Luxury Marketing Vocabulary Terms

What is Luxury?
high quality, sophisticated, expensive, exclusive, scarce, brand
Craftsmanship
culturally made products, ex: saki
Workmanship
making a product
Traceability
the ability to trace where your product comes from
Cucooning
preferring to stay home instead of going out, being able to have time to be at home and be still
Pre-historic Definition of Luxury
Those who had food and those who didn’t
Antiquity Definition of Luxury
romans and their luxury feasts and festivals, focus on the sheer quantity of what you have
Middle Ages Definition of Luxury
clergy and their luxurious churches, castles and white knights, princes, kings, crown jewels
Renaissance Definition of Luxury
where it really began, aristocracy, arts and culture, rare and precious items
Beginning of the Modern Age Definition of Luxury
in France the “bourgeoisie”, a large social class with money, nobles and noble products, a touch less expensive than royal items
Bernard Arnault
CEO of LVMH
Producer Culture
product orientation, quality based, “I will make this and they will buy it,” industrial revolution, cannot react well to market changes
Consumer Culture
market orientation, “what do you want? I will make it for you,” agile and reacts quickly to changes in the market, ex: Mountain Dew elections
Veblen Goods
the more expensive the goods are, the more people want them
Conspicuous Consumption
buying to show off to others
Snob Goods
use your good in order to differentiate yourself, “I like Chanel because everyone else likes Louis Vuitton.”
Bandwagon Goods
preference for a good increases as the number of people buying them increases
Halo Effect
when you don’t know about the product but one feature acts as a “halo” to make it seem good, ex: wine “from France”
Summary Effect
when you are an expert and you can look at a few details of a product and deduce way more than what is explicitly said
Brand Assets
brand loyalty, quality perceptions, brand awareness, repeat buying
Aspirational Brands
Gucci, Louis Vuitton, looking to buy into the culture/lifestyles that these brands represent
Accessible Brands
Coach, Ralph Lauren, categorized by affordability, status, and membership, these brands are directly affected by the global economy
Absolute Brands
Hermes, Rolex, elitism and brand recognition, there will always be rich people to buy these
Economic Definition of a Luxury Brand
considered higher priced than alternatives even though they serve the same purpose
Marketing Definition of a Luxury Brand
deliver added emotional benefits unmatched by cheaper, comparable brands
Causal Ambiguity
“we don’t know why it happens, it just does”
Brand Equity
= (assets) – (liability)
Luxury Trends
1 – Timeless Quality (museum, tours, movies)
2 – Security and Safety (facts, demonstrations)
3 – Emotional Branding (commercials, live experiences)
4 – Good Karma (doing something good)
5 – Seize the Day (exclusive offers)
6 – Regionalism (reenactments)
7 – Food and Health (samples)
8 – Individual Editions (exclusive offers)
6 Pillars of Luxury
1 – Real vs Imaginary
2 – Material vs Symbolic
3 – Social vs Self
4 – Desire vs Satisfaction
5 – Rationality vs Irrationality
6 – Materialism vs Spirituality
1 – Real vs Imaginary
consumption is imaginary but can have real implications on the self
2 – Material vs Symbolic
luxury products are not things we need but represent some symbol
3 – Social vs Self
you show something to others but you also have higher perceptions of yourself
4 – Desire vs Satisfaction
when we buy we have a desire for something, but we seek to attain more than we desire
5 – Rationality vs Irrationality
if we were rational consumers than luxury would not exist
6 – Materialism vs Spirituality
we can have so many things, but when we have so much is it really satisfying? Or do we require something more in depth than that?
Psychographics
values, attitudes, lifestyles
Segmentation
identify bases for segmenting the market (geographic, demographic, psychographic, socio-demographic, and behavioral)
Geographical Segmentation
segmenting the market into physical areas, ex: Asia vs Europe
Demographic Segmentation
most popular base for segmenting consumer markets, general descriptors of the consumer, ex: income level, man, woman, etc
Psychographic Segmentation
segmenting the market based on lifestyles, social class, and personality traits (ex: seeking authenticity, creativity seekers, timelessness and prestige seekers, and those that seek icons and badges)
Behavioral Segmentation
segmenting the market based on behavior trends, occasions, benefits sought, user status, usage rate, loyalty status, etc
Socio-demographic Segmentation
segmenting the market into high net worth individuals (HNWI), more than $1 million in personal assets, etc
Day-Trippers
occasional luxury buyers, accessories and brand extensions, some money but not much, account for most luxury purchases
Products vs Logos
product is appealing because it is a small masterpiece (Aston Martin, Hermes)
product is appealing because of the emblems (Louis Vuitton)
Authenticity vs History
authenticity compresses time and is long term
history means respect for the tradition
Individual vs Integrate
individual is to be different
integrate is to be discrete, fading into the universe of luxury
3 Levels of the Product
Core Product = the benefit the good gives to you
Actual Product = quality, color, fashion, branding, style, etc
Augmented Product = warranties, services, delivery, customer care, finance, installation
Feature Fatigue
when you don’t know what 90% of the buttons on your remote do, consumers “tune out” when there are too many features
Primary Packaging
the bottle that wine comes in
Secondary Packaging
the box that the bottle of wine comes in
Shipping Packaging
the box with styrofoam that protects the whole product (box and bottle)
Brand
a name, term, sign, symbol, or design that represents your product
Line Extension
minor changes to existing products, a company uses an existing brand name to launch a new product in the same category (ex: Opium launches “Black” Opium)
Brand Extension
brand name helps to introduce new products, a company uses an existing brand name to enter a new product design or category (ex: Apple computers and Apple phones)
Multibrands
multiple product entries into the same product category
Product Line
a group of products that are closely related because of similar functions, customer groups, marketing outlets, and/or given price ranges
Line Stretching
adding products that are higher or lower priced than the existing line (ex: you have eau de parfum at $30, and you add parfum at $45, and eau de toilette at $20)
Line Filling
adding more items within the present price range (ex: you have vanilla soap at $4, then you add strawberry at $4)
Product Line Enlargement
trading up and down within the brand
Product Line Completion
adding more products/articles to the line
Product Line Innovation
add new and remove obsolete (ex: fashion winter lines to spring lines)
Services
either a part of the product or the full product that the consumer is willing to buy, intangible, no ownership, may or may not be attached to a physical product
Servicescape
where the service actually occurs
Substitutability (when it comes to services)
you can always just do it yourself
Postponability (when it comes to services)
you can always stall or put off the service to a later time
Place Marketing
sell a geographic area, ex: houses, buildings, vacation locations
Organization Marketing
PR perform image assessment and shift image towards the goal
Person Marketing
create, maintain, and alter attitudes to a person, similar to organization but more dramatic life-cycles, ex: celebrity and sports agents
Distribution Channels
the path products take from producers to consumers
Intensive Distribution
firm’s products are everywhere, every available outlet has them, many intermediaries are used
Selective Distribution
limited number of retailers (ex: only Monoprix)
Exclusive Distribution
only available in a specific geographic location (ex: Paris)
Licensing
to give someone else who is better at marketing the rights to your brand/product to manage the brand’s image for you
Retail
distribution channel member that sells goods and services for individual use
Direct-Response Retailing
sales through catalogs/telemarketers
Internet Retailing
virtual store fronts
Direct Selling
person to person selling (ex: Mary Kay)
Automatic Merchandising
sales through vending machines
5 Stages of becoming a Luxury Market
1 – Subjugation
2 – Start of money
3 – Show off
4 – Fit In
5 – Way of Life
FMCG
Fast Moving Consumer Goods (speaks for itself)
Maslow’s Hierarchy
Physiological (bottom)
Security
Belonging
Recognition
Accomplishment (top)
B2C Marketing
“business to consumer”
marketing of demand, motivated by need and usage, marketed to nationals and locals, short recurring product cycle
Luxury Marketing
marketing of the offer, motivated by desire and status, marketed to internationals, long purchase cycle
Price
what you pay for something, sum of the values consumers exchange for the product or service (time, cognitive, and emotional costs)
Mecenat
sponsorship
Cost Based Pricing
product -> cost -> price -> value -> customers
Value Based Pricing
customers -> value -> price -> cost -> product
Price Ceiling
there is no demand above a certain price (maximum accepted price)
Price Floor
there are no profits below a certain price (minimum accepted price)
Market Skimming
high priced product with low volumes of quantity, skim the profit from the market, short lifecycle products
Psychological Pricing
Play on consumer’s perceptions, $9.99 vs $10, used to set high prices even if the product is inexpensive to make
Fixing Prices
when i fix my price, i look at what the client is willing to pay and that it is not a ridiculous price
When to Cut Prices
when there is excess capacity, falling market share due to price competition, and/or the desire to be the market share leader
When to Increase Prices
to increase profit margin, when the product faces cost inflation, and/or there is a greater demand than can be supplied
Phantom Effect
when there is a general assumption that there should be or that there are advertisements where there actually are none. ex:
“Do you recall seeing this ad?”
Yes
“Where?”
On TV
“There was no ad on TV”