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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
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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.
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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
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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
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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
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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
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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
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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.
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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.
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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
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– 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.
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Figure 2: Methodology supported by the literature review map provided by the author
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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
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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.
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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.
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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).
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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
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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).
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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.
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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
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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
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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?
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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.
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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.
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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.
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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
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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, &
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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
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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.
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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,
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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
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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.
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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
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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.
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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.
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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:
Gender:
Occupation:
1. 35+
2. 18-30
Men & Women
Business men
and women
1. 18-30
2. 35+
Men & Women
Working
professionals
1. 15-45
2. 5-14
Men & Women
Models, Artists,
Students, Business
People
1. 18-30
2. 40+
Men & Women
Business people,
students, young
professionals
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Income:
Disposable and
high income
Middle-High
income
From low to high
income consumers
Low-High
income
Geographic Asia, Europe,
America
Europe,
America
Europe, Asia Pacific,
India, America
North America
Behavioral Easy-going
consumers
Loyal and
approachable
consumers
Purchases 2 times a
month
Stylish
consumers
Psychographic Influencers,
trendsetters
Brand and
lifestyle-driven
consumers
Lifestyle-oriented
consumers
Lifestyle-
oriented
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.
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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
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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.
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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.
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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+
2. 18-30
Millennials
1. 35+
2. 18-30
Millennials
1. 20-45 20-50 years
Income High and
disposable income
High and disposable
income
Middle to High
income
Low to high
income
Occupation Urban middle-
aged wealthy
business women
Businessmen/women
Celebrities,
fashionistas
Anyone who
appreciates
affordable luxury
+ focus on
parents
Anyone who
appreciates
affordable
luxury
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
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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’.
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
Competitiors Differences Similarities Mantra
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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)
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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
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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
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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.
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• 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.
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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)
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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.
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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.
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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.
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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.
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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
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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
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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.
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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
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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
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• 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
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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
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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.
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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.
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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
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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.
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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).
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Boston Consulting Group offered an effective
approach to reach Millennials. The approach is called
reciprocity principle where five elements are
described. The elements are reach, relevance,
reputation, relation, and referral (Barton, Koslow, &
Beauchamp, 2014).
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
Reach
Use a full array of media to build
brand awareness
Relevance
Make the company appealing and
relevant
Reputation
Strive to reputation that reinforces
values and personalities
Relation
Maintain a two-way dialogue
Referral
Build relationship through
communities and social media
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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.
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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.
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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.
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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.
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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.
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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.
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