Establishing the legitimacy of social media in the luxury segment

A thesis submitted to the Bucerius/WHU Master of Law and Business Program in partial fulfillment of the requirements for the award of the Master of Law and Business (“MLB”) Degree

Kimberly Ewton July 26, 2013

14.520 words (excluding footnotes) Supervisor 1: Prof. Dr. Martin Fassnacht Supervisor 2: Vincent Schmidlin 1.Introduction ………………………………………………………………………………... 2

2. Marketing today …………………………………………………………………………… 4

2.1 A new paradigm ………………………………………………………………………….. 4

2.2 Shifts in consumer culture ……………………………………………………………….. 6

3. Luxury consumers …………………………………………………………………………12

3.1 Digital habits and perceptions …………………………………………………………... 12

3.2 Target groups of tomorrow ……………………………………………………………... 16

4. Social Media ……………………………………………………………………………... 20

4.1 Attempting a definition …………………………………………………………………. 20

4.2 The Topic Circle® ……………………………………………………………………….. 24

4.3 The storefront concept…………………………………………………………………... 27

5. Luxury in social media …………………………………….……………….…….. 29

5.1 Overview of best performers …..………………………………………………………... 29

5.2 Burberry the pioneer …………………………………………………………………..... 35

5.3 Rolex the late-comer ……..……………………………………………………………... 39

5.4 Trend setters …………………………………………………………………………….. 41

5.5 Other examples …………………………………………………………………………. 44

5.6 Observations ……………………………………………...…………………………….. 48

6. Conclusion ….………………………………………………………………………...….. 52

Appendix ….………………...…………………………………………………………...….. 57

1. Introduction

The rise of social media has forced marketing managers around the world to rethink their strategies. Managers of FMCG brands have now started to openly embrace social media as a legitimate element of their media mix, yet luxury managers seem to be lagging behind.

There are, however, more and more examples of luxury brands turning to social media and utilizing it successfully. Nonetheless, there is agreement, both in academic and popular business literature, that there is a reluctance on the part of luxury brand managers and that this reluctance comes from an unwillingness to hand over (at least partial control) of the brand’s messaging to consumers.

The purpose of this thesis is threefold: first, to show that giving consumers a voice in social media is no longer a choice, but a necessity; second, to show that there are various ways of doing so successfully; and third, to provide examples of traditional luxury brands who have decided to embrace social media as a part of their communications portfolio. This thesis therefore asserts that luxury brands should no longer ask themselves whether they should utilize social media, rather the question is how can this be best executed according to a brand’s core values and the values and interests of their relevant consumer groups. In order to do so, this thesis looks at the following issues:

! How marketing has changed due to the rise social media

! How social media and other cultural developments have affected consumer culture

! How to steer conversations in social media

! How luxury brands have to balance the line between accessibility and exclusivity

! Which luxury brands are successfully using social media and what can be learned

from them

! 2!

Chapter two takes a look at the evolution of the marketing paradigm and that of consumer culture over the last decades. This chapter illustrates the importance of recognizing the power of social media in light of statistics that prove that consumers perceive social media as their most credible source for information.

Chapter three focuses on the luxury consumer. This chapter looks at how luxury consumers have become tech-savvy and how the consumers of tomorrow will possess an even greater affinity towards digital media and mobile devices – opening up new avenues for luxury brands.

Chapter four presents essential background on social media. The first section introduces the concept and shows how difficult it to actually define it, considering is it constantly in flux.

Despite its hard to define nature, there one model is presented that can offer brands guidance when conducting conversations in social media and a few points to heed.

The final chapter enumerates various examples of luxury brands who are active in social media. Examples are offered by brand and then later by platform. In addition, an attempt is made to provide a general quantification of the most well-known luxury brands and their activity in social media.

In sum, this thesis provides for enough theoretical evidence and practical examples to prove that social media is an essential part of a luxury brand’s communication portfolio.

! 3! 2. Marketing today

The goal of this chapter is twofold. First, using academic literature, it is establishes why there is reluctance on behalf of luxury managers to integrate social media into their integrated marketing strategies (IMC). Second, using academic literature and practical examples, it shows that FMCG brands are leading the way when it comes to utilizing social media and that their techniques are already being applied in the luxury segment.

2.1 A new paradigm

The tools and strategies for communicating with consumers have changed significantly with the emergence of phenomenon known as social media [1]. The 21st century is witnessing an explosion of Internet-based messages transmitted via this media, and this has become a major factor in influencing various aspects of consumer behavior, such as awareness, information acquisition, opinions, attitudes, purchase behavior and post-purchase attitudes. Unfortunately, the popular business press and academic literature for marketing managers provide very little guidance for incorporating social media into their integrated marketing communication (IMC) strategies. Therefore, many managers lack a full appreciation for social media’s role in the company’s promotional efforts. Despite social media’s ability to magnify the impact of the conversations being held by consumers, there have yet to be any methods to be developed by academic sources and universally accepted and applied in the field of marketing. [1]

There have however been attempts to officially include social media within existing models.

One such attempt is by Mangold and Faulds in which they compare the traditional communications paradigm with a hybrid form, showing how it is enhanced by the integration of social media. These authors propose that in the traditional communications paradigm the elements of the promotional mix are coordinated to develop an IMC strategy, and the content,

! 4! frequency, timing and medium of communications are dictated by the organization in collaboration with it spaid agents (i.e. adverstising agencies, firms, PR consultancies, etc.). The flow of information outside the boundaries of this paradigm were restricted face-to-face and word-of-mouth communications among consumers that, in the long run, had little impact on the dynamics of the market place or the brand image itself. [1]

In comes social media. Now the marketing manager’s control over content, timing and frequency of information is being severely eroded. In the new paradigm, information originates in the marketplace. This shift in power has greatly affected consumer behavior, as it has given consumers influence that they did not have before. The new communications paradigm (see diagram 2.1a) requires marketing managers to recognized the critical impact of the conversations taking place in social media, which is illustrated by four major points [1]:

! The internet has become a mass media vehicle for consumer-sponsored

communications [1], reaching consumers. For example, consumers in the US spend

20% of their time on a PC in social networks and 30% of their time when using

mobile devices [2].

! Consumers are turning away from traditional sources of and are

showing increased demand for more control over their media consumption [1].

! Consumers are looking more and more to social media as a source for information

[3].

! Social media is perceived by consumers as more trustworthy source of information

than corporate-sponsored communications transmitted by the traditional elements

of the mix [4].

! 5!

Diagram 2.1a The new communications paradigm Source: Mangold and Faulds, “Social media: The new hybrid element of the promotion mix”

Marketing managers who are accustomed to exerting a high level of control will have to learn to talk with their consumers as opposed to talking at them in order to influence the conversations taking place in the social media space. In section 5.2 Topic Circle® we look at one model that provides general guidance for doing so. In the next section we take a closer look at the consumer culture and how the rise of social media and the evolution of consumer expectations go hand in hand – even in the luxury segment.

2.2 Shifts in consumer culture

Today brands exist in what is known as the “postmodern consumer culture”, which presents a shift in comparison to the classic models developed in the 1950s and 1960s that are in part still taught today [5]. This postmodern paradigm rests upon the idea that brands will be more valuable if they are not offered as blue prints for living one’s life but as resources – as useful ingredients for life, should one so choose to have these ingredients in their life. In order to be considered as useful ingredients in identifying the “self”, brands must be considered to be authentic. And in order to be authentic, brands must be “distinterested”, they must be

! 6! perceived as invented and disseminated by people with no economic agenda and are intrinsically motivated by promoting the inherent value of the brand. [5]

Postmodern consumers reject brands “modern branding” efforts from previous eras, because they seemed to reek of commercial interest [5]. By the 1990s, four new techniques had emerged, aiming to turn brands into authentic cultural resources [5]. Each of these techniques convey in image of being a cultural resource, unfettered and untainted by any sense of wanting to pursue a particular marketing agenda. These are defined by Holt [5] and summarized below. For each of these techniques, you will also find examples from the luxury segment as well, proving that the shift in consumer culture has permeated the entire marketplace and thus affecting the behavior of luxury brand and luxury consumer behavior as well:

Ironic, Reflexive Brand Persona

This type of communication or campaign often uses irony and reflexive acknowledgement in order to separate themselves from those competitors who use the hard commercial sell. The result is that the brand sounds more like a humble friend, self-conscious of its own short- comings. One example is the famous “It’s a Lemon” ad for Volkswagen in the 60s.

! Example from luxury segment: The Lady Dior films by Christina Dior on

YouTube.

The episode “L.A.dy Dior” satirizes the luxury fashion industry in a six minute film

directed by James Cameron Mitchell, in which all of the typical cliché personalities

play a role. There is a business-driven manager, a self-absorbed photographer and

an anorexic, has-been-model as the stylist. The film is meant to be humorous and is

! 7! one of the very few examples of a luxury brand using this type of reflexive, ironic

humor.

Coattailing on Cultural Epicenters

This technique weaves the brand into cultural epicenters riding the waves of the new bursts of expressive culture. These sources of “expressive culture” include fashion communities (e.g.

Absolut), ethnic subcultures (e.g. Tommy Hilfiger embracing their African-American target group), professional communities (e.g. Nike’s decision to be a pioneer in endorsing professional athletes) and consumption communities (e.g. Cannondale including rough-and- ready mountain bikers in their image). The result is that the brand appears as a member of such communities as opposed to a “cultural parasite” feeding on popular culture. Today the most important cultural epicenter is most often referred to as “urbanization”, meaning a new focus on the lower-income or even poverty stricken lifestyles in African-American and Puerto

Rican ghettos in the US. All major advertising networks have dedicated considerable resources in being able to deliver these types of cultural assets more effectively than their competitors.

! Example from luxury segment: Jean Paul Gautier’s decision to send Beth Ditto,

lead singer of Gossip, down the catwalk for Paris Fashion week in 2010 [6].

Ditto, the corpulent lead singer of Gossip who grew up in a trailer park and openly

identifies with the LGBT (Lesbian Gay Bi-sexual Transgender) community,

represents the global tendency among society in rejecting conventional, XXS

beauty ideals [6] as well as fashion’s sudden embrace of the cultural epicenter of

queer sub-culture also seen in the rise of androgynous representations of models in

fashion photography. Journalists reacted positively with little or no critique. Jean

! 8! Paul Gautier also designed her wedding dress when she married long-time

girlfriend Kristin Ogata [7], which was also positively received in the luxury

fashion world and went viral on various LGBT and fashion blogs.

Life World Placement

This technique works hard to make the case that the brand’s value emanates from disinterested everyday life situations far removed from commercial sponsorship. In other words, the key is “authenticity”. This has manifested in various forms of advertising. Among the most noted examples are what seemed to be rather amateur, candidly shot ads and commercials, such as with the Snapple spots. Here the campaign was based on the idea that real consumers wrote to Snapple, explaining why they should have their own drink machine filled with Snapple right in their own living room. The commercials show the letter allegedly written by the consumer, the consumer being surprised in their living room when the doorbell rings and the “Snapple Man” arriving with the drink machine on a dolly that is immediately placed in a prominent place in the consumer’s home. The entire event is show with a hand- held camera to ensure a sense of spontaneity and authenticity. Other examples of authenticity come from brand’s emphasizing their heritage. L.L.Bean, Eddie Bauer and Abercrombie &

Fitch had chapters in their advertising histories that seemed to suggest they were responsible for clothing long-ago mariners trolling the seas for large marine game and pilots flying off to fight in War World II.

! Example from the luxury segment: Chanel’s website special culture.chanel.com

This site allows anyone to dive into the world and history of Chanel. Upon entering

the site and clicking on “The Exhibition”, one is immediately greeted by the French

curator of an exhibition about the brand Chanel touring the world and opened in the

spring of 2013 in Guanzhou Opera House, designed by the world-renowned

! 9! architect Zaha Hadid [8]. The curator’s first words about the rich history of the

brand and within seconds the name Coco Chanel, the brand’s heart and soul, is

mentioned in order to clearly communicate the brand’s legitimacy as a luxury brand

through its heritage.

Stealth Branding

This technique is based on what used to be called public relations, where marketers would place brands in popular television series and films and hire celebrities to use their products. In the postmodern consumer culture, this technique would seem too economically motivated, too top-down as opposed to being at eye-level, to be accepted. This therefore evolved into inconspicuously placing products in the lives of those target groups who represent the

“cultural epicenters” that exist. For example, placing a particular beer among hipster barflies or even finding a way to place a particular shoe brand among gangsters or to use the association with these groups as leverage for the brand – and then highlighting a well-known personality within one of these groups. Major ad networks are also scrambling to establish sub-agencies that provide this as a service (e.g. Tribal DDB’s agency known as Brand Buzz).

! Example from the luxury segment: Chanel, again, with their campaign “The Little

Black Jacket”.

This campaign is dedicated to the simple black blazer that can be worn with

anything. It ran in 2012 and was based on a series of black and white photography

of celebrities in candid, un-posed shots with their favorite Chanel blazer. The

collection of photography was an exhibition that toured around the world and a

website [9]. Here we see the product placed among celebrities who represent a

particular cultural epicenter, namely the emergence of the powerful and practical

woman who is able to manage being successful and beautiful at the same time. The

! 10! motivations of the brand seem not to be economic, as the event emphasizes the

medium of photography and the intention of presenting this particular piece of

clothing as a piece of art – with art being the polar opposite of commerce.

By examining the shifts that have taken place in the marketing paradigm it becomes evident that the notion of a brand, even a luxury brand, speaking to its consumers at eye-level, as peers, is no longer taboo. The shifts in behavior among FMCG brands were indicative of the cultural shifts in society in general at the time. This examination also shows the luxury brands who follow these tendencies first seen among FMCG brands are able to boost their brand’s image without risking their sense of exclusivity, as this can be controlled via price, and product exclusivity.

The link between this shift in marketing paradigm and luxury brands is also confirmed by by

Tokali in his study on Burberry [10], as he uses Holt to justify the brand’s decision to rejuvenate and make social media a central part of these efforts. It has become clear that brands have to offer consumers “ghostwriting” help [5]. In other words, consumers prefer those brands, including luxury brands, that offer them help in authoring their own lives and own forms of creative expression as opposed to prescribing how they should live.

! 11! 3. The luxury consumer

That chapter takes a closer look at how luxury consumers use the Internet, social media and their digital devices when consuming content and making purchase decisions. This chapter also identifies two important target groups for luxury brands for the future, namely the

Millenials and the Chinese consumer and presents tendencies found within these groups – thus showing that social media is an imperative for luxury brands who want to be well positioned for the future.

3.1 Digital habits and perceptions

According to Abrams Research – a leading, full-service digital and social media agency based in New York – over 75% of wealthy Internet (earning over $240, 000 per year) users actively use social media [11]. The question is therefore no longer whether luxury brands should consider the Web as a luxury market, rather the question is now how to do so [11]. The dynamics of the online market place continue to shift with the exponential growth of the social media offerings. Consumer behaviors are expected to shift with them as well [11].

Luxury brands have always had to reinvent themselves to maintain their mystic and to propagate the luxury fantasy in the minds of their consumers. Now they will have to do this on a technological and communications level in the future, in order to continue to reach their consumers, whoever and wherever they may be.

Here are a few important facts to consider, in order to better understanding of the relationship between the luxury consumer and digital and social media [11]:

! 74% of luxury buyers are more likely to buy from a company whose values are

clearly defined through social media.

! 12! ! 60% of luxury consumers on Twitter who follow brands would recommend that

brand to their friends.

! 21% of luxury consumers on Pinterest users have purchased an item that they found

through browsing.

The increase on behalf of social media users to share content, has given rise to a specific archetype of user: the “Brand Evangelist”. This type of marketing is sometimes referred to as

“Evangelism Marketing” as well. This is when someone who strongly identifies with the brand and voluntarily refers the brands to their friends [12]. These users believe so strongly in a particular brand that they try to convince others of the same and even urge them to buy products made by that brand [12]. It is an advanced form of word-of-mouth marketing that can be cultivated by companies themselves by creating online communities [12], and

Evangelism Marketing is therefore considered to be an especially powerful force. Even though we live in a world, in which it is becoming easier and easier to compare information, most consumers turn to their friends before making purchase decisions. They look them for information, recommendations and endorsements and are viewed as being more trustworthy

[11].

Many mass-market brands try to win over potential brand evangelists in roundabout ways, and recent increases in spending on branded entertainment and sponsored content are testament to this. For luxury brands, finding and keeping brand evangelists requires a highly deft touch. Acting overly solicitous undermines the exclusive image that is central to the appeal of so many luxury brands. At the same time, being to protective of certain brand assets will harm the brand’s identity instead of helping it. In order to find the right balance, brands need to understand which aspect of this identity are worth sharing and then adjust their digital presence in digital and social media accordingly and with consideration of the platforms being used. Mo matter how well know a brand might be in a given market, the brands that leverage

! 13! the passion, interest and connectivity of their biggest supporters are invariable the ones that achieve the greatest success [11].

It is clear now that luxury product consumers are at home in the Internet and use social media to inform themselves before purchasing. However, it is also important to better understand their usage habits with respect to the devices they prefer. According to a study conducted by

White Communications – a leading agency specialized in consulting international luxury brands and based in Munich – has researched this question and found the luxury consumers are very accustomed to using their mobile devices:

! 31% of “heavy buyers” (consumers who have “regularly” purchased or “exclusively”

purchased high-end luxury products in the recent past) in the study said they would

welcome an app that let the shop online with their smartphone [13].

! 25% said they actually expect luxury brands to offer such an app [13].

! 29% said they use their smartphones to inform themselves before making a

purchase[13].

! 24% said that they have used their smartphones to make purchases in the past [13].

Luxury consumers are also heavily influenced by the advertising they see while on the

Internet:

! 42% of the heavy consumers said they have a positive attitude towards luxury brands

that advertise on the Internet [13].

! 39% said they consider advertising by luxury brands on the Internet to credible and

authentic [13].

! 20% admitted to being influenced by and decided to purchase [13].

! 19% of heavy buyers “regularly” or “exclusively” purchase luxury products on the

Internet [13].

! 14!

In light of these habits, the answer to one question from the same study seems to be rather remarkable. When heavy buyers were asked whether they feel social media is an appropriate medium for a luxury brand, their responses did not provide for a clear answer. Most notably,

48% of the heavy buyers said that high-end brands have no place in social media, because this would jeopardize their exclusivity [13]. Though this number is high, it is still less than half. In addition, the following was discovered:

! 29% of heavy buyers said they most definitely want to be able to find luxury brands in

social media [13].

! 24% even said that the social media is a must for luxury brands and, arguably the most

important finding [13]

! 24% said they want to be able to talk with their friends about luxury brands in social

media [13].

Though the 48% mentioned above is a rather high number, it is still less than half of the respondents. The other numbers provide evidence that a notable percentage would be accepting towards a luxury brand being present and active in social media.

Looking again at the 48%, an interesting question is however how this perception compares to their actual behavior. In other words, how many of these luxury consumers who feel that luxury brands have no place in social media actively decide not to like, follow or pin luxury brands or cease to see that brand in a positive light. There is little to no information that reveals insight on this particular aspect of the issue. However one can assume, if the current trends in online shopping and being influenced by online advertising continue on their current path, this heavy buyers will begin to be more accepting towards luxury brands in social media.

! 15!

Statistics show that the sales performance and perception of luxury product purchases are – almost literally – in the hand of consumers due to the fact that they are so used to using their mobile devices. Most are comfortable with using social media and do not see a contradiction between the brand’s exclusivity and its presence in social media. In the next section we take a closer look at who these consumers are and how the acceptance towards social media in luxury brands will likely continue to increase.

3.2 Relevant target groups for the future

Various sources agree that in order to position a luxury brand for the future, it is important to identify who the luxury consumer of tomorrow will be. According to Burberry CEO Angel

Ahrendts [14], they have identified the “Millenials” as their trench-coat wearers of the future, and other brands seem to be following suit. According to Forbe’s magazine, by 2017 the

Millenials will have more spending power consumer group than any previous generation [15].

And, due to clear growth trends, the young adults in Asia should also not go unnoticed.

According research by the FOCUS Group, China is the fastest growing luxury market in the world, currently at a rate of 18% [16]. This section presents an overview of the characteristics of each of these consumer groups and how their habits will likely pull more luxury brands into the realm of social media.

Let us first look at the “Millenials”, also frequently referred to as “Generation Y”. Though there is disagreement regarding the exact ages that define the boundaries of member to the

Millenials (some say it ranges from 13 to the mid-30s, others consider all young adults who entered the workforce after the summer of 2000), there are certain characteristics that are uniformly associated with this group that immediately follows “Generation X” chronologically. For example, this generation of consumers experienced early exposure to

! 16! technology and own a variety of digital devices [17]. They also rely heavily on technology for entertainment and interaction with others – even for emotion regulation. Members of this group have experienced long periods of economic prosperity (until the last few years) and rapid advancement in the commonly used technologies (i.e. improvements in the capabilities and functionalities of social media, increased band width, the proliferation of HTML5, etc.)

[17]. Initially, the Millenials seemed to lack a “significant emotional event as tumultuous as the depression of 1929-1940 to serve as a rallying point” [17]. However, some consider the era of economic uncertainty and widespread global violence along with the current global recession as the common story for this generation [17].

There are other general behavioral and attitude traits that they share. They seem to have an “I want it all, and I want it now” attitude [18]. They need to have instant feedback – when there is no reaction, they quickly lose interest [18]. Moreover, they react positively to instant, positive feedback and seem to need this more than other generations [18]. They live in a world that is full of choice and sometimes difficult to navigate, however, they are good and finding “loopholes” and “smart-cuts” that allow them to improve the quality of their lives, simply make things easier on them or, most notably, allow them to better deal with or even circumnavigate authority [18]. Though they are “hardwired” in ways that are different to the generations before them, they are more “old school” that most people might think [18]. They value friendships, they value family and they seem to appreciate traditional values [18]. They tend to not need to rebel, rather they are more involved with navigating their own way through today’s world [18].

Now let us take a look at the Asian consumer, with a focus on Chinese habits and characteristics. As one might expect, the typical Chinese consumer is very tech-savvy and spends a lot of time on the Internet and engaged with their smartphones [19]. Approximately

70% of potential consumers of luxury brands search for luxury brands on the Internet at least

! 17! once a month, with 35% of consumers doing so more than once a week. Both of these figures show a significant increase compared to numbers as recent as 2010 [19]. In addition to this,

40% of consumers indicate they are interested in purchasing goods on the Internet – despite widespread fear in Asia of being sent counterfeited goods [19]. This figure is up 22% when compared to figures as recent as from last year. According to the same report, search engines are also a significant source of traffic to luxury brand websites, however the traffic coming from social networking sites are even more important [19]. According to Timothy Coghlan,

Senior Manager, luxury and Savills China, “Chinese consumers are having those conversations about the (luxury) brands online and the social media trends are moving very fast [19]. It is also increasingly proving a challenge to find the right people to “blog” about your brand [19].”

When we move beyond purchase intention to the actual purchase, there are other important items to note. For example, 79% of Chinese consumers said they preferred to purchase goods online, ahead of 65% of global respondents in the same study [19]. China has also seen exponential growth in the use of mobile devices for both purchases and payments and is leading the way in the mobile banking space, due to the rapid increase in smartphone usage

[19]. The ubiquity of the smartphone is play an important role in terms of the customer experience in the retail space as well. Over 50% of Chinese consumers said they use their smartphones while inside the retail space [19]. Chinese consumers said they tend to use their mobile devices to access coupons and gift cards, whereas the global respondents in the same study said they tend to use their devices to inform themselves about products or locate the nearest store [19].

When brands attempt to refine their digital approaches according to the highly competitive and dynamic Chinese market, there are certain key aspects they should consider. For example, social media is having a huge impact on the luxury segment. Wealthy Chinese consumers are

! 18! younger when compared to the West, and it is therefore important to interact with them early on in order to create a foundation for brand loyalty throughout life [19]. M-Commerce

(Mobile Commerce) is also taking off in China [19].

With regard to the Chinese consumer habits, there is one final aspect to consider. They not only use their mobile devices a great deal, they really are a mobile population [19]. In other words, Chinese consumers travel a lot, and they do so with the intention of purchasing luxury brand products [19]. Travel among mainland Chinese consumers has increased to 71%, which is a margin of increase of about 20% from four years ago [19]. For purchases of cosmetics and perfumes, approximately 60% said Hong Kong, Taiwan and Macau were their top shopping destinations, being a significant increase from 43% in 209 [19]. Mainland China was voted their second choice, while Europe also saw a marked increase in purchases due to the rising number of Chinese – a staggering increase from 3% in 2009 to 20% in 2012 [19].

Prices have seemed to even out globally, and Chinese consumers report positively of their trips to Europe and other shopping destinations around the world [19]. When they travel to other markets for shopping, they take their knowledge they acquire from their experiences at home with them and expect for these to be confirmed [19].

With regard to the Chinese perception of luxury, there are also interesting changes that have taken place. According to Florian Craen, Regional Managing Director at Hermes Chinese consumers are having a huge impact on the luxury industry:

“Consumer behavior patterns are changing at a very rapid pace. Values linked to

craftsmanship selectivity in the distribution and scarcity of the product are becoming

more important in the eyes of the consumers in this market [19].”

! 19! In addition, 56% of Chinese consumers said they prefer to purchase well known luxury brands, with 60% separately indicating they would pa a premium for well known, popular luxury brands [19]. The interest is therefore clearly among well known brands as opposed to niche luxury brands. At the same time, Chinese tastes are seeming to “mature” [19]. Fewer consumers are looking to express their sense of style as opposed to simply displaying conspicuous status symbols, and their increase in appreciation for craftsmanship is also a notable change [19]. 88% of consumers said that they would be willing to pay a premium for

“high quality and durability”, 80% for “exclusivity and uniqueness”, 80% for service and

72% for “long (brand) heritage” [19].

In sum, both the luxury consumers of today and tomorrow own smartphones, are Internet- savvy and expect to have their favorite brands at the tips of their fingers. They are hedonist, run in “tribes” and look for opportunities of personal pleasure. They want to interact with these brands, and they want to be able to use social media to talk to their friends about these brands, and they look to their friends for recommendations. Both also embrace traditional values. In this sense, the Millienials value family and friends and also look to certain conventions for; the Asian consumer openly admits preferring brands with a visible heritage and are willing to pay a premium for them. And a majority thinks it is perfectly normal to be able to find their brand within a social media platform. This could also mean that luxury brands in social media do not need to completely reinvent themselves. In other words, they can continue to rely on their core heritage (possibly with modern twists), but in order to be relevant in the future among the up-coming luxury consumer groups they should be available via the media that best suits these consumers.

! 20! 4. Social Media

This chapter uses academic literature to provide a brief introduction to social media and proposes one way to definite it. The Topic Cirle®, created by advertising professionals, is then presented as a method for steering conversations in social media. Finally, we look at the issue of promoting purchase by using social media as an addition type of storefront.

4.1 Attempting a definition

In order to arrive at a comprehensive formal definition of what social media is, a line has to be drawn between “Web 2.0” and “User Generated Content” (or UGC) [20]. Web 2.0 is a term that was first used in 2004 to describe a new way in which software developers and users began to utilize the Internet [20]. Here the content of the websites were no longer created and published (or “static”), rather they were continuously modified by all users in a participatory and collaborative manner [20]. Encyclopedia Britannica Online was replaced by Wikipedia, for example [20]. Although Web 2.0 does not refer to any specific update that took place during in a particular chapter of the history of the Internet, there is a set of basic functionalities that are necessary for its functioning (such as Adobe Flash, RSS, AJAX, Java

Script, etc.) that made the exchange and sharing of information possible and as seamless and user-friendly as it is today [20].

When Web 2.0 represents the ideological and technological foundation, UGC represents the sum of all ways in which people make uses of social media [20]. This idea can be put into the following general terms, namely:

“A group of internet-based applications that build on the foundations of Web 2.0 and

allow the creation and exchange of user-generated content [20].”

! 21!

The idea of social media therefore not really groundbreaking – its roots in applications that go as far back as the late 1970s when two Duke University professors created Usenet, a platform for colleagues to post public messages [20]. Nevertheless, there seems to be confusion among managers and academic researchers as to what exactly should be included under this term

[20]. For the purposes of this thesis, we will rely on the definition above.

In order to understand why this is definition, in all its broadness and ambiguity, is so widely accepted, let us look at the “Conversation Prism” developed by Brian Solis [21]. This model is often updated and offers an overview of all the social media tools and networks currently in existence (see diagram 4.1a).

Diagram 4.1a Source: “Conversation Prism” by Brian Solis & JESS3

! 22! Here we see that there are 26 different categories for grouping social media platforms according to their type – from Wikis, to social marketplaces to livecasting and more. Within these categories we currently find a total of approximately 200 different platforms.

The insight that Solis provides on reading this model also provides the opportunity to better understand what social media is and how it works. First of all, regarding his model he states:

“This conversation map is a living, breathing representation of social media and will evolve as services and conversation channels emerge, fuse and dissipate. … As a communications or service professional you’ll find yourself at the center of the prism – whether you’re observing, listening or participating. This map… will help you better understand how to listen and in turn, participate transparently, sincerely and effectively [22].”

Regarding how social media works and how to best use its advantages, he states:

“Remember, participating in social media is more meaningful when you have a deeper understanding of anthropology and sociology and not just the social tools that facilitate the interaction. This is about creating and cultivating relationships with people, online and in the real world, and these relationships are defined by mutual value and benefits. … In the social economy, relationships are the new currency [22].”

Once faced with this overview of the multi-faceted world of social media, the formal definition proposed by Kaplan and Haenlein above seems very appropriate – it is as specific as it can be and as vague as it should be in order to include all of the relevant channels. The practically infinite boundaries of social media present us with opportunities but at the same time with a challenge, namely: How should a brand go about steering a conversation in social media? The next section proposes a general model for doing so.

! 23! 4.2 The Topic Circle®

The approach we will look at was developed by the Scholz & Friends Strategy Group. Their approach is consciously based on the shifts in consumer behavior that have taken place since the dawn of interactive technology, recognizing this as the main reason for the fragmentation among current day consumer groups [23].

These shifts in consumer behavior, elicited through the changes in technology and the rise of social media, challenge fundamental characteristics of the classic marketing model. For example, “Word of Mouth” is the most influential marketing medium today, and consumers have a potpourri of communication channels at their disposal for spreading their messages and opinions [23]. Their consumption of media has become more liquid, meaning that they consume wherever they are and whenever they are ready to listen and or interact, and brands have to find them in there natural habitats if they want to be able to reach them with a particular message [23].

The model created by Scholz & Friends gives brands orientation, showing them how to best leverage the power of their brand in this world of independent, empowered consumers who want to have a say. It recognizes the fact that consumers gather in networks in order to talk about certain topics. In general, the world of conversations looks something like webs – or

“tribes” – of users who gravitate towards each other due to common interests (see diagram

4.2a) [23].

! 24!

Diagram 4.2a Source: Scholz & Friends

The model by Scholz & Friends known as the “Topic Circle®” (see diagram 4.3a) shows how to harness this energy for a brand [23]. This model reiterates what Richard Huntington, lead strategist at Saatchi & Saatchi and well-known advertising consultant, was able to summarize in just a few words:

“Social media is all about conversation. Brands only have a role of they can make the

conversation more interesting. Advertising can’t success against the conversation but

it can influence and contribute to the conversation.”

Diagram 4.3a Source: Scholz & Friends

! 25! The model illustrates that a conversation needs to be taking place between the group of consumers and the brand. A topic of interest is first determined, and this can be determined either by the brand or the consumer group, however it should always reflect upon the brand’s values [24]. The tribe offers their attention, and the brand reacts by adding to the conversation

[24]. The conversation continues and, if steered properly, will strengthen the image of the brand or brand’s product while attracting others who may or may not be a part of the tribe but who are interested in the topic or become interested in the topic after learning that the conversation is taking place [24].

Creating such a conversation may however have to start with a monologue [23]. In other words, brands have to find a topic that fits and tell a compelling story that fits to their

“Unique Content Proposition” [24]. The UCP, as opposed to USP, has become a fundamental part of a brand’s identity, and it should provide a framework for the conversations a brand has with consumers in social media [24]. This choice of topic is an expression of the brand’s

DNA and consumers’ interests alike [24]. Louis Vitton’s decision to focus on traveling is an example of this, and this brand has dedicated entire social media campaigns to the topic, for example, with Louis Vuitton’s The Art of Packing at louisvitton.com. Without a UCP, there is no roadmap for the brand wishing to navigate its way through social media [24], which, as

Dan Abrams, CEO of Abrams Research in New York told Luxury Daily in an interview, “A poorly-executed social media strategy is even more detrimental for a luxury brands than other types of businesses [25].”

Though the Topic Circle® was originally developed with FMCG brands in mind, it is highly applicable to luxury brands as well [24]. It is applicable to any brand that is hoping to connect and engage with consumers, and experts agree that luxury brands should be more active in exploring how to harness the opportunities that are available to them in social media [24]

[26]. Luxury brands do, however, have to consider one issue more carefully than FMCG brands, namely how to integrate the drive to purchase [26]. This issue is addressed in the next ! 26! section.

4.4 The storefront concept

Brand managers will naturally ask themselves how to turn the momentum of a conversation in social media into an actual purchase. The temptation to turn every space in which a luxury brand is present in social media into another storefront, by including a link to purchase or a link to that brand’s e-commerce platform is of course enormous [26]. It becomes especially tempting when one considers the following two statistics, especially when we recall the high amount of usage of digital devices among luxury consumers:

! Consumers who engage with a brand on social media spend on average 30-40%

more money [11].

! Mobile-commerce (or “M-commerce”, meaning purchases made via smart phone)

are expected to grow by 55% by 2016 [11].

However, this opportunity to channel the momentum of a conversation in social media towards the purchase of a product has to be dealt with very carefully and only raise the issue of purchasing where appropriate [26]. Marketers should consider having storefronts on various social media platforms, however, they need to be aware that they have to take responsibility for each one and that each one may need to be slightly different in character depending on the context of the platform upon which the option to purchase is located [11].

Not every brand experience should be followed by the option to buy [11]. In fact, this should be the exception, especially considering that 60% of Twitter users are already referring their favorite brands to friends (as mentioned in section 3.1 Digital habits and perceptions) – these types of conversations will likely come to a screeching halt if tainted by the brand’s commercial motivations.

! 27! To illustrate this point, let us consider one example. Imagine a loyal consumer or fan of

Christian Dior goes to YouTube to watch and then share the link to an episode of “Lady Dior” with a friend [27]. At the end of the film, instead of automatically continuing to the next episode, the friend sees, for example, an “Enter Store” button. Does the consumer feel like this is an added convenience, or do they feel like they have been duped – lured into to the lavish world of luxury brand just to greeted with options to buy as opposed to options to explore? They may ask themselves, “Am I just another customer to them?” Considering the fact that most luxury consumers are in the search of personal pleasure and embrace hedonistic values [28], the likelihood that a luxury consumer is disappointed by our theoretical “Enter

Store” button is rather high. Therefore, incorporating e-commerce in social media is something that should be considered very carefully.

However, not all is lost, especially when we remember that the goal of luxury brand presence in social media is to generate awareness, and statistics show that this awareness translates into purchases [11]. It is important to keep this in mind so as to not destroy the power of the conversations taking place about a brand in social media with pushy recommendations to purchase. At the same time, e-commerce options can be integrated if it seamlessly fits into the conversation.

An example of this is provided by Burberry (also mentioned later in section 5.5 Further examples) Burberry engaged their audience using something called #Tweetwalk, which the company used to launch its Spring/Summer collection during London Fashion Week in 2012

[29]. They tweeted backstage photos of each look in the collection moments before each of its models stepped onto the runway [29]. The integrated approach created a touch point with consumers and drove traffic to Burberry’s website (as several key looks in the collection went on sale online immediately after they were shown) and pushing traffic to their bricks and mortar stores [29]. This example possibly shows that if the if a product launch is involved and

! 28! desire for and exclusivity of a specific product is high, linking that social media conversation with an e-commerce functionality may be appropriate. There has been little to no research on this topic, however, experts seem to agree that this is an issue that could be explored further

[24] [26]. Burberry’s #Tweetwalk is one specific example of how a luxury brand is successfully utilizing social media. In the next section we take a closer look at Burberry’s social media activity as well as that of other well-known, traditional luxury brands.

! 29! 5. Luxury brands in social media

In this section we look at the overall situation to find out which brands are more successful at leveraging the power of the Internet and, in particular, social media. We learn that successful digital and social campaigning leads directly to brand growth, and we take a look at specific examples of brands in social media to find out what they are doing – including a look at

Burberry, the brand widely known as a pioneer when it coms to social media campaigning, and Rolex, a notable late-comer to the scene.

5.1 Overview of best performers

The most widely cited digital rankings in popular business media are the “Ditigal IQ” indexes published by L2, a think tank in New York founded by NYU Clinical Marketing Professor

Scotty Galloway. L2 evaluates the digital activity of luxury brands by industry sector and provides rankings that subdivide luxury brands into five categories: Genius, Gifted, Average,

Challenged and Feeble. This section provides an overview of the top five brands in the industry sectors: Fashion, Watch/Jewelry, Auto and Travel.

The rankings are based on a four-pillar system: site (35%), (25%), social media (25%) and mobile (15%). The score of a site is based on functionality and content

(75%) and brand translation (25%). Digital marketing performance is based on search, display and e-mail marketing efforts. Social media is evaluated according to brand presence, community size, content and engagement on major social media platforms. Mobile is examined according to compatibility, optimization and marketing on smartphones and other mobile devices.

Let us first look at the overall rankings per industry sector.

! 30!

Fashion [30]

Rank Brand Parent Company Digital IQ

1 Burberry Burberry Group PLC Genius

2 Kate Spade Liz Claiborne Ltd. Genius

3 Coach Coach, Inc. Genius

4 Gucci PPR – Gucci Group Genius

5 Dolce & Gabbana Dolce & Gabbana Industries S.p.A. Gifted

5 Tory Burch Tory Burch LLC Gifted

Watches/Jewelry [31]

Rank Brand Parent Company Digital IQ

1 Tiffany & Co. Tiffany & Co. Genius

2 Swarovski Swarovski AG Gifted

3 Jaeger-LeCoultre Richemont Average

4 David Yurman Yurman Design, Inc. Average

5 Cartier Richemont Average

Auto – Luxury [32]

Rank Brand Parent Company Digital IQ

1 Audi Volkswagen Group Genius

2 BMW Rolls-Royce Motor Cars Genius

3 Mercedes-Benz Daimler AG Genius

4 Lexus Toyota Gifted

5 Porsche Volkswagen Group Gifted

! 31! Auto – Ultra Luxury [32]

Rank Brand Parent Company Digital IQ

1 Ferrari Fiat Gifted

2 Bentley Volkswagen Challenged

3 Aston Martin Privately held Feeble

4 Maserati Fiat Feeble

5 Rolls-Royce Rolls-Royce Motor Cars Feeble

Hotels [33]

Rank Brand Parent Company Digital IQ

1 Four Seasons Four Seasons Hotels, Inc. Genius

2 Hilton Hilton Worldwide Genius

3 Marriott Marriott International, Inc. Genius

4 Hyatt Hyatt Hotels Corporation Gifted

5 Ritz-Carlton Ritz Carlton Hotel Company Gifted

This overview shows us that there are some sectors that are better at being digital than others.

For example, the six brands among the top five brands in fashion are all categorized as

“Genius” or “Gifted”. Galloway does not provide an explanation as to why the fashion industry is so much better at being digital, however, one can imagine that due to the very

“social” nature of fashion and the rise of the fashion blogger that fashions brands were forced to confront these challenges before brands in other sectors. The worst performing sector is the ultra luxury automobiles. Only one brand, Ferrari, is ranked at all high. The rest are either

“Challenged” or “Feeble”. Lamborghini did not even make it onto the chart, but it should be noted that they are also “Feeble”. One could speculate that these brand managers are skeptical about using modern digital media to reach out to luxury consumers, but there is no concrete proof of this. The question however remains as to how these auto brands plan on competing in ! 32! the future if they do not have a digital strategy to reach out to the luxury consumers of tomorrow.

Galloway’s hypothesis is that Digital IQ directly correlates with brand growth and value across sectors. Considering the fact that there is a proven correlation (of .48 – see diagram

5.1a) between Digital IQ and sales growth across all car brands (from value to ultra luxury), it becomes especially difficult to understand why the auto brands listed as “Feeble” are not doing more.

Diagram 5.1a

Source: L2, “Ranking the digital competence of automobile brands” (2009)

Now let us a take a closer look at social media activity.

In the luxury fashion sector we see a lot of activity across the board, with more and more brands have been flocking to social media. Over a two-year period (from 2009-2011) the presence of luxury brands on Facebook was up 15%, on Twitter it was up 67%, on YouTube it was up 50%, on Foursquare it was up 18%, on Instagram it was up 24$ and on Tumblr it

! 33! was up 18%. Burberry, Gucci, Christian Dior, Chanel and Ralph Lauren have the highest number of likes on Facbook – with Burrbery leading with over 15 million likes. YSL,

Burberry, dkny, Marc Jacobs and Machael Kors have the highest number of followers on

Twitter. Alexaner McQueen, Armani, Burberry, Marc Jacobs and Christian Dior have the highest number of view across branded and non-branded channels on YouTube. [30]

In the luxury jewelry/watch sector there is likewise a great deal of activity to be found. Over the same two-year time span presence of luxury watch/jewelry brands on Facebook increased by 10%, on Twittter it was up 54% and on YouTube it was up 48%. Tiffany & Co.,

Swarovski, Pandora, Bulgari and TAG Heuer have the highest amount of likes on Facebook – with Tiffany & Co. leading with over 4 million likes. Tiffany & Co., Baume et Mercier,

Swarovski, Bulgari (US) and David Yurman have the highest number of followers on Twitter.

Cartier, Hublot, Breitling, De Beers and Tiffany & Co have the highest number of view across branded and non-branded channels on YouTube. [31]

If we look at the top 15 auto brands (including all price categories), we find three luxury and three ultra luxury brands with a high number of likes on Facebook. BMW has over 14 million likes, Audi (US) has over 7 million and Porsche has almost 6 millions likes. Ferrari has 12 million likes, Aston Martin 2.5 million and Maserati almost 800,000. When it comes to

YouTube subscribers, Ferrari is leading the way with over 12 million. BMW, Porsche,

Mercedes-Benz, Cadillac and Audi are also in the top 15, but there is no other ultra luxury car brand other than Ferrari that made it this high in the ranking. [32]

Because the hotel industry differs to the other sectors here (as they provide luxury services and not products and Facebook reviews play a huge role here), the metrics here are quantified differently. Considering the fact that the hotel sector has experienced an explosion social media activity it is important to look at average growth in engagement. The top five leaders

! 34! on Facebook show incredible growth from Feb 2011 to 2012. Hilton Hotels & Resorts went from aprrox. 80,000 to 225,000 – with an average monthly growth rate of 101%. Shangri-La

Hotels and Resorts went from aprrox. 94,000 to 154,000 likes. Sheraton Hotels & Resorts went from aprrox. 77,000 to 115,000 likes. The Ritz-Carlton Hotel Company went from aprrox. 34,000 to 91,000 likes. Four Seasons Hotels and Resorts went from approx. 54,000 likes to 90,000. [33]

All in all, we see that there is a great deal of activity among luxury brands in social media.

Inaddition, Galloway has also proven, not only for the auto sector but for all sectors, that digital activity that is cross linked across all platforms can be used to increase user engagement and thus have a positive effect of brand growth. Thus those brands who do not rank high according to the “Digital IQ” index should likely consider how they can increase their presence and consumer involvement on the Web in general as well as in social media.

5.2 Burberry the pioneer

The luxury brand that is perhaps most noted for its use of social media is Burberry. With the launch of their campaign The Art of the Trench in 2009, they sent a wake-up call to other luxury brands around the world and clearly illustrated that it is possible to utilize the power of social media without sacrificing brand image. By giving their original, iconic product center stage and promoting such values as community and individuality, Burberry has been able to completely rejuvenate their brand image [14].

The launch of The Art of Trench in 2009 is widely accepted as the dawn of social media use in the luxury segment, and it also marks Burberry’s decision to utilize an aggressive communications strategy to revitalize a suffering brand [10]. Despite its long heritage of success, tradition and style – having been a staple in both WWII soldiers’ and Audrey

! 35! Hepburn’s wardrobes – Burberry was facing serious brand dilution at the time from uncontrolled licensing, counterfeiting and the famous “Chav attack” [10]. It remains undisputed that shifting 25% of the advertising budget to digital activity with a focus on social media, as a part of an integrated strategy rejuvenation strategy, was one of Burberry’s key success factors [34].

To launch The Art of the Trench in 2009, Burberry teamed up with photographer Scott

Schumann. At the time Schumann was already known for his site thesartorialist.com, which was ranked as the most influential fashion blogs in the sea of hundreds of fashion blogs worldwide [10]. Schumann’s blog consists of photographs he takes of people on the street who, in his opinion, present an air of style. He travels to the words notoriously stylish cities, such as Rome, Milan, Paris, Madrid and London, capturing images of people with a natural essence of style with his camera. The site is reduced with a white background and little text.

In fact, the primary source of text is from the users themselves, and their comments are mostly very complimentary of the subjects in the photographs. Most importantly, Schumann’s blog shows a mixture of people from various ethnic and financial backgrounds often in luxury brand name clothing – or at least what appears to be brand name clothing. The streets become catwalks and the people become the models. He turns life itself into a fashion show – inspiring everyone who goes to the site to show their style, making the fantasy of fashion a reality for all who care to take part. [35]

The actual campaign by Burberry Art of the Trench translated Schumann’s concept into the world of Burberry. Instead of pictures of people wearing any stylish outfit from their wardrobe, here are images of people wearing their own iconic Burberry trench coat. When a user goes to artofthetrench.com they are created with a grid of images, tiles if you will, of photographs of people wearing the coat in the manner they prefer and in the surroundings they seem to prefer. Some are more formal, urban and ironed. Others are more rustic,

! 36! wrinkled and stoic. The images show that there is no such thing as the average wearer of a

Burberry trench coat, that the coat itself is versatile and, most importantly, that the brand lets you be yourself (see image 5.1a).

Image 5.1a The Art of the Trench landing page Source: artofthetrench.com

The original photographs were taken by Schumann himself, later other photographers were invited to shoot images and even users were soon encouraged to send in their own shots [10].

The first 20 images received were from trench coat loyalists in Amsterdam, Boston, Florence,

Kiev, London, Milan, new York, Paris, Singapore, Tokyo, San Francisco, Seoul, St.

Petersburg, Venice and Zurich – demonstrating the campaign’s global reach [10]. Just like on

Schumann’s blog, Art of the Trench has now grown so much that both sites have an extensive archive of pictures. On Schumann’s blog, there are archives for each year dating from this year all the way back to the founding year of the blog 2005. The Art of the Trench is also still alive and well, and users can sift through the pictures using various filters according to

“popularity”, “gender”, “styling”, “trench colour”, “weather” and “collaborations.

! 37! In addition to the many possibilities of customizing and sharing the site, the tab at the very top left of the site is an interesting attribute, as it takes the user to burberry.com. This is an important point, because the campaign is obviously meant to be seen within the overall context of the brand. Art of the Trench is not simply a one-off microsite, rather it is embedded in the brand’s global online structure and serves as a gateway to the brand. One click on the burberry.com tab, and the user suddenly immersed in the world of Burberry. The brand is presented in a manner that one expects a fashion brand to be: images from the “real” catwalk and a sense of refinement, uniqueness, exclusivity and hedonism [36].

Burberry’s intention is to activate consumers in a special way. With this campaign, the brand intends to stimulate the creative imaginations of users, and to inspire and provoke them so that they are invited to show how Burberry adds to their personal identity. At the same time, he impression is given that Burberry is about creating a community, because customers do their own thing not by themselves but together with thousands of like-minded others, and in the process they feel as if they were a part of the social network, or more precisely, part of a

“brand community” [10].

! 38! Burberry’s investment into this social media campaign and others over the past years seems to have paid off. Listed in Interbrand’s “Top 100 Global Brands” for the fourth consecutive year, this year Burberry was named the luxury fashion brand with the greatest increase in brand value [37]. This year Burberry was cited by Altagamma as the luxury brand with the highest digital consumer awareness and led media think tank L2’s “Fashion Digital IQ Index” for the second year in a row, as well as being named by L2 as the fashion brand with the highest

“digital IQ” in China [37]. Burberry finished 2012 as the most followed luxury brand on

Facebook, with nearly 15 million fans [37]. Total lifetime YouTube video view reached nearly 23 million and the brand’s combined Twitter following was over two million [37].

Burberry was also the leading luxury lifestyle brand on Instagram [37]. According to

England’s leading newspaper “The Independent”, Burberry is “Britain’s most stratospheric fashion success”, and since last year, the brand has grown 24% [38]. According to CEO

Angela Ahrendts, the relationships they have been able to build up with customers via their social media presence has been key.

5.3 Rolex the late-comer

In April of this year Rolex did something that few people saw coming – they started an official Facebook page [39]. Within the short span of just a couple of weeks they accumulated almost a half a million fans [39]. Currently they are poised to soon reach one million fans.

Along with Patek Philipp, Rolex was one of only two major luxury brand watchmakers not to be present on the world’s most famous social networking site [39].

With this move, we see that a notably closed brand has decided to open up [39]. In the past,

Rolex has spent billions in marketing dollars over the years to create and maintain their worldwide appeal and image as not only a watchmaker, but as one of the most valuable luxury brand names in existence [39]. Their reluctance to launch a Facebook page likely came

! 39! from worry that sentiments from even die hard fans will paint their brands in the wrong with their comments and activity on such a social media platform [39] – after all, entering social media is also about giving up a certain level of control and simply allowing conversations to take place about your brand. They however finally made the move, and if the number of fans is any indication, and most people consider this to be the most defining metric, the decision was the right one.

The content of the page is dedicated to the “Rolex Icons” campaign, showing that the brand has a clearly chosen topic for the conversations the plan on having with consumers [26]. Here we see that they have found a Unique Content Position and that the brand is telling a story about their heritage – thus uniting the core of their brand’s DNA with a newer, younger medium. Users can watch films about famous icons who represent the brand’s high standard of excellence, such as of Sir Jackie Stewart, one of the most greatest Formula 1 drivers of all time. Rolex has a rich pool of famous icons who have made great achievements in various sports and can used as protagonists in the stories they tell about the brand, the typical Rolex sports being tennis, golf, sailing and equestrian events. Just because Rolex is now on

Facebook, does not mean their relationship to traditional, elitist sports will be changing. They are simply spreading the message to more fans worldwide. Other icons that have inspired storytelling on the site are Elvis Presley, James Cameron and Andy Warhol – all legendary names.

Another interesting function is the “World of Rolex” calendar. Here users can find an overview of all the events that Rolex is sponsoring around the world – from the Shanhgai

Rolex Masters for tennis to the Maxi Yacth Rolex Cup in Porto Cervo, Italy to the Opening

Night Gala in the Met in New York. Each event posting is equipped with a link that allows users to import this event directly into their Google calendars. Whether they will actually attend is one question, however, other users will see that they have imported this event, the

! 40! event will appear on every personal digital device the user owns and has synchronized with their calendar – meaning the chances are high that the brand will find its way into the users’ conversations.

There are some things that Rolex could be doing better on their Facebook site. For example, the wallpaper image could be more emotional (see image 5.3b). At the moment it is very product focused and cold. Their photo albums are very product heavy with little emotion and story telling. And the video stories told about the “Rolex Icons” are only briefly about the person’s life and then abruptly begin promoting the watch. In addition, Rolex is not yet taking advantage of the fact that social media allows you show longer, extended-cut videos that normally do not work on TV (due to costs) or at the POS (due to the short attention-spans of shoppers). Currently all the video content is approximately 30 seconds long and very

“commercial-like”.

Image 5.3b Source: www.facebook.com/rolex

Nonetheless, luxury experts believe that Rolex is making the right move with the launch of their Facebook page launch [26] [39], and there is proof that the brand has changed their attitude towards social media, looking to other types of integrative, interactive marketing. For

! 41! example, Rolex has invited journalists and bloggers to meet with them at the annual watch show, Baselworld [39]. Rolex will likely benefit in many ways over the next few years thanks to its newfound embrace of social media and other tools that will help them directly communicate with consumer groups online [39]. With Rolex we have an example of how one of the world’s most conservative luxury brands has finally come to terms with social media and accepted this realm of communication as a serious component of their communication portfolio [39].

5.4 Trend setters

In this section we take a look at some examples of how luxury brands are using social media in creative ways to engage users.

In the fashion world Ralph Lauren and Oscar de la Renta have been especially creative. In

2011 Ralph Lauren became the first brand to buy the entire advertising inventory of the New

York Times iPad app. This included rich meida ad displays an dprovided app users with access to five content sections typically held behind the publisher’s pay wall. The in-demand app has registered mor than 2.5 million downloads and boasts 850,000 unique monthly describers, giving Raph Lauren a platform to deliver content, including RL Magazine and live streams of the brand’s runway shows. [30]

Oscar de la Renta added a real-time, crowd-sourcing element to their Spring 2012 fashion show during Paris Fashion Week. Fashion show attendees and home viewers were encouraged to take photos and upload them to oldrlive.tumblr.com with the #odlrlive hashtag.

These pictures were turned into a mosaic that served as thte background leading up to and throughout the live stream. More than 2,600 tweets featured the #odlrlive hashtag, and the brand instantly saw boosts in its number of Facebook fans and Twitter and Instagram followers. [30] ! 42! Among luxury watch/jewelry Breitling seems to be among the few brands consciously pushing to acquire more likes. In 2011 they hosted a photo competition – a rather typical kind of promotion for social media platforms – in which users were to submit photos that

“captured the spirit of aviation”. Breitling received 5,000 submissions and gained an estimated 68,000 new fans. [31]

Among luxury car brands the campaign “Expression of Joy” (see image 5.4a) is on of the most talked about social media experiences. It was launched as a campaign to promote the Z4 and incorporated a microsite, documentary film, iPhone app and Facebook page. The campaign is based on a painting by Robin Rhode rendered with the wheels of Z4 on a giant canvas. The microsite shows making-of videos set to music (that many enthusiasts wanted copies of). With the iPhone being the leading mobile device among drivers, BMW also created three apps and various podcasts to accompany the campaign. The “BMW Z-4” iPhone app received one million downloads within its first few weeks. [32]

Diagram 5.4a Source: BMW ©, “Expression of Joy”

! 43!

Hotels are also becoming increasingly creative when it comes to engaging users. The

Langham launched the “Most Romantic Proporsal” competition, during which users shared their romatic stories with the world by uploading videos to a separate YouTube channel. It was launched in Feb 2011 and in just four comes the Facebook site went from a mere 69 likes to over almost 12,000, and the YouTube channel had over 34,000 views. The brand then featured the winning couple’s trip around the world on a custom-created Tumblr site. The

Ritz Carlton also launched the “World Concierge” program, which sources tips from the local concierge staff of 75 global properties via Foursquare. The brand now leaves tips at famous destinations and hidden surprises on the mobile platform, which has led to a sharp increase in following. This highlights the opportunity for hospitality brands to leverage geo-local platforms to add to the guest experience. [33]

In all sectors except for -luxury auto, we see brands successfully utilizing social media to increase user engagement. With the ultra-luxury autos, we find incredibly aesthetic websites and several attempts to engage users, however, only a few seem to have managed to gain the same momentum as other examples here [32]. This raises the question as to whether the campaigns were poorly conceptualized, or does this target group just not want to play? Proper research is lacking to answer this question. Nonetheless, across the board in other sectors we see a high level of promising activity that has directly led to higher engagement, thus showing that luxury brands have every right to be present in social media.

5.5 Other examples

Notable activity among luxury brands in social media is of course not limited to the four brands mentioned in the previous sections of this chapter. There are many other luxury brands that are using social media to improve their brand images and engage users. Let us now look

! 44! at the most popular types of social media and the luxury brands that are using them in order to find more examples of luxury branding successfully utilizing the power of social media for their brands, to understand how the platforms differ and to gain an overview of where further potential for using these platforms may lie.

Let us start with Facebook. This platform has one of the highest levels of engagement among all the social platforms, with 64% of the affluent respondents in one study having a profile.

Traditional, high-end brands are taking notice of the flocks of luxury customers who are daring to dive to the world of Facebook. Manhattan-based, high-end luxury retailer Bergdorf

Goodmann launched a Facebook contest to crowd source the design of its next Fend 2Bag.

Famous car-maker Bentley keeps content fresh with weekly user-generated Designer-your- own-Bentley contests and other promotions. [29]

Twitter’s luxury following is also growing with over 36% of wealthy consumers now active on the site. Burberry again provides us here with another positive example of how to benefit from a social media platform. They engaged their audience using something called

#Tweetwalk, which the company used to launch its Spring/Summer collection during London

Fashion Week in 2012. Burberry tweeted backstage photos of each look in the collection moments before each of its models stepped onto the runway. The company livestreamd the show on Facebook in high definition, giving fans an exclusive, up-close view mad available on iTunes’ on-demand service. The integrated approach created a touch point with consumers and drove traffic to Burberry’s website (as several key looks in the collection went on sale online immediately after they were shown) and pushing traffic to their bricks and mortar stores. [29]

Another example for utilizing Twitter for luxury brands is #luxechate, a live, interactive

Twitter discussion on the luxury brands and social media in 140 characters or less. Brand that

! 45! have taken part in the conversations include luxury carmaker Infinity, travel accessory brand

Tumi and Four Seasons Hotels. [29]

YouTube is also being used by luxury brands as their number two search engine in the world.

It is quickly becoming a key luxury brand tool, exceeding two billion view a day with 24 hours of video being uploaded every minute. Christian Dior, for example, has over 68,000 followers on their YouTube Channel and their latest video (“Secret Garden 2 – Versailles |

Long Version”) has over ten million hits. This brand is also doing some heavy story telling about its heritage, designers and products and is taking advantage of the fact that they can upload extended-cut video footage. They have a short film series called “Lady Dior”, in which famous French actor Marion Cotillard stars in various short films (running as long as eight to ten minutes long), directed by well-known names such as John Cameron Mitchell.

The “Lady Dior” films regularly receive over one million hits and are vigorously commented upon by Dior fans. Of course the films also feature the products, however they are artfully woven into the story – were they absent, the viewer would almost have the feeling the something was missing, making this series of short films a success when it comes to in social media. What is more, some of the “Lady Dior” films make use of typical fashion industry or French inspired clichés, making Christian Dior one of the first fashion brands to actually play with irony and humor in their marketing in order to make the brand closers to consumers and turn the brand into a source of entertainment. [40]

Location bases services are now also an essential part of the social media toolbox for many luxury brands, and their popularity is likely to continue to grow. In 2011, for example, luxury automaker BMW launched a highly successful integrated digital program for its BMW i3 and i8. The campaign runs on Foursquare, social new round-up site Mashable, and iAd, Apple’s mobile-advertising network. When users check in on Foursquare at a location within one of

30 cities, the get online tips and background information about the area they are visiting. The

! 46! location tips have a focus on sustainability, electromobility, design and art. BMW also contributes weekly news to Mashable on the topic of mobility and technology in the Global

Innovation Series category. [29]

Louis Vuitton is also using location-based concepts, liking how this type of medium affords them the opportunity to create an instant, unique touch point for consumers. After successful runs in the US and UK with such campaigns, they partnered up with Chinese check-in service in Jiepang to launch a similar experience in Beijing for its travel exhibition at the Nation

Museum of China. Those who checked in to the exhibition using Jiepang’s mobile app receive a branded virtual badge and a preview of Louis Vuiton’s profile page for tips and information about the brand conceptual design. [29]

Speaking of China, it makes sense to look at the platforms being used in this region. Major luxury brands are developing separate but clear and conscious strategies for this market, noting the necessity to adapt their activities to Weibo, the Chinese version of Facebook, as

Facebook cannot be easily accessed by Chinese consumers. Audi, for example, has a presence in six Chinese social media networks and has uploaded omore than 250,000 videos to YouKu, the Chinese version of YouTube. Burberry, again, is also setting an example in China, by making YouKu a robust part of the their Chinese e-commerce strategy. [29]

Many experts and brand managers are also asking themselves about the role of Google+. This social site was launched in the summer of 2011 and appeals to a tech-savvy, early adopter audience, meaning it is perfectly aligned with the preferences of the luxury consumer.

Burberry, again, jumped at this digital opportunity and was one of the first companies to leverage aspects of Google+ that are not available on other social media sites, including video chats and animated GIF images. In the past, Burberry has used the latter for top graphic on its

! 47! page that made it look is if it was snowing on one of its Burberry trench coat-clad models.

[29]

One key benefit of Google+ is that clicking on a company’s profile picture does not send users to separate page with a gallery of images, rather it lets the user scroll through images without leaving the company’s main profile page. Burberry uses this capability to highlight campaigns for its diverse lines, including Burberry Prorsum, Burberry Brit and Burberry

Children. The company is also using the platform feed to promote its makeup collections, including solo product images and makeup tutorials. Similar to Facebook’s “like” function, consumers “+1” a post or page in addition to sharing content with their Google+ social circle.

Four Seasons has also established a presence on Google+ to leverage these capabilities and features, and may luxury brands are expected to follow. Many experts think that Google+ will be the next be thing to hit the social media scene, due to its more intuitive approach to new features. [29]

5.6 Observations

After examining the social media activity of a selection of luxury brands, there are certain patterns that appear that could be considered guiding principles. These principles are summarized below in four different categories:

Scale

Most of the social media campaigns presented here were global campaigns, reaching out to a supra-national group of brand lovers. There were however instances in which it was appropriate to address consumers on the local level. [26]

Learning: Global campaigns seem to be best suited for strengthening and improving brand image and amassing followers, likers and hits. Local level activation seems appropriate with

! 48! trying to bring the consumer into closer contact with the actual product, get them involed in local event or invited them to the retail environment (especially to a bricks and mortar location).

“Unique Content Position [24]”

Being active in social media means the brand has to be ready to have conversations with their consumer groups. A brand needs a UCP for social media just as much as their products need to have a USP. Without this, brands are not equipped to properly steer the conversations that are taking place. [24]

Learning: When trying to identifiy a UCP, brands need to tap into the issues that both reflect their brand DNA and at the same time interest their consumers or the relevant tribes that form in the social media networks. A brand can only talk about itself for so long and needs to find peripheral topics to engage consumers (i.e. Louis Vitton with topic of traveling, BMW i3 and i8 with the topic of electromobility).

Story telling

In addition to a UCP, brands need to do story telling. The content they provide to initiate a conversation in social media has to tell a compelling story that is highly emotional or inspirational. [26]

Learning: These stories should not be sales focused, rather they have to truly tell a story that is enticing to consumers. As soon as a consumer feels like they have been made a player in a marketing plot, they will quickly lose interest. This may include showing behind the scenes footage, presenting the brands in authentic ways and can even include using humor and irony to entertain consumers.

Long-term

! 49! Some of the campaigns mentioned in this chapter went online as long as four years ago and continue to run today. Others were one-off promotions whose content is still available and relevant. [26]

Learning: Despite the Internet being a “face-paced” medium, social media campaigns should be long-term. Once something is put online and gains one million followers or receives ten million hits, the brand should have a plan for utilizing this momentum. [26]

Target group management

Despite making the brand more accessible to everyone on the whole, individual consumers groups may not interact personally. A livecasted fashion show, for example, means that the elite luxury consumers are sitting near the catwalk, whereas everyone else is watching the livecast – possibly together with friends, alone in front of their computers or while on the subway to work. [24]

Learning: A luxury brand should consider whom they are targeting. In social media it will be difficult to exclude anyone, however, there are ways to manage the hierarchy among consumer groups. [24]

Accessibility v. exclusivity

The brands in this chapter always attempted to increase their band presence by raising awareness for the brand image. Being active in social media is, however, independent from price management, distribution or any other policies that may make the actual products easier to access.

Learning: It is possible to be active in social media and maintain a brand’s status exclusive status. A brand’s image is not necessarily diluted simply by entering social media.

Communication about luxury brands has been democratized, but not necessarily the brands themselves.

! 50! Chinese presence

China is the fastest growing luxury market and thus a great source of potential for luxury brands.

Learning: Brands who want to compete globally have to have a strategy for China, which will likely mean having a parallel presence. This will likely require partnering with local platforms or providers in order to engage customers in social media. Brands need to know about Weibo and YouKu and how they differ from Facebook and YouTube. [24]

! 51! 6. Conclusion

Summary

By now it is clear that social media has become an imperative for luxury marketing managers.

By examining the new marketing paradigm and shifts in consumer culture and preferences, we saw how social media is affecting the basic nature of how brands communicate or are expected to communicate, creating new challenges and but also opportunities for brands. The information provided here on social media provides a holistic understanding of what it is, the impact it is having and how brands can add to conversations taking place in social media in order to maintain cultural relevance in the marketplace. Finally, the examples of well-known luxury brands using social media in very different ways in order to further their brands goals show that for even the most traditional of luxury brands social media is no longer taboo. In fact, it is an imperative for all luxury brands to consider in which way they can use social media to make their brand more relevant current and future luxury consumers.

State of the literature

Though many articles can be found on the topic of luxury brands in social media, the largest portion of literature stems from popular business media and from the paid agents that normally serve in-house marketing departments (i.e. advertising agencies, market research firms, PR firms, etc.). It can therefore not be completely eliminated that these agents’ motivations for publishing literature on this topic are at least partially commercial. Academic literature on this topic exists, however, it is very limited. In addition to this, there is no real established method for measuring the success of a luxury brand’s social media activity.

Therefore there is limited opportunity to compare the selected paradigms, models and methods in this thesis. This thesis therefore covers a relatively new field of study that presents large potential for future research.

! 52! Outlook

Due to the ever-changing nature of digital media and speed at which technological advancement is made, the topics addressed in this thesis should be revisited on a regular basis.

A conscious effort was made here, on the one hand, to deal with the most current developments in social media and, on the other hand, to present ideas and strategies from a holistic perspective so that they may remain applicable as long as possible.

In addition to revisiting the particular issues mentioned here, there is also great potential for consumer insight research. For example, most marketers and practitioners look at the number of likes, tweets, etc. to determine the success of social activity. There is little to no proof to show that consumers are being surveyed on their online or social media experience with particular brands. Research could be done here to find out, for example: how far offline to the campaigns reach (i.e. do they enter the face-to-face conversations between consumers); what exactly motivates users to write or not to write comments; when are consumers not motivated to take part in a particular campaign or promotion, etc.

Research could be conducted within companies in order to assist them in developing the right social media strategies. For example, it would be interesting to find out why certain brands have not decided to embrace social media until so late. Do they have sufficient knowledge and understanding in-house? Is there resistance from executives? Is the role of the “Social

Media Team” clear, if there is one, and do they feel empowered to act on behalf of the brand?

In essence, this field of study provides various realms for further study.

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