JAPANACCESS
individuals_1.jpg
companies_1.jpg
references_1.jpg
resources_1.jpg
HNWI_blog_1.jpg
contact_1.jpg
WORKING‚ÄàPAPER
3.2. A three-level luxury  marketing model
products. They either have a high income, but low assets (young professionals, corporate climbers in medium to high positions, young entrepreneurs of small companies), or high assets but low income (the retirement rich). Their opinion leaders are members of their respective social milieus (upper professional environment in the case of corporate climbers, colleagues in the case of professional doctors and lawyers, old colleagues and friends in the case of the retirement rich). Celebrity role models are still important but do not have the same impact as on level 1. More important are role models within the respective social environment, as those lifestyles are within immediate reach. Instead of aspiring to become their idol and consuming upper class luxury for the sake of conspicuous consumption, level 2 consumers are imitating social codes of the upper class in order to belong, to be accepted by the respective social milieu. Level 1 consumers are buying luxury goods as a form of imitating their favorite idol or the upper class, influenced by the "very impossibility of attaining what one wishes for" (Allison 2000: 124), the perceived lack finding expression in the fetish: the luxury product. "The fetish substitute for the thing that is desired [an upper class lifestyle] but is impossible to obtain." (Kelsky 2001: 26) At level 2, the luxury product is not the fetish that substitutes the real want of belonging to a different social class, because the upper class lifestyle is either within reach or already attained to some extent. So here the obtained luxury product or service itself, considered appropriate to one's own lifestyle or level of social success, gives the consumer pleasure by transferring that message to others. Level 2 consumers either purchase luxury in accordance to the social codes of their level within the corporate or professional hierarchy, or in case of the retirement rich, consume luxury as a way to reward themselves for a lifetime of work.
LEVEL 2 - PREMIUM‚ÄàLEVEL

There is a lot of potential in this level by mass targeting specific consumer rich segments, such as the Japanese baby boomer generation, corporate climbers, and affluent women in their 40s. In order to distinguish these offers from normal products, it is essential to clearly mark them as being special, by creating luxury spaces within department stores in which the upscale consumer can feel more comfortable (Danziger 2005: 101). A change in product segmentation could include creating aspirational appeal while simultaneously making a brand more accessible and more competitive by boosting demand with entry-level products (“Accessible super premium” items are priced near the top of the category, but are still affordable to the middle-market, because they are relatively low-ticket items. “Old luxury brand extensions” are lower priced versions of products created by companies whose brands have traditionally been affordable only for the rich. See Nunes et al. 2004: 10). The marketing exclusivity to reach level 2 customers has to be higher than on level 1, by making the offers and approaches more personally relevant to the respective customer segments, and by appealing to their heightened sophistication that marks them as different from level 1 consumers. Level 2 consumers want to have their more informed consumption patterns recognized. Word of mouth strategies have to target opinion leaders within their different social environments. With their lifestyles, tastes, and mind sets varying tremendously, thorough segmentation and milieu analysis is needed.
LEVEL 3 - LUXURY‚ÄàLEVEL

Level 3 consumers refrain from discount and mass market stores, and either have a high income and high assets or extremely high income with low assets. In order to reach them, specialized magazines, limited-access internet sites, word-of-mouth, and event marketing strategies with high marketing exclusivity have to be implemented. Their distinguishing characteristics are their regular connections to exclusive marketing environments and extensive contacts to various networks of other rich people. This level clearly demarcates "another world", far away from the normal mass luxury consumer. Members of this group include very successful professional rich (doctors and lawyers), entrepreneurs after a successful IPO (Initial Public Offering. A company issues shares to the public for the first time in order to expand its capital), “super-salarymen” of foreign financial institutions, rich business owners, board members of big corporations, and the wives and girlfriends of the rich and powerful.
In contrast with level 2 consumers, the networks of level 3 consumers are connected by the fact that they all belong to the "upper class"—they have access to a different kind of social environment to which level 2 consumers do not, but aspire to and want to gain access. So when targeting opinion leaders, marketers should be aware of the fact that even though there are different networks within
level 3, they are interconnected by social gatherings where level 3 people from different networks are invited. Simply put, level 2 consumers do not all go to the same party but stay, more or less, within their respective social environments. Level 3 consumers on the other hand—due to their connections, higher income level and often tremendous assets—can achieve another level of social interconnectedness where it is possible for them to meet people from distant networks more easily. They have the capability to set themselves apart from the normal social gatherings of middle-class people. They think of themselves as wealthy and want to be treated accordingly. Many customers in this group are often disappointed by the service level provided to them by luxury companies, and would be willing to spend more in many categories, could they find offerings that are more tailored to their individual needs (Nunes et al. 2004: 13). In interviews conducted with HNWI customers, one of the things mentioned most often was their feeling that their customer value is not recognized and not appreciated. To quote Paul Goldsmith, CEO Esprit Corporation in Tokyo: "Today a customer buying a $800 handbag is treated better than someone buying a $100,000 car." (Interview with Paul Goldsmith, 19.08.2008, Tokyo)
Therefore, the essential point is to create environments that are limited, where the higher customer value of level 3 consumers is recognized. This is done by using techniques such as club-marketing, where rich people are gathered by common interests, in combination with added value conferred by privileges, concierge services, and special experiences that are neither mundane nor easily accessible (See Takahashi 2005, pp. 17-19). In such an environment word of mouth strategies can be effectively executed by providing access to other level 3 consumers. This creates a setting for reaching distant networks of luxury consumers who are not yet customers of the luxury company (see section 3.4).
All three levels require a deep customer understanding and will serve a mixed group of customers, so companies will need to develop “a kind of drive-through approach to segmentation.” (Allen and Rigby 2005: 3) The amount of exclusivity needed for the marketing approach depends on the brand profile in question and the consumption style of the customers. On all three consumer levels, luxury products are consumed. Consumers can change their level, which is a dynamic social process, with the transition taking place predominantly between level 2 and 3. Rich marketing (for level 3) has a profound influence on the other levels of luxury marketing (level 2 and 1), in such a way that the selection of level 3 customers forms the image of a brand that is consumed by level 1 and 2, due to the media coverage of the luxury lifestyles of celebrities and other level 3 consumer (Currid 2007; Chadha and Husband 2006). The expanded luxury marketing model in figure 3.6 incorporates the three consumer levels.
nav_small.jpg
The following analysis will differentiate between [consumer level 1] people who buy products of a luxury company and therefore qualify as luxury consumers but do not have the assets or income to qualify them for a rich lifestyle (trading-up), [consumer level 2] people exhibiting a high salary that enables them luxury consumption in certain categories, but not all, and [consumer level 3] people encompassing both HNWIs and people with an extraordinary income, qualifying them for an active premium consumption lifestyle (table 3.1).
Most premium companies do not restrict their portfolio to one consumption level (figure 3.3) but offer products in all top three categories (premium, luxury, and ultra-luxury level). The key is to provide “luxury for the masses as well as the classes” (Danziger 2005), delivering luxury to the top while simultaneously to the population at large.
In table 3.1, the following descriptions are summarized. The marketing exclusivity of the consumers rises with their consumer level. The opinion leaders in all three levels are different.
table_3.1_250.jpg

LEVEL 1 - Trading-up level

Many brands already have adapted to serve this “mass luxury consumer”. At this level, conformist consumption is predominant, with a strong influential presence of social leadership. Consumers are interested in being “in”, buying trend-conformist luxury products that help to transfer chains of associations to their surroundings. They are trading-up in order to spend on luxury brand items and to afford premium products with emotional importance to them. Reaching this kind of consumer still heavily depends on the use of mass marketing in combination with opinion leader marketing by reaching network hubs from the respective social milieu in level 1 (friends and classmates, colleagues), level 2 consumers that have idolizing character (the superiors of level 1 consumers, members of higher social classes), and by having the right level 3 consumer using more upscale products from the same brand. Individualized lifestyle consumption is still rare at this level. Individuals are checked and judged within their social environment by their conformity to group standards. In the fashion segment, the influence of style magazines and celebrities is strong. Even among level 1 consumers, there is the tendency to become more immune to normal mass marketing channels. So event marketing and pull approaches can be necessary in order to enter the lives of these customers. This is also important for the identification of the above mentioned opinion leaders (see section 3.4).
This level's main characteristic is being accessible in price and physical location, in sharp contrast to the personalized, away from the public strategy deployed to serve HNWIs (Chadha and Husband 2006: 50. It entails having a strategy of lower price points, making part of the range accessible to the consumer rich. This changed the segmentation policy of many premium brands leading to entry products that are well seen in the automotive segment [with entry models such as the A3, the Mercedes A-Class or the BMW 1 Series] and luxury fashion brands [with perfumes offering the cheapest entry into the image of famous brands]). The danger of selling at this consumer level is the potential devaluation of a brand, so it is important for luxury companies to maintain a distinct character and meaning for the products at each consumption level, as well as to clearly articulate the main brand characteristics all the products share (Silverstein and Fiske 2005: 12).
Members of this consumer level freely combine conspicuous consumption and individualized lifestyle consumption. They are interested in products that exemplify their taste and personality, and buy luxury, premium, and mass market
luxurymarketingjapan103-1.jpg
u  download
pdfIcon.png
This is an online version of my working paper dealing with luxury marketing in Japan. It is updated on a regular basis. The online version includes interactive elements and comments not included in the print version.
more_grey.png
ChadHa and Husband (2006)
Paper: Luxury Marketing in Japan
WORKING‚ÄàPAPER
nav_small.jpg
nav_small.jpg
nav_small.jpg
nav_small.jpg
nav_small_dark.jpg
nav_small.jpg
nav_small.jpg
nav_small.jpg
ChadHa and Husband (2006)
NAVIGATION‚ÄàPANEL
figure_3.6_250.jpg
LUXURY‚ÄàAND‚ÄàHNWI MARKETING‚ÄàIN‚ÄàJAPAN
luxury_2.jpg
home_1.jpg