The Evolution Of Luxury: Brand Management Of Luxury Brands .

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The Evolution of Luxury: Brand Management of Luxury Brands, Old and NewRayeCarol CavenderDissertation submitted to the faculty of the Virginia Polytechnic Institute and State University inpartial fulfillment of the requirements for the degree ofDoctor of PhilosophyInApparel, Housing, and Resource ManagementDoris H. Kincade, ChairJulia O. BeamishJames E. LittlefieldPatricia J. FisherJune 21, 2012Blacksburg, VirginiaKey Words: Luxury, Brand Management, Case AnalysisCopyright 2012, RayeCarol Cavender

The Evolution of Luxury: Brand Management of Luxury Brands, Old and NewRayeCarol CavenderABSTRACTThis qualitative study contributed to the growing body of research in luxury brandmanagement by constructing a framework that can be utilized by luxury companies andconglomerates to develop their business strategies. The purpose was to examine: (a) how thechosen luxury firm is addressing the changing business environment of the luxury goods industryand the changing consumer environment targeted by that industry, (b) how the firm is managinggrowth trade-offs, and (c) how the firm is adapting its marketing orientations to becomeconsumer-centric and experiential. Six research questions guided the study, and data collectionand analysis took place in two parts. Methods for this study included and in-depth review ofliterature, an exploration of the business environment, and a case study. The study concludedwith the formation of a brand management framework specific to the luxury goods industry.Data collection and analysis included an in-depth exploration of the evolution of thebusiness environment of the luxury goods industry from the mid-1800s to the first decade of the2000s, and a case study of the sample luxury goods company, Louis Vuitton. A historical reviewwas conducted beginning with the company’s inception in 1854 and continuing through theformation of the LVMH conglomerate in 1987. Exploration of brand management successes andfailures helped identify information relevant to variables in selected business categories(business environment, corporate environment, and marketing strategy). Analysis of the casestudy resulted in the refinement of the four brand management variables: corporate, brandmanagement, trade-off, and strategic planning.Environmental determinism and the zeitgeist were evidenced to be important factors thatshaped the business strategies of LVMH and its brands. Strategic planning and strategicmanagement response were identified as ongoing strategies that helped LVMH and its brands toeffectively address and respond to environmental changes. Both environmental determinism andthe zeitgeist and the use of strategic management response were incorporated into the luxurybrand management framework as overarching themes for explaining the influences andresponses for the four management indicators.

AcknowledgementsThe author wishes to express sincere appreciation to the Virginia Tech faculty whoserved on the study committee: Dr. Doris H. Kincade, Professor, Department for Apparel,Housing and Resource Management (AHRM); Dr. Julia O. Beamish, Professor and DepartmentHead of AHRM; Dr. Patricia J. Fisher, Assistant Professor, Department of ARHM; Dr. James E.Littlefield, Professor Emeritus and former Head, Department of Marketing, Pamplin College ofBusiness.I would especially like to acknowledge the support and encouragement provided by Dr.Doris Kincade, who chaired the committee. Since 2002, when she became my undergraduateadvisor, Dr. Kincade has been a valued mentor for me. Having the opportunity to work with Dr.Kincade again strongly influenced my decision to return to Virginia Tech to complete my PhD.Throughout the completion of my doctoral program, she has provided me with unendingpatience, guidance, and assistance. This support was instrumental in motivating me to overcomenumerous obstacles encountered during the period of the study.A word of appreciation is also extended to Dr. James A. Buford, Jr., retired AuburnUniversity Professor and Management Consultant with Ellis Harper Advertising for beingresponsive to my calls on statistical questions as well as writing letters of recommendation onmy behalf.I deeply appreciate the love and encouragement of my parents, Drs. Ray and DottyCavender, for their continued financial support, counsel, guidance, and belief in my potential.Without them, achieving this goal would have been impossible.Finally, I deeply appreciate the loving support and patience of my husband, Brice Cole.He has been there for me every step of the way and been an unwavering rock for me to lean on intimes of frustration and discouragement. I could not have completed this degree without him.iii

Table of ContentsAcknowledgements . . iiiTable of Contents . .ivList of Figures . . .viiiList of Tables . . . .ixChapter I. Introduction.1Overview of the Luxury Goods Industry . . .1Overview of Brand Management . . .3Strategic Planning 5Statement of the Problem . . . .8Conceptual Framework . . .10Environmental Determinism . .10Fashion Adoption Theory . . 11Model Development . . 12Purpose of the Study . .13Chapter II. Review of Literature . . . 16An Overview of Branding .16Brand Concept .17Brand Identity . . .19Brand Personality . . .20Brand Image . . 22Brand Awareness . .24Brand Positioning .25Brand Loyalty . . .28iv

Brand Equity . . . .31Marketing the Luxury Goods Brand . . .37Motivations Related to Luxury Consumption .39Experiential Marketing .42Managing Growth Trade-offs . .44History of the Luxury Goods Brand . . 50Worth and the Early Modern Designers:The First Era of Modern Fashion . . . .51The Designer as the Brand:The Second Era of Modern Fashion .56The Rise of the Conglomerate:The Third Era of Modern Fashion . . . . 60Chapter III. Methods . . 65Sample . . . 67Validity and Reliability of Study . . . . 69Validity . .70Reliability . . .71Limitations . 73Data Collection . 73Data Analysis . .74Chapter IV. Case Study . . .83Corporate History of Louis Vuitton .84Louis Vuitton . . . .84George Vuitton .86Gaston- Louis Vuitton.87v

Relaunch and International Growth . .89Louis Vuitton Möet-Hennessy Merger .90Brand Portfolio Following the Merger . 94Arnault’s Brand Strategy . .94The Louis Vuitton Brand in the 1990s . . . .95Marc Jacobs and Ready-to-Wear . . . . .98The LVMH Brand Portfolio in the 1990s . . . .99Acquisitions and Divestments in the LVMH Brand Portfolio . .103Dior Couture . . 105Watches and Jewelry . . 110Perfume and Cosmetics . . 116Selective Retailing . . .126Fashion and Leather Goods . . .135Failures within the Fashion and Leather Goods Group .141Successes in the Fashion and Leather Goods Group . .145Back-to-Basics for LVMH and Further Restructuring .148Successes with Fendi . .150LVMH Fashion Group and its Successes . .153Chapter V. Results . . .157Overview of Changes in the Business Environment . .159Successes and Failures of Corporate Variables . . . .163Company History . . . 166Brand Portfolio . . .168vi

Financials . . .172Successes and Failures of Brand Management Variables . .175Brand Management Strategies . 176Brand Identity . . . . .181Marketing Vision . . . .186Successes and Failures of Growth Trade-Off Variables . . .189Growth Trade-Offs . .192Brand Equity . .196Brand Architecture . . .198Indicators of Successes and Failures in Strategic Planning .201Brand Sustainability . .202Effective Response . .206Luxury Brand Management Framework . . .211Chapter VI. Summary, Conclusions, Implications, and Recommendations 216Summary . . . . .216Conclusions . . . . .218Implications . . . .222Recommendations for Future Research . .224References . . 225vii

List of FiguresFigure 1. Brand Knowledge Model . . .23Figure 2. Luxury Brand Management Framework .215viii

List of TablesTable 1. Variables, Operational Definitions, and Measurement for the Study of theBusiness Environment of the Luxury Goods Industry . .77Table 2. Variables, Operational Definitions, and Measurement for the Study of theCorporate Environment . . . . .78Table 3. Variables, Operational Definitions, and Measurement for the Study ofBrand Management . . .79Table 4. Variables, Operational Definitions, and Measurement for the Study ofGrowth Trade-Offs . .80Table 5. Variables, Operational Definitions, and Measurement for the Study ofStrategicPlans .81Table 6. Dior Couture- Holding Company for LVMH . .106Table 7. LVMH Watches and Jewelry Group Brand Portfolio . . .111Table 8. LVMH Perfume and Cosmetics Group Brand Portfolio . .117Table 9. LVMH Selective Retailing Group Brand Portfolio . . 126Table 10. LVMH Fashion and Leather Goods Group Brand Portfolio .137Table 11. Revised Variables, Operational Definitions, and Measurement as Results of theStudy of the Business Environment for Louis Vuitton and the LVMH Conglomerate . 161Table 12. Revised Variables, Operational Definitions, and Measurement as Results for the Studyof the Corporate Environment for Louis Vuitton and the LVMH Conglomerate .165Table 13. Revised Variables, Operational Definitions, and Measurement as Results for the Studyof Brand Management for Louis Vuitton and the LVMH Conglomerate . .176Table 14. Revised Variables, Operational Definitions, and Measurement as Results for the Studyof Growth Trade-Offs for Louis Vuitton and the LVMH Conglomerate . .191Table 15. Revised Variables, Operational Definitions, and Measurement as Results for the Studyof Strategic Plans for Louis Vuitton and the LVMH Conglomerate . . 202ix

Chapter I. IntroductionPark and Kincade (2011) reviewed the business environment of the general apparelindustry from 1973 to 2005 and identified three categories of influence: consumer, globalization,and technology. They reported of increased globalization of the business environment and amovement of the industry from a focus on automation and product quality control to outsourcingand a focus on consumers. Indications from their research and other authors (e.g., AmericanFabrics and Fashion, 1980) are that the apparel industry prior to the 1970s was focused onproduction aspects of the industry and experienced limited change from earliest recorded historyto the later part of the 1900s. For example, increases in production were focused on fabricproduction during the 1800s because home sewing was the norm for clothing production. Duringthe early parts of the 1900s the movement to ready-to-wear clothing and the increase in retailersto sell these products changed home sewing to factory production, but the production aspect ofthe business was still most important (Burns & Bryant, 1997). Park and Kincade note the growthof the marketing aspect of the business starting in the 1970s and 1980s.Overview of the Luxury Goods IndustryIn general, the apparel industry shows little fragmentation of change by product type untilmore recent history. The luxury goods industry, as a subset of the apparel industry, shows somedistinct changes in the more recent business environment for this industry. These recent changesrepresent an unprecedented pattern of growth, averaging 14% growth in sales annually from1996 to 2000, and overall growth in the first decade of the new millennium despite periods ofglobal recession (Bruce & Kratz, 2007). In addition, the cyclical nature of the luxury industry hasbeen especially evident during this time period as events in economic, social and political1

environments (e.g., economic downturns, terrorism, and natural disasters) have impacted growthin the industry. In the long run, continued growth in the sector is predicted due to emergingmarkets, a growing number of wealthy individuals around the world, and growing demandamong middle market consumers due to luxury’s aspirational nature (“The new luxury,” 2004).Although the luxury goods industry has existed since the 1850s, few changes are noteduntil the later decades of the 1900s. These decades and the early decades of the 2000s havewitnessed numerous changes in the industry. Exploration of the changes in the businessenvironment for the luxury goods industry specific to globalization, technology, and thecon

The Evolution of Luxury: Brand Management of Luxury Brands, Old and New RayeCarol Cavender ABSTRACT This qualitative study contributed to the growing body of research in luxury brand

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