A research of luxury brand’s consumer behavior
The current literature review focuses on the investigation of such aspects as the basis of consumer behavior and psychology in marketing, the features of the contemporary Chinese luxury sector, and the tendencies in the behavior of Chinese consumers in the luxury sector. The importance of investigating these phenomena increases the relevance of the research methods selected for the study of the peculiarities in the marketing strategies of Louis Vuitton. Consumer behavior is a valuable predictor of marketing success; therefore, this phenomenon requires a thorough analysis. Furthermore, the revealed universal aspects of consumer behavior and psychology are transferred to the Chinese cultural and marketing sector. The aim of this approach is to compare and contrast the behavior tendencies in Chinese consumers of the luxury sector as well as their counterparts worldwide for the development of a successful outsourcing strategy.
Consumer Behavior and Psychology in Marketing
The sphere of consumer psychology and behavior is tightly intertwined with economic success, profitability, and other business outcomes, thus requiring consideration both from the viewpoint of a consumer and from the marketing specialist. From the position of psychology, consumer behavior is the result of different psychic processes that involve evaluation, analysis, synthesis, etc. The result of such way of thinking is an individual review of short-term and long-term consequences of the decision to buy something as well as opportunity costs, associated risks, etc.. For example, the consumption of a sandwich may have such short-term consequences as mitigating the problem of hunger and resource allocation whereas long-term outcomes may be associated with overweight, resource deficit and other. From the position of marketing, the awareness of the model of the consumers’ behavior allows increasing the success of strategies that stimulate people toward buying the products. For the product managers, awareness of consumer psychology helps in designing the products, allocate the advertising budget, and shape the messages that influence consumers. At the same time, contemporary investigations of consumer behavior do not characterize it as a simple domain that incorporates only the above-mentioned features. However, they offer a wide range of models and theories, which guideline different managers in their struggle for getting consumers’ attention and leading them toward resource spending.
In order to ensure successful wholesale, retail and marketing business, the awareness of models of consumer behavior is vital considering the profits as well as due to the ways it may shape their business or even foster evolvement or removal of the whole production lines. One of the first models that attempted to characterize consumers’ behavior is the model of value maximization, in which the consumers examine all the attributes of a specific product. The revision, comparison, and contrast are directed toward revealing and picking the “best” product for the offered price. In addition, this model states that consumers are maximizing their selection across all the possible consumption choices providing their predictions about the future. A specific feature of this process is that such kind of decision-making is not limited to a single store or supermarket, but the whole market of the similarly offered goods and services. Proposing this model, the scholars note that it offered different marketing tools that are valid and relevant for marketing since the time the theory of value maximization emerged. These include discrete choice modeling, which assists managers in designing products, pricing, and product positioning. At the same time, a specific part of managers and scholars criticized this model. For example, transferring it to the sphere of corporations and shareholding, they state that value maximization strategies are detrimental to the well-being of the society. In addition, Singer argues that this model fails when the managers deal with non-profit and hybrid corporations, where value does not play the role of a critical factor. Therefore, the contemporary theories of marketing have no agreement regarding the application of this model in relation to the stakeholder and consumer behavior.
Criticizing the approach that they consider irrelevant, experts in business and marketing offer diverse alternatives presuming that their proposals reflect the guidelines of the consumer behavior more adequately. One of such proposals is heuristics for choice, which is a process that involves simplification of the decision-making. Choice heuristics is the approach, during which a consumer attempts making appropriate choices at substantial savings of effort by ignoring information. Typically, this process involves selection of a specific attribute in the desired product or exclusion of an unnecessary attribute. In a luxury sector, a consumer may narrow the process of shoes selection by excluding the shoes of specific brands and types. For example, a woman customer may focus on the shoes by Louis Vuitton excluding high-heeled shoes of this brand, which would significantly ease the process of choice. In other cases, for example, when selecting sports shoes, the customers may oppose only two brands, such as Adidas and Nike excluding their competitors. Characterizing this approach, experts argue that the customers tend to oversimplify it by ignoring excessive information or any data that they consider irrelevant. For example, in the case of food choice behavior, they prefer relying on “easy-to-process” information presented in the form of descriptive terms. Such terms may include the slogans “low fat, high fiber” or health claims, such as “Oatmeal helps reduce cholesterol!”; therefore, the consumers typically ignore the comprehensive “Nutrition Facts” section. Nevertheless, although some researchers effectively utilize this methodology for explaining consumers’ behavior, others claim that its concepts are extremely broad. A typical argument in this respect is that the theory of choice heuristics does not offer any strategies for predicting consumers’ behavior. Consequently, marketing and consumer psychology experts prefer utilizing approaches that consider prediction of consumers’ behavior on the basis of cognitive analysis.
One of the theories of consumer behavior that attempts providing an insight into a customer’s decision-making process is the model of mental accounting. According to this theory, people have “mental” accounts that restrict their choices in compliance with the presumptions associated with trade-offs. For example, when an individual is intent on buying the shoes, he or she might want to have a mental account for leather shoes and select products only within this category. The research of this model reveals that it does not offer personalized and abstract mental accounts but is mainly based on the four assumptions. They include under-sampling and/or underweighting the depth of retailer’s infrequent discounts, loss aversion, diminishing sensitivity to the outcomes and use of previously encountered consequences for predicting future results. Thus, the major part of consumers are discount-oriented, tend to compare prices in different shops for evading losses, seek experiencing multiple small gains instead of few larger ones, and refer to their individual experiences in choice prediction. Other findings improve the mental accounting model by extending its characteristics and adding such categories as psychic state and cognitive load during the decision-making process. For example, a research by Loureiro and Haws found that “individuals in a positive affective state are less likely to exploit ambiguity in mental accounts and justify spending, but only when processing resources are unconstrained.” However, when the consumers in a positive affective state experience cognitive load or another kind of limitation of processing resources, they are more likely to spend. Similarly, mental accounting may include other characteristics and actions associated with spending such as the way of payment. For example, people are ready to pay more if they use a credit card rather than pay in cash and remember the details of their transactions better when they use a cash payment method. Consequently, field analysis reveals possibilities for the use of the mental accounting model with the purpose of fostering consumers’ behavior of a specific type.
The last two theories that oppose the idea of value maximization in consumer behavior are context effects and task effects models, which discuss the role of the contextual aspects in the decision-making process and the act of purchase. The role of context effects is critical when a customer makes a choice under the influence of added alternatives and selects an option that one had previously characterized as irrelevant. For example, in the case one set of clothes is cheaper, but the store selling it is located far from the customer, he or she may choose buying a similar but more expensive set that he or she found at one of the local stores. According to value maximization, such choices should not change but they are different in real-life situations due to the role of asymmetric dominance, attraction, or a compromise effect. Furthermore, according to a task effect model, the consumer choice significantly depends on the conditions, in which a person makes this choice. Typically, these conditions may depend on a psychological pressure by a third party, such as a store manager or spouse, physical or mental condition, etc. Explaining this effect, the scholars provide an example of joint and separate evaluation of similar products’ groups, in which the type of evaluation affects the consumer choice although the goods are similar. Modern scholars have improved this model by adding such variables as magnitude or outcome size, time of occurrence, and a probability of occurrence, thus revealing that the consumers are more delay and risk averse during separate evaluation. In similar studies, experts demonstrate the critical role of cognition and the state of mind in the consumers engaged in decision-making and product justification. Among such issues they indicate mood, hunger, stress, and sleep deprivation, which are critical biological factors in decision-making as they presumably affect “the context-sensitive variation in the levels of neuromodulators in the brain”. Moreover, Bartels and Johnson claim that marketing field benefits from merging with cognitive sciences and psychology, which provide a deeper insight into the consumers’ cognitive processes. At the same time, there is a need for reviewing the role of the cultural and domestic market contexts in the consumer behavior. Such analysis may provide valuable information regarding the selection of a relevant marketing strategy for a luxury sector in a specific country, such as China.
Chinese Consumers in the Luxury Sector
Throughout the end of the 20th century and recent decades, the Chinese cultural space and economy have drastically changed causing different effects on the social life of people and their consuming behavior. A significant part of this change is the reaction to the economic boost of the country, during which the consuming capabilities of its population increased. Considering the traditional attraction of the Chinese elite to gold and luxury, these tendencies spread among the population revealing specific patterns of consuming behavior in the luxury sector. As a result, scholars observe a “luxury fever” that is embracing China, during which the worldwide luxury companies have an increased interest in attracting the average Chinese consumer. At the same time, the analysis of contemporary situations with the European and other luxury brands operating in China reveals specific flaws and mistakes in consumer orientation. The basic reason is a lack of cultural and market awareness of the Chinese luxury sector, due to which some strategies achieve moderate success whereas others fail. Currently, the rush of European and American companies to the Chinese market led to their controversial results in profit generation due to the lack of market research and strategy development. The attraction of Chinese consumers in the luxury sector is more difficult than the managers of American and European companies consider since the modern elite class in China is educated by its scholar-bureaucrats, who had a specific vision of luxury and its consumption. Therefore, although the Chinese luxury market is open to the modern globalization tendencies, it may still appear closed from the viewpoint of understanding the behavior of a Chinese consumer.
Characterizing the Chinese luxury sector, it is critical to note that although the strategies of some brands fail, the domestic customers have a considerable and sustainable interest in luxury consumption. The predominant majority of these individuals represent Chinese elite who consume luxury products for supporting the high status, which correspond to that of their ancestors in imperial ages. From the historical viewpoint, the traditional Chinese luxury sector consisted of artisans’ ateliers, which collapsed after industrialization, two world wars, political evolution, and economic competition with their European counterparts. The existence and demise of these ateliers is a direct result of the Chinese luxury sector that has insufficient number of purely Asian traditional brands. At the same time, the interest of the Chinese elite in luxury remains stable, which creates a brand deficit. Consequently, the Chinese luxury sector initially experienced a controversial period, when the excessive demand for the luxury brand was not met at the full capacity due to irrelevant marketing strategies implemented by European and American luxury brands. As the Western civilization brought modernization and its lifestyle became trendy, the situation improved because the consumption of Western luxury products became a symbol of success. At the same time, the demand and decision-making processes of the Chinese consumers in the luxury sector are different due to their different background that affected their experiences and consumption patterns.
Due to historic, economic and cultural reasons, the profiles of the Chinese consumers of luxury brands are different than those in western countries, which impact their decision-making and consuming behavior. The major part of the country remains rural, whereas the societies in the regions, such as Hong Kong, Taiwan, and Singapore, comprise merely descendants of war refugees, poor farmers, and fishermen. As a result, after the economic transition of China, these layers became rich and wanted to fulfill their needs for social recognition and respect by means of buying luxury products. Consequently, China has gradually become of the world’s largest markets for luxury goods with functionality in relation to a highlight of the social status being one of the critical factors in the consumer behavior. The aspect of functionality comes at the first place, when contrasted to conspicuousness due to the mediating role of cultural beliefs and traditional values. Thus, the Chinese culture highly values frugality and simplicity, whereas the struggle for luxury is condemned, which plays an important role in value justification. Therefore, the experts argue that the Chinese society successfully opposes the spread of globalization paradigm associated with being culturally resistant and preserving its traditional values. Therefore, an average Chinese consumer of luxury tends to value functionality and simplicity of a product due to the context of traditional values.
Furthermore, the aspects of consumer psychology and behavior in luxury market in China depend on age difference, as the younger generations deal more actively with cultural assimilation. Scholars experimentally approved that, for the young Chinese consumers, “luxury brands evoked a greater sense of perceived luxury value that is, stronger self-identity, higher status, and more conspicuousness and hedonic value, than did nonluxury brands”. To some extent, this fact reveals that some cultural aspects of the Chinese society, such as the accent on collectivism, have changed. According to the surveys and marketing analyses, the younger generations in China are more individualistic and materialistic than the older ones. Nevertheless, due to the fact that the Chinese society is one of the most populous in the world, luxury brands require field investigations of individual and collective interest toward their products. Such investigation would allow increasing the aspects of product targeting selecting collective or individual oriented advertising campaigns, etc.
At the same time, another factor that is connected with age and culture of Chinese consumers is the strength of a consuming impulse when compared to analytics preceding consumption. For the Chinese society, the balance between these two characteristics is relevant due to the presence of two different cultural and philosophic frameworks. One of them includes traditional values, such as face, harmony, and guanxi, whereas the other one is political ideology, such as Maoism and Deng’s theory. As a result, the major part of the Chinese consumers tends to be materialistic when aspiring for luxury products. This suggests that, unlike in the US and European luxury markets, luxury brands should not base its strategies on stimulation of consumption impulse. The statistic data approves this argument demonstrating that the Chinese elite have an analytic-rational attitude toward luxury. At the same time, there is evidence that age and individualistic attitudes also affect the impulsive and compulsive characteristic of decision-making and consumption. For example, according to Kacen and Lee, “between the ages of 18 and 39, impulse buying increases slightly and thereafter declines.” In addition, the degree of impulsiveness in consumer behavior positively correlates with the prevalence of individualistic approach of Lee. Therefore, the American and European brands have to consider the described characteristic in the consumer behavior of the Chinese population in the luxury sector.
Celebrity Endorsement and the Behavior of Chinese Consumers toward Luxury Brands
When entering the Chinese markets, Western luxury brands tend to utilize alternative marketing strategies that synthesize the results of work of their R&D departments and bypass the procedures of brainstorming the Chinese consumers. One of the strategies that demonstrate this tendency is celebrity endorsement, which has become increasingly popular in diverse European and American players in the luxury market. This strategy, which is adopted in advertising and product placement, has become increasingly popular although experts claim that “there is no perfect celebrity to endorse all types of brands and generate maximum outcomes”. As a result, the models of endorsement are constantly updated considering the necessity to obtain a list of characteristics for the celebrity in order to attract maximum amount of customers. Among such determinants is attractiveness, trustworthiness, expertise; however, for the Chinese market, an endorser’s nationality and products correspondence are also critical. It was experimentally approved that foreign celebrity endorsers generate higher advertisement efficacy, and this characteristic increases if celebrity endorsers “fit” with brands endorsed. Thus, not all the celebrities suit the luxury market of China to generate sustainably high consumer interest and generate profits.
Another aspect that is critical for Chinese consumers is the presence of entertainment motives. Among them one may define aspiration and playfulness as well as experiences, such as fantasy and emotional investment in endorses. The experimental verification of this presumption with such stars as Yao Ming, Jackie Chan, Andy Lau approved that their emotional attractiveness impacted their capability to generate profits for multinational companies, such as Osim, Sony and other. In addition, similarly to global brands, their local counterparts are also interested in endorsing celebrities who are more emotional and appealing. For example, Chinese adolescents aged from 13 to 19 identified that they considered attractive those endorsers, whom they characterized as attractive, funny and expressive. In addition, the Chinese community has a strong interest in endorsers who are either internationally known Chinese or international stars. For example, they have a weak interest in local sports celebrities to endorse international luxury brands. This information partially explains the reason, for which luxury brand owners have problems with raising interest in consumers through sports celebrities’ endorsement. Moreover, the analysis of the attitudes of the Chinese markets and consumers toward domestic celebrities revealed its predominantly low character. Although China has the largest media market in the world, it uses mainly Western celebrities and promoters in philanthropy and endorsement. Thus, Western luxury brands have to consider these peculiarities when going to Chinese markets in order to avoid the failure of establishing a credible luxury reputation and consumer interest.
Although celebrity endorsement is a widespread strategy for impacting the consumers’ decision-making process and stimulating them toward buying behavior, the application of this tool in China in a luxury sector faces other difficulties. Characterizing the situation, some scholars argue that Chinese companies experience celebrity-endorsement crisis, which can be observed through the methods of online interaction with the customers. One of the reasons for considering celebrity endorsement as a risky profit generation strategy is the potential of endorsers to participate in scandals or crises unrelated to the products they promote. As such behavior negatively influences the popularity and positive attributes of such celebrities, the businesses and products they endorse perceive loss of consumer interest. However, within a Chinese cultural context, this problem is characterized as controllable due to a potential of strategies inclusion to generate positive secondary reaction toward integrity violators. At the same time, the analysis related to the relevance of endorsement strategies implemented in Chinese luxury sector demonstrates that they lack efficacy. For example, celebrity endorsement approaches practiced by Macao casino tourism centers with the aim of shifting the customers’ travel perceptions and decision making lack effect on the change of customers’ values. Experts in this industry understand the critical impact of endorsement on the increase of the audience’s attention, branding etc.; however, the increased endorsement of the local celebrities does not generate the expected effect. Therefore, it is required to implement additional investigations of variables associated with consumer behavior under the influence of celebrities that endorse luxury products.
In contrast to other industries, advertising specialists recognize media broadcasting and fashion industries more successful than luxury industry due to the increased popularity of endorsers involved in their frameworks. At the same time, the active use of the Internet creates further significant changes in the ways celebrities are judged as credible and those, in which they reach their target audience. Modern media technologies introduce different barriers and opportunities to the prediction and impact on consumer behavior. In contrast, consumer behavior also experiences the changes that some scholars characterize as evolutional due to the change of cognition and product analysis patterns. However, Chinese luxury market remains a problem for the major part of European brands due to their inadequate product placement and advertising. The reason is that the messages conveyed in the advertisement campaigns of the most typical brands, such as Dior or Gucci, have emerged from the premises of European consumer psychology. In contrast, as it has been stated above, Chinese consumers operate with different cultural concepts and refer to the different decision-making frameworks. For example, the investigation of Chinese and French luxury markets performed by Oswald revealed the fundamental differences in perception of price, status and other messages in luxury brand advertisements from the position of domestic consumers. This difference in mentality and culture is drastic, which luxury brand that wants to succeed in the Chinese market should consider any. Thus, for French customers, each luxury brand conveyed an individual meaning, which allowed them segmenting the brands into categories. French consumers characterized Armani as “modern, bold, sexy, famous”; Gucci as “rich, indulgent, creative”; Patek Philippe as “heritage, timeless, classic”; Dior as “femme fatale, fantasy, seductive, and sophisticated”. In contrast, Chinese consumers evaluated all the enumerated brands from the position of generic attributes disregarding any individual differences in product placement. Thus, the customers labeled all the brands as expensive, successful and royal as the Chinese consumers are generally oriented on the clichés they associate with European luxury. Therefore, any advertising campaign in luxury industry that disregards the mentality and culture of a Chinese consumer would fail in the case it appeals to European individuality and brand association. However, European and American brands should start their branding and product placement from the initial point using the value and cultural framework of the Chinese population. It is evident that Luis Vuitton luxury brand has undergone through all the difficulties of the Chinese luxury market before producing a successful strategy that combined endorsement, image generation, and modification of Chinese consumers’ behavior. One of the basic reasons for the failure of its initial marketing strategy in China was the application of consumer methodologies utilized in other countries, such as Japan and China. Thus, a company failed to recognize that new emerging markets display different luxury consumption styles when contrasted to the ones of the established markets. Therefore, the experts argue that modern luxury brands “should have a good understanding of the conflicting Chinese social cultural sentiments toward luxury consumption”. Apart from other markets, the Chinese luxury sector is attractive due to the huge number of peers. However, this perspective is often misleading because brands fail accessing them. In Chinese market, luxury brands should balance between standardization and adaptation as well as seek both consumers’ needs and their desire for products that approve their high status in the Chinese society. The performed literature review demonstrates that Chinese luxury market is a unique domain regulated by social, historical, economic and cultural variables that expand traditional models of the consumer behavior. As a result, luxury brands, such as Louis Vuitton, Gucci and other, require field investigations related to the attitudes of Chinese consumers toward their brands for revealing the perspectives of appropriate product placement as well as consumer behavior modification.
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