Establishing the Legitimacy of Social Media Marketing in the Luxury Segment
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Establishing the legitimacy of social media marketing 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 brands 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 brand 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, market research 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 advertising 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 promotion 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 !