A Study on Consumer Behaviour on High End Essay

1. Introduction Luxury can be defined as an indulgence rather than a necessity. It comes with a heavy price and only the up-market population can afford to enjoy it. This does not make the market any smaller or short of demand. The luxury goods market include- fashion, fragrances, watches, automobiles, drinks etc. The size of the market was US$ 175bn and grew at 7. 9% in 2000 and faced its first recession in 6 yrs in 2009 where the growth went down to about 3% in 2008, due to the financial crisis worldwide. ( Bain and Company’s luxury goods worldwide market study). Some of the most Luxurious Countries included : >> U. S. A >> Japan >>Taiwan >>Germany >>Italy >>France >>U. K >>Brazil >>Spain >>Switzerland According to the study conducted, the above markets constitute about 80% of the global markets. High End Product Brands We know some consumers buy luxury brands because they are called ‘Luxury Brands’. Be it status, badge value, or a desire to feel part of the in-crowd, come people buy Versace for its plaid, Mercedes for its Hood, Chanel for the CC. But that is not the scenario for the typical luxury consumer. As far as a handful of luxury categories automobiles, cosmetics and beauty, watches, consumer electronics go, a majority of a affluent consumers rate the brand as very important in their purchase decision. Let it be any category for any specific product, the brand image plays a very important role. â€Å"Luxury, derived from the Latin word luxus, means indulgence of the senses, regardless of cost. Luxury brands are brands whose ratio of functional utility to price is low while that of intangible utility to price is high. † – A . V. Vedpuriswar. http://www.thehindubusinessline. com/catalyst/2005/03/03/stories/2005030300170200. htm Luxury Brands have often been associated with the core competences of creativity, exclusivity, craftsmanship, precision, high quality, innovation and premium pricing. The product attributes give the consumers the satisfaction of not only owning expensive items but the extra added psychological benefits like esteem, prestige and a sense of a high status that reminds them and others that they belong to an exclusive group of only selected few who can afford these items. Brands like Rolex and Louis Vuitton represent the highest form of craftsmanship and command a staunch consumer loyalty that is not affected by trends. These brands create and set the seasonal trends and are also capable of pulling all of their consumers with them wherever they go. Premium Brands are those brands like Chritian Dior, Chanel, Ralph Lauren that aspire to be luxury and prestige brands but their marketing strategies are more towards a mass market or a luxury mass market. Luxury has no certified origins. But luxury branding is said to have taken birth in the west with the appearance of High end brands. This Industry is a global multi-billion dollar sector comprising of a multitude of brands with high relevance. Among these are brands like Loius Vuitton, Gucci, Ralph Lauren, Rolex etc. They are also among the most valuable and influential brands in the world. Despite its large size and income generation this industry has witnessed a slow growth in its strategic business direction. This is because for a long time luxury brands were managed through traditional business methods where decisions were made based on intuition and sometimes on a trial basis. These traditional methods also featured a strong focus on product development and publicity generation through conventional advertising methods. [Reference Book : Luxury Fashion Branding (Trends, Tactics, Techniques) by Palgrave Macmillan] Luxury consumers tend to buy luxury products for their superior functionality and quality or luxury consumers tend to buy these brands as a status symbol or luxury consumers tend to buy these goods to lavish themselves for self – appreciation. These are the three components of a luxury brand. The market of luxury brands in India has expanded in the recent times. With income levels going up, customers are prepared to buy such brands. According to a Household Income survey in 2001 – 2002, there were 20,000 families in India (Survey done by NCAER) with annual incomes of more than Rs 1 crore. By 2005, that number is expected to increase to 53,000. By 2010, the number is expected to be around 1,40,000. In the past, brands like Liz Claiborne and Perrie Cardin tasted Indian waters but made hastry retreat following poor customer response. This led to a general perception that India is still not ready for luxury brands. But now the impression is changing. Many leading global luxury brands have started taking our markets seriously. The Global luxurious brands include LVMH, BMW, Mercedes, Lo’real, Gucci, Rolex, Tiffany, Rado, Cognac etc. Out of these brands more than 70% of them are available in most of the metropolitans of India. http://www. exchange4media. com/e4m/news/fullstory. asp? section_id=3&news_id=15248&tag=9983&pict= In India it is necessary to scale the financial potential as well as the mindset of the Indian luxury consumer. According to a study by the American Express,† the mindset of the Indian consumer is so to prove that ‘I have made it’. This can be related to the luxury categorization which is based on the fact that luxury is seen as a reward both for achievements in life as well as showcasing these achievements to others. † http://www. esomar. org/index. php/inside-the-affluent-space. html -Indian Consumers -Status & Brands -Targetted Population The luxury sector targets its products and services at consumers on the top end of the society. These elite groups are more less price insensitive and choose to spend their time and money on objects that are plainly a luxury than necessity. For these reasons, luxury and prestige brands have for centuries commanded an unwavering and often illogical customer loyalty. 2. Literature review: Consumer Behaviour patterns and models: Consumer behaviour is generally a study on individuals, groups or organisations and the processes they include to choose, buy, use or dispose certain products, services or experiences to satisfy their short or long term needs and the effect these processes have on consumers and society. Consumer behaviour is influenced by various factors and changes from product to product and time to time. It is important to study consumer behaviour as it helps the producer or the marketer to serve the consumer better and to stay in the business by attracting new customers and keeping the old potential ones as well. Getting a closer look at what the consumers need also gets the product/brand the competitive edge it requires to survive in the market. Consumer behaviour generally indicates or is referred to its buying decisions. The buying decision of the consumer is influenced by many factors like the word of mouth, health issues, tastes, preferences, personal experiences and market spurs like product advertising, packaging and pricing. Dynamic consumer behaviour: The consumers may at any point act unexpectedly. The nature of their decision making is subject to absolute volatility. Consumers interact in the society with children, adults and peers who influence its feelings, tastes and actions. Strategies are becoming extinct sooner than usual, ideas working today need not work tomorrow. The product life cycle is becoming shorter and a huge assortment of products is available at the consumers disposal, which results in him/her changing his/her decision even at the last moment of the buying process. In such an environment the marketers are forced to cater to three main things: †¢What role does the product/service play in the consumer’s living. †¢What affects consumers purchase decision making. †¢What consumers require to purchase/consume goods and services Consumers all across the world come across various means through which they are made familiar/introduced to numerous products and services. Media is one such channel that brings the consumer closer to what it needs. Television, billboards, newspapers etc play a major role in influencing the buying decision of the masses. Luxury goods are perceived as a symbol of personal and social identity. These goods can be distinguished from other normal/non-luxury products by three vital dimensions of influential dimensions of performance in functionalism, experientialism and symbolic interactionism (Vickers J. S; Renand. F) http://www. ingentaconnect.com/content/westburn/tmr/2003/00000003/00000004/art 00006 This approach sheds light on how luxury products should be positioned and communicated to the consumers and also that the luxury brand symbols have a lots of influence on the customer’s choice in selecting one luxury product than another. World across consumers are flooded with images and scenarios with iconic figures adorning their favourite luxury brands. From movie stars to sportspersons, socialites to politicians, all are portrayed marketing their liked luxury products. Consumers are heavily influenced by these icons and tend to imitate them by buying such luxury products simply to enhance one’s social image as possession of luxury products is an indicator of wealth and success (Mandel, Petrova and Cialdini 2006). Studies also depict that these products are often bought because they tend to speak about the consumers own identity (Belk, Bahn and Mayer 1982; Shavitt 1990; Shavitt and Nelson 1999) and sometimes are just purchased because they cost more and separate them from others (Dubois and Duquesne 1993). Consumers have ever assessed their likes and beliefs with those others in their group, comparing tastes and preferences (Festinger 1954) and study shows that such evaluation results in distinction and combination effects resulting into social comparison (Salovey and Rodin 1984; Richins 1991). Another factor for individuals to purchase luxury products to set themselves apart or b a part of a certain part of the society: eg. , significant group character (Brewer and Weber 1994). Luxury products or prestige products are not purchased on regular basis and they need a high level of knowledge and importance and more often is based on self-perception, so they are high-involvement products (Rossiter, percy and Donovan 1991), this model aids the differentiation between luxury and normal products, however, other studies argue that the model does not considerably distinguish the level of luxury brands among all the luxury products (Horiuchi 1984). Consumer Perception theory: Perception can be defined as a means where an individual selects information from society and sets it in a coherent or a meaningful manner which is a view of the world around him and is usually based on unverified sources, yet guides human activities. Perception as based on emotions, ideas involving one and the surroundings is a cognitive and intellectual process which is biased in nature. The sensory elements that build up perception include:colour, sound, taste and feel of the product. These elements help the consumer to gain knowledge about the quality and bring them closer to the products, as they sense it themselves. The structural elements included innovation, repetition, placement, advertising and size. These factors tend to attract the consumers towards buying the product and also try to distinguish one’s brand from another. Consumer stimulus also forms a part of perception where the user responds to market stimuli. Regular users of a particular product tend to detect minute differences in the product features between brands. Eg. , users of wine and perfumes. Consumer perception of luxury and luxury products is in transition. Daniel Dumoulin, co-founder and director of Sundance Brand Agents- states that even recession in the market has created new opportunities for luxury products not only in terms of exclusive and expensive but also value and worth. Luxury in the mind of people is perceived as up-scale, high quality, class and flashiness. Studies are available on luxury brands that talk of the issues of what position do luxury brand hold in people’s mind (Dubois and Duquesne, 1993) and features of the one’s who take on such luxury products (Andrus, Silver and Johnson, 1986). Luxury is referred to as refinement, artistic and extravagant lifestyle. Luxury has different meaning to different people (Kate, 2009). Some consumers adapt luxury to the way of their living, while some others use it as a means to display their wealth (Okonkwo, 2007). The perception for these products based on the maturity of the market and the intensity with which the consumers are subject to them. In India, luxury not only perceives to be of the present day but has a sound history and cultural value as well. With Maharajas and Nawabs, who ruled, changed and refined the tastes and aficionados of luxury (Kapoor, 2010) and with India’s lavish weddings, advertisements and Bollowood stars, the art of luxury is has a place in India (Pandey Omkar, 2008). Consumer Purchase Behaviour: Purchase characteristic of consumers plays an important role in determining the behaviour pattern in the society and is highly affected by the cultures prevailing in that region (Belwal, 2009). Purchase decision of the consumers is also influenced by social, psychological and personal choices that should be considered for effective marketing (Kotler and Armstrong, 2008).