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Klaus Heine, TU Berlin, Lehrstuhl Marketing, Steinplatz 2, 10623 Berlin, Germany, Tel: +49.(0)30.314-29.922,, [email protected], www.marketing-trommsdorff.de Klaus Heine, TU Berlin, Department of Marketing, Steinplatz 2, 10623 Berlin, Germany, Tel: +49.(0)30.314-29.922,, [email protected], www.marketing.tu-berlin.de
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
The Concept of Luxury Brands Presentation Vol. 2.0
by Klaus Heine, 28 December 2011
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 2
The Concept of Luxury Brands
Klaus Heine Technische Universität Berlin Chair of Marketing Steinplatz 2 10623 Berlin, Room ST 1.05 Tel: +49.30.314-29.922 Fax: +49.30.314-22.664 Mobile: +49.176.294.230.62 www.marketing.tu-berlin.de [email protected]
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Definition of Luxury Products and Brands
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 3
The Concept of Luxury Brands
www.conceptofluxury.brands.com
What are luxury brands not?
What are luxury brands?
Definition of Luxury Products and Brands
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 4
Objective of this Presentation
Definition of Luxury Products and Brands
Definition of Luxury Products and Brands
in order to differentiate between luxury and non-luxury products and brands
and
to distinguish luxury products and brands from similar concepts such as premium and masstige products and brands
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 5
Intensional vs. Extensional Definition
► Intensional Definition by typical characteristics such as high price and superior quality
Extensional Definition
by identifying all luxury brands
in a directory
Definition of Luxury Products and Brands
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 6
Overview about the Approach to Definition
Step 3: Operationalisation
Step 4: Definition
Step 5: Review
Differentiation by market segment
Constantly updating the categorization
Identification of a basic definition of luxury
Luxuries
Luxury arts… Luxury services
Luxury goods…
Result: Broad definition of luxury products and brands
Result: Definition of Luxury Products and Brands
Result: Set of requirements for luxury product characteristics
Step 1: Semantic Analysis
Step 2: Dimensional Analysis
Conc
eptu
al F
ram
ewor
k
Differentiation by area of research
Differentiation by type of relativity Clean air… Color TV
Identification of dimensions by literature analysis and empirical study
Analysis of existing definitions
Selection of types of dimensions / approach to definition
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Definition of Luxury Products and Brands
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 7
Agenda
• Basic Definition of Luxury • Major Understandings of Luxury by Area of Research & Broad Definition
of Luxury Products • Limiting the Scope of Luxury Products • Operationalization of Luxury Products • Definition of Luxury Products and Brands • Major Types of Luxury Products and Brands • Distinguishing Luxury Products and Brands from similar Concepts • World Luxury Brand Directory
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 8
What means Luxury? – Luxury is a relative Term that could refer to almost Anything or Nothing depending on whom you ask.
Luxury Product Marketing Class, Winter Semester 2006/2007
“Luxury stands for exclusivity, excellent quality, rarity, differentiation. I am fascinated by luxury watches, since they are a symbol for the love for the detail. Preferably I also would like to say: "I don’t look for the time, I look for my watch." Typical for a woman, I have already an eye on the shoes of Manolo Blahnik. There are women in New York who take the risk of a surgery in order to fit into these shoes. I wouldn't go that far, because I already have perfect feet.” (Chun-Lan)
“Luxury means to me to have the freedom to set off against the mass – in every way – to maintain a lifestyle that fits me and that is not geared to the mainstream and to social norms. The real luxury for me is to have time and fun with my friends.” (Jasper)
“The only luxury good I own is my car. It’s a Volkswagen Polo. This is also something not everyone can afford.” (Constantin)
Source: Statements of the participants of the seminar “Luxury Product Marketing” at the department of Marketing at TU Berlin, winter semester 2006/2007.
Basic Definition of Luxury
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 9
Basic Definition of Luxury
Ordinary Luxury Necessity
„Bad“ (vs. “Good”) Desirable
Luxury is anything that is desirable and more than necessary and ordinary.
Necessity Luxury
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Basic Definition of Luxury
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 10
Source: According to Sacharidou, The Evolution of Luxury Market, LVMH 2006, p.4.
1960 • Stereo sound
systems • 35-millimeter
cameras • Warhol
lithographs
1970 • Designer jeans • VCRs • Solar homes
exemplars
1980 • Vacation homes • BMWs • Microwave
ovens • Junk-bond
portfolios • PC’s • Champagne
1990 • Internet stocks • Palm Pilots • Cell phones • SUVs
2000
1900 • Model T cars • Pianos • Radios • Hand-cranked
Victorians
1910 • Fur hats • Electric clocks • Fountain pens • Cadillac's • Kodak cameras • Transatlantic
travel
1920 • Fur coats • Movie “talkies” • Gin • Vacuum
cleaners • Washing
machines
1930 • Baseball tickets • Canned foods • Indoor plumbing
1940 • Televisions • Air travel • College degrees • Refrigerators
1950 • Color televisions • Credit cards • Visits to
Disneyland • Convertibles
• Flat-screen monitors
• Maybach • Yachts
2050 • Space tourism? • Transatlantic
travel? • Eternal youth?
From 1900 to Today to Future – How Definitions of Luxuries change
Basic Definition of Luxury
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 11
The Types of Relativity: The Relativity of Luxury splits into a Regional, Temporal, Economic, Cultural and Situational Relativity.
Economic Relativity
Regional Relativity
Temporal Relativity
Situational Relativity
Cultural Relativity
Hierarchic Relativity
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Basic Definition of Luxury
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 12
These Types of Relativity can be used to determine a General Perspective from which Luxury should be defined within the Field of Luxury Brand Management.
Economic Relativity
Regional Relativity
Temporal Relativity
Situational Relativity
Cultural Relativity
Hierarchic Relativity
perspective: normal conditions
perspective: present time
perspective: global
perspective: upper class
perspective: representative for the entire society in developed regions
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Basic Definition of Luxury
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 13
Accordingly, the Basic Definition of Luxury may be complemented as follows:
Luxury is anything that is desirable and which exceeds necessity and ordinariness. As a general rule, this is defined from a global perspective, for the
present and for normal conditions. While the exclusivity of resources is evaluated by the entire society, the desirability of resources and the appearance
of luxury are determined by the upper class.
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Basic Definition of Luxury
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 14
Based on the Extended Basic Definition, there are many Resources that can be differentiated from Luxury:
Example of Non-Luxury Type of Relativity Explanation
Clean air Regional relativity A luxury in Jakarta, but not from the perspective of most people
Color TV Temporal relativity A luxury in the 1950’s, but not from today’s perspective
VW Polo Economic relativity A luxury for a student, but not from a gross-societal perspective
Gold teeth grill Cultural relativity A luxury in the hip-hop scene, but not from the perspective of the upper class
McDonald’s Hamburger Situational relativity Might be a luxury after a strict diet, but not under normal circumstances
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Accordingly, the extended basic definition limits the scope of luxury from almost anything to a more reasonable level and therefore already helps to dissolve a large part of the controversies about the
definition of luxury.
Basic Definition of Luxury
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 15
Agenda
• Basic Definition of Luxury • Major Understandings of Luxury by Area of Research & Broad Definition
of Luxury Products • Limiting the Scope of Luxury Products • Operationalization of Luxury Products • Definition of Luxury Products and Brands • Major Types of Luxury Products and Brands • Distinguishing Luxury Products and Brands from similar Concepts • World Luxury Brand Directory
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 16
“Luxuries” correspond to the Philosophical-Sociological Understanding and the broadest Scope of Luxury.
Everything we can think of – “Luxuries comprise all
resources which are desirable and exceed what is necessary
and ordinary.”
Major Understandings of Luxury by Area of Research
Luxuries are not necessarily marketable, which means that we can’t necessarily buy/sell them.
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 17
Microeconomic Understanding: In Microeconomics the Term “Luxury Goods” is established and mainly refers to entire Product Categories.
2 = High income elasticity (> 1) The demand of (dispensable) luxury goods (also superior goods)
increases relatively stronger than the income.
1 = High price elasticity (> =1) The demand of (dispensable) luxury goods
decreases relatively strongly when prices are rising.
Luxury goods correspond to the micro-economic understanding and the middle scope of luxury, comprising all goods which exceed what is necessary and ordinary, and are suitable
for exchange on the market.
Luxury goods are distinguished from necessary or ordinary goods by consequence-related measures; thus the luxuriousness of any good is not determined by its characteristics, but by peoples’ reaction (changes in demand) to exogenous stimuli:
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Major Understandings of Luxury by Area of Research
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 18
The Managerial Understanding of Luxury usually refers only to the best Products of a Category: “Luxury Products”.
Luxury products correspond to the managerial understanding and the smallest scope of luxury, comprising all products which exceed what is necessary and ordinary compared to
the other products of their category.
Luxury brands are associated with products which exceed what is necessary and ordinary compared to the other products of their category.
Luxu
ry le
vel
The broad definitions of luxury products and brands can be summarized as follows:
Examples of Non-Luxury Products Criteria No Luxury Products, but. . .
Musical talent, time and true love Philosophical-sociological understanding Luxury resources
Air conditioning and golf equipment Micro-economic understanding Luxury goods
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Major Understandings of Luxury by Area of Research
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 19
Louis Vuitton, Rolls-Royce …Ariel Motor?! …Are Ariel Race Cars Luxury Products? Ariel offers Functional Luxury :
• The Ariel is a race car for the streets; the driving experience may be “utterly, utterly addictive“.
• The Ariel Atom V8 can cost £150,000. However, it’s not a (classical) luxury product – because it’s made for maximum functioning.
• Same would be true for superior alpine climbing equipment.
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Major Understandings of Luxury by Area of Research
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 20
Philosophic-sociological Understanding: Luxuries Resources that are desirable and more than necessary and ordinary,
e.g. musical talent, time, and true love
Microeconomic Understanding: Luxury Goods Goods (product categories) that are more than necessary and ordinary
and suitable for the exchange on the market, e.g. air conditioning systems and golf equipment
Managerial Understanding: Luxury Products Products that are more than necessary and ordinary compared
to the other products of their category, e.g. Louis Vuitton bags and Rolls-Royce automobiles
The Understanding of Luxury by Area of Research: Luxury products constitute a Subset of Luxury Goods, which, in turn, form a Subset of Luxuries.
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Major Understandings of Luxury by Area of Research
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 21
Agenda
• Basic Definition of Luxury • Major Understandings of Luxury by Area of Research & Broad Definition
of Luxury Products • Limiting the Scope of Luxury Products • Operationalization of Luxury Products • Definition of Luxury Products and Brands • Major Types of Luxury Products and Brands • Distinguishing Luxury Products and Brands from similar Concepts • World Luxury Brand Directory
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 22
Private Luxury Products Public Luxury Products
Limiting the Scope of Luxury Products
Limiting the Scope of Luxury Products
Branded Luxury Products Unbranded Luxury Products
B2C Luxury Products B2B Luxury Products
Founder-independent Luxury Products Founder-dependent Luxury Products
Uni-regional Luxury Products Multi-regional Luxury Products
Contemporary Luxury Products Luxury Antiquities Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Despite its small scope in comparison to luxuries, the definition of luxury products still covers a wide variety of different products. Therefore, and according to the basic idea of definition by reduction sentences, the scope of luxury products is further limited by differentiating the major luxury market segments.
Luxury Products Luxury Real Estate Luxury Services
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 23
Luxury Products, Services and Real Estate
Luxury Products Luxury Services Luxury Real Estate
• The managerial luxury understanding usually refers to movable assets (products in the classical sense), as the luxury industry was and is characterized by craftsmanship and engineering (Belz 1994, p. 648; Berthon et al. 2009, p. 50).
• Beyond that, especially luxury real estate forms a distinct luxury segment. Marketing knowledge about products covers a basis for other luxury segments, but still needs to be adapted to their specific characteristics.
“World’s most expensive
apartments at One Hyde Park set to make £1 billion profit.”
No…
Limiting the Scope of Luxury Products
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 24
Private vs. Public Luxury Products
Private Luxury Products Public Luxury Products
• Instead of public luxuries such as altar pieces or national monuments, the term luxury products usually refers to private luxury, which is owned by a person or a private organization (Sombart 1922, p. 86; see also McKinsey 1990, p. 13).
No…
Limiting the Scope of Luxury Products
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 25
Branded vs. Unbranded Luxury Products
Branded Luxury Products Unbranded Luxury Products
• Unbranded luxury products are usually made on commission by craftsmen.
• Because of the high relevance of brands in the luxury segment, only branded luxury products are considered (see Kisabaka 2001, p. 104; Vigneron and Johnson 2004, p. 486).
No…
Limiting the Scope of Luxury Products
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 26
Private vs. Public Luxury Products
B2C Luxury Products B2B Luxury Products
• B2C luxury products, also referred to as personal luxury products, are marketed to end consumers and can be used by a person to enhance his or her personal life (Sombart 1922, p. 86; Reith and Meyer 2003, p. 10; Valtin 2004, p. 186).
• In contrast to that, there is a distinct B2B luxury segment, which includes luxury-specialized suppliers to luxury brands. One such supplier is Peter Bock, a manufacturer of nibs for luxury fountain pens.
Limiting the Scope of Luxury Products
“Peter Bock AG has been crafting the finest pen nibs
since 1939.”
No…
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 27
Founder-independent vs. Founder-dependent Luxury Products
Founder-independent Luxury Products Founder-dependent Luxury Products
• Only founder-independent luxury products are considered, which means that the existence of brands and the manufacturing of products should not depend on the life of their creators. The manufacturers of luxury products should possess a distinct brand personality and at least the capacity for infinite business operation.
• Although an artist could become a brand, these requirements are not fulfilled as he or she may only create founder-dependent products. Compared to other products, the luxury art market follows very specific rules and therefore forms a distinct luxury segment.
• The same is true for other industry segments such as (star) architect offices and the relatively complex and fast-changing market of (fashion) designer products.
Limiting the Scope of Luxury Products
No… Founder-dependent luxury by Alexander Vethers
Source: www.alexandervethers.com, http://www.margarethe-illustration.com, Heine, K., The Concept of Luxury Brands, TU Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 28
Typical Founder-dependent Luxury: The vast Amount of Luxury Fashion Designers, who set up their Business within the last Years.
Limiting the Scope of Luxury Products
Founder-dependent Luxury Products
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 29
Uni-regional vs. Multi-regional Luxury Products
Uni-regional Luxury Products Multi-regional Luxury Products
• Uni-regional luxury products are only available in specic regions.
• For instance, shopping in the KaDeWe is only possible in Berlin and spending the night in Le Meurice is only possible in Paris.
• However, many uni-regional luxury brands have the potential to become global. For instance, the luxury group Hilton developed the New York-based Waldorf Astoria into a global luxury hotel chain.
Limiting the Scope of Luxury Products
No…
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 30
Contemporary Luxury Products vs. Luxury Antiquities
Contemporary Luxury Products
• With reference to temporal relativity, only new products are considered.
• Luxury antiquities (including antique cars) form a distinct luxury segment.
Limiting the Scope of Luxury Products
Luxury Antiquities
No…
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 31
Complementing the Broad Definition of Luxury Products
Limiting the Scope of Luxury Products
Luxury products correspond to the managerial understanding and the smallest scope of luxury not comprising services or real estate, but
products which exceed what is necessary and ordinary compared to the other products of their category. These products are branded,
founder-independent, multi-regional, contemporary and possessed or used by a person to enhance his or her personal life.
Based on these limitations, the broad definition of luxury products can be complemented as follows:
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 32
Examples of Non-Luxury Products
Examples of Non-Luxury Products Criteria No Luxury Products, but. . .
Penthouse at the “One Hyde Park” in London Movable assets Luxury real estate
Luxurious built-in cupboards made by a carpenter for his client Branded products Unbranded luxury products /
commission work
Cologne Cathedral Private luxury products Public luxury products
Peter Bock quills for luxury fountain pens B2C luxury products B2B luxury products
“Garçon a la pipe” by Pablo Picasso Founder-independent products Luxury art
Badminton Cabinet from 1732 and Bugatti Royale Type 41 from 1931 Contemporary products Luxury antiquities
Staying at Le Meurice in Paris Multi-regional luxury products Uni-regional luxury products
Limiting the Scope of Luxury Products
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 33
Agenda
• Basic Definition of Luxury • Major Understandings of Luxury by Area of Research & Broad Definition
of Luxury Products • Limiting the Scope of Luxury Products • Operationalization of Luxury Products • Definition of Luxury Products and Brands • Major Types of Luxury Products and Brands • Distinguishing Luxury Products and Brands from similar Concepts • World Luxury Brand Directory
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 34
Characteristics of Luxury Products
Symbolism
Price
Quality
Extraordinariness
Rarity
Aesthetics
Price as a benefit
Quality as perception
Symbolism as major benefit
ESP instead of USP
Stimulation as a main benefit
Limitation and Individualization
The Analysis of 31 in-depth Interviews led to a Consumer-oriented Definition of Luxury Products
Operationalization of Luxury Products
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 35
Eccentric Selling Proposition (ESP): Case Study Silk Production
• “Earlier the main exports of silk cloth, at first restricted to the nobility, had been from Bologna, Lucca and other Italian towns. They had developed the mechanical reeling of silk using water power, apparently developing a Chinese model, while the French industry at Lyon operated at a less sophisticated level.
• But the French court started to invite silk manufacturers from Lyon every six months to discuss future designs. By the time that their patterns had been produced and the Italian manufacturers had set up their looms to copy them, the French court was about to place its next order for a new pattern. So the Italian manufacturers were never able to catch up, leading to the collapse of the weaving industry, and eventually of the production of yarn, in Bologna and elsewhere.
• It was not the appearance of change, of new fashion, that was remarkable but the way that change was regularly established and the effects this had on industrialized production which were remarkable. It rivalled, and set the pattern for, today’s annual fashion shows in Paris, Milan, New York, London and other capitals, shows that are marketplaces for the costumes of the rich but which also set the terms for production for the masses, who with socio-economic developments have now been drawn in to the frequent dictates of fashion” …. “After that time, fashion and ‘taste’ took over the role of distinguishing the elite, with the whole process becoming more complex when this occurred.”
Operationalization of Luxury Products
Source: Goody, J. (2006) From Misery to Luxury. In: Social Science Information, Vol. 45, Issue 3, p. 344 et seq.; Heine, K., The Concept of Luxury Brands., TU Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 36
Characteristics of Luxury Products
Symbolism
Price
Quality
Extraordinariness
Rarity
Aesthetics
Price as a benefit
Quality as perception
Symbolism as major benefit
ESP instead of USP
Stimulation as a main benefit
Limitation and Individualization
The Analysis of 31 in-depth Interviews led to a Consumer-oriented Definition of Luxury Products
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Operationalization of Luxury Products
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 37
Symbolic Meaning of Luxury Products & Emotional Branding: Product Recommendations without Products
Source: Spiegel Neon/Modeheft (2009), April, p. 22.
Operationalization of Luxury Products
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 38
Symbolic Meaning of Luxury Products & Emotional Branding: Product Recommendations without Products
Source: Spiegel Neon/Modeheft (2009), April, p. 16 & 18.
Operationalization of Luxury Products
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 39
The Most Important Ingredients of a Luxury Brand: Emotions & Image
Communication, Know-how,
Image
Production costs
Margin
Dior
Source: Lebas/Israel-Russo/De Gouyon (1990) Stratégies de luxe. Jouy-en-Josas: Groupe HEC, p. 48; Heine, K., The Concept of Luxury Brands., TU Berlin, www.conceptofluxurybrands.com.
Operationalization of Luxury Products
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 40
Symbolic Meaning of Luxury Products & Emotional Branding: Aldi vs. Monoprix
Aldi Monoprix
If products at Aldi say anything at all, they may say “I’m cheap and cheerful” or the butter may say “I’m a butter” and the cookies may say “We are cookies” – while luxury products
seem to be real chatterboxes.
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Operationalization of Luxury Products
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 41
A typical Exemplar of a Luxury Product: The “Kiss Kiss Or & Diamants“ by Guerlain
Source: Trommsdorff/Heine (2008) Das Marketing von Luxusprodukten. In: WISU, Issue12., pp. 1669-1674; Heine, K., The Concept of Luxury Brands., TU Berlin, www.conceptofluxurybrands.com.
Price
Quality
Extra- ordinariness
Rarity
Aesthetics
Symbolism
Constitutive Characteristics of Luxury Products
45,000€
Made of diamantes and precious metals by a
French goldsmith
Classic, time-less design; helps to conceal signs of aging,
to be free of duties and limitations of space and time; its design helps to forget its
purpose
Only 100 pieces; personal lip stick color and gravure
Design and brand image
Reminds on 3 dices
Operationalization of Luxury Products
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 42
What do we have to do with that Chair to create a Luxury Product?
Heine, K., Phan, M., Trading-Up Mass-Market Goods to Luxury Products. Australasian Marketing Journal, Vol. 19, 2/2011, pp. 108-114.
Operationalization of Luxury Products
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 43
The Constitutive Characteristics of Luxury Products
Major Characteristics
Quality
Price
Aesthetics
Rarity
Symbolism
Extraordinariness
Manufacturing Characteristics
Expertise of manufacturer Manufacturing complexity
Abstract Product Characteristics
Durability & Value
Comfortability & Usability
Functionality & Performance
Safety
Aesthetics
Extraordinariness
Symbolism
Concrete Product Characteristics
Material & Components
Service
Construction & Function principle
Workmanship
Features
Product size
Rarity
Price
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Operationalization of Luxury Products
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 44
The Variety of possible Results
Heine, K., Phan, M., Trading-Up Mass-Market Goods to Luxury Products. Australasian Marketing Journal, Vol. 19, 2/2011, pp. 108-114.
Operationalization of Luxury Products
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 45
Influencing the Associations about the Luxury Brand Characteristics by Segment-specific Marketing-Mix Strategies
Quality Price Rarity Extra-ordinariness Aesthetics Symbolism
(brand personality)
Super-superlative priced products
Memberships in recognized associations
Product policy
Distribution policy
Communication policy
Flagship stores Iconic products
Selective distribution Communication of the luxury brand personality
Catwalk shows
Quality leadership
Celebrity endorsement Waiting lists
Superlative pricing strategy
Price policy
Regular price increases
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Operationalization of Luxury Products
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 46
Agenda
• Basic Definition of Luxury • Major Understandings of Luxury by Area of Research & Broad Definition
of Luxury Products • Limiting the Scope of Luxury Products • Operationalization of Luxury Products • Definition of Luxury Products and Brands • Major Types of Luxury Products and Brands • Distinguishing Luxury Products and Brands from similar Concepts • World Luxury Brand Directory
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 47
The Definition of Luxury Products
• The operationalization relies on a literature analysis and an empirical study (as outlined in the paper). The results suggest that consumers perceive that luxury products have six major characteristics including price, quality, aesthetics, rarity, extraordinariness and symbolism (as explained above). In that way, the operationalization helps to decide for most products if they are part of what is meant by the term "luxury product" (see also Kromrey 2009, p. 110).
• The definition of luxury products can be summarized as follows:
Definition of Luxury Products and Brands
Luxury products have more than necessary and ordinary characteristics compared to other products of their category, which include their relatively high
level of price, quality, aesthetics, rarity, extraordinariness, and symbolic meaning.
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 48
The Definition of Luxury Brands
• Luxury brands are highly associated with their core products. • This is reflected by the existing definitions of luxury brands, which define luxury brands by specific
associations about product characteristics (e.g. Meffert and Lasslop 2003, p. 6; Büttner et al. 2006, p. 12; Valtin 2004, p. 30).
• The essential characteristics of luxury products therefore correspond largely with those of luxury brands and lead to the following definition:
Definition of Luxury Products and Brands
Luxury brands are regarded as images in the minds of consumers that comprise associations about a high level of price, quality, aesthetics, rarity and specialty.
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 49
Agenda
• Basic Definition of Luxury • Major Understandings of Luxury by Area of Research & Broad Definition
of Luxury Products • Limiting the Scope of Luxury Products • Operationalization of Luxury Products • Definition of Luxury Products and Brands • Major Types of Luxury Products and Brands • Distinguishing Luxury Products and Brands from similar Concepts • World Luxury Brand Directory
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 50
The Relationships between Luxury Products and Brands
Luxury Products
Luxury Brands
Non-Luxury Brands, but (at least) Luxury Product Brands
Non-Luxury Products
Luxury Products Non-Luxury Products
Luxury-branded Products
Non-Luxury- branded Products
Major Types of Luxury Products and Brands
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 51
The Relationships between Luxury Products and Brands
Luxury Product Brands
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Major Types of Luxury Products and Brands
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 52
Con- noisseur brands
Star brands
Types of Luxury Brands by Level of Luxury, Business Volume and Awareness
Small-scale brands
Medium-scale brands
BIG player
Micro
Large-scale brands
GIANT player
Entry-level luxury brand
Elite- level
Top-level Luxury brand
Medium-level Luxury brand
By Level of Luxury By Business Volume By Awareness + -
+ -
-
+
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Major Types of Luxury Products and Brands
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 53
Agenda
• Basic Definition of Luxury • Major Understandings of Luxury by Area of Research & Broad Definition
of Luxury Products • Limiting the Scope of Luxury Products • Operationalization of Luxury Products • Definition of Luxury Products and Brands • Major Types of Luxury Products and Brands • Distinguishing Luxury Products and Brands from similar Concepts • World Luxury Brand Directory
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 54
54
Categories of Luxury Brands
Price Setting Inter- and Intra-categorical
Risk reduction and information efficiency
Premium Trade Brand
Generic Manufacturer‘s
Brand
Premium Manufacturer‘s
Brand
Luxury Manufacturer‘s
Brand
Trade Brand
Ideational Benefit Dominating Brand Benefit
Distinguishing Luxury Brands from similar Concepts
Source: According to Meffert/Backhaus/Becker (2003) Luxusmarkenstrategie, p. 6; Heine, K., The Concept of Luxury Brands., TU Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 55
55
Differentiation to Masstige („New Luxury“)
Premium Manufacturer‘s
Brand
Masstige
Luxury Manufactur-
er‘s Brand
Acce
ssib
le
Inte
rmed
iary
In
acce
ssib
le
For t
he b
road
er p
opul
atio
n:
Examples
Source: According to Meffert/Backhaus/Becker (2003) Luxusmarkenstrategie, p. 6; Heine, K., The Concept of Luxury Brands., TU Berlin, www.conceptofluxurybrands.com.
Ideational Benefit Risk reduction and information efficiency Dominating Brand Benefit
Price setting Inter- and Intra-categorial
Distinguishing Luxury Brands from similar Concepts
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 56
Luxury brands
Masstige brands
Premium brands
Medium- level brands
Luxury Brands vs. Masstige Brands vs. Premium Brands
Product / Brand Characteristics Prestige
Price Quality Rarity Extra- ordinariness
Aesthetics Symbolism
top
low Prada
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Distinguishing Luxury Brands from similar Concepts
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 57
Luxury vs. Premium Products and Brands – Mercedes vs. Lexus
There is also an essential difference between these types of brands: while premium brands focus especially on functional characteristics, luxury brands put much more effort
into creating symbolic meaning. For instance, Lexus entered the US market with the objective of growing by taking customers away from Mercedes, which was identified as its
major competitor. Therefore, they took the Mercedes E Class as the model to overtake and developed a car with a similar design and even superior technical features that was
only sold for about half of the price. Lexus generated high growth rates in the U.S. However, they still focused very much on functionality and even emphasized their car`s
value-for-money, and also had no vision or story to tell – which clearly positions Lexus as a non-luxury brand (Kapferer and Bastien 2009b, p. 316).
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Distinguishing Luxury Brands from similar Concepts
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 58
Agenda
• Basic Definition of Luxury • Major Understandings of Luxury by Area of Research & Broad Definition
of Luxury Products • Limiting the Scope of Luxury Products • Operationalization of Luxury Products • Definition of Luxury Products and Brands • Major Types of Luxury Products and Brands • Distinguishing Luxury Products and Brands from similar Concepts • World Luxury Brand Directory
Heine, K., The Concept of Luxury Brands. In: Luxury Brand Management, No. 1, ISSN: 2193-1208, Technische Universität Berlin, www.conceptofluxurybrands.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 59
Intensional vs. Extensional Definition
Intensional Definition by typical characteristics such as high price and superior quality
► Extensional Definition
by identifying all luxury brands
in a directory
The World Luxury Brand Directory
Heine, K. (2011) The World Luxury Brand Directory, ISSN: 2193-5440, Technische Universität Berlin, www.worldluxurybranddirectory.com.
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Klaus Heine – The Concept of Luxury Brands 60
Directory of Luxury Brands: www.WorldLuxuryBrandDirectory.com
The collection of luxury brands in a directory helps testing and enhancing the definitions of luxury products and brands.
The World Luxury Brand Directory
Heine, K. (2011) The World Luxury Brand Directory, ISSN: 2193-5440, Technische Universität Berlin, www.worldluxurybranddirectory.com.
Klaus Heine, TU Berlin, Lehrstuhl Marketing, Steinplatz 2, 10623 Berlin, Germany, Tel: +49.(0)30.314-29.922,, [email protected], www.marketing-trommsdorff.de Klaus Heine, TU Berlin, Department of Marketing, Steinplatz 2, 10623 Berlin, Germany, Tel: +49.(0)30.314-29.922,, [email protected], www.marketing.tu-berlin.de
Technische Universität Berlin Department of Marketing Professor Dr. V. Trommsdorff
Thank you! Questions? [email protected]