Millennials Are Changing the Game for Marketers. How to Best Reach Millennials in Luxury Clothing Industry? by Sofya Mikhailava

European Business Administration Final Project

Millennials are Changing the Game for Marketers. How to best reach Millennials in luxury clothing industry? By Sofya Mikhailava

2018 Mentor: Dan Ravick Fiala Acknowledgment First of all, I would like to thank my family for their enormous amount of support during the whole journey of my university studies. I am grateful for their patience in overcoming the issues I have faced while doing this research and throughout my life in general. They are my role models in life.

Secondly, I want to express my sincere thanks to my mentor, – Dan Ravick Fiala, for the constructive criticism, enthusiastic guidance, and tremendous advice during my thesis work.

Thirdly, I would like to thank my friends who have assisted me with their expertise, for providing with the valuable feedback, and offering new ideas that I have implemented in my research.

Lastly, I want to express my thanks to my university for the opportunity to go on an exchange program that greatly affected my life and influenced the choice of my research topic.

Statement of Originality

I, Sofya Mikhailava hereby certify that the intellectual content in this submission is the original product of my work under the advice and guidance of my mentor Dan Ravick Fiala.

Any assistance received in contributing and sources have been acknowledged in the thesis. The work has not been submitted before for any degree or other purposes.

Sofya Mikhailava, 30.11.2018

Table of Contents

Table of figures and tables…………………………………………………………………...…….5 Abstract……………………………………………………………………………………..……...7 Executive Summary…………………………………………………………………………..……8 1. Introduction……………………………………………………………………….….9 1.1 Research Question………………………………………………………………...10 1.2 Methodology……………………………………………………………………...11 1.3 Literature Review…………………………………………………………………13 1.4 Limitations………………………………………………………………………..14 2. Overview……………………………………………………………………………15 2.1 Who are Millennials………………………………………………………………15 2.2 Millennials vs. Older generations…………………………………...……………17 2.3 Generational differences influence purchase behavior…………………………...20 2.4 The idea of luxury………………………………………………………………...21 2.5 Luxury industry for Generation Y………………………………...……………...22 2.6 What do Millennials expect from luxury companies ……………………...……..23 3. External analysis of luxury industry……………………………………………..25 3.1 PESTLE analysis………………………………………………………...….…….25 3.2 Porter’s 5 forces…………………………………………………………………...29 3.3 Scenario planning…………………………………………………………….……32 4. Marketing Audit of the brands chosen…………...……………………..……….35 4.1 Marketing Strategy…………………………………………………...…………...35 4.1.1 Segmentation……………………………………………...... 36 4.1.2 Targeting………………………………………………………….……….40 4.1.3 Positioning………………………………………………………….……..42 4.1.4 Differentiation…….………………………………………...... 45 4.2 Marketing Communication…………………………………………………...... 48 4.3 Pricing Strategy………………………………………………………….………...58 4.4 Pattern…………………………………………………………...... 60 5. McKinsey's consumer decision journey of Millennials…………………..…………62 6. GAP analysis ………………………………………………………………..………...67

7. Conclusion…………………………………………………………..………………...68 Recommendations for further research ………………………………...... 71

Bibliography……………………………………………………………………………………...72

Table of figures

Figure 1: Annual income by generation.………………………………………………………....10 Figure 2: Methodology supported by the literature review map by the author…...... 12 Figure 3: Millennial generation by the author………………………………....………………....16 Figure 4: Comparison of the generations by the author.…………………………………….…...19 Figure 5: Scheme of PESTLE analysis by the author.………………………....………………...25 Figure 6: PESTLE analysis of luxury industry by the author……………….………...…………26 Figure 7: Porter’s five forces of the luxury industry by the author.……………………...………30 Figure 8: Scenario planning of luxury industry by the author.………………………....………..33 Figure 9: Louis Vuitton vs. Gucci Brand Value…………………………………………..……..35 Figure 10: Steps to position provided by the author…….…………………………………...…..42 Figure 11: Positioning map.………………………………………………...... 43 Figure 12: Burberry kisses campaign……………………………………...... 47 Figure 13: Social Media of Louis Vuitton……………………………………….………….…...49 Figure 14: Louis Vuitton pop-up store Red Square…………………………...... 50 Figure 15: Louis Vuitton’s Cruise Show 2018…………………………………………...... 51 Figure 16: Social Media of Gucci…………………………………….………....………...... …..52 Figure 17: Lady Gaga singing the national Anthem at Super Bowl.………….…………..…….53 Figure 18: Social Media of Burberry…………………………………………………....………54 Figure 19: Creation of a personal trench by Burberry………………………...... 55 Figure 20: Creation a personal trench results …………………………………...... 55 Figure 21: Burberry app……………………………………...... 56 Figure 22: Social Media of Coach…………………………...... 57 Figure 23: Selena Gomez for Coach 2018…………………………………….……….….……58

Figure 24: McKinsey decision framework by the author ……………………...... 62 Figure 25: The effective approach to reach Millennials by the author …………….………..…...65

List of tables

Table 1: Segmentation of the brands by the author………………………………….....…….….36 Table 2: Targeting strategy of the brands by the author….…………………………….…....…..41 Table 3: Gap analysis of luxury brands by the author……………………………………...... 67

Abstract

The analysis of this thesis intends to investigate the ways to focus strategic marketing of the luxury clothing industry. The research concentrates on scanning of the efficiency and effectiveness of the communication as well as interconnection with the Millennials who represent the new challenges and transform the marketing.

The author, based on strategic models and analysis of particular luxury brands, provides a roadmap for companies to implement and adapt to the changes Millennials create by exploring and determining the values important to the generation and by building a strong competitive advantage.

Keywords

Millennials, Generation Y

Luxury industry

High quality

Segmentation, targeting, positioning, differentiation

Communication

Pricing Strategy

High Spending power

Reach the generation

Executive Summary

The ongoing increasing effect of Millennials on any industry is the inspiration for this thesis, and certain aspects of reaching the generation were investigated. Research revealed a complete picture with valuable information that will enable companies to reach Millennials not only today, but also in the future. The conclusions affect the luxury goods industry.

The key takeaways:

1. Millennials expect a mutual two-way relationship with the brands. 2. Social media greatly influences the preferences of Millennials. However, having a social media presence is not enough. 3. Transparency is the name of the game. Millennials expect brands to be honest and have values that are important to the generation. 4. Luxury clothing companies should focus on quality and exclusive experiences instead of offering material belongings that show societal status. 5. The shifting tastes of Millennials may destroy the company and in order to prevent the phenomenon, many marketers should reach the generation in different ways.

1. Introduction

There is discussion regarding the significance of accepting changes, the best ways to proceed and to adapt when confronting challenges throughout everyday life. Both people and companies are affected if there is resistance to admit change. Organizations will only survive today’s evolving environment by recognizing the importance of modification.

Millennials, known as generation Y, generation Me, and generation Net, are the cohort that comes after generation X. Researchers use the years of birth, starting from the 1980s to the beginning of the 2000s since there are no exact dates when the generation was started or finished (Howe & Strauss, 2009). Millennials are the largest generation that has existed (1.8 billion). The number of Millennials in the United States is around 80 million, according to the United States Census Bureau. The generation outnumbers not only the previous but the next one as well.

The sheer size of the generation explains the huge purchasing power and much greater marketing potential. Nevertheless, there are numerous obstacles from the point of marketing since the cohort is so different. This generation has been requesting more effort and time spent than in past generations. Those who are in the Me generation are the digital natives who are flooded with advertisements since birth and do not trust marketers very easily. Reaching Millennials is becoming harder since representatives of Generation Y select which promotions to see, and some even pay to turn the advertisements off.

Nowadays, Millennials have power over more than $600 billion yearly in spending. The generation has officially modified changes in the economic sectors. The World Lab Data predicts Millennials will spend more than any other generation by 2020 and the trend will continue to rise.

Figure 1: Annual income by generation (Source: Tilford, 2018)

The main goals of the research are to analyze the ways Millennials change marketing and to propose the appropriate steps to efficiently reach Generation Y. A partial goal is to find and describe particular features luxury brands have already implemented.

The main hypotheses are:

• Hypothesis A: Millennials choose the brands that nurture a certain personality and control sustainable practices. • Hypothesis B: Millennials consider luxury brands as a way to show their status in society. • Hypothesis C: Customization drives the desire of Millennials.

1.1 Research Question

What are Millennials looking for when choosing a specific product? Is it a brand, a company, an experience, reliability, or trust?

The focus of this thesis is to discover what Millennials value the most and how companies should reach, adapt, and behave with the most digitally savvy and educated generation in the luxury clothing industry. Understanding and considering the phenomenon is crucial since Millennials represent the largest generation in history and are the most complicated one to reach. Companies that can create the connection, focus on the experience, and cultivate the relationship

– are the ones who will have a chance to reach Generation Y and change the existing consumers into brand ambassadors, who may do the sales for the companies.

Importance of the study

From this thesis, companies and marketers will gain applicable and valuable information and techniques regarding the Millennials’ preferences and changed behavior. With the findings and conclusions provided, companies may keep analyzing and, investigating the needs of Millennials in order to create a deeper connection and plan new approaches to reach the generation.

1.2 Methodology

In the study, the idea of the changing environment and the Millennial generation in relation to marketing is discussed. Marketers obtain unique experiences, knowledge, and views that may provide information that is relevant to the research.

The secondary sources will be applied. The sources for the research will be public reports and journal articles. The greatest methodological fit for the thesis chosen is an observational approach which seeks to find the answer to the question presented. The study will investigate the relationship of marketers, Millennials, and the changing environment.

Based on the second research and public articles available, the analysis and recommendations will be concluded about the current behavior and trends of Millennials and new ways of reaching the generation. The marketing investigation will present the generation along with the analysis in the frameworks. Lastly, the recommendations for further research will be given.

Figure 2: Methodology supported by the literature review map provided by the author

1.3 Literature Review

Millennials introduce different ways of running a business and bring expertise in technology. Innovations in offers and marketing techniques will determine the failure or possible success of any company. Consequently, Porter (2008) claims that analytics should identify the options of creating and capturing the values while using the resources to create a competitive advantage (Porter, 2008) and reach Millennials. It is critical for companies to understand marketing strategies to stay competitive on a global scale. Hence, this thesis will examine the earlier findings, which are related to the following topics: Millennials’ characteristics and behavior, purchase shifts based on the generational differences, the performance of Millennials and luxury brands, and ways to reach Millennials.

Millennials’ characteristics and differences will be analyzed in comparison to older generations based on the American organization, Pew Research center. Pew Research Center has been studying Millennials for more than a decade by measuring the attitude, increasing spending power, and historical significance. Joel Stein (2013) in the popular article ‘Me me me Generation’ states that Millennials are innovators that are always connected and on-demand in entertainment and communication. The author makes points about cultural differences, effects of globalization, and shifted beliefs (Stein, 2013). With the greatest spending power, Millennials remarkably contribute to the luxury industry. Danziger (2015) affirmed that those brands that want to reach Millennials need to focus on social media, mainly on the quality of the content produced by the companies (Danziger, 2015). The marketing strategy of luxury brands requires a direction towards Millennials to deliver certain values. The following figure will illustrate the model applied to examine the question presented. Certain techniques and analysis will be implemented. To provide a scan of the external environment that has impacts on the luxury industry and points at risks, the PESTLE Analysis will be conducted (CIPD, 2018). Porter’s Five Forces will be used to understand the competitiveness and identify the potential profitability of the luxury brands (Porter, 2008). Scenario Planning will introduce the flexible long-term predictions of the industry (Schoemaker & Heijden, 1992, p.41). After scanning the environment of the luxury industry, the current situation of the market will be implemented based on the four luxury clothing brands. Annual

13 reports and financial documents will determine the marketing mix of the brands, whereas Internet sources will introduce the communication strategy. Finally, GAP analysis, conclusion, and recommendations for further research will be implemented.

1.4 Limitations

Even though there are many changes that have occurred in the previous years, there is an essential point to remember: the information about any concern can be accessed anywhere due to the innovation of the internet and savvy devices. As Millennials have adjusted to the advanced age, marketers should introduce new approaches to reach the generation. Despite the thorough research from the existing literature, many authors are still attempting to determine what attracts Millennials, how members compile the information, and which tools and techniques work better. Moreover, there is a limitation on the credibility of the sources and recommendations given based on the available information. There is an agreement amongst authors that Millennials determine the future of marketing, however, what is the pattern or what are Millennials mostly attracted to, have not yet been concluded, since the generation is incredibly different from the previous ones. Once marketers find an approach, companies will need to keep inspiring Millennials and guarantee the best quality and service in any area.

2. Overview of the generation Each generation encompasses a certain temperament when members start revealing their attitudes, values, and ideals (The Pew Research Center, 2014).

2.1 Who are Millennials?

The Millennial generation is getting closer to the peak years; however, who are Millennials, what are their characteristics, and what is the behavior of the generation? To find the answers to these questions, first, the generation will be defined and subsequently, the importance of Millennials as consumers will be determined.

Millennials, born between the years 1980 and 2000, are the most recent generation of young people entering adulthood. Although referred to a variety of names, like Generation Y or Generation Next, the most popular name is Millennials. Generation Y is considered logical, since it represents the continuation of the previous one, Generation X, even though Millennials are called the ‘why’ generation that regularly asks questions everything.

What should first be explored is what has been examined and discovered in marketing works to determine the characteristics that are inherent to Millennials. Millennials, ranging from 18 to 30, are creating a path into adulthood, according to the Pew Research Center, American research organization (The Pew Research Center, 2014). Millennials are connected by social media (digital natives) and are not involved in organized religion. Many are skeptical about everything, have considerable debt, and are not in a hurry to marry someone – overall, this generation is the most diverse and liberal with regards to governmental and social issues (The Pew Research Center, 2014).

The Millennial generation consists of various people since the generation is considered to be the most diverse. Even though people have different food or consumer preferences and, media habits, there is still a tendency to consider Millennials to be alike (Millennial Marketing, 2012). The generation is the first one that has been growing during the times of instant gratification of digital media and consequently, Millennials have a remarkable understanding of today’s cell phone fast-paced internet society. From the author’s perspective, the daily part of many Millennials includes texting, checking Facebook or Instagram, posting pictures and getting likes.

Many Millennials cannot imagine a life without cell phones, text messages, social media or access to the Internet. Members of the generation are creative, skilled, highly educated, adventurous and social media dependent. ‘Connecting to the Net.Generation: What Higher Education Professionals Need to Know About Today’s Students’ book collects the data of an overview of 7705 US students uncovering that 94% people have a cell phone and 97% have a computer, stating the generation is used to instant gratification.

Because of the globalization and the influence of social media, Generation Y is considered to be more alike than past generations on a global scale (Stein, 2013). As an example of the trends mentioned, the youth from the Western countries and China are similar due to the usage of social media and urbanization that has brought overconfidence in the generation.

Figure 3: Millennial generation provided by the author

Millennials are leading the way society works. Members of Generation Y are innovators, and thus requiring certain marketing attention. What should be critically stressed is that the generation of Millennials is fundamental to all advertisers (Danziger, 2015). Obviously, recent college graduates are at the situation that allows them to be the greatest spending generation ever. Therefore, advertisers should truly consider constantly changing needs, behavior, and approaches taken in order to reach Generation Y (Danziger, 2015).

2.2 Millennials vs. Older generations

Millennials are different when compared to other generations. Members of the generation Y are goal oriented, highly educated, and technology advanced multitaskers. During recent years, Millennials have become the largest generation bringing the greatest number of customers to the market. No doubt, the generation is different and challenging. Here is the comparison of Millennials, Baby Boomers, and Generation X in terms of education, values, work perceptions, communication.

Millennial Generation

Millennials look for the products or services that may change or make life easier. Older generations were focused on providing a family with everything members of the family needed. Meanwhile, Millennials start families later and have other priorities in life than past generations (Loroz & Helgeson,2013). Millennials are considered to be technology enthusiasts. The generation is connected by the Internet. From the author’s perspective, accessible information and instant gratification enables Millennials to use time efficiently. Many members are constantly using phones, creating profiles on social media and connecting with other people. Hence, communication with generation should be done via social media. The author believes that many Millennials view education as an enormous expense. By the time students graduate from university, many have debt for the next ten years. Additionally, a degree does not necessarily guarantee success. However, success can be different for everyone. The author suggests that Millennials want to be treated with respect. The generation wants access to information. Transparency is the key. Moreover, Millennials appreciate networking. It is significant to make valuable connections and communicate with people from various industries that broaden the horizons. Millennials want companies to understand the lifestyle and speak to the values that are important to the generation (Pew Research Center, 2010).

Generation X

‘Sandwich generation’ or generation X, is known to be born after Baby boomers but before Millennials. Many members were raised either by a single divorced parent or two working parents and thus, members of the generation are independent and developed self-reliance since

17 early childhood. The generation focuses on a work-life balance and chooses to develop themselves first. Members of this generation strive to pursue extra skills not only at work but in private lives too. The generation was a witness of the Internet introduction and hence, members stay updated with technology (Pew Research Center, 2010).

Baby Boomers

Baby boomers are probably one of the most influential generations. Members of this generation are confident and independent. Baby boomers own houses and cars while Millennials prefer renting and having debt. Baby boomers value technology and face-to-face communication. Even though the generation has not been growing up along with this technology, the members of the generation are extremely hardworking and attempt to adapt to the newer advancements. The difference between Millennials and baby boomers in terms of using technology is that baby boomers use the tools for productivity whereas Millennials for connectivity and social presence. Additionally, the group shows a high job involvement. Baby boomers are motivated by career opportunities and high positions (Pew Research Center, 2010).

Figure 4: Comparison of the generations provided by the author

From the table, it can be seen that Millennials are looking for the experience by networking with creative people and learning new skills. Education is expensive, and many may not cover the tuition. The generation heavily relies on social media and constant communication it provides. Meanwhile, Generation X focuses on success in life by looking for independence and staying up- to-date with the technology. Lastly, Baby Boomers look closely at the bigger picture with the perspective in their career and recognition. Justice and family are the main values for this generation. From the marketing view, every generation needs a certain approach to be reached since many value different things: each generation has own perception of work, has different spending power and saving purposes for the future, has different relations with technology and requests expected from any industry involvements. Rather than trying to change the minds of people, why not find new ways to reach the generations.

2.3 Generational differences influence purchase behavior The generation to which people are related may give insight about buying behavior and attitude. Millennials may buy the same products as baby boomers but the idea of how Millennials want to buy the same product and what many expect from the companies is different. Here are certain characteristics that may vary: Mobile purchasing

Consumers from any generation make purchases online. Nowadays, everyone understands the power of digitalization and adapts to new possibilities that technology offers. For instance, there is a delivery option which allows a person to stay at home while the product is being delivered (Williams, 2011, pp. 5-9). New opportunities make shopping comfortable and accessible for many.

Loyalty is different Baby boomers usually purchase goods at one location whereas Generation X and Millennials are more likely to find new brands and purchase at different stores. However, if there are many products offered, there should a focus on the best-selling one (Williams, 2011, pp. 5-7).

Generation X and Millennials assume different values from messaging

There are several factors that may influence the purchasing decisions of Millennials, mainly family and friends’ recommendations. Meanwhile, Generation X values atmosphere, technology, and reviews by other customers. Generation X needs a straightforward message with a clear explanation of why someone needs to purchase a certain product (Williams, 2011, p. 7). And from the author’s view, Millennials are looking for experience, thus, Generation Y needs to be emotionally connected to build the relationship with the brand before making any purchase.

Millennials and Generation X are speedy consumers while Baby boomers will spend enough time before buying a product

Baby boomers will spend more time when choosing products. Members focus on product quality, features, and the benefits it may offer. Craftsmanship may help when appealing to this

20 generation. Meanwhile, Millennials and Generation X make decisions fast because of research is done prior to purchasing. Members of these generations understand the pros and cons of goods before making a decision.

Customer service

Great customer service is valued by any generation. However, generations evaluate the service based on certain characteristics that are important to each generation. For instance, from the author’s perspective, Millennials evaluate customer service based on transparent promotions and brand interactions. It is vital for Millennials to see what is behind the scenes and what level of control members may have. Transparency leads to trust and loyalty and, consequently, to repetitive purchases. Meanwhile, Baby boomers expect companies to be an immediate solution- solver (Williams, 2011, pp. 6-7).

2.4 The idea of luxury

In order to research the connection between Millennials and the luxury industry, the concept of luxury should be defined and the characteristics should be presented. Luxury is a conceptual idea that has shown significant changes over time (Kapferer, 2008) and because of its steady improvement, the idea of luxury will continue to vary later on. Luxury may be characterized as products or services and represented as a piece of a broad industry obliging the customers, who may be able to afford high-quality products. There was a negative aspect of luxury that characterizes the unnecessary utilization and way of life of the upper social class. Certainly, the upper class used luxury to show the distinctions between the classes and exhibited the power and the bourgeoisie. However, the times has changed, and the luxury has evolved from being only to upper class to being accessible for everyone (Kauppinen-Räisänen et. al. 2014).

Various authors have debated about the importance of the definition of luxury; it appears that many were not ready to agree with a solitary description. The meaning of what 'luxury' is may differ depending on the case or a certain person. Oxford dictionary identifies luxury as, ‘A state of great comfort or elegance, especially when involving great expense’. Luxury products are the items that increase the desire and offer enjoyment to the general population who devour it (Berry, 1994). Vigneron et.al. (2004) qualified luxury as items that satisfy functional and mental needs through the impression of specific attributes, for example, quality and uniqueness. Many

21 individuals rate things as luxury by assuming it is something a person cannot afford to buy in daily life. However, some people find that time spent with family can be luxury, to others – traveling may be an extravagance. What one considers as luxury might be an regular thing to another person (Liu et.al., 2012). The distinctive definitions plainly delineate the way of characterizing luxury, but the perspectives of specialists are altogether different.

2.5 Luxury Clothing Industry for Generation Y

Since every generation has its own lifestyle and unique tastes and inclinations, the millennial age for many brands will turn into the most critical purchasing power and will create alternate ideas in commercial center. Luxury industry faces a critique moment, since young buyers with the obsession to innovation and the expanded enthusiasm for top of the line experiences are changing the market of luxury (CNBC, 2015). Millennials represent 45% of the luxury market, as indicated in a 2015 report by the Shullmann Research Center. Youthful buyers are more imperative and beneficial for experts since many Millennials purchase more luxury products than past generations.

Many need luxury products that represent the desires of a person. Accenture ventures Millennials by 2020 will spend $1.4 trillion every year and will embody 30% of sales in the United States. Recent college graduates will change the luxury industry, uncovering different methodologies, encouraging the rise of new companies that are committed to faithfulness, and are focused on obtaining control (Danziger, 2015). Many luxury brands will have to reconsider the situation with respect to the extraordinary needs and desires of the recent college graduates and offer items and services that are related to the yearnings of what that age demands (Danziger, 2015).

2.6 What do Millennials expect from luxury clothing brands?

Millennials already greatly contribute to the luxury development market since no other generation spent as much on luxury clothing brands as Millennials do. What are the preferences of Millennials? What does the generation Y expect from luxury brands?

Experiences

Millennials do not want to purchase merchandise to depict their personality and do not view goods as remunerations or a sort of trophy (Loroz & Helgeson, 2013). Millennials appreciate the quality and features the companies can give, rather than a brand name. The brand name does not engage Millennials (Lenhart, 2016). People expect a term to be used to increment and legitimize the cost. It pushes buyers away. Today, Millennials focus on quality and openness (Loroz & Helgeson, 2013). Luxury clothing brands focus on providing an exclusive in-store experience that may become a memorable event in the mind of a consumer.

Social media presence and communication

Millennials use social media to share experiences, post stories, and follow others. Mohr (2013) states that social media captures a larger audience and improves the relationship between a company and a consumer (Mohr, 2013, p. 18). Millennials value brands as a way to connect and communicate personality. Accordingly, given the prevalence of social media, a ton of Millennials depict the personalities to both environments: in real life and on the web (Baron, 2015). To remain focused, it is critical to be innovative. This begins by cooperating with twenty to thirty- year old consumers by utilizing the channels of preferences, where recent Millennials hope to discover advertising campaigns that fortify the brand's picture of superb quality.

Enhanced social media content

Millennials need brands to be available in everyday life; the actions brands make should be commendable to enable Millennials to get a clear picture of what occurs behind the scenes when luxury goods are produced. The content must be visual and memorable. Additionally, partnerships with another clothing brand or celebrity endorsements will assist in reaching many Millennials.

Transparency

Authenticity and transparency. The more transparent the company is – the more attractive it is for Millennials. Generation Y wants to know what happens behind the scenes. Many Millennials want to be involved in creating new products and thus, the areas for feedback and improvement have to be included by the companies.

Good cause

Millennials care if brands give something back to society. Many can switch to other brands that make contributions, like donations or investments in animal protection. Many young people are ready to make personal sacrifices if it makes a positive change for products.

Targeted experience

Millennial are ready to share personal information in order to get personalized recommendations. For example, Amazon collects the data and offers products even before anyone might consider buying an item.

3. External Analysis of luxury industry

3.1 Pestle Analysis

To measure the external factors of fast-moving consumer goods, education, and luxury goods, the PESTLE analysis is presented below. The analysis helps to understand the macro environment of the industry. The framework consists of six external forces (Figure 1) that affect the industry the most. The factors investigate the opportunities and threats, moreover, the factors cannot be controlled and thus, the companies should adapt to changes.

Figure 5: Scheme of PESTLE analysis provided by the author

Marketers understand the importance of the tool when doing international research and predicting the challenges that might appear. Political forces raise questions on the government involvement in a specific industry and economy overall. Economic forces influence both the economic national and international movements. Social forces demonstrate cultural and social issues while technological – digital communication reliability on the Internet. Legal forces are related to external and internal effects on the industry and environmental ones show responsible ways of environmental protection.

There are many political events that have happened in recent years. However, the factors are not only external but also internal that destroyed the stability of the luxury clothing industry. This analysis shows how various factors influence the luxury clothing industry.

Figure 6: PESTLE analysis of luxury industry provided by the author

Political Political factors are the most important for the luxury industry as the aspect present a great source of uncertainty. The factors may impact the companies due to new rules and regulations introduced by the government. The regulations consequently affect the sales of the companies. For instance, a government may convince the population to buy local brands. Moreover, tariff barriers and new certification standards are being constantly introduced because of political events like terrorism, stalled trade deals, or geopolitical instability. The events keep increasing the uncertainty of the luxury clothing industry. There are also political influences on brands. Michelle Obama and Melania Trump, the first ladies, have become idols for many popular brands and consequently, influenced the choices of people. Furthermore, there is one more aspect to

26 remember: several companies and specific groups boycott against many brands that use fur and skin of real animals. Gucci, for instance, announced they will stop using fur in their collections. The CEO of Gucci, Marco Bizzarri, introduced a fur-free policy starting from the spring 2018 collection (Featherstone, 2017).

Economic Economic fluctuations have a great influence over the luxury industry, affecting profits and sales of the companies. After the 2008 recession, the economy is still recovering but the situation has improved significantly. The luxury clothing industry adds to the economy because it represents one of the biggest employers worldwide. There are people with low income who want to wear a suit or a dress on a special occasion but due to the high price of apparel, people can find the places to rent the clothing instead of purchasing, affecting the whole industry and the luxury companies particularly.

Social Nowadays, consumers are looking for experiences rather than products. Social changes that have happened recently have influenced the way people choose products (Hennigs et.al., 2015, p.923). Generation Y is the main target for many luxury clothing brands. Versace is doing a great job at targeting the millennial feminine market by following the trends of the position of women in society and introducing women as strong and independent. Gucci has also succeeded in meeting Millennials’ demands. As it was mentioned above, the brand goes fur-free now. Gucci understands the importance of the concerning topic and invests in media coverage and social campaigns to attract more consumers. Moreover, music impacts the decisions of buyers. Celebrities appear in music videos where luxury brands are presented or use the brand name in the lyrics, influencing the minds of consumers. The iconic looks of musicians make people copy the style and buy luxury brands to fit societal expectations.

Technological Any improvements or progress in technology may immediately affect any company. Internet and globalization have influenced consumer choices. Instead of wasting time, many consumers shop online and immediately leave feedback about their shopping experiences (Seo, &

Oliver, 2015). Additionally, technology allowed an overseas expansion that resulted in attracting a larger customer segment (Seo, & Oliver, 2015). Nowadays, every company understands the significance of social media presence. Usage of cellphones and the accessibility of the information may affect the choice of consumers after conducting research. For instance, Burberry has a virtual reality that offers individuals to choose a product and try it on in a virtual fitting room. Many brands show presence on multiple channels like Facebook, Instagram, Snapchat, Pinterest, and YouTube. Thus, people are always able to stay updated with the most trendy products on the market.

Legal There are many legal issues in the luxury clothing industry. The industry has to follow legal regulations like export and import restrictions. Ethics is one the most vulnerable areas that many brands should work on. There is an obligation to abide by the laws to prevent damage to their reputation. Additionally, since the industry represents a large employer, workers rights need to be maintained. However, many companies have Asian workers who sew the apparel cheaply. The competitive strategies of many brands are driven by the intellectual property, and thus, there is a necessity for many countries to operate as one luxury industry by focusing on knowledge and use of innovation.

Environmental Many brands declare to be eco-friendly and constantly work on carbon footprints in the atmosphere. Companies invest more in eco-friendly packaging and raw materials, but most importantly – in operations. Consumers have adopted environmental concerns as part of life, and many want the companies to mirror the aspirations for a greater world (Hennigs et.al., 2015). However, many clothes contain compounds that may be hazardous. And each transportation of one product from a factory to the store adds to the damage inflicted on the environment by releasing gases and chemicals. Typically, the clothes are stored in unsafe plastic bags for transportation. Moreover, consumers are concerned about the raw materials, especially animal leather. Versace, for example, appealed to consumers by introducing the trend of vegan leather. Gucci is targeted all the time by random activists. Thus, Gucci, using media coverage, explained

28 that the company is interested in protecting animals. And one of the goals of the Kering group will be the elimination of any harmful components in the next 5 years.

The luxury industry has experienced some shifts due to political events. Moreover, the notion of luxury has changed and thus, the perception towards products have also changed. The industry shows growth because of the affordability of the products; however, there is skepticism when consumers notice discounted products of their favourite brands. It is crucial for the industry to face challenges and adapt to the changeable landscape of the market.

3.2 Porters 5 forces

To analyze the competition within the industries and where to position them, the Porter’s Five Forces analysis is presented below. The analysis is valuable when considering entering a certain sector and evaluating how attractive the industry is. According to the framework, competition is based on five forces: bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitutes, and existing rivalry. ‘The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry’ (Porter, 2008).

In How competitive forces shape strategy, Porter (1979) gives a clear explanation of each force: bargaining power of buyers examines the degree to which customers may put pressure on the company to demand higher quality or decrease the price, especially if there are only a few customers; bargaining power of suppliers determines the power and control the supplier has over reducing the quality or raising the prices of services or goods; threat of new entrants determines the barriers to enter a specific industry; threat of substitutes shows the alternatives of similar products and the risks of switching to competitors; rivalry depicts how intense the competition is and what are the possibilities of each competitor (Porter, 1979, pp. 138-143).

Below is the analysis of the luxury goods industries.

Figure 7: Porter’s five forces of the luxury industry provided by the author

Threat of new entrants: medium-low New companies attempting to enter the luxury clothing industry have to invest in marketing. Moreover, luxury companies should have high capital to compete with the existing brands and the distribution channels that others already have in place. However, new entrants usually offer higher quality products comparing to rivals in the same category (Hudders, 2012, p. 611). This will be done in order to win consumers. Moreover, it may be hard to enter the industry because of loyalty and brand recognition towards certain luxury companies that have a reliable reputation. New companies will find the competition too tough to proceed. There should also be an expertise in operation management and many brands have been working on it for years to understand the details of the industry. New players have to start from the beginning to gain the same amount of support as already existing ones.

The power of suppliers: medium. Suppliers can be one of the most crucial parts in the luxury clothing industry. The supplier needs to meet specifications that are important to the customer. More importantly, there has to be profitability after all the operations made. The bargaining power in the luxury industry can be strong when resources are unique. This is the case when resources are hard to get. However,

30 when resources are common, the bargaining power is weak. In this case, there are many suppliers that can deliver the material. The relationship with the supplier is important. If a company wants to switch the supplier, there is a risk of worsening the quality of the product.

Competitive rivalry: high. There is an intense level of competition on the market. Many brands offer similar products. The competitors created an oligopoly in producing luxury clothing. Customers appreciate the uniqueness but many want to pay less for a better quality product. After the financial crisis, there was one more segment determined – affordable luxury, like Michael Kors. Affordable luxury clothing brands compete on price, whereas premium brands on exclusivity. Many brands have a long history and brand stories that greatly affected the customers making the competition tough. It is hard to get the market share in the luxury industry.

The bargaining power of buyer: low. Many luxury goods are manufactured in-house. Buyers have very limited information about the design and the prices, which makes the power of buyers low. Moreover, the buyers have no power to change the price when it is being set. However, any sales or discounts of the luxury clothing brand may lead to the perception of a low quality product. On the other hand, an increase in the price will lead to more attention towards the product. In this case, the quality will be considered as premium because the price was raised. After all, everything depends on the brand. Low switching costs between competitors may strengthen the power of customers. Many brands constantly make efforts to prove the exclusivity by implementing new technology that is relevant to customers. In the future, the power will probably be the same since brands always revive appeals to stay competitive.

Threat of substitute: medium. When buying luxury clothing products, consumers are purchasing pleasing qualities and thus, many choose luxury brands (Hudders, 2012, p. 610). Yet, there is a great variety of choice. For example, Zara may offer the clothing apparel for less money. Yet, customers look at the price of the end product, quality, and switching costs. Customers are also looking for brands that may tell about the status of a person and thus, luxury brands like Prada, Versace, Gucci will remain

31 sustainable. Still, there is an increase in counterfeit clothing shipped from China that threatens the global brands. Many consumers are conscious of embarrassment and would buy a lower luxury brand instead of a counterfeit one. Luxury brands target older people with high incomes; however, some of the brands realized the power of Millennials and started actively using social media to attract Generation Y. Yet, many luxury brands assumed social media presence would result in failure and weakening the relationship with Generation Y (Mohr, 2013, p.18). Moreover, brands appeal to Millennials by celebrity endorsements. For instance, Versace always hosts shows and invites a popular model named Gigi Hadid, who is the icon for many young adults. The threat can be determined as medium because the clothing will be in high demand and brands will continue targeting people with special offers at affordable prices.

3.3 Scenario Planning

The future of the luxury clothing industry is unpredictable but there are several possible scenarios to consider. The analysis lets experts propose modifications to the products or experiences, which are based on certain drivers and stories. Scenario planning is a strategic tool used to analyze the effect of the most uncertain event that helps to learn about the future (Schoemaker & Heijden, 1992, p.42). The purpose is to look at the big picture and make long- term plans. A tool assumes various possible futures based on certain factors with plausible trends that serve as a driving force. Based on the approach, four scenarios of what the future of luxury will be are offered.

1) The first access is a change from exclusive to affordable luxury. Exclusivity means uniqueness of the product and premium price, while affordability is about introducing the luxury that can be available to a wider audience at a lower price. Many brands are anxious about losing the exclusive appeal and not being perceived as a brand for the elite. 2) The second access focuses on how the prices are formed. This starts from the status that luxury can grant to a person in society and moves towards the experience that dominates today.

The matrix is presented below.

Figure 8: Scenario planning of luxury industry provided by the author

Scenario 1. Making up to luxury

Trading up and down by the consumers is considered to be the norm in modern day society. There are more millionaires who can afford staying in the most expensive hotels worldwide or dining in Michelin-starred restaurants on a daily basis. The products that were considered premium before are no longer exclusive. In several years, the clothing apparel by Prada or Versace will be available on any website due to sharing. The sharing economy is popular now. Those who are in the middle class do not own goods. If a person wants to own a Gucci scarf, there are certain websites that indicate where it can be obtained or shared. Middle class individuals are hungry for elite goods and continue to be driving the premiumization of their consumption. The scenario shows society with rising incomes. The consumers will be more educated and, consequently, more demanding. Customers will be selective and will not accept imperfections. This requires personalised communication, exclusive service and, special loyalty programs. However, lower markets imitate the same propositions with reduced prices, meaning there is democratisation of wealth and affordable luxury goods.

Scenario 2: Prestige luxury

Wealthy people who are tired of purchasing exclusive apparel from Louis Vuitton or Chanel can choose to order something special from the most popular designers worldwide. The

33 art of living a dream, the mystery of unique materials, and the design yields exceptional clothing. The well-to do people will dictate the ways the luxury clothing industry transforms. Anything that is coveted by wealthy people will be produced. The scenario is created around extremely wealthy people. The choice of people with lower incomes is dependent upon the wealthy ones. Wealthy people dictate the fashion and shape the taste of others. The scenario allows the products to be available to a greater audience. Those with a lower income may occasionally try the products that are not available every day, but wealthy people consume the same products daily. However, the process will become more tough because the amount of extremely wealthy people is increasing.

Scenario 3: Observational luxury

This type of luxury involves looking for an unique feeling and quality. This type includes experience over possession. After accessing information about the consumer online, companies may produce a personalised product. The customers may take a minor risk when choosing the goods. Observational luxury is the most widespread. Luxury goods are associated with feelings now. For instance, with a certain occasion. In this case feelings will become more attractive.

Scenario 4: Authentic luxury

This type includes access to different, unique goods. Authenticity is the key. Search for the original, linked to the certain culture of the products. Consumers want to impress the public. Many know about the roots and the creation of the design of the possession and feel the need to stand out from the crowd. The authentic luxury scenario reflects the consumers who are looking for crafted luxury clothing that may influence top brands. Consumers will analyze how the materials are used, by whom, and where the clothing was designed. People find products that have a story behind them. These goods have a special meaning to consumers. Luxury clothing brands may become too affordable in the consumers’ minds. To avoid this perception, uniqueness should be changed through authenticity.

Luxury clothing brands face several challenges. Even though the future cannot be predicted, possible scenarios and modifications will help to prevent serious issues and prepare for the worst conditions on the market.

4. Marketing Audit of the brands chosen

4.1 Marketing Strategy

The brands that were chosen for the analysis:

Louis Vuitton is the most valuable brand in the world. The brand is a division of Moët Hennessy Louis Vuitton (LVMH). The range of products: shoes, handbags, accessories, and clothing. LV’s Brand value in 2018 is $28, 152m, whereas Gucci is $12, 942m (Interbrand.com, 2018).

Figure 9: Louis Vuitton vs. Gucci Brand Value (Source: Interbrand, 2018)

Gucci, an Italian brand, is part of the Kering Group. The very influential, progressive, and determined Gucci brand is number three in the most valuable luxury brands, with the brand value of $12,7 billion.

Burberry Group Plc – a company that manufactures and sells the items under the name of Burberry.

Coach Inc or Coach New York is an American brand that produces and designs its own clothing and accessories.

Why these brands were chosen for analysis?

Louis Vuitton keeps the balance by strengthening the products and implementing innovations. The brand outperformed the competitors and drove the excess attention of Millennials by collaboration with the Supreme brand.

Gucci has recently had a spike in revenue because it transformed the company from a label to a trendy brand amongst Millennials. The brand collaborated with influencers and celebrities, promoted the feeling of Gucci through social media, and implemented a fur-free policy that is highly valued by Generation Y.

Burberry is the pioneer in using social media and Millennials highly appreciate the communication via different channels, especially social media.

Coach is a luxury brand that positions itself as affordable luxury. The brand is the victim of its own success. However, the changes that the brand has undergone have attracted the attention of the youth.

4.1.1. Segmentation

Segmentation is considered a part of planning. Many marketers use segmentation in order to divide large markets into smaller ones that can be efficiently reached. Below is the analysis of the segmentation strategies that the selected brands use.

Louis Vuitton Gucci Burberry Coach Demographic Age: 1. 35+ 1. 18-30 1. 15-45 1. 18-30 2. 18-30 2. 35+ 2. 5-14 2. 40+

Gender: Men & Women Men & Women Men & Women Men & Women

Occupation: Business men Working Models, Artists, Business people, and women professionals Students, Business students, young People professionals

Income: Disposable and Middle-High From low to high Low-High high income income income consumers income Geographic Asia, Europe, Europe, Europe, Asia Pacific, North America America America India, America Behavioral Easy-going Loyal and Purchases 2 times a Stylish consumers approachable month consumers consumers Psychographic Influencers, Brand and Lifestyle-oriented Lifestyle- trendsetters lifestyle-driven consumers oriented consumers consumers who have motivations behind the purchase Table 1: Segmentation of the brands provided by the author

Louis Vuitton

Louis Vuitton prioritizes the market based on several aspects: age, gender, occupation, and income. Mainly, Louis Vuitton targets men and women; however, the main focus is given to women from 16 to 80 years old with high incomes (demographic segmentation). In terms of geographic segmentation, Louis Vuitton markets in different areas because customers in various locations show certain behaviors and characteristics. The segmentation will help in further positioning and enhancing in the markets of developing countries like Russia, China, and India. Psychographic segmentation focuses on the lifestyle and motivations people have. For instance, in several countries people need to show their status in society (Brazil). Behavioral segmentation by Louis Vuitton aims at reaching easy-going people who want to express their personality in society. Interestingly, Louis Vuitton implemented usage segmentation that collects and stores the information about the users and afterwards, they are heavily targeted to encourage brand loyalty and repetitive purchases.

Today, Louis Vuitton focuses more on demographic, psychographic, and usage segmentation. This is because it doesn’t only target wealthy people who can afford the products, showing their status in society, but also value the craftsmanship and fabric materials. Moreover, the brand emphasizes the great spending power of millennials who can identify the communication messages Louis Vuitton creates. Louis Vuitton collaborated with hip-hop artists to create more buzz around the brand. The brand always drives the desire by announcing limited edition products. There is so much attention and advertisement campaigns that are dedicated to reach Generation Y and sets new standards for other luxury brands.

Gucci

Demographic segmentation for Gucci reflects the products that are targeted for men, women, and children. Historically, Gucci targeted middle-aged wealthy consumers; however, today, every aspect of the brand is focused on attracting millennials. The products are designed for people who want to impress and show a high financial base in society. The income of the consumers are supposed to be high but can be disposable. Geographic segmentation for Gucci recognizes the purchasing power mainly in Europe and America. It can be concluded that Gucci does not focus on the geographic segmentation since the brand ignores developing countries. Meanwhile, psychological segmentation is the main focus for Gucci. The brand used to target celebrities and aristocrats whose decision to buy Gucci products was copied. Today, millennials are the main power for the brand. Motivations millennials have prior to purchasing are the main drivers. Generation Y is highly influenced by social media, celebrities’ choice, and friends. By focusing on this generation, Gucci maximizes competitive advantage and improves its loyal customer base. Behavioral segmentation of Gucci evaluates loyalty and market responsiveness towards a specific product. Gucci has proved the quality and durability, hence has consumer’s loyalty.

Currently, Gucci focuses on psychological segmentation since the brand noticed the potential power of Millennials. However, in order to increase sales, Gucci should explore the emerging markets and developing countries that have certain values and consumption behavior.

Burberry

Burberry recognizes the opportunities hidden behind the segmentation,. Thus, it develops and integrates the market segmentation strategy within the brand. Geographic segmentation of the brand grew due to the market development and globalization. Historically, Burberry sold only outerwear, which was perfect clothing for the weather in London. However, trench coats and gloves are not the best choice for warmer climates. That is why the brand expanded the products (offering fragrances, bags, accessories) and consequently, entered different markets worldwide to gain a larger audience. In the table above, it can be clearly seen that the Burberry customers (demographic segmentation) including a huge range of people starting from an early age. As Burberry is considered to be an affordable luxury brand, it targets consumers from low to high income. Psychographic segmentation is used by the brand in order to attract stylish people who appreciate the heritage of Burberry and are proud to wear British classic. Behavioral segmentation targets fashion-conscious consumers who go shopping at least two times a month.

Today, Burberry mainly focuses on demographic and psychographic segmentation. The brand targets young people of any gender who buy products from Burberry and stay loyal to the brand. There are numerous advertisement campaigns worldwide reaching fashion-conscious young enthusiasts.

Coach

Demographic segmentation by Coach markets from low to high income consumers. Specifically, consumers who want to purchase luxury clothing or accessories but cannot afford to spend a huge amount of money. The age of the consumers varies. The consumers are most likely to be young people and middle-aged women. Geographic segmentation can show that Coach focuses on North America. Similarly, as Gucci, Coach ignores the developing countries and emerging markets. Psychographic segmentation is the central focus of Coach. The brand has recently started targeting millennials by using celebrity endorsements and collaborations to effectively communicate the advertising campaigns. Coach focuses on motivations Generation Y has. Behavioral segmentation targets consumers who are aware of the fashion trends and may spend on an affordable luxury brand.

Today, Coach focuses on the psychographic segmentation and attempts to keep the clothing products trendy while also reinventing the classics to attract millennials.

From the author’s perspective, Louis Vuitton does a better job in reaching Generation Y. The brand identified key things and implemented the strategies that work effectively with Millennials.

4.1.2 Targeting

Louis Vuitton

Historically, Louis Vuitton targeted urban middle-aged (35+) classy women. Even though times have changed, Louis Vuitton still targets wealthy consumers who value traditions, style, and original craftsmanship. Exclusivity and premium pricing add extra value to the customers in society. Additionally, Louis Vuitton defined the new target market. Affluent females, aged 18 to 30, that are impacted by social media and celebrity endorsements became the main target today. These consumers have disposable income and feel the importance of self-esteem in society. Moreover, with the collaboration of the Supreme brand, Louis Vuitton will soon target a subsection of the brand’s audience.

Gucci

Gucci’s target market has always been middle-aged businesswomen and men with high income and status in society. The target audience also included celebrities and fashionistas. However, the audience had been expanded. Today, more than half of the sales derive from millennials; thus, the current target customers are young males and females, aged 18 to 30, with the street or fashion show styles. Moreover, Gucci presented a children’s collection, appealing to young mothers, which set the brand apart from others.

Burberry

Burberry’s target audience is upper social class, ages 20 to 45, who are interested in affordable and aspirational clothing. However, the female target audience with a high disposable income prevails over the male one. The brand appeals to dual genders and can be worn from all ages. Burberry has a children’s wear targeting wealthy parents. The new products will meet the new target audience for Burberry – millennials. Burberry realized the spending power of millennials and now focuses more on the values significant to Generation Y.

Coach

The primary target audience for Coach is women and men, ages 20 to 50, with mid-high disposable incomes with a focus on affordable luxury that provides a certain value. Coach started repositioning the brand in order to be available to a larger audience. Coach targets wholesale and factory outlet customers. Coach created certain products that are available in department stores in several locations worldwide. Factory-outlet customers are another area Coach targets. These customers purchase the accessible luxury products at a discounted price. Additionally, Coach appeals to customers with occasional purchases. The brand focuses on millennials, but not as the primary target. However, with several collaborations, Coach started attracting millennials and focusing on Generation Y.

Louis Vuitton Gucci Burberry Coach

Age 1. 35+ 1. 35+ 1. 20-45 20-50 years 2. 18-30 2. 18-30 Millennials Millennials

Income High and High and disposable Middle to High Low to high disposable income income income income Occupation Urban middle- Businessmen/women Anyone who Anyone who aged wealthy Celebrities, appreciates appreciates business women fashionistas affordable luxury affordable + focus on luxury parents Table 2: Targeting strategy of the brands provided by the author

All these brands realized the great spending power of Millennials. Louis Vuitton and Gucci made Generation Y their number one priority. However, both brands still target the middle-aged and wealthy consumers. Meanwhile, Burberry and Coach have changed from premium luxury brands to affordable ones. Even though brands target millennials, Coach and Burberry do not get the same amount of interaction with buyers as the previous two brands. If Burberry and Coach

41 want to increase sales to compete with Louis Vuitton and Gucci, brands need to spend relevant time to explore the opportunities of Generation Y and, consequently, come up with advertising campaigns that are worth it to millennials.

4.1.3 Positioning

Positioning map is a great tool to understand where the company is placed in the consumers’ minds in relation to the competitors. The tool will determine where the brand is right now and where it wants to be. Without a clear positioning strategy, the brand may not get enough recognition. The purpose of positioning is to explain all the brand activities and benefits, resulting in the customers caring about the brand. Brands do not need to introduce new ideas to fill a gap in the consumers’ minds but rather engage in the dynamics to build a strong brand. The map may identify the necessity of the repositioning strategy.

To start positioning, a range of competitors should be identified. Brands may compete not only on products but also on services or certain benefits. Hence, the points of competition are not obvious. The points of difference and parity come after the first part. These factors show how similar or distinguished the company is in relation to the competitors. Finally, a brand will need a mantra that will represent the ‘heart of the brand’.

Competitiors Differences Similarities Mantra

Figure 10: Steps to position provided by the author

Louis Vuitton

Louis Vuitton, originally a luggage brand, is the most recognisable and valuable fashion brand today. Louis Vuitton positions itself as the brand that offers supreme luxury and quality

42 along with its heritage. The company focuses on handmade craftsmanship, yet has mechanisation boosting the productivity. All of the products are tested prior to selling to make sure there are no imperfections. To show the heritage to the consumers, many products are made of the same material that was used when the company had just started operating.

Louis Vuitton still focuses on the adventure and experience. However, traveling is rather philosophical for the brand. Louis Vuitton implies the idea that the journey never ends. The brand extensively controls the pricing and the quality, maintaining the prestige among competitors. Louis Vuitton is constantly improving the image of exclusivity. The brand offers limited edition collections and personal engravings on certain pieces, which leads to increasing the uniqueness of the brand. Hence, the image of prestige adds value to the products and makes the brand highly desirable.

Figure 11: Positioning map (Brand Positioning, 2013)

Gucci

At first, Gucci was a luggage company. The company focused on leather goods; however, the company quickly gained popularity and became a global luxury fashion brand. Gucci used to focus on the sex and glamour appeal that was communicated through advertising. Today, the brand focuses on romance, rather than a sexy and less glossy style. Gucci positions itself as a luxurious fashion brand that uses value-based strategies. The main values are: quality, exclusivity, craftsmanship, design, and a made in Italy label. The significance of Gucci’s positioning offers exclusivity to the main customers. The image of uniqueness, perfect balance of innovation, and traditions are experienced through the controversial advertising.

From the table, it can be concluded that Gucci appeals to the mass market more than to exclusivity. Gucci has two options in this case: either to stay with the same position or reposition themselves and risk the direct competition of Prada, Louis Vuitton, Hermes.

Burberry

Burberry is one of the most popular British brands. Earlier, Burberry was considered as an upper luxury fashion brand. However, in the beginning of 2000s, the brand suffered a significant shift of the brand status. British clubs banned anyone who was wearing a Burberry t-shirt, which led to the popularity of the brand among ‘street’ people (Oliver, 2004). The brand had lost its exclusivity and could not provide any symbolic benefits anymore, requiring new rebranding strategies. Since that time, the price is being protected and no sales or discounts are offered. Today, Burberry offers classic products and positions itself as a wearable brand. The brand focuses on coats that can be fashionable and functional at the same time. However, most of the products the brand offers are accessories so, logically, the purchases are made by women. The figure above shows the positioning of the brand as a luxury fashion brand that appeals more to exclusivity and moves towards prestige with its unique heritage and trendy style – ‘britishness’. Burberry stays ahead of the trends and keeps innovating the brand position.

Coach

Coach positioned itself as a premium luxury brand. It started as a family brand that offered leather goods, mainly wallets. As it quickly gained popularity, Coach lost its luster. The brand

44 was no longer considered unique as it offered discounted goods that could be easily purchased in any store. Coach had to reposition their strategy to rebuild their reputation.

Today, Coach can be considered as a luxury affordable brand that offers an original American design and heritage of leather products. From the figure above, it can be seen that Coach appeals more to a mass market as the brand is still trying to rebuild its reputation. Recently, the brand acquired Kate Spade to reach millennials who are attracted to colorful designs. The numbers are good and the brand is moving in the right direction; however, not as fast as other luxury brands.

To retain exclusivity, the brand needs to offer a unique product and great service to create an emotional relationship with the customer. Traditionally, brands focused on symbolic values, like prestige; today, consumers choose the brand based on personal values, like emotional closeness (Choo et. al., 2012). Louis Vuitton positioned the brand better than the others through the distribution channels, exceptional products and services, and premium prices that indicate high quality. The brand focused on improving customer-brand relationship. Brands need to innovate and extend the products to stay ahead of Louis Vuitton. Innovation will be the key in maintaining the status of luxury.

4.1.4 Differentiation Consumers imitate the styles of other people in order to be accepted in the society (Grotts & Johnson, 2012, p.283). Thus, differentiation strategy for luxury brands is crucial.

Louis Vuitton

There is so much advertising noise and various products on the market today. It is necessary to differentiate the brand from the existing competition.

What makes Louis Vuitton so special?

• Products. Louis Vuitton produces high quality products using the latest technology and the greatest fabrics that will make the product last longer. • Distribution channels. Louis Vuitton sells the products through specific distribution channels in order to control the product pricing and quality. Consumers can purchase Louis

Vuitton apparel through its own stores, official website, or in malls. This tactic is used to avoid counterfeiting and make the original products unique and limited, which is highly appreciated by young enthusiasts. • Brand image. Louis Vuitton has a reputation of a well-established luxury brand that has high quality products for premium prices. Moreover, the brand cultivates the relationship with actresses and models to attract the younger generation. • Service. Louis Vuitton adopted customization by offering consumers personal engravings on the products and door to door delivery. • Advertising. Surprisingly, the brand does not spend on TV advertising. Louis Vuitton is advertised through magazines.

Gucci

Gucci’s differentiation strategy is based on:

• Brand image. Gucci, just like Louis Vuitton, has a great reputation. The brand provides customers with high quality products and innovative designs. Moreover, the acquisition of Yves Saint Laurent brought even more attention to the brand. 2018 is a meaningful year for the brand. Gucci implemented a fur-free policy, which attracted many millennials who care about the environment and animal protection. Gucci reports any environmental impacts, making the brand transparent and authentic. • Distribution channels. There are more than 500 stores worldwide. The products are distributed not only through the company-owned stores, but through wholesalers and retailers. • Strong parent company. The brand is a part of the famous Kering group that includes 13 more brands, which helps Gucci in being ahead of the competitors.

Burberry differentiation strategy is based on:

• Bespoke services. Burberry allowed consumers to participate in designing trench coats. The service is available online and the customer may experience it virtually before the product is produced.

• Social media. The brand is beloved by many Millennials simply because Burberry interacts with customers. Burberry partnered with Google to deliver digital kisses (Figure 12) that attracted many young enthusiasts (Burberry, 2013).

Figure 12: Burberry kisses campaign (Source: Think with Google, 2014)

• Celebrity endorsement. Burberry has recently become popular with attracting celebrities to promote the products. Burberry was one of the first brands that noticed the value in having celebrities, like the Beckham family, wearing the apparel and increasing the popularity of the brand.

Coach differentiation strategy is based on:

Brand Image. The brand has long history that helped to create an emotional connection with the consumers. Coach spends on advertising and designing in order to communicate the messages with the younger generation.

Distribution Channels. Coach focuses on implementation of the multi-channel distribution, effectively reaching a larger audience when compared to competitors who fear brand dilution.

Customer Service. To show the value to customers, Coach customizes the orders if there was no available product while visiting the store.

Excellent quality with unique heritage, scarcity and emotional values – that is how luxury brands maintain the idea of exclusivity and attract Generation Y.

4.2 Marketing Communication

Louis Vuitton

Louis Vuitton has a rich history and it seems like anything the brand does will end with a great outcome.

• Social media. To accommodate millennials passion towards social media, Louis Vuitton communicates new collections through fashion shows that are streamlined. Louis Vuitton has active followers on Instagram, YouTube, Twitter, Facebook, Snapchat, and Pinterest (the accounts are represented below). The company is doing great on Instagram by collaborating with fans, posting high quality photos, and offering the latest fashion advice. Louis Vuitton produces visual content with the right balance of photo and video usage while using relevant hashtags to reach consumers. The official website gives a feeling of being invited to continue exploring. However, there is more room for improvement. The author noticed that communication with the brand via social media is one way. Louis Vuitton shows the insights of the brand but does not always reply to the customers.

On the left: Louis Vuitton Instagram account (https://instagram.com/louisvuitton) On the right: Louis Vuitton YouTube Channel (https://www.youtube.com/user/louisvuitton)

On the left: Louis Vuitton Facebook account (https://facebook.com/louisvuitton) On the right: Louis Vuitton Twitter account (https://twitter.com/louisvuitton) Figure 13: Social Media of Louis Vuitton

• Collaboration with fashion designers. Louis Vuitton can afford hiring the most prestigious designers to make consumers dreams come true. Lifestyle-oriented people spread the word about the brand by word-of-mouth. • Print advertising. Louis Vuitton does not promote the products via television. The brand focuses on magazines, like Vogue and Elle. Moreover, brand usually opens pop-up stores in different locations. For instance, in 2013, Louis Vuitton constructed a giant pop-up store on the Red Square in Moscow. The store was so huge that it had to be removed, which created even more buzz around the brand.

Figure 14: Louis Vuitton pop-up store Red Square (Source: Bellomag, 2013)

• Celebrity collaborations. Louis Vuitton collaborated with Jade Smith, Jenna Stone, and the Kardashian family to promote the products via personal channels. Moreover, there are several hip-hop artists who wrote songs or used the brand name while rapping (Nicki Minaj, Drake) that hugely affected millennials choices.

• Shows, movies. Louis Vuitton organizes cruise shows in different corners of the world, which attracts various generations and spreads by word-of-mouth. Interestingly, the products by Louis Vuitton are depicted in movies. For instance, since Louis Vuitton started with the spirit of travel and focused on luggage, ‘Titanic’ used the luxury products in the movie and awoke the interest of people to the brand.

Figure 15: Louis Vuitton’s Cruise Show 2018 (Source: Fashionista, 2018)

Louis Vuitton wins over millennials because the brand communicates both online and offline. Even though many people cannot afford the products from the brand, Louis Vuitton leaves everyone with a warm feeling.

Gucci

The company greatly invests in their communication strategy to create a special entity.

• Experiential and controversial advertisement. Gucci once used scandalous images that led to the awareness of the brand.

• Social media. Gucci publishes visual content. Social media is filled with high-quality images of the latest products. Below are the number of followers the brand has. Gucci was a pioneer in launching a Facebook campaign. The purpose was to educate customers about the brand. However, today, Gucci needs to put effort into changing the brand’s Facebook page and implementing a two-way interaction instead of teaching customers. Moreover, Gucci cooperates with social media influencers who interact with millennials and have influence over the decisions taken by Generation Y.

On the left Gucci Youtube channel (https://www.youtube.com/user/gucci) On the right Gucci Instagram (https://www.youtube.com/user/gucci)

On the left: Gucci Twitter account (https://twitter.com/gucci) On the right Gucci Facebook account (https://facebook.com/gucci) Figure 16: Social Media of Gucci

• Pop Culture and Celebrity endorsements. Gucci was worn by many celebrities. For instance, Lady Gaga performed in Super Bowl in 2016 in a Gucci suit. Beyoncé introduced a video where she appears to be wearing Gucci designed clothing. Many singers depict the products in videos and concerts and become walking advertisements.

Figure 17: Lady Gaga singing the national Anthem at Super Bowl (Source: Fashionsizzle, 2016)

• Fashion shows. The exclusivity of the brand is portrayed through fashion shows. The behind the scenes view is visualized via snapchat and Instagram.

• TV and print advertising. In 2016, many dominating fashion magazines were obsessed with Gucci products and dedicated the covers to the latest trends.

Gucci greatly communicates with millennials; however, the brand has the same issue as Louis Vuitton. The communication is mostly one way. Moreover, fashion shows are one of the most exclusive content, and thus, Gucci should give more insights to millennials to awaken the interest and spread the word.

Burberry

Burberry promotes the products through experience.

• The brand increases favourability through technology and implementations of social media. Burberry has active followers on Snapchat, Instagram, Facebook, Twitter, Pinterest, and YouTube. The number of followers is below. Live streams became popular with communicating the latest trends on the runway shows. The engagement was increased with the implementation of designing a personal trench on the website that enabled consumers to customize the style, color, and materials of the coats. Moreover, the consumers were given 15 minutes of fame. Instead of

53 using models or celebrities, Burberry allowed consumers to upload personal photos wearing the brand’s iconic products. Word of mouth worked better than expected. The Burberry kisses campaign that was discussed earlier reached a high number of millennials who sent messages in a 3D landscape. To attract millennials, Burberry uses Snapchat and provides a special snapcode to deliver exclusive content. The content is usually a behind the scenes snap that gives a glance of the new collection.

On the left Burberry Youtube channel (https://www.youtube.com/user/burberry) On the right Burberry Instagram (https://www.youtube.com/user/burberry)

On the left: Burberry Twitter account (https://twitter.com/burberry) On the right Burberry Facebook account (https://facebook.com/burberry) Figure 18: Social Media of Burberry

Figure 19: Creation of a personal trench by Burberry (Source: http://itsocialmedia.com/case-study-burberry/)

15 minutes of fame resulted in:

Figure 20: Creation a personal trench results (Source: https://www.madebymany.com/case-studies/launching- burberry-as-a-luxury-digital-brand)

• Celebrity collaborations. Burberry collaborates with Cara Delevingne, who represents the millennial generation and is considered to set the standards of luxury. • Burberry app. Burberry created an application engaging consumers with seasonal updates, allowing them to run a personal runway, watch live streams, and communicate directly with the brand. Moreover, Burberry uses chatbox for Millennials to browse current collections and make the brand more attractive.

Figure 21: Burberry app (Source: Behance, 2015)

• Print advertisements. With the spreading word of mouth, popular magazines like Vogue give a room for advertising Burberry collections.

Instead of traditional print advertising, Burberry mostly focuses on technology and social media to give consumers the choice and freedom to customize the orders and products. Burberry cultivates this relationship and increases the brand’s knowledge and relevance with Generation Y. However, the app created by Burberry can provide more exclusive information and piquant details.

Coach

Coach has offered customers accessories and clothing with distinctive quality and design for many years. The brand needs to maintain loyal customers. The ways Coach hopes to achieve this lie through communication methods: social media, celebrity collaborations and influencers, print advertising.

• Social media. Social media has changed the way people communicate. Coach realizes the power of digital information and intentionally forces word of mouth. The company has accounts on Instagram, Twitter, and Facebook. The number of followers can be seen below. Additionally, Coach uses a YouTube channel that has more than 60 thousand followers. The brand shares

56 images and updates customers with the latest trends through social media. However, the author noticed that even though the brand utilizes social media, customers get replies to their requests in one or two days, which may depict that the customer is not valued. Coach should establish a greater way to assist customers in order to keep loyalty.

On the left: Coach Twitter account (https://twitter.com/coach) On the right: Coach Instagram account (https://instagram.com/coach)

On the left Coach Facebook account (https://facebook.com/coach) On the right Coach Youtube channel (https://www.youtube.com/user/coach) Figure 22: Social Media of Coach

• Celebrity collaborations and influencers. Coach collaborates with muses of the brand. Chloe Moretz and Hari Nef connected the brand to personal communities and audiences. To establish a bond with Millennials, Coach signed Selena Gomez to create a personal design. Selena, who has mental health issues, stays strong and encourages female

Figure 23: Selena Gomez for Coach 2018 (Source: COACH UK Official Site, 2018) Support. The singer perfectly represents the millennial generation. With millions of followers on Instagram and YouTube, Selena dictates the taste of the Generation Y. The products designed by Selena are top sellers today. • Print advertising. Coach promotes products through magazines that feature influencers (Kate Bosworth, Gwyneth Paltrow) who have a story to tell.

Coach positioned itself as an affordable luxury. Comparing Coach to the previously mentioned brands, it can be concluded that Coach does attempt to achieve a larger audience, however, it makes a relatively small amount of effort. Experiential or controversial advertising can be risky but may attract Millennials who will talk about the brand. More customization on social media, standing for a good cause, and making donations will reach the right customers.

4.3 Pricing Strategy

Consumers purchase luxury goods not only because of the functions the product offers, but due to the perceived value to the image of the buyer. Luxury products may be purchased because the premium costs are considered to offer a better quality and higher status in society. The price of the brand should reflect the quality and exclusivity.

Louis Vuitton

Louis Vuitton uses premium price strategy. The brand follows a value-based pricing strategy. Quality and material dictate the premium price. LV follows the strategy of no sudden

58 price changes by posting advertisements and sending emails to loyal customers prior to implementing any changes. Throughout the distribution network, Louis Vuitton implied the integrity pricing strategy. The brand does not offer discounts or sales and does not reduce the actual price. However, the CEO once reduced the prices in Japan, which resulted in huge interest and trust among women (Nagasawa, 2009). The analysts set the price based on the factors of a country and market characteristics (Wealth-x, 2018).

Gucci

Gucci also offers premium end products. Customers feel distinguished while purchasing Gucci products and showing off their status in society. Unique designs and quality result in the premium price while cost cutting seems impossible for the brand. Yet, the brand occasionally offers discounts to keep the loyalty of the customers. Several price fluctuations in the past caused confusion in the eyes of consumers. After unsuccessful attempts, Gucci realized the potential of millennial consumers and redesigned the strategy of the brand. Gucci has a team of specialists who determine the price of the items. Analysts, not designers, predict what the product will sell for; the expenses for producing the goods are not considered (Kering, 2017). One of the creative parts of the pricing strategy Gucci made is developing the e-shop. E-shop quickened the delivery and made personalized recommendations based on the specific needs of the consumer.

Burberry

Burberry represents the luxury clothing brand; thus, it is associated with premium prices. Burberry tries to balance from low to high price end products. The pricing strategy is based on the evaluation of the market demand and prices of the competitors. It can be noted that Burberry has similar prices to Michael Kors. The marketing team of Burberry does the research to identify the demand and competitor’s prices prior setting the Burberry ones.

Coach

Coach products can be afforded by people with low – high incomes since not all the products are overpriced. Coach implemented a mid-premium pricing strategy, maintaining a competitive pricing policy and keeping the prices lower than Michael Kors and Tory Burch (their main rivals). Premium pricing helps to keep the exclusivity of the brand. Additionally, unlike

Louis Vuitton, Coach runs a promotional pricing strategy. There are clearance sales upon the arrival of the new stock (Coach Inc, 2015).

4.4 Pattern

In the age of authenticity, Millennials value authentic brands with integrity, authentic communications, and relationships. Luxury is more emotional today and people purchase luxury goods because the items represent something important to the customers. With the greatest spending power, Millennials are dominating the market and many brands need to consider how to reach the game-changers.

The behavior of Generation Y is different; thus, marketers need to interact with Millennials through various platforms and not traditional channels.

Social media has become the most significant tool for luxury brands to promote, engage, and understand the communication with Millennials. Storytelling is a relevant key to the hearts of Millennials through various channels. Instead of being sold, Millennials need to feel that the content was created with the greatest interests of the generation at heart. Cultivated relationships will aid in earning trust and highlighting the expertise. By being quiet, brands are losing an opportunity and becoming blind. Moreover, brands are facing the risk of being traded off for a lower-priced or counterfeit item.

Brands, mentioned in the chapter, engage Millennials through social media; however, there are some areas that need improvement. For instance, the brands lack dialogue. To be more precise, it is one-way communication. Another area is linking the accounts, meaning if the customer explores on one social media platform then clicking only one button will encourage them to check another. This should be done in order to reach a larger audience. With millennials, who may use three social media at the same time, this concept will be useful. Hence, being present is not enough.

Additionally, Generation Y appreciates quality and experience over status. Louis Vuitton and Gucci focus on in-store customer experience and additional services that add value to the purchase and build long-term loyalty.

Furthermore, customization drove the desire of Millennials. Louis Vuitton offered personal engravings, whereas Burberry allowed customers to be the designer of a personal trench coat. Scarcity and uniqueness of these goods built a stronger bond between the Generation Y and the brands. These brands entered the relationship with the customers and spoke to Millennials on the same level.

Managing and maintaining the luxury status of the brand is complicated. Status quo no longer exists because consumers are more educated, and Millennials are more sophisticated. Lifestyles have changed as social and economic issues prevail. Brands that follow past strategies will not survive in the competitive environment. Brands need a strong positioning placed in the centre of the company. Moreover, differentiation strategy is a must. Clarity and visual storytelling will create new opportunities for the brands.

5. McKinsey consumer decision process of Millennials in the luxury industry

‘If marketing has one goal, it would be reaching consumers at the moments that most influence their decisions’ (Court, Elzinga, Mulder, & Vetvik, 2009).

The ways the consumers make decisions have fundamentally changed especially in the age of digitalization. McKinsey specialists saw the evolving necessity to understand the shifts in the consumer behavior and thus, offered a new model – a consumer decision journey. The journey reveals triggers, criteria for decision and more

Figure 24: McKinsey decision framework provided by the author

complicated shift choices. Marketers used the model instead of the sales funnel, where the decision begins with the brand awareness and ends with customer loyalty. According to Liu et.al (2012), ‘Loyalty signifies the degree of attachment a customer has, and it is closely linked to use experience’ (p. 924). ‘The decision-making process is a more circular journey, with four primary phases representing potential battlegrounds where marketers can win or lose: initial consideration; active evaluation, or the process of researching potential purchases; closure, when consumers buy brands; and post-purchase, when consumers experience them’ (Court et.al., 2009). The model helps marketers to think strategically what the company should do at certain points of the consumer journey.

Millennials are the digital generation that has reasonable expectations making the companies study the ways of doing business. Companies that target Millennials need to realize that this generation is enormously fast in the consumer decision process because of the amount of

62 information can be accessed. Millennials need to be targeted accordingly; otherwise, there is a risk of losing the greatest spending power in the future (Giovannini, Xu, & Thomas, 2015).

The first part includes aligning. Fishing only in places where there are fish, meaning using relevant to Millennials channels. The second part is a link. Companies need to focus on consistency when promoting and identifying the brand. The third part is a lock. This part means to retain the interest of Millennials, ensure ‘locking customers’ by introducing loyalty programs and offers that may capture relevant data. The last step is a loop. McKinsey experts explain the element as ensuring Millennials think of a certain company when there is a need for a product.

Millennials will support luxury brands if companies use social media to communicate and interact on the Internet. A recent study from Deloitte found the most common trigger for Millennials is considered to be social media (Deloitte, 2017). And the triggers are varied across the markets. Engagement for Millennials is critical. Surprisingly, the study shows the most important trigger for Millennials in purchasing a luxury thing is a particular occasion, like a wedding or birthday. Other triggers: ‘when I want to treat myself’ or ‘receiving a bonus at work’. While social media helps to explore the brand and engaging consumers, loyalty can be gained if a brand is transparent enough and stays for a good cause. From authors experience many Millennials express more loyalty to the brand if any time one buys from the company and part of the purchase goes to saving the environment or donation to children in need.

At the second stage of active evaluation Hall & Towers (2017) determined the factors companies should consider when influencing the purchasing behavior of Millennials:

Friends/peers review The influence of friends is extremely important. However, there are many digital ‘friends’ and word of mouth that may impact a post-purchase evaluation. Furthermore, like-minded Millennials usually share thoughts or become fans of online communities where many discuss the company’s products or experience. Thus, the companies should encourage open conversations and reviews of the products and services even by anonymous users.

Values

Millennials value if a company acts with a social cause, like making donations after any purchase by the consumer. The opposite commitment is also true. Values that resonate with what Millennial expect from companies should be also focused on.

Social media presence and communication

Millennials are known as digital natives who have a great tendency to use several online devices at the same time (Kirk et.al., 2015). Millennials want companies to use the most popular media to expose the products or services. Many expect constant updates and notifications from the social- sharing platforms, like Facebook, Instagram, and Tweeter. Millennials seek information through visuals. Moreover, it is assumed there are instant responses and less formal interactions between the company and the person. For this reason, companies should be authentic when using social media encouraging open conversations and asking for a feedback.

Budget

Millennials are discovering new ways to acquire products having a control over the spending. Many have student loans and therefore, the companies should offer smarter techniques and give more flexibility when communicating the products or services to Millennials.

Innovation

Millennials enjoy trying new goods; however, many will not become loyal customers because the product does not offer a certain value. Companies need to define what adds value, what makes life easier before investing in the new products (Hall & Towers, 2017).

Boston Consulting Group offered an effective Reach Relevance Use a full array of Make the company approach to reach Millennials. The approach is called media to build appealing and brand awareness relevant reciprocity principle where five elements are described. The elements are reach, relevance, Reputation Strive to reputation Relation reputation, relation, and referral (Barton, Koslow, & that reinforces Maintain a two- values and way dialogue Beauchamp, 2014). personalities

Referral Build relationship through communities and social media Figure 25: The effective approach to reach Millennials provided by the author

The millennials’ expectations are different from older generations. New technologies are disrupting every area of life and luxury industry is not an exception. The generation is not loyal to companies, many are willing to try new products. Millennials are day traders and if the brand is not exclusive, there is a great possibility of being traded out for an alternative.

The fourth stage of the loyalty loop includes social media, transparency, sustainability. Since Millennials have been growing with plenty of information and great access, many use social media to review if there is a value the brand offers. Social media is a top trigger for Generation Y. Social media allows many companies to interact with the cohort and offer the products which Millennials are ready to pay the premium. To make Millennials loyal, the company should stay transparent and sustainable. Young consumers are more conscious of the environmental issues, and those businesses, who fail to address these issues, will lose the customers. In addition, more personalized experience should be offered. The communication should be relevant to the generation to gain insights and expectations. Moreover, to reach Millennials, companies should listen to the feedback and apply new concepts to build the relationship. Interacting and connecting with a customer is a crucial part (Choo et. al., 2012, p. 87).

Millennial’s behavior influences the behavior of other generations as well. Consequently, brands and marketers need to make changes in the organizational processes and adjust to the spending of Millennials. The changes should not be considered that the company has lost power

65 over consumers. The length of the journey and the formers of the opinion are important to the decision-making process when determining the purchase decision. Even though there are no right decisions when marketing to Millennials, the key takeaway: companies and marketers should connect with generation Y early and remain on the same journey when Millennials are triggered with the new purchase.

6. Gap Analysis Gap analysis that is provided below will analyze the actual and the desired results of luxury brands that attempt to reach Millennials. The analysis includes what many luxury brands have, what brands need to have, and what are the actions to reach the anticipated result.

Table 3: Gap analysis of luxury brands provided by the author

Even though Millennials are different from the previous generation, there are certain ways to reach and engage Generation Y. Once the companies realize how to interact with Millennials, the easier and faster will be the ways to convert Millennials into the customers and brand ambassadors.

7. Conclusion

The findings of the thesis verify that generations are different, and each generation needs a personalized approach in order to reach the desired result. Globalization has changed consumers’ minds and allowed companies not only promote luxury clothing to Millennials but build a long- lasting relationship, develop brand loyalty, communicate with the audience, and create a personality (Giovannini, Xu, & Thomas, 2015). Traditional advertising is not what Millennials expect from the luxury brands. Exclusive visual content, originality, transparency, and authenticity – are the keys to reaching Millennials.

The practical was dedicated to Market Audit of four luxury brands. The findings show that brands make attempts in reaching Millennials, yet, there are certain shortcomings and a room for improvement.

Based on the research above, it is possible to prove the hypotheses identified at the beginning of the research.

Hypothesis A: Millennials choose the brands that nurture a certain personality, and the ones that control the sustainable practices.

Hypothesis A can be confirmed. The results of the marketing audit prove that Millennials value luxury brands that have moral practices and stand for a good cause. These brands cultivate a personality. It is one of the characteristics from the Millennial’s perspective a luxury brand should have. Many Millennials would support the brand that has these qualities and at the same time would be indifferent to those that do not.

However, only a few Millennials are able to name several luxury brands that support a good cause. Hence, it is crucial for companies to focus on communication strategy and put the information forward. Luxury brands will be known not only for the premium price and brand name but for ethical reasons that are considered imperative for Generation Y.

Moreover, in the era of digitalization, the simplest way to communicate with Millennials and nurture the personality is through social media. As it was mentioned in chapter four, Millennials believe social media is the best way to keep customers engaged, and many brands understand this idea and focus on building a strong relationship through different channels.

However, it is not enough for Millennials. Generation Y wants luxury brands to be available 24/7, many expect quick responses from the brands. Moreover, the content should be engaging and visual that increases interaction. Social media may support a brand to develop a personality and quickly gain Millennial’s loyalty.

Hypothesis B: Millennials consider luxury brands as a way to show the status in the society.

Hypothesis B disapproved. Most Millennials value qualities the brand can offer. Many Millennials might not purchase an item for a premium price even though popular brands determined a product as a luxury that may show the financial stability and the status in the society. Many Millennial consumers are educated to distinguish a premium price and the value of the luxury item.

To persuade Generation Y, the price-performance ratio of the items should be provided. For instance, companies may focus on determining the quality of the product. Generation Y showed the considerable measure of noteworthiness to quality of the items and quality can be the key principle inspiration for making a luxury product purchase rather than status in the society. The qualities that can be emphasized: exceptional fabric materials, durability, and comfortability.

Hypothesis C: Customization drives the desire of Millennials

Hypothesis C can be confirmed. Millennials value experience. Many representatives of Generation Y will neglect the material goods in order to pursue great experiences. The importance of experiences should be significantly considered and applied by the luxury brands. Even though luxury brands that produce clothing products cannot provide with the experiences Millennials expect, the brands may focus on service and in-store contact showing a special treatment and creating a memorable feeling in the mind of a consumer. In this case, customization and experience are linked.

Customization can provide with a special meaning and truly extraordinary experience right in the store. However, customization is not something that can be rapidly done; in reality, it is a genuine collaboration where both the brand and Millennials work on one goal. Luxury brands should also focus on the uniqueness of the future design and scarcity of the product.

To guarantee the effectiveness of customization with Millennials, luxury brands should encourage the feedback, and in this case, the initiative needs to be done by the companies. Hence, the brands will have more positive and negative feedback that will encourage improvement and consequently, more satisfied and loyal customers.

If luxury clothing brands follow the recommendations outlined in thesis and conduct own research, the companies will be likely to increase Millennial’s loyalty and trust.

Recommendations for further research

Millennials are technologically savvy and financially cautious consumers. Research that has been done for the thesis, identified several parts on which further research would be useful.

Firstly, the researcher is interested in narrowing the literature down. Most of the existing literature is general and certain luxury brands will gain the insights by conducting own research and identifying key parts.

Secondly, the researcher is interested in conducting an observational study on how Millennials search for information and make purchase decisions of luxury brands later. The researcher has had useful conversations with representatives of Generation Y within the context of the thesis, who tend to believe that search and interpretation of the information are clearly personal and different due to the advance of technology, mainly social media.

Finally, the researcher is interested in geographical differences and preferences of Millennials. Consumers from different cultures exhibit different perceptions towards the luxury products, yet there are trends proving consumers’ opinions are becoming similar (Seo, & Oliver, 2015). Literature review provides a summary of the increased demand and changed the behavior of Millennials in regard to the luxury brands. However, the in-depth analysis including income, education, nationality based on geographical differences would be beneficial. Cultural differences of Millennials may depict various demands from the luxury brands. Hence, more research needed in this area.

Bibliography

1. Account, B. (2018). Burberry (@Burberry). Retrieved from https://twitter.com/burberry 2. Account, C. (2018). Coach (@Coach). Retrieved from https://twitter.com/coach 3. Account, G. (2018). Gucci (@gucci). Retrieved from https://twitter.com/gucci 4. Account, L. V. (2018). Louis Vuitton (@LouisVuitton). Retrieved from https://twitter.com/louisvuitton 5. Baron K. (2015). The Secrets to Luxury Online For Millennials. Luxury Society. Retrieved from http://luxurysociety.com/articles/2015/09/the-secrets-to-luxury-online- formillennials 6. Barton C., Koslow L., & Beauchamp C. (2014). How Millennials Are Changing the Face of Marketing Forever. Boston Consulting Group. Retrieved from https://www.bcg.com/publications/2014/marketing-center-consumer-customer-insight-how- millennials-changing-marketing-forever.aspx 7. Behance. (2015). Burberry. Retrieved from https://www.behance.net/gallery/25291265/Burberry 8. Belloteam. (2013). 'A Problem of Scale' – Giant Louis Vuitton Suitcase Removed From The Red Square. Retrieved from http://www.bellomag.com/a-problem-of-scale-giant-louisvuitton-suitcase-removed-from-the-red-square-louisvuitton-natasupernova/ 9. Berry C. (1994). The Idea of Luxury: A Conceptual and Historical Investigation. Cambridge. 10. Brand Positioning. (2013). Retrieved from https://louisvuittonbrand.wordpress.com/brand-positioning/ 11. Brannigan M. (2018). Louis Vuitton to Show Its Cruise 2019 Collection On the French Riviera. Retrieved from https://fashionista.com/2018/02/louis-vuitton-cruise-2019-runway- location 12. Burberry (@burberry). Photo and Video Instagram. (2018). Retrieved from https://www.instagram.com/burberry/?hl=ru 13. Burberry Group Plc. (2017/18). ANNUAL REPORT 2017/18. Retrieved from https://www.burberryplc.com/en/investors/annual-report.html

14. Burberry. (12 June 2013). Introducing Burberry Kisses. Retrieved from www.youtube.com/watch?v=LRiZMVEIhas 15. Burberry. (2018). Burberry. Retrieved from https://www.youtube.com/channel/UCw7aeTxfJ4aP8REx8SMZQxQ 16. Burberry. (2018). Retrieved from https://www.facebook.com/Burberry/ 17. Choo H., Moon H., Kim H., & Yoon N. (2012). Luxury Customer Value. Journal of Fashion Marketing and Management: An International Journal, 16(1), 81-101. 18. Coach (@coach). Photo and Video Instagram. (2018). Retrieved from https://www.instagram.com/coach/?hl=ru 19. Coach Inc. (2014) Coach Annual Report. Coach Inc. Retrieved from http://www.annualreports.com/Company/coach-inc 20. Coach Inc. (2015) Coach Annual Report. Coach Inc. Retrieved from http://www.annualreports.com/Company/coach-inc 21. COACH UK Official Site. (2018). New York Modern Luxury Brand Est. Retrieved from https://uk.coach.com/ 22. Coach. (2018). Coach. Retrieved from https://www.youtube.com/user/coach 23. Coach. (2018). Retrieved from https://www.facebook.com/coach/ 24. Danziger P. (2015). Millennials & Their Luxury Aspirations. Unity Marketing. Retrieved from http://unitymarketingonline.com/millennials-their-luxury-aspirations/ 25. Deloitte. (2017). Global Powers of Luxury Goods 2017. Press release. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/at/Documents/consumer-business/deloitte- global-powers-of-luxury-goods-2018.pdf 26. Fashionsizzle. (2017). Lady Gaga in Gucci Singing the National Anthem at Super Bowl 50. Retrieved from https://fashionsizzle.com/2016/02/09/lady-gaga-in-gucci-singing-the-national- anthem-at-super-bowl-50 27. Featherstone E. (2017). Gucci is going fur free. Retrieved from https://www.independent.co.uk/news/business/news/gucci-fur-free-2018-commitment-social- responsibility-italian-fashion-brand-marco-bizzarri-a7996061.html 28. Gabi. (2014). Case Study - Burberry and Online Media. Retrieved from http://itsocialmedia.com/case-study-burberry/

29. Giovannini S., Xu Y., & Thomas J. (2015). Luxury Fashion Consumption and Generation Y Consumers. Journal of Fashion Marketing and Management: An International Journal, 19(1), 22-40. 30. Glaser M. (2014). Kisses and Smiles: How "Art, Copy & Code" Ad Campaigns Came to Life. Think with Google. Retrieved from https://www.thinkwithgoogle.com/marketing- resources/experience-design/kisses-and-smiles-burberry-and-volkswagen-ad-campaigns/ 31. Grotts A., & Johnson T. (2012). Millennials consumers’ status consumption of handbags. Journal of Fashion Marketing and Management, 17(3), 280-293. 32. Gucci (@gucci). Photo and Video Instagram. (2018). Retrieved from https://www.instagram.com/gucci/?hl=ru 33. Gucci. (2018). Retrieved from https://www.facebook.com/GUCCI/ 34. Gucciofficial. (2018). GUCCI. Retrieved from https://www.youtube.com/channel/UCo6fjlKg6GuCmEMeqYbGJng 35. Gustafson K. (2015). Millennials redefine luxury and the stakes are high. CNBC. Retrieved from http://www.cnbc.com/2015/02/18/-redefine-luxury-and-the-stakes-are-high.html 36. Hall A., & Towers N. (2017). Understanding how Millennial shoppers decide what to buy: digitally connected unseen journeys. International Journal of Retail and Distribution Management, 45 (5), 498-517. 37. Hennigs N., Wiedmann K., Klarmann C., & Behrens S. (2015). The Complexity of Value in the Luxury Industry. International Journal of Retail & Distribution Management, 43(10/11), 922-939. 38. Howe N., & Strauss W. (2009). Millennials rising: The next great generation /by Neil Howe and Bill Strauss. New York: Vintage Books. 39. Hudders L. (2012). Why the devil wears Prada: Consumers’ purchase motives for luxuries. Journal of Brand Management, 19(7), 609-622. 40. Interbrand. (2018). Best Brands. Retrieved from https://www.interbrand.com/best- brands/best-global-brands/2018/ranking/ 41. Junco R., & Mastrodicasa J. (2007). Connecting to the net.generation: What higher education professionals need to know about todays students. Washington, DC: NASPA, Student Affairs Administrators in Higher Education.

42. Kapferer J.N. & Florence V.P. (2016). Beyond rarity: the paths of luxury desire. How luxury brands grow yet remain desirable. Journal of Product & Brand Management. 25(2), 120- 133. 43. Kauppinen-Räisänen H., Gummerus J., Koskull C., Finne A., Helkkula A., Kowalkowski C., & Rindell A. (2014). Am I Worth It? Gifting Myself with Luxury. Journal of Fashion Marketing and Management: An International Journal, 18(2), 112-132. 44. Kering group (2017). Financial document. Retrieved from http://www.kering.com/en/finance 45. Kirk C., Chiagouris L., Lala V., & Thomas J. (2015). How Do Digital Natives and Digital Immigrants Respond Differently to Interactivity Online? A Model for Predicting Consumer Attitudes and Intentions to Use Digital Information Products. Journal of Advertising Research, 55(1), 81-94. 46. Lenhart M. (2016). Study: Millennials Eschew Luxury Brands. Travel Market report. Retrieved from http://www.travelmarketreport.com/articles/Study-Millennials-Eschew-Luxury- Brands. 47. Liu F., Li J., Mizerski D., & Soh H. (2012). Self-Congruity, Brand Attitude, and Brand Loyalty: A Study on Luxury Brands. European Journal of Marketing, 46(7/8), 922- 937. 48. Loroz P., & Helgeson J. (2013). Boomers and their babies: an exploratory study comparing psychological profiles and advertising appeal effectiveness across two generations. Journal of Marketing Theory and Practice, 21(3), 289-306. 49. Louis Vuitton Official (@louisvuitton). Photo and Video Instagram. (2018). Retrieved from https://www.instagram.com/louisvuitton/?hl=ru 50. Louis Vuitton. (2018). Retrieved from https://www.facebook.com/LouisVuitton/ 51. LOUISVUITTON. (2018). Louis Vuitton. Retrieved from https://www.youtube.com/user/LOUISVUITTON 52. Made by many. (n.d.). Fashion's most famous digital case study. Retrieved from https://www.madebymany.com/case-studies/launching-burberry-as-a-luxury-digital-brand 53. McKinsey C. (2009). The Consumer Decision Journey. McKinsey & Company. Retrieved from https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/the- consumer-decision-journey

54. Millennial Marketing (2012). At last, a millennial segmentation. Retrieved from http://www.millennialmarketing.com/2012/04/at-last-a-millennial-segmentation/ 55. Mohr I. (2013). The Impact of Social Media on the Fashion Industry. Journal of Applied Business and Economics, 15 (2), 17-22. 56. Nagasawa S. (2009). Luxury Brand Strategy of Louis Vuitton: Details of marketing Principles. Waseda Business & Economic Studies, 45, 21-40. 57. Oliver M. (2004). Leicester pubs ban drinkers from wearing Burberry label. The Guardian. Retrieved from https://www.theguardian.com/politics/2004/aug/21/clothes.politics 58. PESTLE Analysis. (2018). CIPD. Factsheets. Retrieved from https://www.cipd.co.uk/knowledge/strategy/organisational-development/pestle-analysis-factsheet 59. Porter M. E. (1979). How Competitive Forces Shape Strategy. Harvard Business Review, 59 (2), 137-145. 60. Porter, M. E. (2008). The Five Competitive Forces That Shape Strategy. Retrieved from https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy 61. Schoemaker P., & Heijden C. (1992). Integrating Scenarios into Strategic Planning at Royal Dutch/Shell. Planning Review 20, 41–46. 62. Seo Y. & Oliver M. (2015). Luxury Branding: The Industry, Trends, and Future Conceptualisations. Asia Pacific Journal of Marketing and Logistics, 27(1), 82-98. 63. Shullman Research Center (2016). Affluent Millennials' Top 20 “Luxury” Brands in the World. Retrieved from http://www.shullman.net/insights/weekly-insights/affluent-millennials- top-20-luxury-brands-in-the-world. 64. Stein J. (2013). Millennials: The Me Me Me Generation. Time. Retrieved from http://time.com/247/millennials-the-me-me-me-generation/ 65. Zickuhr K. (2010). Generations 2010. The Pew Research Center. Retrieved from http://www.pewinternet.org/2010/12/16/generations-2010/ 66. The Pew Research Center (2014). Millennials in Adulthood. Retrieved from http://www.pewsocialtrends.org/2014/03/07/millennials-in-adulthood/ 67. Think with Google. (2014). Kisses and Smiles: How "Art, Copy & Code" Ad Campaigns Came to Life. Retrieved from https://www.thinkwithgoogle.com/marketing- resources/experience-design/kisses-and-smiles-burberry-and-volkswagen-ad-campaigns/

68. Tilford C. (2018). The millennial moment - in charts. Financial Times. Retrieved from https://www.ft.com/content/f81ac17a-68ae-11e8-b6eb-4acfcfb08c11 69. Vigneron F., & Johnson L. (2004). Measuring perceptions of brand luxury. Journal of Brand Management, 11(6), 484-506. 70. Wealth-x. (2018). Luxury Brand Pricing Strategy: Consistency is Key to Brand Success. Retrieved from https://www.wealthx.com/intelligence-centre/exclusive-content/wealth-x- institute/2018/luxury-brand-pricing-strategy-consistency-key-brand-success/ 71. Williams C. K., & Page A. R. (2011). Marketing to Generations. Journal of Behavioral Studies in Business, 5, 1-17.