A huge continent that presents unprecedented opportunities, luxury brands need to dissect Asia and then create their marketing and operational strategies
By: Madhumita Banerjee, Jaywant Singh and Paurav Shukla
Posted on: August 28, 2015
While luxury in Asia is booming with the rise of new money and an affluent consumption class, the picture is not all rosy for luxury brands within or outside of Asia. Some remarkable examples of this struggle involve Prada and Mulberry in China, Aigner and de Grisogono in India and Ermenegildo Zegna entering, leaving, and re-entering the markets. Moreover, with Chinese gift-giving on sudden decline due to subtle messages from its political leadership, many luxury brands have their work cut out for present and future regarding how to succeed in these rapidly growing, but ever so competitive and fickle markets.
Therefore, we attempt to decipher the underlying value perceptions driving luxury consumption in three of the largest emerging Asian economies, namely China, India and Indonesia. We also discuss the underlying problems and possible ways of engaging luxury customers in each of these markets and show how these consumers differ significantly from each other.
So, why are luxury brand firms struggling in Asia?
Analysts ascribe the underperformance of some luxury brands in Asia to over-expectations from the market and, crucially, to treating many Asian markets as homogenous. Asia cannot be approached as a laggard market anymore, wherein, consumers will buy anything foreign and especially with European heritage. While business analysts and research scholars emphasize the diversity and uniqueness of individual country markets in terms of geography, demography, culture and consumption patterns, market realities suggest that many Western luxury businesses might have erred in considering Asia as a homogenous market. Many a times, in our own travels across Asia, we have seen the same advertisements, the same messages and the same communication means employed by luxury brands across Asia to serve these vastly different markets.
We wondered why top luxury brands did not see the significant differences within these markets? Or were they blinded by their own grand self-impressions, which did not resonate with the Asian consumers? This homogenous treatment of Asian consumers baffled us, and hence we asked the questions:
• What are the underlying values that consumers in Asia associate with luxury brands?
• How can a luxury brand profit from these rapidly growing, competitive and diverse markets?
We all buy and consume what we believe offers value. Hence, value is one of the fundamental drivers of consumption. For regularly consumed products, value can be largely derived as a trade-off between costs (mostly price) and benefits (utility). However, in the case of luxury goods, this equation becomes significantly more complex as costs are considerably high and at the same time the benefits are not just utility oriented, but significantly more hedonic at personal, as well as social level.
Using the philosophical framework developed by Berthon et al. (2009) who employed Karl Popper’s “three worlds” hypothesis – we examined the constituent value perceptions among Chinese, Indian and Indonesian consumers. Extending earlier debate, we conceptualised luxury brands with three distinct value-based dimensions:
• Experiential, and
The symbolic dimension gets reflected in social signals, which are constructed through the narrative associated with the brand’s meaning, myth, stories, and consumer’s own wealth, prestige, and social status. The functional dimension relates to the material embodiment, which reflects in physical manifestations, such as quality of material and craftsmanship. The experiential dimension is associated with subjectivity and is idiosyncratic, as it differs from person to person. It gets reflected through sensations, feelings, thoughts, and behavioural intentions aroused by brand-related stimuli such as logo, packaging, advertisements and in-store environment.
Incorporating the instrumental and expressive aspects of the well-known theory of impression management, we extended Berthon et al.’s (2009) three-component model by including two specific sub-dimensions for symbolic value: other-directed symbolism and self-directed symbolism. We argue that symbolic value is reflected not only through social signals (i.e., instrumental aspect—other-directed symbolism) but also through possessions that help build a unique image for the desired personality (i.e., expressive aspect—self-directed symbolism). Our model is presented below.
We asked more than 600 luxury consumers in India, China and Indonesia about their luxury value perceptions and employed structural equation modelling to analyse the results.
So, what Asian consumers value the most?
In India, we found the construct of other-directed symbolism to be significantly related to luxury value perceptions, conforming to the crucial role of the instrumental aspect of impression management. Thus, Indian luxury brand consumers seem to be influenced by what others think of them and therefore consume in a way to influence others, in order to achieve societal acceptance, reflecting the hierarchical nature of the society (vertical collectivist). They use luxury brands to indicate social status. More importantly, luxury brands are used in India as a means to symbolise achievement, wealth and prestige.
While Indian consumers are predominantly influenced by other-directed symbolic value, in contrast, the luxury value perception of Indonesian consumers is influenced by self-directed symbolism of luxury brands. Self-directed symbolism resonates with expressive self-presentation, wherein the individual seeks to enhance the self through consumption. This result, while counterintuitive to the general perception of Indonesia as a collectivistic society, can be explained through the lens of equality perspective (horizontal collectivist). Indonesian consumers in general would see themselves as similar to others, however, they will not submit to in-group authority if the consumption choice is distasteful to them. This behaviour is dissimilar to the Indian consumer for whom luxury goods shopping is not an individual experience, rather it seems rooted in the societal process and the decision is as a group as against individual and hence, stronger other-directed rather than self-directed symbolism is observed.
Indonesian consumers also show significant impact of experiential value on their luxury value perceptions, which is consistent with the result relating to self-directed symbolism. Experiential value perceptions represent store-level and personal pleasure derived from consumption of luxury brands. In this regard, Indonesian consumers may use luxury shopping as a way to overlook their problems. The differences in the symbolic value perceptions of Indian and Indonesian customers are also consistent with what is observed in prior research, which shows that social and self-directed behaviour vary as per cultural differences.
Functional value perception has a significant impact on luxury value perceptions amongst Chinese consumers. However, as a value perception this was significant across all three countries in the study. This result shows that consumers evaluate the functional value of a luxury brand in terms of the status it brings and therefore, are willing to pay a premium price. The three countries have witnessed rapid economic growth over the last two decades and a consequential increase in aspirational consumers. These consumers associate prestige with the price and product quality perceptions and therefore buy luxury brands, which are perceived to accord higher status in the eyes of the society.
How to customise your luxury strategy in Asia?
Marketers can benefit from knowledge about the differences (and similarities) in constituent luxury value perceptions and customise or standardise their marketing strategy accordingly. For instance, a luxury brand positioning strategy in Indonesia should emphasise how the brand could enhance a consumer’s self-image and could make them feel good about themselves, as well as focus on the experiential aspects of buying and using the brand. Moreover, a brand should offer a unique store-level experience to the Indonesians.
On the other hand, a luxury brand in India should focus more on how the brand could add to the buyers’ social status. Marketing a luxury brand to Indian consumers by stating the European heritage and highlighting foreign origins may not work, as these consumers are well-travelled and are aware of global trends. Moreover, they have a strong Indian luxury heritage connection. So, a luxury brand planning to establish itself in the Indian market should work on social acceptability and symbolism of achievement, prestige and wealth. This wealth connection will also get integrated with the functional value, wherein, Indian consumers associate higher price with high quality and desire that which is hard to get.
The higher price and social symbolism offers a significant meaning to a luxury brand for Chinese consumers as well. Thus, the luxury brand marketer should customise their positioning and communication strategies for symbolic and experiential value perceptions across the three countries. Given that functional value has a significant impact on luxury value perceptions in all three countries, marketers could achieve scale economies by standardising their strategy for this dimension of luxury value perception.
Overall, the key implication of our study indicates that the luxury brands in Asia should adopt a flexible strategy consistent with characteristics of the consumers in each market, and be ready to adapt, or customize, where necessary. Developing insights from country-level research and responding accordingly will be crucial for their success.
Shukla, Paurav, Jaywant Singh, Madhumita Banerjee (2015), “They are Not All Same: Variations in Asian Consumers’ Value Perceptions of Luxury Brands,” Marketing Letters, 26 (3), 265-278. http://dx.doi.org/10.1007/s11002-015-9358-x
Madhumita Banerjee is Assistant Professor of Marketing at the American University of Sharjah, UAE and Fellow of Institute on Asian Consumer Insight, Nanyang Technological University, Singapore. Prior to the academic career, Madhumita had a corporate career in professional services including design, international business and strategic marketing research. She has worked across Asia, Europe and the Middle East. Her research is about understanding consumption experiences. Her work has been published in top-tier international journals such as Journal of Service Research, Marketing Letters, Journal of Business Research, Industrial Marketing Management, Journal of Business and Industrial Marketing and other scholarly publications.
Jaywant Singh is Associate Professor of Marketing in the Department of Strategy, Marketing and Innovation at Kingston University, UK. Jaywant studied and worked in India, Australia (MBA), Denmark, Singapore and UK (PhD) for several years. His research is focused on consumer behaviour and branding. His research has been published in several top-tier international journals such as the Marketing Letters, European Journal of Marketing, Journal of Advertising Research, Journal of Business Ethics, Journal of Business Research, International Journal of Market Research, Industrial Marketing Management, and Journal of Business and Industrial Marketing, amongst others. Jaywant regularly delivers corporate training and consulting to organizations on issues of branding and consumer behaviour.
Paurav Shukla is Professor of Luxury Brand Marketing at the Glasgow Caledonian University, UK. Paurav's career began in the industry, and he continues to work hand-in-hand with industry as a researcher, practitioner and advisor. He has published many articles in top-tier academic journals, chapters to edited books, and popular accounts of his work have appeared in the Sunday Times, Woman's Wear Daily, Inc., LuxuryFacts, Luxury Society, Retail Wire, Business Week, National Post of Canada and LiveMint Wall Street Journal, among others. He has also delivered corporate training, teaching and consulting assignments for organisations in Europe, Asia and North Africa, and has been actively involved in funded research projects.