"Money plays no Rolex" : influencing the consumers' perception of luxury brands

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Master’s Thesis – MSc Business Administration

(Marketing Track)

Author: Eva van Ekdom Student number: 11111232

First Supervisor: drs. J. Labadie MBM Second assessor: drs. R.E.W. Pruppers Date of submission: March 24th_{, 2017}

“Money plays no Rolex”

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Statement of

originality

This document is written by student Eva van Ekdom, who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Acknowledgements

While writing this section, I finally start to realize that this thesis represents the end of my MSc Business Administration at the University of Amsterdam. After a lot of hard work, struggles and personal victories, I can look back at an intense and very meaningful period in my life. After graduating from the Hotel Management School, I decided to challenge myself more by starting my pre-master education at the University of Amsterdam. One and a half year later, I can say I am very proud of what I have achieved during this study. This thesis represents my final masterpiece, where I combined all my gained knowledge together. However, I could not have come to this point without the endless help and support of a lot of people, and therefore I would like to express my gratitude to some specific persons.

First of all, I would sincerely like to thank my supervisor Jorge Labadie, for not only being a good supervisor but also for guiding me through the process and providing me with more personal insights than I have ever gained in such a short period. I really enjoyed working with you, and I am sure we will keep in touch!

Second, I would like to thank all my UvA buddies for their support and faith in me, and the many hours we spent together studying in the library. I will seriously miss spending the time with you.

And last but not least, I would really like to thank my family and friends, for their patience, attention and loving support. You cheered me up and helped me to put things in perspective.

This is just the start of a new beginning and I am curious what the future will bring!

Eva van Ekdom

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Abstract

The consumer’s perception of luxury brands is an interesting phenomenon. Consumers spend irrationally, believing they get what they pay for, regardless of proof. But is choosing for a luxury brand a common sense explanation for paying more money? Because only few studies have investigated consumers’ perceptions of luxury brands, this research attempted to gain more in-depth insights regarding the factors that influence a consumer’s perception of luxury brands. A more important question was, is there a point when a luxury brand does not only evoke positive associations, but negative associations as well? For this purpose, this research operationalized the concept of correlational points-of-parity by means of Ofman’s theory on core quadrants. After conducting various pre-studies, the main study used the brand Rolex as a representation of a luxury brand. The established points-of-parity were: ‘exclusivity’, ‘high quality’, ‘prestige’, ‘unattainable’, ‘flawless’, and ‘elitist’, and were expected to correlate with price. In the main study, the price of the luxury brand was manipulated to see what would happen with the perceived points-of-parity and the overall perception of the luxury brand. The results show proof that when the price of a luxury product increases, consumers perceive the luxury product as more exclusive, unattainable, and elitist. Moreover, the consumer’s perception alters after certain events: when the consumer perceives the luxury brand of high quality, as prestigious, and as flawless, the consumer develops more favorable associations about the luxury brand. More importantly, it seems that regardless the price level, the overall favorability of luxury brand associations stays unaffected. All in all, this research gained new insights into the consumer’s perception of luxury brands and contributed to both existing theory and the field of luxury brand management.

Keywords: correlational points-of-parity; perceived core quality; perceived pitfall; favorability of luxury brand associations

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CHAPTER 5 – METHODOLOGY 35 5.1.PRE-STUDY 1 ... 35 5.1.1.STIMULI DEVELOPMENT ... 35 5.1.2.STIMULI TESTING ... 35 5.2.PRE-STUDY 2 ... 37 5.2.1.STIMULI DEVELOPMENT ... 37 5.2.2.STIMULI TESTING ... 37 5.2.3.ANALYSIS ... 38 5.3.PRE-STUDY 3 ... 40 5.3.1.STIMULI DEVELOPMENT ... 40 5.3.2.STIMULI TESTING ... 41

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5.4.STIMULI MAIN STUDY... 48 5.5.EXPERIMENTAL DESIGN ... 49 5.5.1.SAMPLE ... 49 5.5.2.PROCEDURE ... 49 5.6.MEASUREMENTS ... 50 CHAPTER 6 – RESULTS 56 6.1.DESCRIPTIVE STATISTICS ... 56

6.1.1.DISTRIBUTION AND SAMPLE PROCEDURE ... 56

6.1.2.BETWEEN-SUBJECTS GROUP SIMILARITY ... 57

6.2.ASSUMPTION CHECKS ... 57 6.2.1.NORMALITY CHECK ... 57 6.2.2.MANIPULATION CHECKS ... 58 6.2.3.RELIABILITY CHECKS ... 60 6.2.4.SUMMATED SCALES ... 61 6.2.5.INDEPENDENCE CHECK ... 62 6.3.HYPOTHESES TESTING ... 63 6.3.1.HYPOTHESIS 1 ... 63 6.3.2.HYPOTHESIS 2 ... 65 6.3.3.HYPOTHESIS 3 ... 70 6.3.4.HYPOTHESIS 4 ... 76 6.4.ADDITIONAL ANALYSIS ... 78

6.4.1.MULTIPLE REGRESSION ANALYSIS... 78

6.4.2.DIFFERENCE IN GENDER AND OUTCOMES ... 79

CHAPTER 7 – DISCUSSION 84 7.1.DISCUSSION OF THE RESULTS... 84

7.1.1DOES PRICE INFLUENCES CONSUMERS’ FAVORABILITY OF LUXURY BRAND ASSOCIATIONS? ... 84

7.1.2.WHAT ABOUT THE PERCEIVED CORE QUALITY? ... 86

7.1.3.WHAT ABOUT THE PERCEIVED PITFALL? ... 89

7.1.4.THE MODERATING EFFECT OF PERCEIVED PITFALL ... 91

7.2.THEORETICAL CONTRIBUTIONS ... 91

7.3.MANAGERIAL CONTRIBUTIONS ... 93

CHAPTER 8 – CONCLUSION 97 8.1.SUMMARY ... 97

8.2.LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCH ... 98

REFERENCES 101

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List of tables and figures

Table 1. The different topics and corresponding subquestions ... 5

Table 2. Expected core quadrants according to the researcher ... 35

Table 3. Final core quadrants per context ... 36

Table 4. Top most valuable luxury brands worldwide ... 37

Table 5. Correlation matrix ... 39

Table 6. Predetermined prices Rolex watch ... 41

Table 7. Predetermined prices Hermès Birkin bag ... 41

Table 8. Luxury brand values – items and labels ... 54

Table 9. ANCOVA on Favorability of luxury brand associations ... 63

Table 10. Overview key results mediation analysis core qualities ... 65

Table 11. Overview key results mediation analysis pitfalls ... 70

Table 12. Analysis and support for hypotheses 2 and 3 ... 75

Table 13. Multiple regression model Favorability of luxury brand associations ... 79

Table 14. Most mentioned subcategories by respondents ... 81

Figure 1. Theoretical model for luxury value dimensions ... 17

Figure 2. Customer-based brand equity model pyramid ... 23

Figure 3. Examples of correlational points-of-parity ... 25

Figure 4. Overview possible mediation effects core qualities ... 65

Figure 5. Overview possible mediation effects pitfalls ... 70

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Chapter 1 – Introduction

1.1. Consumers in the world of luxury brands

1.1.1. Perception towards luxury brands

Over the past 20 years, the number of luxury consumers has tripled. Every year new consumers are entering the luxury market, and occasional luxury shoppers turn into more loyal luxury shoppers (The Economist, 2014). More importantly, the spending on luxury goods is rising. But who are these luxury consumers and how do they perceive luxury products? Luxury consumers attach more value to the experience and their perception of luxury products than on the utility of the product itself. When purchasing a luxury product, a consumer shows how much he/she is willing to spend and what his/her perception of the product is (Adams, 2013).

Successful luxury companies play a pricing game with the consumer, in which they know the consumer’s perception and desirability. The selling price of a luxury product strongly exceeds the rough costs of production, and results in gross margins that are typically around 65 percent (Sherman, 2013). So a large part of the amount a consumer pays goes directly to marketing, advertising, packaging, and the status and prestige the product carries. The more expensive they price their product, the more exclusive the consumer perceives the product and, therefore, the more desirable the product becomes. This created desire “goes beyond any rational assessment of value and quality” (The Economist, 2014, p.1). Although true luxury products are of very high quality, the larger part that the consumer is paying for is status and being associated with the product (Sherman, 2013). In addition, the consumer has in most cases an intrinsic promise that he/she will become more desired if he/she owns certain luxury products (The Economist, 2014). When buying higher priced goods, Page (2015) mentions, “we spend irrationally, believing you get what you pay for regardless of whether the goods are proven better than their affordable counterparts” (Page, 2015, p.1). Not only the

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price of a product affects the expectation of its quality, identical products may even be experienced as being better if the product is priced higher (Money and Values, 2008). Consumers “distinguish between objective price, the actual price of a product, and perceived price, the price as judged by the consumer” (Wiedmann, Hennigs, & Siebels, 2009, p.630). Reflecting to personal experiences, there are some interesting consumer behavior patterns in the domain of luxury brands. While being party responsible for different brands of champagnes and distilled drinks for one of the largest luxury conglomerates of the world, the consumers of these luxury brands were intriguing. There seemed to be a tendency going on: the more expensive the product, the better the perceived quality. The consumers liked to show off with all their prestige and spent a lot of money for one bottle of champagne. Whilst all champagne brands come from the same wine region, Champagne, the consumers perceived all brands differently. Of course, there could be differences in quality of the grapes or the blend, but quite often consumers judged the champagne only based on the brand and whether they wanted to be associated with that brand. This example highlights the inconsistency between the real value and the perceived value of the luxury product (Beck, 2014).

According to Deval, Mantel, Kardes and Posavac (2013) consumers rarely have complete information when considering and choosing a product, which is also common known as information asymmetry between the company and the consumer. Besides, “when consumers make purchasing decisions, they often have to predict the quality of the products they are considering on the basis of other cues, such as price. When high-priced products are consistently of high quality, consumers underestimate the quality of low-priced products” (De Langhe, van Osselaer, Puntoni, & McGill, 2014, p. 991). But is choosing for a luxury brand a common sense explanation for paying more money? Since the abovementioned consumers seem to have their ‘own luxury perception’, it is interesting to see which factors influence the consumer’s behavior and perception of a luxury brand. Is there a limit in willingness to pay?

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At which point does a luxury product not only evoke positive associations?

Concerning these factors, this thesis will have a closer look at the second stage of Keller’s Customer Brand-Based Equity (CBBE) pyramid (2001), brand meaning: how is a brand characterized and what should the brand stand for in the mind of the consumers? Brand meaning consists of two categories of brand associations in consumers’ minds, related to brand performance and brand imagery. These brand associations involve three important dimensions, which are essential in order to build CBBE: they need to be strong, favorable and unique (Keller, 2001). Even more, the branding objective at the second stage of the CBBE pyramid is to create points-of-parity and points-of-difference, which reflect the types of associations the consumers have in their minds (Keller, Sternthal, & Tybout, 2002). When an association is strong and favorable but not unique, there is a point-of-parity. In this case, there is no reason not to buy the brand. “Points-of-parity are elements with essentially the same performance or functionality as those of the next best alternative” (Anderson, Narus, & Van Rossum, 2006, p.6). Points-of-parity must be met if consumers are to perceive the brand as a legitimate and credible player within the frame of reference the brand is in (Keller et al., 2002). These points-of-parity influence a consumer’s perception towards a brand.

Furthermore, different consumers have different opinions about luxury brands, just as different consumers judge every brand differently. Some consumers may perceive a luxury brand as superior and glamorous, where other consumers may perceive a luxury brand as snobbish. In this light, Ofman’s theory on core quadrants can come in useful (2007). This core quadrant model (2007) shows a person’s qualities, pitfalls, challenges and allergies. Although Ofman applies the core quadrant model to persons, it is an idea to apply this model to brands. It is interesting to position a luxury brand in the core quadrant model in order to gain more insight into the brand’s ‘behavior’ and qualities. Can a brand have the same characteristics and objectives as persons?

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1.1.2. Why should this phenomenon be researched?

Only few studies investigated consumers’ perceptions of luxury brands. Existing research on consumers’ perceptions of the degree of luxury (Vigneron & Johnson, 2004; Wiedmann, Hennigs, & Siebels, 2007) has pointed out that these perceptions vary with the values consumers seek when purchasing a luxury brand. In addition, Keller (2009a) states that it is important to completely understand the change in brand knowledge consumers have and how this change affects consumer responses towards a brand and how this brand is marketed. A more complete picture is needed that “recognizes the type, strength, valence and uniqueness of all brand associations engendered by different types of communication options” (Keller, 2009a, p.153). In addition, “little research has dealt with comprehensive brand equity constructs” (Stegemann, 2011, p.61), of which a consumer’s perception can be seen as a brand equity construct. According to Stegemann, “much research can be done in the area of brand equity management for luxury brands, as research in this area has only scratched the surface so far” (2011, p.65). There is little literature regarding managing brand equity for luxury brands.

In essence, the phenomenon is clear: in the world of luxury brands, there seems to be a mismatch between perceived value and true value. We know that consumers base their choice on the brand’s parity, however, we do not know yet in what ways these points-of-parity correlate with each other. It is important and interesting to investigate the degree in which these points-of-parity can be stretched before a change in perception will occur, e.g. where the consumer will hesitate or withdraw its’ decision about the luxury brand. Also, when applying the core quadrant model of Ofman (2007) on brands, more insight can be gained into the current position of the brand in consumers’ minds.

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1.2. Problem definition

1.2.1. Problem statement and subquestions

This thesis will have a closer look at consumers’ perception of luxury brands, and the different points-of-parity that influence this perception. A consumer’s perception is very subjective and there are different researchers investigating this phenomenon in different research areas. But to what degree let consumers themselves be talked into anything and hold their perception about a luxury brand before they start doubting about the true value? It would be really interesting to see if and how the points-of-parity that influence consumers’ behavior and perception of a luxury brand correlate with each other, also known as correlational points-of-parity. When points-of-parity correlate, two associations about the brand will affect each other. A consumer can think for example: the higher the price, the more exclusive the product. All these different questions lead to one leading research question in this thesis project:

“To what extent does a change in correlational points-of-parity influences a consumer’s perception towards a luxury brand?”

In order to answer the research question, different topics will be discussed and corresponding subquestions will be answered, as illustrated in table 1.

- Table 1. The different topics and corresponding subquestions that will be answered in this thesis -

1.2.2. Delimitations of the study

Because the topic ‘luxury brands’ is very broad, it is important to indicate the delimitations of

Topic Subquestions

Luxury brands The definition of luxury; what does it really mean? What are luxury brands?

Consumers perception

What lead consumers to identify a brand as luxurious?

How do consumers develop a perception towards a luxury brand? What are the consumers’ buying motivations?

Points-of-parity Which points-of-parity influence a consumer’s perception of luxury brands: its (e.g.) quality, price, prestige, exclusivity, service?

How can Ofman’s theory on core quadrants help to operationalize the concept of (correlational) points-of-parity?

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parity of a luxury brand and the effect on a consumer’s perception. The focus will be on the second stage of Keller’s CBBE pyramid, brand meaning, which is about establishing a brand image and its corresponding associations. The research is about the consumer’s perception of the brand, so the focus will be consumer oriented. Moreover, the main study will highlight one specific luxury brand with one product, so accurate insights can be generated and subsequently, these outcomes could be generalized to multiple other luxury brands.

1.3. Theoretical contributions

This research will contribute to theory because only little research about consumers’ perceptions of luxury brands exists. Whereas Keller (1993; 2001; 2002; 2009a) already mentions the importance of brand equity management, Stegemann (2011) states research in the area of brand equity management for luxury brands has only scratched the surface so far. This thesis contributes to the field of brand equity management research in the domain of luxury brands: it investigates the role of (correlational) points-of-parity to see how brands can manage their brand equity more effectively. More specific, it will investigate the effect of correlational points-of-parity on consumers’ perception in the domain of luxury brands. In addition, this research tries to integrate Ofman’s theory on core quadrants (2007) on brands instead on persons, to identify and strengthen a brand’s characteristics and to operationalize the concept of points-of-parity.

1.4. Managerial contributions

This research will contribute to practice because it will grow the understanding of consumer behavior in the domain of luxury brands. Since a consumer’s perception is very subjective, it is important to recognize the role of the product and situational characteristics. Marketers can take into account different behavior when managing their brand equity construct, and “have to consider individual differences in associating luxury values with certain situations”

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(Wiedmann et al., 2007, p.11). By measuring the consumers’ perception of a luxury brand, managers can focus and adjust accordingly their marketing strategies to improve purchase value for different segments of consumers (Wiedmann et al., 2007). Moreover, this thesis can provide interesting and useful answers about the points-of-parity consumers take into account when making a brand choice in the world of luxury brands.

1.5. Structure/outline

This thesis is structured as follows: after this first chapter, Chapter 2 reviews the world of luxury brands. What is the definition of luxury? What are luxury brands, and why do consumers buy luxury brands? After providing an overview, Chapter 3 explains the brand equity construct by means of the CBBE pyramid (Keller, 2001). How do associations arise, and what about a brand’s points-of-parity and points-of-difference? Moreover, Ofman’s theory on core quadrants (2007) is applied to operationalize the concept of points-of-parity. All together, this review will help clarify pieces of the main research question of this thesis. After the theoretical framework is established, hypotheses will be developed based on the current literature and expectations of the thesis in Chapter 4. What is expected to happen with the consumer’s perception towards a luxury brand after changes in the points-of-parity? In Chapter 5, the methodology will provide results of various pre-studies and details about measurement scales for the main study, the research strategy and research design. Subsequently, Chapter 6 describes the results of the research: which points-of-parity correlate with each other and how far can these points be stretched before a perception change occurs? Which manipulations succeeded? Chapter 7, Discussion, interprets the results: what do they actually mean? Furthermore, possible explanations are provided. Lastly, Chapter 8, Conclusion, gives an answer to the main research questions and discusses limitations and suggestions for future research.

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Chapter 2 – The characteristics of luxury brands and buying motivations

As elaborated in chapter 1, the consumers’ perception of luxury brands is an interesting phenomenon. This current chapter reviews the world of luxury brands. What defines luxury, and which brands are considered to be luxury brands? The focus will be consumer oriented: how do consumers evaluate luxury brands? Most important, what are the consumers’ buying motivations of luxury brands and can this buying behavior be influenced?

2.1. Definition of luxury

To start with some history, Adam Smith, the founder of economics, mentioned consumption could be divided in four categories: necessary consumption, basic consumption, affluence consumption and luxury consumption (Smith & Nicholson, 1887). Considering luxury consumption, he defined luxury goods as “goods that are in limited supply, difficult to procure and/or very expensive” (Berthon, Pitt, Parent, & Berthon, 2009, p.46). Subsequently, authors took the standpoint of linking luxury to scarcity and high prices (Mortelmans, 2005), while other authors tried to identify attributes of a luxury brand (Kapferer, 1997; Vigneron & Johnson, 1999). Kapferer, who is internationally recognized as one of the most influential experts on brand management, defines luxury as it “defines beauty; it is art applied to functional items. Like light, luxury is enlightening. Luxury items provide extra pleasure and flatter all senses at once” (Kapferer, 1997, p.253). Although this is very symbolically expressed, there exist some more scientific explanations.

The word ‘luxury’ stems from the Latin word ‘luxus’, which means “indulgence of the senses, regardless of cost” (Nueno & Quelch, 1998, p.62). Moreover, Nueno and Quelch (1998) state luxury brands have a low functional utility / price ratio and a high intangible and situational utility / price ratio. This is in line with multiple authors that declare that the distinction between luxury and non-luxury goods is the difference in satisfaction: luxury

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goods satisfy both psychological and functional needs, whereas non-luxury goods only satisfy functional needs (Nia & Lynne Zaichkowsky, 2000; Vigneron & Johnson, 2004).

In sum, the definition of luxury is a subjective and multidimensional construct. It contains more than just the material elements; it is contextual dependent – on both the social and individual level (Berthon et al., 2009). Because the goal of this research is to investigate the consumers’ perception towards a luxury brand and to see whether this perception could be influenced due to changes in a brand’s points-of-parity, it is interesting to know how different authors define the luxury concept and the corresponding consumers’ perception on this luxury concept.

2.2. What are luxury brands?

Many economists and marketing experts describe luxury brands as brands whose price is significantly greater than the price of comparable goods that possess the same tangible features (McKinsey, 1990). According to Phau and Prendergast (2000) luxury brands “evoke exclusivity, have a well-known brand identity, enjoy high brand awareness and perceived quality, and retain sales levels and customer loyalty” (as cited in Atwal & Williams, 2009, p. 339). However, what really constitutes a luxury brand is not well defined in the literature. While there are multiple types of luxury brands, which are dimensional, they are often treated as homogenous: a luxury brand is just a luxury brand (Berthon et al., 2009). In essence, luxury brands are understood inadequately, even though they might be one of the most profitable and fastest-growing brand segments (Berry, 1994).

Mortelmans (2005) tries to outline the formulation of luxury goods. As mentioned above, luxury has a different appearance in different times and cultures. In his article, the analyses in social sciences of Thorstein Veblen were used as a starting point (Veblen, 2005). Veblen considered luxury as a status symbol that exclusively belongs to the upper class, also

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people could afford more comfort and luxury necessities in life. Veblen mentioned people have social status when necessities are bought with wealth and publicly exhibited, so he really highlighted the social aspect of luxury consumption. Veblen’s study was so influential that it dominated the luxury debate for almost a century.

According to Mortelmans, every product can become a luxury product as soon as it meets some conditions, which leads to a narrow definition of luxury. To start with this narrow definition of luxury, Mortelmans states producers of luxury goods set boundaries for their economic territory to attract consumers. These companies have a very specific view on luxury goods, which can be summarized by three characteristics: “scarcity, extra value, and high quality” (Mortelmans, 2005, p.505). First of all, scarcity (a.k.a. limited in production, selective distribution) is necessary to be exclusive as a brand in the eyes of the consumer. Luxury companies must try to strictly control the production and distribution processes. Second, a luxury product must contain extra value, for example with a unique design. This added value has an aesthetic value, meaning it triggers sensori-emotional feelings among consumers. The third and last characteristic, high quality is essential for a luxury product to contain. Without high quality the luxury brand suffers from being mediocre according to the consumer. High quality can be achieved in two manners: selecting the raw materials carefully and gaining a detailed workmanship. Because of the scarcity of the product, the extra value that gives the brand more prestige, and the high quality, the product has consequently a higher price. Besides these characteristics, a high price is an essential feature of a luxury product. However, a luxury company does not have to meet all four aspects in order to have a luxurious product. That being the case, Mortelmans describes the narrow definition of a luxury product as “those scarce products with an objective or symbolic extra value, with a

higher standard of quality, and with a higher price than comparable products” (Mortelmans,

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Although this narrow definition is closely related to the marketing understanding of the luxury phenomenon, a broad definition of luxury is necessary to cover all luxury in society. This broad definition concerns a possible meaning, also referred to as ‘logics’ (Baudrillard & Levin, 1981). Luxury goods can be placed within the logic of sign value. “The sign-value of an object is a catchall in which several diverse significations (beyond use-value, exchange value, and symbolic value) can be brought together” (Mortelmans, 2005, p.510). All in all, Mortelmans mentions the broad definition of luxury goods as “those products that have

a sign-value on top of (or in substitution of) their functional or economical meaning”

(Mortelmans, 2005, p.510). So, according to Mortelmans (2005), luxury products have not only essential characteristics that distinguish them from ordinary products (narrow definition), they also have a specific sign value that distinguishes them from ordinary products that only have a functional and economical meaning (broad definition).

From another point of view, Atwal and Williams (2009) state that luxury brands are almost always experiential, which means they consist of tangible, physical and interactive experiences. According to them, there are multiple ‘experiential zones’ associated with luxury brands: (1) Entertainment, (2) Education, (3) Escapist, and (4) Aesthetic. These zones are based on customer involvement and intensity, whereas involvement is about “the level of inter-activity between the supplier and the customer” (Atwal & Williams, 2009, p.342) and intensity “refers to the perception of the strength of feeling towards the interaction” (Atwal & Williams, 2009, p.342). According to Atwal and Williams (2009), consumers can experience various forms of involvement and intensity with luxury brands. Next to being entertained and educated in many luxury consumption situations, one core feature is the ‘escape’ feeling where the consumer has the feeling he/she can create a whole new identity or reality. Besides, many luxury goods have an aesthetic nature, wherein the consumer engages in the experience, but without (much) active participation.

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More strongly stated, Kapferer and Bastien (2009) even mention that most luxury brands market products that themselves are not luxury products, but just lever the prestige of the name they carry. These goods might have a luxurious allure, but are not luxury. Fragrances, eyewear and accessories are examples of these types of goods. A Louis Vuitton scarf levers the prestige of the Louis Vuitton name, but is not a luxury product on itself: every consumer can buy a scarf. In the opinion of Kapferer and Bastien, luxury is a social identification. There exists a “democratic luxury: a luxury item that extraordinary people would consider ordinary is at the same time an extraordinary item to ordinary people” (Kapferer & Bastien, 2009, p.4). Any product that can be reminded to a social identification can become a luxury product. But besides this social aspect, a luxury brand should also contain a strong personal and hedonistic aspect. Luxury has to be (1) qualitative and not quantitative, (2) multi-sensory and experiential, (3) strongly linked to human content and be of human origin. In line with Mortelmans (2005), Kapferer and Bastien state in order to be a luxury brand the product must be (partly) handmade, and the brand must offer exclusive services.

According to Keller (2009b), there are multiple defining characteristics of luxury brands. Luxury brands maintain a premium image, involve in the creation of many intangible brand associations and an aspirational image. Besides, they ensure a high quality and pleasurable purchase and consumption experiences. Moreover, luxury brands must employ a premium pricing strategy with strong quality cues in order to attract consumers (Keller, 2009b).

All in all, luxury brands have main features that all authors agree upon: they are characterized by their high price, their exclusivity, high quality and prestige. Now the question rises, are these the features that motivate consumers to buy luxury brands? The next section will discuss various views on consumers’ luxury buying behavior.

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2.3. Buying motivations

Why do consumers buy luxury goods? As mentioned by the European Financial Review, consumers buy these products primarily for what they symbolize (Hennigs, Wiedmann, Klarmann, & Behrens, 2013). Moreover, “consumers investing in luxury products seek a journey and experience from the brand when parting with a large chunk of their hard earned cash” (Granby Marketing, 2015, p.1). As mentioned by Kapferer and Bastien (2009) luxury purchases have two features: (1) satisfying your own pleasure (luxury for self) and (2) signaling success (luxury for others).

Wiedmann et al. (2007; 2009) mention a buying motive that gained a lot of attention in the current literature: the notion ‘to impress others’ (Berry, 1994; O'cass & Frost, 2002; Vigneron & Johnson, 2004). Following the theory of impression management (Eagly & Chaiken, 1993; Mandrik, 1996; Sallot, 2002), consumers “are highly affected by the internal drive to create a favorable social image from their purchase behavior outcomes” (Wiedmann et al., 2009, p.626). However, besides socially oriented motives, there are more motives that explain the luxury market consumption. According to Wiedmann et al. (2007; 2009), functional, personal and financial oriented motives of consumption should also be considered. Besides Wiedmann et al. (2007; 2009), there were other authors who highlighted these motives as well (Hanzaee, Teimourpour, & Teimourpour, 2012). The next section will discuss these motives in more detail.

2.3.1. Functional motives

The functional motives that consumers consider when buying a luxury product reflect the core benefits and basic utilities of the product (Wiedmann et al., 2007; 2009). These could be the quality, uniqueness, usability, reliability, and durability of the product (Sheth, Newman, & Gross, 1991). The functional value can be subdivided in three elements: (1) uniqueness value,

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(1) Uniqueness value focuses on the exclusivity that is been offered by luxury brands. Consumers add more value to a luxury good that is more unique or more rare in comparison to a non-luxury good. This is a characteristic of a luxury good: not every consumer can access it (Dubois, Laurent, & Czellar, 2001). Therefore, luxury goods are limited available (Vigneron & Johnson, 2004) and distributed narrowly (Kapferer & Bastien, 2009). In this way, a luxury product will be associated with exclusivity (Phau & Prendergast, 2000).

Second, (2) quality value reflects to the quality of the luxury product. As already mentioned in the literature above, a luxury brand should reflect superior brand quality (Dubois et al., 2001; Mortelmans, 2005; Kapferer & Bastien, 2009). “One of the reasons consumers buy luxury brands is for the superior quality reflected in the brand name” (Hanzaee et al., 2012, p.1446). Lastly, (3) usability value is the extent to which a luxury good satisfies the consumer’s needs. Do luxury goods have usable features? Are they necessary in life? (Wiedmann et al., 2007; 2009)

2.3.2. Social motives

In many occasions consumers desire to portray status when purchasing a luxury good. The social value that luxury goods contain is fundamental in the decision-making process of a consumer. Multiple authors stress the importance of this social motive: consumers are influenced by- and associate themselves with other people in the society (Vigneron & Johnson, 2004; Wiedmann et al., 2007; Kapferer & Bastien, 2009; Amatulli & Guido, 2012). The social recognition consumers receive from other people in society when purchasing a luxury good distinguishes a luxury good from a non-luxury good. Social value can be subdivided in two dimensions: (1) conspicuousness value and (2) prestige value (Wiedmann et al., 2007; 2009; Hanzaee et al., 2012).

First, (1) conspicuousness value highlights the social aspect mentioned in Veblen’s analysis in social sciences (2005). His theory on conspicuous consumption explains “when

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individuals consume luxury goods and services conspicuously they are sending a signal to others about their relative status in society” (Hanzaee et al., 2012, p.1446). So, conspicuous consumption is displaying wealth to indicate one’s status (O'cass & McEwen, 2004; Amatulli & Guido, 2012). As a definition, it is “the tendency for individuals to enhance their image,

through overt consumption of possessions, which communicates status to others” (O'cass &

McEwen, 2004, p.34). To satisfy the conspicuousness value, a luxury brand must be acknowledged and recognized by people, whether they are people belonging to the social group of the consumer or people from other social groups. When people cannot interpret the values a luxury good tries to signal, status cannot be achieved (Han, Nunes, & Drèze, 2010).

Second, (2) prestige value explains the desire of consumers to possess luxury goods that serve as a symbolic sign of group membership. As mentioned by Vigneron and Johnson (1999a), a prestige brand distinguishes itself in five values: 1. Prestige brands signal status and wealth: perceived conspicuous value. 2. A brand is prestigious if not every consumer owes the brand: perceived unique value. 3. The role a prestige brand plays can influence the decision-making process: perceived social value. 4. A prestige brand satisfies emotional desires: perceived hedonic value. Lastly: prestige brands excel in quality: perceived quality value. Although the prestige of a luxury brand consists of multiple motives, it is particularly considered to be a part of the social motives (Vigneron & Johnson, 1999).

2.3.3. Personal / individual motives

Personal motives that are considered when purchasing a luxury good represent the individuals’ own point of reference and the personal value the individual attaches towards luxury consumption. Three elements are associated with this individual value: (1) hedonic value, (2) materialistic value, and (3) self-identity value (Wiedmann et al., 2007; 2009; Hanzaee et al., 2012).

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To start, (1) hedonic value represents the positive emotional experiences consumers’ gain when purchasing a luxury good. “These include aesthetic beauty, enjoyment and sensory pleasure” (Wiedmann et al., 2009; as cited in Hanzaee et al., 2012, p.1447). “Luxury-seekers are considered hedonic consumers when they are looking for personal rewards and fulfilment acquired through the purchase and consumption of goods evaluated for their subjective emotional benefits and intrinsically pleasing properties, rather than functional benefits” (Sheth et al., 1991; as cited in Vigneron & Johnson, 2004, p. 490). Because a luxury good fulfils the emotional benefits on top of the functional benefits, it is distinguished from non-luxury goods (Vigneron & Johnson, 2004).

Second, there is (2) materialistic value. Referring to the research on the expression of material values, Richins (1994) stated materialism consists of three categories: centrality, happiness and success. Centrality refers to the importance of possessions and the central role possessions play in a consumer life, happiness describes well being is a consequence of having the right possession, and success is dependent and judged on the possessions consumers have. Considering this materialistic value, luxury goods are more valuable than non-luxury goods.

Third, (3) self-identity value puts the consumer’s identity central. It is about the thoughts and feelings about the individual’s self, including one’s own abilities and characteristics. When purchasing luxury goods, consumers value goods that reflect to or even strengthen or extend their self-identity. Consumers can apply the symbolic meaning of a luxury good to their own identity, but only when the image of the luxury good is congruent and coherent with their own identity (Amatulli & Guido, 2012; Hanzaee et al., 2012).

Altogether, figure 1 demonstrates the abovementioned luxury value dimensions and provides a clear overview (Hanzaee et al., 2012, p.1447).

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- Figure 1. Theoretical model for luxury value dimensions (Hanzaee et al., 2012, p.1447) -

2.3.4. Financial motives

The abovementioned motives explain the luxury market consumption for a great extent. However, there is one more important motive: the financial motive (Wiedmann et al., 2007; 2009). The element associated with the financial motive is price value. Price value explains the dominant role price has in the world of luxury goods. There is a lot research dated from the ‘90s, which shows price influences consumers’ perception of the quality of the product (Erickson & Johansson, 1985; Lichtenstein, Bloch, & Black, 1988; Tellis & Gaeth, 1990). Besides, consumers that tend to be conscious of their status use the price of a product as an indicator of the prestige value (Groth & McDaniel, 1993; Vigneron & Johnson, 1999). Price is often used as a proxy for quality (Yeoman & McMahon-Beattie, 2006): pricing a product with a high price, that in turn suggests higher quality or status, may make a product more desirable (Groth & McDaniel, 1993).

However, there is more value attached to a luxury good than just the price tag. Consumers “distinguish between objective price (the actual price of a product) and perceived price (the price as judged by the consumer)” (Wiedmann et al., 2009, p.630). Wiedmann et al. (2009) propose that “price as an indicator of outstanding quality or exclusivity of a luxury product or service is an appropriate criterion for value-based segmentation of luxury

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Chapter 3 – Managing brand equity by brand positioning of luxury brands

As chapter 2 introduced the world of luxury brands, subsequently it is important to have a closer look at the positioning of a (luxury) brand. This current chapter describes a brand as an associative network in the mind of the consumer. How are associations formed? How does a brand create brand equity? How does a brand position itself in the right way? Moreover, what is the role of points-of-parity and how can Ofman’s theory on core quadrants help to operationalize and further define this concept?

3.1. Brand associations

Every brand wants to attract consumers. Keller states that in order “to build a strong brand, the right knowledge structures must exist in the minds of actual or prospective customers so that they respond positively to marketing activities and programs in these different ways” (Keller, 2009a, p.140). Branding helps consumers to make a buying decision by organizing the knowledge the consumers receive from the brand (Keller, 2013). But how do brands have access to consumers’ minds?

Aaker and Equity (1991) reflect to brand associations as “anything linked in memory to a brand” (p.109). They state that the goal of these associations is to be meaningful for consumers. Keller (1993; 2001; 2009a) has conducted extensive research on associations. In his research, he presented multiple conceptual models of brand equity from the perspective of the consumer, where ‘brand equity’ is defined as “the differential effect of brand knowledge on consumer response to the marketing of the brand” (Keller, 1993, p.1). Brand knowledge is conceptualized as consisting of a brand node1_{in memory to which a variety of associations}

are linked. He suggests that part of the strength of brand equity is a result of brand associations being easily accessible in memory. Associations can be categorized into

1_{“Nodes are stored information connected by links that vary in strength. The strength of association between the activated}

node and all linked nodes determines the extent of spreading activation and the particular information that can be retrieved from memory” (Keller, 1993, p.2).

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related or non-product related attributes, functional or symbolic benefits, and overall brand attitudes (Keller, 1993).

Brand associations are very broad: they can concern the physical product, or the people, places and occasions associated with the product. There are many ways in which brand associations create value for a product. First, associations help to process and retrieve information consumers receive. In this way, associations (hopefully) highlight the benefits of the product and raise considerations to buy the product. Moreover, brand associations can be used by a brand to extend into a new product category (Henderson, Iacobucci, & Calder, 1998).

As stressed the importance of associations above, Keller (1993) adds to the discussion that associations can differ. He states brand associations involve three important dimensions that are essential in order to build customer-based brand equity, and which determine the consumer’s response: “(1) Strength – how strongly is the brand identified with a brand association? (2) Favorability – how important or valuable is the brand association to customers? (3) Uniqueness – how distinctively is the brand identified with the brand association?” (Keller, 2001, p.12). Concerning luxury brands, marketers have to evaluate the above three dimensions to ensure the luxury brand equity stays strong (Keller, 2009b).

3.1.1. Associative network

As mentioned above, reaching the mind of the consumer is important. All the knowledge a consumer adapts is stored in an ‘associative network’. Back to the start, Collins and Loftus (1975) began with explaining that a node in a network represents a concept. Everything that belongs to this concept forms links from the node to other concept nodes, and in turn to other concept nodes, and so on…

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stimulus activates immediately. This activation continues, while the memory retrieval causes a spread towards other concepts that are closely related to the stimulus. In their research, they show that when an individual is reminded of a fire truck, he/she can immediately think of fire, the red colour, other medical services such as an ambulance, or a fire truck. These nodes continue into associations with other colours, with the red colour, other vehicles, and so on. In this way, the network spreads further and further. In addition, Henderson et al. (1998) take a closer look at the associative network for a brand. This network helps managers to understand the perceptions consumers have about the brand and all the related elements to the brand. The nodes in their illustration include “the firm name, the product brand name, a generic product category, features of the products and people and occasions” (Henderson et al., 1998, p. 308). Because the activated nodes form a connection in the associative network, consumers will develop brand preference (Keller, 2013). Given these points, brand associations are essential to create brand equity.

3.1.2. Luxury brand associations

As already mentioned by Aaker and Equity (1991), brand associations are defined as anything linked in memory to a brand. Since luxury brands exceed regular brands on various aspects, it is expected that these brands evoke various and typical associations.

As Keller (2009b) argues, luxury branding is about creating associations. Luxury brands carry a lot of meaning to consumers, due to (e.g.) their status, symbolic value, heritage and history. Prospect consumers become influenced by the brand affiliation of current consumers. Marketers often use associations from other entities and link them to luxury brands, as these associations are very valuable and reinforce the brand. The use of celebrities, a luxurious country-of-origin or some high-class event is common in the world of luxury branding (Keller, 2009b).

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In a research of De Barnier, Rodina and Valette-Florence (2006), three different countries (France, United Kingdom and Russia) were compared to see if luxury brand associations differ per country. Results showed that there were several common luxury brand associations across all countries, related to personal history, premium quality, aesthetics, self-pleasure and expensiveness. More luxury brand associations that differed per country were product conspicuousness, aspiration and luxury atmospherics. In sum, all consumers that were interviewed searched for “quality benefits in luxury brands associated with comfort, security or other special characteristics that could make life easier” (De Barnier et al., 2006, p.8).

Another research that reveals typical luxury brand associations is the brand research for Lancôme, performed by Labadie (2015). During this research, the free association technique was used and respondents were asked to list all their associations that come to mind when thinking about the brand Lancôme. Some mentioned associations were price, expensive, luxurious, exclusive, status, chic, high quality, good material, and status enhancing. The strongest associations were related to the product, the price, elegance, prestige, France, and quality, and were not gender dependent. Moreover, Lancôme scored high scores for all positive brand values, and had no apparent problems with negative luxury brand traits. As indicated by the strongest associations, the majority of the associations is not a specific association for Lancôme, but could be associated with other luxury brands as well (Labadie, 2015).

In sum, luxury brands do possess some typical associations, of which most are related to its’ price, exclusivity, quality and status. As can be noticed, these associations are in line with the typical features of luxury brands as described in the literature chapter above.

3.2. Keller’s Customer-Brand Based Equity pyramid

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be followed, with the consumer put central in mind. These steps are proposed in the Customer-Based Brand Equity model pyramid, as shown in figure 2: “(1) establishing breadth and depth of brand awareness; (2) creating strong, favorable, and unique brand associations; (3) eliciting positive, accessible brand responses; and (4) forging intense, active brand relationships” (Keller, 2001, p.17). In order to achieve these four steps, six brand-building blocks have to be established (Keller, 2001).

Returning to the goal this thesis is interested in the establishment of a perception towards a luxury brand and the possible development / changes of this perception towards the brand, it is important to focus on the second stage of the CBBE pyramid, brand meaning. This stage is about establishing a brand image: how is the brand characterized and what should the brand stand for in the mind of the consumers? Brand meaning consists of two categories of brand associations in the mind of a consumer, related to brand performance and brand imagery (Keller, 2001).

Brand performance reflects the attempt of the product or service to fulfil a consumer’s

functional needs. There are five dimensions that serve this performance category: (1) primary characteristics and secondary features, (2) product reliability, durability, and serviceability, (3) service effectiveness, efficiency, and empathy, (4) style and design, and (5) price.

Brand imagery reflects the attempt of the product or service to fulfil a consumer’s

psychological or social needs. For luxury brands, much equity is intangible and is therefore situated in brand imagery (Keller, 2009b). There are four dimensions that serve this imagery category: (1) user profiles, which could be an idealised user for luxury brands, (2) purchase and usage situations, which are very apparent for luxury brands (3) personality and values, which could be sophistication or excitement for luxury brands, and (4) history, heritage, and experiences, in which luxury brands have many strong associations (Keller, 2001).

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- Figure 2. Customer-based brand equity model pyramid (Keller, 2001) -

3.2.1. Building CBBE for luxury brands

In a luxury-branding context, building Customer-Brand Based Equity is a little bit different than building CBBE for ordinary brands. Research between luxury consumers and economy consumers showed that luxury consumers “perceive their brands’ image (quality, prestige, and affect) significantly better than economy consumers” (Guzmán, Abimbola, Tolba, & Hassan, 2009, p.363). The authors have drawn the conclusion that luxury consumers emphasize more on image, where economy consumers emphasize more on the higher value for money. Another remarkable finding was that the economy consumers tend to be more loyal to the brand. They provided an explanation, which stated that although luxury consumers are satisfied with the image and the excellent quality of a brand, still switch brands due to the lack of differentiation. On the other hand, economy consumers avoid taking the risk to switch to other brands and are satisfied with the current value they are offered (Guzmán et al., 2009). So in the luxury market, brand switching is high and brand loyalty is more difficult to achieve. Therefore, in order to build strong CBBE for luxury brands, the focus needs to be on the imagery and subsequently on more loyalty programs to have more luxury consumers’ stick to the brand and achieve brand resonance.

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3.3.Points-of-Parity and Points-of-Difference

As shown in Figure 2, the branding objective of the second stage of the CBBE pyramid is to create points-of-parity and points-of-difference, which reflect the types of associations the consumers have in their minds (Keller et al., 2002). In their paper, Keller et al. (2002) mention that as a brand, you need to ask yourself three important questions to help ensure the right brand positioning. These questions are: (1) Have we established a frame? (2) Are we leveraging our points-of-parity (PoPs)? and (3) Are the points-of-difference (PoDs) compelling?

First of all it is essential to start with understanding your own frame of reference, since this shows consumers what they can expect to achieve by using your brand. The frame of reference reflects the category in which you compare your brand with other brands. It is important to choose the right frame of reference since it determines the associations’ consumers will have in their mind when using your brand. Subsequently, these types of associations will function as the PoPs and PoDs for your brand (Keller et al., 2002).

When an association is strong and favorable but not unique in the mind of the consumer, there is a point-of-parity. In this case, there is no reason not to buy the brand. “Points-of-parity are elements with essentially the same performance or functionality as those of the next best alternative” (Anderson et al., 2006, p.6). Points-of-parity must be met if consumers are to perceive the brand as a legitimate and credible player within the frame of reference the brand is in (Keller et al., 2002). It is important for a brand to identify what it takes to be a player in the category it is in, and to cover all the points-of-parity (Michael, 2011).

There are different types of points-of-parity, namely (1) category, (2) competitive, and (3) correlational points-of-parity (Keller, 2013). Categorical points-of-parity represent the necessary conditions a brand needs to have when a consumer makes a brand choice. These

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attributes and benefits are like “the ‘green fees’ to play the marketing game” (Keller, 2013, p.105). Competitive of-parity represent the associations that make competitors’ points-of-difference ineffective. When a brand can enter the area where competitors claim to have more advantages, the brand should have an unbeatable competitive position. Lastly,

correlational points-of-parity are “those potentially negative associations that arise from the

existence of other, more positive associations for the brand” (Keller, 2013, p.84). Considering the consumers’ thoughts, it is believed that if you as a brand are good at providing one thing, you cannot be as good in providing another thing. For example, it is hard for consumers to believe that something can be ‘inexpensive’ and ‘of the highest quality’ at the same time. These items are inversely related. Figure 3 provides some more illustrations of these correlational points-of-parity.

- Figure 3. Examples of correlational points-of-parity (Keller, 2013, figure 2.6, p.84) -

A point-of-parity does not have to mean the brand attribute or benefit is literally equal to its’ competitor brands, as long as the consumer believes the brand is ‘good enough’ on that specific attribute or benefit. In this way, the consumer does not consider the attribute or benefit as negative or problematic and chooses the specific brand on different factors that may be more favorable in comparison to other brands.

When an association is strong, favorable and unique, the brand is distinguished from another brand in the same frame of reference. This is known as a point-of-difference (Keller et al., 2002). In this case, a point-of-difference is the reason to buy the brand, because according

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to the consumer, other brands will not offer the same extent. PoDs make a brand preferred more over other brands. The brand has to offer ‘reasons to believe’: why should you buy this specific product over another competitors’ product? Consumers have to become convinced that the brand is strictly unique in offering that specific attribute or benefit.

The research of Guzmán et al. (2009) shows a clear difference between luxury consumers and economy consumers and their perceived PoPs and PoDs. In their research, they concluded that luxury consumers easily switch brands and perceive the ‘image’ of a luxury brand as a point-of-parity. However, they perceive ‘value’ as a point-of-difference that lets one luxury brand differentiate itself from the other luxury brands. Vice versa, economy consumers perceive the value offered by luxury brands as a point-of-parity, while they stay loyal to the brands that have, according to them, a better image, thus a point-of-difference (Guzmán et al., 2009).

Developing a solid brand strategy will be easier when a brand thinks through its points-of-parity and points-of-difference: if a brand knows where the brand value proposition is strong and where it is weak (Grams, 2009). According to Keller (2013), when points-of-parity can overcome potential weaknesses, points-of-difference may not even matter. While points-of-parity are easier to achieve than points-of-difference, it is important to focus on necessary categorical, competitive and correlational points-of-parity.

Returning to the purpose of this research, it is expected that the correlational points-of-parity in a luxury-branding context are characterized by a high price, accompanied by potentially negative associations that arise from the existence of this high price. In addition, it is expected some positive associations also accompany that high price. It is interesting to see whether this relationship actually exists, and what these accompanied associations might be.

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3.4. Correlational points-of-parity extended: Ofman’s theory on core quadrants

A theoretical framework that might help to operationalize the correlational points-of-parity in a luxury-branding context is Ofman’s theory on core quadrants (2007). Daniel Ofman developed a core quadrant model (2007) that shows a person’s qualities, pitfalls, challenges and allergies. Every human is different and has different strengths and weaknesses. It is important to recognize this, in order to gain more insight into human behavior, patterns and qualities. The model was introduced for the purpose of having a closer look at someone’s personality and the influence of personality traits, and answering the question: Who am I? Although Ofman applies the core quadrant model to persons, it is an idea to apply this model to brands. As the model covers personal development, it would be easily suited in a branding context as well. Specifically, brands have certain core qualities, pitfalls, challenges and allergies as well.

3.4.1. Core quality

Core qualities are the qualities from within the person’s essence. These are characteristics that

stand out and are things other people notice when thinking of this person. Because the person is so strongly associated with a core quality, the person would no longer be recognizable without the core quality. Core qualities cannot be learned, only developed. Ofman argues humans are born with a number of core qualities. The better you know your core qualities, the better you can apply them in practice (Ofman, 2007).

In a luxury-branding context, luxury brands are also strongly associated with certain characteristics, such as high quality, exclusivity and prestige, as already mentioned in the chapters above. In essence, the core qualities of a luxury brand can be seen as the consumers’ positive associations that are essential for the luxury brand. A core quality can also be considered as the brand’s points-of-parity: a strong and favorable association, but not unique

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3.4.2. Pitfall

When a core quality is overdeveloped, distortion can appear. This is also known as a person’s

pitfall: the core quality (good thing) is too much present. Subsequently, this pitfall is the

negative quality the person is likely to be labelled. Ofman states you have to treat your core qualities and pitfalls as a gift, since they cannot get detached (Ofman, 2007).

Regarding luxury brands, the core qualities could become overdeveloped as well. For example, a luxury brand could be perceived as exclusive (core quality), but when the luxury brand becomes too exclusive, the brand can become unattainable (pitfall). When operationalizing the concept of correlational points-of-parity, these negative associations can arise from the existence of other, more positive associations for the brand.

3.4.3. Challenge

A person can challenge him/herself by asking what he/she misses in him/herself. When challenging yourself, you can develop yourself more. A challenge represents the opposite of the pitfall: it represents the positive side. The core quality and the challenge are complementary: when a person is between his/her core quality and challenge, he/she is ‘most impressive’. It is hard to find the balance between these two core quadrants. However, when connecting the core quality with the challenge, the pitfall will be dissolved (Ofman, 2007). To establish a link to luxury branding, a luxury brand that is perceived as unattainable can challenge itself by leveraging more accessible products. However, as already mentioned above, the luxury brand should stay between being exclusive (core quality) and being accessible (challenge) to be the most impressive.

3.4.4. Allergy

The last quadrant is allergy: a person appears to be allergic to other persons who have an excess of the person’s challenge. When a person is confronted with “too much” of the challenge (that is exposed at another person), the person will have an allergic reaction

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(Ofman, 2007).

When applied to a luxury-branding context, the allergy of a luxury brand that is exclusive (core quality) and tries to be accessible (challenge) could be that the brand becomes a mass brand. In other words, a very exclusive brand will be allergic to a mass brand.

3.5. Application to brands

Regarding luxury branding, it is expected that brands that are strongly positively linked to a core quality (core association) also have a pitfall (a negative, but less strong association). Furthermore, it is expected that the brand dislikes the ‘allergic association’ and can gain ground by stronger linking the ‘challenge association’ to the brand. Since luxury brands are not accessible to every consumer, it is possible that different consumers have different opinions about these brands. Some consumers may perceive a luxury brand as superior and glamorous, where other consumers may perceive a luxury brand as snobbish. It is interesting to position a luxury brand in the core quadrant model in order to gain more insight into the brand’s ‘behavior’ and qualities. Moreover, the perception of consumers could be discovered as well, by asking consumers how they think the core quadrant of a luxury brand looks like. In this way, the correlational points-of-parity in a luxury-branding context could be discovered.

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Chapter 4 – Hypotheses formulation

In this chapter, hypotheses are formulated based on relevant academic literature as described in the previous chapters. Turning back to the purpose of this research, the main question that these hypotheses try to answer is: “To what extent does a change in correlational points-of-parity influences a consumer’s perception towards a luxury brand?”

4.1. Conceptual framework

The knowledge a consumer gains from a brand is stored in an ‘associative network’. A brand can create strong, favorable and unique associations in the mind of the consumer. These associations subsequently influence the brand image and eventually the consumer’s attitude towards the brand (Keller, 2013). To gain more insight into the current position of the associations about luxury brands in the mind of the consumer, the core quadrant model of Ofman (2007) can be used. This core quadrant model is initially applied to persons, while this study applies the model in a luxury-branding context. The core quadrant model can be divided into a brand’s Core Quality, Pitfall, Challenge and Allergy (Ofman, 2007). A luxury brand has a certain brand personality that is apparent and important in order to maintain its luxury position. When applying the core quadrant model, the characteristics of a luxury brand can be identified and discussed more in-depth.

When having a look at the main research question this study tries to answer, the core quadrant model (Ofman, 2007) is suitable to identify the core qualities and pitfalls of luxury brands. Luxury brands have certain strong associations that correlate with each other (correlational points-of-parity). As already described in the theoretical framework, price is strongly associated with luxury brands and correlates with high quality, prestige and exclusivity (Vigneron & Johnson, 2004; Mortelmans, 2005; Wiedmann et al., 2009). In other words, the higher the consumer perceives the price of a luxury brand, the higher the consumer perceives its quality, prestige and exclusivity. Now the question rises: is there a limit when