Luxury Marketing Essay Example
Luxury Marketing Essay Example

Luxury Marketing Essay Example

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  • Pages: 16 (4298 words)
  • Published: October 21, 2017
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Luxury Marketing

Luxury Marketing is the art of pampering customer’s senses and ego – overtly, so the world notices. Price is no real objective, as for many the greatest luxury is showing the world prices don’t matter to them. The Theory of Giffen Goods can also be applied to the luxury segment because of their exclusivity. Luxury fundamentally revolves around experiences and service. Luxury marketing is becoming particularly important in emerging economies like India, where the new rich want to announce themselves and the old rich want to separate themselves.

Luxury Brands

Leading Brands of the World aims to effectively communicate the unique essence that is embodied in every brand to those in the brands target audience. A prominent shift that is taking place in luxury markets today from 'Old world luxury charm' to that of 'New world luxury charm'

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reflects the challenges that luxury brand marketers could face if each luxury target segment is not correctly addressed. Each market differs in cultural, rationale, sociological & emotional values and understanding these emotional value ties to that of a sentimental purchase is vital for successful brand penetration. Old world luxury charm is deep rooted in the attributes, qualities and features of the product whilst 'New world luxury charm' is defined by the consumer who focuses on the experience of luxury deep rooted in the goods and services they purchase and not in the ownership or possession of the product itself. So 'New luxury' is about the experience of luxury while 'Old luxury' is about the product itself. All luxury segments such as property, auto, apparel and accessories, manufacturers are reporting enthusiastic sales this year.

The reason is simple — th

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uber-rich consumers’ boisterous lapping up of products and services that command a premium.

The 8 P’s of Luxury Marketing

1. Performance: The delivery of superior experience of a luxury brand at both levels – product level and experiential level.

2. Paucity: Over-revelation and distribution of luxury brand dilutes luxury character.

3. Persona: The visual brand identity captures the brand’s personality, mystique and emotional values.

4. Public Relations: PR in luxury branding plays an enormous role in image proliferation, thereby subtly influencing public opinion.

5. Placement: The branded environment is all about heightening the customer’s experience and amplifying the aura of the brand’s essence.

6. Personal Touch: Luxury branding is all about establishing and enhancing ‘emotional connections’ with discerning luxury consumers.

7. Pedigree: Many luxury brands have a rich pedigree and extraordinary history that become an inseparable part of the brand story.

8. Public Figure: The role of public-figures or celebrities endorsement can be observed to be more skewed towards the aspiring and accessible luxury brands.

Luxury Market in India

With a growing millionaire base in India, the luxury market is growing annually at around 35% CAGR (ET, 10th Aug, 2008). The World Wealth Report, 2008 states that the high net worth individual (HNI) growth was highest in India for 2007 at 22. 7 %. The growth in the luxury segment ensures that even new brands keep stepping in from time to time on home turf.

Source: Capgemini Lorenz curve analysis, 2008 According to a survey done by KSA Technopak, it is estimated that 1. 8 million households in India spend about $10,000 per year on luxury or premium goods and services.The number adds up to a market potential of about $18 billion for 2007. The gestation period

for the global luxury industry in India is expected to be much shorter at 5-8years as compared to China’s over 10years. Source: KNA Technopak*Estimated India Luxury Trends, 2006 divides consumers for luxury goods into 4 categories:

Luxuriated: Source of affluence is largely traditional and inherited wealth. Most importantly, they have high levels of exposure and awareness to world class living.

New Rich: Adequate spending power. Acquiring orientation to luxury.

Getting There: Acquiring spending power. Spends mainly on high end white goods, education of children, better housing and larger automobiles.

Mid Affluent: They are also acquiring orientation to luxury, however unlikely to indulge beyond a limit.

Reasons for Market Luxurification: The accelerating pace of economic and social change is transforming the Indian luxury landscape.

Today, the luxury consumer has become less homogeneous and increasingly diverse. This so-called “luxurification” of society is a phenomenon that can be attributed to the following dynamics: New affluence

The success stories of Indian tycoons and entrepreneurs have received widespread media attention. Although the country’s most affluent represent an elite consumer class, the willingness to flex their financial muscles reveals a golden market opportunity.

According to McKinsey Global Institute, the share of private consumption is projected to increase from 7% to 20% in 2025. It is however the emergence of ‘mass affluence’ combined with aspiration mindsets and lifestyle that is helping to stimulate consumer demand. Indeed, the desire for international brands is also driving consumption abroad. Media exposureThe growth of fashion and lifestyle media has established a strong following.

This media-cultural phenomenon is, however, not restricted to the pages of glossy magazines. Mainstream media are taking a greater interest in luxury brands, fashion trends and consumer lifestyles. Weekend supplements in national

newspapers devote pages to fashion features and product reviews. The significant increase of media exposure is helping to instill and forge positive brand images.

Zenith Optimedia reports that advertising expenditures in India increased from US$1. 1 billion in 1996 to US$4. 7 billion in 2006.Increased product knowledge and brand awareness are translating into greater consumer confidence – an important catalyst for luxury consumption in a fast-emerging market. Luxury accessibility It has never been easier for consumers to access luxury brands.

Indian consumers need no longer to travel to London or New York to purchase Gucci accessories or Cartier Jewellery. Luxury brands are now following the Indian consumer as they expand their sales operations not only in Delhi and Mumbai, but to smaller cities or metros such as Pune and Hyderabad. New retailing opportunities are also quietly revolutionizing the format of luxury retailing.Luxury boutiques were traditionally confined to the secure but often inaccessible surroundings of exclusive hotels. The shopping mall boom is set to democratize luxury consumption.

A pioneering project is the opening of the Delhi luxury-goods mall, Emporio, in March 2008. Shoppers will be overwhelmed by over 70 international high-end brands, but also immersed in a pleasurable and memorable shopping experience. Market regulation Although high import duties on luxury goods continue to prevail, India’s policy of liberalization and deregulation has improved its image as an attractive destination for foreign investment.Foreign companies that sell products under a single brand, such as Ermenegildo Zegna, have recently been allowed to acquire up to 51% in Indian joint ventures.

The introduction of market reforms is winning over the long-term commitment of foreign investors. The Automobile Sector Past Trends It was in 1898 that

the first motorcar rode down India’s roads. From then till the First World War, about 4,000 cars were directly imported to India from foreign manufacturers. Before independence, Maharajas, Nawabs and Zamindars, all had cars far luxurious than available today and there were more Rolls-Royces’ in India than in rest of the world. In the next five decades following independence, PAL and HM together symbolized India's car industry.

Hindustan Motors In 1984, HM launched Contessa which was labeled as one of the first ‘upmarket’ cars in India. The Contessa Classic was a popular choice for government limousines. It was one of the few Indian manufactured luxury cars in the late 80's and early 90's. In 1995, HM entered into collaboration with the Japanese automobile major Mitsubishi Motor Corporation Mitsubishi Lancer was launched to cater luxury market. HM produced another luxury car, Opel Astra in collaboration with GM in 1996.

Premier Automobiles Ltd PAL was engaged in the manufacture of luxury car, Premier 118 NE. PAL also entered into a MoU with Automobile Peugeot to set up a joint-venture company, for manufacture and distribution of 60,000 Peugeots throughout India. Maruti Suzuki The Maruti 1000 was the first ever contemporary sedan-type car launched in India. The car was introduced in October, 1990, sold at Rs.3. 81 lakh, it was back then the costliest car released in the Indian market. With a large waiting list for all Maruti cars, a computerized lottery was used to decide who got a chance to buy a Maruti 1000.

In 1994 it was discontinued when an upgraded version of the car, with more powerful engine, was released and renamed the Maruti Esteem. Mercedes Super-Luxury cars occupied

a small portion of the Indian car industry. The super-luxury cars started rolling on the Indian roads during 1996 when Mercedes Benz introduced their new car models in the country.

It could easily accommodate 6 passengers and most of the cars under this segment are built with state-of-the-art technology. The body of these cars was aerodynamically designed so that they can easily pass through the viscous resistance of the air. Mercedes Benz C-class was the entry level car in this segment. Mercedes introduced many advanced features like Agility control which ensures superb handling characteristics. Other trends During 1995-2000, International car makers started entering the Indian market, a trend that accelerated. Luxury cars and advanced technology is introduced to meet competitive pressures, and environmental and safety imperatives.

Automobile companies start investing in service network to support maintenance of on-road vehicles. Auto financing started emerging as an important driver for demand.It was also in the mid 80’s that crude air-conditioners were first fitted into the cars of the more affluent customers. They were expensive optional extras that buyers would ponder over before buying a new car.

Advertising Advertising in the Indian passenger car industry hardly existed till the onset of competition. HM stepped up its advertising budget by introducing several promotion strategies like Contessa Campaign Scheme, free servicing, shields for no problem performance and customer gifts. Advertising was concentrated to the print media. The advertising communication for General Motor's Opel Astra handled by McCann-Ericson India brought discernible shifts. It talked of a rare combination of German engineering, American management and Indian values. Daewoo's Cielo saw many changes, initially the theme of advertising for Cielo stressed on the image of the

company and the brand in international markets, in order to generate awareness.

Once awareness was created, they stressed on product features. The campaign described the ownership as a ‘state of mind’ on the triple benefits of comfort, safety and power. Maruti's luxury brand Esteem had been using ‘slice of life’ ads, with the family as focus. Ford initially talked of their market leadership in US, European and Japanese markets.

They then talked of Ford's new face on the global map - India. In the next stage, their corporate values like customer care and safety were highlighted. Now, the ads are showing the product, with stress on a ‘pulse racing’ feeling and the endorsement of Indian celebrities. Mercedes-Benz car has been positioned as a super-luxury car. Their ads in the print media have been consistent with the universal positioning of the product.

The luxury car market in India has tripled in the past five years. In 2007-08, the luxury segment registered nearly 100% growth. According to industry experts, the current luxury car market is an estimated 4,500-5,000 unit per annum.

The Segmentation of Luxury Car Market

Important segment due to high volumes as it offer a luxury branded car at relatively lower price, 20-30 lakhs.

1. More importantly, most customers tend to be loyal to one brand forever and if their first experience is good, the chances are that each time they upgrade to a bigger, better model, they will continue to choose the same brand. This segment sees all models across manufacturers being totally revamped every few years. For example, Honda Accord, BMW 3-series, Mercedes Benz C-class.

2. Mid Level Luxury Saloons: This segment is dominated by German marquees – Mercedes Benz

E-class, BMW 5-series, and Audi A6, priced in range of 35-55 lakhs. ?The power factor of the car is replaced by comfort in this segment.

3. High End Luxury Saloons: ?In this segment, factors like fuel-economy, engine displacement, etc become irrelevant. Price ranging from 55 lakhs to 1. 5 crores, the German trio again has a stronghold in this segment with Mercedes Benz S-class, BMW &-series and Audi A8.

4. Super High End Saloons: ?Priced above 1. 5 crores; Rolls-Royce (BMW), Bentley (VW) and Maybach (Mercedes Benz) dominates this segment.

5. SUVs combine the qualities of cars and off-roaders.

Audi Q7, Mercedes M-class, Toyota Prado, Porsche Cayenne are the luxurious SUVs available in Indian markets. About 40% of the luxury saloons bought in India are in entry level segment and another 40% is the share of mid-level segment. A little more than 10% of sales go to high-end luxury saloons whose main customers are hotels and travel companies who can import duty-free. A little less than 10% goes to imported SUVs and super luxury saloons.

Global Position of Indian Luxury Car IndustryIndia's luxury car market is likely to edge past Thailand and draw level with Malaysia this year and will soon overtake Singapore's sales of about 10,000 units a year. That is still a far cry from China, where luxury car sales are expected to rise by a fifth this year to about 233,000 units. India is lagging due to the relatively late entry of luxury car brands and steep import tariffs on India’s new cars that are nearly three times the 25% duties in Russia and China. The Russian luxury car market is fast emerging as one of the

'hottest’ destinations for luxury cars.

Last year, luxury sports car maker Porsche made its Indian debut with the iconic 911 Carrera turbo and its highly rated Cayenne SUV. Within a week of a launch, Porsche dealers claim to have taken 19 orders in Delhi and 12 in Mumbai.

Super luxury cars like Bentley are available locally at prices between Rs 1. 5-4 crore. By next year Ferrari enthusiasts will be able to buy the Ferrari Modena in India. BMW has had a good 2008 so far, selling 1,673 cars in India and revising sales target for the year to 2,800 cars from 2,000 cars.Similarly, compatriot Audi reported a 123% rise in sales in the first quarter of 2008 and now aims to sell 1,000 cars this year. Meanwhile, market leader, Mercedes-Benz, has reportedly set a target of 3,000 cars for 2008.

It registered sales of 748 units in the April-June quarter this year as compared to 515 units in the same period last year. Rolls-Royce, favoured by Indian royalty in the days of the British Raj, returned in 2005 after a gap of 50 years with the Phantom super luxury sedan. At Rs 6 crore, the Maybach is the costliest car in India but that hasn't slowed sales.The acquisition of Jaguar and Land Rover by Tata Motors Ltd this year signalled India's serious intent in the small but rapidly growing segment of luxury cars, once the exclusive preserve of royalty and business barons.

Consumer Trends for Buying Luxury Cars

Apart from the usual clientele like industrialists, filmstars and chairmen of companies, an increasing number of young professionals like doctors, chartered accountants and lawyers don't mind splurging on luxury cars. Year

2007 witnessed a new variety of customers from IT, real estate as well as doctors and architects buying luxury cars.

Luxury car manufacturers are also targeting new age entrepreneurs and SMEs segments. Younger consumers today want to show they've arrived, and luxury cars are seen as very desirable status symbols. Although the craze for luxury cars is visible all across India, Punjab tops the list and remains one of the bestsellers for luxury cars in India. According to reports BMW sold 90 cars since its launch six months back while Mercedes-Benz sold more than 550 Mercedes in Punjab and is poised to sell another 210 units by the end of this financial year.India is emerging as a young economy that is taking to luxury goods as an extension of their flamboyant lifestyle.

According to a survey by TNS, one of the most significant trends in recent years has been the gradual decline in the amount of time car owners replace their existing vehicle with a new one. There has been a progressive reduction from an average of 61 months in 2002 to 53 months in 2005. Another trend is of a growth in multiple car households, as more members of the same family purchase their own vehicle.In fact, the number of multiple car households is up quite significantly from 51 percent in 2002 to 65 percent in 2005.

This is also likely to drive demand for higher-end and premium segment models, since many buyers show a marked preference to buy their additional cars from segments above those of their existing vehicle. ? According to McKinsey Auto Survey, 2008 – only 45% of Indian car buyers are Price and

Value-conscious, rest 55% are conscious about brand, hi-tech features as well as comfort. Indian car buyers are more image and value conscious

  • Price conscious (21%)
  • Value conscious (24%)
  • Image seeker 23%)
  • Performance oriented (18%)
  • Naive buyers (14%)

Be it apparel or high-end consumer electronics or automobiles, the impact remains the same. Luxury goods are purchased out of choice and so aren’t impacted by inflation. Industry sources also point out that even in times of inflation, the disposable income of the rich is not dented much. People with money continue to buy things of their choice and in inflationary times, the gap between the rich and the middle class widens considerably, leading to increased spending by hem.

Financing Leading industry players, Mercedes-Benz and BMW, have partnered with ICICI Bank for loans to attract a new, younger set of consumers who are not averse to splurging on luxuries unlike their more investment-oriented predecessors. Various loan schemes have been launched by the automobile manufacturers and the financial institutions. This has made it very easy for the people to buy luxury cars and this has boosted the luxury car market in India. Sales Promotion Luxurious car companies are offering new and innovative ways to woo the customers. From making consumers enjoy single malts that are not even launched in India to taking customers on long drives. BMW unfolded yet another innovative way to add to its brand campaign by opening its 'BMW Studio' in the country.

The BMW Studio is a unique concept, wherein people can come and witness the BMW experience. The 'studio' has been conceptualized to offer an experience that fully meets customers' requirements and make best use of the

brand's strength.

Distribution

As a part of its strategy to increase sales, companies are opening up exclusive showrooms in Tier-II cities like Ahmedabad, Kochi and Ludhiana.Presently, luxury car has showrooms in cities like Delhi, Hyderabad, Gurgaon, Mumbai and Bangalore. The showrooms have huge displaying capacities and state-of-the-art workshops and premium bodyshops according to the international quality standards.

Showroom invites the customers to experience the exclusive models. Company’s also target high-end customers by opening showrooms at five star hotels or shopping malls like Italy’s Automobili Lamborghini started selling its super luxury cars through Exclusive Motors situated in New Delhi’s Ashok Hotel in the middle of 2006.

Diesel Dominates the Luxury Car Market

Though diesel versions of luxurious cars carry a premium, they are seen as one-time investment compared with relatively far less running cost of these cars. For example, the Octavia, with a diesel variant, is powering the rise in sales, indicating customers' increasing preference for diesel cars.

Clearly, diesel gives operating economy in terms of lower costs as well as higher mileage. Features Provided and Customization Luxury carmakers are aware of the buyers’ passions, so they are steadily going about their plans to manufacture and/or sell luxury cars for the Indian market.Rolls-Royce offers highly customized cars in India and depending on the level of customization sought; there is a waiting period for the Phantom, of up to six months. Ace car designer Dilip Chabria showcased his super luxury concept car ‘Ambierod’, the most expensive designer car at the Ninth Auto Expo in New Delhi. Luxury cars comes with sleek instrument panel backed by a satellite navigation system, rear vision camera, three LCD televisions, Internet and videoconferencing-enabled flat bed, multi-colored mood lighting

and the best of comfort, appearance and amenities.Manpower Trends to Market Luxury Cars Luxury car manufacturers are looking for talent from hospitality industry as the basic level of service remains same.

Well groomed personality, excellent communication skills as well as know-how to differentiate brands and sell them – someone who is aware about brands and their USP. This segment of is badly affected by shortage of manpower. Here, clientele is completely different from that of regular brands and hence, manpower is provided with high pay package ranging from Rs 24 lakhs per annum to Rs. 1-1.5 Cr. Also, one can easily move within segments, from high-end cars to high-end villas. Future Trends Chinese Automobiles Manufacturers to Market Luxury Cars Chinese car makers are eyeing the fast growing Indian market. Its main mission was to look for local partners to assemble and distribute its vehicles in India. The Chinese automobile heavyweights, Geelys and Cherys, are looking to increase their exports to Russia, Middle-East, Central Asia and North Africa.

The Society of Automobile Manufacturers Association India (SIAM), has told the government that to gradually increase the use of such vehicles, the price has to come down significantly. For that, support from the government by way of reduced taxes/duties on CNG/LPG/Hybrid vehicles and other alternative fuel vehicles and components are needed. The government is also expected to extend infrastructure support, such as providing consumers with enough CNG, LPG, clean fuels and electric charging stations. Hyundai introduced a CNG variant of its Sedan 'Accent' in order to cater for the increasing demand for CNG/LPG fitted vehicles, and more manufactures are looking to follow suit.

Luxury car heavyweight Mercedes have some cars running

on CNG in India.It's a successful technology and has been developed over the years. They are also trying the bio-diesel option on the E-Class saloon here. Joint Ventures and Partnerships for Luxury Car Marketing Companies are getting into partnerships for marketing and distribution of its luxury brands in India. For example, automobile giant Tata Motors is likely to market Fiat's gen-next models, Bravo and Cinquecento, in India in the next fiscal. Fiat has a close relationship with Tata as Tata uses Fiat turbodiesel engines in their cars, and the two companies have a partnership worth Rs 4000 crore (3.billion ringgit) in India. This will also help Fiat to market its high-end premium Luxury brand Alfa-Romeo in India.

Tapping Tier-II Cites

The world’s most prestigious luxury brands are expanding their footprint in India. It is not just the big Indian cities like Delhi, Mumbai and Bangalore where the rich are located. A small town like Nagpur which had nine millionaires in 1995-1996, by 2001 that figure increased to 425, with a growth rate of 91 percent. As The Euro Study notes, 80% of Mercedes S Class sold in India are sold in Ludhiana.

These youngsters believe that “greed is good”. As a result, the Buntys are quicker to latch on to newer, better brands and consumables. Export Market for Luxury Cars Carmakers including Mercedes-Benz, BMW and Audi assemble their lower-end vehicles to draw more buyers and import their more premium offerings. But import duties on new cars are nearly three times the 25 percent tariffs in Russia and China.

If import tariffs are lowered, there will be a big jump in sales, as these cars already have a following here.

India's entry to the WTO is expected to lead to a cut in import tariffs. Carmakers can also tap India's low-cost manufacturing advantage for greater economies. Today, the country of origin matters less and less, and India can be a good hub for exports to the Middle East and Southeast Asia, which together make up a fairly large market. The Money Says It All! Arguably, the most opulent automotive brands - Rolls-Royce, Maybach and Bentley with sticker prices ranging from $25,000 to $400,000 are entering Indian market.

As a part of its marketing strategy, Fiat organized a 72-day, 13,000 km Ferrari Magic India Discovery Drive. The car manufacturers have also started playing with the brand positioning of their multiple brands, even cannibalizing each other’s market.For example, VW offering Passat is priced at the same peg as Skoda’s Superb. Here, the company is making difference is the positioning of both cars – Superb as more luxurious and Passat as more sporty vehicle.

The luxury market is so enticing that Hyundai as it is considering a high-end division; much like Toyota did with Lexus, Honda with Acura, and Nissan with Infiniti. For positioning in super-luxury segment, car manufacturers adopt different positioning and brands as Mercedes builds the super-expensive Maybach and BMW builds Rolls-Royce which are already present in India.

Buying Habits of Customers Automobile

Dealerships of the future must serve the Online Buying habits of the online luxury auto buyer differently than today. Many luxury automobile shoppers will buy their cars 100% online in the very near future, and may never even step foot in the dealership. The Luxury car market will go through many changes in the future due to

the Internet. Auto dealerships must start thinking about how to separate themselves by offering a different kind of buying experience for luxury auto buyer.

The luxury buyer is becoming so accustomed to speed through the Internet that dealerships may have to bring the cars to the buyers in order to make the transaction. If customer shop for the car online, and then a dealer says they will bring the car for a test drive, it would be difficult to turn that type of service down. For a luxury car to be a luxury car, its features have to stay ahead of the innovative curve for customers. To get an idea of what lies ahead for luxury cars, companies have to gaze into the concept cars and get detailed customer reviews as did by Honda for Jazz before its much-awaited launch in India.

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