The Evolution of Luxury: Brand Management of Luxury Brands, Old and New
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The Evolution of Luxury: Brand Management of Luxury Brands, Old and New RayeCarol Cavender Dissertation submitted to the faculty of the Virginia Polytechnic Institute and State University in partial fulfillment of the requirements for the degree of Doctor of Philosophy In Apparel, Housing, and Resource Management Doris H. Kincade, Chair Julia O. Beamish James E. Littlefield Patricia J. Fisher June 21, 2012 Blacksburg, Virginia Key Words: Luxury, Brand Management, Case Analysis Copyright 2012, RayeCarol Cavender The Evolution of Luxury: Brand Management of Luxury Brands, Old and New RayeCarol Cavender ABSTRACT This qualitative study contributed to the growing body of research in luxury brand management by constructing a framework that can be utilized by luxury companies and conglomerates to develop their business strategies. The purpose was to examine: (a) how the chosen luxury firm is addressing the changing business environment of the luxury goods industry and the changing consumer environment targeted by that industry, (b) how the firm is managing growth trade-offs, and (c) how the firm is adapting its marketing orientations to become consumer-centric and experiential. Six research questions guided the study, and data collection and analysis took place in two parts. Methods for this study included and in-depth review of literature, an exploration of the business environment, and a case study. The study concluded with the formation of a brand management framework specific to the luxury goods industry. Data collection and analysis included an in-depth exploration of the evolution of the business environment of the luxury goods industry from the mid-1800s to the first decade of the 2000s, and a case study of the sample luxury goods company, Louis Vuitton. A historical review was conducted beginning with the company’s inception in 1854 and continuing through the formation of the LVMH conglomerate in 1987. Exploration of brand management successes and failures helped identify information relevant to variables in selected business categories (business environment, corporate environment, and marketing strategy). Analysis of the case study resulted in the refinement of the four brand management variables: corporate, brand management, trade-off, and strategic planning. Environmental determinism and the zeitgeist were evidenced to be important factors that shaped the business strategies of LVMH and its brands. Strategic planning and strategic management response were identified as ongoing strategies that helped LVMH and its brands to effectively address and respond to environmental changes. Both environmental determinism and the zeitgeist and the use of strategic management response were incorporated into the luxury brand management framework as overarching themes for explaining the influences and responses for the four management indicators. Acknowledgements The author wishes to express sincere appreciation to the Virginia Tech faculty who served on the study committee: Dr. Doris H. Kincade, Professor, Department for Apparel, Housing and Resource Management (AHRM); Dr. Julia O. Beamish, Professor and Department Head of AHRM; Dr. Patricia J. Fisher, Assistant Professor, Department of ARHM; Dr. James E. Littlefield, Professor Emeritus and former Head, Department of Marketing, Pamplin College of Business. I would especially like to acknowledge the support and encouragement provided by Dr. Doris Kincade, who chaired the committee. Since 2002, when she became my undergraduate advisor, Dr. Kincade has been a valued mentor for me. Having the opportunity to work with Dr. Kincade again strongly influenced my decision to return to Virginia Tech to complete my PhD. Throughout the completion of my doctoral program, she has provided me with unending patience, guidance, and assistance. This support was instrumental in motivating me to overcome numerous obstacles encountered during the period of the study. A word of appreciation is also extended to Dr. James A. Buford, Jr., retired Auburn University Professor and Management Consultant with Ellis Harper Advertising for being responsive to my calls on statistical questions as well as writing letters of recommendation on my behalf. I deeply appreciate the love and encouragement of my parents, Drs. Ray and Dotty Cavender, for their continued financial support, counsel, guidance, and belief in my potential. Without them, achieving this goal would have been impossible. Finally, I deeply appreciate the loving support and patience of my husband, Brice Cole. He has been there for me every step of the way and been an unwavering rock for me to lean on in times of frustration and discouragement. I could not have completed this degree without him. iii Table of Contents Acknowledgements……………………………………………………..…….…………………iii Table of Contents……………..………………………………………………………………....iv List of Figures………..……………………………………………………………..……….....viii List of Tables………………………………………………………………………….…..….….ix Chapter I. Introduction................................................................................................................1 Overview of the Luxury Goods Industry…………………………………..…..….1 Overview of Brand Management……………………………………….……..…..3 Strategic Planning…………………………………………………………………5 Statement of the Problem……………………..…………………………….….….8 Conceptual Framework…………….………………………………………....….10 Environmental Determinism…………………………….……………….10 Fashion Adoption Theory………………………………….………….…11 Model Development……………………….…………………………..…12 Purpose of the Study……………………………….…………………………….13 Chapter II. Review of Literature……….……..………………………………………….……16 An Overview of Branding………………………………………………………..16 Brand Concept…………………………………………………………...17 Brand Identity…………………..……………….……………………….19 Brand Personality……….………………….…………………….20 Brand Image……………………………..…………………….…22 Brand Awareness…………………….…………………………………..24 Brand Positioning………………………………………………………..25 Brand Loyalty……..……………………….…………………………….28 iv Brand Equity…………….………..……………………………….……..31 Marketing the Luxury Goods Brand……………………………..…………..…..37 Motivations Related to Luxury Consumption…………………………....39 Experiential Marketing…………………………………………………..42 Managing Growth Trade-offs……….…………………………………...44 History of the Luxury Goods Brand…….…………………………………….…50 Worth and the Early Modern Designers: The First Era of Modern Fashion…………………..…………..……..….51 The Designer as the Brand: The Second Era of Modern Fashion……………………………………..56 The Rise of the Conglomerate: The Third Era of Modern Fashion………….………..…….…….………60 Chapter III. Methods….……..…………………………………………………………………65 Sample…………………………….……………………..……….………………67 Validity and Reliability of Study………..….…..……………………………..…69 Validity………….……………………………………………………….70 Reliability………….….………………………………………………….71 Limitations……………….………………………………………………………73 Data Collection………..…………………………………………………………73 Data Analysis………………...………………………………………………......74 Chapter IV. Case Study…………………………..………………………..…………………...83 Corporate History of Louis Vuitton……………………………………………...84 Louis Vuitton…………….…….……………..………………………….84 George Vuitton…………………………………………………………...86 Gaston- Louis Vuitton................................................................................87 v Relaunch and International Growth……………………………….……..89 Louis Vuitton Möet-Hennessy Merger…………………………………..90 Brand Portfolio Following the Merger…………………………………..………94 Arnault’s Brand Strategy……………………….………………………..94 The Louis Vuitton Brand in the 1990s….…………..……….…………...95 Marc Jacobs and Ready-to-Wear…….…..………………….……….…..98 The LVMH Brand Portfolio in the 1990s………………….….….……...99 Acquisitions and Divestments in the LVMH Brand Portfolio……………..…...103 Dior Couture………………..……………………………………..……105 Watches and Jewelry……………………..……………..………………110 Perfume and Cosmetics……………………..………….………………116 Selective Retailing………………….…………….…………………….126 Fashion and Leather Goods……………..………………….…………..135 Failures within the Fashion and Leather Goods Group………...141 Successes in the Fashion and Leather Goods Group………..….145 Back-to-Basics for LVMH and Further Restructuring………....148 Successes with Fendi………………………………..….150 LVMH Fashion Group and its Successes………..……..153 Chapter V. Results…………………..……………………………………………………..….157 Overview of Changes in the Business Environment……………………..…….159 Successes and Failures of Corporate Variables………………..……..……..….163 Company History…………………..…………..……………….………166 Brand Portfolio………………………………….…………………..….168 vi Financials………………………………………..………………….…..172 Successes and Failures of Brand Management Variables……………….……...175 Brand Management Strategies…………………………………….……176 Brand Identity…………………………..……………….…….…….….181 Marketing Vision……………………..…………….………….……….186 Successes and Failures of Growth Trade-Off Variables…..……………….…...189 Growth Trade-Offs………………………………………………....…..192 Brand Equity………………………………………………………..…..196 Brand Architecture………………….…………………………….…….198 Indicators of Successes and Failures in Strategic Planning…………………….201 Brand Sustainability………………………………….………………....202 Effective Response…………………………………..………………….206 Luxury Brand Management Framework……………………..………….……...211 Chapter VI. Summary, Conclusions, Implications, and Recommendations………………216 Summary…………………………………………….…………….……..….….216 Conclusions………………………………….……………….……..……….….218 Implications…………………………………………………………..…..….….222 Recommendations for Future Research…………………………………….…..224 References………………………………………………………………………..………….…225 vii List of Figures Figure 1. Brand Knowledge Model…………………..………………………………..……….23 Figure 2. Luxury Brand Management Framework…………………………………………......215 viii List of Tables Table