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Preserve the Luxury or Extend the Brand In context with Indian Market

Preserve the luxury or extend the brand

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Preserve the

Luxury or

Extend the Brand

In context with Indian

Market

Indian Consumer

Market

Indian consumers are becoming increasingly demanding and knowledgeable. Urban as well as rural consumers know what they want, and are looking for products and avenues to fulfil their needs without compromising on quality.

Today's Indian consumer has more expectations regarding - variety, availability of the latest products and location close to response.

The opportunities -- and the challenges -- posed by the Indian market are enormous. The world's second most populous nation, India has already become its twelfth largest economy.

India is a booming emerging market.

Today, the demand for luxury brands is ever increasing and brand offering is continuously on the rise.

The luxury market is expanding rapidly in India on the back of Economic deregulation,

Fast GDP growth,

Wealth (re)generation,

Increasing per capita consumption,

Growing young working population.

Luxury Brand Segment in India

The fast rising Indian Consumer Markets has attracted many Luxury brands from the worldwide to set up their business in India.

India being the second-fastest growing economy is believed to be one of the most sought after market by the luxury brands.

India's growing luxury market is set to exceed $14 billion-mark by 2015 boosted by a new class of wealthy termed as the 'closet customers' who have joined the traditionally rich contributing to higher luxe sales.

From about $3.66 billion in 2007, the luxury market has more than doubled to $7.58 billion in 2013.

According to industry experts, India could emerge as

an important luxury market in the next decade but

pricing will continue to play a key role in expanding

the market.

The Key Consumers

The CII-IMRB report said luxury is no longer restricted to the

rich & famous alone, the new age or 'closet consumers'

who do not typically fit into the boardroom definition of luxury

consumers are staking claims to luxury products, brands and

services as well, but on their own terms.

The past 10 years of economic growth has given rise to a new

wealthy class in India —‘closet consumers’— who are a

major force behind the country’s luxury market growth.

Who are

CLOSET

Consumers

Closet consumers are cost-conscious and seek “value”

even when buying luxury products. And their definitions, symbols of luxury are often in variance with

conventional ones.

These are new generation entrepreneurs,

senior corporate executives,

farmers who have sold their land to developers ,

the BPO generation that lives with parents and has

money to splurge.

Typically these are people who have not been born wealthy

and luxury is not a way of life yet – they are just

experimenting with luxury.

Despite their newfound riches, there is an inherent middle

class mind set among this class, even as they can no longer

be classified as middle class based on their income.

“The inner conflict between a middle class mind set and the globally rich income level,

between conspicuous consumption and a

level of luxury is what called as the ‘closet consumer”

The “closet consumers” are represented in Green

The Red and Green

sections are the target

markets of the Luxury

Brands in India.

Projected Income distribution of the Indian Consumers in

the upcoming years.

The question here is, whether the Luxury

brands need to bring down the prices or extend the brand set at lower price in order to attract more customers to make it more affordable

and become capable of catering the larger segment of the target market.

Let’s Find Out

Luxury products are perhaps one of the purest form of branding because the brand and its image are often key competitive advantages that create enormous value and wealth for organizations.

Luxury for many have become more about personal pleasure and self-expression.

The common denominators of luxury brands are quality and uniqueness.

Enduring Style and authenticity are often critical to justifying a sometimes highly extravagant price.

According to BMW Group India President: Phillip von Sahr

Challenges luxury players face in India is making the brand known amongst its target customers. "For luxury companies, making brand familiar is the most important challenge. The next is to ensure that customer remains loyal to the brand”.

Let’s take an example of Multinational Luxury

Brand..

Louis Vuitton

A French fashion house founded in 1854 by

Louis Vuitton.

Ranging from luxury trunks and leather goods to ready-to-wear, shoes, watches, jewellery, accessories, sunglasses and books.

LV is one of the world's leading international fashion

houses.

In 2003, LV launched its first official store in New Delhi, India. The target market:

Rich Businessman

The Royals

CEO’s Celebrities

NRI’s Closet Spenders

NEWS REPORT TELLS ABOUT THE KEY

GROWTH MARKETS IN INDIA

Key growth drivers are the 150,000-plus HNIs (high net worth individuals) with a net worth of $600 billion-3.1 million households earning more than Rs.10 lakh in the top 10 cities (Mumbai,

Delhi/NCR, Bangalore, Kolkata, Pune,

Chandigarh, Hyderabad, Ludhiana, Chennai

and Ahmedabad)

How does

“Closet Consumers”

make purchases

Closet Consumers "won't pick up a Louis Vuitton [bag] because it's Louis Vuitton. They examine it and give a glance to its worth. "The new Indian luxury buyer is more aware of brands.

While he values and buys international luxury brand offerings, he also appreciates his Indian roots and culture.

Clever buyers, prefer the best quality with a reasonable price.

About two-thirds of India's population is below 30 years in age, which is a challenge for most brands as these are aspirational consumers, but may not have the money to buy.

So does this mean that Louis Vuitton should drop down the

prices or extend the brand set at lowered price in order to reach this

segment ??

Louis Vuitton‘s continued success can be attributed to consistently upholding its core values and remaining loyal to its travel-centric heritage.

Core Consumers buy LV because it is more about personal pleasure and self-expression.

Quality and Exclusivity.

Symbol of social status for them.

High reputed Brand symbolizing the wealthy and elegant lifestyle.

A note describing some of the “Indian Consumers of Luxury Brands”

While extending the brand has positive effects for the firm

as it can serve more people and simultaneously increase

its market share which in turn may help the firm to survive

the economic downturn.

But it also have negative effects

Brand dilution: Consumers no longer associate the brand with a specific or highly similar set of products and start thinking less of the brand.

Alienate the Core Consumers base and ultimately erode and dilute the Louis Vuitton brand equity.

People may start thinking that the company has shifted

its focus towards the other segment and have lost the

interest in the original segment of products.

Lower priced brand segment might cannibalize the sales

of the original Louis Vuitton product segment (its core

segment).

“India could become an important luxury market in the next decade. However, right pricing is very important. A luxury brand cannot bring down prices just to attract more customers, to make it more affordable. Premium pricing is essential to ensure the brand exclusivity" .

Canali, Generale Manager, Stefano Canali said in the CII-ET Dialogue on Luxury.

Instead of extending the

brand, the company needs

to think about boosting

the sales of the brand…

1. Increasing the footfall to

their stores

2. Endorsing and Sponsorship

3. Opening outlets in Luxury Malls

4. Outlets in 5 star hotels.

5. High streets: high footfall

6. Delighting customers with gifts on

purchasing during the low season.

7. stores located in the country’s most favourite Tourist Destinations.

8.

Appealing

more to

Young

Millionai

res

But sometimes

Bad times pose difficult challenges on the luxury brands pricing.

`

Those who have successfully extended their brands from vertically across a range of price points are usually the most immune to economic downturns.

LIKE…

Giorgio Armani

Giorgio Armani

Italian fashion house founded by Giorgio Armani which designs, manufactures, distributes and retails haute couture, ready-to-wear, leather goods, shoes, watches, jewellery, accessories, eyewear, cosmetics and home interiors.

Armani is the fastest growing fashion brand.

In India, Genesis Luxury Fashion Pvt Ltd. Markets brands ARMANI along with many other luxury brands.

The Armani brand extended from the most expensive to most accessible

In Tier 1 : Custom made couture products

Giorgio Armani Prive

and

Giorgio Armani

In Tier 2: Young, modern, more affordable styles

Emporio Armani

and

Armani Collezioni

Tier 3: More youthful and street-savy translations of Armani Style

AJ | Armani Jeans

and

AX | Armani Exchange

Clear differentiation exists between these brands, minimizing the potential for consumer confusion and brand cannibalization.

Each also lives up to the core promise of the parent brand, reducing chances of hurting the parent’s image.

Market share of

Luxury Brands

SIMILARLY

BMW cannot launch a car in the compact segment below 20 lakhs INR because the company is associated with high performance and luxury segment in spite of a tremendous market opportunities in the lower priced segment.

The BMW’s lowest priced car in India is 1 series: 22 lakhs. It maintains the luxury of the Parent brand and does not dilute the Brand’s image.

Conclusion

A brand is a name, term, sign, symbol, design or some

combination of these elements, intended to identify the

goods of one seller and to differentiate them from those

of competitors.

Brands are valuable intangible assets that offer a

number of benefits to customers.

If we want to keep younger and closet consumers buying and consuming good-quality luxury products at affordable prices—and attract future high-quality-luxury consumers as well—then companies like LV, with superior reputations, must make good-quality branded products available at competitive prices.

They can be made under the umbrella of the original group, but the production and distribution chains must be clearly separated. One option is to create two discrete business units within the group.

Companies with superior reputations must offer good-quality branded luxury products

at competitive prices.

Any attempt to change the traditional way of doing things could alter the Brand’s

perceived value in the eyes of both the industry and the consumers.

Created By: Dipanshu Sehjal, IIIT Allahabad

During an Internship under guidance of

Prof. Sameer Mathur

IIM Lucknow

www.IIMInternship.com