception of luxury has surely changed, at least to a certain extent. This critical point merits further considerations and, therefore, it will be investigated in the following research at the core of this study.

In the next lines some leaders' opinions in luxury will be presented. Some of these thoughts were collected in a confidential in-depth research carried out at the beginning of 2009, supplied by Montblanc's management. They will introduce the student's point of view about the “sharp” evolution of luxury meaning in the last months.

Herein, some comments about the change of luxury construct in the last year.

S. Toledano, Dior: “Compulsive shopping, it's over.”

M. Nieto, Baume & Mercier: “Price sensitivity is coming back fiercely.”

C. Binkley, The Wall Street Journal: “It's bling over”

J. Rupert, Richemont: “During a recession, I'm sure consumers will choose solid values.”

B. Pavlowski, Chanel: “Don't neglect any aspect of the product quality.”

R. Palti, Le Nouvel Economiste: “Many markets are saturated and there is an increasing number of offers proposing the same service. Finding what will best meet the clients' expectations is no easy task. And yet, in these days of economic, financial (& lack of confidence) crisis, there is not a single company that can afford not to satisfy its clients, even just to sell.”

B. Arnault, LVMH[13]: “post-recovery customers will not only place a particular emphasis on values like quality and craftsmanship, but also on exclusivity and commitment to social and environmental responsibility.

D. Dion, Sorbonne University: “Luxury has to return to its exclusive and extraordinary roots.”

B. Fornas, Cartier: “We are witnessing a return to true luxury and high end luxury products, which Cartier symbolises.”

JC Biver, Hublot: “When there is a crisis, it is necessary to get as close as possible to one's clients to better understand them, to reassure them and to make in due time the right decisions.”

S. Toledano, Dior: “There should be both empathy and connivance between the brand and the client.”

A. Ahrendts, Burberry: “Even though the overall market may become difficult, I think that retailers and customers are always open to a new innovative idea or a new exciting concept.”

Jeffry M. Aronsson, Donna Karan: “luxury is attention to detail and quality backed by superior service.”[14]

B. Pavlowski, Chanel: “One should keep investing in creation.”

D. Peters, Jewelers of America: “Selling in challenging times is not about product and it's not about price. Rather, it's about people and relationships, and the quality of the customer experience.”

J. Taylor, Harrison: “The definition of living well is changing. There is a desire to not stand out. If you're laying people off, you don't want to buy a Ferrari.”

S. Geary, Mulberry: “In the coming months, the mood will be against that ‘blind consumption.'”

A. Arnault, LVMH: “The collection focused on elegance and discretion and used materials that were noble but not too visibly noble.”

Giorgio Armani: “Those who deliver what they promise to their customers, and bear their customers in mind, will survive the current economic climate.”

After this round-up, some further considerations have to be made. At our time, some relevant trends can be observed in luxury. These trends have an important impact on today's interpretation/ perception of luxury.

Increasing of price sensitivity is one of them. In time of crisis, luxury sector is one of the most negatively affected due to the nature itself of luxury products. According to Maslow's pyramid, luxury products do not belong to the first steps of the human beings' needs (physiological and safety)[15]. Therefore, their purchase can be easily postponed causing a time of “diet” for luxury brands.

But according to some experts, reducing prices is one of the things that luxury brands cannot do because it will irremediably harm their in the eyes of customers.

Another direction is that the return of luxury to its exclusive and extraordinary roots, someone would say to true luxury and high end products.

But probably one of the most important tendencies is that, nowadays, the luxury business model is evolving from a model driven by supply to a model driven by demand. In other words, the era of “the client is king” is back. Customer satisfaction is again the priority. But consumers have become more and more demanding. And, albeit an impeccable product quality is something that cannot be at all neglected by luxury brands, today it seems not to be enough to fulfil final customers. They want more...

Luxury brands have to dedicate themselves to fully and deeply understand their customers. The key success factor to overcome challenging times is not about product and price but it is about the quality of the customer experience, people and relationships. Customers want to be reassured, guided, supported, understood and surprised by luxury brands. Luxury brands have to build up solid, growing and ongoing relationships with their customers, which go beyond the customer experience during the act of purchase.

In the present day, the era of “bling bling” is over. The desire not to stand out is noticeable. Luxury, today, is about an accurate simplicity. This new modesty reflects as well a particular attention to all that concerns a social responsibility of the brand.

To sum up, quality, confidence, proximity, creativity, service, new modesty, exclusivity, responsibility, are key terms that could somehow outline the today's definition of luxury. This construct will be investigated in this study thanks to specific questions in the questionnaire submitted to final customers.

After having exhaustively covered the definition of luxury by underlining the evolution of its interpretation along the history with major attention to our time, the literature review will proceed in studying the construct of luxury goods. This represents a good opportunity to clarify some key doubts related to the classification of luxury goods. This will be followed by a further analysis and classification of luxury brands.

The definition of luxury goods

Luxury goods

The definition of luxury goods has been attempted by many researchers of different fields. It is evident from the literature that there is a lack of consensus particularly among academics regarding the definition of luxury goods products. In this regards, it is undoubtedly important the underlying context of the definition.

The discipline of economics provides a rather precise definition of luxury goods which can be empirically tested based on Engel curves (Ernst Engel 1821-1896)[16]. These curves gives a classification of goods, by showing the relationship between quantity demanded of particular goods and disposable income given a constant price.

A first classification consists in distinguishing between normal goods and inferior goods. Inferior goods are goods whose demand decreases as disposable income increases. On the contrary, normal goods are goods whose demand increases as disposable income increases.

Moreover within normal goods, one can identify between “necessity goods” and “luxury goods”. The former category has a downward sloping Engel curve since the proportion spent on such goods proportionally decreases as income increases, the latter one has an upward sloping Engel curve indicating that as income increases, a greater proportion is spent on these goods.

Moreover, form an economic point of view, luxury goods are characterised to have high income elasticity of demand (Ԑi≥1): as people become wealthier, they will buy more and more of the luxury goods. This also implies that that should there be a decline in income its demand will significantly drop. A further consideration is that income elasticity of demand is not constant with respect to income, and may change sign at different levels of income. That is to say, a luxury good may become a necessity good or even an inferior good at different income levels, e.g. a wealthy person stops buying increasing numbers of luxury cars for his automobile collection to start collecting airplanes (at such an income level, the luxury car would become an inferior good).

GRAPH (Engel Curve for a Normal Good Ԑi> 0; Luxury Goods are Normal Goods but they have an Ԑi≥1, Quantity demanded is very sensitive to changes in disposable income; “Necessity Goods” are Normal Goods but 0< Ԑi<1, Quantity demand is not very sensitive to changes in disposable income; Engel Curve for an Inferior Good, Ԑi< 0.)

In other words, economists define luxury goods as goods that have a comparatively high price-to-quality ratio. However, for the economist, quality means tangible functions; therefore, a luxury good has a significantly higher price than another good with similar tangible functions.

But, according to Dubois and Duquesne (1993)[17], the purchase of luxury goods is clearly not governed simply by economic factors, as income is a necessary but not sufficient condition to explain purchase. Further considerations on the factors which drive the purchase of luxury goods will follow.

Their opinion seems to be in line with the studies of Vickers and Renand (2003)[18] who remark that “although luxury and non-luxury goods can be conceptualised on the basis of functional, experiential and interactional symbolic dimensions, there is a distinctive difference in the mix of these components.” In particular, they point out that luxury goods score higher in the psychological, social and symbolic dimensions, while non-luxury goods are higher in the functional dimension.

Moreover, according to Veblen (1899)[19] the distinction between luxury and non-luxury goods products cannot be made by appearance or intrinsic qualities of the goods themselves, but they have to be assessed into their socio-economic context. As a consequence, a luxury goods product is something that is definitely out of the ordinary in terms of daily living needs.

Definition of brand

Although the academic and practitioner branding literature is extensive, it is challenging to find a universally accepted definition of the term “brand”.

Cambridge Dictionary defines brand as “a mark that is burnt or frozen into the skin of an animal such as a cow to show who owns it”. Therefore, branding is the act of making something uniquely recognisable.

Jevons (2007)[20], after several studies, provides the following definition of brand: “A brand is a tangible or intangible concept that uniquely identifies an offering, providing symbolic communication of functionality and differentiation, and in doing so sustainably influences the value offered.”

This definition, albeit quite recent, was criticised for two main reasons. The first one concerns the high number of the key components which renders this classification rather complicated. The second one refers to the fact that a key component is missing, that is to say the experiential dimension of the brand (Buchanan-Oliver et al. 2008)[21].

Definition of luxury brands

After having clarified the construct of luxury and of luxury goods, the student will address the concept of luxury brand. It is demanding also in this regards to find a uniquely accepted definition and classification. As seen, the concept of luxury itself is rather arbitrary. Moreover, this task becomes even harder after the so called “democratisation of luxury” phenomenon. In his studies Kapferer (2006)[22] stresses the ambiguity in defining a luxury brand “where does luxury stop and where does upper range start for instance? Is what has been called mass-stage products (a contraction from mass prestige) or new luxury still luxury?”

Although it is difficult to clearly define luxury brands, all the major researchers classified luxury brands in three different categories. In the ‘90s D. Allérès (1990)[23], proposes three different luxury worlds related to three distinctive social classes:

· At the top of the pyramid there is “the inaccessible luxury” characterised by absolute products accessible only by a narrow elite socio-economic class. These products, few in quantity and definitely custom-made, are distributed in few points of sales and have an extremely high price tag. They offer the owner exceptional social prestige and distinctiveness.

· In the middle, there is “the intermediate luxury” which describes luxury products attainable by the “professional” socio-economic class. These products are not anymore custom-made but anyway they can be adapted to the customer's needs. Their distribution channel is still limited and their price is still very high.

· At the bottom of the luxury brand pyramid there is “the accessible luxury” which includes luxury products attainable by the middle socio-economic class. Also defined “mass-luxury”, these products are produced and distributed in large scale.

However, this categorisation is open to some criticisms for two main reasons. On one hand, some concerns are raised due to the difficulty to establish the difference between the intermediate and the accessible level, mainly related to the shift of socio-economic groups within western industrial nations towards a professional middle class position. On the other hand, some researchers underline the fact that to classify a luxury goods product as accessible or inaccessible, it is necessary to understand the sellers' desired product position and the consumers' perceived product position (Renand, 2003)[24]. This would confirm the importance of the consumer's role in the brand positioning pursued by a luxury brand.

A very close classification was presented by Nueno and Quelch (1998)[25] which identify three types of luxury brands:

* “Limited awareness brands”, focalised on one limited product line targeting an exclusive niche market. Their distribution is absolutely selective and their price is out of range.

* “Well-known luxury brands” which are inaccessible to the mass market due to their limited distribution and high price.

* “Well-known luxury brands” which are affordable to a broader audience for availability and price.

Finally, Kapferer (2006)[26] admits the difficulty to uniquely define the construct of luxury and, instead adding another definition, provides a classification of two different models of luxury brands. Both of them represent luxuries but their philosophy is different: one is rooted in “history, rarity and craftsmanship” and in most cases is associated with European luxury brands, a second model is based “upon stories, image and marketing finesse” and represents the American luxury brands.

Within the European model, he identifies three different classes of luxury brands which follow the direction given by his predecessors such as D. Allérès, 1990 and Nueno and Quelch, 1998:

* The “griffe”, which represents pure creation of a single person, materialised in the perfection of unique products.

* The “luxury brands” produced in small series within a workshop or “manufacture” and mostly hand-crafted.

* The “mass-production luxuries”. In this respect the author argues “at this level of industrialization the brand's frame generates an aura of intangible added values for expensive and prime quality products which, nonetheless, gradually tend to look more and more like the rest of the market”.

With regard to the American model which includes also European brands, everything is built up around the brand itself and stories related to the brand, creations of marketing. The brand power is the engine thanks to which “everything” becomes possible, even a brand extension to close and less close product categories (Ralph Lauren).

This typology offers an important field for investigation. Indeed, if empirically proved, this would mean the possibility that newcomers, regular or even non-luxury brands, may be able to tackle effectively the issue of authenticity, heritage and tradition by re-inventing or repositioning themselves.

Whether they are luxuries or new luxuries and how long they will survive is something that remains to be seen after time. As Kapferer notes “at some point in time, illusion may not work anymore and authenticity[27] could become the very exclusive benefit of luxury brands”.

But, finally, how can luxury brands be distinguished from the common ones? A clear answer is not given in the existing literature; the only point of agreement on this issue is that luxury products represent high-involvement products in contrast to most regular brands. Moreover, luxuries seem to be outlined by a combination of high price tags and additional quality, aesthetic, hedonic and emotional elements not usually found, at least all together, in non-luxury brands; these together with their enhanced symbolic - social or identity-related - functions are the elements that draw the line between the luxury and the non-luxury brand (and partly between the old and new luxuries).

In addition to this, as suggested by Phau and Prendergast (2000), luxury brands “evoke exclusivity, have a well-known brand identity, enjoy high brand awareness and perceived quality, and retain sales levels and customer loyalty”[28]. According to them, luxury brands focus on status and rarity, target a niche market and follow an exclusive distribution strategy (Nueno and Quelch, 1998)[29]. In opposition to them, regular brands focus on price competition, address the mass market (Dibb et al., 2001)[30] and go for mass distribution. Finally, the founder's heritage and the importance of craftsmanship are key elements of luxury brands (Kapferer, 1998)[31].

The last consideration about the concept of luxury will concern the difference between the terms luxury and prestige.

Luxury vs prestige

Luxury and prestige are the most widely used words to refer to brands that possess considerable intangible value. However, these terms are often confused in the economic and marketing literature. For instance, Vigneron and Johnson (1999)[32] initially positioned the luxury brands at the very end of the prestige category which includes also premium and upmarket brands in opposition to others types of brand category. Few years later (2004)[33], the authors assumed a completely different position by positioning prestige brands on the extreme end of the “luxury brand” category; adding to the confusion between the two terms.

According to Dubois and Czellar (2002)[34], “luxury and prestige cover different conceptual domains in the customers' eyes”. They underline that prestige requires a “perception of a positive and outstanding accomplishment that can be deferred to”. Therefore, in order to be judged as prestigious a brand has to possess an inherent, unique know-how, which may either refer to a specific attribute or the overall quality and evaluation of the brand. According to them, prestige can be also acquired by association when consumers interpret prestige symbols (such as a name, person, high prices, events or characters) as being associated with a brand.

On the other hand, luxury refers to the hedonic benefits of the brands. “Luxury refers to benefits stemming from refinement, aesthetics and a sumptuous lifestyle” and it is linked to subjective perceptions of comfort and beauty or “everything that is more than what one needs”, interpretation already widely expressed by Berry's (1994)[35].

According to Dubois and Czellar (2002) using luxury and prestige as synonyms should be avoided because they are perceived in a different way from the customer's point of view. Indeed, prestige is “always a positive evaluative judgement, whereas luxury can be negative if it is too ostentatious”.

From their researches, “prestige must be merited, luxury - not necessarily". As a consequence, prestige is long and difficult to acquire (to be investigated in MB for watches & jewellery) and very easy to lose. “If unique know-how is lacking, one negative experience is enough to disqualify the brand from the domain of prestige.”

The authors conclude that a brand can be luxury without being prestigious as well as a brand can be prestigious without being luxurious. Luxury in fact is not a necessary prestige symbol.

After having discussed so far the construct of luxury under different aspects, in the next pages we will address the most important reasons to buy luxury goods products. The focus will be concentrated on the two concepts of conspicuous consumption and status consumption before analysing the impact that the financial/economic crisis of autumn 2008 may have had on customers.

Why do people buy luxury? Conspicuous consumption vs status



[3] Paul Iribe, Défense du luxe, 1932.

[4] Caractérisation des éléments spécifiques de la marque de luxe dans l'esprit du consommateur. Une étude des images mentales associées à un visuel publicitaire. Oliver Lallement, doctorant IAE Montpellier 20, Rue d'Elbée

[5] Strategies and Structure of the Luxury Clothing and Accessories Sector. A Critical Analysis based on Porter's Five Forces Model Diplomarbeit: Diplomarbeit von Mirela Orlovic ; Abgabe November 2002; 97 Seiten, 1,2 MB ; Note 1,0; Sprache Englisch Heinrich-Heine-Universität Düsseldorf Deutschland

[6] As well as the French “luxe” and the Italian “lusso”.

[7] Les marques de luxe face à l'engouement du grand public, Wesford Ecole supérieure de Commerce, 6, boulevard Gambetta - 38000 Grenoble Juillet 2004, Première partie, L'industrie du luxe

[8] Title: Luxury Redefined. Authors: Kletter, Melanie Source: WWD: Women's Wear Daily; 11/25/2003, Vol. 186 Issue 109, p13-13, 1/4p Document Type: Article Database: Business Source Complete, Defining luxury goods or brands is difficult

[9] Meyers, T. (2004), "Marketers learn luxury isn't simply for the very wealthy", Advertising Age, Vol. 75 No.37, pp.S2-S3

[10] Article Information, Title: Trading up: The New American Luxury, Author(s): Traci Warrington, Journal: Journal of Consumer Marketing, Year: 2004, Volume: 21, Issue: 2, Page: 157 - 158, ISSN: 0736-3761, Publisher: Emerald Group Publishing Limited

[11] Luxury brand perception Status and Conspicuousness - Are They Related? Implications for Luxury Brands Yann Truonga, Geoff Simmonsb*, Rodd McCollc and Philip J. Kitchend, Reference, Open University Research School, France; University of Ulster; École Supérieure de Commerce de Rennes, France; Hull University Business School, UK, (Received 9 November 2006; final version received 8 April 2008)

[12] Yeoman, I. And McMahon-Beattie, U. (2005) “Luxury markets and premium pricing”, Journal of Revenue & Pricing Management, vol. 4, (4), p. 319-328

[13] Luxe Brands To Face Demanding Consumers, Berton, Elena Maitre, Dominique, Women's Wear Daily; 6/16/2009, Vol. 197 Issue 124, p2-1NULL, 1p, 1 bw, Article, Accession Number: 42099082, database: Business Source Complete,

[14] Title: Luxury Redefined. Authors: Kletter, Melanie, Source: WWD: Women's Wear Daily; 11/25/2003, Vol. 186 Issue 109, p13-13, 1/4p, Article, Business Source Complete


[16] The Marketing of Luxury Goods: An exploratory study - three conceptual dimensions The Marketing Review, 2003, 3, 459-478, Jonathan S. Vickers1 and Franck Renand, Northampton Business School and Ecole Superieure de Commerce De Poitiers

[17] Tynan C, et al, Co-creating value for luxury brands, J Bus Res (2009), doi:10.1016/j.jbusres.2009.10.012, Nottingham University Business School, UK, Caroline Tynan, Sally McKechnie, Celine Chhuon

[18] Vickers, J.S. and Renand, F. (2003) “The Marketing of Luxury Goods: An exploratory study - three conceptual dimensions”, The Marketing Review, Vol. 3, No. 4, pp. 459-478.

[19] T.Veblen, The Theory of the Leisure Class (Penguin Classics) (Paperback), 1899,

[20] Jevons Colin. Towards an integrated definition of brand. Birmingham Business School: Paper presented at Thought Leaders International Conference on BrandManagement; 2007.

[21] Buchanan-Oliver Margo, Brodie Roderick J, Huang Diana. Refining the dimensions of the brand in the service economy. Paper presented at Thought Leaders International Conference on Brand Management. Birmingham Business School; 2008.

[22] Kapferer, J.-N. (2006) “The Two Business Cultures of Luxury Brands“, chapter in “Brand Culture”, eds. Schroeder, J. E. and Salzer-Mörling, M., Routledge: Oxon

[23] Allérès, D. (1990), Luxe ... Stratégies Marketing, Paris: Economica

[24] The Marketing of Luxury Goods: An exploratory study - three conceptual dimensions The Marketing Review, 2003, 3, 459-478, Jonathan S. Vickers1 and Franck Renand, Northampton Business School and Ecole Superieure de Commerce De Poitiers

Vickers Jonathan S, Renand Franck. The marketing of luxury goods: an exploratory study — three conceptual dimensions. Market Rev 2003;3(4):459-78 4.

[25] Nueno, J. L. and Quelch, J. A. (1998) “The mass marketing of luxury”, Business Horizons, Vol. 41 Issue 6, p. 61

[26] Kapferer, J.-N. (2006) “The Two Business Cultures of Luxury Brands“, chapter in “Brand Culture”, eds. Schroeder, J. E. and Salzer-Mörling, M., Routledge: Oxon

[27] Authenticity is considered by many as a core component of successful brands because it forms part of a unique brand identity (Aaker, 1996; Kapferer, 2001; Keller, 1993) and consumers also seek out for authentic brands (Fine, 2003; Holt, 1997; Thompson and Tambyah, 1999). As Brown et al. state, “the search for authenticity is one of the cornerstones of contemporary marketing…”.

[28] I. Phau, G. Prendergast, (2000), Consuming luxury brands: the relevance of the rarity principle, in ''Journal of Brand Management'', Vol.8 No.2, 2000

[29] Nueno, J. L. and Quelch, J. A. (1998) “The mass marketing of luxury”, Business Horizons, Vol. 41 Issue 6, p. 61

[30] Dibb, S., Simkin, L., Pride, W. M. and Ferrel, O. C. (2001) “Marketing: Concepts and Strategies”, Houghton Mifflin: Boston

[31] Kapferer, J.-N. (1998) “Why are we seduced by luxury brands?”, Journal of Brand Management, 6 (1), p. 44-49

[32] Vigneron, F. and Johnson, L. W. (1999) “A Review and a Conceptual Framework of Prestige-Seeking Consumer Behavior”, Academy of Marketing Science Review, Online at: hppt://

[33] Vigneron, F. and Johnson, L. W. (2004) “Measuring perceptions of brand luxury”, Journal of Brand Management, vol. 11, Issue 6, p. 484

[34] Dubois, B. and Czellar, S. (2002) “Prestige Brands or Luxury Brands? An Exploratory Inquiry on Consumer Perceptions”, 31st European Marketing Academy Conference Proceedings, Braga Portugal: European Marketing Academy

[35] Berry, C. (1994) “The Idea of Luxury”, Cambridge: Cambridge University Press

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