New HNWI Marketing Project

In addition to this blog, a new website is in progress to be built, dealing with all issues related to luxury marketing and HNWI marketing, with a special focus on Japan. This site wants to provide up-to-date information, analysis, and links on the premium and luxury market in Japan. It is built to increase the available information on the topic, with continually expanding list of refernces, weekly updated information on companies and the market, and links to outside resources.
This site is made to interact with outside experts and researchers all over the world to gather the newest marketing theories and models on luxury and word of mouth, as well as networking theories in closed environments. Please feel free to contact me anytime.

HNWI Marketing Project

Luxury Model - Advanced communication chain

luxury marketing communication chain

This model is an attempt to combine the communication chain of marketing (Chevalier and Mazzalovo 2008) with the word of mouth mechanism. It looks complicated at first, but try to follow the arrows from field to field and you will find it quite easy to use. Look at which arrows point to the field anaylzed and follow the arrows to other fields to understand the chain of influence.

As can be seen, purchase decisions are influenced by the preceptions that a customer has of a certain product or luxury brand. The main influence is the brand identity, as perceived by the customer (the brand image, which is therefore not identical with the barnd identity), which in turn is influenced by many factors, including price, the wealth level of the customers buing the brand, the quality, the heritage, the advertising, and of course word of mouth, the combined conversations about the brand. The brand image is something that has built up over time, the accumulated experiences the customer has with the brand/product. Although many factors influence the brand identity of the product, some have also a direct impact on the perceptions/brand image. They can therefore influence customers on a short time basis: the customers' image or wealth level (seeing someone using the product or buying it), the advertising (seeing a new commercial that alters the way the customer evaluates previous experiences), the price (for example a sale), the shopping environment (maybe the customer never saw the shop before and is thrilled by the thought to purchase something in such an high-class/stylish/trendy/sophisticated environment), and, most important again, word of mouth (a friend or colleague telling him about the brand/product, a conversation that he overhears and that hooks him).

The most important feature of the model is the influence of the customer group on the brand identity and its exclusive image. As the clientele influences brand image and identity which in turn influences the clientele, the system becomes self-referential and can explain dynamics that lead to the devaluation of a brand. The wrong message or going to much downscale with a brand can lead to a preceived devaluation of the brand by changing its customers or expanding the customer group too much.

The democratization of luxury has three effects in this model. 1) it changes the (perceived ) availability of the product, leading to a less exclusive image, changing the brand identity, changing its clients, changing the perceptions, changing purchase intentions (even possible, the purchase intention of the same customer that was part of the process of devaluation. You never want to be part of a club that accepts you as a member ...) 2) It changes the advertising message, creating products more accessible to the mass luxury consumer, changing its customers which in turn again changes the shopping environment, which decreases the exclusivity, ... 3) If not executed sufficiently well, an extension of the product portfolio can lead to a major change in brand identity, by not integrating the main caracteristics that all product categories should share to form a distinctive brand personality. Also, a change in the segmentation and product mix can cause negative word of mouth, caused by a less exclusive image. Most dangerous is negative word of mouth among level 3 consumers. As the fact that they are buying the product is causing other customers (of level 2 and 1) to buy the product, if they stop buying it, the damage to the exclusivity and the aspirational appeal of the brand could be devastating.

All the above mentioned effects are basically part of the same chain of effects and interdependencies. The difference of luxury goods to normal mass market products could now be articulated again: the customers buying a luxury product have a profound influence on the image of the brand, by regulating its exclusivity and changing its brand image, sometimes even the brand identity. Therefore, increases in sales alone does not justify brand extensions. The qulity of the customer group is defining. The brand identity of luxury products is built in interaction with the luxury consumer. The image of mass market products is much less sensitive to changes in its core customer group. The important word is less sensitive. The degree of sensitivity goes up among luxury products. The model is still in its development phase, so any comments regarding logical consistency are more than welcome.