New luxury brand positioning and the emergence of Masstige brands

New Luxury Brand Positioning: The Emergence of Masstige Brands PLEASE CITE AS: Truong, Y., McColl, R., & Kitchen, P. J. (2009). New luxury brand positioning and the emergence of masstige brands. Journal of Brand Management, 16(5), 375-382. 1|Page INTRODUCTION “These new customers for luxury are younger than clients of the old luxe 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. They do not stay put. They now have money to burn. The competition for their attention is intense, and their consumption patterns-if you haven’t noticed- are changing life for the rest of us.” Twitchell [1, p. 272] The luxury market has been booming since the early 1990s. Several sources have estimated that the size of this market was $840 billion in 2004 and would reach 1 trillion in 2010 [2-4]. Two main reasons may explain such a growth. First, improved economic factors worldwide have contributed to more a favorable environment. These factors include increasing disposable incomes, lower unemployment rate, lower production costs, a growing wealthy class in emerging countries, and increasing work rate among women [4-7]. Second, the consumption of luxury goods has also increasingly reached the subsequent lower classes of the society in most countries [5, 8]. Consumers buy more luxury goods today than before for different reasons which could include a desire to emulate the lifestyle of the riches or the social class immediately above them [9, 10], the superior quality of the products [11], or on more hedonic grounds as self-rewards [6]. Consequently, the luxury market may be seen as becoming a relative mass market which not only includes members of the wealthiest social class but also those who belong to more modest classes [7, 8]. This democratization of the luxury market has been accompanied by a stretching range of offers from firms [1]. These new offers are often targeted to the mass and are less expensive than traditional luxury goods which have a well-confined exclusivity in terms of both accessibility and price [8]. Examples of new luxury goods can span from a urban BMW 1-series starting at $19,000 to Ralph Lauren Polo shirts sold in outlets for $9 or Swaroski crystals with prices as low as $20. These new luxury products tend to be more accessible to middle-class or lower-class members because they are sold at reasonable price premiums [5]. In terms of research outputs, the global growth of the luxury market has led to an increasing regain of interest from researchers for luxury marketing including conspicuous consumption in a contemporary context [e.g. 12, 13, 14], trading up for new luxury goods [5, 6]; luxury brands’ 2|Page construct and measurement issues [11, 15-17], mass marketing of luxury goods [e.g. 8, 18], and status consumption behavior in general [e.g. 9, 19, 20]. Although this regain of interest has unveiled many aspects of contemporary consumer behavior towards luxury goods and brands, there is still a lack of empirical research on the causes, both psychological and demographical, of new luxury consumption patterns [18, 21]. Yet, researching these causes and testing them are critical for elaborating positioning strategies for luxury brands [21]. This study proposes an empirical research to investigate the positioning strategies of two of the most popular new luxury fashion brands, namely Calvin Klein and Ralph Lauren. As suggested by Silverstein and Fiske [6], although affordable, new luxury brands still enjoy a reasonable level of perceived prestige which differentiate them from middle-range products. At the mean time, they are sold at prices that are only slightly above those of comparable middlerange products in order to reach a broader target than the niches of traditional luxury brands. This strategy may be best described as a masstige strategy [22]. A masstige positioning strategy is viewed by the authors as being very innovative and effective because it combines a successful prestige positioning with a broad appeal but with little if no brand dilution. Such a strategy has made some of the new luxury brand owners the largest firms in their industry in terms of revenues [23]. Figure 1 below depicts a typical example of a masstige strategy. 3|Page Figure 1 Example of a Masstige Strategy Traditional Luxury Brands Traditional Luxury Brands New Luxury Brands New Luxury Brands Middle-Range Brands Middle-Range Brands Perceived Prestige Price As shown by figure 1, in terms of perceived prestige, new luxury brands are substantially closer to traditional prestige brands than middle-range brands. However, in terms of price, they are substantially closer to middle-range brands than traditional luxury brands. Although some authors have suggested the existence of such a masstige strategy in previous conceptual research [e.g. 1, 5, 7, 8], little if no empirical study has confirmed this. Therefore, the objective of the proposed study is to verify the above hypothesized positioning of new luxury brands in relation with traditional luxury brands and middle-range brands, and to draw implications for both academics and practitioners. DESCRIPTION OF THE STUDY In order to achieve the objective of this research, the study involved three stages. The first stage concerned the selection of traditional luxury, new luxury and middle-range brands. The second stage involved calculating the average prices for the above three categories of brands. The last stage is dedicated to measuring the average level of perceived prestige for the three categories of brands using a specific scale. Once completed, the distances between the average levels of 4|Page perceived prestige and the average prices were compared to confirm the hypothesized positioning of new luxury brands. These stages are described in the following section. METHODOLOGY Stage 1: Brand selection Eight unisex fashion brands have been selected based on the suggestions of 12 participants of a focus group. Participants were asked to name several unisex luxury brands and middle-range brands. Then the researcher proposed to discuss Ralph Lauren and Calvin Klein. The participants were nearly unanimous that these two brands were considered as higher premium brands with high price tags rather than traditional luxury brands. It was agreed by the participants that Armani, Gucci and Hugo Boss were reasonable examples of traditional luxury brands; Ralph Lauren and Calvin Klein would be high-premium brands (new luxury brands in this study); and Zara, Celio and H&M would represent middle-range brands. Table 1 shows the shortlist of selected brands. Table 1 Selected Brands Fashion Brands 1) Armani 2) Gucci 3) Hugo Boss 4) Polo Ralph Lauren 5) Calvin Klein 6) Zara 7) Celio 8) H&M Stage 2: Prices The price for each brand was calculated based on the average price of the cheapest sweater for men and women. The prices were collected in the official brand stores in the largest mall in the French city of Lyon. Table 2 presents the average prices for the three categories of brands. 5|Page Table 2 Average Prices for Brands Brands Traditional Luxury Brands Armani Gucci Hugo Boss Average New Luxury Brands Middle-Range Brands Price 160 265 255 227 Polo Ralph Lauren Clavin Klein Average 76 69 73 Celio H&M Zara Average 33 28 39 33 Perceived Prestige The chosen instrument for measuring perceived prestige is based on the Luxury Brand Index (LBI) developed by Truong et al. [24]. This index uses the Attribute Rating method and factor analysis to position brands on a map which includes status and conspicuousness as the two attributes. Respondents were asked to rate each brand in terms of perceived status and conspicuousness on a 10-point scale. Then a factor analysis was performed to confirm the correct loadings of the items on the two underlying factors. The questionnaire containing the items of the two dimensions was pretested twice on a sample of 16 and then 12 respondents. The questionnaire was then administered to a convenience sample of 204 real consumers (4 were discarded due to missing data) aged between 21-40 years old. ANALYSIS OF RESULTS This section presents and analyses the results of the study. The section is divided into three parts. The first part presents the statistics of the sample data; the second part presents the results of the factor analysis and shows the perceptual map built from the factor scores. The final part compares the averages prices and perceived prestige of the three categories of brands. 6|Page Sample Statistics This section is concerned with the adequacy of the sample. One of the major issues with samples lies in over-representations of one or several groups of respondents, which can be interpreted as signs of sample biases [25]. The sample concerned in this study is composed of consumers aged between 21 and 40 with an equivalent ratio of males and females. The range of 21-40 has been chosen to ensure sample homogeneity. Therefore, a chi-square test was applied to the sample’s age groups and gender groups in order to compare the observed frequencies of the sample with expected frequencies to see if this sample is significantly different from a sample with a flat distribution. A conservative p-value of 0.01 was chosen to determine the level of significance accepted in this test. The results of the binomial test for gender showed that p = 0.205 which higher than 0.01. Therefore, it was concluded that the sample obtained in this study was not significantly different from a sample with a balanced ration of males and females. The p-value of the chi-square test for age 0.03 is higher than 0.01. Therefore, this sample was not significantly different from a sample with equal groups. Based on the results obtained in these tests, it was concluded that the sample of this study is not significantly different from a sample with a flat distribution. Factor Analysis A factor analysis was performed to verify that the six items loaded on the corresponding factors (status and conspicuousness). KMO and Barlett tests which assess the suitability of the sample data for factor analysis were performed and produced satisfactory results (KMO = .881 and Barlett = .000). These results support that the sample data are very suitable for factor analysis. Principal Component Analysis and Varimax rotation were then used in SPSS to calculate the factor loadings. Table 3 shows the loadings of the items. Table 3 Factor Loadings Status Consp Prestige ,818 Status ,861 Achieve ,810 Attractive ,838 Wealth ,796 Impress ,817 Cronbach alpha F1: 0.87 Cronbach alpha F2: 0.88 7|Page The six items loaded strongly on the corresponding factors with all loadings above .796. Moreover, the combined variance explained of the two factors accounts for 80% of the total variance. The results of the factor analysis were deemed very high according to the general recommendations provided by several authors [25-27]. Finally, factor scores were calculated for each brand so that all brands could be plotted on a perceptual map. Figure 2 presents the map of the brands according to two dimensions representing status and conspicuousness. Figure 2 Perceptual Map Comparison of the Brands Using the prices shown in table 2, the ratios were calculated to compare the prices of the three categories of brands. The ratio of traditional luxury brands and new luxury brands was 3.10 and the ratio between new luxury brands and middle-range brands was 2.20. In concrete words, the traditional brands were sold 3.10 times more expensive than new luxury brands while these latter were sold only 2.20 times more than middle-range brands. Similarly, the ratios were calculated to compare the perceived prestige. The ratio of traditional luxury brands and new luxury brands was 1.14 and the ratio of these latter and middle-range brands was 1.74. Therefore, while the perceived prestige of traditional luxury brands and new luxury brands are relatively close (1.14), these latter are perceived as being much more prestigious than middle-range brands (1.74). Plotting the three categories of brands on two scales 8|Page which are proportional to these ratios provides a similar figure as depicted in figure 1. Figure 2 shows the scales proportional to the ratios. Figure 2 Positioning of the Brands Traditional Luxury Brands Traditional Luxury Brands 1.14 3.10 New Luxury Brands New Luxury Brands 1.74 2.20 Middle-Range Brands Perceived Prestige Middle-Range Brands Price In conclusion, the ratios calculated from the average prices and average ratings of perceived prestige confirmed that new luxury brands are positioned as masstige brands, that is, these brands have successfully differentiated themselves from middle-range brands in terms of perceived prestige and at the mean time maintain reasonable price premiums in order to target segments that are much wider than those targeted by traditional luxury brands. Discussion and Implications For academics and more specifically researchers in luxury marketing, this study provides empirical evidence of masstige positioning strategies of new luxury brands. The findings have confirmed that the two new luxury fashion brands are perceived by consumers to be much closer to the level of prestige of traditional brands than middle-range brands. Yet, their prices are much closer to those of middle-range brands. The most direct and major implication for researchers is 9|Page that current empirical studies seem to hold on to the traditional binary taxonomy of fashion brands into luxury brands and other brands. Luxury brands are often considered as being exclusive and expensive, thus their prestige brand image can only be maintained via limited accessibility in both geographical terms and socio-demographical terms. One of the objectives of this study was to demonstrate that the line delimiting traditional luxury brands from other brands has become blurred by the emergence of new luxury brands, and it seems that a certain level of brand prestige can be maintained even when a mass targeting strategy is pursued. This latter point is also the focus of the implications for practitioners. As mentioned earlier, a growing number of traditional luxury firms are widening the range of their offers with products that are more accessible to the mass. Examples could include BMW 1 series ($19,000) vs. traditional BMW sedans ($50,000), Armani Jeans ($100) vs. Armani Haute Couture (900), or Tag Heuer Formula 1 ($550) vs. Tag Heuer Link ($4,000). These latter brands have been trying to include consumers who belong to lower classes than the one of their traditional costumers. Even though these brands are typical examples of successful masstige strategies, it seems that most of the traditional luxury brands are concerned about brand dilution when pursuing this type of strategies. Indeed, the prestige of BMW will be seriously damaged when every single teacher drives one of the brand’s cars. The critical success factor of a masstige strategy lies in the equilibrium between a prestige differentiation and a reasonable price premium. In practical words, substantial money needs to be invested in creating a prestigious environment around the brand so that this latter appeals to consumers as an aspirational brand. Such an environment may be created via visually appealing and prestigious stores or sections in department stores (Ralph Lauren in Galeries Lafayette), advertising in glamorous magazines (Hugo Boss in Vogue), holding seasonal fashion shows or exhibitions (Calvin Klein in New York), and signing well-know designers (e.g. H&M and Karl Lagerfeld). At the mean time, adequate price premiums need to ensure limited accessibility to the brand for the mass. Ideally, middle-class consumers should have access to the brand only on occasional basis. Brand dilution tends to happen when purchases from middle-class consumers become relatively frequent or habitual, making the brand widely accessible and therefore less exclusive. In conclusion, masstige strategies may be seen as an opportunity to traditional luxury firms as long as these two recommendations are respected. 10 | P a g e Future Research As suggested in the latter paragraph, the adequate equilibrium between perceived prestige and price premiums is critical to successful masstige strategies. Future research may therefore attempt to empirically assess the different equilibrium points for luxury firm. This would allow recommendations on appropriate price premiums according to the perceived prestige of a particular brand. Other suggestions for future research may focus on the effects of masstige strategies on consumer behavior. One problematic could concern the suitability of very traditional and exclusive luxury brands for masstige strategies. It is intuitive to say that certain brands are not suitable for masstige strategies simply because their clientele is extremely sensitive to the exclusive character of their brands. Another problematic could involve the identification of the risk factors of brand dilution. In conclusion, it is believed by the researchers that the lack of both empirical and conceptual research in this area suggests ample opportunities for further research. 11 | P a g e BIBLIOGRAPHY [1] Twitchell JB (2002) "Living it up : our love affair with luxury", Columbia University Press, New York. [2] Metha SN. Fighting innovation stagnation. CNN Money 2006. [3] LuxuryInstitute. The luxury consumer market: A wealth of opportunity. 2007. [4] Fiske N, Silverstein M. 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