Working Paper Marketing

KAMSU POKEM SANDRA

INSEEC BACHELOR – BBA 240 ECTS

PARIS

1st APRIL 2015

MARKETING WORKING PAPER

LUXURY KNOWS NO CRISIS

KAMSU POKEM SANDRA INSEEC BACHELOR – BBA 240 ECT


2

I hereby attest that; this work has been done solely by me, and all the related work has been

sited in the bibliography. I understand what plagiarism is, and I understand that if plagiarism

is found in my paper I will be penalised

KAMSU

Abstract

This paper tries to set up a structure for the study of luxury with the purpose of providing

ideas and instructions for more in-depth analysis focused on the consumption of luxury

products. It seeks to explore the effects of the crisis on luxury market. It first addresses some

of the key definitions of luxury, then points out some of the reasons why luxury is not so

much affected by the crisis, based on some theories. And behind this entire sector try to figure

out if the success of luxury is directly linked to it’s marketing since it is not severely touched

by the crisis. How beneficial marketing is to some companies, but equally the impact that this

marketing can have if not well exploited and equally the impact of this marketing during the

crisis. And finally show the characteristics of the luxury that does not need marketing. And

since luxury is consumed primarily for pleasure, and everyone can dream to own

excellence, as stated so well the brand slogan of the most glamorous cosmetics of the

moment "L’Oreal: Because I'm worth it." People will always go get it.



3

PLAN

INTRODUCTION

PART I: THE LUXURY INDUSTRY

A. Luxury in general

B. Sectors of luxury

C. Customers of luxury

PART II: CHARACTERISTIC OF THE LUXURY, WHICH DOES NOT NEED

MARKETING

A. Luxury marketing/Mass marketing

B. Luxury market expenses/Basic market expenses

PART III: LUXURY AND CRISIS

A. Luxury market during the past years

B. Subprime mortgage crisis/Recession/Lehman Brothers

C. Theories

PART IV: MARKETING

A. Benefits of marketing

B. Companies resisting thanks to marketing

CONCLUSION

BIBLIOGRAPHY



4

INTRODUCTION

This paper seeks to establish a framework for the study of luxury marketing. The idea that

luxury goods have a special nature, that sets them apart from other goods. With a market of

around 20000 companies, customers hungry for perfection, pushing them to target a certain

group of people. Setting a high price on this goods and services usually are a consequence of

the excellent quality of product or service.

Knowing that it can be assured that it is a sector that keeps growing, according to Bain & Co,

in 2025, the luxury market will be five times larger than it was in 1995.

This paper will equally bring out the benefits of luxury be it in the mass market or the luxury

market.

The differences between mass marketing and luxury marketing y studying the financial status

of some of this companies and approximately how much they spend on their marketing

campaign. Hence showing that luxury needs less marketing than mass does for a particular

reason that is luxury product speak by their selves so no need to do that much.

Keeping in mind the question is luxury success directly linked to its marketing since it is not

so affected by the crisis. Our analysis will focus on the subprime crisis and the recession



5

PART 1: THE LUXURY MARKET

A – LUXURY IN GENERAL

Luxury is derived from the Latin word “Luxus” which means excess, comfort and beauties

of life beyond what is really necessary. These goods are pleasant but not necessary.

Danielle Alaress an author defines luxury as being the perfect product that is done with the

use of most precious materials, search of most harmonious colours, the selection of the

most innovative ideas and the most perfect realisation and control.

There are many definitions for luxury, but they all bring us to the same conclusion;

exclusivity, privacy, creation, sense for detail and so on.

The luxury market has considerably changed over the last years, it used to be accessible only

to the Elites, and day after day these goods and services became accessible to a wider range of

people. The luxury brand must grow old and give the feeling that the “maison” and “products

or services” are inaccessible; in this way the customer will give more value to the product or

service. But it should be kept in mind that some goods are considered as luxury in a society

and not in another one.

For examples sanitary pads “Always” used to be luxury goods but today these same sanitary

pads are considered basic goods. This is usually believed because the massive production of

several identical goods tends to reduce them to basic standard goods and industrial production

guarantees similarity, and no scarcity, the permanence of the goods, which looses the purpose

of luxury, which is exclusivity.

Since luxury goods have a special nature, which set them apart from other goods, they are

considered special because the society recognises them as such. Luxury means difference,

distinction. And if the society acknowledges it as such, it is such.

As it used to be said and is still said, luxury stays and has always been for a particular class of

people “the elites”.



6

As read in the essays of MONTAIGNE Michel Eyquem, in France luxury exists since the

18th century and the story of consumption show the importance of distinction and wealth

If even the beginning of consumption recognised distinction and wealth then it is necessarily

for the good functioning of the market.

Another famous proverb says that “we must let time penetrate what the present cannot”, it

is then believed that luxury incorporates time, that this time is an essential source of its value.

It should equally be remembered that there in no luxury without a brand.

Characteristics of luxury goods and services; finishes, quality of service, elevation, “Maison”,

detail makes difference, service personalisation

Market for Luxury

The luxury market has around 20,000 companies around the world, and employs more than

125,000 people. This market is characterized by; high quality products, a very specific market

and a limited distribution of its products.

But the low distribution of its products is compensated by the high price. The luxury market

has experienced strong growth from 1996 to 2000. It has entered a new growth cycle that

continues gaining force as evidenced by the excellent performance of the big luxury groups.

Products

The are various luxury items on the market; they are “Haute Couture” (sewing, leather goods,

jewellery), perfumes, cosmetics, automobiles, wine and spirits, hospitality and catering.

These products have different attributes that characterize them as luxury goods:

The quality of the product that can be supported by its particularity, like white gold,

tanzanite and the preciseness of the making-of.

The high price, the price can be considered as a consequence of the excellent quality

of a product or service.



7

The scarcity, not only in the demand but equally in the supply. A luxury good and

service cannot be sold in a mass market, or own by several people. It has to be

exclusive and doesn’t answer to massive demand

Appealing, making use of the luxury good or service must be pleasing to the customer.

The product must tell a story, carry a baggage.

B-SECTORS OF LUXURY

As seen in the above graphic took on Internet, luxury can be classified in 4 sectors, which are

personal, transportation, technological and experiential;

The personal type will be considered to be jewellery, fashion and accessories`

The transportation will be automotive.

LUXURY

AutomotiveFashion,

leather goods & accesories

Jewellery

Beauty

Wealth management

Property & real estate

Wine and spirits

Home and interior

Travel & experience

Electronic devices



8

The experiential will be beauty, wealth management, property and real estate, wine

and spirits, home and interiors, travel and experience.

The technological sector carries only electronic devices

The NC state university states that these sectors carry around $1600 billion, $700 Billion

for experiential luxury, $300 Billion for personal luxury, $400 Billion for experiential

luxury, and we then assume $200 Billion for Electronic devices

C-CUSTOMERS OF LUXURY

It is important to have a target, to know on whom you are focusing to sell your product. Since

for the luxury goods are related to pleasure rather than necessity. Their products cannot be

addressed to every one because they do not all have the required characteristics attributed to

these products.

Luxury does not aim to sell, but to share experience, to share a know-how known only by

them. The client adds value to the brand; the creator is a griffe “Phillip Mihailovic”

For example Armani has a brand with various targets, he does in mass marketing and luxury

marketing. What makes his success is that he keeps his customers away from each other, has

different brands, one goes to the customer and one lets the customer come to him privately.

The luxury consumers of the past were the ultra-rich. And while the extremely wealthy still

represent an important segment of luxury consumers, they are no longer the only audience in

this market

Luxury used to be dominated by relatively older consumers, they still hold an import position

in the picture, but nowadays, younger consumers, are making up an increasingly large portion

of the luxury market.

The luxury consumer of yesterday was more likely to be female since it was considered they

created consumption, but now, rapid global growth in male apparel and other categories is

helping to balance the market, and soon men will consume as much as women.



9

In the past, luxury shoppers were mostly concentrated in the US and Western Europe. Now,

the luxury market is really global, with some of the biggest shoppers creating this growth

coming from emerging markets especially Asia.

Consumers today are hungry for fashion discovery, and the shivering they show with the idea

of finding the next ‘it’ brand is incredible.

There are a segment of consumers (mostly in emerging markets) that prefer flash and

fashionable glitz to classic professional work.

So luxury is now in a conflict traditional vs. trend, however both survive on tradition and live

on both.

It is said in the luxury market that a consumer from a middle class will be attracted by the

quality-price and will have the feeling of owning a part of the dream represented by a Brand

lets say Dior, the purchase of a luxury brand is considered as a proof of social success (these

are more a classification of the new riches), the regular customers know the product and

appreciate the quality, the occasional buyers love luxury, buy to impress during special events

like weddings, birthdays and so on.



10

PART II: LUXURY BEHAVIOUR DURING THE CRISIS

A-WHY LUXURY KNOWS NO CRISIS

The business dictionary tells us a crisis is a critical event or point of decision which, if not

handled in an appropriate and timely manner (or if not handled at all), may turn into a

disaster or catastrophe.

Regardless of the kind of business you are running, there are many types of crisis that can

affect your business. However, this crisis is not always a negative thing, because it can create

opportunities for learning and improvement

In comparism to other economic activities, it has been noticed that the luxury sector is less

affected by the crisis, when the normal market regresses; luxury market remains constant or

grows.

Although the presence of the crisis, some brands are able to strengthen their current position

and at the same time exercise profit.

"The impact of the financial crisis will bring some sectors into a recession," said Claudia

D'Arpizio, a Bain partner based in Milan and lead author of the study in economic times

In 2008, after a growth of more than 10% in the 4 precedent years, a slight decrease was

noticed in the sales of the year 2009 “seen in the financial times J.P Morgan’.

The growth for example of LVMH reduced in the end of year of 2008 (but it was a just a slow

down in the growth).

Channel for example who has a turnover of almost a billion € was slightly touched by the

crisis, sales declined by the end of 2008 and beginning 2009, the growth rate at this period

was close to zero. The emerging countries recovered luxury in 2009. Bain & Co stated “after

a short decrease in 2008, the luxury picked up by 3% in Europe and recovered by 15% in

china”

http://www.businessdictionary.com/definition/event.html

http://www.businessdictionary.com/definition/decision.html

http://www.businessdictionary.com/definition/disaster.html

http://www.businessdictionary.com/definition/catastrophe.html



11

The luxury world stays spared but not completely by the crisis affecting the markets, after a

growth of 10% in 2012, the global luxury market remained untouched by the other crisis with

an expected increase of 4 to 5% turnover in 2013, based on a study conducted by Bain &

Company.

"The world market outlook is positive despite the weakness of many economies in the world

and a slight slowdown in the pace in the first quarter 2013," Altagamma announced in a

press release about a market that has earned 213 billion of euros in 2013.

The President of the Foundation, Andrea Illy, announced that the weight of luxury on the

Italian economy was: "12% of the industry, 24% of exports, 2% of GDP after a rise of 8%

in 8 years and a turnover doubling every ten years." The luxury sector continues to grow

because customers of these luxury products are seeking product of excellence”

According to Bain, in 2025, the luxury market will be five times larger than it was in 1995.

In 2014, the sales in Europe’s’ sector were expected to increase by 4 to 5%, Similar level of

growth is expected for 2015.

Bain predicted total revenue from the personal luxury goods industry - which includes

watches, jewellery, clothes, shoes and leather goods - to reach 223 billion euros ($282.70

billion) in 2014 against 218 billion in 2013, when sales rose 7% at constant exchange rates.

Supported by a saying of Claudio d’Arpizo where he says in is book "The luxury goods

market has entered a weaker growth cycle but it is more sustainable on the long term."

It has been noticed that European brands contribute to around 70% of the global luxury goods

market.

For example Louis Vuitton Moet Hennessey, which is the world-leading group for luxury,

recorded in 2013 an increase of 4% revenue that is around 29.1 billion alone.

As mentioned above there is a slow down in tourist traffic, especially in japan.



12

In Japan, domestic consumption is expected to benefit the luxury sector but "brands have had

trouble keeping up with the behaviours and preferences of youth that are constantly

changing," according to Altagamma.

In the United States "where high buyer confidence supports domestic consumption,"

Altagamma predicts a growth of 7% in this sector. Equally predicts a rise of 12% in South

America, despite the import taxes that slowdown business.

In China, the anti-corruption campaign brings some concern to large luxury actors but they

however expect an increase of 7% of its turnover in this market. Since china is renowned for

their love for counterfeit.

Asia Pacific is expected to compensate with an expected 20% increase in turn over, in

particular with a boom in tourism in Australia thanks to an arrival of these Chinese tourists.

Singapore has established itself as a regional hub of luxury with a turnover of 2.5 billion

euros in 2012.

In the Middle East, the market was $ 6.3 billion in 2012 with a predicted increase of 5% in

2013. Dubai represents 30% of sales in the region through its ability to attract domestic

consumers but also Russians, Indians, Africans and even some Europeans; this may be due to

the tax-free status of these luxury goods in the area, and les unconstrained found in present in

the area.

On the most mature markets, luxury brands have high expectations of consumers who are

considered by the society as high earners, not rich yet, but having a big income, which in

these areas are far more numerous than the ultra-rich.

We can equally notice the gap between rich and poor continues to increase, so it helps

somehow luxury not to die.

An example is if I buy an expensive car, lets say a Sports vehicle (a Maserati or a Bentley); I

increase the probability the other drivers die in traffic accidents and in process because they



13

are watching my car. I create envy, I incite them to buy as Sport vehicle and replace what

they actually want or have which may be more useful. Thus he spent more and now finds his

self-having less, but the rich that spent more still has enough.

Another example is if I buy a bag from the new Hermes collection lets say a Birkine which

cost around 30,000€ and use it as a school bag I incite students to have the bag and spend

more than they planned. Since I’m looking for exclusively I’m going to buy a more expensive

Bag equally spending more than I planed, because as said above luxury is exclusivity.

So we can see people are always pushed to spend more because companies produce more, not

necessarily better but more.

During the European crisis many because of taxes many companies found their selves forced

to eave the place because of heavy taxes but these luxury retailers stayed and continued

succeeding in their business

Although the crisis I believe people to escape from problems want to go to a place where they

are treated as queens and kings. Where the clientele is really intimate with the person in

charge of the store, where they are invited in a “maison” and taken care of. A culture is

shared; a relation is constructed. The customer is in a magical world. The consumer is in a

place where his psychology is understood, which is the key to this luxury brand

In Paris in the 2000’s the imposable taxes on retailers increased and it was not more

affordable for retailers to have their shops in Paris - France so they moved to either other

countries or cities, and example are those Haute Couture boutiques who although the crisis

stayed.

An example of artist is BO2BA who because of high taxes went to live in United States, and

Jennifer who is a far more known artist stayed in France and continued paying taxes



14

B-SUBPRIME CRISIS / RECESSION

The subprime crisis took place from 2007 to 2009. It was the beginning of the financial crisis.

And this period, Banks used to give out easy Credit. Anyone could lend money, the bank

interest rates were changing; the rate where exotic that is, the rate could only go up, so the

rates which you were meant to pay at the beginning could double even triple. The People

getting the loans usually gave their house as a guarantee. This is what convinced the bank to

give out money, because they knew that if the people couldn’t refund the money the house

would be theirs. The interest rates had grown so high that the people couldn't refund on time

so the bank owned the house. But this phenomenon happened more and more and they had

too much houses. Since a lot of houses were available on the market, they had to reduce

prices. The bank put money in the stock market, since there was a greater interest you gained

than in the bank. The stock market fell, so banks lost money. The People then rushed to the

bank to remove their money, so not every body could get back their money because there was

not enough liquidity.

Companies that had put money in the stock as the bank had lost all their money, thus pushing

the companies to close their doors. Industries closed, leading to unemployment, people did

not consume because there was no money.

Below will be an example of the crisis on the Spanish market.

The crisis did not directly reach Spain because of its good banking system, but they suffered a

little because of lack of liquidity, the decline of the housing market.

In Spain, the housing industry contributed to about 12% of the gross national product in

2007 and 2008 and fell to 10% in 2010.

The increase in unemployment aggravated the situation of the Spanish economy. Tourism was

affected since unemployment reduced their spending’s.



15

Since Spanish hostelry business and leisure relied heavily on domestic tourism. 58% of hotel

overnight stays where Spanish residents. This International and domestic tourism contributes

highly to the national income.

Due to this crisis, international tourism in Spain decreased.

The problem arises when they realised that hotels could change its location to go and enjoy or

benefit from better economic conditions. And equally found out it was difficult to adjust to

changing environment, so this mass market hotels decides to do discounts on their prices,

qualities and further more.

Where as luxury hotels are not that affected by the crisis because they offer a superior service

and at a higher price and changing their prices can negatively affect their image. “They should

not talk the talk of luxury and walk the walk of mass”.

For the customers price represents quality; the price is high for the complexity of the

product, thus reflecting a higher quality in the eye of the customer.

The price sensitivity of demand equally tells that the more exclusive the product is, the

more the product service offered is good

Customers will be willing and able to pay more for services if they know that the hotel

has already adapted to their needs that is service personalisation.

Barsky and Nash stated that around the world during the 2008 recession, following the

financial crisis, branded luxury hotels were more able to maintain their prices than other

hotels.

C-THEORIES SUPPOTING THE FACT THAT LUXURY KNOWS NO CRISIS

1. Theory of Thorsten Veblen:

Thorsten Veblen with his theory “The Theory of the Leisure Class proposes that

economic life is driven by the vestiges of the social stratification of tribal society, rather

than by social and economic utility.” Book.



16

"In order to gain and to hold the esteem of men it is not sufficient merely to possess

wealth or power. The wealth or power must be put in evidence, for esteem is awarded

only on evidence." Book

From this quote, we can observe that, men nowadays should show off the good and

services they purchase, it is a proof of social success and recognition

“The emergence of a leisure class coincides with the beginning of ownership.” The

Book of Veblen also explained how the consumption of the leisure class « has very little

to do with comfort or subsistence, but with esteem and, through the latter, self-respect. »

The interpretation through bourgeoisie and old aristocracy leads to the constitution of

a social elite separated from vulgar people by this wealth, power and education. The

high bourgeoisie participates to the new places of ostentatious leisure (Thorsten Veblen

1899)

2. Theory of Adam Smith

Adam Smith claims that society as a whole does so well when individuals pursue their

own interests in the marketplace. The possession of wealth confers honour; it provides

some distinction. People don’t care if the money is well spent or not.

Crazy money: the return. It was thought that the crisis had put the counters and

bridled delusions of luxury. But after eighteen months of decline, the market is racing

again. Thus, the industry invested $ 1.4 billion purchase of spaces in the first half of

2010 in the world, according to Zenith Optimedia.



17

PART III: MARKETING

A-COMPAGNIES MARKETING HELPES TO REVIVRE

Some sectors escaped from bankruptcy thanks to their marketing that was present to bring

them up.

An example is Mauboussin who was a Luxury jewellery brand created in 1827, Mauboussin

is an old house that has the distinction of having been focused on creating. For a long time,

Mauboussin used to target only the happy few, the elites. In this, the house perfectly met the

current laws of marketing in the luxury sector.

But in 1998, they lost their main customer, the Sultan of Brunei, who alone represented 80%

of their sales, pushing them to bankruptcy.

An interview of the marketing director of Mauboussin says that; they then decided to change

their strategy, creation remained in the service of emotion, but the House had to get a new

target, which was the modern woman. That woman of time; the one who gained her freedom

during the second half of the twentieth century and now accepts her social position.

He says Before the 60’s, women were not allowed to have check books and before 1966 they

could not manage their property alone or even choose a profession without the permission of

their husbands. It was only in 70’s that the great schools for girls opened; till then, the boys

had intended for management and girls to be their executive secretary. At that time, men

mainly bought the jewellery to their wives or girlfriends. This purchase could be considered

as his social status and power. Buying a jewel was extremely involved to humans.

Mauboussin now displays the price of some of their products in the mainstream media - on

TF1, in the subway or in magazines - and the press called "code breaker" luxury.

They had to change their marketing campaign and adapt not because they wanted to break the

codes, just because they spoke to a different woman. They equally used the basic marketing

action "make known, loved, bought"



18

They make their brand known by trying to touch this modern woman during their leisure time

when she flips fashion magazines, especially during her movements, which display in the

subway, advertising in newspapers and also in free newspapers.

They communicate more than their competitors this may be because they renew their

collections more than their competitors.

They make their brand loved by flattering they make believe to the client that it is the person

who will sublimate the article and not the contrary as usually said.

The display of prices makes it obviously to buy. They believe the woman ought to know the

price without having to go to them. In this way she can be prepared. Displaying prices equally

reduces the fear to come and this to the modern woman the opportunity to come and try and

taste and artistic creation. A jewel is, worth much more than its price, it's worth the power of

emotion that justified the purchase.

Mauboussin had commercial communication completely centred on product for the

"endearing" and in parallel, it had a social communication which impacted. With the

campaigns "Yes we can! "Or" liberty, equality, brotherhood and love then? ", The

Mauboussin brand goes against the crisis and seeks to share, with some derision, another

vision of society, more optimistic and more fraternal. In these messages, which are always

accompanied by a gift, a discount, an invitation to share a moment or gluttony, brand

communicates differently because she wants to be a social agent of hope.

As for their communication, the diamond sales are related to advertising they do on

television, but beyond that they have hunches. They measure customer relationship that is

their strategy that has helped develop loyalty: it now reached an average of two purchase

visits Per year.

They create jewellery that is the taste of women.



19

So thank to their communication these women know Mauboussin. But by doing this

communication, Maubousin gets known but places itself as low cost. Their theory was to

place their self on a non-occupied segment. The communication looks cheap and accessible

but maybe is the result expected because in 2012 was noticed a 65% growth compared to the

preceding year. The strategy enabled them to attract new customers. When they started

effective marketing, they had 3,000 clients’ files; today they have just over 100,000.

B-BENEFITS OF MARKETING

Before entering the benefits marketing we need to know what marketing is.

Marketing is transferring goods and services from a producer to a consumer using the 4ps of

marketing (product, place, promotion, price)

To identify, select and develop the product for a selected target group. A market

research is made to determine how well the product meets wants and needs of the

target group.

Select the distribution method to reach a place where the target group can get the good

or service. A market research is made to determine how well the product meets the

wants and need of the targeted group

Developing a strategy to promote the good or service, they intend to influence the

consumer’s behaviour but equally the retailers and others who resell or distribute the

good or service.

Fixing a price considering competition, demographic conditions and geographical

influences. Keeping in mind that pricing is an implicit negotiation between supplier

and customer. Firms trying to maximise profit, some set a low price to sell more I

consider these ad mass marketers and others price high to sell fewer units I call these

luxury marketing managers.



20

Marketing is all about thinking about consumer’s needs and satisfaction. Marketing is not

selling. In conclusion the role of marketing is the, awareness of a product that is to make

know to a larger number of people a good, service, or message so as to incite them to

purchase.

Marketing is beneficial in several ways;

Marketing helps establish recognition for the brand; this is the most important benefit

of marketing. Marketing strategies help to mark a brand in the minds of potential

customers and associate the brand with a correct product. This ensures that customers

seek a particular brand of a product, rather than the brand seeking out its customers.

Marketing helps earn and keep customers: Once a brand has earned its site and defined

its customers, marketing enables this brand to keep its customers. This is necessary so

that the brand keep ground and not loose it to products that newly come into the

market.

Marketing helps identify the real customers, to identify potential and actual customers.

Instead of trying to force a product or service to unwilling customers and is not the

purpose of marketing, marketing is not selling, marketing helps to target customers

who really need the product.

Marketing helps inform customers and even producers: Marketing a product is the

best way to provide information about it. The features of a product or service are what

are used to market the product. It is that same information that will attract customers

towards the product because nowadays people want to know what they purchase, how

it was made and for what purpose. Therefore knowing the brand better ensures that

customers will come to trust it better.

Marketing helps to save time: effective marketing will help reduce the break-even

period of a business. By promoting a product or service through effective marketing, a



21

business can promote its sales and reach its objective faster let it be sales or clientele.

Marketing helps establish trust: Repeated and effective marketing makes sure that a

product remains in the minds of its target group. This in the long run will help create

brand loyalty, which would make customers choose the product even though there is

competition. Trust is created over a long period of time and marketing is an effective

way in establishing it.

Marketing encourages new customers to seek information about the brand. By making

a product seen and heard frequently, a business also increases the chances of mouth to

mouth. For example the marketing of Tobacco in the early 1870’s where a young boy

just repeated the name again and again in the streets saying he had a mail for that

name by this way the name tobacco was impregnated in their minds, so at the official

outing of Tobacco it was already known. The chances of suggesting an often-seen

product is higher when compared to something that you do not see frequently or are

unaware of.

Marketing a product can also act as a means of clearing inhibitions or

misapprehensions about the quality or nature of a product or service like what

happened with Dasani of Coca Cola when they compared Dasani pure water to not

pure water and that they did not get it where they said to get it. Thanks to their

marketing manager he quickly solved the problem before it got to far. Often,

marketing can become an effective tool in clarifying misunderstandings relating to a

brand.

C-DANGERS OF MARKETING

Interpreting data correctly is vital. If you do not interpret correctly facts and make

decisions based on that misinterpretation. The marketing campaign will be completely

ruined. Always make sure your analysis is not wishful thinking.



22

The longer are the sales promotion; the perceived value of your product or service will

reduce. For example, if a Monoprix store does a promotion on Soap and the customers

get used to it, they will reuse to pay more. So it is better to keep promotions short to

prevent long-term damage to your overall pricing strategy.

Marketing that relies on advertising run the risk of oversaturating the targeted market.

It can either be in markets with lots of competition, advertising too much from one

business tends to be ignored, same for all advertisements from that industry and in the

other case business or product receives so much advertising and promotion that the

targeted consumers get turned down by the only mention of the business or product.

Cost represents the biggest disadvantage for most marketing efforts. Television spots,

particularly during high viewership hours, can cost more than the entire marketing

budgets of some businesses, which incurs time costs, as well as financial costs.

Constant change in the market makes assumptions difficult, since marketing is made

of a lot of assumptions it tend to be a little difficult since there are constant changes.

If you are too simple or even too complicated, the customer may get lost because he

doesn’t know where to situate your brand.

D--BENEFITS OF LUXURY MARKETING

In luxury marketing there is no real competitor, because they market their savoir-faire

rather than their product. Their product pictures their savoir-faire.

The brand must be relevant to the consumers’ needs. Depending on the mindset of the

luxury sector, it is a must for a brand to satisfy those luxury customers’ needs, whether

they are for recognition or functional use.

The brand must line up with consumers’ value; a brand that does not act this way (get

together with the basic values of a consumer’s society) has a small chance of

succeeding because luxury customers kind of identify their selves in the products or



23

service they purchase. If the brand doesn’t align to the customer’s values it is difficult

for the customers to purchase their products or service.

E-DANGERS OF LUXURY MARKETING

The problem with luxury is that they sell many different products to different people.

There may be too much personalisation, because each and every customer must be

treated with a high-level of attention and if this is not made, they may loose their

customers.

In luxury marketing you communicate you don't advertise, because luxury gods and

services are not made to be accessible by every one. I bring back the point of

exclusivity.

Luxury marketers are not just competing in their categories like for example hand bag

manufacturers compete amongst themselves but for the portfolio share of luxury

goods in total.



24

PART IV: CHARACTERISTIC OF THE LUXURY, WHICH DOES NOT NEED

MARKETING

A-LUXURY MARKETING/MASS MARKEETING

Marketing for a luxury is different from simple marketing. All the theories applicable in

marketing does not always work in the luxury markets

Luxury marketing communicates legends to create a myth for example Fragonard has a

MAISON at Grasse, which is visited to see the manufacturing of their perfume

In basic communication, particularly the advertising side, we await an exhibition and a

highlight of the product. In luxury communication, it is quite different. The products

themselves already speak by their own, are symbolic and meaningful.

The success of basic marketing relies on controlled management. This is the reason why

nowadays most companies give much importance to customer loyalty.

An example is YVES ROCHER; who always gives thanks to customers by sending gifts etc.

creating a willingness in the customer’s hearts to stay, they buy their loyalty.

However, becoming more and more accessible, luxury is dependent on specific situations of

purchase and consumption. Once powered by the ordinary consumer exceptional people,

luxury thrives today the exceptional use of ordinary people. Many people have probably

dreamed of spending a night in the presidential suite of a palace or visit the paradise islands of

the Pacific or even go to Copa for a round trip. Great

But it is not because they realize their dream one day that; they will be very satisfied, and

will hardly want to repeat. By becoming a reality, the dream destroys itself; it is no longer a

dream but was. Therefore, in the field of luxury, satisfaction does not automatically lead to

fidelity or loyalty

The increase in demand is more related to the favourable mouth-to-mouth rather than a

continuous flow of renovation.



25

For basic products, cost structure and competitive positioning are the two bases of pricing.

In the luxury sector, costs remains important, but at the same time, the "imaginary value"

attached to the product and the brand, puts a distance in the relationship between the final

selling price and the cost of raw materials.

By buying a luxury product, the consumer consumes a dream.

But what is the price of a dream? For how much can a dream be valued?

As for the competition, in the world of basic marketing, managers are obsessed with finding a

"competitive advantage." To succeed, a new product should definitely provide a "plus", bring

something new, original: to be more efficient, more convenient to use, last longer, be cheaper,

expose value rapidly.

A customer does not buy Guilty of Gucci by comparing to all other flavours available. She

simply decides, because it pleased her to take that perfume.

Furthermore, a designer let’s say Emilio Pucci does not look out in its collections, to be better

than Karl Lagerfeld or Steve Maden, or even different.

He first seeks to provide a universe that reflects his singular choices and personality.

Ultimately, a luxury product has no real competitor.

In Basic marketing, the strength of a distribution is evaluated through the number and weight

of its several outlets. The success of a new product often depends on the number of stores that

have agreed to reference it.

In the luxury sector, it is quite different: too much distribution affects the image of the

product or service, by depriving it of an essential element of its value; it’s rarity, its

exclusivity, innovation.

Also, most luxury “Maison” chooses to implement a selective distribution in as long as

possible to the retail pressure resistant. Just as Christian Louboutin who made a model of shoe



26

with only 30 pairs. If these brands make their selves accessible and visible by every one, they

make their selves common, they loose their aura

If every body can have access to the same goods and services; what about the exclusivity of

the customers of luxury goods and services?

In the luxury sector, location and atmosphere of a store are more important than its surface.

The customer expectations are such that, they usually require the assistance of an affable sales

staff and competence, so this staff must be at the customer’s image, which is why the luxury

sector must understand the customer’s psychology.

In classical marketing, it is the customer needs and the product development is studied.

Given the weight of creation, the item response has no place in the world of luxury. By

buying a bag from Coco Channel, the client does not want Coco Channel to ask how he

would have the bag done. She buys the contrary, the “savoir-faire” of the designer and is just

waiting to be seduced and dazzled.

Luxury marketing is a marketing proposal, where the initiative is still in the creator of the

camp. This does not mean, of course, that market studies are unnecessary. They are simply

more confirmatory.

Finally, the luxury marketing appears full of contradictions. Must be created in the hope

market acceptance, without tarnishing disseminate and promote without compromising

himself. Where personality construct the relation

The most successful companies have realized it was a job where the artist and the manager

had to live together in enriching themselves at each other from a mutual respect and

recognition of their respective roles.

So it is normal that luxury marketing progress, but the difference and originality of luxury

marketing calls into question some concepts of basic marketing



27

Marketing luxury does respond to riding demand, where as mass market does. The luxury

market protects clients from non-clients, big from the small.

The table below illustrates the differences between Luxury marketing and mass marketing

from the book applied economics for advanced level

LUXURY MARKETING MASS MARKETING

Needs in the Maslow

pyramid

Membership

Accomplishment

Consideration

Security

Psychological

Products Subject

Professionalism

Utility

Packaging

Price High Cheaper to increase

consumption

Distribution Selective

Expo

Duty free

Nearby ships

Department stores

Supermarkets and

hypermarkets

Communication Selective and

targeted

Sometimes television

Sponsorship

Editorials

General public

Television

Advertising

Strategy Elimination of

competitors by

difference

Elimination of

concurrence by cost

and advertising



28

Result Maximum margin Maximum volume

As mentioned in the table above the Maslow pyramid is a pyramid illustrating the human

motivation, why people aim to meet basic needs.

The first 4 levels are kind of wants, needs that when a lack of satisfaction is present, cause a

deprivation that motivates people to get things done.

The Last level that is physiological are the basic necessities those with which it is hard to live

like food, water, air, shelter and so on. These need find their self, predominant when unmet.

Below is an illustration of the Maslow Pyramid found on Internet;

Self-actualisation further be breakdown to; morality, creativity, spontaneity, problem

solving, lack of prejudice, acceptance of facts.

Esteem can further be breakdown into; confidence, self-esteem, achievements, respect

of others, respect by others.

Love/ belonging can further be breakdown to; friendship, Family, sexual intimacy.

Self Actualisation

Esteem

Love/Belonging

Safety

Pysiological



29

Safety can further be breakdown to; security of body, security of employment,

security of resources, security of morality, security of the family, security of health,

security of property.

Finally Physiological can be break to; breathing, food, water, sex, sleep, homoeostasis

(internal stability), excretion.

So according to this pyramid luxury goods are more localised in the two first levels of the

pyramid.

Using the Harvard Business School professor Michael Porter model for industry analysis,

there are five problems in this industry

Industry Competitors ==> Rivalry

amongst existing firms

Potential entrants

Buyers

Substutites

Suppliers



30

Threat of new entrants here are the barriers to enter the market, they may be technological,

the know-how difficult to master, the actual players benefit of a patent), the cost of building

the brand is equally very high.

Bargaining power of buyer this power may be high if the customers decide to work

together.

Bargaining power of suppliers This can cause an increase in sellers price, power is high

where there are a lot of buyers but few sellers, the product here is exclusive for example

edible gold. In Dubai an ice cream made of edible gold and truffles is sold at 730€.

Threats of substitute there are high switching costs; customers are not likely to find a

substitute.

Rivalry amongst existing firms Competition is intense if the barriers to exit the industry

are high, which is totally the case in the luxury market

B-LUXURY MARKET/MASS MARKET EXPENSES

Luxury markets does not spends as much on there marketing as Mass markets.

For example: H&M spends 3 to 4% of sales on advertisement, while Zara spends 0.3% on

advertisement. Zara being a more renowned and recognised than H&M so it is considered

luxury speaks more by his self than mass market. They need to be seen in order to be known

while luxury market already has a little advance. That is the same with cars that are basic and

cars that are considered as luxury; as found on Illiti, we can use the comparism of the luxury

car Lexus – The Mitsubishi Diamante car (from the Toyota brand) which spends around €60

million on Marketing in 2013, and Renault that has the top budget on communication in

France in 2013, where they invested around €412,1 Million in the marketing, that is around

29.5% of their sales, another example is Peugeot with €343 Million on marketing, where

42.4% goes on television and this ads can heavily be noticed on TV, lets take the example of

TF1 which shows an Ad of this car around 13 times a day.



31

In luxury market, for the communication strategy, the brand can sponsor a person, an event or

a team. Usually, brands use celebrities, dead or alive this strategy is used the most. The

product is the star and nothing else is shown on the advertisement beside the product. The

background is usually very simple but it can also be a lot more sophisticated.

Examples below are of Dior Ads one more sophisticated than the other

And here is an example for a Basic watch from the mass market



32

The table below took on Internet (in the article by Lexis Nexis, cosmetic Magazine) shows

approximately how much a luxury brand can spend using these celebrities.

M represents millions and in Euros

NAME MAIN

ADVERTISING

CONTRACT

ANNUAL

RATE OF THE

CELEBRITY

PUBLICATIONS

IN THE PRESS

COST PER

ARTICLE

Beyoncé ARMANI 4 M 7274 Articles 550€

Kate Winslet LANCOME 4 5 M 4799 Articles 938€

Penélope Cruz L’OREAL 3 4 M 3521 Articles 994€

Kate Moss YSL 0.8 1M 3467 Articles 260€

Scarlett

Johansson

DOLCE &

GABBANNA

3 4M 2201 Articles 1590€

Charlize Theron DIOR 2 3M 1456 Articles 1717€

Sharon Stone DIOR 2 3M 983 Articles 2543€

Audrey Tatou CHANNEL 2 3M 698 Articles 3581€

Vannessa

Paradis

CHANNEL 1M 203 Articles 4926€

Luxury markets does not want to stifle the market, he will just use the image of these muses,

the mass market will be seen every where for example L’Oreal that will spend 177 Million €

and will be seen at all cross roads and Dior only 86 Million € but will be seen in editorials and

reserved areas (according to the top communication budgets in 2013 in France)

In 2012, Samsung Electronics dedicated a high budget to marketing. The company, which

gets about half of its revenue (around 140 Billion €) on the mobile sector, spent 9 billion € for



33

its promotion, 38% more than the preceding year, while Microsoft spent around 1.2 billion €

in advertising and Apple only 700 million. Samsung advertises so much that it even exceed

Coca Cola, but on the other hand Samsung has far much articles than all these electronic

devices brands

Over the past year, Samsung has been focusing mainly on the United States, where Apple

ranks first in smartphone sector. It has fivefold its spending in telecoms from 78 to $ 401

million (according to Kantar Media figures reported by the Wall Street Journal), $ 333 million

more than Apple in his own home country. These investments are not slowing down:

Samsung recently paid $ 15 million for a two-minute spot broadcast during the Super Bowl in

early February. Samsung has already conquered the European market. He was already the

first amongst smartphone manufactures in France that decided to advertise and yet, he still

invested 95 million € on publicity for its mobile in 2012, where as apple spent 54 million €

From these two electronic device brands it can still be noticed that Luxury products spend less

on advertisement than other products.



34

CONCLUSION

The luxury sector is a growing market where stakeholders seek to increase or at least

maintain their market share.

Luxury marketing is a marketing proposal, where the initiative is still in the creator of the

camp. This does not mean, of course, that market studies are unnecessary. They are simply

more confirmatory and exploratory focus not on current expectations, but the reactions and

market preferences. “Luxury is actually at a stage of maturity, so it is in a constant move so it

is normal that luxury marketing progress, but the difference and originality of luxury

marketing calls into question some concepts of basic marketing

Finally, the luxury marketing appears full of contradictions. Must be created in the hope

market acceptance, without tarnishing disseminate and promote without compromising

himself. Where personality construct the relation

Luxury is not really touched by the crisis because it is saved by the emerging countries, this is

the only driving force when else where the decrease is substantial. Luxury is not immune yet

it has strong recovery capacities.

It is profitable to own stores in emerging countries, but since only big luxury group’s can

enter these markets. They are the only ones really surviving during these crises.

The turn over of these companies comes from emerging countries, which contributes to about

30%. IPSOS said there was no break in luxury good consumption, due to the crisis the

desires to buy luxury products was still present. Some 6000 people still express the interest

in buying Ferraris new California which cost around 175000 € in Europe.

As said above by buying a luxury product, the consumer consumes part of a dream. Luxury is

never more necessary as in tough period because the customer needs to escape from his

problems and joining such a world will give them the impression to posses a part of this

dream.



35

SOURCES

Internet

1. http://en.wikipedia.org/wiki/The_Theory_of_the_Leisure_Class#Thesis

2. http://www.llllitl.fr/2014/03/investissements-publicitaires-marques-

annnonceurs-france-2013/ 3. http://www.nytimes.com/1991/05/09/business/the-media-business-

advertising-campaign-for-luxury-car-polishes-up-diamond-image.html 4. http://www.sciencedirect.com/science/article/pii/S002243591100073X 5. http://fr.slideshare.net/celtine/prsentation-marketing-du-luxe-

presentation?qid=05a9013b-a8f2-4a4d-a197-62721b358dcd&v=default&b=&from_search=1

6. https://books.google.fr/books?id=kYhtAQAAQBAJ&pg=PA5&lpg=PA5&dq=subprime+crisis+luxury&source=bl&ots=q5l4Fuc20k&sig=7MxSVpRnUKbH4aqUMSboRXQCjwA&hl=en&sa=X&ei=6NEKVejHL4XsaJbbgcAE&ved=0CEYQ6AEwBg#v=onepage&q=subprime%20crisis%20luxury&f=false

7. http://articles.economictimes.indiatimes.com/2008-10-29/news/28663523_1_luxury-sales-claudia-d-arpizio-luxury-market

8. http://therobinreport.com/the-new-luxury-consumer-think-multiple-consumers/

9. http://luxurysociety.com/articles/2014/02/inside-frances-168-billion-luxury-goods-market

10. http://www.reuters.com/article/2014/10/14/luxury-report-idUSL6N0S93YG20141014

11. http://www.reuters.com/article/2014/10/14/luxury-report-idUSL6N0S93YG20141014

12. http://www.adbrands.net/fr/lvmh_fr.htm 13. http://fr.slideshare.net/confcrea/communication-et-le-luxe?related=1 14. http://fr.slideshare.net/Renaud_Favier/economie-reelle-face-a-la-crise-extraits-

22-06-raoul-chabot-2010?qid=2758aa17-dfe1-4708-a6b2-1721fe0b6bf2&v=default&b=&from_search=1

15. http://fr.slideshare.net/SarahArphi/mmoire-jeunes-en-milieu-dfavoris-et-marques-de-luxe-je-taimemoi-non-plus?next_slideshow=1

16. https://www.youtube.com/watch?v=LjUqEWeI8WE 17. http://www.hs-pforzheim.de/De-de/Wirtschaft-und-

Recht/50Jahre/Die_Turmthesen/Documents/TT_Bd2_17_Bremser_Russer_Almeida.pdf

18. https://books.google.fr/books?id=kYhtAQAAQBAJ&pg=PA5&lpg=PA5&dq=subprime+crisis+luxury&source=bl&ots=q5l4Fuc20k&sig=7MxSVpRnUKbH4aqUMSboRXQCjwA&hl=en&sa=X&ei=6NEKVejHL4XsaJbbgcAE&ved=0CEYQ6AEwBg#v=onepage&q=subprime%20crisis%20luxury&f=false

19. http://luxurysociety.com/articles/2014/02/inside-frances-168-billion-luxury-goods-market

20. http://www.federalreservehistory.org/Events/DetailView/55 21. http://www.learning-theories.com/maslows-hierarchy-of-needs.html

http://en.wikipedia.org/wiki/The_Theory_of_the_Leisure_Class#Thesis

http://www.llllitl.fr/2014/03/investissements-publicitaires-marques-annnonceurs-france-2013/

http://www.llllitl.fr/2014/03/investissements-publicitaires-marques-annnonceurs-france-2013/

http://www.nytimes.com/1991/05/09/business/the-media-business-advertising-campaign-for-luxury-car-polishes-up-diamond-image.html

http://www.nytimes.com/1991/05/09/business/the-media-business-advertising-campaign-for-luxury-car-polishes-up-diamond-image.html

http://www.sciencedirect.com/science/article/pii/S002243591100073X

http://fr.slideshare.net/celtine/prsentation-marketing-du-luxe-presentation?qid=05a9013b-a8f2-4a4d-a197-62721b358dcd&v=default&b=&from_search=1



https://books.google.fr/books?id=kYhtAQAAQBAJ&pg=PA5&lpg=PA5&dq=subprime+crisis+luxury&source=bl&ots=q5l4Fuc20k&sig=7MxSVpRnUKbH4aqUMSboRXQCjwA&hl=en&sa=X&ei=6NEKVejHL4XsaJbbgcAE&ved=0CEYQ6AEwBg#v=onepage&q=subprime%20crisis%20luxury&f=false




http://articles.economictimes.indiatimes.com/2008-10-29/news/28663523_1_luxury-sales-claudia-d-arpizio-luxury-market

http://articles.economictimes.indiatimes.com/2008-10-29/news/28663523_1_luxury-sales-claudia-d-arpizio-luxury-market

http://therobinreport.com/the-new-luxury-consumer-think-multiple-consumers/

http://therobinreport.com/the-new-luxury-consumer-think-multiple-consumers/

http://luxurysociety.com/articles/2014/02/inside-frances-168-billion-luxury-goods-market


http://www.reuters.com/article/2014/10/14/luxury-report-idUSL6N0S93YG20141014




http://www.adbrands.net/fr/lvmh_fr.htm

http://fr.slideshare.net/confcrea/communication-et-le-luxe?related=1

http://fr.slideshare.net/Renaud_Favier/economie-reelle-face-a-la-crise-extraits-22-06-raoul-chabot-2010?qid=2758aa17-dfe1-4708-a6b2-1721fe0b6bf2&v=default&b=&from_search=1



http://fr.slideshare.net/SarahArphi/mmoire-jeunes-en-milieu-dfavoris-et-marques-de-luxe-je-taimemoi-non-plus?next_slideshow=1

http://fr.slideshare.net/SarahArphi/mmoire-jeunes-en-milieu-dfavoris-et-marques-de-luxe-je-taimemoi-non-plus?next_slideshow=1

https://www.youtube.com/watch?v=LjUqEWeI8WE

http://www.hs-pforzheim.de/De-de/Wirtschaft-und-Recht/50Jahre/Die_Turmthesen/Documents/TT_Bd2_17_Bremser_Russer_Almeida.pdf









http://www.federalreservehistory.org/Events/DetailView/55

http://www.learning-theories.com/maslows-hierarchy-of-needs.html



36

22. http://www.hs-pforzheim.de/De-de/Wirtschaft-und-Recht/50Jahre/Die_Turmthesen/Documents/TT_Bd2_17_Bremser_Russer_Almeida.pdf

23. https://halshs.archives-ouvertes.fr/halshs-00634447v1/document 24. http://www.businessdictionary.com/definition/marketing.html 25. http://smallbusiness.chron.com/benefits-marketing-companies-61300.html 26. http://smallbusiness.chron.com/disadvantages-marketing-promotional-

strategies-35199.html 27. http://www.adamsofineti.com/2011/02/the-hidden-benefits-of-luxury/

28. http://benefitof.net/benefits-of-marketing/ 29. http://www.brandchannel.com/images/papers/297_Luxury_Branding_India.pdf 30. http://www.hec.unil.ch/cms_irm/Gautschi.pdf

Books 1. https://books.google.fr/books?hl=fr&lr=&id=nlmNzL7ZNPkC&oi=fnd&pg=PP10

&dq=luxury+&ots=jVhoOQHyGG&sig=0Unb1JyXCH-Yjb-ewX_DILkuWGM#v=onepage&q=luxury&f=false

2. https://books.google.fr/books?id=gCQtAgAAQBAJ&pg=PA140&lpg=PA140&dq=budget+of+advertising+luxury+cars&source=bl&ots=1vBd9sRPOc&sig=X-bOqyVAJocHbtMdUEBeIXg64-0&hl=en&sa=X&ei=2GUAVc-pI4GxUPjZgfAB&ved=0CEoQ6AEwCA#v=onepage&q=budget%20of%20advertising%20luxury%20cars&f=false

3. Applied economics for advanced level “V.P.Kogah”

4. Luxe Oblige 5. Marketing management by Kotler end Keller 14th Edition 6. Direct Marketing Nash 4th Edition




https://halshs.archives-ouvertes.fr/halshs-00634447v1/document

http://www.businessdictionary.com/definition/marketing.html

http://smallbusiness.chron.com/benefits-marketing-companies-61300.html

http://smallbusiness.chron.com/disadvantages-marketing-promotional-strategies-35199.html

http://smallbusiness.chron.com/disadvantages-marketing-promotional-strategies-35199.html

http://www.adamsofineti.com/2011/02/the-hidden-benefits-of-luxury/

http://benefitof.net/benefits-of-marketing/

http://www.brandchannel.com/images/papers/297_Luxury_Branding_India.pdf

http://www.hec.unil.ch/cms_irm/Gautschi.pdf

https://books.google.fr/books?hl=fr&lr=&id=nlmNzL7ZNPkC&oi=fnd&pg=PP10&dq=luxury+&ots=jVhoOQHyGG&sig=0Unb1JyXCH-Yjb-ewX_DILkuWGM#v=onepage&q=luxury&f=false



https://books.google.fr/books?id=gCQtAgAAQBAJ&pg=PA140&lpg=PA140&dq=budget+of+advertising+luxury+cars&source=bl&ots=1vBd9sRPOc&sig=X-bOqyVAJocHbtMdUEBeIXg64-0&hl=en&sa=X&ei=2GUAVc-pI4GxUPjZgfAB&ved=0CEoQ6AEwCA#v=onepage&q=budget%20of%20advertising%20luxury%20cars&f=false





Working Paper Marketing

Documents

Transcript of Working Paper Marketing